When the federal government created Petro-Canada in 1975, Canadians, distrustful of multinational oil companies, overwhelmingly endorsed the concept of a Crown-owned oil company. At the time, upwardly spiralling oil prices were creating havoc on the world energy scene. But a Gallup poll released in April revealed that 45 per cent of Canadians now think that Ottawa should sell Petrocan to the private sector. Increasingly, Canadians wonder if they are getting value for their money from the national oil company, now the fourthlargest gasoline merchant in the country, with 12.5 per cent of the market. Noted MP Harvie Andre, the Conservative energy critic whose party is a long-
71 is disenchanting that the maple leaf gas station charges no less than one with the scallop shell9
time Petrocan foe: “When you see that the service station with the maple leaf charges no less than the service station with a scallop shell you become disenchanted.”
Since the cabinet created Petrocan, the company’s assets have grown, through a series of taxpayer-financed acquisitions, to $7.5 billion, from $700 million eight years ago. In May, 1981, Ottawa imposed a 0.8-cent-a-litre levy on gas-pump sales, called the Canadian Ownership Special Charge, to cover Petrocan’s $1.6-billion purchase of Petrofina Ltd. That amount has now been raised, but the government has retained the levy to fund its $500-million bailout of Dome Petroleum. Notes Andre: “Suddenly, there is a realization that this thing is costing us a bundle.” In February federal Auditor General Kenneth Dye, after completing his yearly audit of Energy, Mines and Resources, expressed concern at not finding an analysis of Petrocan’s Petrofina purchase. Industry analysts also expressed concern about Petrocan’s November, 1982, decision to purchase BP Canada’s refining and gasoline marketing operations. The original purchase price of $357 million jumped by $230 million after BP’S
inventory and debt were taken into account.
For their part, oil industry critics and analysts charge that the Crown firm’s accounting practices and capital structure give it significant political and financial advantages over its private sector competitors. A November, 1982, study by Montreal-based Concordia University concluded that Petrocan’s financial record between 1976 and 1980 was “substantially inferior to that of the industry.” Moreover, the study’s authors, Lawrence Kryzanowski and Peter Marzitelli, concluded that the Canadian public could have earned more by investing in a portfolio of oil and gas stocks than by investing in Petrocan.
While the Crown corporation benefits from its favored position under Ottawa’s wing, it has felt the pinch of the oil industry downturn. The company is now consolidating its operations and rationalizing its network of service stations. In Ontario alone, where gasoline sales are steadily declining, oil industry observers estimate that Petrocan has 600 more stations than the market dictates. The Crown firm is also trimming its staff, offering them generous early retirement benefits and educational leaves of absence. The staff is now reduced to 8,000 employees, from a high of 9,000 in 1982.
Petrocan is also saddled with a huge surplus of office space. Although the company will not reveal how much excess space it has, The Calgary Herald reported in April that Petrocan had unsuccessfully tried to disengage itself from its 20-year lease on 227,000 square feet of the Hanover building in Calgary. The company had designated that space for future expansion, and its failure to sublet could be, according to the Herald, costing it as much as $19,600 a day in rental payments. The completion of Petrocan’s new $200-million twin skyscraper headquarters in Calgary this fall will only compound the company’s surplus office problems.
Petrocan officials, for their part, are quick to defend company expenditures. Explained Edward Lakusta, 53, Petrocan’s president: “If you are going to build any sort of oil company, you have to put some seed money up front.” In an appeal that sounds more characteristic of a major multinational, Petrocan’s chairman, Wilbert Hopper, 45,
in February asked the federal government to move quickly to world prices for Canadian oil—a request that he would not have even contemplated two years ago and one that Finance Minister Marc Lalonde denied. Said Hopper: “We do not need to protect ourselves from a high price, which no longer exists. However, we do need to protect our ability to continue investing in the search for new energy supplies.”
While Petrocan is beleaguered in some areas, it continues to forge ahead in others. In early May the Crown firm announced its participation, along with four partners, in a new exploration venture in the South China Sea, an area that could prove to have as much oil as the North Sea. Later that month the company, in partnership with BP Resources, announced its decision to build a $200million, 7,000-barrela-day heavy oil development project near Fort McMurray, Alta.
If Petrocan officials are concerned about their deteriorating public image, they are heartened at least by increasing gasoline sales. In 1982 Petrocan’s market share was up to 7.8 per cent, while the industry’s sales dropped an average of four per cent. But industry observers charge that Petrocan’s market share increase resulted from price wars at the pumps. Still, those price wars cut into Petrocan’s profits, which last year dropped to $10.5 million from $64.8 million one year earlier.
Whether or not the Crown oil company is serving its Canadian shareholders well is a debatable point. Said Bud McDonald, president of Gold Lake Resources, a Calgary-based junior oil company: “We have to satisfy our shareholders or we go down the tube. Petrocan is still not faced with that kind of discipline. It is a terrible waste of the taxpayers’ money.” Still, while McDonald and many other oil company executives criticize Petrocan’s very existence, such oil firms as Bow Valley Industries and Shell Canada are pragmatically participating in joint ventures with the Crown firm. Explained Ian Smythe, executive director of the Canadian Petroleum Association: “There is and will he a Petro-Canada.” It would appear that Canadians will be helping to fund the Crown behemoth for a long time to come.
The story you want is part of the Maclean’s Archives. To access it, log in here or sign up for your free 30-day trial.
Experience anything and everything Maclean's has ever published — over 3,500 issues and 150,000 articles, images and advertisements — since 1905. Browse on your own, or explore our curated collections and timely recommendations.WATCH THIS VIDEO for highlights of everything the Maclean's Archives has to offer.