When you’re president of a Crown Corporation like Petro-Canada, you have to worry about your image—at least as much as finding oil.
A horrifying thing happened to Wilbert “Bill” Hopper as he waddled, with the protruding belly and genial menace of a small Japanese sumo wrestler, into the passenger compartment of the Toronto bound Air Canada jet one fine April evening in Ottawa. He had just virtuously repudiated the idea, inadvertantly insinuated by a journalist who had been watching him testify before the Standing Committee on Public Works and Natural Resources, that his status as president of Petro-Canada and the long drag back to Calgary automatically entitled him to a first-class seat. Now it looked dangerously as if he had one anyway. His agonized protest revealed the culprit was a solicitous lieutenant from among his numerous entourage. Of course, there’s every reason why a man with Hopper’s schedule should travel firstclass. In any case he was only paying an economy fare. The journalist continued thoughtfully to his rear seat above the engine.
That afternoon, Maurice Strong’s feet had done a nervous tap dance beneath the witnesses’ table as Standing Committee members asked him about his much publicized speech the previous day. As chairman of Petro-Canada he had asserted that “a few large foreign controlled companies are waging a relentless underground campaign against Petro-Canada.” But today he pirouettes disarmingly away from the uncouth suggestion that he should provide actual evidence for this charge. In fact, he told an incredulous Stan Schumacher (PC—Palliser), “it’s not a charge—not even a complaint.” He meant nothing more, it now appeared, than that there are a lot of oilmen, all (quite properly) with opinions. Some of them Strong even agreed with himself! Okay? Schumacher shook his blond head as if trying to clear it.
Throughout, Bill Hopper sat in the principal witnesses’ chair, silent and grim. “Maurice is off on his own,” he said later, declining to back up his chairman. Hopper abruptly succeeded Strong as Petro-Canada’s chief executive last year, apparently because of friction between Strong and Alastair Gillespie, minister of energy, mines and resources, who has ultimate responsibility for the Calgary based Crown Corporation. He does things differently. But both Hopper and Strong are essentially political animals. Appearance matters more than reality. And politics is the
reason why Petro-Canada’s problems, both in conception and execution, need not worry its officers—except in their capacity as taxpayers. The union of government and industry has produced a strange corporate mule, inevitably sterile.
The state-owned oil company issued its first annual report recently. As such documents go, it is not particularly lucid. It does not show Petro-Canada’s oil reserves, perhaps because this might reveal how successful future exploration programs are from year to year. It capitalizes expenses in such a way that the administrative costs, allegedly high, cannot be fully assessed. Petro-Canada earned $3.3 million in its start-up year, unexciting in relation to its $714 million assets. It is absolutely de-
pendent on further financing from the government this year to meet its contracted obligations. An industry expert, Alastair Thomson of Calgary based Touche Thomson Yeoman Investment Consultants Ltd., estimates the company is now worth about two thirds of book value. This means Petro-Canada’s assets have not been deployed so that they can pull their weight by current financial standards, partly because of the inflated price the company was forced to pay in return for having the stray government investments in Panarctic Oils Ltd. and the Syncrude tar sands project dumped on it.
But Petro-Canada’s undistinguished financial record has attracted less attention than periodic reports of mutiny and desertion in its ranks. Gillespie himself has been asking questions since the recent departure of Donald W. Axford. who, as senior vicepresident, exploration planning, had been
nominally second only to Hopper. Axford was recruited by Strong after a highly successful career with Mobil Oil Co. Unusual for a Calgary oilman, he was enthusiastic about the Petro-Canada concept. But Hopper sidelined him shortly after assuming control, and he finally resigned in disagreement with Petro-Canada’s hard negotiating line with Shell over their joint activities off Nova Scotia. (There is outright disagreement over whether the departure of the Shell rig renders impossible projected ventures in the Gulf of St. Lawrence.)
Hopper flatly denies there is any unusual turnover, and he rattles off volleys of supporting figures—only two management departures out of a staff of 32 at Petro-Canada itself; only eight out of 56 at Petro-Canada Exploration Inc. (Pex). This argument makes the helpless outsider uncomfortably aware of Disraeli’s crack about lies, damned lies and statistics. For one thing, further investigation elicits that the exit of Marie Choquet, a confidante of Pierre Trudeau and Strong’s choice for public relations chief, is not counted because she was one of Petro-Canada’s numerous resident consultants. Similarly, planning manager Doug Scrim’s widely remarked return to the Ministry of Energy, Mines and Resources takes effect only after the period surveyed. However, critics do seem able to document qualitatively that the management core of Atlantic Richfield Canada Ltd. (Arcan) has been eroded since the company was bought and renamed Petro-Canada Exploration Inc. (Interestingly, this core does not apparently include Pex’s current president, Sam Stewart, whose comment that Petro-Canada could in 24 hours decide what Los Angeles took six months over, is attributed to his exile in the financially unattractive Syncrude tar sands project, now inherited by Petro-Canada.) And there is no mistaking the fact that morale in Petro-Canada is really bad—and not just among the “couple of guys” Hopper has identified as Axford partisans.
