CORPORATE CITIZENSHIP REPORT

A partner in the Canadian community

YESTERDAY, TODAY AND TOMORROW Imperial Oil Limited With operations across the country, Imperial Oil has been a leading member of the Canadian petroleum industry for more than 120 years. It is one of the country’s largest producers of crude oil and a major producer of natural gas. It is also Canada’s largest refiner and marketer of petroleum products and a major producer of petrochemicals. Built on a tradition of integrity and caring, Imperial is committed to contributing to the well-being of Canadians by: • ensuring that the health and safety of its employees, contractors and neighbours remains its number one priority • operating in ways that are both environmentally and economically responsible • maintaining high ethical standards in every area of its business • supplying quality products that are vital to almost every aspect of daily life • providing challenging employment opportunities from coast to coast in a work environment enriched by diversity • supporting a wide range of educational, environmental and community initiatives • sharing its expertise with the broader Canadian community.

We welcome your comments If you would like to comment on our corporate citizenship report, please write to us at: Public Affairs Contents Imperial Oil Limited 111 St. Clair Avenue West Toronto, Ontario 1 A letter from the chairman Canada M5W 1K3 2 Highlights Our Web site 4 A commitment to the community For more information about Imperial, including its history, operations, contributions and sponsorship programs and on-line publications, please visit our Web site 10 Caring for people’s health and safety (www.imperialoil.ca) 12 Protecting the environment 16 Straightforward management systems 18 Developing Canada’s potential 21 Improving the future through research 22 Employees make the difference 25 Strong financial performance

www.imperialoil.ca CORPORATE CITIZENSHIP REPORT

A letter from the chairman

At Imperial, we believe that the foundation of good corporate citizenship lies in doing our job well, fulfilling all our responsibilities with integrity, sensitivity and concern for both people and the environment

From finding, processing and delivering the energy that Imperial and its current and retired employees are generates heat, light and motive power for Canadians also major supporters of United Way-Centraide to producing a multitude of products essential to campaigns. And it gives me particular pleasure to agriculture, food production, medicine, transportation report that during 2002, our combined donations to and many other fields, Imperial’s job is large and those campaigns totalled $2.4 million, up 14 percent complex. Touching the lives of millions of people, it’s from the previous year. one we undertake every day, in every part of the country. But non-profit groups need more than funding; they However, we realize that there is more to doing our need physical help as well. For this reason, Imperial job well than supplying customers with excellent encourages volunteerism among its employees, retirees products and services. In addition, it means being a good and retailers across the country through programs that neighbour – operating facilities in a safe and reliable provide grants to the groups with which they volunteer. manner. It means being a good employer – providing a Imperial also tries to make a difference by sharing diverse, challenging, rewarding, safe and healthy work its knowledge and ideas, contributing to the discussion environment. It means being a good customer for the on vital issues of the day. As a company with deep thousands of Canadian businesses that supply Imperial roots in Canada and many years of experience in the with goods and services. And it means being a good development of natural resources, Imperial has investment for the more than 75,000 shareholders who accumulated considerable expertise, and we believe it hold Imperial stock directly, and for the hundreds of is our responsibility to share this expertise with the thousands of others who have an indirect stake in the broader Canadian community. company’s performance through mutual or pension funds. This company has a long-standing commitment Doing our job well also means protecting the to good corporate governance. Our governance policy environment. Like other Canadians, we have children is continually reviewed and updated to ensure that and grandchildren for whom we want to leave a legacy it conforms not only with regulatory guidelines but that includes a healthy environment. And we believe with best practices. For example, the committee it is possible – and necessary – for this legacy to be structure of the board of directors was recently founded on the dual goals of environmental protection modified – all committees are now composed solely and economic growth, ensuring both a clean, healthy of non-employee directors. environment and an economically sound future. The following pages provide an update on the efforts Imperial also realizes that Canadians define a that the corporation and its many dedicated people successful company in terms of more than just products are making to translate our pledge of good corporate and profits. They expect a good company to make a citizenship into tangible results for Canadians. contribution to the communities in which it operates. I’m proud to say Imperial has been doing just that for Sincerely, more than a century, and today is one of the country’s 1. largest corporate donors. Through the Imperial Oil Foundation alone, the company made contributions of $6.7 million in 2002, largely focused on programs and organizations devoted to Canada’s youth, especially in the area of education. Apart from this giving, Imperial also contributed more than $1 million through its Tim Hearn Aboriginal Scholarship program and support of such Chairman, president and chief executive officer community activities as minor hockey. Imperial Oil Limited IMPERIAL OIL LIMITED Highlights

PROGRESS TODAY...

From Imperial's contributions to Canadian communities to major investments that will help ensure we leave a clean, healthy environment for our children, 2002 was a year of significant achievement for the company.

Three new phases were opened at the Cold Lake bitumen SAFETY recovery operation, where closely spaced wells help to reduce Imperial’s environmental footprint. The expansion • With a safety record that continues to be among the best in includes a 170-megawatt cogeneration facility. Canada, Imperial recorded its second-best year for safety performance. • The Nobody Gets Hurt initiative, which is aimed at helping Imperial achieve its goal of zero workplace injuries and illnesses, was introduced throughout the company.

ENVIRONMENT

• More than $375 million was invested in projects aimed at protecting the environment and improving safety. This included a $300-million investment in Imperial’s four refineries as part of a multi-year project that will enable the company to eliminate virtually all sulphur from its gasoline before the end of 2003, and a substantial investment in the building of two cogeneration facilities, a $250-million initiative that The Royal Canadian Mint introduced a $100, 14-karat gold coin to commemorate Imperial’s major oil strike will significantly improve energy efficiency and reduce emissions. at Leduc, Alta., in 1947. • Recovering 99.7 percent of the solution gas produced with crude oil, Imperial once again had the best recovery rate of Alberta’s 50 largest oil producers.

COMMUNITY

Our total community giving was $7.8 million. 2. • $6.7 million was contributed through the Imperial Oil Foundation to more than 400 non-profit organizations throughout Canada, with a focus on youth and education. • $175,000 was given through the Esso Community Program, Energy efficiency at the company’s four refineries continues to improve. Today, they are about 40 which supports Esso retailers in their community activities. percent more energy efficient than 30 years ago. CORPORATE CITIZENSHIP REPORT

A FUTURE OF PROMISE

• $2.4 million was contributed to United Way-Centraide campaigns across the country, a 14-percent increase over 2001. Of that amount, employees and annuitants raised $1.5 million, with the Imperial Oil Foundation contributing a further $900,000. • $715,000 was provided to support amateur hockey.

CORPORATE GOVERNANCE

• Building on a long-standing tradition of good corporate governance, Imperial made a number of changes to the nature and

Employees and retirees across the country structure of its board of directors, reflecting existing and proposed participated in a variety of events to raise money requirements as well as best practices. for the United Way-Centraide. • The company’s incentive compensation programs have historically been cash based and reported against earnings, a tradition that was reaffirmed in 2002.

FINANCIAL PERFORMANCE

• Capital investments of $1.6 billion were made to expand or improve operations across the country. • Governments received $1.3 billion in taxes and royalties directly from Imperial, which generated a further $3 billion of government tax revenue through sales of products. Imperial opened three community offices in the • With earnings of $1.2 billion, Imperial met the primary Northwest Territories, enabling it to share information about the Mackenzie gas project with local residents. responsibility of business to stakeholders – to remain financially Other initiatives in the North included a $350,000 contribution to improve the literacy skills of children. successful. • Medium-term notes issued by Imperial during the year received a Triple-A credit rating from Standard & Poor’s Corporation. • With total returns, including capital appreciation and dividends,

of three percent, Imperial shares substantially outperformed the 3. S&P/TSX composite index, which recorded a 12-percent loss. Over the last 10 years, the total annual return on Imperial shares has averaged 17 percent, compounded.

