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SECURITIES AND EXCHANGE COMMISSIONWASHINGTON, D.C. 20549

FORM 10-K

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE
SECURITIES EXCHANGE ACT OF 1934

|For the fiscal year ended December 31, 2002 | Commission file number: 0-12014
|------------------------------------------- | -------------------------------

IMPERIAL OIL LIMITED(Exact name of registrant as specified in its charter)

|CANADA
(State or other jurisdiction of
incorporation or organization)                     |  |  |  | 98-0017682
(I.R.S. Employer
Identification No.)
|----------------------------------------------------------------------------------------- |  |  |  | -----------------------------------------------
|111 ST. CLAIR AVENUE WEST, TORONTO, ONT., CANADA
(Address of principal executive offices) |  |  |  | M5W 1K3
(Zip Code)                             
|Registrant's telephone number, including area code:                                      
|1-800-567-3776                                                                           
|Securities registered pursuant to Section 12(b) of the Act:                              
|                                                                                          |  |  |  |                                                
|Title of each class
None                                                                  |  |  |  | Name of each exchange on
which registered
None 
|                                                                                          |  |  |  |                                                
|                                                                                          |  |  |  |                                                
|Securities registered pursuant to Section 12(g) of the Act:                              
|Common Shares (without par value)                                                        
|                                                                                         
|(Title of Class)                                                                         

The
registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding
12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes
ý No o

Disclosure
of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

Yes
ý No o

The
registrant is an accelerated filer (as defined in Rule 12 b-2 of the Securities Exchange Act of 1934).

Yes
ý No o

As
of the last business day of the 2002 second fiscal quarter, the aggregate market value of the voting stock held by non-affiliates of the registrant was Canadian
$5,446,609,246 based upon the reported last sale price of such stock on the Toronto Stock Exchange on that date.

The
number of common shares outstanding, as of February 28, 2003, was 377,338,757.

The
Index to Exhibits is located on page E-1

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TABLE OF CONTENTS    PART I

|                                  |                                                                                                |     | Page
|--------------------------------- | ---------------------------------------------------------------------------------------------- | --- | ----
|Item 1.                           | Business                                                                                       |     | 3   
|                                  | Financial Information by Operating Segments                                                    |     | 3   
|                                  | Natural Resources                                                                              |     | 4   
|                                  | Petroleum and Natural Gas Production                                                           |     | 4   
|                                  | Land Holdings                                                                                  |     | 10  
|                                  | Exploration and Development                                                                    |     | 10  
|                                  | Petroleum Products                                                                             |     | 12  
|                                  | Supply                                                                                         |     | 12  
|                                  | Refining                                                                                       |     | 12  
|                                  | Distribution                                                                                   |     | 12  
|                                  | Marketing                                                                                      |     | 13  
|                                  | Chemicals                                                                                      |     | 14  
|                                  | Research                                                                                       |     | 14  
|                                  | Environmental Protection                                                                       |     | 14  
|                                  | Human Resources                                                                                |     | 14  
|                                  | Competition                                                                                    |     | 14  
|                                  | Government Regulation                                                                          |     | 15  
|                                  | The Company Online                                                                             |     | 15  
|Item 2.                           | Properties                                                                                     |     | 16  
|Item 3.                           | Legal Proceedings                                                                              |     | 16  
|Item 4.                           | Submission of Matters to a Vote of Security Holders                                            |     | 16  
|PART II                          
|Item 5.                           | Market for Registrant's Common Equity and Related Stockholder Matters                          |     | 16  
|Item 6.                           | Selected Financial Data                                                                        |     | 16  
|Item 7.                           | Management's Discussion and Analysis of Financial Condition and Results of Operation           |     | 20  
|Item 7A.                          | Quantitative and Qualitative Disclosures About Market Risk                                     |     | 25  
|Item 8.                           | Financial Statements and Supplementary Data                                                    |     | 25  
|Item 9.                           | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure           |     | 29  
|PART III                         
|Item 10.                          | Directors and Executive Officers of the Registrant                                             |     | 30  
|Item 11.                          | Executive Compensation                                                                         |     | 32  
|Item 12.                          | Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters |     | 40  
|Item 13.                          | Certain Relationships and Related Transactions                                                 |     | 41  
|PART IV                          
|Item 14.                          | Controls and Procedures                                                                        |     | 41  
|Item 15.                          | Exhibits, Financial Statement Schedules, and Reports on Form 8-K                               |     | 42  
|Index to Financial Statements     |                                                                                                | F-1
|Report of Independent Accountants |                                                                                                | F-2

All dollar amounts set forth in this report are in Canadian dollars, except where otherwise indicated.The following table sets forth
(i) the rates of exchange for the Canadian dollar, expressed in U.S. dollars, in effect at the end of each of the periods indicated, (ii) the
average of exchange rates in effect on the last day of each month during such periods, and (iii) the high and low exchange rates during such periods, in each case based on the noon buying rate
in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of New York.

|                           |  | 2002 |        | 2001 |   | 2000   |  | 1999 |        | 1998
|-------------------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ----
|                           |  |     
|Rate at end of period      |  | $    | 0.6329 |      | $ | 0.6279 |  | $    | 0.6669 |     
|Average rate during period |  |      | 0.6368 |      |   | 0.6444 |  |      | 0.6725 |     
|High                       |  |      | 0.6619 |      |   | 0.6697 |  |      | 0.6969 |     
|Low                        |  |      | 0.6200 |      |   | 0.6241 |  |      | 0.6410 |     

On
February 28, 2003, the noon buying rate in New York City for cable transfers in Canadian dollars as certified for customs purposes by the Federal Reserve Bank of
New York was $0.6720 U.S. = $1.00 Canadian.

2

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This report contains forward looking information on future production, project start ups and future capital spending. Actual results could differ materially as a result of market
conditions or changes in law, government policy, operating conditions, costs, project schedules, operating performance, demand for oil and natural gas, commercial negotiations or other technical and
economic factors.

PART I

Item 1.    Business.

Imperial Oil Limited was incorporated under the laws of Canada in 1880 and was continued under the Canada Business Corporations Act (the "CBCA") by certificate of
continuance dated April 24, 1978. The head and principal office of the Company is located at 111 St. Clair Avenue West, Toronto, Ontario, Canada M5W 1K3; telephone
1-800-567-3776. Exxon Mobil Corporation owns approximately 69.6 percent of the outstanding shares of the Company with the remaining shares being publicly
held, the majority by shareholders with Canadian addresses of record. In this report, unless the context otherwise indicates, reference to the"Company" includes Imperial Oil Limited and its
subsidiaries.

The
Company is Canada's largest integrated oil company. It is active in all phases of the petroleum industry in Canada, including the exploration for, and production and sale of, crude
oil and natural gas. In Canada, it is one of the largest producers of crude oil and a major producer of natural gas, and the largest refiner and marketer of petroleum products. It is also a major
supplier of petrochemicals.

The
Company's operations are conducted in three main segments: natural resources ("upstream"), petroleum products ("downstream") and chemicals. Natural resources operations include the
exploration for, and production of, crude oil and natural gas, including upgraded crude oil and crude bitumen. Petroleum products operations consist of the transportation, refining and blending of
crude oil and refined products and the distribution and marketing thereof. The chemicals operations consist of the manufacturing and marketing of various petrochemicals.

Financial Information by Operating Segments

|                                        |                                       | 2002 |        | 2001   |   | 2000   |        | 1999 |        | 1998   |  
|--------------------------------------- | ------------------------------------- | ---- | ------ | ------ | - | ------ | ------ | ---- | ------ | ------ | -
|                                        |                                       |      |       
|
|External revenues:                      |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 2,677  |   | $      | 3,155  |      | $      | 3,262  |  
|                                        | Petroleum products                    |      |        | 13,396 |   |        | 13,105 |      |        | 13,788 |  
|                                        | Chemicals                             |      |        | 955    |   |        | 930    |      |        | 945    |  
|                                        | Corporate and other                   |      |        | 14     |   |        | 63     |      |        | 56     |  
|                                        |                                       |      |       
|                                        |                                       | $    | 17,042 |        | $ | 17,253 |        | $    | 18,051 |        | $
|                                        |                                       |      |       
|Intersegment sales:                     |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 2,217  |   | $      | 2,166  |      | $      | 2,638  |  
|                                        | Petroleum products                    |      |        | 1,038  |   |        | 1,300  |      |        | 1,332  |  
|                                        | Chemicals                             |      |        | 209    |   |        | 245    |      |        | 228    |  
|Total revenues:                         |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 4,894  |   | $      | 5,321  |      | $      | 5,900  |  
|                                        | Petroleum products                    |      |        | 14,434 |   |        | 14,405 |      |        | 15,120 |  
|                                        | Chemicals                             |      |        | 1,164  |   |        | 1,175  |      |        | 1,173  |  
|                                        | Corporate and other                   |      |        | 14     |   |        | 63     |      |        | 56     |  
|Net earnings (1):                       |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 1,042  |   | $      | 941    |      | $      | 1,165  |  
|                                        | Petroleum products                    |      |        | 127    |   |        | 353    |      |        | 313    |  
|                                        | Chemicals                             |      |        | 52     |   |        | 23     |      |        | 59     |  
|                                        | Corporate and other (2) /eliminations |      |        | (11    | ) |        | (78    | )    |        | (139   | )
|                                        |                                       |      |       
|                                        |                                       | $    | 1,210  |        | $ | 1,239  |        | $    | 1,398  |        | $
|                                        |                                       |      |       
|Identifiable assets at December 31 (3): |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 5,988  |   | $      | 5,365  |      | $      | 5,288  |  
|                                        | Petroleum products                    |      |        | 5,060  |   |        | 4,348  |      |        | 4,812  |  
|                                        | Chemicals                             |      |        | 406    |   |        | 373    |      |        | 379    |  
|                                        | Corporate and other/eliminations      |      |        | 414    |   |        | 675    |      |        | 743    |  
|                                        |                                       |      |       
|                                        |                                       | $    | 11,868 |        | $ | 10,761 |        | $    | 11,222 |        | $
|                                        |                                       |      |       
|Capital and exploration expenditures:   |                                       |      |        |        |   |        |        |      |        |        |  
|                                        | Natural resources                     |      | $      | 986    |   | $      | 746    |      | $      | 434    |  
|                                        | Petroleum products                    |      |        | 589    |   |        | 339    |      |        | 232    |  
|                                        | Chemicals                             |      |        | 25     |   |        | 30     |      |        | 13     |  
|                                        |                                       |      |       
|                                        |                                       | $    | 1,600  |        | $ | 1,115  |        | $    | 679    |        | $
|                                        |                                       |      |       

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(continued
on following page)

3

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Natural Resources



The Company's average daily production of crude oil and natural gas liquids during the five years ended December 31, 2002, was as follows:

|                                              |              |   |   |         |           | 2002 |      | 2001 |      | 2000 |      | 1999 |      | 1998
|--------------------------------------------- | ------------ | - | - | ------- | --------- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ----
|                                              |              |   |   |         |           |     
|
|Conventional (including natural gas liquids): |              |   |   |         |           |      |      |      |      |     
|                                              | Cubic metres |   |  |         | Gross (1) |      | 12.4 |      | 13.2 |      | 14.3 |      | 15.3 |     
|                                              |              |  |   | Net (2) |           | 9.5  |      | 10.2 |      | 11.0 |      | 11.9 |      | 11.6
|                                              | Barrels      |   |  |         | Gross (1) |      | 78   |      | 83   |      | 90   |      | 96   |     
|                                              |              |  |   | Net (2) |           | 60   |      | 64   |      | 69   |      | 75   |      | 73  
|Oil Sands (Cold Lake):                        |              |   |   |         |           |      |      |      |      |      |      |      |      |     
|                                              | Cubic metres |   |  |         | Gross (1) |      | 17.8 |      | 20.4 |      | 18.9 |      | 21.0 |     
|                                              |              |  |   | Net (2) |           | 16.9 |      | 19.2 |      | 16.2 |      | 17.1 |      | 20.0
|                                              | Barrels      |   |  |         | Gross (1) |      | 112  |      | 128  |      | 119  |      | 132  |     
|                                              |              |  |   | Net (2) |           | 106  |      | 121  |      | 102  |      | 107  |      | 126 
|Tar Sands (Syncrude):                         |              |   |   |         |           |      |      |      |      |      |      |      |      |     
|                                              | Cubic metres |   |  |         | Gross (1) |      | 9.1  |      | 8.9  |      | 8.1  |      | 8.9  |     
|                                              |              |  |   | Net (2) |           | 9.1  |      | 8.3  |      | 6.7  |      | 8.7  |      | 8.3 
|                                              | Barrels      |   |  |         | Gross (1) |      | 57   |      | 56   |      | 51   |      | 56   |     
|                                              |              |  |   | Net (2) |           | 57   |      | 52   |      | 42   |      | 55   |      | 52  
|Total:                                        |              |   |   |         |           |      |      |      |      |      |      |      |      |     
|                                              | Cubic metres |   |  |         | Gross (1) |      | 39.3 |      | 42.5 |      | 41.3 |      | 45.2 |     
|                                              |              |  |   | Net (2) |           | 35.5 |      | 37.7 |      | 33.9 |      | 37.7 |      | 39.9
|                                              | Barrels      |   |  |         | Gross (1) |      | 247  |      | 267  |      | 260  |      | 284  |     
|                                              |              |  |   | Net (2) |           | 223  |      | 237  |      | 213  |      | 237  |      | 251 

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From
1998, conventional production has declined due to the sale of oil and gas producing properties and the natural decline in the productivity of the Company's conventional oil fields.
The increase in conventional production in 1999 was due to a reduction in the injection of natural gas liquids to enhance crude oil production which allowed more natural gas liquids to be available
for sale. The reduction in net production at Cold Lake in 1999 resulted mainly from the increase in the effective royalty rate on gross production at Cold Lake, which depends in part on profitability.
In 2000, Cold Lake production declined due to the timing of steaming cycles and Syncrude production decreased because of operating difficulties and extended maintenance to heavy crude oil upgrading
equipment. In 2001, Cold Lake net production increased mainly due to the timing of steaming cycles and lower royalties and Syncrude production increased mainly due to the start up of the Aurora mine
during the second half of 2000 and fewer disruptions in upgrading operations than the previous year. In 2002, Cold Lake production decreased mainly due to the timing of steaming cycles and Syncrude
net production increased mainly due to lower royalties.

4

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The
Company's average daily production and sales of natural gas during the five years ended December 31, 2002 are set forth below. All gas volumes in this report are calculated at
a pressure base of, in the case of cubic metres, 101.325 kilopascals absolute at 15 degrees Celsius and, in the case of cubic feet, 14.73 pounds per square inch at 60 degrees Fahrenheit.

|                                         |              | 2002 |      | 2001 |      | 2000 |      | 1999 |      | 1998
|---------------------------------------- | ------------ | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ---- | ----
|                                         |              |     
|
|Sales (1):                               |              |      |      |      |      |      |      |      |      |     
|                                         | Cubic metres |      | 14.1 |      | 14.2 |      | 11.9 |      | 11.1 |     
|                                         | Cubic feet   |      | 499  |      | 502  |      | 419  |      | 393  |     
|Gross Production (2):                    |              |      |      |      |      |      |      |      |      |     
|                                         | Cubic metres |      | 15.0 |      | 16.2 |      | 14.9 |      | 13.3 |     
|                                         | Cubic feet   |      | 530  |      | 572  |      | 526  |      | 469  |     
|Net Production (2):                      |              |      |      |      |      |      |      |      |      |     
|                                         | Cubic metres |      | 13.1 |      | 13.2 |      | 13.0 |      | 11.7 |     
|                                         | Cubic feet   |      | 463  |      | 466  |      | 459  |      | 413  |     
|Gross Production available for sale (3): |              |      |      |      |      |      |      |      |      |     
|                                         | Cubic metres |      | 13.1 |      | 13.7 |      | 9.8  |      | 8.5  |     
|                                         | Cubic feet   |      | 463  |      | 482  |      | 345  |      | 300  |     
|Net Production available for sale (3):   |              |      |      |      |      |      |      |      |      |     
|                                         | Cubic metres |      | 11.2 |      | 10.7 |      | 7.8  |      | 6.9  |     
|                                         | Cubic feet   |      | 396  |      | 376  |      | 277  |      | 244  |     

---

In
1999, production of natural gas increased mainly due to new natural gas field developments and increased compressor capacity at two gas fields. In 2000 and 2001, natural gas
production increased primarily due to gas production from the Sable Offshore Energy Project, which went into production at the end of 1999, and increased production from gas caps overlaying two former
oil fields, both in Alberta. In 2002, natural gas production decreased primarily due to the depletion of one of the gas caps in Alberta.

Most
of the Company's natural gas sales are made under short-term contracts.

The
Company's average sales price and production (lifting) costs for conventional and Cold Lake crude oil and natural gas liquids and natural gas for the five years ended
December 31, 2002, were as follows:

|                                                                   |                                    | 2002                      |  | 2001 |        | 2000 |   | 1999   |  | 1998
|------------------------------------------------------------------ | ---------------------------------- | ------------------------- |  | ---- | ------ | ---- | - | ------ |  | ----
|                                                                   |                                    |                          
|Average Sales Price:                                               |                                    |                           |  |      |        |      |   |        |  |     
|                                                                   | Crude oil and natural gas liquids: |                           |  |      |        |      |   |        |  |     
|                                                                   |                                    | Per cubic metre           |  | $    | 174.72 |      | $ | 134.16 |  | $   
|                                                                   |                                    | Per barrel                |  |      | 27.78  |      |   | 21.33  |  |     
|                                                                   | Natural gas:                       |                           |  |      |        |      |   |        |  |     
|                                                                   |                                    | Per thousand cubic metres |  | $    | 141.91 |      | $ | 201.92 |  | $   
|                                                                   |                                    | Per thousand cubic feet   |  |      | 4.02   |      |   | 5.72   |  |     
|Average Production (Lifting) Costs Per Unit of Net Production (1): |                                    |                           |  |      |        |      |   |        |  |     
|                                                                   |                                    | Per cubic metre           |  | $    | 48.81  |      | $ | 46.17  |  | $   
|                                                                   |                                    | Per barrel                |  |      | 7.76   |      |   | 7.34   |  |     

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5

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Canadian
crude oil prices are mainly determined by international crude oil markets which are volatile.

Canadian
natural gas prices are determined by North American gas markets and are also volatile. Improved access to U.S. markets for natural gas, resulting from expanded export
pipeline capacity from the Province of Alberta in late 1998, allowed Canadian natural gas prices to increase in 1999 and to attain parity with U.S. natural gas markets. Prices for Canadian
natural gas increased significantly in 2000 and again in early 2001, in line with tighter North American market conditions. Canadian natural gas prices decreased in 2002 primarily due to a weaker
U.S. economy and warmer weather.

In
1999, increased steam injections at Cold Lake were the main cause for the increase in average production (lifting) costs. In 2000, average production (lifting) costs increased mainly
due to higher costs for purchased natural gas at Cold Lake. In 2001, average production (lifting) costs decreased mainly due to higher net production at Cold Lake. In 2002, average production
(lifting) costs increased mainly due to lower net production at Cold Lake.

The
Company has interests in a large number of facilities related to the production of crude oil and natural gas. Among these facilities are 28 plants that process natural gas to produce
marketable gas and recover natural gas liquids or sulphur. The Company is the principal owner and operator of 11 of the plants.

The
Company's production of conventional and Cold Lake crude oil and natural gas is derived from wells located exclusively in Canada. The total number of producing wells in which the
Company had interests at December 31, 2002, is set forth in the following table. The statistics in the table are determined in part from information received from other operators.

|                            |  | Crude Oil |  | Natural Gas |  | Total
|--------------------------- |  | --------- |  | ----------- |  | -----
|
|                            |  |          
|Conventional wells          |  | 2,421     |  | 1,389       |  | 3,995
|Oil Sands (Cold Lake) wells |  | 3,139     |  | 3,139       |  |     

---



The Company has major interests in the Norman Wells oil field in the Northwest Territories and the West Pembina oil field in Alberta. Together they currently
account for approximately 60 percent of the Company's net production of conventional crude oil (approximately 65 percent of gross production).

Norman
Wells is the Company's largest producing conventional oil field. In 2002, net production of crude oil and natural gas liquids was about 2,700 cubic metres (17,100 barrels) per day
and gross production was about 4,000 cubic metres (25,200 barrels) per day. The Government of Canada has a one-third carried interest and receives a production royalty of five percent in
the Norman Wells oil field. The Government of Canada's carried interest entitles it to receive payment of a one-third share of an amount based on revenues from the sale of Norman Wells
production, net of operating and capital costs. Under a shipping agreement, the Company pays for the construction, operating and other costs of the 870 kilometre (540 mile) pipeline which transports
the crude oil and natural gas liquids from the project. In 2002, those costs were about $40 million.

Most
of the larger oil fields in the Western Provinces have been in production for several decades, and the amount of oil that is produced from conventional fields is declining. In some
cases, however, additional oil can be recovered by using various methods of enhanced recovery. The Company's largest enhanced recovery projects are located at the West Pembina oil field.

The
Company produces natural gas from a large number of gas fields located in the Western Provinces, primarily in Alberta.

The
Company has a nine percent interest in a project to develop natural gas reserves in the Sable Island area off the coast of the Province of Nova Scotia. About $3 billion has
been spent by the participants to the end of 2002 on the project. Production from the Sable Offshore Energy Project began at the end of 1999 and is expected to average about 14 million cubic
metres (500 million cubic feet) per day of natural gas and 3,200 cubic metres (20,000 barrels) per day of natural gas liquids over a 20 year period.

6

---



The Company holds about 78,000 leased hectares (192,000 acres) of oil sands near Cold Lake, Alberta. This oil sands deposit contains a very heavy crude oil (crude
bitumen). To develop the technology necessary to produce this oil commercially, the Company has conducted experimental pilot operations since 1964 to recover the crude bitumen from wells by means of
new drilling and production techniques including steam injection. During 2002, net production from the pilots averaged about 2,100 cubic metres (13,400 barrels) per day and gross production was about
2,240 cubic metres (14,100 barrels) per day. Research at, and operation of, the Cold Lake pilots is continuing.

In
late 1983, the Company commenced the development, in stages, of its oil sands resources at Cold Lake. The initial six stages of this production project were completed by 1986. In
1987, the Company received approval from the Alberta Energy Resources Conservation Board ("AERCB") to increase the production of the existing six stages from 9,000 cubic metres (57,000 barrels) to
12,000 cubic metres (76,000 barrels) of crude bitumen per day. Also in 1987, the Company received an amended approval from the AERCB for four additional stages (stages seven to ten) of development at
Cold Lake. During 2002, average net production from those ten stages was about 14,100 cubic metres (88,700 barrels) per day and gross production was about 14,900 cubic metres (93,400 barrels) per day.

In
2002, the Company spent $81 million to drill 332 development wells. To maintain production at Cold Lake, capital expenditures for additional production wells and associated
equipment will be required periodically. The Company plans to spend about $92 million in 2003 on such facilities.

Construction
began in 2000 on stages 11 to 13 of development. Total capital investment for the development was about $650 million with the project being completed in
late 2002. The new stages are expected to provide, on average, an additional 4,800 cubic metres (30,000 barrels) per day of crude bitumen production by the second half of 2003. To improve overall
energy efficiency, the project includes a 170 megawatt cogeneration facility that will provide steam for the new stages and generate enough electricity to supply all of the Company's other Cold Lake
operations. Any surplus electricity is sold into the Province of Alberta power pool.

In
2002, the Company applied for regulatory approval for further expansion of its operations at Cold Lake. The expansion would include three more production stages (stages 14
to 16), which is expected to add about 4,800 cubic metres (30,000 barrels) per day, and the extension of existing stages 9 and 10. Assuming timely regulatory approval and
favourable market conditions, production is expected to begin as early as 2007. The total cost of the new developments is expected to be about $1 billion. The expansion, along with
stages 11 to 13, is expected to bring total production to about 28,600 cubic metres (180,000 barrels) per day by the end of the decade.

Most
of the production from Cold Lake is sold to refineries in the northern United States. The remainder of the Cold Lake production is shipped to certain of the Company's refineries and
to a heavy oil upgrader in Lloydminster, Saskatchewan.

The
Province of Alberta, in its capacity as lessor of the Cold Lake oil sands leases, is entitled to a royalty on production from the Cold Lake production project, as defined in an
agreement with the Province. Near the beginning of 1996, the royalty increased from five percent of production to the greater of five percent of production or 30 percent of an amount based on
revenue net of operating and capital costs for the project. The effective royalty on gross production was five percent in 2002 and 2001, 14 percent in 2000, 18 percent in 1999 and eight
percent in 1998. In late 2000, the Company entered into an agreement with the Province of Alberta, effective January 1, 2000, on a transitional royalty arrangement that will apply to all of the
Company's current and proposed operations at Cold Lake until the end of 2007, at which time the generic Alberta regulations for royalties that apply to all other oil sands development in the Province
will take effect. This transition is expected to be royalty neutral. The Company expects that after 2007 the royalty will be the greater of one percent of gross revenue or 25 percent of an
amount based on revenue net of operating and capital costs for the Cold Lake production project and the pilot operations.



The Company has interests in other oil sands leases in the Athabasca and Peace River areas of northern Alberta. Evaluation wells completed on these leased areas
established the presence of very heavy crude oil in place. The Company continues to evaluate these leases to determine their potential for future development.

The
Company holds varying interests in lands totalling about 78,000 leased net hectares (192,000 net acres) in the Athabasca area where the oil sands are buried too deeply to permit
recovery by surface mining methods. The Company, as part of an industry consortium and several joint ventures, has been involved in recovery research and pilot studies and in evaluating the quality
and extent of the oil sands.