The private oil companies are also snarling bitterly. The foreign owned companies have been generally discreet, at least until Strong’s speech. But some Canadian companies are scathing: “We’ll never work with them again,” said one industry source. The root of the problem is that Petro-Canada simply is not spending the expected sums on exploration. Hence it is not cooperating with the companies in their constant search for partners to share the risk. Last year, excluding Panarctic, Petro-Canada spent a mere $27 to $28 million on the “frontier” areas—the Beaufort Sea, the High Arctic and so on—which are Canada’s last chance for big finds. Hopper told the standing committee that PetroCanada had already committed a total of $70 million to all areas, including Panarctic, although $10 million was “deferred.” A Petro-Canada spokesman subsequently could only provide details of
some $45 to $47 million. Yet its exploration budget is officially $130 million. (In 1977, the private companies will spend over $400 million in the Arctic and Northwest Territories alone.) Even the deals Petro-Canada boasts about, such as the Sun Oil Company Limited agreements in the Arctic, were initiated last year, when Axford had his full authority.
The companies are also alienated by the style in which Petro-Canada refuses to join deals. It is a slow, mean negotiator, with a bad reputation for reneging on handshake agreements, thus discrediting its own officers. It has not yet made any commitments overseas, where some of the smaller companies hoped it might join them in dealing with unpleasant foreign governments such as South Yemen. Petro-Canada spokesmen claim that they helped reconcile with Hanoi those Canadian companies which had concessions to drill off South Vietnam. But in fact nothing has been settled, and there are ominous recent reports that some concessions have been reassigned to the Italian state company.
Petro-Canada’s mandate was to stimulate exploration. Yet it is a company that dislikes risk. It is obviously aware of the fear stalking Calgary that after hundreds of millions of dollars worth of exploration, nothing much will be found on the frontier after all. “In 10 years’ time, this will be a ghost town,” said one oilman melodramatically, peering down from one of the oil companies’ soaring new towers to where Petro-Canada’s red brick building crouches, conveniently within spitting distance. And to assume this risk, Petro-Canada would have to pay an additional premium, since it has no land of its own. There is little incentive to do this when it will be able to force its way into profitable plays under privileges which it will get under Ottawa’s new Northern Land Regulations, due out imminently, as they have been for the last seven years. (Hopper’s previous close involvement as assistant deputy min-
ister with this sword hanging over the industry’s head has not endeared him to it, much less the advice he gave as a consultant that the Norwegian government should not deal with the small Canadian companies which are heavily involved in the North Sea.) Civil servants are paid to stay out of trouble by avoiding decisions (“keeping options open”) and to prefer quantifiable risks like those to be found in its heavy oil projects. Exploring for oil is for gamblers only.
Setting up an operation from scratch is a painful process, even for those with more line experience than Hopper. His style does not help. He is so little known in Calgary (he spends part of each week in Ottawa, where his family still lives) that there’s a widespread misconception that he’s Jewish. Petro-Canada’s officers outside his immediate clique have difficulty getting in to see him. This clique includes Bob Meneley, who will probably succeed Axford, and Joel Bell, a Harvard Ph.D. and ex-Ottawa whiz kid who was associated with the first Competition Act, the Foreign Investment Review Agency, the Anti-Inflation Board and energy policy before being eased out of the Prime Minister’s Office after the arrival of Jim Coutts. Another Ottawa man, Barry Yates, formerly with Indian and Northern Affairs, is Hopper’s personal assistant. Insiders complain of emotional and unsystematic management, despite the efforts of ex-Alberta Liberal leader Jack Lowery, now with Ottawa’s Bureau of Management Consultants. All agree, however, that changes are made rapidly in response to press or political criticism.
Political criticism, at least, is muted. There have been reports of territorial clashes with Energy, Mines and Resources deputy minister Gordon MacNabb (a problem probably exacerbated by the presence on Petro-Canada’s board of three deputy ministers with empires to protect). But the proceedings of the Standing Committee were almost drowned by the noise of self-congratulating politicians.
Although there have been a number of adverse press stories about the company out of Calgary, government spokesmen dismiss these as the product of oil industry venom. “Oilmen think they have a right to rape, pillage and steal,” said one ministerial aide. Paul McRae (l—Fort Williams) stopped talking to his neighbors long enough to rejoice that Petro-Canada had been created to operate “in some way the people can trust.” And the personable Dr. Maurice Foster (l—Algoma) raised the central question when he gloated that the Tories would have to explain to the Maritimes how, if Petro-Canada is abolished, offshore drilling could be continued now that the industry is giving up in despair.
He did not, however, discuss the fact that drilling holes is not an end in itself. Even Ottawa won’t be able to find oil that isn’t there. PETER BRIMELOW
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