January 12, 2004

Imperial Oil reports environmental progress, GHG emissions

Imperial Oil spent more than $375 million in environmental protection-related projects during 2002, including a $300-million investment to enable its four refineries to produce virtually sulfur-free gasoline by the end of 2003, well ahead of new federal limits on sulfur in gasoline.

This achievement is among the highlights of Imperial's latest corporate citizenship report, A Partner in the Canadian Community, now available on the company's Web site, www.imperialoil.ca. The report examines Imperial's safety and environmental performance and community contributions throughout 2002. It discusses the company's corporate governance and ethical priorities and standards, as well as its commitments to meaningful dialogue with communities and other partners.

"Imperial's successful operation is based on a 120-year history of understanding and responding effectively to the varied expectations of millions of people who have an interest in our business," said Tim Hearn, chairman, president and CEO.

Another major environmental initiative has been the investment of $250 million in two cogeneration projects: a 170-megawatt (MW) facility began operating at the Cold Lake bitumen recovery project in November 2002, with a 95-MW unit slated to start up at Imperial's Sarnia manufacturing complex in 2004. Together, these will significantly improve energy efficiency and reduce emissions.

In 2002 as well, notes the report, Imperial achieved a 99.7% recovery rate for flared solution gas produced with crude oil; this was the best rate of all 50 of Alberta's largest oil producers, says the company.

As a result of additions to the list of required substances for reporting of releases to Canada's National Pollutant Release Inventory (NPRI), Imperial reported significantly higher emissions in 2002 than in 2001. For substances listed in 2001 and the previous five years, notes the report, emissions from the company's operations remained stable and are forecast to decline over the next few years.

Imperial recorded nine operating incidents (such as spills) at its facilities in 2002, resulting in direct costs of more than $75,000 each. This is one more than the record low of eight in 2001, and the company continues to work toward its goal of preventing all such incidents.

Also posted on Imperial's Web site is the company's 2002Action Plan Update to Canada's Climate Change Voluntary Challenge and Registry Inc (VCR Inc). The company's ninth report to the Registry documents its performance, progress and plans to meet its corporate goals to reduce greenhouse gas emissions. Imperial has been accorded Gold Champion Level Reporter status, having surpassed the rigorous reporting standards of VCR Inc's Champion Reporting System.

The report format conforms to VCR Inc's 1999 Registration Guide and provides an inventory of direct and indirect GHG emissions for 2002, on both absolute and unit-of-production bases, as well as a projection for 2007. It also provides a review of initiatives and progress in 2002 and assumptions supporting the 2007 projection.

The scope of Imperial-operated facilities covered by this report remains essentially unchanged from 2001. Greenhouse gas (GHG) emissions from company-operated facilities in 2002 were about the same as the previous year and were 5% higher than in 1990, exclusive of divested operations. If divested operations were included, the company's 2002 GHG emissions would be 20% lower than 1990. Emissions from operations divested since 1990 amount to about 3,400 kilotonnes (Kt).

Emissions from upstream operations increased by almost 1% from 2001 levels, due mainly to increased fuel use for steam production and injection at Cold Lake bitumen operations. This increase was partially offset by reductions in conventional oil and gas operations and further reductions in the flaring and venting of natural gas associated with oil production.

Downstream emissions decreased by about 1.0% with reductions being achieved from improved energy efficiency, reduced production of hydrogen through synthesis processing and less flaring, somewhat offset by a slightly higher carbon fuel mix. Emissions from chemicals manufacturing increased about 5.0% due almost entirely to additional production.

Based on current growth expectations for our business, including a 1.1% per year increase in petroleum product demand, up to current manufacturing capability, we expect total emissions in 2007 to be about 0.6% lower than 1990, exclusive of divested operations. Including divested operations, we expect total emissions in 2007 to be about 24% lower than 1990. Increased energy efficiency and cogeneration initiatives are forecast to offset emission increases from expansion of bitumen production at Cold Lake and increased energy required to manufacture lower-sulfur fuels.

On a unit-of-production basis, emissions increased in 2002 from Cold Lake compared to the previous year, due to higher steam production concurrent with lower bitumen production. Projections for 2007 unit-of-production emissions call for a significant decline, reflecting both expanded production as well as the positive impact of the Cold Lake cogeneration facility. Emissions per unit-of-production from other upstream production in 2007 are expected to increase slightly due to aging fields.

Emissions on a unit-of-production basis from petroleum products operations were essentially unchanged in 2002 from the previous year, due to energy efficiency improvements, reduced hydrogen production from synthesis processes and reduced flaring, offset somewhat by a slightly higher carbon fuel mix. Unit-of-production emissions are expected to continue to decrease by 2007.

Further gains in energy efficiency through systematic management and deemed emissions credits associated with a 90-megawatt cogeneration facility at Sarnia are expected to offset increased total production and the more energy-intensive processing required to manufacture low-sulfur gasoline and diesel fuel.

Emissions from chemicals manufacturing are expected to decrease significantly on both absolute and unit-of-production bases in 2007, as the chemicals portion of the cogeneration credit will more than offset a small increase in total production.

Paper copies of both these reports may be requested from the company's public affairs department, 416/968-4875.

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