7

---



The Company holds a 25 percent participating interest in Syncrude, a joint venture established to recover shallow deposits of tar sands using
open-pit mining methods, to extract the crude bitumen, and to produce a high-quality, light (32 degree API), sweet, synthetic crude oil. The Syncrude operation, located near
Fort McMurray, Alberta, exploits a portion of the Athabasca Oil Sands Deposit. The location is readily accessible by public road. The produced synthetic crude oil is shipped from the Syncrude site to
Edmonton, Alberta by Alberta Oil Sands Pipeline Ltd. The pipeline is currently being expanded to accommodate increased Syncrude production. Since startup in 1978, Syncrude has produced about
1.4 billion barrels of synthetic crude oil.

Syncrude
has an operating license issued by the Province of Alberta which is effective until 2035. This license permits Syncrude to mine tar sands and produce synthetic crude oil from
approved development areas on tar sands leases. Syncrude holds eight tar sands leases covering about 102,000 hectares (252,000 acres) in the Athabasca Oil Sands Deposit. Issued by the Province of
Alberta, the leases are automatically renewable as long as tar sands operations are ongoing or the leases are part of an approved development plan. Syncrude leases 10, 12, 17, 22 and 34 (containing
proven reserves) and leases 29, 30 and 31 (containing no proven reserves) are included within a development plan approved by the Province of Alberta's Department of Resource Development. There were no
known previous commercial operations on these leases prior to the start-up of operations in 1978.

The
Syncrude participants agreed with the Province of Alberta, in its capacity as lessor of Syncrude tar sands leases, on an amendment to their revenue sharing agreement, which amendment
applies from January 1, 1997. Among other things, this amendment provided for lower royalties on certain new production and for immediate royalty credit on capital expenditures. The royalty was
reduced to 25 percent of deemed net profits from Syncrude, as defined in the agreement, on production in excess of 1996 levels for the period 1997 through 2001. As of January 1, 2002, a
greater of 25 percent deemed net profit royalty or one percent gross royalty applies to all Syncrude production after the deduction of new capital expenditures.

The
Government of Canada has issued an order that expires at the end of 2003 which provides for the remission of any federal income tax otherwise payable by the participants as the
result of the non-deductibility from the income of the participants of amounts receivable by the Province of Alberta as a royalty or otherwise with respect to Syncrude. This remission
order excludes royalty payable on production for the Aurora project.

Operations
at Syncrude involve three main processes: open pit mining, extraction of crude bitumen and upgrading of crude bitumen into synthetic crude oil. In the Base mine (lease 17),
the mining and transportation system uses draglines, bucketwheel reclaimers and belt conveyors. In the North mine (leases 17 and 22) and in the Aurora mine (leases 10, 12 and 34), a truck,
shovel and hydrotransport system is used. The extraction facilities, which separate crude bitumen from sand, are capable of processing approximately 495,000 tonnes (545,000 tons) of tar sands a day,
producing about 18 million cubic metres (110 million barrels) of crude bitumen a year. This represents recovery capability of about 92 percent of the crude bitumen contained in
the mined tar sands.

Crude
bitumen extracted from tar sands is refined to a marketable hydrocarbon product through a combination of carbon removal in two large, high temperature, fluid coking vessels and by
hydrogen addition in high temperature, high pressure, hydrocracking vessels. These processes remove carbon and sulphur and reformulate the crude into a low viscosity, low sulphur, high quality
synthetic crude oil product. In 2002, the upgrading process yielded 0.863 cubic metres of synthetic crude oil per cubic metre of crude bitumen (0.863 barrels of synthetic crude oil per barrel of crude
bitumen). In 2002, about 60 percent of the synthetic crude oil was processed by Edmonton area refineries and the remaining 40 percent was pipelined to refineries in eastern Canada and
the mid-western United States. Electricity is provided to Syncrude by a 270 megawatt electricity generating plant and a 80 megawatt electricity generating plant, both located at Syncrude.
The generating plants are owned by the Syncrude participants. The Company's 25 percent share of net investment in plant, property and equipment, including surface mining facilities,
transportation equipment and upgrading facilities is about $1.6 billion.

8

---

In
2002, Syncrude's net production of synthetic crude oil was about 36,100 cubic metres (227,000 barrels) per day and gross production was about 36,500 cubic metres (229,000 barrels) per
day. The Company's share of net production in 2002 was about 9,000 cubic metres (56,800 barrels) per day.

In
2000, Syncrude completed development of the first stage of the Aurora mine. The Aurora investment involved extending mining operations to a new location about 35 km from the main
Syncrude site. The first stage of the Aurora mine is expected to increase the Company's share of Syncrude's gross production to about 9,500 cubic metres (60,000 barrels) per day in 2003.

In
2001, the Syncrude owners approved another major expansion of upgrading capacity to convert crude bitumen into synthetic crude oil. This project, when combined with further
development of the Aurora deposits, is expected to increase the Company's share of Syncrude's gross production to more than about 14,200 cubic metres (89,000 barrels) per day. Startup of production is
expected in early 2005, and the Company's share of the project costs is expected to be about $1.2 billion.

The
following table sets forth certain operating statistics for the Syncrude operations:

|                                       |                          | 2002 |       | 2001 |       | 2000 |       | 1999 |       | 1998
|-------------------------------------- | ------------------------ | ---- | ----- | ---- | ----- | ---- | ----- | ---- | ----- | ----
|                                       |                          |     
|Total mined volume (1)                 |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of cubic metres |      | 77.9  |      | 90.3  |      | 65.0  |      | 76.5  |     
|                                       | millions of cubic yards  |      | 102.0 |      | 118.3 |      | 85.1  |      | 100.1 |     
|Mined volume to tar sands ratio (1)    |                          | 1.05 |       | 1.15 |       | 0.96 |       | 0.99 |       | 1.05
|Tar sands mined                        |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of tonnes       |      | 156.5 |      | 164.8 |      | 142.2 |      | 162.1 |     
|                                       | millions of tons         |      | 172.1 |      | 181.2 |      | 156.4 |      | 178.7 |     
|Average bitumen grade (weight percent) |                          | 11.2 |       | 11.0 |       | 11.0 |       | 10.8 |       | 10.7
|Crude bitumen in mined tar sands       |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of tonnes       |      | 17.5  |      | 18.1  |      | 15.6  |      | 17.5  |     
|                                       | millions of tons         |      | 19.2  |      | 19.9  |      | 17.2  |      | 19.3  |     
|Average extraction recovery (percent)  |                          | 89.9 |       | 87.0 |       | 89.7 |       | 91.4 |       | 91.6
|Crude bitumen production (2)           |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of cubic metres |      | 15.5  |      | 15.5  |      | 13.8  |      | 15.8  |     
|                                       | millions of barrels      |      | 97.8  |      | 97.6  |      | 86.8  |      | 99.6  |     
|Average upgrading yield (percent)      |                          | 86.3 |       | 84.5 |       | 84.3 |       | 83.9 |       | 84.6
|Gross synthetic crude oil produced     |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of cubic metres |      | 13.5  |      | 13.1  |      | 11.6  |      | 13.3  |     
|                                       | millions of barrels      |      | 84.8  |      | 82.4  |      | 73.2  |      | 83.6  |     
|Company's net share (3)                |                          |      |       |      |       |      |       |      |       |     
|                                       | millions of cubic metres |      | 3     |      | 3     |      | 2     |      | 3     |     
|                                       | millions of barrels      |      | 21    |      | 19    |      | 15    |      | 20    |     

---



Prior to October, 2002, the Company held a 75 percent interest in approximately 13,600 leased hectares (33,800 acres) and a 20 percent interest in
about 13,900 leased hectares (34,800 acres) in the Kearl Lake area in the Athabasca area of northern Alberta containing tar sands. In October 2002, the Company completed transactions that
resulted in the Company obtaining a 100 percent interest in approximately 16,500 hectares (40,700 acres) of surface mineable tar sands. The Company continues to evaluate these leases to
determine their potential for future development.

9

---

Land Holdings

At December 31, 2002 and 2001, the Company held the following oil and gas rights, and tar sands leases:

|                   |                                   | Hectares  |  | Acres
|------------------ | --------------------------------- | --------- |  | -----
|
|
|
|
|
|
|Western Provinces  |                                   |           |  |      
|                   | Conventional                     |           |  |      
|                   |                                   | Gross (1) |  | 1,109
|                   |                                   | Net (2)   |  | 454  
|                   | Oil Sands (Cold Lake and other)  |           |  |      
|                   |                                   | Gross (1) |  | 41   
|                   |                                   | Net (2)   |  | 41   
|                   | Tar Sands (Syncrude and other)   |           |  |      
|                   |                                   | Gross (1) |  | 20   
|                   |                                   | Net (2)   |  | 10   
|Canada Lands (3):  |                                   |           |  |      
|                   | Conventional                     |           |  |      
|                   |                                   | Gross (1) |  | 31   
|                   |                                   | Net (2)   |  | 4    
|Atlantic Offshore: |                                   |           |  |      
|                   | Conventional                     |           |  |      
|                   |                                   | Gross (1) |  | 17   
|                   |                                   | Net (2)   |  | 2    
|Total (4):         |                                   |           |  |      
|                   |                                   | Gross (1) |  | 1,218
|                   |                                   | Net (2)   |  | 511  

---



The Company has been involved in the exploration for and development of petroleum and natural gas in the Western Provinces, in the Canada Lands (which include the
Arctic Islands, the Beaufort Sea/Mackenzie Delta, and Other Northwest Territories, Nunavut and the Yukon) and in the Atlantic Offshore.

The
Company's exploration strategy in the Western Provinces is to search for hydrocarbons on its existing land holdings and especially near established facilities. Higher risk areas are
evaluated through shared ventures with other companies.

The
following table sets forth the conventional and oil sands net exploratory and development wells that were drilled or participated in by the Company during the five years ended
December 31, 2002.

|                                |                                 | 2002          |           | 2001 |     | 2000 |     | 1999 |     | 1998
|------------------------------- | ------------------------------- | ------------- | --------- | ---- | --- | ---- | --- | ---- | --- | ----
|                                |                                 |              
|Western and Atlantic Provinces: |                                 |               |           |      |     |      |     |      |     |     
|                                | Conventional                    |               |           |      |     |      |     |      |     |     
|                                |                                 | Exploratory  |           |      |     |      |     |      |     |     
|                                |                                 |               | Oil       |      |    |      |    |      |    |     
|                                |                                 |               | Gas       |      | 1   |      | 1   |      | 3   |     
|                                |                                 |               | Dry Holes |      | 2   |      |    |      | 1   |     
|                                |                                 | Development  |           |      |     |      |     |      |     |     
|                                |                                 |               | Oil       |      | 1   |      | 17  |      | 18  |     
|                                |                                 |               | Gas       |      | 42  |      | 68  |      | 49  |     
|                                |                                 |               | Dry Holes |      | 3   |      |    |      |    |     
|                                | Oil Sands (Cold Lake and other) |               |           |      |     |      |     |      |     |     
|                                |                                 | Development  |           |      |     |      |     |      |     |     
|                                |                                 |               | Oil       |      | 332 |      | 307 |      | 112 |     
|                                |                                 |              
|Total                           |                                 | 381           |           | 393  |     | 183  |     | 251  |     | 105 
|                                |                                 |              

The
oil sands development wells in 2002 include 267 wells related to the development of stages 11 to 13 at Cold Lake with the balance for productivity maintenance in
existing stages and prior to 2001 also reflect drilling for stages 9 and 10 at Cold Lake, and the addition of productivity maintenance wells.

At
December 31, 2002, the Company was participating in the drilling of 44 gross (35 net) exploratory and development wells.

10

---



In 2002, the Company had a working interest in four gross (three net) exploratory wells and 491 gross (378 net) development wells, while retaining an overriding
royalty in an additional 11 gross exploratory wells drilled by others. The majority of the exploratory wells were directed toward extending reserves around existing fields.



Substantial quantities of gas have been found by the Company and others in the Beaufort Sea/Mackenzie Delta.

In
1999, the Company and three other companies entered into an agreement to study the feasibility of developing Mackenzie Delta gas. The four companies are participating in development
planning for onshore natural gas resources totaling approximately 170 billion cubic metres (six trillion cubic feet). The Company's share of these resources is about 50 percent. The
commercial viability of these natural gas resources, and the pipeline required to transport this natural gas to markets, is dependent on a number of factors. These factors include natural gas markets,
support from northern parties, regulatory approvals, environmental considerations, pipeline participation, fiscal terms, and the cost of constructing, operating and abandoning the field production and
pipeline facilities. There are complex issues to be resolved and many interested parties to be consulted, before any development could proceed. In October 2001, the four companies and the
Mackenzie Valley Aboriginal Pipeline Corporation ("MVAPC"), which represents aboriginal peoples of the Northwest Territories, signed a memorandum of understanding to pursue economic and timely
development of a Mackenzie Valley pipeline. In 2002, the four companies completed a preliminary study of the feasibility of developing existing discoveries of Mackenzie Delta gas and based on the
results of the study announced together with MVAPC their intention to begin preparing the regulatory applications needed to develop the gas resources, including construction of a Mackenzie Valley
pipeline.

The
Company retains an 86 percent interest in a petroleum and natural gas lease with the Inuvialuit Land Corporation. Other land holdings include majority interests in 20 and
minority interests in six "significant discovery" licences granted by the Government of Canada as the result of previous oil and gas discoveries, all of which are managed by the Company and majority
interests in two and minority interests in 16 other "significant discovery" licences and one production licence, managed by others.



The Company has an interest in 16 "significant discovery" licences and one production licence granted by the Government of Canada in the Arctic Islands. These
licences are managed by another company on behalf of all participants. The Company has not participated in wells drilled in this area since 1984.



The Company manages five "significant discovery" licences granted by the Government of Canada in the Atlantic offshore. The Company also has minority interests in
27 "significant discovery" licences, and four production licences, managed by others.

The
Company has a nine percent working interest in an exploration licence for about 74,000 gross hectares (183,000 gross acres) in the Sable Island area off the coast of the Province of
Nova Scotia. An exploratory well was completed in 2001 in this area, without commercial success.

In
1998, the Company acquired a 20 percent interest in an exploration licence for about 23,500 gross hectares (58,100 gross acres) in the Sable Island area. In 1999, the Company
acquired a 20 percent interest in six exploration licences for about 217,000 gross hectares (536,000 gross acres) in the Sable Island area. One exploratory well was completed in 2000 in that
area, without commercial success. Also in 1999, the Company acquired a 100 percent interest in two exploration licences for about 225,000 gross hectares (556,000 gross acres) farther offshore
in deeper water. A 3-D seismic evaluation program was begun in 2000 in that area, which was completed in 2001, and in 2002 there were 3-D seismic and geological evaluations. In
2002, the Company signed a farmout agreement with another company whereby that company will earn a 30 percent interest in these licenses by participating in the first exploration well. In early
2001, the Company acquired about a 17 percent interest in three additional deep water exploration licences for about 475,000 gross hectares (1,174,000 gross acres). The Company's share of
proposed exploration spending in these areas is about $125 million.

11

---

Petroleum Products



To supply the requirements of its own refineries and condensate requirements for blending with crude bitumen, the Company supplements its own production with
substantial purchases from others.

The
Company purchases domestic crude oil at freely negotiated prices from a number of sources. Domestic purchases of crude oil are generally made under 30-day contracts.
There are no domestic purchases of crude oil under contracts longer than 60 days.

Crude
oil from foreign sources is purchased by the Company at competitive prices mainly through Exxon Mobil Corporation (which has beneficial access to major market sources of crude oil
throughout the world).



The Company owns and operates four refineries. Two of these, the Sarnia refinery and the Strathcona refinery, have lubricating oil production facilities. The
Strathcona refinery processes Canadian crude oil, and the Dartmouth, Sarnia and Nanticoke refineries process a combination of Canadian and foreign crude oil. In addition to crude oil, the Company
purchases finished products to supplement its refinery production.

In
2002, capital expenditures of about $370 million were made at the Company's refineries. About 80 percent of those expenditures were on new facilities required to meet
Government of Canada regulations on the sulphur level in motor gasoline with the remaining expenditures being on safety and efficiency improvements, and environmental control projects.

The
approximate average daily volumes of refinery throughput during the five years ended December 31, 2002, and the daily rated capacities of the refineries at December 31,
1997 and 2002, were as follows:

|                       |  | Average Daily Volumes of
Refinery Throughput (1)
Year Ended December 31 |  | Daily Rated
Capacities at
December 31 (2)
|---------------------- |  | ----------------------------------------------------------------------- |  | -----------------------------------------
|
|
|
|Strathcona, Alberta    |  | 26.0                                                                    |  | 25.4                                     
|Sarnia, Ontario        |  | 16.5                                                                    |  | 16.5                                     
|Dartmouth, Nova Scotia |  | 12.5                                                                    |  | 12.3                                     
|Nanticoke, Ontario     |  | 16.2                                                                    |  | 17.2                                     
|                       |  |                                                                        
|Total                  |  | 71.2                                                                    |  | 71.4                                     
|                       |  |                                                                        

|                       |  | Average Daily Volumes of
Refinery Throughput (1)
Year Ended December 31 |  | Daily Rated
Capacities at
December 31 (2)
|---------------------- |  | ----------------------------------------------------------------------- |  | -----------------------------------------
|
|
|
|Strathcona, Alberta    |  | 163                                                                     |  | 160                                      
|Sarnia, Ontario        |  | 104                                                                     |  | 104                                      
|Dartmouth, Nova Scotia |  | 78                                                                      |  | 77                                       
|Nanticoke, Ontario     |  | 102                                                                     |  | 108                                      
|                       |  |                                                                        
|Total                  |  | 447                                                                     |  | 449                                      
|                       |  |                                                                        

---

Refinery
throughput was 90 percent of capacity in 2002, the same as for the previous year.



The Company maintains a nation-wide distribution system, including 29 terminals, to handle bulk and packaged petroleum products moving from refineries
to market by pipeline, tanker, rail and road transport. The Company owns and operates crude oil, natural gas liquids and products pipelines in Alberta, Manitoba and Ontario and has interests in the
capital stock of two products and three crude oil pipeline companies.

At
December 31, 2002, the Company owned and operated two barges. These vessels are used primarily for domestic transportation of refined petroleum products.

12

---



The Company markets more than 700 petroleum products throughout Canada under well known brand names, notably Esso, to all types of customers.

The
Company sells to the motoring public through approximately 2,100 Esso retail outlets, of which about 870 are Company owned or leased, but none of which are Company operated. The
Company continues to improve its Esso retail outlet network, providing more customer services such as car washes and convenience stores, primarily at high volume sites in urban centres.

The
Canadian farm, residential heating and small commercial markets are served through about 110 sales facilities, of which about 40 also sell fertilizers to the western Canadian farm
markets under the brand name Engro. A major program to improve the productivity of the Company's rural agency marketing network was largely completed in 2002. The three year $50 million project
transformed the rural network from more than 300 bulk fuel locations to less than 100 sites supplied by a more efficient transportation system. The final component of the new network, a centralized
order management process to better meet customer needs, is expected to be completed in 2003.

Heating
oil and related equipment services are provided through authorized dealers as well as through three Company operated Home Comfort facilities in urban markets. The Company also
sells petroleum products to large industrial and commercial accounts as well as to other refiners and marketers.

The
approximate daily volumes of petroleum products sold during the five years ended December 31, 2002 are set out in the following table:

|                                          |              |  |      |  |      |  |      |  |      | 
|----------------------------------------- | ------------ |  | ---- |  | ---- |  | ---- |  | ---- | 
|
|                                          |              | 
|
|Gasolines:                                |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 32.9 |  | 32.3 |  | 32.0 |  | 31.9 | 
|                                          | Barrels      |  | 207  |  | 203  |  | 201  |  | 201  | 
|Heating, Diesel and Jet Fuels:            |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 25.0 |  | 26.5 |  | 27.5 |  | 26.9 | 
|                                          | Barrels      |  | 157  |  | 166  |  | 173  |  | 169  | 
|Heavy Fuel Oils:                          |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 4.9  |  | 5.4  |  | 5.1  |  | 4.6  | 
|                                          | Barrels      |  | 31   |  | 34   |  | 32   |  | 29   | 
|Lube Oils and Other Products (1):         |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 6.4  |  | 5.4  |  | 5.0  |  | 5.8  | 
|                                          | Barrels      |  | 41   |  | 34   |  | 31   |  | 36   | 
|Net petroleum product sales:              |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 69.2 |  | 69.6 |  | 69.6 |  | 69.2 | 
|                                          | Barrels      |  | 436  |  | 437  |  | 437  |  | 435  | 
|Sales under purchase and sale agreements: |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 13.9 |  | 11.6 |  | 10.7 |  | 10.8 | 
|                                          | Barrels      |  | 87   |  | 73   |  | 67   |  | 68   | 
|Total:                                    |              |  |      |  |      |  |      |  |      | 
|                                          | Cubic metres |  | 83.1 |  | 81.2 |  | 80.3 |  | 80.0 | 
|                                          | Barrels      |  | 523  |  | 510  |  | 504  |  | 503  | 

---

The
total domestic sales of petroleum products as a percentage of total sales of petroleum products during the five years ended December 31, 2002, were as follows:

| |  |       |  |       |  |       |  |       |  |       |  | 
| |  | ----- |  | ----- |  | ----- |  | ----- |  | ----- |  | 
|
| |  |       |  |      
| |  | 91.5% |  | 93.4% |  | 94.0% |  | 95.6% |  | 96.0% |  | 

The
Company continues to evaluate and adjust its Esso retail outlet and distribution system to increase productivity and efficiency.

During
2002, the Company closed or debranded about 140 Esso retail sites, about 60 of which were Company owned, and added about 70 sites. The Company's average annual throughput per Esso
retail outlet was 3.3 million litres, an increase of 0.3 million litres from 2001. Average throughput per Company owned Esso retail outlet was 4.9 million litres in 2002, an
increase of about 0.5 million litres from 2001.

13

---

Chemicals

The Company's Chemicals operations manufacture and market ethylene, benzene, aromatic and aliphatic solvents, plasticizer intermediates and polyethylene resin. Its
major petrochemical and polyethylene manufacturing operations are located in Sarnia, Ontario, adjacent to the Company's petroleum refinery. There is also a heptene and octene plant located in
Dartmouth, Nova Scotia.

The
Company's average daily sales of petrochemicals during the five years ended December 31, 2002, were as follows:

|                |  |     |  |     |  |     |  |     |  |    
|--------------- |  | --- |  | --- |  | --- |  | --- |  | ---
|
|                |  |    
|
|Petrochemicals: |  |     |  |     |  |     |  |     |  |    
|Tonnes          |  | 3.5 |  | 3.3 |  | 3.1 |  | 3.0 |  | 3.5
|Tons            |  | 3.9 |  | 3.6 |  | 3.4 |  | 3.3 |  | 3.9

Research

In 2002, the Company's research expenditures in Canada, before deduction of investment tax credits, were $50 million, as compared with $37 million in
2001 and $31 million in 2000. Those funds were used mainly for developing improved heavy crude oil recovery methods and better lubricants.

A
research facility to support the Company's natural resources operations is located in Calgary, Alberta. Research in these laboratories is aimed at developing new technology for the
production and processing of crude bitumen. About 40 people were involved in this type of research in 2002. The Company also participated in bitumen recovery and processing research for tar sands
development through its interest in Syncrude, which maintains research facilities in Edmonton, Alberta and through research arrangements with others.

In
Company laboratories in Sarnia, Ontario, research is mainly conducted on the development and improvement of lubricants. About 130 people were employed in this type of research at the
end of 2002. Also in Sarnia, there are about 15 people engaged in new product development for the Company's and Exxon Mobil Corporation's polyethylene injection and rotational molding businesses.

The
Company has scientific research agreements with affiliates of Exxon Mobil Corporation which provide for technical and engineering work to be performed by all parties, the exchange of
technical information and the assignment and licensing of patents and patent rights. These agreements provide mutual access to scientific and operating data related to nearly every phase of the
petroleum and petrochemical operations of the parties.

Environmental Protection

The Company is concerned with and active in protecting the environment in connection with its various operations. The Company works in cooperation with government
agencies and industry associations to deal with existing and to anticipate potential environmental protection issues. In the past five years, the Company has spent about $510 million on
environmental protection and facilities. In 2002, the Company's capital expenditures relating to environmental protection totalled approximately $360 million, and are expected to be about
$275 million in 2003. Increased environmental expenditures over the past two years primarily reflect spending on a project to reduce sulphur in motor gasolines, a requirement of the Government
of Canada. The total cost of that project is expected to be about $575 million. In 2002, the Government of Canada adopted a new regulation requiring ultra-low sulphur
on-road diesel fuel commencing in 2006 and which is to be fully implemented in 2007. Capital expenditures on safety related projects in 2002 were approximately $15 million.

Human Resources

At December 31, 2002, the Company employed full-time approximately 6,500 persons compared with about 6,700 at the end of 2001 and 2000. About
seven percent of those employees are members of unions.

The
Company continues to maintain a broad range of benefits, including illness, disability and survivor benefits, a savings plan and pension plan.

Competition

The Canadian petroleum, natural gas and chemical industries are highly competitive. Competition includes the search for and development of new sources of supply,
the construction and operation of crude oil and refined products pipelines and the refining, distribution and marketing of petroleum products and chemicals. The petroleum industry also competes with
other industries in supplying energy, fuel and other needs of consumers.