A proud sponsor of Canada’s men’s and women’s • The annual dividend payment increased to 84 cents a share, national hockey teams, Imperial shared the joy of the representing the eighth consecutive year of dividend growth. nation when both teams won gold at Salt Lake City. IMPERIAL OIL LIMITED A commitment to the community

For more than 120 years, Imperial has remained profitable while at the same time contributing to the Canadian community in many and varied ways

Supporting environmental education Teaching children about conservation, biodiversity and the environment is vitally important, and our contributions to Canadian zoos are helping to do this. With more than 5,000 animals, representing 460 species, and the largest collection of tropical and rare plants in Canada, the Toronto Zoo attracts children from a wide area. A supporter of the zoo’s education program since 1999, Imperial announced a $125,000 grant in 2002 A grant from Imperial is helping a wetlands society in Bonnyville, Alta., build a 10-kilometre walking trail, as well as a number to help build a new of viewing stands where hikers can take a break while reading about the flora and fauna of the surrounding wetlands. facility to support the zoo’s environmental and By doing its job well, Imperial does the most good for Tax payments help support social services conservation education programs. the most people. That job is finding and producing Imperial’s support for communities takes many forms. In recent years, the oil and natural gas and providing fuels and chemical In 2002, for example, governments received a total of company has also made products at competitive prices, safely and in an $4.3 billion from the company in the form of taxes and contributions to help environmentally responsible manner. In doing its job royalties ($1.3 billion in direct payments and a further develop programs at both the Granby Zoo, well, Imperial helps fuel the Canadian economy. $3 billion generated through sales of products). Nearly near Montreal, and the It provides jobs. It supplies energy and high-quality double the total amount of payments to company Calgary Zoo. 4. products that are essential to both industry and employees, dividends to shareholders, and business- individuals. And it generates billions of dollars in reinvestment and research-development costs, these local, provincial and national tax revenues. tax revenues and royalties help governments fund Setting an example for responsible corporate education, health care and other essential social citizenship by going about its job with honesty and services throughout Canada. adhering to the highest ethical standards is extremely important to Imperial, which considers its reputation A responsibility to share knowledge for fair and ethical dealings in all of its relationships With roots deeply planted in Canada and decades of to be an important business asset. experience in the development of natural resources, CORPORATE CITIZENSHIP REPORT

Imperial can make a significant contribution to the Helping hospitals advancement of public policy and believes it has a In 2002, Imperial announced four major grants to responsibility to share its knowledge in those areas health-care organizations. where it has expertise. • The Alberta Children’s Hospital is receiving $250,000 The open exchange of ideas is a cornerstone of over five years to help fund the Southern Alberta Child Canadian society, and in 2002, the company invested & Youth Health Network and the Family & Community Resource Centre. $200,000 in memberships to organizations devoted to • The Capital Health Authority in Edmonton is receiving discussing and understanding issues affecting Canada. $250,000 over five years for a program designed to help The company shares its perspective on public policy make school health services more accessible to children matters in a number of ways, including through its in inner-city schools and their families. Evidence Math matters suggests that increasing access to school health Esso Math Camps, run by Web site. services, including those that lead to early detection the Canadian Mathematical of health and learning problems, can have a significant Society, give gifted math Working with neighbours impact on a child’s ultimate success in life. students from across the • The Norfolk General Hospital in Simcoe, Ont., is country the opportunity to Our community involvement takes many forms. In the receiving $150,000 over three years to redevelop its go beyond the high-school Northwest Territories, where the company is leading a emergency facility and to expand its library and curriculum. In addition to project to develop trillions of cubic feet of natural gas health-education facilities. developing their skills, the in the Mackenzie River delta, for example, Imperial • The Dartmouth General Hospital in Nova Scotia is students have the chance receiving $150,000 over five years for the construction to prepare for national and has opened community offices in Inuvik, Fort Simpson and equipping of a pediatric room in its emergency international competitions and Norman Wells to help build working relationships department. against some of the world’s with neighbours. The offices offer information about best young mathematicians. the project, advance regional employment and business Last year, students who had attended Esso Math opportunities, and enable northerners to provide input or in conjunction with company-sponsored activities. Camps won gold, silver into the project plan. The project itself provides for In Sarnia, for example, Len Carey, who works in the and bronze medals at the significant direct involvement by Aboriginal peoples, research department, served as chair of Lambton International Mathematical who are represented by the Mackenzie Valley Aboriginal Olympiad in Glasgow, College’s board of governors. And in Toronto, Jim Scotland. In 2002, Imperial Pipeline Corporation. Imperial has been involved in Levins, who directs Imperial’s corporate safety, health announced a three-year, the development of a number of successful Aboriginal and environment programs, is chair of the Safe $105,000 grant to help peoples’ business ventures, including Shehtah Drilling Communities Foundation, a company-supported fund the camps, which in the Northwest Territories and Pimee Well Servicing it has been supporting organization that works to make communities safer. He since 1999. in Alberta. is also on the board of the Imperial-sponsored Learning The company also Our employees also get involved in their communities Partnership, which is dedicated to channelling business supports a number of on an individual basis, either through personal interest support for public education into focused programs for camps across the country designed to foster children’s interest in science. Among these are In 1923, a typhoid epidemic devastated the Northern Ontario the Manitoba Museum’s 1923 town of Cochrane. When the seriousness of the epidemic Science Discovery Day was realized, Imperial sent two of its nurses, along with Camps in Winnipeg and financial assistance, to the town. “What you are doing to relieve the distress in the Town of Cochrane is well worth commendation,” wrote R.S. Taylor of the Discovery Centre’s 5. Summer Science Camp in the Canadian Red Cross Society in response to the support offered by Imperial. Halifax, both of which offer “If all companies interested were taking similar action, the situation at Cochrane hands-on workshops and would indeed be greatly relieved.” live science demonstrations. On a more personal note, A.L. Hancock, a resident of the town, wrote: “I wish to thank you … for your kindness and thoughtfulness in sending us two nurses and in supplying our home with pure milk and water during the epidemic of typhoid from which our town has so greatly suffered.” Six members of Hancock’s family of eight were afflicted with the illness. All, including the four pictured at right, recovered. IMPERIAL OIL LIMITED A commitment to the community (continued)

Working with Aboriginal communities Imperial has a long history of working with Canada’s Aboriginal peoples to develop mutually beneficial business, employment and educational opportunities. For example, in Northern and Western Canada, the Imperial continued its tradition of supporting amateur hockey across Canada, providing $715,000 to a variety of programs company funds scholar- in 2002. Through the Esso Medals and Certificates of Achievement program, for example, the company supports young ships for Aboriginal hockey players, recognizing dedication, effort and fair play. It is also a strong supporter of women’s hockey and sponsors students to assist them both the Canadian women’s national hockey team and the Esso Women’s National Hockey Championships. in acquiring the academic qualifications and technical schools. These are just two of the hundreds of employees skills they need to compete who are making a difference in their communities. for jobs in the oil and Contributing through others gas industry. Imperial also contributed $425,000 through its Giving is an Imperial tradition And in Southwestern partnerships in Syncrude Canada and the Sable Imperial contributed $7.8 million to increase the Ontario, Imperial sponsors Offshore Energy Project. a number of educational One of the many initiatives it supports through quality of life in Canadian communities in 2002, programs aimed at building Syncrude (the Alberta oil sands consortium in which building on a tradition of corporate giving that began the math and science Imperial holds a 25-percent share) is Careers: The in 1894, when the company made its first donation to skills of students from Next Generation. Syncrude is the founding partner a Newfoundland seamen’s mission. the Six Nations of the of the initiative, which addresses the twin challenges Grand River, and also of youth employability and a potential shortage of Today, the majority of the company’s community supports a program at Six skilled workers in Alberta. Developing programs support is delivered through the Imperial Oil Founda- Nations Polytechnic that that provide opportunities for students to alternate tion, which in 2002 contributed $6.7 million to more enables mature students periods of academic study with work placements, than 400 organizations in Canada. The funds supported to boost their math and Careers has assisted hundreds of young people science marks so that they across the province. education, health, community services and the arts. can meet university or Through the Sable project (the East Coast natural Sixty percent was specifically directed to programs technical-school entrance gas operation in which Imperial holds a nine-percent focused on youth and education – we believe that requirements. share) it is involved in such initiatives as a business- by supporting youth and education, we can make a 6. The company also education partnership in Halifax with Joseph Howe provides tuition funding Elementary School, which provides a number of contribution to preparing young people to be more for Aboriginal students important resources to the inner-city school. successful in an increasingly global marketplace. attending Lambton and The Sable project is also the prime corporate Some of the organizations that receive support from Mohawk community sponsor of the Stan Rogers Festival. Named in the foundation are listed on the Imperial Web site. colleges. As well, the honour of the renowned Canadian folksinger, the Nanticoke refinery annual music festival, held in Canso, N.S., draws In addition to the company’s giving through the provides job-shadowing thousands of people from across North America. Imperial Oil Foundation and its funding of the and summer-employment Aboriginal Scholarship Program, individual operations opportunities for local First Nations students. directly support a number of local activities and events. CORPORATE CITIZENSHIP REPORT

A focus on math, science and technology Imperial’s vision in education is to contribute to building a lifelong learning system in Canada that ranks among the best in the world. Since we believe that Canada’s future progress is predicated, in large part, on advances in science and technology, the company’s educational support is focused on programs that enhance math, science and technology education. At the university level, Imperial encourages research Helping to ensure that in areas of interest – including the environment – to children are not hungry its petroleum, chemical and energy resource development and therefore better able businesses through the University Research Awards to learn, a number of employees from the program, which provides funding for specific research Strathcona refinery helped projects carried out by full-time faculty members and provide hot lunches for students under their direction. In 2002, the company 2,300 students in 14 schools directed 46 of these awards – totalling $650,000 – to through Edmonton’s School Lunch Program. While projects at 18 Canadian universities. most employees served lunches, one ran a course Connected to conservation for young chefs, which Imperial supports a number of environmental and taught children how to make nutritious, low-cost conservation-related projects across the country. meals for their families. In Alberta, for example, we provide funds that enable the Calgary Wildlife Rehabilitation Society to produce educational material. The material helps create awareness of the group’s work in treating injured and orphaned animals, enabling them to return to their A student studies the temperature of soil as part of a project funded by a University Research Award. The project, headed natural habitats. In Bonnyville, near our Cold Lake by Dr. Peter Kershaw of the University of Alberta, is examining facility, our support is helping a local wetlands society the impact on subalpine tundra of crude oil spilled from the build a 10-kilometre walking trail. Canol pipeline, which was built during the Second World War to supply oil to Allies in the Pacific. In Ontario, the company funds a range of initiatives

