Bringing Energy to Canada for 125 Years

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Bringing Energy to
Canada for 125 Years

Imperial has been a part of Canada since the country was in its infancy. From its discovery of major oil supplies to its development of innovative products, it has played a role in shaping the story of Canada

by Russell Felton

IN THE SEPIA-TONED PHOTOGRAPHIC portraits, the bewhiskered gentlemen pose formally. Unsmiling in tight-fitting coats and starched collars, they appear to be men of probity, solemnity and foursquare Victorian conservatism – prudent boardroom stewards of their investors' hard-earned funds. Yet it's likely that they were, in reality, as much savvy entrepreneurs as sober-sided bookkeepers, as much innovators as organized administrators.

These are the 16 southwestern Ontario businessmen who met in London, Ont., on September 8, 1880, to form the Imperial Oil Company. They were younger than one might assume. The new company's president, Frederick A. Fitzgerald, was 40, its vice-president, J.L. "Jake" Englehart, was 33, and its corporate secretary, William M. Spencer, a mere 28. All 16 founders had been active in the fledgling, sometimes dangerous and almost absurdly competitive business of petroleum refining, Englehart from the age of 19.

Canada's oil industry was young at the time. It had started in the late 1850s, when James Miller Williams had sunk the first successful oil well in North America at Black Creek, Ont., not far from London. Over the next 20 years, using rickety wooden derricks and primitive cable tools and chisels, dozens of other people had punched shallow but successful wells in other places in southwestern Ontario – Oil Springs, Bothwell and Petrolia, to name a few. The entire region earned the cognomen "Canada's Oil Lands."

Refineries (which were then essentially simple stills where crude oil was boiled in order to "break" it into its various hydrocarbon components or "fractions") had also sprung up willy-nilly as entrepreneurs flocked to the region in search of "black gold" wealth. At one point, there were 52 refineries in London alone.

The most useful fraction at the time was kerosene, or "coal oil," as it was also known. Cheap and plentiful, it had replaced whale oil as the primary fuel for lighting the homes of the day, even though its less-than-pleasant smell caused it to be dubbed "skunk oil." Waxes for candles and greases for axles and other uses were marginally profitable by-products of the refining process. Another fraction, known as gasoline, was considered relatively useless.

By the late 1870s, the bubble had burst for Canada's Oil Lands and its enterprising drillers and refiners. Higher quality, "sweeter" crude oil had been discovered in Pennsylvania, and it quickly came to dominate and then glut the market. The price of kerosene fell from more than 20 cents a litre to less than three cents. Many aspiring Canadian oilmen moved on to other pursuits.

It was against this bleak business background that Imperial's 16 co-founders saw fit to join forces. Seeing more security in cooperation than competition, they got together $25,000 and formed the company with refineries in London and Petrolia. Total capitalization was $500,000, an enormous sum for the time. The practicality and straightforwardness that had led the men to join forces also inspired the Imperial Oil Company's original mission as outlined in its charter: To find, produce, refine and distribute petroleum and its products throughout the Dominion of Canada.

One hundred and twenty-five years later, it's reasonable to say that the company those 16 young men founded has been successfully fulfilling that original mission – and then some. And lofty though it may sound, it's also reasonable to say that Imperial has played a role in the development of this country. Without the oil Imperial found and refined and without the petroleum products it distributed throughout the country, Canada would not have developed as it has. Progress and development would have come, certainly, but perhaps not in quite the same way or at the same pace.

Assessing the contributions of a single corporation to an entire nation over a period of 125 years is perhaps best approached through a series of "what if" questions. For example, what if the Imperial Oil Company had never been formed? What if its founders had not elected to assume a national mandate? What if their successors had taken a less expansive view?

One of the first decisions made by Imperial's founders as they set about their stated mission was to hire a chemist named Herman Frasch to tackle the problem of the foul smell of the "skunk oil." Frasch was assigned to devise a distillation process that would reduce the sulphur content of Imperial's refined products, making them more pleasant for consumers and more competitive with relatively odourless U.S. products. If he had failed, imported U.S. petroleum would likely have driven Canadian products off the market altogether, and the Imperial Oil Company might have been no more than a historical footnote.

As it happened, Frasch succeeded, thus allowing the company to follow through on its vision of supplying petroleum throughout the Dominion. Imperial hired an agent, H.E. Sharpe, to scout for markets in Western Canada and another, Edward Hewitt, to develop markets in Quebec. Sharpe established an office in Winnipeg – population 8,000 – and hired an assistant to cover a sales territory from Lake Superior to the West Coast. By the mid-1880s, oak barrels of kerosene, paraffins, greases and other petroleum products were trundling across the Prairies by rail on their journey to remote Hudson's Bay Company outposts and logging camps in the interior of British Columbia.

In 1883, after Imperial's London refinery was struck by lightning and burned down, the company consolidated operations in the Petrolia refinery, which soon employed 500 people, covered 26 hectares and shipped products across the country in barrels made in its own cooperage with wood from its own woodlots. By 1893, the company had 23 branch offices from coast to coast, and its products were helping to open up Canada's vast wilderness areas, to build homes and to develop farmland and industries.

A watershed was reached in 1898, when Imperial, needing capital for further expansion and unable to raise it in Canada, turned to the Standard Oil Company (later Exxon Corporation and now Exxon Mobil Corporation). In exchange for a majority interest, Imperial acquired Standard's Canadian assets, which included refineries in the Maritimes and in Sarnia, as well as marketing operations in Ontario, Quebec and British Columbia. The vision of a truly national petroleum company had become a reality.