14

---

Government Regulation



Most of the Company's petroleum and natural gas rights were acquired from governments, either federal or provincial. Reservations, permits or licences are acquired
from the provinces for cash and entitle the holder to obtain leases upon completing specified work. Leases may also be acquired for cash. A lease entitles the holder to produce petroleum or natural
gas from the leased lands. The holder of a licence relating to Canada Lands and the Atlantic Offshore is generally required to make cash payments or to undertake specified work or amounts of
exploration expenditures in order to retain the holder's interest in the land and may become entitled to produce petroleum or natural gas from the licenced land.



The maximum allowable gross production of crude oil from wells in Canada is subject to limitation by various regulatory authorities on the basis of engineering and
conservation principles.



Export contracts of more than one year for light crude oil and petroleum products and two years for heavy crude oil (including crude bitumen) require the prior
approval of the National Energy Board (the "NEB") and the Government of Canada.



The maximum allowable gross production of natural gas from wells in Canada is subject to limitation by various regulatory authorities on the basis of engineering
and conservation principles. A permit is required from the Alberta Energy and Utilities Board, subject to the approval of the Province of Alberta, for the removal from Alberta of natural gas produced
in that province.



The Government of Canada has the authority to regulate the export price for natural gas and has a gas export pricing policy which accommodates export prices for
natural gas negotiated between Canadian exporters and U.S. importers.

Exports
of natural gas from Canada require approval by the NEB and the Government of Canada. The Government of Canada allows the export of natural gas by NEB order without volume
limitation for terms not exceeding 24 months.



The Government of Canada and the provinces in which the Company produces crude oil and natural gas impose royalties on production from lands where they own the
mineral rights. Some producing provinces also receive revenue by imposing taxes on production from lands where they do not own the mineral rights.

Different
royalties are imposed by the Government of Canada and each of the producing provinces. Royalties imposed by the producing provinces on crude oil vary depending on well
production volumes, selling prices, recovery methods and the date of initial production. Royalties imposed by the producing provinces on natural gas and natural gas liquids vary depending on well
production volumes, selling prices and the date of initial production. For information with respect to royalty rates for Norman Wells, Cold Lake and Syncrude, see "Natural
Resources  Petroleum and Natural Gas Production".



The Investment Canada Act requires Government of Canada approval, in certain cases, of the acquisition of control of a Canadian business by an entity that is not
controlled by Canadians. In certain circumstances, the acquisition of natural resource properties may be considered to be a transaction that constitutes an acquisition of control of a Canadian
business requiring Government of Canada approval. The Act requires notification of the establishment of new unrelated businesses in Canada by entities not controlled by Canadians, but does not require
Government of Canada approval except when the new business is related to Canada's cultural heritage or national identity. By virtue of the majority stock ownership of the Company by Exxon Mobil
Corporation, the Company is considered to be an entity which is not controlled by Canadians.

The Company Online

The Company's Web sitewww.imperialoil.cacontains a variety of corporate and investor information which are
available free of charge, including the Company's Form 10-K and quarterly reports on Form 10-Q. The Company's current reports on
Form 8-K will also be made available on the Web site for reports filed during and after 2003.

15

---



Item 2.    Properties.

Reference is made to Item 1 above, and for the reserves of the Syncrude mining operations, reference is made to Item 8 of this report.

Item 3.    Legal Proceedings.

Not applicable.

Item 4.    Submission of Matters to a Vote of Security Holders.

Not applicable.

PART II

Item 5.    Market for Registrant's Common Equity and Related Stockholder Matters.

Information for Security Holders Outside Canada

Cash dividends paid to shareholders resident in countries with which Canada has an income tax convention are usually subject to a Canadian nonresident withholding
tax of 15 percent.

The
withholding tax is reduced to five percent on dividends paid to a corporation resident in the United States that owns at least 10 percent of the voting shares of the Company.

There
is no Canadian tax on gains from selling shares or debt instruments owned by nonresidents not carrying on business in Canada.

Quarterly Financial and Stock Trading Data

|                                |                                | 2002
three months ended |       | 2001
three months ended
|------------------------------- | ------------------------------ | ----------------------- | ----- | -----------------------
|
|                               
|Per-share information(dollars)  |                                |                         |       |                        
|                                | Dividends (declared quarterly) |                         | 0.21  |                        
|Share prices(dollars)           |                                |                         |       |                        
|Toronto Stock Exchange          |                                |                         |       |                        
|                                | High                           |                         | 47.85 |                        
|                                | Low                            |                         | 41.13 |                        
|                                | Close                          |                         | 47.45 |                        
|American Stock Exchange ($U.S.) |                                |                         |       |                        
|                                | High                           |                         | 30.33 |                        
|                                | Low                            |                         | 25.83 |                        
|                                | Close                          |                         | 29.84 |                        

The
Company's shares are listed on the Toronto Stock Exchange and are admitted to unlisted trading on the American Stock Exchange in New York. The symbol on these exchanges for
the Company's common shares is IMO. Share prices were obtained from stock exchange records.

As
of February 28, 2003, there were 15,920 holders of record of common shares of the Company.

Item 6.    Selected Financial Data.

|                             |  | 2002 |        | 2001 |   | 2000   |  | 1999 |        | 1998
|---------------------------- |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ----
|                             |  |     
|
|Total revenues               |  | $    | 17,042 |      | $ | 17,253 |  | $    | 18,051 |     
|Net earnings                 |  |      | 1,210  |      |   | 1,239  |  |      | 1,398  |     
|Total assets                 |  |      | 11,868 |      |   | 10,761 |  |      | 11,222 |     
|Long-term debt               |  |      | 1,466  |      |   | 1,029  |  |      | 1,037  |     
|Other long-term obligations  |  |      | 1,187  |      |   | 1,063  |  |      | 1,044  |     
|Net earnings/share  basic   |  | $    | 3.19   |      | $ | 3.15   |  | $    | 3.35   |     
|Net earnings/share  diluted |  |      | 3.19   |      |   | 3.15   |  |      | 3.35   |     
|Cash dividends/share         |  |      | 0.84   |      |   | 0.83   |  |      | 0.78   |     

Reference
is made to the table setting forth exchange rates for the Canadian dollar, expressed in U.S. dollars, on page 2 of this report.

16

---

Presentation of Financial Statements

The financial statements of the Company have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada. These principles conform
in all material respects to those in the United States except for the following:

|                                                             |                                                                                                                                          | 2002 |       | 2001 |   | 2000  |     | 1999 |       | 1998 |  
|------------------------------------------------------------ | ---------------------------------------------------------------------------------------------------------------------------------------- | ---- | ----- | ---- | - | ----- | --- | ---- | ----- | ---- | -
|                                                             |                                                                                                                                          |      |      
|
|Net earnings as shown in financial statements (restated) (a) |                                                                                                                                          | $    | 1,210 |      | $ | 1,239 |     | $    | 1,398 |      | $
|Impact of U.S. accounting principles:                        |                                                                                                                                          |      |       |      |   |       |     |      |       |      |  
|                                                             | Capitalized interest (1)                                                                                                                 |      |       | 4    |   |       | (3  | )    |       | (3   | )
|                                                             | Enacted tax rate difference (2)                                                                                                          |      |       |     |   |       | (13 | )    |       | 13   |  
|                                                             |                                                                                                                                          |      |      
|Net earnings under U.S. GAAP (6) (a)                         |                                                                                                                                          | $    | 1,214 |      | $ | 1,223 |     | $    | 1,408 |      | $
|Other comprehensive income (expense), net of tax (7):        |                                                                                                                                          |      |       |      |   |       |     |      |       |      |  
|                                                             | Minimum pension liability adjustment (net of tax benefit of $155 million in 2002; 2001  $34 million benefit; 2000  $9 million benefit) |      |       | (238 | ) |       | (52 | )    |       | (16  | )
|                                                             |                                                                                                                                          |      |      
|Comprehensive income under U.S. GAAP                         |                                                                                                                                          | $    | 976   |      | $ | 1,171 |     | $    | 1,392 |      | $
|                                                             |                                                                                                                                          |      |      

---

Under accounting principles of:Canada basic

$3.19

$3.15

$3.35

$1.44

$1.01 diluted

$3.19

$3.15

$3.35

$1.44

$1.01United States basic

$3.20

$3.11

$3.37

$1.43

$1.01 diluted

$3.20

$3.11

$3.37

$1.43

$1.01


Notes (1)
through (12) found on pages 18 to 20 apply to the above and following tables.

The
adjustments under United States GAAP result in changes to the consolidated balance sheet of the Company as follows:

|                                                                                   |                                 | As at
December 31, 2002
(millions) |        | As at
December 31, 2001
(millions) |  
|---------------------------------------------------------------------------------- | ------------------------------- | ---------------------------------- | ------ | ---------------------------------- | -
|
|                                                                                   |                                 |                                    |        |                                    |  
|Current assets (5)                                                                 |                                 | $                                  | 2,657  |                                    | $
|Future income tax assets (4)                                                       |                                 |                                    | 323    |                                    |  
|Investments and other long term assets (5)                                         |                                 |                                    | 134    |                                    |  
|Property, plant and equipment  cost (1) (4)                                       |                                 |                                    | 18,045 |                                    |  
|Property, plant and equipment  accumulated depreciation
    and depletion (1) (4) |                                 |                                    | (9,519 | )                                  |  
|Goodwill (8)                                                                       |                                 |                                    | 204    |                                    |  
|Other intangible assets                                                            |                                 |                                    |        |                                    |  
|                                                                                   |  cost (3) (8)                  |                                    |        | 54                                 |  
|                                                                                   |  accumulated amortization      |                                    |        | (30                                | )
|                                                                                   |                                 |                                    |       
|Total Assets                                                                       |                                 | $                                  | 11,868 |                                    | $
|                                                                                   |                                 |                                    |       
|Current liabilities (5)                                                            |                                 | $                                  | 2,743  |                                    | $
|Long term debt (5)                                                                 |                                 |                                    | 1,466  |                                    |  
|Other long term obligations (3)                                                    |                                 |                                    | 1,187  |                                    |  
|Future income tax liabilities (4)                                                  |                                 |                                    | 1,260  |                                    |  
|Shareholders' equity                                                               |                                 |                                    | 5,212  |                                    |  
|                                                                                   |                                 |                                    |       
|Total liabilities, deferred income taxes and shareholders' equity                  |                                 | $                                  | 11,868 |                                    | $
|                                                                                   |                                 |                                    |       
|Shareholders Equity:                                                               |                                 |                                    |        |                                    |  
|Common shares at stated value                                                      |                                 |                                    |        |                                    |  
|                                                                                   | At beginning of year            |                                    | $      | 1,941                              |  
|                                                                                   | Share purchases at stated value |                                    |        | (2                                 | )
|                                                                                   |                                 |                                    |       
|                                                                                   | At end of year                  |                                    | $      | 1,939                              |  
|                                                                                   |                                 |                                    |       

(continued
on following page)

17

---

|                                       |                                           | As at
December 31, 2002
(millions) |       | As at
December 31, 2001
(millions) |  
|-------------------------------------- | ----------------------------------------- | ---------------------------------- | ----- | ---------------------------------- | -
|
|                                       |                                           |                                    |       |                                    |  
|Retained earnings                      |                                           |                                    |       |                                    |  
|                                       | At beginning of year                      |                                    | $     | 2,392                              |  
|                                       | Net earnings for the year                 |                                    |       | 1,210                              |  
|                                       | Share purchases in excess of stated value |                                    |       | (11                                | )
|                                       | Dividends                                 |                                    |       | (318                               | )
|                                       |                                           |                                    |      
|                                       | At end of year                            |                                    | $     | 3,273                              |  
|                                       |                                           |                                    |      
|Accumulated other comprehensive income |                                           |                                    |       |                                    |  
|                                       | At beginning of year                      |                                    |       |                                   |  
|                                       | Other comprehensive income for the year   |                                    |       |                                   |  
|                                       |                                           |                                    |      
|                                       | At end of year                            |                                    |       |                                   |  
|                                       |                                           |                                    |      
|Total shareholders' equity             |                                           | $                                  | 5,212 |                                    | $
|                                       |                                           |                                    |      

---



Pension Benefits2002

2001Net liability recognized under Canadian GAAP

$
(388
)
$
(285
)Intangible asset


(114
)

(112
)Accumulated other comprehensive income (before tax)


(521
)

(128
)Net liability recognized under U.S. GAAP

$
(1,023
)
$
(525
)




2002

2001Carrying Amount

Fair Value

Carrying Amount

Fair Value(millions)AssetsCash

$
766

$
766

$
872

$
872Accounts receivable


1,348


1,348


992


992Other long term assets (receivable)


60


59


67


61Liabilities:Current


(2,743
)

(2,743
)

(3,025
)

(3,025
)Current portion of long term debt











Long-term debt


(1,466
)

(1,466
)

(1,029
)

(1,030
)




18

---





19

---



2002

2001

2000(millions)Net earnings as shown in financial statements

$
1,210

$
1,239

$
1,398Stock-based compensation expense as reported, net of tax


24


30


38Stock-based compensation expense, net of tax, determined under fair value based method


(40
)

(30
)

(38
)Pro forma net earnings

$
1,194

$
1,239

$
1,398Net earnings/share:As reported  basic and diluted

$
3.19

$
3.15

$
3.35Pro forma  basic and diluted

$
3.15

$
3.15

$
3.35




Additional Financial Statement Disclosures

The Company's policy regarding the provision for site restoration costs is described on page F-8. Amounts recorded to date are shown in
note 7 to the financial statements on page F-15. In Natural Resources, additional costs for site restoration that are to be accrued over future years are estimated to
be about $585 million (2002  $525 million).

These
additional costs will be accounted for as part of the transitional adoption provisions of SFAS No. 143 (see note 10 above). The transitional provisions require that
the present value of a liability be recognized as if SFAS No.143 had been in effect at the time the natural resources assets were originally installed. The Company is then required to recognize a
cumulative accretion for the change in the present value of the liability to adoption date, as well as a cumulative depreciation measurement to adoption date. Any resulting adjustment to the current
recorded liability is to be recognized as a cumulative effect adjustment in the statement of earnings.

Item 7.    Management's Discussion and Analysis of Financial Condition and Results of Operation.

Net earnings in 2002 were $1,210 million or $3.19 a share, compared with $1,239 million or $3.15 a share in 2001
(2000  $1,398 million, or $3.35 a share). Higher prices for bitumen largely offset lower prices for natural gas, reduced production of crude oil and weak
markets for petroleum products.

Earnings
in 2002 included after tax gains of $4 million on asset sales, compared with gains of $7 million in 2001 (2000  gains of
$96 million).

Compared
to 2001, the positive factors affecting 2002 earnings were: higher resource prices by $265 million; higher product volumes by $48 million; lower expenses by
$34 million and favourable foreign exchange effects on U.S. dollar debt by $64 million.

Compared
to 2001, the negative factors affecting 2002 earnings were: lower product margins by $300 million and reduced production of oil and gas by $140 million.

The
following table shows the Company's net earnings by segment for the five years ending December 31, 2002:

|                    |  | 2002 |       | 2001 |   | 2000  |   | 1999 |       | 1998 |  
|------------------- |  | ---- | ----- | ---- | - | ----- | - | ---- | ----- | ---- | -
|                    |  |      |      
|
|Natural resources   |  | $    | 1,042 |      | $ | 941   |   | $    | 1,165 |      | $
|Petroleum products  |  |      | 127   |      |   | 353   |   |      | 313   |      |  
|Chemicals           |  |      | 52    |      |   | 23    |   |      | 59    |      |  
|Corporate and other |  |      | (11   | )    |   | (78   | ) |      | (139  | )    |  
|                    |  |      |      
|Net earnings        |  | $    | 1,210 |      | $ | 1,239 |   | $    | 1,398 |      | $
|                    |  |      |      

Natural Resources

Earnings from natural resources were $1,042 million  the second best year on
record  up from $941 million in 2001 (2000  $1,165 million). Higher prices for blended bitumen more than
offset the effects of lower prices for natural gas and decreased production of crude oil. Included in the earnings were gains of $3 million from the sale of assets, unchanged from 2001
(2000  gains of $86 million).

Compared
to 2001, the positive factors affecting 2002 earnings were higher prices by $265 million.

Compared
to 2001, the negative factors affecting 2002 earnings were: reduced production of oil and gas by $140 million and higher project related and other expenses by
$24 million.

20

---

Resource
revenues were $4.9 billion, down from $5.3 billion in 2001 (2000  $5.9 billion). The main reasons for the decline
were lower natural gas prices and decreased production of crude oil.

World
prices for light crude oil were slightly higher in 2002 than the previous year. The annual average price of Brent crude oil, the most actively traded North Sea crude and a common
benchmark of world oil markets, was $25 (U.S.) a barrel in 2002, compared with $24.50 in 2001 (2000  $28.40). Prices strengthened considerably as the year
progressed, beginning 2002 much lower than the previous year, but ending the year higher.

The
Company's realizations on sales of conventional Canadian crude mirrored the same trends as world prices. Average realizations during the year were $36.81 (Cdn) a barrel versus $35.56
in 2001 (2000  $41.52).

In
contrast, world markets for heavy oil were tighter throughout the year, reflecting reduced global supplies. This contributed to a strengthening of prices for Canadian heavy oil,
including blended bitumen from Cold Lake. The price of Bow River, a benchmark Canadian heavy crude oil, increased by more than 25 percent in 2002, compared with a two percent increase in prices
for Canadian light crude oil.

Prices
for Canadian natural gas in 2002, while strong by historical standards, were lower on average than in the previous year. The average of 30 day spot prices for natural gas
at the AECO hub in Alberta was about $4.10 a thousand cubic feet in 2002, down from $6.30 a thousand in 2001 (2000  $5.00).

The
Company's average realizations on natural gas sales decreased to $4.02 a thousand cubic feet from $5.72 a thousand in 2001 (2000  $4.99).

Gross
production of crude oil and natural gas liquids (NGLs) decreased to 247,000 barrels a day from 267,000 barrels in 2001 (2000  260,000). Net
production decreased to 223,000 barrels a day from 237,000 barrels in 2001 (2000  213,000).

Net
bitumen production at the Company's Cold Lake operation was 106,000 barrels a day, down from 121,000 barrels in 2001 (2000  102,000). The
decline resulted from the timing of steam injections associated with the recovery process used at Cold Lake. The effective royalty rate on Cold Lake production was unchanged from 2001.

Production
from the Syncrude operation, in which the Company has a 25 percent interest, increased in the year as a result of greater operating reliability. Gross production of
upgraded crude oil rose to 229,000 barrels a day from 223,000 barrels in 2001 (2000  203,000). The Company's share of average net production increased to 57,000
barrels a day from 52,000 barrels in 2001 (2000  42,000).

Net
production of conventional oil decreased to 39,000 barrels a day from 42,000 barrels in 2001 (2000  46,000) as a result of the natural decline
in western Canadian reservoirs.

Net
production of natural gas was 463 million cubic feet a day in 2002, largely unchanged from 466 million in 2001
(2000  459 million).

Net
production available for sale increased to 396 million cubic feet a day from 376 million in 2001 (2000  277 million). The
primary reason for the increase was a reduction in the Company's natural gas used in its own operations.

Operating
costs, including exploration expenses, increased by about one percent in 2002. The main factor was increased costs associated with planned expenses for the start up of the Cold
Lake expansion and other growth projects.

Proceeds
from divestments and property sales in natural resources were $34 million in 2002, up from $8 million in 2001
(2000  $234 million).

The
following table shows the Company's capital and exploration expenditures for natural resources during the five years ending December 31, 2002:

|            |  | 2002 |     | 2001 |   | 2000 |  | 1999 |     | 1998
|----------- |  | ---- | --- | ---- | - | ---- |  | ---- | --- | ----
|            |  |     
|
|Exploration |  | $    | 39  |      | $ | 49   |  | $    | 56  |     
|Production  |  |      | 143 |      |   | 109  |  |      | 110 |     
|Heavy Oil   |  |      | 804 |      |   | 588  |  |      | 268 |     
|            |  |     
|Total       |  | $    | 986 |      | $ | 746  |  | $    | 434 |     
|            |  |     

About
90 percent of the capital and exploration expenditures in 2002 was focused on growth opportunities. The largest single investment during the year was the Company's share of
the Syncrude expansion. Significant expenditures were also made to complete development of Cold Lake stages 11 to 13. The remainder of 2002 investment was directed to East Coast
development and exploration, advancing the Mackenzie gas project and drilling for conventional oil and gas in Western Canada.

21

---

Planned
capital and exploration expenditures in natural resources are expected to total about $1 billion in 2003, with nearly 90 percent of the total focused on growth
opportunities. Much of the expenditure will be directed to the expansion now underway at Syncrude. Investments are also planned for the Mackenzie gas project, continued maintenance at Cold Lake,
development of a second tier of the Sable Offshore Energy Project, as well as on further development drilling in Western Canada. Planned expenditures for exploration and development drilling, as well
as for capacity additions in conventional oil and gas operations, are expected to be about $140 million.

Petroleum Products

Net earnings from petroleum products were $127 million or 0.4 cents a litre in 2002, down from a record $353 million or 1.2 cents a litre in 2001
(2000  $313 million or 1.1 cents a litre). The decline was caused by reduced industry refining and marketing margins.

Compared
to 2001, the positive factors affecting 2002 earnings were: lower expenses by $60 million and higher volumes by $20 million.

Compared
to 2001, the negative factors affecting 2002 earnings were lower refining and marketing margins by $306 million.

Revenues
were $14.4 billion, unchanged from the previous year (2000  $15.1 billion).

Margins
were lower in both the refining and marketing segments of the industry, reflecting high inventories and strong competition. Although refining margins improved late in the year,
as North American product inventories returned to more normal levels, average
margins for the year as a whole were significantly lower than in 2001. Average marketing margins were also lower than the previous year.

The
Company's total sales volumes, including those resulting from reciprocal supply agreements with other companies, were 83.1 million litres a day, compared with
81.2 million litres in 2001 (2000  80.3 million). Excluding sales resulting from reciprocal agreements, sales were 69.2 million litres a
day, compared with 69.6 million litres in 2001 (2000  69.6 million).

Operating
costs decreased by about three percent in 2002 from the previous year.

The
following table shows the Company's capital expenditures for petroleum products during the five years ending December 31, 2002:

|                    |  | 2002 |     | 2001 |   | 2000 |  | 1999 |     | 1998
|------------------- |  | ---- | --- | ---- | - | ---- |  | ---- | --- | ----
|                    |  |     
|
|Marketing           |  | $    | 133 |      | $ | 171  |  | $    | 121 |     
|Refining and supply |  |      | 399 |      |   | 118  |  |      | 100 |     
|Other (1)           |  |      | 57  |      |   | 50   |  |      | 11  |     
|                    |  |     
|Total               |  | $    | 589 |      | $ | 339  |  | $    | 232 |     
|                    |  |     

---

Capital
expenditures increased to $589 million in 2002, compared with $339 million in 2001 (2000  $232 million). The Company
invested more than $300 million in refining operations during the year as part of a $575-million project to eliminate virtually all sulphur from Esso gasoline. In addition, almost
$100 million was invested in a variety of refinery projects to improve energy efficiency and increase yield.

Major
investments were also made to upgrade the network of Esso retail outlets in 2002.

Capital
expenditures in 2003 are expected to be about $500 million. Major items include additional investment in refining facilities to complete the sulphur reduction project and
continued enhancements to the Company's retail network. There will also be significant expenditures on a 95 megawatt cogeneration facility in Sarnia, slated for completion in 2004, which will improve
energy efficiency and reduce emissions at the Company's Sarnia based petroleum product and chemical operations.

Chemicals

Earnings from chemical operations were $52 million in 2002, up from $23 million in 2001
(2000  $59 million). Increased margins on sales of polyethylene and a full year of production from an expansion of the polyethylene plant, which was
completed in late 2001, were the main reasons for the improvement.

Compared
to 2001, the positive factors affecting 2002 earnings were: higher volumes by $28 million and higher margins by $6 million.

Compared
to 2001, the negative factors affecting 2002 earnings were higher volume related expenses by $5 million.

Increased
sales of intermediate products, which include solvents, plasticizers and industrial alcohols, also contributed to the higher earnings.

Total
revenues from chemical operations were $1,164 million, compared with $1,175 million in 2001 (2000  $1,173 million).
Prices for both polyethylene and intermediate chemicals were lower in the year, offsetting gains from increased sales volumes.

22

---

The
average industry price of polyethylene was $1,229 a tonne in 2002, down four percent from $1,284 a tonne in 2001 (2000  $1,368). However,
margins improved because of lower feedstock costs, reflecting reduced prices for natural gas.

Sales
of chemicals increased to 3,500 tonnes a day from 3,300 tonnes a day in 2001 (2000  3,100 tonnes), following the fifth expansion of the
Sarnia polyethylene plant.

Operating
costs in the chemical segment increased by four percent in 2002, largely because of a seven-percent increase in total production volumes.

The
following table shows the Company's capital expenditures for chemicals during the five years ending December 31, 2002:

| |  | 2002 |    | 2001 |   | 2000 |  | 1999 |    | 1998 |   |   
| |  | ---- | -- | ---- | - | ---- |  | ---- | -- | ---- | - | --
| |  |      |    |     
|
| |  | $    | 25 |      | $ | 30   |  | $    | 13 |      | $ | 20

Of
the capital expenditures in 2002, the major investment was the Sarnia cogeneration project, a joint development between the petroleum product and chemical operations at the site.

Planned
expenditures in 2003 will increase to more than $40 million, with the majority of the investment relating to the Sarnia cogeneration project.

Financial Review

Earnings from corporate and other accounts were negative $11 million in 2002, compared with negative $78 million in 2001
(2000  negative $139 million). The improvement was mainly attributable to favourable foreign exchange effects on the Company's U.S. dollar
denominated debt.