In the minds of many Canadians, Imperial and 1936 hockey are inseparable. The association started in 1936, when the company began sponsoring Hockey Night in Canada radio broadcasts featuring the play-by-play voice of Foster Hewitt. The 1930s also saw the birth of another enduring hockey tradition, the naming of three star players at the end of every game, a custom introduced by Imperial to promote its 3 Star gasoline. As Scott Young wrote in his 1985 book Hello Canada! The Life and Times of Foster Hewitt: 7. “The Leafs and Foster Hewitt and the other teams in the NHL, along with Imperial, had combined to produce the greatest single national once-a-week get-together Canada had ever known.” In fact, the broadcasts were so much a part of Canada that during the Second World War, Canadian soldiers overseas asked if there was any way of receiving them. Accordingly, Imperial began financing 30-minute condensed versions of Hockey Night in Canada, which were transmitted by short-wave to Britain and aired by the BBC. IMPERIAL OIL LIMITED A commitment to the community (continued)

mation and public education services for children and youth throughout the country. Imperial’s funding supports an awareness program in schools, which works to ensure that every young person in Canada knows about Kids Help Phone. In 2002, employees, retirees and the company itself contributed Helping retailers $2.4 million to United Way-Centraide support their campaigns across Canada, an increase communities of 14 percent over the previous year. Through the Esso Community Program, The company also supports the Imperial provides grants volunteer efforts of its current and to retailers and associates retired employees through the Volun- across the country to teer Involvement Program. In 2002, support their community Founded in 1985, Opera Atelier has earned international renown for bringing the initiatives, which range ballet-rich operas of the baroque period to contemporary audiences. Supporting the company awarded grants totalling from sponsoring local Opera Atelier since 1987, Imperial currently directs its contributions to the Dance $270,000 to 254 not-for-profit groups sporting events and Through Time program, a weekly series of free performances presented at Toronto's to which employees and retirees con- Art Gallery of Ontario by students of the opera company’s School of Atelier Ballet and teams to raising funds for young professional dancers, such as Natalya Gomez and Nathaniel Kozlow (above). tribute their time. hospitals and educational programs. In Montreal, for example, from the Connecting Kids with Conservation program A tradition of hockey one of these grants sup- through the Long Point Foundation for Conservation to Imperial has long been a strong supporter of amateur ported an effort to raise the Owl Foundation, which rehabilitates injured owls. In hockey. From supporting minor league players through funds and collect food for families in need. About 2002, the Owl Foundation lost almost 100 northern owls the Medals and Certificates of Achievement Program 60 Esso dealers together to West Nile virus; a contribution provided funds for an to sponsoring Canada’s national teams, the company’s raised $45,000, which they isolation building to help stop the spread of the disease hockey giving is aimed at encouraging young players to contributed to La Grande and enable more of the owls to return to nature. Guignolée, Montreal’s Imperial also supports SEEDS (Society Environment annual holiday drive in 2002 GIVING December. “This event and Energy Development Studies), which distributes was a golden opportunity educational material on energy and the environment for the company and its to schools across Canada. retailers to show that $800,000 we care,” says Montreal sales manager Charles Helping local communities TOTAL Normandeau. “Caring – About 30 percent of the contributions support a broad $4.5 MILLION $7.8 MILLION and showing we care – is range of projects aimed at improving the quality of life $2.5 what the Esso Community MILLION Program is all about.” in Canadian communities. In Cold Lake, for example, 8. Last year, Imperial and it supports Youth Drop-in Nights, a program in which Esso-branded retailers teens hold monthly evening get-togethers aimed at teamed up to contribute promoting active living and healthy lifestyles among about $350,000 to local young people. community activities Education across the country. A contribution to Breakfast for Learning supports Community the delivery of this vital child-nutrition program to Arts and culture a number of Aboriginal communities.

The company also supports the Kids Help Phone, In 2002, Imperial contributed $7.8 million to support a wide which provides telephone counselling, on-line infor- range of activities and organizations throughout Canada. CORPORATE CITIZENSHIP REPORT

challenge themselves, shooting for their goals and dreams both on and off the ice. In 2002, Imperial directed $715,000 to amateur hockey in Canada.

Helping young people appreciate the arts Helping kids read The arts also receive support. A grant of $350,000 is In this area, too, the company helping schools in the focuses its giving on programs Northwest Territories and activities that typically improve the literacy skills of children from kinder- have an educational garten to grade 6. The component and are aimed at grant is being shared by young people. In Vancouver, the territory’s school for example, it supports Opera boards and will be used to develop library Experience, a program offered resources to support the by the Vancouver Opera that development of literacy gives high-school students and, in so doing, increase insight into the production students’ employability in the future. of operas. “There is no more On the other side of the important gift we can give country, we support an Art children to equip them for Gallery of Newfoundland the future than literacy,” says K.C. Williams, senior and Labrador program vice-president of Imperial’s called Artists-in-the- resources division. “It is Schools, which helps the key to opening minds Friends Amy Marks (left) and Jennifer Adams met through the Imperial-supported Best Buddies bring creativity into the and opening doors of organization, which pairs university, college and high-school students with intellectually challenged opportunity.” people of similar ages and is credited with helping the latter to lead fuller, more independent lives. province’s classrooms. Imperial also supports a variety of other literacy- related initiatives across Despite the fact that The Loon’s Necklace, now a Canada, ranging from 1949 classic, was named Film of the Year at the first summer reading programs Canadian Film Awards in 1949, its creators, at libraries to the Canadian Budge and Judy Crawley, could not find a distributor for it. Children’s Book Centre’s Finally, Budge approached Imperial, which bought the Canadian Book Week, during which rights to the film. It then donated the rights to the Canadian authors and illustrators Education Association, enabling schools and libraries across the visit schools and libraries country to borrow the film, which tells the story of how the loon 9. in every province and got its necklace of white feathers. territory. But this wasn’t Imperial’s only involvement with Canadian film. In fact, the company played a role in the development of the Canadian film industry, sponsoring a number of productions during the 1950s. Two of these, Newfoundland Scene and The Seasons, also earned Canadian Film of the Year honours. Later on, to mark its centennial in 1980, the company sponsored The Newcomers, a series of seven hour-long television dramas that trace the contribution of immigrants to Canada’s social history. IMPERIAL OIL LIMITED Caring for people’s health and safety

Imperial believes that nothing is more important than the health and safety of its employees, contractors, neighbours and customers. Safety is the company’s number one priority

Imperial’s goal is to have a work environment where nobody gets hurt, and employs rigorous programs and management systems to help ensure that it operates in a safe and environmentally responsible manner. Over the years, the company has made great strides in improving safety – its safety record is among the best in Canadian industry. In 2002, the company achieved its second-best year for safety performance – recordable safety incidents, Safety and emergency- such as injuries that require medical treatment or result response training are a in lost workdays, were only slightly higher than during priority for employees, the previous year, when the company recorded its best Susan Workman, a technologist at the Sarnia Research Centre, such as these field and year ever for safety performance. Unfortunately, there fits Mohawk College co-op student Corrin Knight with a face shield, plant operators at Cold helping to ensure that she is properly protected while working. Lake, who are undergoing was also a contractor fatality, a tragic reminder of the training in firefighting. importance of Imperial’s ongoing work in this area. The Nobody Gets Hurt concept involves everyone. All contractors and employees need to identify and Nobody gets hurt eliminate unsafe work practices; all of us need to go In a continuing effort to improve its safety performance, beyond being responsible for our own safety and and believing that work-related safety incidents are intervene when observing others working unsafely. preventable, Imperial has introduced the Nobody Gets Priorities for operating have been established to Hurt concept across the company. Further strengthening leave no ambiguity that safety is the top priority. the effectiveness of the Operations Integrity Management As well, clear safety rules – and measures to ensure System (OIMS – see page 15), the concept is increasing people comply with them – are in place throughout the company’s focus on improved leadership, better the company. A number of other improvements identification and addressing of risks and hazards, and designed to reduce the potential for work-related more effective execution of already established OIMS injuries and illnesses are also being advanced. processes and procedures. Imperial is actively working to improve the safety performance of its contractors. This includes Achievements reflect focus on safety identifying the best-performing contractors and An emphasis on health and safety in the workplace resulted in a number of achievements in 2002. developing contractor-specific risk-reduction plans. •The company recorded its second-best year for safety Several formal analyses of how employees interact performance, following its best year ever in 2001. It also with their work environments have been conducted. recorded the fewest number of employee and contractor This initiative has resulted in facilities being redesigned injuries resulting in lost workdays in its history. • The chemical organization received a safety award from (including the reconfiguration of some control rooms) or the Canadian Chemical Producers’ Association as a result tasks being changed to reduce the potential for incidents. 10. of having zero recordable safety incidents. Driving is also receiving particular attention. The • The resources division had zero employee lost-time company has introduced upgraded driver-training incidents, and 11 gas-processing facilities were recipients of the Canadian Gas Processors Association’s safety programs to improve fleet and passenger-vehicle safety. awards for having recorded no lost-time incidents for at The training focuses on building awareness of potential least a year. In fact, Imperial’s facility in Boundary Lake, hazards and increasing route-risk assessment skills. Alta., hasn’t had a lost-time incident in the last 38 years. The company has also initiated more frequent truck • The company received seven Safe Handling Awards from Canadian National Railways for the safe shipment inspections and monthly driver meetings, at which of dangerous goods. safety issues are emphasized. CORPORATE CITIZENSHIP REPORT

