Imperial Oil Limited (IMO) CORRESP Correspondence with SEC

Imperial Oil Limited	Paul A. Smith	Tel. (403) 237-4304
237 Fourth Avenue SW	Senior Vice-President,	Fax (403) 237-2060
P.O. Box 2480, Station M	Finance and Administration,
Calgary, AB, Canada T2P 3M9	and Treasurer
		May 15, 2008

Mr. H. Roger Schwall
Assistant Director
U.S. Securities and Exchange Commission
Division of Corporation Finance
100 F Street, N.W., Stop 7010
Washington, D.C. 20549

Re: Imperial Oil Limited
Form 10-K for the Fiscal Year ended December 31, 2007
Filed February 28, 2008
File No. 0-12014

Dear Mr. Schwall:

On behalf of Imperial Oil Limited, please find enclosed our responses to your comments regarding the above filing set forth in your letter of March 28, 2008. Our responses are numbered to correspond to the numbered comments in your letter.

We also acknowledge that:

• the company is responsible for the adequacy and accuracy of the disclosure in the filing;

• staff comments or changes to disclosure in response to staff comments do not foreclose the Commission from taking any action with respect to the filing; and

• the company may not assert staff comments as a defense in any proceeding initiated by the Commission or any person under the federal securities laws of the United States.

If you desire clarification of our responses, please direct any questions to Mr. Sean Carleton, Controller, at 403-237-3825.

Yours truly,
 

/s/ Paul A. Smith  

Attachment

c: Kevin Stertzel
Mark Wojciechowski

Imperial Oil Limited’s Response to the
Comments Included in the SEC Letter of March 28, 2008

Form 10-K for the year ended December 31, 2007

General

1.	Briefly explain to us why you do not file proxy or information statements with the Commission.
	Imperial Oil Limited (“Imperial”) is a “foreign private issuer”, as defined in Rule 3b-4, and is therefore exempted from the U.S. proxy statement rules by Rule 3a12-3. Imperial files its proxy in Canada on SEDAR in accordance with National Instrument 51-102 — Continuous Disclosure Obligations.
2.	Please confirm in writing that you will comply with the following compensation disclosure comments in all future filings. Provide us with responsive disclosure, along with an example of the disclosure you intend to use. After our review of your responses, we may raise additional comments.
	As noted in our response to comment number 1 above, Imperial is a “foreign private issuer”, and as provided in Item 402(a)(1) of Regulation S-K, is therefore not subject to the U.S. domestic issuer executive compensation disclosure requirements. Imperial prepares its executive compensation disclosure in accordance with National Instrument 51-102 — Continuous Disclosure Obligations. The executive compensation disclosure that appears in the 2007 Form 10-K is identical to the disclosure provided in Imperial’s 2007 management proxy circular filed in Canada on SEDAR.

We understand that comments numbers 3 through 14 are intended to address U.S. domestic issuer executive compensation disclosure requirements to which we are not subject.

Executive Compensation

Executive Resources Committee Report on Executive Compensation

Compensation Discussion and Analysis, page 38

3. You indicate that the “appraisal process assesses performance against business performance measures and objectives relevant to each employee” This suggests that there may be qualitative factors and targets requiring disclosure. Describe and disclose the factors and targets in each case, or revise the disclosure to clarify this point further.

4. There appear to be substantial differences among named executives officers with regard to the type and amount of compensation received. Explain the reasons for the differences. As noted in Section II.B.1 of Release 33-8732A, the compensation discussion and analysis should be sufficiently precise to identify material differences in compensation policies with respect to individual executive officers.

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5. Clarify whether each element of compensation is benchmarked, and provide additional detail and context for your statement that “On a case-by-case basis, depending on the scope of market coverage represented by a particular comparison, compensation is targeted to a range between the mid-point and the upper quartile of comparable employers”

6. The range between the “mid-point” and the “upper quartile” appears to be a range encompassing all points between 50% and 100%. Avoid general references, and identify the specific targeted percentile of each element of compensation for each named executive officer. With regard to actual compensation paid for 2007, disclose the actual percentiles that the compensation represented in each case.

7. If individual components of compensation are benchmarked, provide the particulars in each case. Similarly, if benchmarking varies by executive officer, disclose the particulars for each. If there is no individual benchmarking, whether by components or with regard to different executive officers, provide clarifying disclosure to that effect. In that case, explain further how the levels between the 50% mid-point and 100% upper quartile are determined in practice. See Item 402(b)(2)(xiv) of Regulation S-K.

8. Identify the peer group of 25 companies that you use to benchmark compensation. State whether these same companies comprise the “competitive market” used to determine Mr. Hearn’s salary. If there are two separate groups, identify the companies comprising each.