Cash
flow from earnings was $1,758 million, down from $1,991 million in 2001 (2000  $1,844 million), mainly because of the
timing of income tax payments. Cash provided from operating activities was $1,676 million, compared with $2,004 million in 2001
(2000  $2,089 million). The main reasons for the reduction were the effects of higher commodity prices on accounts receivable, partly offset by changes to
accounts payable, and the timing of income tax payments.

At
the beginning of 2002, the Company purchased 296,000 shares for $13 million, essentially completing the normal course issuer bid (share buyback program) that had begun in
June 2001. In June 2002, the Company renewed the buyback program for another 12 months. No shares were purchased under the program during the balance of the year. Since the
Company initiated its first buyback program in 1995, the Company has purchased 202.7 million shares  representing about 35 percent of the total
outstanding at the start of the program  with resulting distributions to shareholders of $5,169 million.

The
Company declared dividends totalling 84 cents a share in 2002, up from 83 cents in 2001 (2000  78 cents). Regular dividends per share have
increased in each of the past eight years and, since 1986, payments have grown by more than 50 percent a share.

At
year-end, the balance of cash and marketable securities was $766 million, compared with $872 million at the end of 2001
(2000  $1,020 million).

In
2002, the Company retired the remaining $45 million (U.S.) of its 83/4-percent sinking fund debentures due in 2019 for $71 million (Cdn), replacing this
long term debt with short term Canadian commercial paper. The Company also issued $500 million of floating rate notes under its $1 billion medium term notes program. They have an initial
term of two years and are extendable up to five years at the discretion of noteholders.

Total
debt outstanding at the end of 2002 was $1,538 million, compared with $1,489 million at the end of 2001
(2000  $1,412 million).

Debt
related interest expense paid in 2002 was $40 million, down from $77 million in 2001 (2000  $106 million). Generally
lower interest rates and the retirement of the Company's long term, fixed rate debt during the past few years were the reasons for the reduction. The average effective interest rate on the Company's
debt was 2.1 percent in 2002, compared with 5.1 percent in 2001 (2000  7.3 percent).

Capital
and exploration expenditures increased to $1,600 million in 2002 from $1,115 million in 2001 (2000  $679 million). The
funds were used mainly to maintain and expand crude oil and natural gas production capacity, to upgrade refineries to meet low sulphur gasoline requirements and to enhance the Company's retail outlets
and rural agency network.

Capital
and exploration expenditures in 2003, which will focus mainly on growth and productivity improvement, are expected to total about $1.5 billion and will be financed
primarily from internally generated funds.

23

---

Expenditures
in Canada on research and development were $50 million in 2002, up from $37 million in 2001 (2000  $31 million).
These funds were used mainly to develop improved methods for recovering heavy oil and manufacturing polyethylene, as well as developing higher quality lubricants.

During
2002, the Company spent more than $375 million on projects related to reducing the environmental impact of operations and improving safety. This included investments of
more than $300 million in the Company's four refineries as part of its $575 million capital project to produce lower sulphur gasolines.

The
following table shows the Company's cash provided from operating activities during the five years ending December 31, 2002:

| |  | 2002 |       | 2001 |   | 2000  |  | 1999 |       | 1998 |   |      
| |  | ---- | ----- | ---- | - | ----- |  | ---- | ----- | ---- | - | -----
| |  |      |       |     
|
| |  | $    | 1,676 |      | $ | 2,004 |  | $    | 2,089 |      | $ | 1,470

In
2003, the Company's employee retirement benefit plan will be subject to an actuarial valuation that is required every three years. At the time of the last required valuation in 2000,
the Company's registered pension plan was fully funded. Given the downturn in financial markets that has occurred since 2000, the upcoming valuation is expected to result in a requirement for the
Company to contribute funds to the plan. The size of any required contribution will not be known until the valuation is completed. However, the Company does not expect the funding requirement to
affect its existing capital investment plans or its ability to take advantage of new investment opportunities.

The
following table shows the Company's long term contractual obligations:

|                                       |  |         |  | Payment due by period
|-------------------------------------- |  | ------- |  | ---------------------
|
|                                      
|Long term debt                         |  | Note 4  |  |                     
|Operating leases                       |  | Note 10 |  | 64                   
|Unconditional purchase obligations (1) |  | Note 10 |  | 93                   
|Firm capital commitments (2)           |  | Note 10 |  | 254                  
|Other long term agreements (3)         |  | Note 10 |  | 214                  
|                                      
|Total                                  |  |         |  | 625                  
|                                      

Critical Accounting Policies

The Company's financial statements have been prepared in accordance with Canadian generally accepted accounting principles and include estimates that reflect
management's best judgments. The Company's accounting and financial reporting fairly reflects its straightforward business model. The Company does not use financing structures for the purpose of
altering accounting outcomes or removing debt from the balance sheet. The following summary provides further information about the critical accounting policies and the estimates that are made by the
Company to apply those policies. It should be read in conjunction with pages F-7 to F-9.

Oil and gas and synthetic crude oil reserves

Proved oil and gas and synthetic crude oil reserves quantities are used as the basis of calculating the unit of production rates for depreciation and evaluating
for impairment. These reserves are the estimated quantities of crude oil, natural gas and natural gas liquids that geological and engineering data demonstrate with reasonable certainty to be
recoverable in future years from known reservoirs and deposits under existing economic and operating conditions. The estimation of reserves is an ongoing process based on rigorous technical
evaluations and extrapolations of appropriate information. While proved reserves have a reasonable certainty of recovery, they are based on estimates that are subject to some variability. This
variability has, however, generally resulted in net upward revisions of proved reserves for the Company through effective reservoir management and the application of new technology. Over the last five
years, the Company's net revisions of previous estimates and improved recovery have averaged an increase of 23 million oil equivalent barrels per year including 10 million oil equivalent
barrels of synthetic crude oil. While revisions the Company has made in the past are an indicator of variability, they have had a very small impact on the unit of production rates of depreciation and
in impairment testing because the revisions have been small compared to the large proved reserves base.

24

---

Site restoration costs

Provision for site restoration costs is recorded when it is probable that obligations have been incurred and the amounts can be reasonably determined. This
provision is based on engineering estimates of costs, taking into account the anticipated method and extent of remediation consistent with legal requirements, industry practices, current technology
and the possible use of the site. Changes in these factors may result in material changes to the provision.

Retirement benefits

The Company's pension plan is managed in compliance with the requirements of governmental authorities and meets funding levels as determined by independent third
party actuaries. Pension accounting requires explicit assumptions regarding, among others, the discount rate for the benefit obligations, rate of return on plan assets and the long term rate for
future pay increases. All pension assumptions are reviewed annually by senior financial management and at least once every three years by independent third party actuaries. These assumptions are
adjusted only as appropriate to reflect long term changes in market rates and outlook. The long term expected rate of return on plan assets of 81/4 percent used in 2002 compares to
actual returns of 9.8 percent and 10.1 percent actually achieved over the last 10 and 20 year periods ending December 31, 2002. If different assumptions are used, the
expense and obligations could increase or decrease as a result. The Company's potential exposure to change in assumptions is summarized in footnote (e) of note 6 to the financial
statements. At the Company, differences between actual returns on plan assets versus the long term expected return are amortized in pension expense, along with other actuarial gains and losses.
Pension expense represented about one percent of total expenses in 2002.

Item 7A.    Quantitative and Qualitative Disclosures About Market Risk.

The Company is exposed to a variety of financial, operating and market risks in the course of its business. Some of these risks are within the Company's control,
while others are not. For those risks that can be controlled, specific risk management strategies are employed to reduce the likelihood of loss. Other risks, such as changes in international commodity
prices and currency exchange rates, are beyond the Company's control. The Company's potential exposure to these types of risks is summarized in the table on earnings sensitivities. The amount quoted
to illustrate the impact of each sensitivity represents a change of about 10 percent in the value of the commodity or rate in question at the end of 2002.

Each
sensitivity calculation shows the impact on earnings that results from a change in one factor, after tax and royalties and holding all other factors constant. While these
sensitivities are applicable under current conditions, they may not apply proportionately to larger fluctuations.

The
Company does not use derivative markets to speculate on the future direction of currency or commodity prices and does not sell forward any part of production from any business
segment. Interest and currency swaps may be used within limits to manage the interest rate or currency exposure of the Company's debt, but no such swap contracts have been used in the past three
years.

The
following table shows the estimated annual effect, under current conditions, of certain sensitivities of the Company's after tax earnings.

|                                                                                         |  | millions of dollars after tax
|---------------------------------------------------------------------------------------- |  | -----------------------------
|Three dollars (U.S.) a barrel change in crude oil prices                                 |  | +(-)                         
|Sixty cents (Canadian) a thousand cubic feet change in natural gas prices                |  | +(-)                         
|One cent (Canadian) a litre change in sales margins for total petroleum products         |  | +(-)                         
|Two cents (U.S.) a pound change in sales margins for polyethylene                        |  | +(-)                         
|One quarter percent decrease (increase) in short term interest rates                     |  | +(-)                         
|Six cents decrease (increase) in the value of the Canadian dollar versus the U.S. dollar |  | +(-)                         

The
sensitivity to changes in the value of the Canadian dollar versus the U.S. dollar has increased from the year 2001 by about $15 million after tax per year for each one
Canadian cent difference. This is a result of the higher prices for crude oil, bitumen, natural gas and petroleum products denominated in U.S. dollars at year end 2002 compared to year end
2001. The sensitivity to changes in interest rates reflects a change in both U.S. and Canadian short term interest rates, which reflects the Company's current funding arrangements. Per unit
sensitivities for other factors are generally unchanged from the year 2001.

Item 8.    Financial Statements and Supplementary Data.

Reference is made to the Index to Financial Statements on page F-1 of this report. The reconciliation to U.S. GAAP is in Item 6 of
this report.

25

---



Syncrude Mining Operations

Syncrude's crude bitumen is contained within the unconsolidated sands of the McMurray Formation. Ore bodies are buried beneath 15 to 45 metres (50 to 150 feet) of
overburden, have bitumen grades ranging from 4 to 14 weight percent and ore thickness of 35 to 50 metres (115 to 160 feet). Estimates of synthetic crude oil reserves are based on detailed geological
and engineering assessments of in-place crude bitumen volume, the mining plan, historical extraction recovery and upgrading yield factors, installed plant operating capacity and operating
approval limits. The in-place volume, depth and grade are established through extensive and closely spaced core drilling. Proven reserves include the operating Base and North mines and the
Aurora mine. In accordance with the approved mining plan, there are an estimated 2,990 million tonnes (3,295 million tons) of extractable tar sands, in the Base and North mines, with an
average bitumen grade of 10.4 weight percent. In addition, at the Aurora mine, there are an estimated 3,665 million tonnes (4,050 million tons) of extractable tar sands at an average
bitumen grade of 11.3 weight percent. After deducting royalties payable to the Province of Alberta, the Company estimates its 25 percent net share of proven reserves is equivalent to
127 million cubic metres (800 million barrels) of synthetic crude oil.

The
following table sets forth the Company's share of net proven reserves of Syncrude after deducting royalties payable to the Province of Alberta:

|                              |  | Synthetic Crude Oil |  
|----------------------------- |  | ------------------- | -
|
|
|
|Beginning of year 2000        |  | 62                  |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (2                  | )
|
|End of year 2000              |  | 60                  |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (2                  | )
|
|End of year 2001              |  | 58                  |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (3                  | )
|
|End of year 2002              |  | 55                  |  
|

|                              |  | Synthetic Crude Oil |  
|----------------------------- |  | ------------------- | -
|
|
|
|Beginning of year 2000        |  | 387                 |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (14                 | )
|
|End of year 2000              |  | 373                 |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (15                 | )
|
|End of year 2001              |  | 358                 |  
|Revision of previous estimate |  |                    |  
|Production                    |  | (14                 | )
|
|End of year 2002              |  | 344                 |  
|

Oil and Gas Producing Activities

The following information is provided in accordance with the United States' Statement of Financial Accounting Standards No. 69, "Disclosures about Oil and
Gas Producing Activities".

Results of operations

|                           |  | 2002 |       | 2001 |   | 2000 
|-------------------------- |  | ---- | ----- | ---- | - | -----
|                           |  |     
|
|Sales to customers         |  | $    | 1,381 |      | $ | 1,306
|Intersegment sales         |  |      | 741   |      |   | 767  
|                           |  |     
|Total sales (1)            |  |      | 2,122 |      |   | 2,073
|Production expenses        |  |      | 599   |      |   | 551  
|Exploration expenses       |  |      | 30    |      |   | 45   
|Depreciation and depletion |  |      | 424   |      |   | 409  
|Income taxes               |  |      | 343   |      |   | 333  
|                           |  |     
|Results of operations      |  | $    | 726   |      | $ | 735  
|                           |  |     

26

---

Capital and exploration expenditures

|                                           |          | 2002 |     | 2001 |   | 2000
|------------------------------------------ | -------- | ---- | --- | ---- | - | ----
|                                           |          |     
|
|Property costs (2)                         |          |      |     |      |   |     
|                                           | Proved   |      | $   | 13   |   | $   
|                                           | Unproved |      |     | 5    |   |     
|Exploration costs                          |          |      | 34  |      |   | 44  
|Development costs                          |          |      | 469 |      |   | 489 
|
|Total capital and exploration expenditures |          | $    | 521 |      | $ | 538 
|

Property, plant and equipment

|                                       |          | 2002 |       | 2001 
|-------------------------------------- | -------- | ---- | ----- | -----
|                                       |          |     
|
|Property costs (2)                     |          |      |       |      
|                                       | Proved   |      | $     | 3,338
|                                       | Unproved |      |       | 155  
|Producing assets                       |          |      | 5,371 |      
|Support facilities                     |          |      | 126   |      
|Incomplete construction                |          |      | 227   |      
|                                       |          |     
|Total cost                             |          |      | 9,217 |      
|Accumulated depreciation and depletion |          |      | 5,528 |      
|                                       |          |     
|Net property, plant and equipment      |          | $    | 3,689 |      
|                                       |          |     

---

Net proved developed and undeveloped reserves (1)

|                                                      |  | Crude oil and natural gas liquids |   |     |  
|----------------------------------------------------- |  | --------------------------------- | - | --- | -
|
|
|
|Beginning of year 2000                                |  | 36                                |   | 139 |  
|Revisions of previous estimates and improved recovery |  |                                  |   | 2   |  
|(Sale)/purchase of reserves in place                  |  | (1                                | ) |    |  
|Discoveries and extensions                            |  |                                  |   |    |  
|Production                                            |  | (4                                | ) | (6  | )
|
|End of year 2000                                      |  | 31                                |   | 135 |  
|Revisions of previous estimates and improved recovery |  | (1                                | ) |    |  
|(Sale)/purchase of reserves in place                  |  |                                  |   |    |  
|Discoveries and extensions                            |  |                                  |   |    |  
|Production                                            |  | (4                                | ) | (7  | )
|
|End of year 2001                                      |  | 26                                |   | 128 |  
|Revisions of previous estimates and improved recovery |  |                                  |   | 5   |  
|(Sale)/purchase of reserves in place                  |  |                                  |   |    |  
|Discoveries and extensions                            |  |                                  |   |    |  
|Production                                            |  | (3                                | ) | (6  | )
|
|End of year 2002                                      |  | 23                                |   | 127 |  
|

---

27

---

|                                                      |  | Crude oil and natural gas liquids |   |     |  
|----------------------------------------------------- |  | --------------------------------- | - | --- | -
|
|
|
|Beginning of year 2000                                |  | 225                               |   | 878 |  
|Revisions of previous estimates and improved recovery |  | 1                                 |   | 10  |  
|(Sale)/purchase of reserves in place                  |  | (5                                | ) |    |  
|Discoveries and extensions                            |  | 1                                 |   |    |  
|Production                                            |  | (26                               | ) | (37 | )
|
|End of year 2000                                      |  | 196                               |   | 851 |  
|Revisions of previous estimates and improved recovery |  | (8                                | ) |    |  
|(Sale)/purchase of reserves in place                  |  |                                  |   |    |  
|Discoveries and extensions                            |  |                                  |   |    |  
|Production                                            |  | (23                               | ) | (44 | )
|
|End of year 2001                                      |  | 165                               |   | 807 |  
|Revisions of previous estimates and improved recovery |  | 3                                 |   | 33  |  
|(Sale)/purchase of reserves in place                  |  |                                  |   |    |  
|Discoveries and extensions                            |  |                                  |   |    |  
|Production                                            |  | (22                               | ) | (39 | )
|
|End of year 2002                                      |  | 146                               |   | 801 |  
|

---

Crude
oil and natural gas reserve estimates are based on geological and engineering data, which have demonstrated with reasonable certainty that these reserves are recoverable in future
years from known reservoirs under existing economic and operating conditions, i.e. prices and costs as of the date the estimate is made. Reserves of crude oil at Cold Lake are those estimated
to be recoverable from the existing experimental pilot plants and commercial stages 1 through 13.

Net
proved reserves are determined by deducting the estimated future share of mineral owners or governments or both. For conventional crude oil (excluding enhanced oil recovery
projects), and natural gas, net proved reserves are based on estimated future royalty rates representative of those existing as of the date the estimate is made. Actual future royalty rates may vary
with production and price. For enhanced oil recovery projects and Cold Lake, net proved reserves are based on the Company's best estimate of average royalty rates over the life of each project. Actual
future royalty rates may vary with production, price and costs.

Reserves
data do not include certain resources of crude oil and natural gas such as those discovered in the Beaufort Sea/Mackenzie Delta and the Arctic Islands, or the resources
contained in oil sands other than those attributable to the Cold Lake pilot area and stages 1 through 13 of Cold Lake production operations.

In
2002, the Company's net proved reserves of crude oil and natural gas liquids decreased by about four million cubic metres (25 million barrels), while the proved reserves of
natural gas decreased by about five billion cubic metres (190 billion cubic feet). Production in 2002 totaled about nine million cubic metres (61 million barrels) of crude oil and
natural gas liquids and about five billion cubic metres (169 billion cubic feet) of natural gas. Revisions of previous estimates and improved recovery increased reserves of crude oil and
natural gas liquids by about five million cubic metres (36 million barrels) and decreased reserves of natural gas by less than one billion cubic metres (26 billion cubic feet). Purchases
of reserves accounted for an increase of less than one billion cubic metres (two billion cubic feet) of natural gas. Discoveries and extensions in 2002 totaled less than one billion cubic metres
(three billion cubic feet) of natural gas.

Net Proved Developed and Undeveloped Reserves of Crude Oil and Natural Gas (1)

|             |                                      | 2002         |  | 2001  |  | 2000  |  | 1999  |  | 1998 
|------------ | ------------------------------------ | ------------ |  | ----- |  | ----- |  | ----- |  | -----
|             |                                      |             
|
|Crude Oil:   |                                      |              |  |       |  |       |  |       |  |      
|             | Conventional:                        |              |  |       |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 23    |  | 26    |  | 31    |  | 36   
|             |                                      | Barrels      |  | 146   |  | 165   |  | 196   |  | 225  
|             | Oil Sands (Cold Lake crude bitumen): |              |  |       |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 127   |  | 128   |  | 135   |  | 139  
|             |                                      | Barrels      |  | 801   |  | 807   |  | 851   |  | 878  
|             | Total:                               |              |  |       |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 150   |  | 154   |  | 166   |  | 175  
|             |                                      | Barrels      |  | 947   |  | 972   |  | 1,047 |  | 1,103
|Natural Gas: |                                      | (billions)  
|             |                                      | Cubic metres |  | 35    |  | 40    |  | 45    |  | 48   
|             |                                      | Cubic feet   |  | 1,224 |  | 1,414 |  | 1,572 |  | 1,692

28

---

Net Proved Developed Reserves of Crude Oil and Natural Gas (1)

|             |                                      | 2002         |  | 2001 |  | 2000  |  | 1999  |  | 1998 
|------------ | ------------------------------------ | ------------ |  | ---- |  | ----- |  | ----- |  | -----
|             |                                      |             
|
|Crude Oil:   |                                      |              |  |      |  |       |  |       |  |      
|             | Conventional:                        |              |  |      |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 22   |  | 25    |  | 28    |  | 32   
|             |                                      | Barrels      |  | 139  |  | 157   |  | 175   |  | 200  
|             | Oil Sands (Cold Lake crude bitumen): |              |  |      |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 49   |  | 34    |  | 40    |  | 36   
|             |                                      | Barrels      |  | 308  |  | 216   |  | 250   |  | 229  
|             | Total:                               |              |  |      |  |       |  |       |  |      
|             |                                      | Cubic metres |  | 71   |  | 59    |  | 68    |  | 68   
|             |                                      | Barrels      |  | 447  |  | 373   |  | 425   |  | 429  
|Natural Gas: |                                      | (billions)  
|             |                                      | Cubic metres |  | 27   |  | 30    |  | 35    |  | 36   
|             |                                      | Cubic feet   |  | 959  |  | 1,060 |  | 1,233 |  | 1,264

---

Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves (1)

|                                                                 |  | 2002 |        | 2001 |   | 2000   |  
|---------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|                                                                 |  |      |       
|
|Future cash flows                                                |  | $    | 35,811 |      | $ | 17,936 |  
|Future production costs                                          |  |      | (8,940 | )    |   | (7,107 | )
|Future development costs                                         |  |      | (3,117 | )    |   | (2,641 | )
|Future income taxes                                              |  |      | (9,107 | )    |   | (3,285 | )
|                                                                 |  |      |       
|Future net cash flows                                            |  |      | 14,647 |      |   | 4,903  |  
|Annual discount of 10 percent for estimated timing of cash flows |  |      | (6,446 | )    |   | (2,114 | )
|                                                                 |  |      |       
|Discounted future net cash flows                                 |  | $    | 8,201  |      | $ | 2,789  |  
|                                                                 |  |      |       

Changes in Standardized Measure of Discounted Future Net Cash Flows Related to Proved Oil and Gas Reserves (1)

|                                                                             |  | 2002 |        | 2001 |   | 2000   |  
|---------------------------------------------------------------------------- |  | ---- | ------ | ---- | - | ------ | -
|                                                                             |  |      |       
|
|Balance at beginning of year                                                 |  | $    | 2,789  |      | $ | 5,987  |  
|Changes resulting from:                                                      |  |      |        |      |   |        |  
|Sales and transfers of oil and gas produced, net of production costs         |  |      | (1,645 | )    |   | (1,698 | )
|Net changes in prices, development costs and production costs                |  |      | 9,276  |      |   | (6,477 | )
|Extensions, discoveries, additions and improved recovery, less related costs |  |      | 34     |      |   | 31     |  
|Purchase/(sales) of minerals in place                                        |  |      | 4      |      |   | 5      |  
|Development costs incurred during the year                                   |  |      | 432    |      |   | 504    |  
|Revisions of previous quantity estimates                                     |  |      | 111    |      |   | 88     |  
|Accretion of discount                                                        |  |      | 423    |      |   | 1,030  |  
|Net change in income taxes                                                   |  |      | (3,223 | )    |   | 3,319  |  
|                                                                             |  |      |       
|Net Change                                                                   |  |      | 5,412  |      |   | (3,198 | )
|                                                                             |  |      |       
|Balance at end of year                                                       |  | $    | 8,201  |      | $ | 2,789  |  
|                                                                             |  |      |       

---

Within
the past 12 months, the Company has not filed oil and gas reserve estimates with any authority or agency of the United States.

Item 9.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

None.

29

---



PART III

Item 10.    Directors and Executive Officers of the Registrant.

The Company currently has nine directors. Each director is elected to hold office until the close of the next annual meeting.

All
of the nominees are now directors and have been since the dates indicated.