Safety in the office TOTAL RECORDABLE Office-based injuries and illnesses accounted for about INJURY RATE 5 Based on 200,000 20 percent of total recordable employee safety incidents hours worked in 2002. Imperial has responded by introducing OIMS 4 for Offices, an extension of the company’s effective management system for operating sites. OIMS for Offices 3 includes a series of tools and training material designed Imperial employees Oil and gas industry to make employees aware of hazards that can exist in the employees 2 office and practices that can result in injuries. Computer Petroleum products industry employees 1 Operating sites regularly users, for instance, are at risk of developing repetitive- Imperial contractors provide open-house days strain injuries. To increase office safety, the company is Oil and gas industry for local residents. Displays contractors reviewing the ergonomic layout of each workstation and 0 at a recent open house at the Sarnia facility included has introduced a software tool called Office Athlete, 1998 1999 2000 2001 2002 an opportunity to see how which prompts computer users to take regular breaks, microscopic bacteria break leading them through helpful stretching exercises. Imperial achieved its second-best year for safety in 2002; its safety down contaminants in the performance record remains among the best in Canadian industry. plant’s waste water. Safety in the community To help ensure the safety of the communities in which also stands ready to assist fire and other authorities in it operates, Imperial has in place a series of emergency the community, should the need ever arise. response teams and procedures and regularly conducts drills and simulations to make sure it is ready to address Working with neighbours an operational emergency at any time. Recognized as a We know our neighbours have a direct interest in the leader in many areas of emergency response, the company safety of our operations. All Imperial operating facilities maintain regular contact with local communities to keep Asbestos funding them informed of important issues. This includes making In 2002, Imperial announced that it would provide them aware of what to expect during regular crisis $375,000 over three years to help fund a further three years of research into new therapies for the treatment simulations and drills, which are designed to ensure we of mesothelioma, a very rare, but difficult-to-treat, form are well prepared to deal with any operating incident. of cancer primarily caused by exposure to asbestos. Many of our sites hold open houses for local residents, Researchers at the London Regional Cancer Centre hope enabling them to learn more about company operations. to complete preclinical testing of the optimal treatment agents for the disease during the period of the grant. And major sites publish periodic safety, health and The grant continues Imperial’s funding of the project, environment reports to update neighbours on specific which it helped initiate in 1999 with a commitment to emissions from operations and progress in areas such as provide $350,000 over the initial three years. employee and contractor safety performance.

In 1953, Canadian industry had only one full-time industrial hygienist. His 1953 name was John Johnston (at right in larger photo), and he was hired by Imperial that year to take part in the company’s program of preventive 11. medicine. Johnston, who had done post-graduate research with the University of Toronto’s school of hygiene and Toronto’s Banting Institute, visited company plants all over Canada, providing advice on ways to prevent injuries and occupational health problems. He also examined all plans for renovations and new facilities, suggesting improvements that would make for a healthier environment. “My job,” he once said, “is to sell the idea of constant prevention and care.” Imperial’s focus on health and safety was well recognized. That same year, the corporation also became the first in Canada to receive the prestigious Health Achieve- ment in Industry award (smaller photo) from the Industrial Medical Association, an international body of doctors, for its “outstanding contribution to industrial health.” IMPERIAL OIL LIMITED Protecting the environment

Sharing the concern many Canadians have for the environment, Imperial is committed to environmental protection in all aspects of its business

Investing in low- sulphur gasoline In 2002, Imperial invested more than $300 million in its four refineries as part of a multi-year project, costing about $600 million, that will enable the company to eliminate virtually all sulphur from its gasoline. Before the end of 2003, the sulphur content of Imperial’s gasoline will be among the lowest in the world. The combination of new vehicle technologies and low-sulphur fuels will almost eliminate vehicular emissions of sulphur compounds. Innovative technology and helicopters enabled Imperial to conduct a seismic survey of a large-volume gas field with minimal At the Strathcona and environmental disruption at Gwillim Lake, B.C. Traditionally, such surveys have required tracts of land to be cleared to allow data Dartmouth refineries, acquisition points to be located and for equipment to be delivered and removed. At Gwillim, however, NavPacs (sophisticated navigational technology developed by the U.S. military), with support from helicopters, made it possible for the survey of the 270-square-kilometre SCANfining, a patented area to be conducted with very minor impact on the forest. Above, helicopters touch down in a clearing en route to the survey site. process co-developed with ExxonMobil, will be used (the process selectively Like all Canadians, we want to leave our children and them produce gasoline with virtually no sulphur removes sulphur while grandchildren a legacy that includes a clean, healthy (see sidebar at left) before the end of 2003. minimizing octane loss). environment and a country with a prosperous and During 2002, the company experienced nine In Ontario, new sulphur- growing economy that offers employment opportunities, operating incidents (such as spills at company removal facilities at the Nanticoke refinery will a high standard of living and affordable energy. Through facilities) that resulted in direct costs of more 12. also process gasoline the development and deployment of innovative than $75,000 each. This is only one more than transported via a new technologies, Imperial is committed to the dual goals the company’s 2001 record low of eight. Imperial’s pipeline from the Sarnia of meaningful environmental progress coupled with goal is to prevent all operational incidents and refinery. economic prosperity and well-being for all Canadians. is continuing its work to achieve this. In 2002, the company spent about $360 million on Environmental planning is a key part of the projects related to reducing the environmental impact company’s business planning process. As such, it is of its products. This included major investments in subject to formal stewardship. This ensures that it its four refineries as part of an initiative that will see receives the disciplined attention it deserves. CORPORATE CITIZENSHIP REPORT

GREENHOUSE Substance-release reporting COGENERATION 450 140 000 Residential households* GAS EMISSIONS Each year since 1993, Environment Canada has CAPACITY (MW) Millions of tonnes 400 of CO2 equivalent collected information from industries on releases 120 000 350 16 of substances for its National Pollutant Release 100 000 Inventory (NPRI). The list of substances has been 300 14 expanded several times and for 2002 included releases 250 80 000 Megawatts of electricity 12 to the air of sulphur dioxide and nitrogen oxides, 200 60 000 which are typically of higher volume than previously 10 150 listed NPRI substances. Based on this expanded list, Cumulative 40 000 8 Imperial’s 2002 emissions were significantly higher capacity (MW) 100 20 000 6 than those of 2001. For substances listed in 2001 and Number of households 50 previous years, however, emissions from Imperial’s 0 4 operations remained stable during the last five years 2 and are expected to decline over the next few years. Pre-90 91-95 96-99 00-02 03-04 *Number of typical Canadian residential households that 0 could be served by our cogeneration assets. Investing in energy efficiency 1990 1998 1999 2000 2001 We are investing heavily in cogeneration, which uses significantly (1990 includes subsequently Imperial is continuing to seek ways to improve less energy to generate electricity and steam than conventional divested operations) the energy efficiency of its operations. This is good methods. Imperial’s emissions fell by both for the environment and the bottom line. three percent between 2000 • Over the past 30 years, the energy efficiency of and 2001 and were well below the base year of 1990. Imperial refineries across the country has improved by about 40 percent, a level of reduction that is the solution gas produced with crude oil, which has equivalent to saving each year the amount of energy traditionally been flared or vented into the air. In 2002, needed annually to provide heat, light and power to the company recovered 99.7 percent of solution gas, GAS FLARING FROM OIL PRODUCTION about 400,000 Canadian homes. once again leading Alberta’s 50 largest oil producers Millions of cubic • To improve energy efficiency and reduce energy in this important area. feet per day costs and emissions, the company is investing • The Global Energy Management System is helping

9 $250 million in cogeneration facilities (see sidebar, identify opportunities for further improving the energy page 14). In November 2002, a 170-megawatt efficiency of company operations. Leading energy 8 facility began operating at the Cold Lake bitumen experts from ExxonMobil’s worldwide network have 7 recovery project. A 95-megawatt unit at the conducted energy audits at Imperial’s operating sites, 6 manufacturing complex in Sarnia is scheduled to providing comprehensive lists of site-specific oppor- 5 begin operating in 2004. tunities for improvement drawn from best practices

4 • We continue to make good progress in recovering being used around the world.