It was a timely expansion. A new invention that would transform not only the petroleum industry but society itself was about to make an appearance – the age of the gasoline-powered automobile was dawning. In 1903, there were 178 cars in Canada. In 1905, there were 565, by 1910 almost 6,000, and by 1920 a quarter of a million. Almost overnight, gasoline became a coveted and vital commodity, as two of what are now the world's largest industries – automobile manufacturing and petroleum – walked into the spotlight.

That Imperial was large, organized and capable of handling the increase in demand was, perhaps, a fortunate coincidence, a happy accident of history for both the company and its Canadian customers. Imperial was in fact the only integrated petroleum company in Canada at that time. What if it had not existed?

• • • • •

FOR DECADE AFTER DECADE, through almost the entire first half of the 20th century, through two world wars, a major depression and countless other obstacles, Imperial continued to meet its commitment to supply Canadians with needed fuels and other products. Horse-drawn wagons gave way to tanker trucks, rail cars, barges and lakers. With Ontario oilfields long since depleted, most of the crude oil the company processed had to be imported from the United States and South America, where an Imperial subsidiary, the International Petroleum Company, carried out extensive exploration during the first half of the 20th century. And along the way, by dint of establishing the first research laboratory and testing facility in Canada, the company became world-renowned for advances in refining methods, including the processing of lubricants designed specifically for Canadian conditions.

At the same time, Imperial's management continued to believe – some would say persisted in believing, despite mounting evidence to the contrary – that the wilderness of Western Canada held commercial quantities of crude oil that could reduce Canada's need for imports.

In 1914, Imperial sent a geological party to Alberta to follow up a promising oil discovery at Turner Valley, near Calgary. But the field was short-lived, and the First World War presented other priorities. Another Turner Valley "oil boom" would create wild excitement in 1924, but it too would peter out. In the meantime, a geological survey would see an Imperial drilling party journey 1,700 kilometres north along the Mackenzie River to Fort Norman (now Norman Wells), N.W.T. Here, under the direction of the legendary oil geologist Ted Link, the party would make the first significant oil find in the West – and also the last for nearly a quarter of a century. The field was too remote to serve more than local needs, but it encouraged the company to persist in its western exploration efforts.

During this period, Imperial was virtually the only company exploring for oil in Western Canada, and by the end of the Second World War it had drilled more than 130 "dry holes" in succession. But success, when it came, was spectacular. Imperial's landmark discovery of commercial quantities of crude oil at Leduc, Alta, in February 1947 effectively created the modern Canadian oil and gas producing industry.

In 1946, Canadian crude-oil production totalled 20,000 barrels a day. By 1953, it exceeded 400,000 barrels a day. Today, Canada produces about 2.6 million barrels of crude oil and natural gas liquids a day and is the world's ninth-largest producer of oil and natural gas liquids. It is also the third-largest producer of natural gas, with a production rate of about six trillion cubic feet last year. Far from being an importer of crude oil today, Canada is a net exporter and the largest single supplier of oil, gas and refined petroleum products to the United States.

A mainstay of Canada’s national economy, the petroleum industry is not only a major source of wealth for the country but also a major employer and taxpayer, a customer for Canadian goods and services and one of the country’s largest investors. It supports a wide range of construction and service industries and has made a major material contribution to the development of many other resource industries in Canada, from forestry and mining to farming and fishing.

In addition, the industry has given rise to a world-scale petrochemical industry, which supplies Canadians with chemical feedstocks for a multitude of products that have become indispensable to almost all areas of modern life, including medical care, education, food services, communications, housing and clothing.

Again "what if" – what if Imperial had not persisted in exploring the West for oil hardly anyone believed was there? The world's need for oil would certainly have driven others to explore eventually, and major discoveries would surely have followed. But at what cost in time and unrealized wealth for the country in terms of jobs, export revenues, taxes and industrial growth?

Imperial's determination to continue to supply Canadians with needed petroleum products and to increase domestic oil and gas production did not end at Leduc, or with later discoveries of so-called conventional crude oil. As early as the late 1950s, the company's management recognized that the oil sands of Western Canada, with some 1.7 trillion to 2.4 trillion barrels of oil in place, represented one of the three largest potential sources of oil in the world. Even if only a small proportion of that resource could be economically developed, Canada's long-term future as a significant oil-producing nation would be secured.

With that goal in view, Imperial became a prime mover in the mammoth Syncrude project at Fort McMurray, Alta. The largest oil-sands mining operation in the world, Syncrude currently produces 240,000 barrels of crude oil a day, which will increase to 350,000 barrels a day in mid-2006, when an expansion comes into operation. And starting in 1960, at Cold Lake, Alta, the company pioneered technologies and processes for the so-called "in situ" recovery of bitumen: the process would enable bitumen to be recovered from oil-saturated sand beds 500 metres underground without removing the sand. Today, Imperial's Cold Lake operation is producing about 150,000 barrels of bitumen a day.

But the company is not resting on these laurels. Recognizing that further future development of the oil sands must be both economically viable and environmentally acceptable, Imperial recently committed to donate $10 million to the University of Alberta for research into new and innovative technologies that will allow these dual objectives to be achieved.

Investing in innovative research has long been a tradition at Imperial. In 1924 it established the first research facility in the Canadian petroleum industry, which over the years has been responsible for major improvements in fuel quality and instrumental in the development of lower-emission gasolines. In 1978, Imperial became the first company in Canada to introduce premium unleaded gasoline. And today Esso gasoline has one of the lowest sulphur contents in the world.

• • • • •

IMPERIAL'S 16 CO-FOUNDERS, like any other people of their generation, would no doubt be struck with wonder at today's world of computers and instant communication, supersonic and space travel, teeming cities and gleaming gadgetry. But they might also be pleased to know that the company they created has been fulfilling their vision over the last 125 years and be proud of the manner in which it has done so.

They might even ask themselves, "What if we hadn’t...?"

Photography: Imperial Oil Archives

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