The
following table provides information on the nominees for election as directors.

|Name and current principal occupation or employment                                                                                                |  | Last major
position or office with the Company or Exxon Mobil Corporation |  | Director since    |  | Holdings(1)(2)                                 |  |       
|-------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------- |  | ----------------- |  | ---------------------------------------------- |  | ------
|                                                                                                                                                  
|P. (Pierre) Des Marais II
President, Gestion PDM Inc. (management company)                                                                         |  |                                                                          |  | April 22, 1977    |  | Common shares of Imperial Oil Limited          |  | 1,560 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Deferred share units of Imperial Oil Limited   |  | 3,232 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Restricted stock units of Imperial Oil Limited |  | 750   
|                                                                                                                                                   |  |                                                                           |  |                   |  | Shares of Exxon Mobil Corporation              |  | 0     
|                                                                                                                                                  
|B.J. (Brian) Fischer
Senior vice-president, products and chemicals division, Imperial Oil Limited                                                  |  | Senior vice-president, chemicals division, Imperial Oil Limited           |  | September 1, 1992 |  | Common shares of Imperial Oil Limited          |  | 33,354
|                                                                                                                                                   |  |                                                                           |  |                   |  | Deferred share units of Imperial Oil Limited   |  | 19,716
|                                                                                                                                                   |  |                                                                           |  |                   |  | Restricted stock units of Imperial Oil Limited |  | 21,700
|                                                                                                                                                   |  |                                                                           |  |                   |  | Shares of Exxon Mobil Corporation              |  | 0     
|                                                                                                                                                  
|T.J. (Tim) Hearn
Chairman, president and chief executive officer, Imperial Oil Limited                                                             |  | President, Imperial Oil Limited                                           |  | January 1, 2002   |  | Common shares of Imperial Oil Limited          |  | 20,601
|                                                                                                                                                   |  |                                                                           |  |                   |  | Deferred share units of Imperial Oil Limited   |  | 0     
|                                                                                                                                                   |  |                                                                           |  |                   |  | Restricted stock units of Imperial Oil Limited |  | 50,000
|                                                                                                                                                   |  |                                                                           |  |                   |  | Shares of Exxon Mobil Corporation              |  | 9,069 
|                                                                                                                                                  
|R. (Roger) Phillips
Retired president and chief executive officer, IPSCO Inc. (steel manufacturing)                                                |  |                                                                          |  | April 23, 2002    |  | Common shares of Imperial Oil Limited          |  | 3,000 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Deferred share units of Imperial Oil Limited   |  | 1,038 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Restricted stock units of Imperial Oil Limited |  | 750   
|                                                                                                                                                   |  |                                                                           |  |                   |  | Shares of Exxon Mobil Corporation              |  | 2,000 
|                                                                                                                                                  
|J.F. (Jim) Shepard
Retired chairman and chief executive officer, Finning International Inc. (sale, lease, repair and financing of heavy equipment) |  |                                                                          |  | October 21, 1997  |  | Common shares of Imperial Oil Limited          |  | 3,000 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Deferred share units of Imperial Oil Limited   |  | 3,556 
|                                                                                                                                                   |  |                                                                           |  |                   |  | Restricted stock units of Imperial Oil Limited |  | 750   
|                                                                                                                                                   |  |                                                                           |  |                   |  | Shares of Exxon Mobil Corporation              |  | 0     
|                                                                                                                                                  

(Table
continued on following page)

30

---

|Name and current principal occupation or employment                                                                            |  | Last major
position or office with the Company or Exxon Mobil Corporation |  | Director since   |  | Holdings(1)(2)                                 |  |       
|------------------------------------------------------------------------------------------------------------------------------ |  | ------------------------------------------------------------------------- |  | ---------------- |  | ---------------------------------------------- |  | ------
|                                                                                                                              
|P.A. (Paul) Smith
Controller and senior vice-president, finance and administration, Imperial Oil Limited                       |  | Corporate finance manager, Exxon Mobil Corporation                        |  | February 1, 2002 |  | Common shares of Imperial Oil Limited          |  | 3,887 
|                                                                                                                               |  |                                                                           |  |                  |  | Deferred share units of Imperial Oil Limited   |  | 0     
|                                                                                                                               |  |                                                                           |  |                  |  | Restricted stock units of Imperial Oil Limited |  | 12,500
|                                                                                                                               |  |                                                                           |  |                  |  | Shares of Exxon Mobil Corporation              |  | 1,190 
|                                                                                                                              
|S.D. (Sheelagh) Whittaker
Executive vice-president, EDS (Australia) Pty Limited (business and information technology services) |  |                                                                          |  | April 19, 1996   |  | Common shares of Imperial Oil Limited          |  | 3,000 
|                                                                                                                               |  |                                                                           |  |                  |  | Deferred share units of Imperial Oil Limited   |  | 5,949 
|                                                                                                                               |  |                                                                           |  |                  |  | Restricted stock units of Imperial Oil Limited |  | 750   
|                                                                                                                               |  |                                                                           |  |                  |  | Shares of Exxon Mobil Corporation              |  | 0     
|                                                                                                                              
|K.C. (K.C.) Williams
Senior vice-president, resources division, Imperial Oil Limited                                           |  | Vice-president, production, Exxon Company, International                  |  | January 1, 1999  |  | Common shares of Imperial Oil Limited          |  | 11,600
|                                                                                                                               |  |                                                                           |  |                  |  | Deferred share units of Imperial Oil Limited   |  |      
|                                                                                                                               |  |                                                                           |  |                  |  | Restricted stock units of Imperial Oil Limited |  |      
|                                                                                                                               |  |                                                                           |  |                  |  | Shares of Exxon Mobil Corporation              |  | 70,162
|                                                                                                                              
|V.L. (Victor) Young
Corporate director of several corporations                                                                 |  |                                                                          |  | April 23, 2002   |  | Common shares of Imperial Oil Limited          |  | 3,000 
|                                                                                                                               |  |                                                                           |  |                  |  | Deferred share units of Imperial Oil Limited   |  | 259   
|                                                                                                                               |  |                                                                           |  |                  |  | Restricted stock units of Imperial Oil Limited |  | 750   
|                                                                                                                               |  |                                                                           |  |                  |  | Shares of Exxon Mobil Corporation              |  | 100   
|                                                                                                                              

The
ages of the directors, nominees for election as directors, and the five senior executives of the Company are: Pierre Des Marais II 68, Brian J. Fischer 56, Timothy J. Hearn 59, Roger
Phillips 63, James F. Shepard 64, Paul A. Smith 50, Sheelagh D. Whittaker 55, K.C. Williams 53, Victor L. Young 57, and John F. Kyle 60.

Roger
Phillips is a director of Canadian Pacific Railways Limited, Cleveland  Cliffs Inc., Fording Inc., and The Toronto Dominion
Bank, and Victor L. Young is a director of Royal Bank of Canada and BCE Inc., which companies are subject to reporting requirements under the U.S. Securities Exchange Act of 1934.

All
of the directors and nominees for election as directors, except for Pierre Des Marais II, Roger Phillips, Victor L. Young and James F. Shepard, have been engaged for more than five
years in their present principal occupations or in other executive capacities with the same firm or affiliated firms. For more than five years before 1999, Pierre Des Marais II's principal occupation
was president and chief executive officer of UniMédia Inc., (holding company: newspaper publishing, commercial printing and distribution) following which in 1999 he became
president of Gestion PDM Inc. (management company). During the five preceding years, Roger Phillips

31

---

was
president and chief executive officer of IPSCO Inc. (steel manufacturing) until he retired on January 1, 2002. During the five preceding years, Victor L. Young was chairman and chief
executive officer of Fishery Products International Limited (seafood products), until May 1, 2001 and is currently a director of Royal Bank of Canada, BCE Inc., McCain Foods Limited,
Aliant Inc. and Telesat Canada. For more than five years before 2000, James F. Shepard's principal occupation was successively president and chief executive officer, and from April 1996,
chairman and chief executive officer of Finning International Inc. (sale, lease, repair and financing of heavy equipment) following which, in 2000, he retired.

The
following table provides information on the senior executives of the Company.

Name and Office

Office held sinceTimothy J. Hearn
chairman of the board, president and chief executive officer

April 23, 2002Brian J. Fischer
senior vice-president, products and chemicals division

February 1, 1994Paul A. Smith
controller and senior vice-president, finance and administration

February 1, 2002K.C. Williams
senior vice-president, resources division

January 1, 1999John F. Kyle
vice-president and treasurer

June 1, 1991


All
of the above senior executives have been engaged for more than five years at their current occupations or in other executive capacities with the Company or its affiliates. All senior
executives hold office until their appointment is rescinded by the directors, or by the chief executive officer.

Item 11.    Executive Compensation.

Directors' compensation

Directors' fees are paid only to nonemployee directors. For 2002, nonemployee directors were paid an annual retainer of $35,000 for their services as directors,
plus an annual retainer of $4,500 for each committee on which they served, an additional $5,000 for serving as chair of a committee and $2,000 for each board and board committee meeting attended.
Effective December 31, 2002, the annual board retainer was increased by the issuance of 750 restricted stock units to each nonemployee director. The restricted stock units issued to nonemployee
directors have the same features as the restricted stock units for selected employees described on page 36.

Starting
in 1999, the nonemployee directors have been able to receive all or part of their directors' fees in the form of deferred share units for nonemployee directors. The purpose of
the deferred share unit plan for nonemployee directors is to provide them with additional motivation to promote sustained improvement in the Company's business performance and shareholder value by
allowing them to have all or part of their directors' fees tied to the future growth in value of the Company's common shares. This plan is described on page 36.

32

---

While
serving as directors in 2002, the aggregate cash remuneration paid to nonemployee directors, as a group, was $628,919, and they received an additional 5,946 deferred share units
for nonemployee directors, as a group, based on an aggregate of $272,135 of cash remuneration elected to be received as deferred share units. The nonemployee directors, as a group, received an
additional 302 deferred share units granted as the equivalent to the cash dividend paid on Company shares during 2002 for previously granted deferred share units.

Senior executive compensation

Summary compensation table

The following table shows the compensation for the current chief executive officer, a former chief executive officer and the four other senior executives of the
Company who were serving as senior executives at the end of 2002. This information includes the dollar value of base salaries, cash bonus awards, the number of stock options and units of other
long-term incentive compensation and certain other compensation.

33

---

|                                                                            |  |      |  | Annual Compensation |  | Long-Term Compensation |  |                      
|--------------------------------------------------------------------------- |  | ---- |  | ------------------- |  | ---------------------- |  | ---------------------
|
|
|
|
|                                                                           
|T.J. Hearn
Chairman, president and chief executive officer                  |  | 2002 |  | 668,333             |  | 442,000                |  | 71,777
U.S. 328,796  
|                                                                            |  | 2001 |  | 475,000             |  | 300,000                |  | 19,888
U.S. (163,873)
|                                                                            |  | 2000 |  | 445,000             |  | 300,000                |  | U.S. 210,672         
|                                                                           
|R.B. Peterson (1)
Former chairman and chief executive officer               |  | 2002 |  | 343,333             |  | 400,000                |  | 102,595              
|                                                                            |  | 2001 |  | 990,000             |  | 750,000                |  | 233,034              
|                                                                            |  | 2000 |  | 933,333             |  | 502,500                |  | 193,795              
|                                                                           
|B.J. Fischer
Senior vice-president, products and chemicals division         |  | 2002 |  | 505,000             |  | 216,000                |  | 0                    
|                                                                            |  | 2001 |  | 475,000             |  | 67,500                 |  | 2,935                
|                                                                            |  | 2000 |  | 448,333             |  | 75,000                 |  | 0                    
|                                                                           
|P.A. Smith
Controller and senior vice-president, finance and administration |  | 2002 |  | 331,667             |  | 94,500                 |  | U.S. 100,390         
|                                                                            |  | 2001 |  | 291,666             |  | 110,000                |  | U.S. 30,908          
|                                                                            |  | 2000 |  | 272,000             |  | 125,000                |  | U.S. 3,050           
|                                                                           
|K.C. Williams (2)
Senior vice-president, resources division                 |  | 2002 |  | U.S. 412,500        |  | U.S. 158,000           |  | U.S. 363,932         
|                                                                            |  | 2001 |  | U.S. 382,750        |  | U.S. 197,500           |  | U.S. 144,175         
|                                                                            |  | 2000 |  | U.S. 357,000        |  | U.S. 197,500           |  | U.S. 32,372          
|                                                                           
|J.F. Kyle
Vice-president and treasurer                                      |  | 2002 |  | 345,000             |  | 110,000                |  | 13,077               
|                                                                            |  | 2001 |  | 325,000             |  | 150,000                |  | 15,107               
|                                                                            |  | 2000 |  | 305,000             |  | 150,000                |  | 20,430               
|                                                                           

34

---

Long-term incentive compensation

Long-term incentive compensation is granted to retain selected employees and reward them for high performance. The compensation has generally been in
the form of units.

The
Company's incentive share units give the recipient a right to receive cash equal to the amount by which the market price of the Company's common shares at the time of exercise
exceeds the issue price of the units, if exercised within the periods of eligibility. These units were granted prior to 2002. The issue price of the units granted to executives was the closing price
of the Company's shares on the Toronto Stock Exchange on the grant date. The periods of eligibility for the exercise of the units are as follows: no units may be exercised before one year after the
grant date; up to 50 percent of the units may be exercised on or after one year following the grant date; an additional 25 percent of the units may be exercised on or after two years
following the grant date; and the remaining 25 percent of the units may be exercised on or after three years following the grant date.

In
1998, an additional form of long-term incentive compensation ("deferred share units") was made available to selected executives whereby they could elect to receive all or
part of their performance bonus compensation in the form of such units. The number of units granted to an executive is determined by dividing the amount of the executive's bonus elected to be received
as deferred share units by the average of the

35

---

closing
prices of the Company's shares on the Toronto Stock Exchange for the five consecutive trading days ("average closing price") immediately prior to the date that the bonus would have been paid
to the executive. Additional units will be granted to recipients of these units based on the cash dividend payable on the Company shares divided by the average closing price immediately prior to the
payment date for that dividend and multiplying the resulting number by the number of deferred share units held by the recipient. An executive may not exercise these units until after termination of
employment with the Company and must exercise the units no later than December 31 of the year following termination of employment with the Company. The units held must all be exercised on the
same date. On the date of exercise, the cash value to be received for the units will be determined by multiplying the number of units exercised by the average closing price immediately prior to the
date of exercise.

Starting
in 1999, a form of long-term incentive compensation, similar to the deferred share units for executives, was made available to nonemployee directors in lieu of their
receiving all or part of their directors' fees. The main differences between the two plans are that all nonemployee directors are allowed to participate in the plan for nonemployee directors and that
the number of units granted to a nonemployee director is determined at the end of each calendar quarter by dividing the amount of the directors' fees for that calendar quarter that the nonemployee
director elected to receive as deferred share units by the average closing price immediately prior to the last day of the calendar quarter.

Starting
in 2001, the earnings bonus unit plan was made available to selected executives to promote individual contribution to sustained improvement in the Company's business performance
and shareholder value. Each earnings bonus unit entitles the recipient to receive an amount equal to the Company's cumulative net earnings per common share as announced each quarter beginning after
the grant. Payout occurs on the fifth anniversary of the grant or when the maximum settlement value per unit is reached, if earlier.

Under
the new stock option plan, adopted by the Company in April 2002, a total of 3,210,200 options were granted on April 30, 2002 for the purchase of the Company's common
shares at an exercise price of $46.50 per share. Up to 50 percent of the options may be
exercised on or after January 1, 2003, a further 25 percent may be exercised on or after January 1, 2004, and the remaining 25 percent may be exercised on or after
January 1, 2005. Any unexercised options expire after April 29, 2012. Shares authorized for granting under the incentive stock option plan were 20 million at December 31,
2002.

In
December 2002, the Company introduced a restricted stock unit plan, which will be the primary long-term incentive compensation plan in future years. The purpose of
the plan is to align the interests of employees and nonemployee directors directly with the interests of shareholders. A total of 791,890 units were granted on December 31, 2002. Each unit
entitles the recipient the conditional right to receive from the Company, upon exercise, an amount equal to the closing price of the Company's shares on the exercise dates. Fifty percent of the units
will be exercised on the third anniversary of the grant date, and the remainder will be exercised on the seventh anniversary of the grant date. The Company will pay the recipients cash with respect to
each unexercised unit granted to the recipient corresponding in time and amount to the cash dividend that is paid by the Company on a common share of the Company.

Earnings bonus unit plan  awards in most recently completed financial year

The following table provides information on earnings bonus units granted in 2002 to the named senior executives.

|                  |  |         |  |               |  | Estimated Future Payouts Under Non-Securities-Price Based Plans
|----------------- |  | ------- |  | ------------- |  | ---------------------------------------------------------------
|
|
|
|                 
|T.J. Hearn        |  | 146,000 |  | Nov. 20, 2007 |  | 0                                                              
|R.B. Peterson     |  |        |  |              |  |                                                               
|B.J. Fischer      |  | 72,000  |  | Nov. 20, 2007 |  | 0                                                              
|P.A. Smith        |  | 31,500  |  | Nov. 20, 2007 |  | 0                                                              
|K.C. Williams (3) |  |        |  |              |  |                                                               
|J.F. Kyle         |  | 37,000  |  | Nov. 20, 2007 |  | 0                                                              

36

---

Option/SAR grants during the most recently completed financial year

The following table provides information on stock options granted in 2002 to the named senior executives.

|Name          |  | Securities
Under
Options/SARs
Granted
(#) |  | % of Total
Options/SARs
Granted to
Employees in
Financial Year (1) |  | Exercise
or
Base Price
($/Security) |  | Market Value
of Securities
Underlying
Options/SARs
on the Date of
Grant
($/Security) |  | Expiration
Date (2)
|------------- |  | ----------------------------------------- |  | ------------------------------------------------------------------ |  | ----------------------------------- |  | ------------------------------------------------------------------------------------ |  | -------------------
|             
|T.J. Hearn    |  | 65,000                                    |  | 2.0                                                                |  | 46.50                               |  | 46.50                                                                                |  | April 30, 2012     
|R.B. Peterson |  | 145,000                                   |  | 4.5                                                                |  | 46.50                               |  | 46.50                                                                                |  | April 30, 2012     
|B.J. Fischer  |  | 50,000                                    |  | 1.6                                                                |  | 46.50                               |  | 46.50                                                                                |  | April 30, 2012     
|P.A. Smith    |  | 25,000                                    |  | 0.8                                                                |  | 46.50                               |  | 46.50                                                                                |  | April 30, 2012     
|K.C. Williams |  |                                          |  |                                                                   |  |                                    |  |                                                                                     |  |                   
|J.F. Kyle     |  | 29,000                                    |  | 0.9                                                                |  | 46.50                               |  | 46.50                                                                                |  | April 30, 2012     

Aggregated option/SAR exercises during the most recently completed financial year and financial year-end option/SAR values

The following table provides information on the exercise in 2002 and the aggregate holdings at the end of 2002 of incentive share units (referred to in the table
as "SARs") by the named senior executives.

|                  |  |   |  |         |  | Unexercised Options/SARs at Financial Year-End (#) |  | Value of Unexercised in-the-Money Options/SARs at Financial Year-End
($)
|----------------- |  | - |  | ------- |  | -------------------------------------------------- |  | ------------------------------------------------------------------------
|
|
|                 
|T.J. Hearn        |  |  |  | 583,125 |  | 32,500                                             |  | 102,500                                                                 
|R.B. Peterson     |  |  |  | 0       |  | 267,250                                            |  | 253,750                                                                 
|B.J. Fischer      |  |  |  | 0       |  | 118,500                                            |  | 87,500                                                                  
|P.A. Smith        |  |  |  | 378,768 |  | 61,500                                             |  | 42,500                                                                  
|K.C. Williams (1) |  |  |  |        |  |                                                   |  |                                                                        
|J.F. Kyle         |  |  |  | 496,275 |  | 74,250                                             |  | 50,750                                                                  

37

---

Payments to employees who retire

Pension plan table

|          |  | Estimated undiscounted payments
on retirement at the age of 65 after years of service indicated below ($)
|--------- |  | ---------------------------------------------------------------------------------------------------------
|
|
|         
|300,000   |  | 96,000                                                                                                   
|400,000   |  | 128,000                                                                                                  
|500,000   |  | 160,000                                                                                                  
|600,000   |  | 192,000                                                                                                  
|700,000   |  | 224,000                                                                                                  
|800,000   |  | 256,000                                                                                                  
|900,000   |  | 288,000                                                                                                  
|1,000,000 |  | 320,000                                                                                                  
|1,100,000 |  | 352,000                                                                                                  
|1,200,000 |  | 384,000                                                                                                  
|1,300,000 |  | 416,000                                                                                                  
|1,400,000 |  | 448,000                                                                                                  
|1,500,000 |  | 480,000                                                                                                  
|1,600,000 |  | 512,000                                                                                                  
|1,700,000 |  | 544,000                                                                                                  
|1,800,000 |  | 576,000                                                                                                  
|1,900,000 |  | 608,000                                                                                                  
|2,000,000 |  | 640,000                                                                                                  
|2,100,000 |  | 672,000                                                                                                  
|2,200,000 |  | 704,000                                                                                                  
|2,300,000 |  | 736,000                                                                                                  

The
Company's pension plan applies to almost all employees. The plan provides an annual pension of a specific percentage of an employee's "final three year average earnings", multiplied
by the employee's years of service, subject to certain requirements concerning age and length of service. An employee may elect to forego three of the six percent of the Company's contributions to the
savings plan under one of the options of that plan to which the senior executives subscribe, except for K.C. Williams, to receive an enhanced pension equal to 0.4 percent of the employee's
"final three year average earnings", multiplied by the employee's years of service while foregoing such Company contributions. In addition to the pension payable under the plan, the Company has paid
and may continue to pay a supplemental retirement income to selected executives. The pension plan table on this page shows estimated undiscounted annual payments, consisting of pension and
supplemental retirement income, payable on retirement to the senior executives in specified classifications of remuneration and years of service currently applicable to that group.

The
remuneration used to determine the payments on retirement to the individuals named in the summary compensation table on pages 34 and 35, except for R.B. Peterson,
corresponds generally to the salary, bonus compensation, and bonus compensation amount elected to be received as deferred share units in that table, and the aggregate maximum settlement value that
could be paid for earnings bonus units granted shown in the table on page 36 is included in the employee's "final three year average earnings" for the year of grant of such units. R.B.
Peterson's remuneration used to determine payment on retirement on May 1, 2002 was $1,972,389. As of February 19, 2003, the number of completed years of service used to determine
payments on retirement were 36 for T.J. Hearn, 34 for B.J. Fischer, 22 for P.A. Smith and 26 for J.F. Kyle. R.B. Peterson had 42 years of service on retirement.

K.C.
Williams is not a member of the Company's pension plan but is a member of Exxon Mobil Corporation's pension plan. Under that plan, K.C. Williams has 30 years of service and
he will receive a pension payable in U.S. dollars. The remuneration used to determine the payment on retirement to him also corresponds generally to his salary and bonus compensation in the
summary compensation table on pages 34, and 35, which remuneration may be applied to the pension plan table above but with the dollars in that table representing U.S. rather than
Canadian dollars.

38

---

Composition of the Company's compensation committee

The executive resources committee of the board of directors, composed of the nonemployee directors, is responsible for decisions on the compensation of senior
management above the level of vice-president and for reviewing the executive development system, including specific succession plans for senior management positions. It also reviews
corporate policy on compensation. During most of 2002, the membership of the executive resources committee was as follows:

P.
Des Marais II  Chair
R. Phillips  Vice-chair
T.J. Hearn
J.F. Shepard
S.D. Whittaker
V.L. Young

As
of January 23, 2003, T.J. Hearn was no longer a member of the executive resources committee. Instead he will attend meetings at the request of the committee and bring forward
recommendations on compensation or succession planning.

Executive resources committee report on executive compensation

The Company's executive compensation policy is designed to reinforce the Company's orientation toward career employment and its emphasis on performance as the
primary determinant of advancement. This acknowledges the long-term nature of the Company's business and its philosophy that the experience, skill and motivation of its senior executives
are significant determinants of future business success. The compensation program emphasizes competitive salaries and performance-based incentives as the primary instruments to develop and retain key
personnel.

In
establishing levels of compensation for its senior executives, the executive resources committee relies on market comparisons to other leading Canadian employers, typically in the
group of major companies with revenues in excess of $1 billion a year. These market comparisons are prepared by independent external compensation consultants. 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, reflecting the Company's emphasis on quality of management.

The
Company's senior executive compensation policy has three main elements: base salary, short-term and long-term incentive compensation. While these elements are
related to the extent that compensation policy is compared in total to the competitive practices of other major Canadian employers, individual decisions on base salary, short-term and
long-term incentive compensation are made independently of each other.



The Company's salary ranges for executives were increased by four and one-half percent in 2001 and 2002 and by three percent in 2003.
High-performing executives, and those recently promoted, whose salaries were low relative to their level of responsibility, were given limited additional salary increases. This included
senior executives.

T.J.
Hearn's salary is currently assessed to be below the median of peer salaries for his level of responsibility, experience, and personal contribution. This reflects his new
responsibilities but is below the competitive target for the Company's chief executive officer which is
between the median and upper quartile. The target is consistent with the executive resources committee's view that the chief executive officer's salary should be above the average of salaries for
chief executive officers of major Canadian companies, reflecting the Company's executive development philosophy and the significance placed on experience and judgment in leading a large, complex
operation.



Cash bonuses are typically granted to about 100 executives at the end of each year, based on individual performance. The bonuses are drawn from an aggregate bonus
amount established annually by the executive resources committee based on the Company's financial performance, and are granted in tandem with the Company's earnings bonus units, which are described on
page 36.

In
2002, the executive resources committee reduced the bonus awards including the grant of earnings bonus units to reflect the Company's financial results and in response to comparisons
to other leading Canadian employers.

In
the case of T.J. Hearn, the committee's approach to cash bonuses is based almost exclusively on the Company's financial performance and on the committee's assessment of T.J. Hearn's
effectiveness in leading the organization toward improved financial performance. The continuing progress being made in focussing the organization on advancing key strategic interests, productivity,
cost effectiveness and asset management has been a primary consideration in awarding cash bonuses to the chief executive officer. T.J. Hearn's bonus including the grant of earnings bonus units was
increased in 2002 to reflect his new responsibilities, effectiveness in the position, and comparisons to other leading Canadian employers.

39

---



Each year, the executive resources committee has approved long-term incentive awards for selected executives and other employees. These awards were an
added incentive to promote individual contribution to sustained improvement in business performance and shareholder value, and to encourage key employees to remain with the Company. Individual awards
reflected both level of responsibility and performance, with an emphasis on ability to influence longer-term results. In each case, including senior executives and the chief executive
officer, award amounts took into account the competitive practices of other major Canadian employers and were not influenced by prior-years' results or by an individual's holdings of unexercised
long-term incentive compensation units.

Incentive
awards also have been awarded selectively to the general managerial, professional and technical (non-executive) workforce as a way of delivering added financial
incentive to selected high-performing employees. Following approval at the 2002 annual general meeting of shareholders, the Company adopted an incentive stock option plan for this purpose.
A total of 766 employees, including executives, were granted incentive stock options in 2002.

For
selected executives, the executive resources committee allows cash bonus awards to be elected to be received in the form of deferred share units and also awards earnings bonus units
as a means of providing additional incentive to promote the Company's long-term financial performance. Eligibility to participate in the deferred share unit and earnings bonus plans is
restricted to those executives whose decisions are considered to have a direct effect on the long-term financial performance of the Company. In 2002, no executives elected to receive
deferred share units and 75 executives were awarded earnings bonus units.