3

2 In 1954, Imperial’s researchers solved a problem that refineries around 1 1954 the world had been wrestling with: how to clean refinery effluent (waste 13. 0 water from both refinery processes and storm drains). The solution lay in a process called biological oxidation, which takes advantage of nature to rid the water

1998 1999 2000 2001 2002 of hydrocarbons. Hydrocarbons occur naturally in the environment, as do the microbes that eat them. The The company’s 99.7-percent biological oxidation process developed by Imperial takes advantage of this fact of nature. solution-gas recovery rate Hydrocarbon-eating microbes are harnessed in large tanks filled with refinery effluent and was the best among Alberta’s provided with optimal living conditions. The hungry microbes feast on the unwanted top 50 oil producers. hydrocarbons, and in so doing clean the water before it is returned to the rivers or oceans. This deceptively simple process is still used today by refineries around the world, with an average-sized refinery treating about 20 million litres of water a day. IMPERIAL OIL LIMITED Protecting the environment (continued)

NOx AND VOC EMISSIONS Tonnes per million barrels (Refining and chemical operations) Cogeneration facilities increase energy efficiency 80 To save energy and reduce emissions, Imperial is 70 investing $250 million in cogeneration, a process that uses natural gas fired turbines to produce, 60 simultaneously, electricity and steam, which is used in both petroleum refining and bitumen production. 50 By capturing heat from turbines and using it to make 40 steam, cogeneration consumes 30 to 50 percent less energy than producing steam and electricity 30 separately. Depending on the power-generating 20 fuel it replaces, cogeneration can lead to significant reductions in net emissions of greenhouse gases 10 and other substances. Last year, Imperial opened a 170-megawatt 0 cogeneration plant (right) to supply steam for the latest three phases of the Cold Lake bitumen 1998 1999 2000 2001 2002 production operation, as well as electricity for the NOx (nitrogen oxides) entire Cold Lake operation (surplus electricity is sold into the Alberta power pool). VOC (volatile organic At the Sarnia manufacturing complex, the compounds) company is building a 95-megawatt cogeneration Emissions of VOCs from facility, which will supply about 80 percent of the Imperial’s manufacturing operations continued to power used at the site after it is completed in 2004. decline; new cogeneration facilities will help reduce NOx emissions in the future. Responding to climate change • technology research to develop innovative, SULPHUR DIOXIDE EMISSIONS Imperial recognizes the seriousness of climate change commercially viable solutions to lower greenhouse 300 risks and realizes that they pose important questions for gas emissions globally. 270 the oil and gas business. While the company believes 240 that studies must continue so that the risks and AIR EMISSIONS vs. GROWTH 210 possible consequences of climate change can be better TRENDS IN CANADA 70 180 understood, it is taking actions both to reduce Percent change 60 150 greenhouse gas emissions now and to develop long- 50 120 term solutions. Imperial’s objective is to help Canada 40

90 achieve the twin goals of continuing economic growth 30

60 and meaningful environmental progress. Population 20

30 Initiatives taken by Imperial and its affiliated 10 Economic growth 0 companies include: 0 • scientific, technical and economic research on Vehicle kilometres -10 1998 1999 2000 2001 2002 14. climate change and proposed actions Emissions -20 Downstream (tonnes per • continuing efforts to improve energy efficiency and -30 million barrels processed) reduce emissions economically Upstream (tonnes per 1980 to 2000 million barrels of oil- • investments in advanced technology and research to equivalent production) reduce emissions that result from company operations Sources: Statistics Canada and the Fraser Institute. Significant further reductions in sulphur dioxide emissions and the use of Imperial products – for example, fuel- Continued improvements in fuel quality and automotive will result when the Sarnia cell and hybrid vehicle research efficiency have resulted in lower emissions despite increases cogeneration facility begins in the number of kilometres driven by a growing population. operating in 2004. CORPORATE CITIZENSHIP REPORT

OPERATIONS INTEGRITY MANAGEMENT Working to improve the environment SYSTEM The company’s efforts to protect the environment reach beyond major projects such as reducing sulphur A framework for operating in gasoline and building cogeneration facilities. all facilities safely, the For example: OIMS elements target • The company continues to sponsor and participate in 11 areas. several programs aimed at improving air quality. These • Management, include the Car Heaven program, which works to get leadership, commitment older, higher-polluting cars off the road; the Idle-Free and accountability Campaign; and the Smog Alert Response Program. • Risk assessment and • To minimize the amount of hydrocarbons sent to management landfill sites, Imperial has introduced a unique process • Facilities design and for cleaning oil tanks at the Sarnia site. The technique construction removes the buildup from the bottom of the tanks in • Information and such a way that it can be reprocessed at the refinery documentation to recover the hydrocarbon components. • Personnel and training • Playing a leading role in an initiative to set up used- • Operations and oil collection and recycling programs, Imperial has maintenance helped to establish programs in Ontario, Alberta, • Management of change Manitoba and Saskatchewan. • Third-party services • At the Norman Wells operation, it is continuing a • Incident investigation multi-year program to monitor water quality in the reduced by about 50 percent since 1999. and analysis Mackenzie River. • New technology is being applied to the work of • Community awareness • A family of peregrine falcons, an endangered reclaiming old well sites. By inserting equipment into and emergency species, is currently nesting at the Strathcona refinery, the ground to facilitate the digesting of hydrocarbons preparedness where environmental adviser Werner Groeschel (top by microbes, for example, the need to remove soil is • Operations integrity right) is working with biologists from Alberta Fish eliminated. assessment and and Wildlife to tag and monitor the birds. • Double seals and floating-roof systems have been improvement • Through its leak-detection and repair programs, installed on storage tanks at a number of operating Imperial monitors thousands of refinery valves and sites to further reduce emissions. pump seals, which are a major source of emissions to • New procedures for both loading trucks with and the air. As a result of the programs, fugitive emissions sampling residual solids from the coker unit at the at the Dartmouth refinery, for example, have been Sarnia site have been introduced, significantly reducing coke dust in the air during these processes. • A project has been initiated to evaluate new technologies for detecting leaks in pipelines from the air. One of these uses thermal imagery to identify differences in temperature – which can indicate a leak – along pipelines. • The Sarnia chemical plant is continuing to produce a 15. cyclopentane-based blowing agent for use in manufacturing foam products. The plant was the first facility in Canada to manufacture the agent, which provides an alternative to ozone- depleting chlorinated and fluorinated blowing agents. IMPERIAL OIL LIMITED Straightforward management systems

Imperial is committed to maintaining the highest standards of ethics, corporate governance, financial control and operational integrity

Since Imperial was founded more than a century ago, safety; executive resources; and nominations and high ethical standards and business integrity have been corporate governance) are independent directors. part of the fabric of the company. Over the years, The audit committee is empowered to investigate it has communicated the importance of these values any matter and has complete access to all company to all those associated with the company and has facilities, personnel, records and books. The developed policies to guide employees in all areas of committee reviews the company’s annual and quarterly business conduct. These straightforward policies apply financial statements, accounting practices, and to everyone, without exception. business and financial controls, as well as the findings Our high standards of ethics and business integrity of the internal audit program. are reflected in all our activities, corporate policies We monitor current standards, requirements and and management systems. Imperial’s approach is best practices for corporate governance, making straightforward and central to long-term sustainable changes where appropriate to ensure adherence business results. to the highest standards. For example, in 2002, a For example, the ethics policy – established in 1978 – number of alterations were made to the nature and To ensure the provides employees with specific direction on such structure of the board to reflect new and proposed independence of matters as conflict of interest, integrity of dealings both requirements and best practices. As a result: Imperial’s board of within and outside the company, competition law and • the four board committees are composed exclusively directors, the majority of its members are not restrictive trade practices. Every year, all directors and of independent directors employees of the most employees of the company sign a statement • non-employee directors meet regularly in the absence company. Non-employee acknowledging that they agree to abide by the policy. of Imperial’s management, with a non-employee board members are All other employees do so every four years. director chairing the meetings (clockwise from top left): Pierre Des Marais II, Other corporate policies cover a wide range of • directors, committees and individual members of president of Gestion issues, such as safety, health and environmental committees have the right to engage an outside adviser PDM Inc.; Jim Shepard, performance, employment equity and harassment at the company’s expense retired chairman and in the workplace. The policies are used not only as • the audit committee has the authority to establish chief executive officer of Finning International Inc.; a guide to how business should be conducted, but as processes for the confidential receipt and handling of Victor Young, a director a starting point for discussions between employees employee complaints. of several corporations; and managers, who meet regularly to review business Historically, Imperial’s long-term incentive Roger Phillips, retired practices. Employees are encouraged to raise any compensation programs have been cash based and president and chief executive officer of issue, question or concern with their manager, tied to earnings and share performance, with incentive IPSCO Inc.; and Sheelagh ethics advisers or human resources contacts. awards being reported as expenses. In 2002, to meet Whittaker, managing competitive practices, the company introduced a stock- director, commercial High standards of corporate governance option program. However, to better align management sector, Electronic Data Systems Limited, Integrity starts at the top of any organization, and incentives with shareholder expectations, the company

