UPDATE 3-Imperial Oil names Exxon veteran Kruger as CEO
* Rich Kruger to replace Bruce March next month
* March named senior VP at ExxonMobil Chemical Co
* Shuffle comes after oil sands budget woes
* Shares drop 27 Canadian cents in Toronto
CALGARY, Alberta, Feb 21 (Reuters) - Imperial Oil Ltd has named Exxon Mobil Corp executive Rich Kruger to replace Bruce March as CEO of Canada's No. 2 oil producer and refiner as it readies to start up its C$12.9 billion ($12.7 billion) Kearl oil sands mine against a backdrop of weak heavy-crude prices.
March, who ran Imperial Oil for five years, will become senior vice-president at Exxon's chemical unit, Imperial said on Thursday. Kruger, currently president of ExxonMobil Production Co, will take over at the Canadian company on March 1. Exxon Mobil has a 69.6 percent stake in Imperial.
March, 56, laid the groundwork for a big expansion of Imperial's oil production as he completed construction of the Kearl project in northern Alberta, which is expected to begin producing before the end of March. A second phase is scheduled to start up in 2015.
During his tenure, he took on a more public persona than his predecessors, often taking center stage in the industry's campaign to persuade the public it is moving quickly to improve environmental performance despite growing criticism from green groups.
Kruger, a 53-year-old Minnesota native and hockey fan, said he did not plan major changes in leadership style or corporate strategy, central to which is a push to double oil and gas production over the next decade from such assets as the Kearl and Cold Lake oil sands holdings in Alberta and shale gas fields in British Columbia.
Imperial is also known for its four refineries and national chain of Esso service stations in Canada.
"I think you'll find that Bruce and I are cut from the same cloth in that regard," he told reporters. "You don't need a great memory if you always tell the truth and tell it straight. We've been developed in the same business model."
Kruger and March have known each other for a decade, having taken Exxon Mobil management training together.
The 110,000 barrel a day Kearl project, a 50-50 joint venture with Exxon Mobil, is nearing start-up and will use production technology that allows the oil sands' tar-like bitumen to flow to market without the need for upgrading.
However, the project has been plagued by cost overruns that pushed the budget two-thirds above Imperial's original C$7.9 billion estimate.
A final, C$2 billion overrun announced earlier this month was blamed on frigid northern Alberta winter temperatures and a series of court challenges in the U.S. Pacific Northwest that delayed the transport of huge foreign-made processing modules to the Kearl site, forcing a change in construction schedules and increasing costs.
"We wonder whether Mr. March's departure from Imperial Oil is related to the cost overruns at Kearl," Michael Dunn, an analyst at FirstEnergy Capital, wrote in a research note.
March said the transition had nothing to do with the cost hikes, which have plagued oil sands construction projects for more than a decade. The Kearl start-up represents a good time to make the change, the executives said.
It does come, however, as Canadian heavy crude prices are being heavily pressured by tight pipeline capacity to traditional markets such as the U.S. Midwest, a situation that has hurt bottom lines and shares across the industry.
March also oversaw a push into unconventional gas that began when Imperial moved into the Horn River shale gas field in northeastern British Columbia and will expand when the company and Exxon Mobil complete the C$2.6 billion purchase of Celtic Exploration Ltd, a deal that was approved by the Canadian government on Wednesday.
One long-running initiative that remains unfulfilled is the C$16.2 billion Mackenzie Gas project, which would move large volumes of the fuel to southern markets from Canada's Mackenzie Delta on the Beaufort Sea Coast.
Imperial, which leads a consortium of companies that proposed the project, has yet to say what its fate will be as North American gas prices remain low due to the rapid development of shale supplies much closer to major markets, squeezing Mackenzie's economics.
March gave no indication that conditions were conducive to proceeding. According to the 2010 National Energy Board approval, the partners must give an updated cost estimate and report on their decision to build by the end of this year.
"There is a set of conditions that we're going to comply with, if and when it gets developed, and it really needs a (favorable) gas market, with the tolls for the pipeline, to get into the market," he said.
"We maintain our aboriginal relations - we still have good relations with the aboriginal communities along the pipeline route and up in the Inuit area - and we look forward to having the market be more amenable to making Mackenzie an operating asset."
Kruger started his career with Exxon in 1981 and has held positions in Russia, Africa and Malaysia.
Imperial shares fell 27 Canadian cents to C$42.55 on the Toronto Stock Exchange.
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