For
many years, the Company's long-term incentive compensation programs have been cash-based programs tied to earnings and share performance, and incentive awards
have been reported as expenses in the consolidated statement of earnings. In 2002, to meet competitive practices, the Company introduced a stock option program. However, recognizing current concerns
over stock option incentive programs and their proper accounting treatment, the Company decided to return to straightforward, cash-based incentive compensation programs that will again be
reported as expenses against earnings. There are no plans to issue stock options in the future.

A
total of 690 employees, including executives, were granted restricted stock units in 2002.

Submitted
on behalf of the executive resources committee:

P.
Des Marais II  Chair
R. Phillips  Vice-chair
J.F. Shepard
S.D. Whittaker
V.L. Young

Item 12.    Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.

To the knowledge of the management of the Company, the only shareholder who, as of February 19, 2003, owned beneficially, or exercised control or direction
over, more than five percent of the outstanding common shares of the Company is Exxon Mobil Corporation, 5959 Las Colinas Boulevard, Irving, Texas 75039-2298, which owns beneficially
263,014,882 common shares, representing 69.6 percent of the outstanding voting shares of the Company.

Reference
is made to the security ownership information under the preceding Items 10 and 11. As of February 19, 2003, Robert B. Peterson was the beneficial owner of 25,606
common shares of the Company and held options to acquire 145,000 common shares of the Company and John F. Kyle was the owner of 3,263 common shares of the Company and held options to acquire 29,000
common shares of the Company.

The
directors and the senior executives of the Company consist of 10 persons, who, as a group, own beneficially 86,265 common shares of the Company, being approximately
0.02 percent of the total number of outstanding shares of the Company, and 82,521shares of Exxon Mobil Corporation. This information not being within the knowledge of the Company has been
provided by the directors and the senior executives individually. As a group, the directors and senior executives of the Company held options to acquire 314,000 common shares of the Company as of
February 19, 2003.

40

---

Equity Compensation Plan Information as of December 31, 2002

|Plan category                                              |  | Number of securities to
be issued upon exercise
of outstanding options,
warrants and rights
(a) |  | Weighted-average
exercise price of
outstanding options,
warrants and rights
(b) |  | Number of securities
remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
(c)
|---------------------------------------------------------- |  | ----------------------------------------------------------------------------------------------- |  | ------------------------------------------------------------------------------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------
|                                                          
|Equity compensation plans approved by security holders (1) |  | 3,210,200                                                                                       |  | $46.50                                                                          |  | 16,789,800                                                                                                                                     
|                                                          
|Equity compensation plans not approved by security holders |  | nil                                                                                             |  | nil                                                                             |  | nil                                                                                                                                            
|                                                          
|Total                                                      |  | 3,210,200                                                                                       |  | $46.50                                                                          |  | 16,789,800                                                                                                                                     
|                                                          

Item 13.    Certain Relationships and Related Transactions.

On June 21, 2001, the Company implemented another 12-month "normal course" share-purchase program under which it purchased 19,400,280 of its
outstanding shares between June 21, 2001, and June 20, 2002. On June 21, 2002, another 12-month "normal course" program was implemented under which the Company may
purchase up to 18,943,154 of its outstanding shares, less any shares purchased by the employee savings plan and Company pension fund. Exxon Mobil Corporation participated by selling shares to maintain
its ownership at 69.6 percent. In 2002, such purchases cost $13 million, of which $9 million was received by ExxonMobil.

The
amounts of purchases and sales by the Company and its subsidiaries for other transactions in 2002 with Exxon Mobil Corporation and affiliates of Exxon Mobil Corporation were
$2,191 million and $1,036 million, respectively. These transactions were conducted on terms as favorable as they would have been with unrelated parties, and primarily consisted of the
purchase and sale of crude oil, petroleum and chemical products, as well as transportation, technical and engineering services. Transactions with Exxon Mobil Corporation also include amounts paid and
received in connection with the Company's participation in a number of natural resources joint venture operations in Canada and the Company entering into an agreement with ExxonMobil
Canada Ltd., effective November 15, 2000, to share common business and operational support services that allow the companies to consolidate duplicate work and systems.

PART IV

Item 14.    Controls and Procedures.







41

---





Item 15.    Exhibits, Financial Statement Schedules, and Reports on Form 8-K.

Reference is made to the Index to Financial Statements on page F-1 of this report.

The
following exhibits numbered in accordance with Item 601 of Regulation S-K are filed as part of this report:

|(3)  |  | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Restated certificate and articles of incorporation of the Company (Incorporated herein by reference to Exhibit (3) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 0-12014)).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | By-laws of the Company (Incorporated herein by reference to Exhibit B to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1979 (File No. 2-9259)).                                              
|(4)  |  | Term Loan Agreement, dated as of July 13, 1989, relating to the borrowing of $2 billion (U.S.) (Incorporated herein by reference to Exhibit (4) of the Company's Annual Report on Form 10-K for the year ended December 31,
1989 (File No. 0-12014)). The Company's other long-term debt authorized under any other instrument does not exceed 10 percent of the Company's consolidated assets. The Company agrees to furnish to the Commission upon request a copy of
any such instrument.
|(10) |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                           

42

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| |  |       |  |     |  | (12) |  | Amendment to Alberta Crown Agreement, dated January 1, 1986 (Incorporated herein by reference to Exhibit (10)(ii)(12) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  | ----- |  | --- |  | ---- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  |       |  |     |  | (13) |  | Amendment to Alberta Crown Agreement, dated November 25, 1987 (Incorporated herein by reference to Exhibit (10)(ii)(13) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |  |       |  |     |  | (14) |  | Amendment to Syncrude Ownership and Management Agreement, dated March 10, 1982 (Incorporated herein by reference to Exhibit (10)(ii)(14) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  |       |  |     |  | (15) |  | Amendment to Alberta Crown Agreement, dated August 1, 1991 (Incorporated herein by reference to Exhibit (10)(ii)(15) of the Company's Annual Report on Form 10-K for the year ended December 31,
 1991 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   
| |  |       |  |     |  | (16) |  | Norman Wells Settlement Agreement, dated July 31, 1996. (Incorporated herein by reference to Exhibit (10)(ii)(16) of the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |       |  |     |  | (17) |  | Amendment to Alberta Crown Agreement, dated January 1, 1997. (Incorporated herein by reference to Exhibit (10)(ii)(17) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
| |  |       |  |     |  | (18) |  | Norman Wells Pipeline Amending Agreement, dated December 12, 1997. (Incorporated herein by reference to Exhibit (10)(ii)(18) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |  |       |  |     |  | (19) |  | Norman Wells Pipeline 1999 Amending Agreement, dated May 1, 1999. (Incorporated herein by reference to Exhibit (10)(ii)(19) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |  |       |  |     |  | (20) |  | Alberta Cold Lake Transition Agreement, effective January 1, 2000, relating to the royalties payable in respect of the Cold Lake production project and terminating the Alberta Cold Lake Crown Agreement. (Incorporated
herein by reference to Exhibit (10)(ii)(20) of the Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| |  |       |  |     |  | (21) |  | Amendment to Alberta Crown Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(21) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |  |       |  |     |  | (22) |  | Amendment to Syncrude Ownership and Management Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(22) of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |  |       |  |     |  | (23) |  | Amendment to Syncrude Ownership and Management Agreement effective September 16, 1994 (Incorporated herein by reference to Exhibit (10)(ii)(23) of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| |  |       |  |     |  | (24) |  | Amendment to Alberta Crown Agreement dated November 29, 1995 (Incorporated herein by reference to Exhibit (10)(ii)(24) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
| |  | (iii) |  | (A) |  | (1)  |  | Form of Letter relating to Supplemental Retirement Income (Incorporated herein by reference to Exhibit (10)(c)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1980
(File No. 2-9259)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |  |       |  |     |  | (2)  |  | Incentive Share Unit Plan and Incentive Share Units granted in 2001 are incorporated herein by reference to Exhibit (10)(iii)(A)(2) of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. Units granted in 2000 are incorporated herein by reference to Exhibit (10)(iii)(A)(2) of the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 0-12014); units
granted in 1999 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 0-12014); units granted in 1998 are incorporated
herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 0-12014); units granted in 1997 are incorporated herein by reference to
Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 0-12014); units granted in 1996 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of
the

43

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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  |                                        |  | Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 0-12014); units granted in 1995 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of the
Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-12014); units granted in 1994 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1994 (File No. 0-12014); and units granted in 1993 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K
for the year ended December 31, 1993 (File No. 0-12014).
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | -------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (3)                                    |  | Deferred Share Unit Plan. (Incorporated herein by reference to Exhibit(10)(iii)(A)(5) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (4)                                    |  | Deferred Share Unit Plan for Nonemployee Directors. (Incorporated herein by reference to Exhibit (10)(iii)(A)(6) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (5)                                    |  | Earnings Bonus Unit Plan and Earnings Bonus Units granted in 2002. Units granted in 2001 are incorporated herein by reference to Exhibit (10)(iii)(5) of the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 (File No. 0-12014).                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (6)                                    |  | Incentive Stock Option Plan and Incentive Stock Option granted in 2002 (Incorporated herein by reference to Exhibit(10)(iii)(A)(6) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                        
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (7)                                    |  | Restricted Stock Unit Plan and Restricted Stock Units granted in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
|(21) |  | Imperial Oil Resources Limited, McColl-Frontenac Petroleum Inc., Imperial Oil Resources N.W.T. Limited and Imperial Oil Resources Ventures Limited, all incorporated in Canada, are wholly-owned subsidiaries of the
Company. The names of all other subsidiaries of the Company are omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary as of December 31, 2002.
|(23) |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (A) |  | Consent of PricewaterhouseCoopers LLP.
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | (B) |  | Consent of Chief Engineering Officer. 

Copies
of Exhibits may be acquired upon written request of any shareholder to the investor relations manager, Imperial Oil Limited, 111 St. Clair Avenue West, Toronto, Ontario, Canada
M5W 1K3, and payment of processing and mailing costs.

Except
for a report on Form 8-K dated November 6, 2002, the Company did not file any other reports on Form 8-K during the fourth quarter of
2002. By the report on Form 8-K dated November 6, 2002, the Company submitted to the Securities and Exchange Commission written certification by each of the chief executive
officer and the chief financial officer of the Company for purposes of 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, of the Company's
report on Form 10-Q for the quarter ended September 30, 2002.

44

---



SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf on March 26, 2003 by the undersigned, thereunto duly authorized.

| |  | IMPERIAL OIL LIMITED
| |  | --------------------
| |  | By                  

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been signed below on March 26, 2003 by the following persons on behalf of the registrant and
in the capacities indicated.

|Signature                         |  | Title                                                                                                                                       
|--------------------------------- |  | --------------------------------------------------------------------------------------------------------------------------------------------
|                                  |  |                                                                                                                                             
|/s/  T.J. Hearn(Timothy J. Hearn) |  | Chairman of the Board, President,
Chief Executive Officer and Director
(Principal Executive Officer)                                        
|/s/  Paul A. Smith(Paul A. Smith) |  | Controller and Senior Vice-President,
Finance and Administration and Director
(Principal Accounting Officer and Principal Financial Officer)
|/s/  Pierre Des Marais II         |  | Director                                                                                                                                    
|(Pierre Des Marais II)            |  |                                                                                                                                             
|/s/  Brian J. Fischer             |  | Director                                                                                                                                    
|(Brian J. Fischer)                |  |                                                                                                                                             
|/s/  Roger Phillips               |  | Director                                                                                                                                    
|(Roger Phillips)                  |  |                                                                                                                                             
|/s/  J. Shepard                   |  | Director                                                                                                                                    
|(James F. Shepard)                |  |                                                                                                                                             
|/s/  Sheelagh Whittaker           |  | Director                                                                                                                                    
|(Sheelagh D. Whittaker)           |  |                                                                                                                                             
|/s/  K.C. Williams                |  | Director                                                                                                                                    
|(K.C. Williams)                   |  |                                                                                                                                             
|/s/  Victor L. Young              |  | Director                                                                                                                                    
|(Victor L. Young)                 |  |                                                                                                                                             

45

---

Certifications

I,
Timothy J. Hearn, certify that:





Date:
March 26, 2003

|/s/  T.J. Hearn                                                                                            
|-----------------------------------------------------------------------------------------------------------
|Timothy J. Hearn
Chairman of the Board, President and
Chief Executive Officer
(Principal Executive Officer)

46

---

Certifications

I,
Paul A. Smith, certify that:





Date:
March 26, 2003

|/s/  Paul A. Smith                                                                                          
|------------------------------------------------------------------------------------------------------------
|Paul A. Smith
Controller and Senior Vice-President,
Finance and Administration
(Principal Financial Officer)

47

---



INDEX TO FINANCIAL STATEMENTS

The following are incorporated in this report from the Company's Annual Report to Shareholders for the year ended December 31, 2002:

|                            |                                                                                    | Pages in this Report
|--------------------------- | ---------------------------------------------------------------------------------- | --------------------
|Auditors' report            |                                                                                    | F-3                 
|Financial statements:       |                                                                                    |                     
|                            | Consolidated statement of earnings for the years 1998, 1999, 2000, 2001 and 2002   |                     
|                            | Consolidated statement of cash flows for the years 1998, 1999, 2000, 2001 and 2002 |                     
|                            | Consolidated balance sheet as at December 31,1998, 1999, 2000, 2001 and 2002       |                     
|                            | Summary of significant accounting policies                                         |                     
|                            | Notes to the consolidated financial statements                                     |                     
|Glossary of financial terms |                                                                                    | F-18                

F-1

---

REPORT OF INDEPENDENT ACCOUNTANTS

Our audits of the consolidated financial statements referred to in our report dated February 19, 2003 on page F-3 also included audits of
the information under the caption "Presentation of Financial Statements" in Item 6 of this Form 10-K, and were conducted in accordance with auditing standards
generally accepted in the United States of America. In our opinion, the information presented under the caption "Presentation of Financial Statements" in Item 6 is presented fairly, in all
material respects, when read in conjunction with the related consolidated financial statements.

/s/  PricewaterhouseCoopers
LLP     
PricewaterhouseCoopers LLP
Chartered Accountants
Toronto, Ontario
February 19, 2003

F-2

---

AUDITORS' REPORT

To the shareholders of Imperial Oil Limited

We have audited the consolidated statements of earnings and of cash flows of Imperial Oil Limited for each of the three years in the period ended
December 31, 2002, and the consolidated balance sheets as at December 31, 2002, and 2001. These financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on our audits.

We
conducted our audits in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance
whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.

In
our opinion, these consolidated financial statements present fairly, in all material respects, the results of operations and cash flows of the Company for each of the three years in
the period ended December 31, 2002, and its financial position as at December 31, 2002, and 2001, in accordance with Canadian generally accepted accounting principles.

/s/  PricewaterhouseCoopers
LLP     
Chartered Accountants
Toronto, Ontario
February 19, 2003

F-3

---



CONSOLIDATED STATEMENT OF EARNINGS (a)

|millions of dollars                  |  |        |  |        |  |        |  |        |  |       
|------------------------------------ |  | ------ |  | ------ |  | ------ |  | ------ |  | ------
|
|                                     |  |       
|Revenues                             |  |        |  |        |  |        |  |        |  |       
|Operating revenues                   |  | 16,890 |  | 17,153 |  | 17,829 |  | 12,763 |  | 10,949
|Investment and other income (note 3) |  | 152    |  | 100    |  | 222    |  | 90     |  | 137   
|                                     |  |       
|Total revenues                       |  | 17,042 |  | 17,253 |  | 18,051 |  | 12,853 |  | 11,086
|                                     |  |       
|Expenses                             |  |        |  |        |  |        |  |        |  |       
|Exploration                          |  | 30     |  | 45     |  | 35     |  | 28     |  | 37    
|Purchases of crude oil and products  |  | 10,155 |  | 10,134 |  | 10,772 |  | 7,091  |  | 5,663 
|Operating, selling and general       |  | 3,110  |  | 3,135  |  | 2,846  |  | 2,776  |  | 2,722 
|Federal excise tax                   |  | 1,231  |  | 1,180  |  | 1,194  |  | 1,188  |  | 1,190 
|Depreciation and depletion           |  | 703    |  | 716    |  | 724    |  | 734    |  | 704   
|Financing costs (note 13)            |  | 32     |  | 152    |  | 163    |  | 38     |  | 250   
|                                     |  |       
|Total expenses                       |  | 15,261 |  | 15,362 |  | 15,734 |  | 11,855 |  | 10,566
|                                     |  |       
|Earnings before income taxes         |  | 1,781  |  | 1,891  |  | 2,317  |  | 998    |  | 520   
|Income taxes (note 5)                |  | 571    |  | 652    |  | 919    |  | 377    |  | 76    
|                                     |  |       
|Net earnings                         |  | 1,210  |  | 1,239  |  | 1,398  |  | 621    |  | 444   
|                                     |  |       
|Per-share information(dollars)       |  |        |  |        |  |        |  |        |  |       
|Net earnings  basic (note 11)       |  | 3.19   |  | 3.15   |  | 3.35   |  | 1.44   |  | 1.01  
|Net earnings  diluted (note 11)     |  | 3.19   |  | 3.15   |  | 3.35   |  | 1.44   |  | 1.01  
|Dividends                            |  | 0.84   |  | 0.83   |  | 0.78   |  | 0.75   |  | 0.74  
|                                     |  |       

---



The
information on pages F-7 through F-17 is part of these consolidated financial statements. Certain figures for prior years have been reclassified
in the financial statements to conform with the current year's presentation. The effects of new accounting standards on the consolidated statement of earnings and balance sheet are described in
note 2.

F-4

---

CONSOLIDATED STATEMENT OF CASH FLOWS

|millions of dollars                            |  |        |   |        |   |        |   |       |   |       |  
|---------------------------------------------- |  | ------ | - | ------ | - | ------ | - | ----- | - | ----- | -
|
|
|                                               |  |        |  
|Operating activities                           |  |        |   |        |   |        |   |       |   |       |  
|Net earnings                                   |  | 1,210  |   | 1,239  |   | 1,398  |   | 621   |   | 444   |  
|Depreciation and depletion                     |  | 703    |   | 716    |   | 724    |   | 734   |   | 704   |  
|(Gain)/loss on asset sales, after tax (note 3) |  | (4     | ) | (7     | ) | (96    | ) | (17   | ) | (47   | )
|Future income taxes and other                  |  | (151   | ) | 43     |   | (182   | ) | (329  | ) | 28    |  
|                                               |  |        |  
|Cash flow from earnings(a)                     |  | 1,758  |   | 1,991  |   | 1,844  |   | 1,009 |   | 1,129 |  
|Accounts receivable                            |  | (356   | ) | 504    |   | (358   | ) | (124  | ) | 76    |  
|Inventories and prepaids                       |  | 51     |   | (11    | ) | (6     | ) | (16   | ) | 8     |  
|Income taxes payable                           |  | (225   | ) | (408   | ) | 503    |   | 225   |   | (178  | )
|Accounts payable and other                     |  | 448    |   | (72    | ) | 106    |   | 376   |   | (256  | )
|                                               |  |        |  
|Change in operating assets and liabilities     |  | (82    | ) | 13     |   | 245    |   | 461   |   | (350  | )
|                                               |  |        |  
|Cash from operating activities                 |  | 1,676  |   | 2,004  |   | 2,089  |   | 1,470 |   | 779   |  
|                                               |  |        |  
|Investing activities                           |  |        |   |        |   |        |   |       |   |       |  
|Additions to property, plant and equipment     |  | (1,552 | ) | (1,070 | ) | (644   | ) | (625  | ) | (575  | )
|Proceeds from asset sales (note 3)             |  | 61     |   | 46     |   | 274    |   | 88    |   | 213   |  
|Proceeds from marketable securities            |  |       |   |       |   | 116    |   | 59    |   | 79    |  
|Additions to marketable securities             |  |       |   |       |   | (58    | ) | (88   | ) | (87   | )
|                                               |  |        |  
|Cash from (used in) investing activities       |  | (1,491 | ) | (1,024 | ) | (312   | ) | (566  | ) | (370  | )
|                                               |  |        |  
|Cash flow before financing activities          |  | 185    |   | 980    |   | 1,777  |   | 904   |   | 409   |  
|Financing activities                           |  |        |   |        |   |        |   |       |   |       |  
|Short-term debt  net                          |  | (388   | ) | 385    |   | 75     |   |      |   |      |  
|Long-term debt issued                          |  | 500    |   |       |   |       |   |      |   |      |  
|Repayment of long-term debt                    |  | (71    | ) | (379   | ) | (68    | ) | (379  | ) |      |  
|Common shares purchased (note 11)              |  | (13    | ) | (812   | ) | (1,208 | ) |      |   | (434  | )
|Dividends paid                                 |  | (319   | ) | (322   | ) | (331   | ) | (319  | ) | (326  | )
|                                               |  |        |  
|Cash from (used in) financing activities       |  | (291   | ) | (1,128 | ) | (1,532 | ) | (698  | ) | (760  | )
|                                               |  |        |  
|Increase (decrease) in cash                    |  | (106   | ) | (148   | ) | 245    |   | 206   |   | (351  | )
|Cash at beginning of year                      |  | 872    |   | 1,020  |   | 775    |   | 569   |   | 920   |  
|                                               |  |        |  
|Cash at end of year(b)                         |  | 766    |   | 872    |   | 1,020  |   | 775   |   | 569   |  
|                                               |  |        |  

---



The
information on pages F-7 through F-17 is part of these consolidated financial statements. Certain figures for prior years have been reclassified
in the financial statements to conform with the current year's presentation.

F-5

---

CONSOLIDATED BALANCE SHEET

|millions of dollars                        |                                                  |                                                    |       |        |       |        |       |        |       |        |      
|------------------------------------------ | ------------------------------------------------ | -------------------------------------------------- | ----- | ------ | ----- | ------ | ----- | ------ | ----- | ------ | -----
|
|                                           |                                                  |                                                    |      
|Assets                                     |                                                  |                                                    |       |        |       |        |       |        |       |        |      
|                                           | Current assets                                   |                                                    |       |        |       |        |       |        |       |        |      
|                                           |                                                  | Cash                                               |       | 766    |       | 872    |       | 1,020  |       | 775    |      
|                                           |                                                  | Marketable securities                              |       |       |       |       |       |       |       | 59     |      
|                                           |                                                  | Accounts receivable (note 12)                      |       | 1,348  |       | 992    |       | 1,496  |       | 1,138  |      
|                                           |                                                  | Inventories of crude oil and products (note 12)    |       | 433    |       | 478    |       | 421    |       | 451    |      
|                                           |                                                  | Materials, supplies and prepaid expenses           |       | 110    |       | 116    |       | 162    |       | 125    |      
|                                           |                                                  | Future income tax assets (note 5)                  |       | 323    |       | 227    |       | 377    |       | 285    |      
|                                           |                                                  |                                                    |      
|                                           | Total current assets                             |                                                    | 2,980 |        | 2,685 |        | 3,476 |        | 2,833 |        | 2,301
|                                           | Investments and other long-term assets           |                                                    | 134   |        | 139   |        | 127   |        | 172   |        | 167  
|                                           | Property, plant and equipment (note 1)           |                                                    | 8,526 |        | 7,709 |        | 7,369 |        | 7,525 |        | 7,667
|                                           | Goodwill (notes 1 and 2)                         |                                                    | 204   |        | 204   |        | 232   |        | 260   |        | 288  
|                                           | Other intangible assets (note 1)                 |                                                    | 24    |        | 24    |        | 18    |        | 14    |        | 10   
|                                           |                                                  |                                                    |      
|Total assets(note 1)                       |                                                  | 11,868                                             |       | 10,761 |       | 11,222 |       | 10,804 |       | 10,433 |      
|                                           |                                                  |                                                    |      
|Liabilities                                |                                                  |                                                    |       |        |       |        |       |        |       |        |      
|                                           | Current liabilities                              |                                                    |       |        |       |        |       |        |       |        |      
|                                           |                                                  | Short-term debt                                    |       | 72     |       | 460    |       | 75     |       |       |      
|                                           |                                                  | Accounts payable and accrued liabilities (note 14) |       | 2,114  |       | 1,791  |       | 1,866  |       | 1,731  |      
|                                           |                                                  | Income taxes payable                               |       | 557    |       | 774    |       | 1,182  |       | 666    |      
|                                           |                                                  | Current portion of long-term debt                  |       |       |       |       |       | 300    |       |       |      
|                                           |                                                  |                                                    |      
|                                           | Total current liabilities                        |                                                    | 2,743 |        | 3,025 |        | 3,423 |        | 2,397 |        | 2,073
|                                           | Long-term debt (note 4)                          |                                                    | 1,466 |        | 1,029 |        | 1,037 |        | 1,352 |        | 1,583
|                                           | Other long-term obligations (note 7)             |                                                    | 1,187 |        | 1,063 |        | 1,044 |        | 1,091 |        | 1,042
|                                           | Future income tax liabilities (note 5)           |                                                    | 1,260 |        | 1,311 |        | 1,488 |        | 1,599 |        | 1,667
|                                           | Commitments and contingent liabilities (note 10) |                                                    |       |        |       |        |       |        |       |        |      
|                                           |                                                  |                                                    |      
|Total liabilities                          |                                                  | 6,656                                              |       | 6,428  |       | 6,992  |       | 6,439  |       | 6,365  |      
|                                           |                                                  |                                                    |      
|Shareholders' equity                       |                                                  |                                                    |       |        |       |        |       |        |       |        |      
|                                           | Common shares at stated value (note 11)          |                                                    | 1,939 |        | 1,941 |        | 2,039 |        | 2,209 |        | 2,209
|                                           | Net earnings retained and used in the business   |                                                    |       |        |       |        |       |        |       |        |      
|                                           |                                                  | At beginning of year                               |       | 2,392  |       | 2,191  |       | 2,156  |       | 1,859  |      
|                                           |                                                  | Net earnings for the year                          |       | 1,210  |       | 1,239  |       | 1,398  |       | 621    |      
|                                           |                                                  | Share purchases (note 11)                          |       | (11    | )     | (714   | )     | (1,038 | )     |       |      
|                                           |                                                  | Dividends                                          |       | (318   | )     | (324   | )     | (325   | )     | (324   | )    
|                                           |                                                  |                                                    |      
|                                           |                                                  | At end of year                                     |       | 3,273  |       | 2,392  |       | 2,191  |       | 2,156  |      
|                                           |                                                  |                                                    |      
|Total shareholders' equity                 |                                                  | 5,212                                              |       | 4,333  |       | 4,230  |       | 4,365  |       | 4,068  |      
|                                           |                                                  |                                                    |      
|Total liabilities and shareholders' equity |                                                  | 11,868                                             |       | 10,761 |       | 11,222 |       | 10,804 |       | 10,433 |      
|                                           |                                                  |                                                    |      

The
information on pages F-7 through F-17 is part of these consolidated financial statements. Certain figures for prior years have been reclassified
in the financial statements to conform with the current year's presentation. The effects of new accounting standards on the consolidated statement of earnings and balance sheet are described in
note 2.

