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Mar 15, 2019

Imperial Oil to slow Aspen project; blasts Notley's intervention

Imperial taps the brake on $2.6B Aspen project; blames Notley’s intervention

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Imperial Oil Ltd. is slowing down the development of its $2.6-billion Aspen oil sands project amid market uncertainty and competitiveness concerns, the Calgary-based company said Friday.

In its release, the company cited market “uncertainty stemming from Alberta government intervention and other industry competitiveness challenges.”

“This was a difficult choice in light of our final investment decision on Aspen announced last November,” said Imperial Oil President and CEO Rich Kruger in a release. “However, we cannot invest billions of dollars on behalf of our shareholders given the uncertainty in the current business environment.”

Kruger added the company’s goal is to ensure the work it does this year will allow Imperial to resume planned activity levels “when the time is right.”

The slowdown of the project is expected to result in a delay of at least one year.

“The decision to return to planned project activity levels will depend on factors such as any subsequent government actions related to curtailment and our confidence in general market conditions,” Kruger said.

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 Bloomberg News 

Imperial gave Aspen the green light in November, ahead of Alberta Premier Rachel Notley’s mandated oil production cuts, which have been eased in recent months.  

CIBC analysts Jon Morrison and Trevor Bolland said they aren’t surprised the company is slowing the project.

“We viewed the decision [in November to proceed with Aspen] as a surprising one at the time given heavy oil differentials and uncertainties surrounding major pipeline export project progress,” they wrote in a note to clients Friday. “As such, we don't consider this update as terribly surprising, especially given the company's vocal stance against curtailments since they were announced.”

When it approved the project last year, Imperial said Aspen was projected to employ 700 people during construction, create more than 200 permanent jobs and produce 75,000 barrels of oil per day. Imperial expected that the project would be up and running by 2022.

The company also estimated Aspen would generate more than $4 billion in direct federal and provincial revenues, and $10 billion in royalties for Alberta.