16. London, England. Imperial and its board of directors are committed to a decided to return to straightforward cash based high standard of corporate governance. The company incentive compensation programs that will again be has in place processes and structures that contribute reported as expenses against earnings. to the sound management of business with a view to How the company achieves its results is as important enhancing shareholder value. as the results themselves. With a straightforward capital To ensure independence and objectivity, the majority structure and a transparent approach to financial of board members are not employees of the company or management and reporting, the company’s results can its major shareholder, ExxonMobil. Chairs and members be clearly and readily understood by its shareholders. of board committees (audit; environment, health and Special-purpose entities are not used, all financial CORPORATE CITIZENSHIP REPORT

arrangements are straightforward and fully recorded violation of company policy or other ethics-related and disclosed, and special adjustments or pro forma problems should occur, the appropriate manager reports are not used to explain operations or results. promptly reviews the incident and takes corrective The company’s factual results speak for themselves. action, which may include terminating individuals. Imperial’s corporate governance guidelines are Upward reporting guidelines, which extend to the available on its Web site. company’s management committee and board of directors, ensure appropriate management review Disciplined business and financial controls and action. The integrity of internal financial and operating Further ensuring the integrity of information, information is essential to the effective management members of the internal audit staff independently assess of any corporation. Imperial takes a disciplined compliance with policies and procedures and evaluate approach to business controls, which guides the way the effectiveness of financial and other controls. work is conducted at the company, including how it Managers are required to evaluate all internal audit records business transactions and protects its assets. findings and recommendations and to take appropriate Our commitment to maintaining a sound financial corrective action. control environment is supported by the Control Integrity Management System (CIMS), which Operational integrity and citizenship establishes a consistent controls framework based on a The company recognizes that many of its operations set of clearly defined expectations that every operation and products, although vital to the modern economy, must fulfill. It provides a structured approach to involve an element of risk to employees, contractors, assess financial control risks, establish procedures for the public, the communities in which it operates and mitigating concerns, monitor activities for conformance the environment. with standards, and report results in a timely manner Managing this risk is a critical aspect of our business. to management. In 1992, the company adopted the Operations Integrity Every employee is expected to understand and meet Management System (OIMS – see page 15), a structured the control expectations of his or her work, and process for managing the safe operation of all facilities. managers in each part of the organization are required Lloyd’s Register Quality Assurance Ltd. has attested to confirm annually in writing their compliance with that OIMS meets the ISO 14001 requirements for a Imperial takes a both control and financial-reporting standards. If a comprehensive environmental management system. transparent approach to financial management and reporting. We want Imperial’s annual meeting in 1930 our financial and 1930 was one of the most memorable in operating results to be its history. It was at this meeting that clearly understood by company employees presented the board of directors shareholders and others with $35,700, an enormous sum in those days. with a stake in the Employees across the company had raised the money company and strive to to form the nucleus of an endowment fund to be used present them in a for humanitarian purposes outside the company. straightforward manner Stated the plaque that was given with the generous gift: 17. through such documents “As a tangible and enduring expression of gratitude and as the 10-K, annual and loyalty to the president, directors and shareholders of quarterly reports. Imperial Oil Limited, who have created an actual community of interest between the company and its employees, the employees of Imperial Oil … have voluntarily inaugurated a trust fund to be devoted to humanitarian purposes.” IMPERIAL OIL LIMITED Developing Canada’s potential

Assessing Canada’s energy outlook is central to Imperial’s business and investment planning. Forecasts suggest that the demand for energy in this country will continue to grow in the foreseeable future

Three new phases of the Cold Lake operation went into production in 2002, helping to develop Canada’s vast oil sands potential. The new phases will contribute an average of 30,000 barrels a day to Cold Lake production over an estimated 25-year operating life. Above, pipelines deliver steam to wells, where it is injected into the reservoir to heat the oil, enabling it to be pumped to the surface.

Since the days of the Industrial Revolution, Canada’s What will Canada’s energy future be? growth has been encouraged by the availability of Most authorities – including domestic ones such as the MAJOR EFFORT TO MEET GLOBAL DEMAND relatively plentiful supplies of energy. From our National Energy Board and international ones such as Millions of oil-equivalent abundance of water, which powered early mills and the International Energy Agency – agree that demand barrels per day more latterly has been used to produce hydroelectricity, for energy in Canada will continue to increase. 160 to our extensive reserves of crude oil and natural gas, This assumption is based on the expectation that Canadians have long been fortunate in having ready Canada’s economy will continue to grow, and there

120 access to reliable, affordable supplies of energy. This is a proven correlation between economic growth has contributed to the high standard of living that and increased demand for energy. Canada enjoys compared with many other countries. Forecasters have projected that the Canadian 80 During its 123-year history, Imperial has played economy will grow by about two and a half percent

18. an important role in supplying energy and a variety a year over the next two decades. That’s good news, 40 of other products to North American and world because a growing economy provides job opportunities markets. Today, the company’s products are vital to and greater prosperity for Canadians. 0 almost every area of life, from medicine and agriculture The amount of energy needed to support economic

1980 1990 2000 2010 to child care and transportation, and it is dedicated to and population growth is expected to increase,

Oil and gas demand ensuring that it will not only continue to meet the although only by one and a half percent a year, needs of Canadians in these areas in the future but reflecting continued improvements in the efficiency Existing production will do so in an environmentally and economically with which energy is used, largely as a result of

Required new production sound manner. technological innovation. CORPORATE CITIZENSHIP REPORT

CANADIAN ENERGY needed by a growing population, it may see expanded DEMAND use in electrical-power generation. Thousands of barrels per day of oil equivalent Although wind and solar power are expected to be among the fastest-growing sources of energy supply in Total energy demands Other energy Wind and solar coming decades, it is thought that their total 8000 contribution two decades from now will be relatively 2000 3 7000 small. This expectation is based on essentially the 1500 same factors that result in wind and solar power making 6000 2 1000 a relatively minor contribution to energy supply today. 5000 1 500 Not only are renewables such as wind and solar power 4000 expensive when compared with more conventional 0 0 3000 energy sources, but they can neither provide the “on 1980 1990 2000 2010 2020 1980 1990 2000 2010 2020 2000 Hydro Wind demand” energy that our society has come to expect Nuclear Solar nor supply the peak-period demands of the hottest and 1000 Biomass coldest days of the year. Storing energy generated 0 (Wind and solar less than 3,000 during off-peak periods is also very difficult. oil-equivalent barrels per day)

1980 1990 2000 2010 2020 Fortunately Canada, unlike many developed countries, Other How will this growth in demand be supplied? has significant potential energy sources of many kinds Coal Gas It is expected that in 2020, crude oil and natural gas, to develop for the future. Oil which currently supply about two-thirds of Canada’s Imperial believes that Canadian policy should be total energy requirements, will be meeting about the aimed at fairly encouraging all sources of energy that Although renewables such as wind and solar same proportion of total demand in this country as can be developed on an economic basis and in an power are expected to be they do today. environmentally sound manner. among the fastest-growing sources of energy in coming There are a number of reasons why crude oil and In this way, Canada’s energy industries can continue decades, they will still natural gas will remain important sources of energy. making the same major contribution to the Canadian supply a relatively small Certain sectors of the economy, such as transportation, economy as they have in recent decades. Energy proportion of total energy in the near term. will continue to be very heavily reliant on products exports are a very significant source of export revenue manufactured from crude oil for the foreseeable future. for this country. Net energy exports in 2001, for This is a matter of both physics and economics. Products example, totalled about $37 billion – more than half made from crude oil offer a powerful combination of of Canada’s merchandise trade surplus. attributes – they provide highly concentrated energy that is relatively easy to transport and store, inexpensive ENERGY USE 8 to manufacture, and supported by an extensive supply AND ECONOMIC GROWTH ARE infrastructure. LINKED 6 As a result, in areas such as aviation and commercial Percent annual rate of growth 4 trucking, economic alternatives to petroleum products are not expected to emerge for many decades. It is 2

also anticipated that petroleum products will be the 19. 0 dominant source of motive energy for automobiles and Canadian economic other personal-use vehicles until at least 2020, given growth -2 the large stock of existing vehicles and relatively slow Canadian energy -4 penetration into the market of alternatives such as consumption fuel cells. -6 In addition, demand for natural gas is expected to grow 70 75 80 85 90 95 00 Year in the next few decades. Besides being a source of fuel Over time, there has been a strong correlation between for the increased number of homes and other buildings economic growth and demand for energy. IMPERIAL OIL LIMITED CORPORATE CITIZENSHIP REPORT

Developing Canada’s potential (continued)