Approved
by the directors

|/s/  T.J. Hearn                                 |  | /s/  P.A. Smith                                                 
|----------------------------------------------- |  | ----------------------------------------------------------------
|T.J. Hearn                                      |  | P.A. Smith                                                      
|Chairman, president and
chief executive officer |  | Controller and senior vice-president,
finance and administration

F-6

---



Summary of significant accounting policies

Principles of consolidation

The consolidated financial statements include the accounts of Imperial Oil Limited and its subsidiaries. Intercompany accounts and transactions are eliminated.
Subsidiaries include those companies in which Imperial has both an equity interest and the continuing ability to unilaterally determine strategic operating, investing and financing policies.
Significant subsidiaries included in the consolidated financial statements include Imperial Oil Resources Limited, Imperial Oil Resources N.W.T. Limited, Imperial Oil Resources Ventures Limited and
McColl-Frontenac Petroleum Inc. All of the above companies are wholly owned. A significant portion of the Company's activities in natural resources is conducted jointly with other companies.
The accounts reflect the Company's proportionate interest in such activities, including its 25-percent interest in the Syncrude joint venture and its nine-percent interest in
the Sable Offshore Energy Project.

Segment reporting

The Company operates its business in Canada in the following segments:

Natural resourcesincludes the exploration for and production of crude oil and natural gas.

Petroleum productscomprises the refining of crude oil into petroleum products and the distribution and marketing of these products.

Chemicalsincludes the manufacturing and marketing of various hydrocarbon-based chemicals and chemical products.

Corporateand other includes assets and liabilities that do not specifically relate to business
segments  primarily cash, marketable securities and long-term debt. Net earnings in this category primarily include debt-related charges
and interest income.

Segment
accounting policies are the same as those described in this summary of significant accounting policies. Natural resources, petroleum products and chemicals operating expenses
include amounts allocated from the "corporate and other" segment. The allocation is based on a combination of fee for service, proportional segment operating expenses and a three-year
average of capital
expenditures. Transfers of assets between segments are recorded at book amounts. Items included in capital employed that are not identifiable by segment are allocated according to their nature.

Accounts receivable

Accounts receivable arise mainly from customer purchases of the Company's products. Interest is accrued on overdue accounts (generally those over 30 days)
and is reported in "investment and other income" in the consolidated statement of earnings. Interest accrual will be suspended if collection becomes doubtful. An allowance for doubtful accounts is
established based upon an assessment of the collectability of individual larger account balances and upon historical experience, economic and judgmental factors collectively for groups of smaller
homogeneous accounts. Accounts are written off when judged to be uncollectable.

Inventories

Inventories are recorded at the lower of cost or net realizable value. The cost of crude oil and products is determined primarily using the last-in,
first-out (LIFO) method. LIFO was selected over the alternative first-in, first-out and average cost methods because it provides a better matching of current costs
with the revenues generated in the period.

Costs
include purchase costs and other applicable operating expenses. Selling and general administrative expenses are excluded.

Investments

The principal investments in companies other than subsidiaries are accounted for using the equity method. They are recorded at the original cost of the investment
plus Imperial's share of earnings since the investment was made, less dividends received. Imperial's share of the after-tax earnings of these companies is included in "investment and other
income" in the consolidated statement of earnings. Other investments are recorded at cost. Dividends from these other investments are recorded as income.

These
investments represent interests in non-publicly traded pipeline companies that facilitate the sale and purchase of crude oil and natural gas in the conduct of Company
operations. Other parties who also have an equity interest in these companies share in the risks and rewards according to their percentage of ownership. Imperial does not invest in these companies in
order to remove liabilities from its balance sheet.

F-7

---

Property, plant and equipment

Property, plant and equipment are recorded at cost.

The
Company follows the successful-efforts method of accounting for its exploration and development activities. Under this method, costs of exploration acreage are capitalized and
amortized over the period of exploration or until a discovery is made. Costs of exploration wells are capitalized until their success can be determined. If the well is successful, the costs remain
capitalized; otherwise they are expensed. Capitalized exploration costs are reevaluated annually. All other exploration costs are expensed as incurred.
Development costs, including the cost of natural gas and natural gas liquids used as injectants in enhanced (tertiary) oil-recovery projects, are capitalized.

Imperial
selected the successful-efforts method over the alternative full-cost method of accounting because it provides a more timely accounting of the success or failure of
exploration and production activities.

Oil,
gas and other properties held and used by the Company are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amounts may not be
recoverable. The Company estimates the future undiscounted cash flows of the affected properties to judge the recoverability of carrying amounts.

Maintenance
and repair costs are expensed as incurred. Improvements that increase or prolong the service life or capacity of an asset are capitalized.

Investment
tax credits and other similar grants are treated as a reduction of the capitalized cost of the asset to which they apply.

Depreciation
and depletion (the allocation of the cost of assets to expense over the period of their useful lives) are calculated using the unit-of-production
method for producing properties. Depreciation of other plant and equipment is calculated using the straight-line method, based on the estimated service life of the asset. In general,
refineries are depreciated over 25 years; other major assets, including chemical plants and service stations, are depreciated over 20 years.

Gains
or losses on assets sold are included in "investment and other income" in the consolidated statement of earnings.

Goodwill and other intangible assets

Goodwill and intangible assets with indefinite lives are not subject to amortization. These assets are tested for impairment annually or more frequently if events
or circumstances indicate the assets might be impaired. Impairment losses are recognized in current period earnings. The evaluation for impairment of goodwill is based on a comparison of the carrying
values of goodwill and associated operating assets with the estimated present value of net cash flows from those operating assets.

Intangible
assets with determinable useful lives are amortized over a maximum of 10 years. The amortization is included in "depreciation and depletion" in the consolidated
statement of earnings.

Site-restoration costs

Provision for site-restoration costs (net of any expected recoveries) is made if they can be reasonably determined. This provision is based on
engineering estimates of costs, taking into account the anticipated method and extent of remediation consistent with legal requirements, industry practices, current technology and the possible use of
the site. For natural resources assets, accruals are made over the useful life of the asset using the unit-of-production method. For other assets, a provision is made at the
time management approves the sale or closure of a facility.

Foreign currency translation

Monetary assets and liabilities receivable or payable in foreign currencies have been translated at the rates of exchange prevailing on December 31. Any
exchange gains or losses are recognized in earnings.

Financial instruments

Financial instruments are initially recorded at historical cost. If subsequent circumstances indicate that a decline in the fair value of a financial asset is
other than temporary, the financial asset is written down to its fair value. Unless otherwise indicated, the fair values of financial instruments approximate their recorded amounts.

The
fair values of cash, marketable securities, accounts receivable and current liabilities approximate recorded amounts because of the short period to receipt or payment of cash. The
fair value of the Company's long-term debt is estimated based on quoted market prices for the same or similar issues or on the current rates offered to the Company for debt of the same
duration to maturity. The fair values of other financial instruments held by the Company are estimated primarily by discounting future cash flows, using current rates for similar financial instruments
under similar credit risk and maturity conditions.

F-8

---

The
Company does not use financing structures for the purpose of altering accounting outcomes or removing debt from the balance sheet. The Company's use of and method of accounting for
derivative financial instruments are described in note 8 to the consolidated financial statements.

Revenues

Revenues associated with sales of crude oil, natural gas, petroleum and chemical products and other items are recorded when title passes to the customer. The
Company does not enter into ongoing arrangements whereby it is required to repurchase its products, nor does the Company provide the customer with a right of return.

Revenues
include amounts billed to customers for shipping and handling. Shipping and handling costs incurred up to the point of final storage prior to delivery to a customer are included
in "purchases of crude oil and products" in the consolidated statement of earnings. Delivery costs from final storage to customers are recorded as a marketing expense in operating, selling and general
expenses.

Consumer taxes

Taxes levied on the consumer and collected by the Company are excluded from the consolidated statement of earnings. These are primarily provincial taxes on motor
fuels and the federal goods and services tax.

Interest costs

Interest costs are expensed as incurred and included in "financing costs" in the consolidated statement of earnings.

Accounting principles

The consolidated financial statements have been prepared in accordance with generally accepted accounting principles (GAAP) in Canada.
Form 10-K, filed with the United States Securities and Exchange Commission, includes a description of the differences between GAAP in Canada and in the United States as they apply
to the Company.

The
Canadian Institute of Chartered Accountants (CICA) is expected to issue a standard on accounting for asset retirement obligations in 2003. The Company plans to adopt the new CICA
standard early if permitted.

F-9

---



NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1. Business segments

|                                        |  | Natural resources (a) |   | Petroleum products |   | Chemicals |  
|--------------------------------------- |  | --------------------- | - | ------------------ | - | --------- | -
|
|                                        | 
|Revenues                                |  |                       |   |                    |   |           |  
|External sales (c)                      |  | 2,573                 |   | 3,144              |   | 3,124     |  
|Intersegment sales                      |  | 2,217                 |   | 2,166              |   | 2,638     |  
|Investment and other income (note 3)    |  | 104                   |   | 11                 |   | 138       |  
|                                        | 
|Total revenues                          |  | 4,894                 |   | 5,321              |   | 5,900     |  
|                                        | 
|Expenses                                |  |                       |   |                    |   |           |  
|Exploration                             |  | 30                    |   | 45                 |   | 35        |  
|Purchases of crude oil and products     |  | 1,814                 |   | 2,444              |   | 2,586     |  
|Operating, selling and general (d)      |  | 1,034                 |   | 1,007              |   | 921       |  
|Federal excise tax                      |  |                      |   |                   |   |          |  
|Depreciation and depletion (e) (f)      |  | 477                   |   | 455                |   | 467       |  
|Financing costs (note 13)               |  | 1                     |   | 2                  |   | 1         |  
|                                        | 
|Total expenses                          |  | 3,356                 |   | 3,953              |   | 4,010     |  
|                                        | 
|Earnings before income taxes            |  | 1,538                 |   | 1,368              |   | 1,890     |  
|Income taxes(note 5)                    |  |                       |   |                    |   |           |  
|Current                                 |  | 517                   |   | 556                |   | 815       |  
|Future                                  |  | (21                   | ) | (129               | ) | (90       | )
|                                        | 
|Total income tax expense                |  | 496                   |   | 427                |   | 725       |  
|                                        | 
|Net earnings                            |  | 1,042                 |   | 941                |   | 1,165     |  
|                                        | 
|Cash flow from earnings                 |  | 1,503                 |   | 1,262              |   | 1,422     |  
|                                        | 
|Capital and exploration expenditures(g) |  | 986                   |   | 746                |   | 434       |  
|                                        | 
|Property, plant and equipment           |  |                       |   |                    |   |           |  
|Cost                                    |  | 11,612                |   | 10,733             |   | 10,067    |  
|Accumulated depreciation and depletion  |  | 6,269                 |   | 5,839              |   | 5,412     |  
|                                        | 
|Net property, plant and equipment(h)    |  | 5,343                 |   | 4,894              |   | 4,655     |  
|                                        | 
|Total assets(f)                         |  | 5,988                 |   | 5,365              |   | 5,288     |  
|                                        | 
|Total capital employed                  |  | 3,321                 |   | 2,590              |   | 2,168     |  
|                                        | 

Business segments

|                                        |  | Corporate and other |   | Consolidated (b) |  
|--------------------------------------- |  | ------------------- | - | ---------------- | -
|
|                                        | 
|Revenues                                |  |                     |   |                  |  
|External sales (c)                      |  |                    |   |                 |  
|Intersegment sales                      |  |                    |   |                 |  
|Investment and other income (note 3)    |  | 14                  |   | 63               |  
|                                        | 
|Total revenues                          |  | 14                  |   | 63               |  
|                                        | 
|Expenses                                |  |                     |   |                  |  
|Exploration                             |  |                    |   |                 |  
|Purchases of crude oil and products     |  |                    |   |                 |  
|Operating, selling and general (d)      |  | 10                  |   | 19               |  
|Federal excise tax                      |  |                    |   |                 |  
|Depreciation and depletion (e) (f)      |  |                    |   |                 |  
|Financing costs (note 13)               |  | 30                  |   | 148              |  
|                                        | 
|Total expenses                          |  | 40                  |   | 167              |  
|                                        | 
|Earnings before income taxes            |  | (26                 | ) | (104             | )
|Income taxes(note 5)                    |  |                     |   |                  |  
|Current                                 |  | (11                 | ) | (13              | )
|Future                                  |  | (4                  | ) | (13              | )
|                                        | 
|Total income tax expense                |  | (15                 | ) | (26              | )
|                                        | 
|Net earnings                            |  | (11                 | ) | (78              | )
|                                        | 
|Cash flow from earnings                 |  | (24                 | ) | (20              | )
|                                        | 
|Capital and exploration expenditures(g) |  |                    |   |                 |  
|                                        | 
|Property, plant and equipment           |  |                     |   |                  |  
|Cost                                    |  |                    |   |                 |  
|Accumulated depreciation and depletion  |  |                    |   |                 |  
|                                        | 
|Net property, plant and equipment(h)    |  |                    |   |                 |  
|                                        | 
|Total assets(f)                         |  | 766                 |   | 873              |  
|                                        | 
|Total capital employed                  |  | 816                 |   | 918              |  
|                                        | 

(continued
on following page)

F-10

---

|millions of dollars                 |  | 2002  |   | 2001  |   | 2000  |  
|----------------------------------- |  | ----- | - | ----- | - | ----- | -
|                                    | 
|Total revenues                      |  | 2,357 |   | 2,689 |   | 2,851 |  
|Total expenses                      |  | 1,520 |   | 1,733 |   | 1,691 |  
|Net earnings, after income taxes    |  | 557   |   | 637   |   | 716   |  
|                                    |  |       |   |       |   |       |  
|Total current assets                |  | 321   |   | 232   |   | 378   |  
|Long-term assets                    |  | 3,038 |   | 2,750 |   | 2,705 |  
|Total current liabilities           |  | 669   |   | 919   |   | 1,023 |  
|Other long-term obligations         |  | 268   |   | 262   |   | 247   |  
|                                    |  |       |   |       |   |       |  
|Cash flow from earnings             |  | 767   |   | 828   |   | 833   |  
|Cash flow from operating activities |  | 615   |   | 850   |   | 912   |  
|Cash (used in) investing activities |  | (601  | ) | (301  | ) | (224  | )
|                                    | 

|millions of dollars                     |  | 2002  |  | 2001  |  | 2000 
|--------------------------------------- |  | ----- |  | ----- |  | -----
|                                       
|Purchases of crude oil and products     |  | 3,463 |  | 3,710 |  | 4,196
|Operating, selling and general expenses |  | 1     |  | 1     |  | 2    
|                                       
|Total intersegment sales                |  | 3,464 |  | 3,711 |  | 4,198
|                                       
|Intersegment receivables and payables   |  | 352   |  | 198   |  | 279  
|                                       

|millions of dollars |  | 2002  |  | 2001  |  | 2000 
|------------------- |  | ----- |  | ----- |  | -----
|                   
|Natural resources   |  | 942   |  | 1,018 |  | 1,212
|Petroleum products  |  | 723   |  | 770   |  | 781  
|Chemicals           |  | 520   |  | 503   |  | 522  
|                   
|Total export sales  |  | 2,185 |  | 2,291 |  | 2,515
|                   

|millions of dollars      |  | 2002 |  | 2001 |  | 2000
|------------------------ |  | ---- |  | ---- |  | ----
|                        
|Cost                     |  | 54   |  | 49   |  | 39  
|Accumulated amortization |  | 30   |  | 25   |  | 21  
|                        
|Net intangible assets    |  | 24   |  | 24   |  | 18  
|                        
|Amortization expense     |  | 5    |  | 5    |  | 3   
|Customer lists acquired  |  | 5    |  | 11   |  | 6   
|                        



F-11

---

2. Reporting changes

Effective January 1, 2002, the Company implemented reporting changes to reflect the new accounting standards of the Canadian Institute of Chartered
Accountants (CICA) dealing with accounting for foreign currency translation, accounting for goodwill and other intangible assets and on stock-based compensation and other stock-based payments.

Foreign currency translation

The new CICA standard dealing with accounting for foreign currency translation eliminates the deferral and amortization of translation gains or losses. The new
standard has been applied retroactively, and financial statements of prior periods have been restated. The impact of adopting the new foreign currency translation standard on the consolidated balance
sheet and statement of earnings is:

Changes
in consolidated balance sheet

|millions of dollars  increase/(decrease)  |  | 2002 |   | 2001 |  
|------------------------------------------ |  | ---- | - | ---- | -
|                                           | 
|Long-term debt                             |  | 61   |   | 121  |  
|Future income tax liabilities              |  | (13  | ) | (25  | )
|Retained earnings                          |  | (48  | ) | (96  | )
|                                           | 
|Total liabilities and shareholders' equity |  |     |   |     |  
|                                           | 

Changes
in consolidated statement of earnings

|millions of dollars  increase/(decrease)        |  | 2002 |   | 2001  |   | 2000  |  
|------------------------------------------------ |  | ---- | - | ----- | - | ----- | -
|                                                 | 
|Total expenses                                   |  | (60  | ) | 6     |   | 4     |  
|Income taxes                                     |  | 12   |   | (1    | ) | 18    |  
|                                                 | 
|Net earnings                                     |  | 48   |   | (5    | ) | (22   | )
|                                                 | 
|Earnings per share  basic and diluted (dollars) |  | 0.13 |   | (0.01 | ) | (0.05 | )

Goodwill and other intangible assets

The new CICA standard dealing with accounting for goodwill and other intangible assets eliminates the amortization of goodwill.

The
standard does not permit retroactive application. On a pro forma basis, the impact of adopting the new goodwill accounting standard on prior period earnings is:

|millions of dollars                     |  | 2002  |  | 2001  |  | 2000 
|--------------------------------------- |  | ----- |  | ----- |  | -----
|                                       
|Net earnings                            |  | 1,210 |  | 1,239 |  | 1,398
|Add: goodwill amortization              |  |      |  | 28    |  | 28   
|                                       
|Adjusted net earnings                   |  | 1,210 |  | 1,267 |  | 1,426
|                                       
|Per share  basic and diluted (dollars) |  |       |  |       |  |      
|Net earnings                            |  | 3.19  |  | 3.15  |  | 3.35 
|Add: goodwill amortization              |  |      |  | 0.07  |  | 0.07 
|                                       
|Net earnings                            |  | 3.19  |  | 3.22  |  | 3.42 
|                                       

Stock-based compensation and other stock-based payments

The Company's accounting policy for its incentive compensation programs complies with the new CICA standard. Consequently, there was no impact on the recorded
expense or liability upon adoption of the new accounting standard on January 1, 2002.

3. Divestments

Investment and other income includes gains and losses on asset sales as follows:

|millions of dollars                        |  | 2002 |  | 2001 |  | 2000
|------------------------------------------ |  | ---- |  | ---- |  | ----
|                                          
|Proceeds from sale of assets               |  | 61   |  | 46   |  | 274 
|Book value of assets sold (a)              |  | 56   |  | 36   |  | 135 
|                                          
|Gain/(loss) on asset sales, before tax (b) |  | 5    |  | 10   |  | 139 
|                                          
|Gain/(loss) on asset sales, after tax (b)  |  | 4    |  | 7    |  | 96  
|                                          



4. Long-term debt

|                                                 |  |                                                                                |  |          |  | 2002  |  | 2001 
|------------------------------------------------ |  | ------------------------------------------------------------------------------ |  | -------- |  | ----- |  | -----
|                                                
|
|                                                
|Sinking-fund debentures                          |  |                                                                                |  |          |  |      
|1989                                             |  | October 15, 2019 (2001  $45 million (U.S.)) (a)                               |  | 83/4     |  |      |  | 71   
|Other debentures and notes(b)                    |  |                                                                                |  |          |  |      
|1989                                             |  | September 1, 2004 (2002  $600 million (U.S.); 2001  $600 million (U.S.)) (c) |  | Variable |  | 946   |  | 956  
|2002                                             |  | May 7, 2004 (a) (d)                                                            |  | Variable |  | 500   |  |     
|                                                
|Long-term debt (at period-end exchange rates)(e) |  |                                                                                |  | 1,446    |  | 1,027
|Capital leases(f)                                |  |                                                                                |  |          |  | 20    |  | 2    
|                                                
|Total long-term debt                             |  |                                                                                |  |          |  | 1,466 |  | 1,029
|                                                



F-12

---



5. Income taxes

|millions of dollars                    |                                                 | 2002 |       | 2001 |       | 2000  |      
|-------------------------------------- | ----------------------------------------------- | ---- | ----- | ---- | ----- | ----- | -----
|                                       |                                                
|Current income tax expense             |                                                 | 718  |       | 679  |       | 1,122 |      
|Future income tax expense (a)          |                                                 | (147 | )     | (27  | )     | (203  | )    
|                                       |                                                
|Total income tax expense(b)            |                                                 | 571  |       | 652  |       | 919   |      
|                                       |                                                
|Statutory corporate tax rate (percent) |                                                 | 42.0 |       | 42.7 |       | 44.6  |      
|Increase/(decrease) resulting from:    |                                                 |      |       |      |       |       |      
|                                       | Non-deductible royalty payments to governments  |      | 5.4   |      | 7.9   |       | 8.1  
|                                       | Resource allowance in lieu of royalty deduction |      | (11.8 | )    | (11.4 | )     | (11.4
|                                       | Manufacturing and processing credit             |      | (0.3  | )    | (1.3  | )     | (1.6 
|                                       | Non-deductible depreciation and amortization    |      |      |      | 0.6   |       | 0.5  
|                                       | Enacted tax rate change                         |      | (0.9  | )    | (2.1  | )     |     
|                                       | Other                                           |      | (2.2  | )    | (2.0  | )     | (1.4 
|                                       |                                                
|Effective income tax rate              |                                                 | 32.2 |       | 34.4 |       | 38.8  |      
|                                       |                                                

Components
of future income tax liabilities and assets as at December 31 are:

|millions of dollars                       |  | 2002  |   | 2001  |  
|----------------------------------------- |  | ----- | - | ----- | -
|                                          | 
|Depreciation and amortization             |  | 1,092 |   | 1,021 |  
|Successful drilling and land acquisitions |  | 660   |   | 760   |  
|Pension and benefits                      |  | (229  | ) | (195  | )
|Site restoration                          |  | (182  | ) | (191  | )
|Net tax loss carryforwards (c)            |  | (37   | ) | (32   | )
|Other                                     |  | (44   | ) | (52   | )
|                                          | 
|Total future income tax liabilities       |  | 1,260 |   | 1,311 |  
|                                          | 
|LIFO inventory valuation                  |  | (271  | ) | (177  | )
|Other                                     |  | (52   | ) | (50   | )
|                                          | 
|Total future income tax assets            |  | (323  | ) | (227  | )
|                                          | 
|Net future income tax liabilities         |  | 937   |   | 1,084 |  
|                                          | 



The
operations of the company are complex, and related tax interpretations, regulations and legislation are continually changing. As a result, there are usually some tax matters in
question. The Company believes the provision made for income taxes is adequate.

6. Employee retirement benefits

Retirement benefits, which cover almost all retired employees and their surviving spouses, include pension-income and certain health-care and
life-insurance benefits. They are met through funded registered retirement plans and through unfunded supplementary benefits that are paid directly to recipients. Funding of registered
retirement plans complies with federal and provincial pension regulations that require an actuarial valuation of the pension funds at least once every three years. The Company makes contributions to
the plans as required by those valuations.

Pension-income
benefits consist mainly of Company-paid defined benefit plans that are based on years of service and final average earnings. The Company shares in the cost of
health-care and life-insurance benefits. The Company's benefit obligations are based on the projected benefit method of valuation that includes employee service to date and
present pay levels, as well as a projection of salaries and service to retirement.

The
expense and obligations for both funded and unfunded benefits are determined in accordance with generally accepted Canadian accounting principles and actuarial procedures. The
process for determining retirement-income expense and related obligations includes making certain long-term assumptions regarding the discount rate, rate of return on plan assets and rate
of pay increases. The discount rate is based on the year-end rate of interest on high-quality bonds.