Base Salary, page 38

9. You stated that in determining base salaries, increases vary depending on each executive’s performance assessment and other factors such as time in position and potential for advancement. Identify the actual performance factors or goals that you consider in setting base salaries, and discuss whether, for each named executive officer, he met those goals.

Cash Bonus, page 38

10. You state that in determining cash bonuses, bonuses are drawn from an aggregate bonus pool based on the company’s financial and operating performance and that cash bonus awards vary depending on each executive’s performance assessment. Identify the factors used to establish the 2007 pool and explain why it remained the same in 2006 and 2007. Identify the actual performance factors or goals that you considered in awarding bonuses to each named executive officer and discuss whether, for each named executive officer, he met those goals.

Medium/Long term Incentive Compensation, page 38

11. You state that the earnings bonus unit plan promotes individual contribution to sustained improvement in your performance and shareholder value.

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• For each named executive officer state the amount of the bonus awarded, identify the actual performance factors or goals that you considered in awarding the bonuses and discuss whether he met those goals.

• Explain further the material features of this plan. For example, it is unclear what you mean by payout occurring when the “maximum settlement value” is achieved.

12. In regard to the restrictive stock unit plan, which you indicated will be your primary long term incentive compensation plan in future years, state the grant level guidelines and explain how they were determined. For each named executive officer state the amount of the grant awarded. State whether the grants are awarded to the named executive officers based on the achievement of performance goals.

Details of long-term and medium-term incentive compensation, page 43

13. Please include separate subheadings identifying the name of the plan that you discuss.

14. It appears from note 9 at page F-16 that you no longer intend to issue options under the stock option plan, pursuant to which none have been awarded since 2002, according to note 4 at page 41. Please disclose that information in this section as well.

Financial Statements

Note 1 — Summary of Significant Accounting Policies

Property, Plant and Equipment, page F-7

15.	We note your disclosure indicates depreciation of oil sands assets begins at the time when production commences on a regular basis. Please clarify the meaning of “regular basis” and tell us how your policy is consistent with the guidance found in EITF 04-6.
	EITF 04-6 deems the production phase of a mine to have begun when saleable minerals are extracted from an ore body, regardless of the level of production. EITF 04-6 further clarifies that the removal ofde minimissaleable material that occurs in conjunction with the removal of overburden would not qualify as the commencement of production. Our accounting practice is consistent with the above guidance, and we use the term “regular basis” in this context. There are two main asset groups in the oil sands operations: (1) oil sands mining and extraction and (2) bitumen upgrading. Production is considered to commence for oil sands mining and extraction when bitumen ore is produced on a sustained basis and for bitumen upgrading when feed is introduced to the upgrading unit and maintained on a continuous basis.
	Beginning in our 2008 Form 10-K, we will expand our disclosure on page F-8 to include the following additional description on the commencement of production for major oil sand assets:
	“Production is considered commenced for oil sands mining and extraction assets when bitumen ore is produced on a sustained basis and for bitumen upgrading assets when feed is introduced to the upgrading unit and maintained on a continuous basis.”

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16.	We further note that the extraction facilities and upgrading facilities are depreciated based on proven developed reserves. Please explain why your method for depreciating oil sands assets does not include all proven as well as probable reserves.
	Costs associated with extraction and upgrading facilities are depreciated based on estimates of reserve quantities to which those costs relate. For Imperial’s interest in Syncrude, an oil sands joint venture operation, there are no proven undeveloped reserves. As the concept of proven undeveloped and developed reserves is not applicable to the accounting for mining activities, we will delete this reference from our 2008 10-K disclosure and will refer simply to “proven reserves”.
	Syncrude probable reserves are excluded from the depreciation base because the co-venturers have not made a formal commitment to develop them, nor have they obtained the required regulatory approval.
17.	Please expand your disclosure to state the method and reserve base used to depreciate other mining related infrastructure costs such as pre-production stripping, roads, waste dumps, water control, etc.
	Oil sands assets include those other mining related infrastructure costs that are of a long-term nature intended (1) for continued use in or (2) to provide long-term benefit to the operation such as pre-production stripping, certain roads, etc. These oil sand assets are depreciated on a unit of production basis based on proven developed reserves. Other mining related infrastructure costs that do not have a long-term function or provide long-term benefit are expensed as incurred.
	Beginning in our 2008 Form 10-K, we will expand our disclosure on page F-8 to include the depreciation of other mining related infrastructure as follows:
	“Other mining related infrastructure costs that are of a long-term nature intended for continued use in or to provide long-term benefit to the operation, such as pre-production stripping, certain roads, etc., are depreciated on a unit of production basis based on proven reserves.”

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