Quality products stations, about 60 percent are owned by dealers who Today’s sophisticated engines require equally sophisti- operate the facilities according to standards set by the cated product-development and testing facilities. company, while the remaining 40 percent are company Established more than 75 years ago, Imperial’s owned. Imperial provides extensive training to dealers, research centre in Sarnia is today one of the most agents and their employees to help ensure that all advanced in North America. Its all-weather chassis customers receive “the best experience to enhance dynamometer – the only one in Canada able to test their life on the move.” As well, Esso service stations fuels and lubricants under actual running conditions are equipped with vapour-recovery equipment to reduce in temperatures from -40 C to 40 C – ensures that vapour emissions to the air. In summer, customers in All Esso fuel and products Esso products will perform under the full range of some parts of the country may be greeted by “car are tested throughout the temperatures typically experienced in this vast and angels,” who, as part of the Imperial-sponsored Car manufacturing and varied country. Heaven program, educate drivers about ways to reduce distribution process to make sure they meet All fuel products sold under the Esso brand name energy consumption in day-to-day driving. stringent specifications. are rigorously tested throughout the manufacturing The company also operates two customer service All gasoline sold at the and distribution process to ensure they meet stringent centres in New Brunswick, which are staffed by more more than 2,000 Esso specifications. All grades of gasoline sold through than 350 highly trained people who expedite orders, retail outlets carries our product-quality guarantee. Imperial’s network of more than 2,000 conveniently handle billing for a variety of products, and respond located Esso retail outlets carry the company’s unique to customer queries and concerns. product-quality commitment guarantee. This Because motorists want convenience, almost all Esso assurance of quality applies not only to gasoline service stations sell food and a range of convenience purchased at Esso service stations but also to jet items in addition to petroleum products. An alliance and diesel fuel, home-heating oil and the company’s with Tim Hortons will see the food chain’s full soup- complete range of lubricants and greases. and-sandwich menu, in addition to coffee and freshly baked goods, offered in most of the company’s On the Getting products to customers Run locations across Canada. For most Canadians, the human face of Imperial In 2001, Imperial also introduced the Speedpass is represented by the thousands of people who transponder payment system, which allows customers work at Esso service stations, aviation outlets and to pay for gasoline, food and convenience items with commercial sales depots and who deliver home-heating a wave of a key fob. Speedpass readers have now been oil across the country. installed in more than 630 Esso stations in major Of the more than 2,000 Esso retail outlets, or service markets across Canada.

In 1919, Imperial’s legendary geologist Ted Link, 1919 who was then only 23, led a six-man crew by railway and riverboat on a two-month journey to Fort Norman, N.W.T. There, at a site that was to become known as Norman Wells, Link, with a sweep of his arm, told the crew to drill “anywhere around here.” The next year, at a depth of 235 metres, 20. the crew struck oil. It was Canada’s first major oil find since the discovery of oil near Petrolia, Ont., 63 years earlier. Unfortunately, there was no economical way of shipping the oil south. So Imperial built the world’s northernmost refinery there to provide products for the area. But Norman Wells was to remain a relatively small operation until the early 1980s, when Imperial invested $500 million in a huge expansion, which resulted in the flow of 33,000 barrels of oil a day to southern markets via pipeline. Today, Norman Wells remains the company’s largest single source of conventional crude oil and provides many jobs to northerners. Improving the future through research

Imperial is an innovative industry leader in research and development, working to enhance the country’s resource potential, develop better products and services and protect the environment

In 2002, Imperial spent in excess of $50 million on (fuel-cell engines currently cost about 10 times as research and development in Canada. The research was much to build as conventional engines) and the lack broad and included developing improved methods for of the necessary infrastructure to supply the required recovering heavy oil, finding better ways to manufacture fuel, hydrogen. Through a partnership with General polyethylene, and creating higher-quality lubricants. Motors Corporation and Toyota Motor Corporation, Through its affiliation In addition to conducting its own work, the company research is being conducted that is focused on with ExxonMobil, Imperial also provided funds for the research efforts of others. developing alternative fuel technologies for fuel-cell- is involved in the work of an innovative partnership For example, a total of 46 projects carried out powered vehicles. with Toyota Motor at 18 universities were funded through Imperial’s So-called hybrid vehicles, which run on both Corporation that focuses University Research Awards program at a cost of internal combustion and electric power, also provide on developing environ- $650,000. One such project, based at Queen’s dramatically improved fuel economy and lower emissions. mentally friendly vehicles, such as the Toyota Prius University in Kingston, Ont., is developing ways to Researchers are working with auto makers to advance (above). Now available in improve the ability of Canadian highways to resist this innovative technology. Canada, the fuel-efficient, cracking in cold weather. Another global research initiative is Stanford low-emission Prius is Imperial also helps fund the global research effort University’s Global Climate and Energy project, to powered by an electric motor supplemented being conducted by ExxonMobil, benefiting from which Imperial and ExxonMobil are contributing a by a small internal the results of nearly $1 billion in annual research total of $100 million (U.S.). This groundbreaking combustion engine. expenditures. 10-year project is uniting scientific and engineering This effort includes research into fuel-cell-powered researchers with private industry from around the world vehicles, “hybrid” vehicles and alternative fuels and in the search for new, commercially viable technologies energy sources. that can substantially reduce greenhouse gas emissions. Fuel cells are at the forefront of emerging trans- Being able to fund and draw on leading-edge research portation technologies because they promise high from a variety of sources has many benefits for Imperial – performance, significantly lower emissions and a fuel among them, access to the technology that will enable economy twice that of today’s internal combustion it to eliminate almost all sulphur from gasoline before engines. There are, however, major challenges to the end of 2003, at which time the sulphur content of bringing this technology to market, including cost its gasoline will be among the lowest in the world.

In 1924, Imperial hired a bright young Petroleum provides 1924 chemist named Reginald Stratford to more than just fuel. establish, in Sarnia, the first petroleum From car seats, food research centre in Canada. An unusually persevering man containers, fertilizer and whose doctoral thesis explored the catalytic cracking of roofing materials to hydrocarbons (a process essential to petroleum refining), 21. medical supplies, paint, Stratford was the ideal person to found and lead the new electrical-wire insulation facility. By 1951, when he left the research centre and its and clothing, petroleum 83-person staff to become Imperial’s scientific adviser, he is the fundamental had personally patented more than 30 petroleum products ingredient of an almost and processes and had supervised the development of about endless list of products. 50 others. Several of these represent major industrial achievements and are still in use around the world, including, for example, processes for manufacturing lubricating oils. IMPERIAL OIL LIMITED Employees make the difference

Imperial strives to be the employer of choice by attracting, developing and retaining high-performing individuals from diverse backgrounds

employees to contribute fully and achieve their potential • identifying and developing leaders capable of performing effectively in a wide variety of circumstances. In 2001, Imperial launched a program to help managers enhance employees’ understanding and support of the company’s commitment to diversity. Since then, more than 295 managers have participated in the program and have spearheaded a number of initiatives to promote diversity across the company. Employees in the Working in non- controller’s department, for example, participated in traditional roles learning activities that highlighted different aspects Some of the women of language, communication and learning styles at a working in non-traditional departmental diversity exposition. roles at Imperial are actively encouraging girls to follow in their Continually renewing its workforce footsteps. Every year the company recruits men and women with Roxanne General has a broad range of skills to operate its facilities, provide had an interesting career that has seen her pursuing professional expertise and perform administrative a number of different In 2002, Imperial hired more than 300 employees. Among them were functions. In 2002, the company hired 313 people. trades over the past (clockwise from left) Steven LaChapelle, Rishma Pradhan, Matt Towns, One hundred and forty were professionals and 20 years, learning new Ingrid Protacio, Zahra Kassam and Jason MacKelvie, who joined the technical specialists, mostly graduates of Canadian skills to enable her to company as part of the Early Professional Development Program and take advantage of broader now work in a wide range of business and operational settings. universities; 54 percent of these recruits were women. work opportunities. She The company also provided internships and co-op has, for example, worked We believe that our capable and dedicated employees placements to top students (40 percent of whom were as a carpenter, painter, are one of our major strengths. True competitive women), providing them with practical experience dry waller, machinist and general mechanic, the advantage is developed through our employees, and while they were still in school. role she now holds at the company is committed to providing them with To strengthen its relationships with the communities the Nanticoke refinery. a safe workplace that is enriched by diversity and in which it operates and to foster a strong pool of Last fall, General, who characterized by mutual respect. Imperial offers potential employees, Imperial supports a variety of joined Imperial 12 years ago, participated in a challenging assignments, encourages employees to organizations, alliances and partnerships. Through its discussion panel that work together to achieve superior business results, and Northern Development Program, for example, it offers was coordinated by the rewards them through competitive salaries and benefits. a two-year pre-employment internship, which involves Words on Work Women’s Having a workforce that is representative of the progressive training for Aboriginal people in the Speakers Bureau. “I try to encourage diversity of the company’s customers, suppliers and the Northwest Territories and qualifies graduates for a

