Imperial Oil remains confident in renewable diesel project; construction progresses

Article Content

CALGARY — Imperial Oil Ltd. has provided an update on what will be Canada’s largest renewable diesel facility, saying construction of the complex near Edmonton is progressing well and should be completed sometime next spring.

The $720 million project, being implemented at Imperial’s Strathcona refinery, is expected to have a capacity of more than one billion litres of renewable diesel per year.

Article Content

The facility will use locally sourced vegetable oils and low-carbon hydrogen to produce biomass-based fuel, helping Imperial prepare itself for the energy transition by diversifying its petroleum-based portfolio, according to the company.

Imperial Chairman and CEO Brad Corson told analysts on a conference call Friday that the company remains satisfied with its decision to move forward with the project, despite the fact that a recent glut of renewable fuel supplies south of the border is hurting margins for U.S. producers of the product.

“It’s important to differentiate between the market we see and the economic drivers for us, versus what we might see in other markets like the US,” Corson said.

“For us, we still see this project as a very economical project.”

Renewable diesel is chemically equivalent to petroleum diesel. This means it can be transported directly into petroleum pipelines or sold at retail stations without any infrastructure modifications or fuel blending.

This makes it an attractive proposition for fuel refiners in the face of climate-related regulations such as Canada’s Clean Fuel Standard, which requires liquid fuel suppliers to gradually reduce the carbon intensity of the fuels they produce and sell in Canada.

Article Content

Article Content

According to the Canadian Energy Regulator, increasing renewable diesel production is one way fuel producers in this country can work toward meeting the federal goal of reducing the emissions intensity of their products by 15 per cent below 2016 levels by 2030.

If countries are to meet their stated climate commitments, 35% of the world’s diesel supply could be renewable diesel by 2050, says the Central Energy Authority.

Canada’s first independent renewable diesel plant, built by Tidewater Renewables in Prince George, British Columbia, was completed last year, and there are a handful of other projects proposed across the country.

But in the United States, renewable diesel production has been on the rise. Since 2021, renewable diesel and other biofuel production capacity has more than tripled, according to the U.S. Energy Information Administration.

Energy analytics firm RBN Energy LLC says renewable diesel production south of the border now exceeds fuel blending requirements set by the U.S. Environmental Protection Agency.

Furthermore, the abundance of new renewable diesel production facilities forces them to compete with each other to secure the raw materials they need to produce the product. (Renewable diesel can be made from vegetable oils, animal fats, used cooking oil, or even algae.)

Article Content

The challenges facing the U.S. renewable diesel market are not a problem for Imperial, Corson told analysts on Friday.

“We designed this facility to process agricultural raw materials and oils that are generally available in the region. We import them from crops and farms that are relatively close, so there are no significant transportation costs,” he said.

“What also makes it unique compared to what you see in the United States is the regulatory environment we have here,” he added, noting that provincial regulatory incentives combined with the federal Clean Fuel Standard provide further economic support for Canadian projects.

“All of these things combined put us in a different, but much better, place than you might see in the United States.”

Imperial Oil Ltd. saw a significant increase in net income in the second quarter, which reached $1.13 billion, compared to net income of $675 million a year earlier.

The increase for the period ended June 30 was $2.11 per share on a diluted basis compared to $1.15 per share in the second quarter of 2023.

Imperial attributed the profit growth to the combined benefit of stronger benchmark North American crude oil prices, as well as the opening of the Trans Mountain pipeline expansion, which helped reduce the discount Canadian producers typically take on their oil due to lack of export access.

Imperial’s average production in the quarter was 404,000 barrels of oil equivalent per day in the quarter, up from 363,000 barrels a year earlier.

The refinery’s average production during the quarter was 387,000 barrels per day, compared to 388,000 barrels per day a year earlier.

This report by The Canadian Press was first published Aug. 2, 2024.

Companies in this story: (TSX:IMO)

Article Content