BUSINESS/ECONOMY

Growth of the chains

ANN WALMSLEY April 4 1988
BUSINESS/ECONOMY

Growth of the chains

ANN WALMSLEY April 4 1988

Learning to love Petro-Canada

Although Petro-Canada cannot make Canada into a sea of oil, it may succeed in lining it with glassware. So joked Canada chairman Wilbert (Bill) Hopper recently before a group of company executives who were happily contemplating the impact of their firm’s successful Olympic torch relay and souvenir glass promotion. Although some of Petro-Canada’s detractors say that Hopper is indeed right—that the Crown firm is better at marketing glasses than oil—there also are many signs that Westerners, particularly Calgarians, are finally learning to love Canada’s oil company. Indeed, Petro-Canada’s gasoline sales may be up in the region, and this week Hopper will be invested as chairman of the Canadian Petroleum Association—a staunchly free-enterprise lobby group which once excluded Petro-Canada from its membership.

The torch run is the brightest component of PetroCanada’s new appeal. Robert Foulkes, Petro-Canada’s vicepresident of public affairs, says that Petro-Canada had a number of objectives in funding the $6.5-million relay run and spending as much as $9 million on associated advertising. Foulkes added that Petro-Canada wanted to improve its image in free-market Calgary, sell more gasoline in the West and improve employee morale, which had withered in the face of almost constant criticism of the company. Now Foulkes says that not only has employee morale improved, but the company’s image in Western Canada has been enhanced. Indeed, last month a companycommissioned marketing survey found that Petro-Canada was by far the most recognized sponsor backing the Calgary Olympics.

And despite the doubts that some of Petro-Canada’s competitors continue to express, there are strong indications that the Crown corporation has dramatically increased its share of the gasoline market. During the 15-monthlong torch relay campaign, Petro-Canada sold 35 million glasses at $1 each with a minimum 25-litre purchase. According to an independent analyst who surveyed 1,500 of the company’s 3,677 stations across Canada, the average daily sales increased by about 6.6 per cent for all of 1987. If etro-Canada can maintain that pace throughout

1988, some energy analysts say that its refining and marketing revenues will greatly increase.

Hans Maciej, a vice-president of the petroleum association, says that there are other, less obvious reasons for Petro-Canada’s new acceptability in the West. Most importantly, the demise of the National Energy Program has

meant that the Crown corporation no longer appears to be a threat to the investments of other major oil companies. Under the NEP’s widely criticized back-in clause, Ottawa announced that it would retroactively take a 25-percent share of any energy find on federal Crown land. The program, which never came into effect, resulted in animosity toward Petro-Canada as the expected beneficiary.

The election of a Conservative federal government in 1984 was also a watershed for Petro-Canada. The Tories said that Petro-Canada would no longer be Ottawa’s policy tool in the oil patch and instructed its officials to act like those of any private company. As one result of that directive, said PetroCanada spokesman Alexander Hunter, when oil prices collapsed in 1986 Petro-Canada laid off staff as readily as any private-sector organization. From 1985 to 1987, ranks fell to 7,200 from 9,700. Although it is little comfort to the people who lost their jobs, Hunter

added that at least Petro-Canada was seen to be behaving more like an oil company than a government agency.

And the oil giant is finally showing profits after receiving $4.2 billion in capital injections from Ottawa from 1976 to 1984. The company recently reported 1987 profits of $172 million, an increase of 40 per cent from 1986 earn-

ings of $123 million. But Calgary North Conservative MP Paul Gagnon, speaking as one of Petro-Canada’s numerous detractors, pointed out that the company still has accumulated losses of about $300 million since 1982.

But some analysts say that PetroCanada’s new profitability could help persuade the government to privatize the firm. In the eyes of some prospective buyers, the attraction is heightened because of suggestions that Petro-Canada would be allowed to keep the money raised through a share issue and use it to finance energy megaprojects. Some industry officials say that the political decisions involved in selecting what energy project to proceed with could provoke another round of enmity toward Petro-Canada—and, in the process, destroy Calgary’s fragile truce with its Crown-owned resident.

—BRIAN BURTON in Calgary