22. young people because Canadian communities in which it operates is critical variety of external certifications and employment at some women think they if Imperial is to continue to achieve superior business the company’s Norman Wells operation. just can’t do it,” says results in Canada’s increasingly diverse marketplace. General. “While work in the trades is not for every- Imperial is committed to building on the strength of Learning never ends at Imperial one, there’s no reason its diversity by: We strongly believe that providing opportunities to why women can’t do it if • attracting, developing and retaining high-performing enhance skills and capabilities is key to helping employees they want to – they may employees from diverse backgrounds reach their potential and to ensuring continued business find it the career of a lifetime.” • fostering a productive work environment that respects success. In 2002, about a third of our employees attended Continued on page 23 and values individual differences and encourages all some of the more than 130 courses offered to assist them CORPORATE CITIZENSHIP REPORT

in developing skills applicable throughout the company. example, spent time at our facilities in Western In addition, many employees participated in programs to Canada to gain operational experience that they could develop skills specific to their particular professional or apply to major projects under development in their technical discipline. own countries. All of Imperial’s training activities reinforce capabilities Highly skilled and experienced technicians and plant gained or enhanced through work experiences. Future operation personnel are critical to Imperial’s business, leaders are developed primarily through a disciplined and the company actively supports local training program of job rotations, which exposes them to a programs wherever it does business. In Sarnia, for variety of situations. This on-the-job learning is example, it helped develop two courses at Lambton Elaine Somers, an area supplemented by training programs that help potential College through membership in the Industrial Education measurement coordinator leaders develop their abilities in a number of areas. In Cooperative: the mechanical technician and industrial at Imperial’s production 2002, about 140 employees participated in management maintenance course, which was introduced in 2001; facility in Norman Wells, ensures that measurement development programs. and the chemical-production engineering technology equipment used to The Early Professional Development Program involves program, introduced in 1998. The company employs monitor the flow, pressure job rotations for recent university graduates during their co-op students from these programs to work at the and temperature of oil and first three to five years with the company. The program Sarnia refining and chemical manufacturing operation gas from 150 production wells meets contractual, enables them to develop the varied skills critical to and hires many of them after they graduate. regulatory and accuracy success in their fields and within the company at large. Imperial’s commitment to education is also reflected standards. She has been Assignments with ExxonMobil around the world also in its higher education awards, which are given to working in this field for help to challenge and develop employees, providing qualified children of employees and retirees attending 25 years, 18 of them with Imperial. In 2002, Somers them with a valuable opportunity for personal growth, Canadian post-secondary institutions. In 2002, the was among 40 trades- career enhancement and exposure to other cultures. company provided more than 1,000 awards, totalling people and technicians These assignments give experience vital to individuals $4 million. who were invited to talk who will take on leadership roles, working in Canada’s about their careers at a Skills Canada youth increasingly diverse society. Today, about 200 employees Sharing experiences and perspectives conference in Yellowknife. are on assignment around the world in countries such as In addition to offering structured training programs, “When I speak to girls, Qatar, Chad, Belgium, Venezuela and the United States. Imperial supports employee networks that provide I stress that they should Imperial’s affiliation with ExxonMobil enables mentoring and coaching opportunities. There are a choose a field that is interesting and important employees to experience cultural differences firsthand number of formal mentoring programs for employees. to them,” she says. not only by undertaking expatriate assignments, but by Many new employees, for example, participate in the “Technology careers can hosting ExxonMobil employees from around the world Network Adviser Program, through which they get be both. They can also who come to Canada to gain experience. In 2002, together informally with other people new to Imperial enable them to have a lifestyle with choices and employees from Esso Chad and Esso Angola, for as well as with managers and longer-service employees, provide the means to help care for their families.” Back in 1918, 1918 Imperial introduced its first Joint Industrial Council 23. (JIC), an innovative approach to labour-management relations in which wage earners and management representatives work together to optimize working conditions and resolve concerns brought forward by either group. The JIC model continues to operate today at a number of Imperial locations, including its refinery and petrochemical complex in Sarnia, the site of the first Imperial JIC. (Pictured here is the first JIC meeting at Imperial in 1918.) At the same time as it established the JIC, Imperial helped pioneer the eight-hour workday and paid life-insurance and sickness benefits for its employees. IMPERIAL OIL LIMITED CORPORATE CITIZENSHIP REPORT

Employees make the difference (continued)

gaining insight about the company and the work envi- comprehensive benefit programs that meet or exceed ronment. Programs such as these help newer employees both industry standards and legal requirements. For to grow personally and develop their capabilities by example, it offers a savings plan through which bringing them together to share experiences and Imperial matches a portion of employees’ contributions, diverse perspectives. and the pension plan is company paid and highly In the company’s resources division, the Women in competitive and provides employees with a unique Wage program provides both support and networking variety of choices. opportunities for female employees working in non- traditional jobs – for example, as field or plant operators TOTAL 2002 HIRES or instrument technicians. The group meets three or Number 350 313 four times a year and periodically provides management 300 with suggestions for further improving opportunities for women at Imperial. 250

Total 200 A positive and productive work environment

Women 44% 140 Imperial is committed to providing a work environment 150

that fosters working relationships free of any form of Visible minorities 100 54% harassment. The company defines harassment in the Aboriginal peoples 50 10% broadest terms, including not just behaviour specifically 19% 3% prohibited by law. Any inappropriate conduct that 0 Total Total creates an intimidating, hostile or offensive work new hires professional environment or that unreasonably interferes with hires an individual’s work performance or employment *Designated groups with representation of fewer than five employees have been excluded from the above graph. opportunity is simply not tolerated.

WORKFORCE REPRESENTATION Meeting diverse needs Percent

The company provides a variety of programs to meet Women Aboriginal the diverse needs and expectations of employees, peoples including flexible work arrangements, referral services for child and elder care, leaves of absence, educational assistance, physical fitness program refunds, and relocation and spousal job-search assistance.

Competitive salaries and benefit programs 9002 24.5 28.1 9002 0.7 1.3 The company’s overall compensation program is carefully designed to attract and retain talented men Visible Persons with and women. It includes competitive salaries and minorities disabilities

24. 2002 EMPLOYMENT DATA Total number Visible Aboriginal Persons with of employees Women minorities peoples disabilities Executive, management, 3774 31.4% 9.7% 0.6% 0.7% professional and technical Administrative support 681 76.8% 9.8% 1.3% 2.5% and clerical Operations, manual 1869 3.7% 2.6% 2.6% 1.4% 9002 5.6 7.6 9002 0.1 1.1 and trade Total 6324 28.1% 7.6% 1.3% 1.1% Imperial continues working to build a diverse workforce that is representative of its customers, its suppliers and the Data are collected from self-identification questionnaires. Figures do not include subsidiaries. Canadian communities in which it operates. Strong financial performance

Committed to creating value for shareholders, Imperial is well positioned for growth in the most promising areas of the Canadian petroleum industry

Imperial’s fundamental strategy for creating shareholder • Imperial continued to buy back its shares, bringing value is to allocate investments to projects that will total repurchases since the program began in 1995 to provide high returns on capital employed in a safe and more than 200 million shares for $5.2 billion by year-end. environmentally responsible manner. Studies have shown Looking to the future, the company is positioned for that companies that achieve high returns on capital over growth in the most promising areas of the Canadian time also provide superior returns to their shareholders. petroleum industry. Through a strategic focus on those With a high-quality resource base and diverse asset mix, elements of the business within its control (costs, Imperial represents a superior long-term investment. operating reliability and the quality of its asset base) Since the mid-1990s, the company’s return on capital and through a disciplined capital allocation process, employed has been significantly higher than the average the company is continuing its commitment to returns from the Canadian integrated oil group. Over achieving long-term growth in shareholder value. the past 10 years, total returns to shareholders in the form of dividend payments and capital appreciation DOUBLE-DIGIT $M % have been 17 percent a year, compounded – significantly RETURNS 1500 30 ACHIEVED higher than the average for the Toronto Stock Exchange 1300 energy group. 25 1100 20 Financial highlights 900 During 2002, Imperial recorded a number of achieve- Total earnings 700 15 ments in the areas of financial performance and the Return on average 500 creation of value for shareholders. capital employed 10 • Return on average capital employed was 19.6 percent, 300 Canadian significantly exceeding its target of double-digit returns. integrated oil 5 100 • Earnings were the third highest in the company’s companies

history, exceeding $1.2 billion for the third consecu- -100 93 94 95 96 97 98 99 00 01 02 0 tive year. • Debt instruments issued by Imperial received a Triple-A credit rating from Standard & Poor’s Corporation (S&P). SHAREHOLDER RETURNS • Capital and exploration expenditures rose to a near Percent a year, compounded, 17 record $1.6 billion, 40 percent higher than in 2001. based on original investment; assumes dividends are 14 13 • The company retained a strong financial position, reinvested 10 10 with a balance of $766 million in cash and marketable 9 securities at year-end. This strong financial performance translated into 3 1

-12 25. further growth in shareholder value. Imperial

• Total return on Imperial’s shares from dividends and S&P/TSX energy index capital appreciation was three percent, compared with a loss of 12 percent for the TSX composite index. S&P/TSX composite index

• Regular dividends increased for the eighth year in 1510 succession – to 84 cents a share from 83 cents a year year years years

earlier. Imperial has paid annual dividends for more Total returns on Imperial shares were three percent in 2002, than a century. while 10-year returns were 17 percent a year, compounded. IMPERIAL OIL LIMITED