The
total obligation for employee retirement benefits exceeded the fair value of plan assets at December 31, 2002, by $1,780 million
(2001  $1,181 million). The obligation and pension expense can vary significantly with changes in the assumptions used to estimate the obligation and the
expected return on plan assets.

Details
of the employee retirement benefits plans are as follows:

|                                   |  | Pension benefits |   | Other post-retirement benefits
|---------------------------------- |  | ---------------- | - | ------------------------------
|
|                                  
|Components of net benefit expense: |  |                  |   |                               
|Current service cost               |  | 64               |   | 57                            
|Interest cost                      |  | 222              |   | 215                           
|Expected return on plan assets     |  | (191             | ) | (257                          
|Amortization of prior service cost |  | 25               |   | 23                            
|Recognized actuarial loss/(gain)   |  | 34               |   |                              
|                                  
|Net expense (a) (e)                |  | 154              |   | 38                            
|                                  

F-13

---

|                                                            |  | Pension benefits |   | Other
post-
retirement
benefits |  
|----------------------------------------------------------- |  | ---------------- | - | ------------------------------- | -
|
|                                                            | 
|Change in benefit obligation:                               |  |                  |   |                                 |  
|Benefit obligation at January 1                             |  | 3,248            |   | 3,065                           |  
|Current service cost                                        |  | 64               |   | 57                              |  
|Interest cost                                               |  | 222              |   | 215                             |  
|Amendments                                                  |  | 27               |   | 30                              |  
|Actuarial loss/(gain)                                       |  | 196              |   | 104                             |  
|Benefits paid                                               |  | (227             | ) | (223                            | )
|                                                            | 
|Benefit obligation at December 31 (e)                       |  | 3,530            |   | 3,248                           |  
|                                                            | 
|Change in plan assets:                                      |  |                  |   |                                 |  
|Fair value of plan assets at January 1                      |  | 2,390            |   | 2,674                           |  
|Actual return on plan assets                                |  | (107             | ) | (95                             | )
|Company contributions (b)                                   |  | 19               |   | 6                               |  
|Payments directly to participants                           |  | 29               |   | 28                              |  
|Benefits paid                                               |  | (227             | ) | (223                            | )
|                                                            |  |                  |   |                                 |  
|Fair value of plan assets at December 31 (b)                |  | 2,104            |   | 2,390                           |  
|                                                            |  |                  |   |                                 |  
|Excess (deficiency) of plan assets over benefit obligations |  | (1,426           | ) | (858                            | )
|Unrecognized net actuarial (gain)/loss (c)                  |  | 924              |   | 461                             |  
|Unrecognized prior service cost (c)                         |  | 114              |   | 112                             |  
|                                                            | 
|Net liability recognized (note 7)                           |  | (388             | ) | (285                            | )
|                                                            | 

The
benefit obligation at year-end includes funded and unfunded plans, as follows:

|                                        |                                               | Pension benefits |      | Other post-retirement benefits
|--------------------------------------- | --------------------------------------------- | ---------------- | ---- | ------------------------------
|
|                                       
|Funded plans                            |                                               | 3,230            |      | 2,972                         
|Unfunded plans                          |                                               | 300              |      | 276                           
|                                       
|Benefit obligation at end of year       |                                               | 3,530            |      | 3,248                         
|                                       
|Assumptions as at December 31 (percent) |                                               |                  |      |                               
|                                        | Discount rate                                 |                  | 6.25 |                               
|                                        | Long-term rate of compensation increase       |                  | 3.50 |                               
|                                        | Long-term rate of return on funded assets (d) |                  | 8.25 |                               



|millions of dollars            |  | One-percent increase |   | One-percent decrease |  
|------------------------------ |  | -------------------- | - | -------------------- | -
|                               | 
|Rate of return on plan assets: |  |                      |   |                      |  
|Effect on net benefit expense  |  | (20                  | ) | 20                   |  
|                               |  |                      |   |                      |  
|Discount rate:                 |  |                      |   |                      |  
|Effect on net benefit expense  |  | (30                  | ) | 40                   |  
|Effect on benefit obligation   |  | (415                 | ) | 510                  |  
|                               |  |                      |   |                      |  
|Rate of pay increases:         |  |                      |   |                      |  
|Effect on net benefit expense  |  | 25                   |   | (20                  | )
|Effect on benefit obligation   |  | 155                  |   | (135                 | )

For
measurement purposes, a five-percent health-care cost trend rate was assumed for 2002 and thereafter. A one-percent change in the assumed
health-care cost trend rate would have the following effects:

|millions of dollars                                |  | One-percent increase |  | One-percent decrease |  
|-------------------------------------------------- |  | -------------------- |  | -------------------- | -
|                                                   | 
|Effect on service and interest cost components     |  | 2                    |  | (2                   | )
|Effect on other post-retirement benefit obligation |  | 30                   |  | (25                  | )

F-14

---

7. Other long-term obligations

|millions of dollars                       |  | 2002  |  | 2001 
|----------------------------------------- |  | ----- |  | -----
|                                         
|Employee retirement benefits (note 6) (a) |  | 671   |  | 560  
|Site restoration (b)                      |  | 434   |  | 415  
|Other obligations                         |  | 82    |  | 88   
|                                         
|Total other long-term obligations         |  | 1,187 |  | 1,063
|                                         



8. Derivative financial instruments

The impact of price and foreign-exchange fluctuations on purchases and sales may be mitigated by selling and buying energy derivatives (primarily futures contracts
and natural gas price swaps) and foreign-exchange forward contracts. These transactions are conducted on recognized commodities exchanges or with banks of the highest credit standing and are normally
settled in less than one year. Gains or losses on these contracts are recognized in earnings as a component of the related physical transaction.

No
significant energy derivative, foreign-exchange forward contracts or currency and interest-rate swaps were transacted in the past three years.

9. Incentive compensation programs

Incentive compensation programs are designed to retain selected employees, reward them for high performance and promote individual contribution to sustained
improvement in the Company's future business performance and shareholder value.



All units require settlement by cash payments. For deferred share units, a charge is made to expense in the year of grant equal to the cash performance bonus
payment foregone. The Company records expense for incentive share and deferred share units based on changes in the price of common shares in the year. Expense for earnings bonus units is recorded
based on the cumulative net earnings per outstanding common share from issue date, up to the maximum settlement value for the units.

Incentive
share units have value if the market price of the Company's common shares when the unit is exercised exceeds the market value when the unit was issued. The issue price of
incentive share units is the closing price of the Company's shares on the Toronto Stock Exchange on the grant date. Up to 50 percent of the units may be exercised after one year from issuance;
an additional 25 percent may be exercised after two years; and the remaining 25 percent may be exercised after three years. Incentive share units are eligible for exercise up to
10 years from issuance. The units may expire earlier if employment is terminated other than by retirement, death or disability.

In
1998, the deferred share unit plan was made available to selected executives whereby they could elect to receive all or part of their performance bonus compensation in units. The
number of units granted is determined by dividing the amount of the bonus elected to be received as deferred share units by the average of the closing prices of the Company's shares on the Toronto
Stock Exchange for the five consecutive trading days immediately prior to the date that the bonus would have been paid. Additional units are granted based on the cash dividend payable on the Company
shares divided by the average closing price immediately prior to the payment date for that dividend and multiplying the resulting number by the number of deferred share units held by the recipient.

Starting
in 1999, a similar deferred share unit plan was made available to nonemployee directors in lieu of receiving all or part of their directors' fees. The number of units granted to
a nonemployee director is determined at the end of each calendar quarter by dividing the amount of directors' fees for the calendar quarter that the nonemployee director elected to receive as deferred
share units by the average closing price of the Company's shares immediately prior to the last day of the calendar quarter.

Deferred
share units cannot be exercised until after termination of employment with the Company or resignation as a director and must be exercised no later than December 31 of the
year following termination or resignation. On exercise date, the cash value to be received for the units will be determined based on the average closing price of the Company shares immediately prior
to the date of exercise.

Starting
in 2001, the earnings bonus unit plan was made available to selected employees. Each earnings bonus unit entitles the recipient to receive an amount equal to the Company's
cumulative net earnings per common share as announced each quarter beginning after the grant. Payout occurs on the fifth anniversary of the grant or when the maximum settlement value per unit is
reached, if earlier. Earnings bonus units may expire if employment is terminated other than by death or disability.

A
summary of the incentive share units, deferred share units and earnings bonus units is as follows:

|                      |        |        | Granted in period |           |    |     |   |   |          
|--------------------- | ------ | ------ | ----------------- | --------- | -- | --- | - | - | ---------
|
|
|                     
|Incentive share units |  2002 |        | 7,000             |           | 3  |     |  |   | 8,012,250
|                      |        |  2001 |                   | 2,752,700 |    | 744 |   |  |          
|                      |        |  2000 |                   | 2,731,200 |    | 756 |   |  |          
|Deferred share units  |  2002 |        | 7,479             |           | 6  |     | 7 |   | 85,523   
|                      |        |  2001 |                   | 15,222    |    | 2   |   | 5 |          
|                      |        |  2000 |                   | 29,861    |    | 4   |   | 5 |          
|Earnings bonus units  |  2002 |        | 1,036,500         |           | 75 |     |  |   | 2,169,040
|                      |        |  2001 |                   | 1,132,540 |    | 21  |   |  |          

Incentive stock options

In April 2002, shareholders approved an incentive stock option plan. Under the new stock option plan, a total of 3,210,200 options were granted on
April 30, 2002, for the purchase of the Company's common shares at an exercise price of $46.50 per share. Up to 50 percent of the options may be exercised on or after January 1,
2003, a further 25 percent may be exercised on or after January 1, 2004, and the remaining 25 percent may be exercised on or after January 1, 2005. Any unexercised options
expire after April 29, 2012. Shares authorized for granting under the incentive stock option plan were 20 million at December 31, 2002.

F-15

---

The
Company does not recognize compensation expense on the issuance of stock options because the exercise price is equal to the market value at the date of grant. If the
fair-value-based method of accounting had been adopted, net income and earnings per share (on both a basic and diluted basis) of 2002 would have been reduced by $16 million or $0.04
per share. The average fair value of each option granted during 2002 was $12.70. The fair value was estimated at the grant date using an option-pricing model with the following weighted average
assumptions: risk-free interest rate of 5.7 percent; expected life of five years; volatility of 25 percent and a dividend yield of 1.9 percent.

The
Company expects to purchase shares on the market to fully offset the dilutive effects from the exercise of stock options.

Restricted stock units

In December 2002, the Company introduced a restricted stock unit plan, which will be the primary long-term incentive compensation plan in future
years. Under this plan, a total of 791,890 units were issued on December 31, 2002, to 690 employees and five nonemployee directors. Each unit entitles the recipient the conditional right to
receive from the Company, upon exercise, an amount equal to the closing price of the Company's common shares on the Toronto Stock Exchange on the exercise dates. Fifty percent of the units will be
exercised on December 31, 2005, and the remainder will be exercised on December 31, 2009. Compensation expense is recorded in the consolidated statement of earnings over the period in
which the units vest. The impact of this plan on expense and liability in 2002 was not material.

10. Commitments and contingent liabilities

At December 31, 2002, the Company had commitments for non-cancellable operating leases and other long-term agreements that require
the following minimum future payments:

|millions of dollars                    |  | 2003 |  | 2004 |  | 2005 |  | 2006 |  | 2007 |  | After 2007
|-------------------------------------- |  | ---- |  | ---- |  | ---- |  | ---- |  | ---- |  | ----------
|                                      
|Operating leases (a)                   |  | 64   |  | 55   |  | 45   |  | 36   |  | 32   |  | 128       
|Unconditional purchase obligations (b) |  | 93   |  | 66   |  | 46   |  | 37   |  | 38   |  | 117       
|Firm capital commitments (c)           |  | 254  |  | 30   |  |     |  |     |  |     |  |          
|Other long-term agreements (d)         |  | 214  |  | 212  |  | 192  |  | 141  |  | 47   |  | 272       
|                                      



Other
commitments arising in the normal course of business for operating and capital needs do not materially affect the Company's consolidated financial position.

The
Company was contingently liable at December 31, 2002, for a maximum of $152 million relating to guarantees of purchasing operating equipment and other assets from its
rural marketing agents upon expiry of the agency agreement or the death or resignation of the agent. The Company expects that the fair value of the operating equipment and other assets so purchased
would cover the maximum potential amount of future payment under the guarantees.

The
Company provides in its financial statements for site-restoration costs (see accounting policy on page F-8). Provision is not made with respect to
those manufacturing, distribution and marketing facilities for which estimates of these future costs cannot be reasonably determined. These are primarily currently operated sites. These costs (net of
any expected recoveries) are not expected to have a material effect on the Company's consolidated financial position.

Various
lawsuits are pending against Imperial Oil Limited and its subsidiaries. The actual liability with respect to these lawsuits is not determinable, but management believes, based on
the opinion of counsel, that any liability will not materially affect the Company's consolidated financial position.

11. Common shares

|number of shares      |  | 2002        |  | 2001        |  | 2000       
|--------------------- |  | ----------- |  | ----------- |  | -----------
|                     
|Authorized            |  | 450,000,000 |  | 450,000,000 |  | 450,000,000
|Issued at December 31 |  | 376,663,095 |  | 379,159,147 |  | 398,263,375

In
1995 through 2001, the Company purchased shares under seven 12-month normal course share purchase programs, as well as an auction tender. On June 21, 2002, another
12-month normal course program was implemented with an allowable purchase of 18.9 million shares (five percent of the total at June 19, 2002), less any shares purchased by
the employee savings plan and Company pension fund.

The
results of these activities are shown below.

|Year                         |  | Purchased
shares |  | Millions of
dollars
|---------------------------- |  | ---------------- |  | -------------------
|                            
|1995-1999                    |  | 150,049,063      |  | 3,136              
|2000                         |  | 33,211,858       |  | 1,208              
|2001                         |  | 19,104,228       |  | 812                
|2002                         |  | 296,052          |  | 13                 
|                            
|Cumulative purchases to date |  | 202,661,201      |  | 5,169              
|                            

Exxon
Mobil Corporation's participation in the above maintained its ownership interest in Imperial at 69.6 percent.

The
excess of the purchase cost over the stated value of shares purchased has been recorded as a distribution of retained earnings.

The
following table provides the calculation of basic and diluted earnings per share:

|                                                                          |  | 2002    |  | 2001    |  | 2000   
|------------------------------------------------------------------------- |  | ------- |  | ------- |  | -------
|                                                                         
|Net earnings (millions of dollars)                                        |  | 1,210   |  | 1,239   |  | 1,398  
|Average number of common shares outstanding, weighted monthly (thousands) |  | 378,875 |  | 393,121 |  | 417,753
|Plus: Issued on assumed exercise of stock options (thousands)             |  |        |  |        |  |       
|                                                                         
|Weighted average number of diluted common shares (thousands)              |  | 378,875 |  | 393,121 |  | 417,753
|                                                                         
|Earnings per share  basic (dollars)                                      |  | 3.19    |  | 3.15    |  | 3.35   
|Earnings per share  diluted (dollars)                                    |  | 3.19    |  | 3.15    |  | 3.35   

F-16

---

12. Miscellaneous financial information

In 2002, net earnings included an after-tax loss of $2 million (2001  $18 million gain;
2000  $25 million gain) attributable to the effect of changes in LIFO inventories. The replacement cost of inventories was estimated to exceed their LIFO
carrying values at December 31, 2002, by $941 million (2001  $506 million).

Research
and development costs in 2002 were $64 million (2001  $71 million;
2000  $55 million) before investment tax credits earned on these expenditures of $10 million
(2001  $6 million; 2000  $6 million). The net costs are included in expenses, due to the uncertainty of
future benefits.

Accounts
receivable included allowance for doubtful accounts of $13 million in 2002 (2001  $12 million).

13. Financing costs

|millions of dollars                        |  | 2002 |   | 2001 |  | 2000
|------------------------------------------ |  | ---- | - | ---- |  | ----
|                                          
|Debt-related interest                      |  | 40   |   | 77   |  | 106 
|Other interest                             |  | 2    |   | 4    |  | 4   
|                                          
|Total interest expense(a)                  |  | 42   |   | 81   |  | 110 
|Foreign-exchange expense on long-term debt |  | (10  | ) | 71   |  | 53  
|                                          
|Total financing costs                      |  | 32   |   | 152  |  | 163 
|                                          



14. Transactions with Exxon Mobil Corporation and affiliated companies (ExxonMobil)

Revenues and expenses of the Company also include the results of transactions with ExxonMobil in the normal course of operations. These were conducted on terms as
favourable as they would have been with unrelated parties and primarily consisted of the purchase and sale of crude oil, petroleum and chemical products, as well as transportation, technical and
engineering services. Effective November 15, 2000, the Company entered into an agreement with ExxonMobil Canada to share common business and operational support services that allow the
companies to consolidate duplicate work and systems. Transactions with ExxonMobil also include amounts paid and received in connection with the Company's participation in a number of natural resources
joint-venture operations in Canada. The amounts paid or received have been reflected in the statement of earnings as shown in the following table.

Throughout
2000, the Company purchased in the short-term money market Canadian-dollar commercial paper of an Exxon Mobil Corporation subsidiary. The notes were guaranteed by
ExxonMobil. These promissory notes matured less than three months from purchase date and were replaced by similar short-term notes upon their maturity. The notes were replaced with
Canadian-dollar commercial paper of non-related parties prior to December 31, 2000. Interest on the notes was at competitive Canadian interest rates. Interest earned on the notes in
2000 was $23 million.

Accounts
payable due to Exxon Mobil Corporation at December 31, 2002, with respect to the above transactions were $146 million
(2001  $27 million).

|millions of dollars                     |  | 2002  |  | 2001  |  | 2000 
|--------------------------------------- |  | ----- |  | ----- |  | -----
|                                       
|Operating revenues                      |  | 1,036 |  | 664   |  | 578  
|Investment and other income             |  |      |  |      |  | 24   
|Purchases of crude oil and products     |  | 2,134 |  | 1,873 |  | 1,483
|Operating, selling and general expenses |  | 57    |  | 47    |  | 67   

15. Net payments to governments

|millions of dollars                            |                        | 2002   |       | 2001   |       | 2000   |      
|---------------------------------------------- | ---------------------- | ------ | ----- | ------ | ----- | ------ | -----
|                                               |                       
|Current income tax expense (note 5)            |                        | 718    |       | 679    |       | 1,122  |      
|Federal excise tax                             |                        | 1,231  |       | 1,180  |       | 1,194  |      
|Property taxes included in expenses            |                        | 85     |       | 86     |       | 93     |      
|Payroll and other taxes included in expenses   |                        | 51     |       | 47     |       | 41     |      
|GST/QST/HST collected (a)                      |                        | 1,717  |       | 1,749  |       | 1,818  |      
|GST/QST/HST input tax credits (a)              |                        | (1,368 | )     | (1,384 | )     | (1,376 | )    
|Other consumer taxes collected for governments |                        | 1,589  |       | 1,585  |       | 1,524  |      
|Crown royalties                                |                        | 314    |       | 460    |       | 623    |      
|                                               |                       
|Total paid or payable to governments           |                        | 4,337  |       | 4,402  |       | 5,039  |      
|Less investment tax credits and other receipts |                        | 12     |       | 7      |       | 9      |      
|                                               |                       
|Net payments to governments                    |                        | 4,325  |       | 4,395  |       | 5,030  |      
|                                               |                       
|Net payments to:                               |                        |        |       |        |       |        |      
|                                               | Federal government     |        | 2,171 |        | 2,160 |        | 2,455
|                                               | Provincial governments |        | 2,069 |        | 2,149 |        | 2,482
|                                               | Local governments      |        | 85    |        | 86    |        | 93   
|                                               |                       
|Net payments to governments                    |                        | 4,325  |       | 4,395  |       | 5,030  |      
|                                               |                       



F-17

---



Glossary of financial terms

Capital employedis short-term and long-term debt and shareholders' equity. Average capital employed is the average of the
beginning-of-year and end-of-year amounts.

Cashrepresents cash as recorded in the books of account and cash equivalents at cost. Cash equivalents are all highly liquid securities with a maturity
of three months or less when purchased.

Debtrepresents amounts borrowed from external sources.

Marketable securitiesare securities of the governments of Canada and the provinces, banks and other corporations, with a maturity of longer than three
months when purchased.

Net realizable valueis the estimated selling price of an asset, less estimated costs of completion and disposal.

Future income taxesare based on differences between the book and tax values of assets and liabilities. These differences in value are remeasured at each
period end using the tax rates and tax laws expected to apply when those differences are settled in the future. The largest source is the difference between book and tax depreciation and amortization,
where deductions are made earlier for tax purposes than for accounting purposes.

F-18

---



INDEX TO EXHIBITS

|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  |      |  |                                                                                                                                                                                                                                                                                                                                                                            |  | Page
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|(3)  |  | (i)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  | Restated certificate and articles of incorporation of the Company (Incorporated herein by reference to Exhibit (3) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1998
(File No. 0-12014)). |  |     
|     |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  | By-laws of the Company (Incorporated herein by reference to Exhibit B to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1979 (File No. 2-9259)).                                               |  |     
|(4)  |  | Term Loan Agreement, dated as of July 13, 1989, relating to the borrowing of $2 billion (U.S.) (Incorporated herein by reference to Exhibit (4) of the Company's Annual Report on Form 10-K for the
year ended December 31, 1989 (File No. 0-12014)). The Company's other long-term debt authorized under any other instrument does not exceed 10 percent of the Company's consolidated assets. The Company agrees to furnish to the
Commission upon request a copy of any such instrument. |  |                                                                                                                                                                                                                           
|(10) |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |                                                                                                                                                                                                                            |  | (1)  |  | Alberta Crown Agreement, dated February 4, 1975, relating to the participation of the Province of Alberta in Syncrude (Incorporated herein by reference to Exhibit 13(a) of the Company's Registration Statement on
Form S-1, as filed with the Securities and Exchange Commission on August 21, 1979 (File No. 2-65290)).                                                 |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (2)  |  | Amendment to Alberta Crown Agreement, dated January 1, 1983 (Incorporated herein by reference to Exhibit (10)(ii)(2) of the Company's Annual Report on Form 10-K for the year ended December 31,
 1983 (File No. 2-9259)).                                                                                                                                                 |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (3)  |  | Syncrude Ownership and Management Agreement, dated February 4, 1975 (Incorporated herein by reference to Exhibit 13(b) of the Company's Registration Statement on Form S-1, as filed with the Securities and
Exchange Commission on August 21, 1979 (File No. 2-65290)).                                                                                                   |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (4)  |  | Letter Agreement, dated February 8, 1982, between the Government of Canada and Esso Resources Canada Limited, amending Schedule "C" to the Syncrude Ownership and Management Agreement filed as
Exhibit (10)(ii)(2) (Incorporated herein by reference to Exhibit (20) of the Company's Annual Report on Form 10-K for the year ended December 31, 1981 (File No. 2-9259)). |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (5)  |  | Norman Wells Pipeline Agreement, dated January 1, 1980, relating to the operation, tolls and financing of the pipeline system from the Norman Wells field (Incorporated herein by reference to Exhibit 10(a)(3) of
the Company's Annual Report on Form 10-K for the year ended December 31, 1981 (File No. 2-9259)).                                                       |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (6)  |  | Norman Wells Pipeline Amending Agreement, dated April 1, 1982 (Incorporated herein by reference to Exhibit (10)(ii)(5) of the Company's Annual Report on Form 10-K for the year ended December 31,
1982 (File No. 2-9259)).                                                                                                                                                |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (7)  |  | Letter Agreement clarifying certain provisions to the Norman Wells Pipeline Agreement, dated August 29, 1983 (Incorporated herein by reference to Exhibit (10)(ii)(7) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1983 (File No. 2-9259)).                                                                                                 |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (8)  |  | Norman Wells Pipeline Amending Agreement, made as of February 1, 1985, relating to certain amendments ordered by the National Energy Board (Incorporated herein by reference to Exhibit (10)(ii)(8) of the
Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 0-12014)).                                                                  |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (9)  |  | Norman Wells Pipeline Amending Agreement, made as of April 1, 1985, relating to the definition of "Operating Year" (Incorporated herein by reference to Exhibit (10)(ii)(9) of the Company's Annual Report on
Form 10-K for the year ended December 31, 1986 (File No. 0-12014)).                                                                                          |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (10) |  | Norman Wells Expansion Agreement, dated October 6, 1983, relating to the prices and royalties payable for crude oil production at Norman Wells (Incorporated herein by reference to Exhibit (10)(ii)(8) of the
Company's Annual Report on Form 10-K for the year ended December 31, 1983 (File No. 2-9259)).                                                               |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |                                                                                                                                                                                                                            |  | (11) |  | Alberta Cold Lake Crown Agreement, dated June 25, 1984, relating to the royalties payable and the assurances given in respect of the Cold Lake production project (Incorporated herein by reference to Exhibit (10)
(ii)(11) of the Company's Annual Report on Form 10-K for the year ended December 31, 1986 (File No. 0-12014)).                                         |  |     

E-1

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| |  |       |  |     |  |      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          |  | Page
| |  | ----- |  | --- |  | ---- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
| |  |       |  |     |  | (12) |  | Amendment to Alberta Crown Agreement, dated January 1, 1986 (Incorporated herein by reference to Exhibit (10)(ii)(12) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |     
| |  |       |  |     |  | (13) |  | Amendment to Alberta Crown Agreement, dated November 25, 1987 (Incorporated herein by reference to Exhibit (10)(ii)(13) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1987 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            |  |     
| |  |       |  |     |  | (14) |  | Amendment to Syncrude Ownership and Management Agreement, dated March 10, 1982 (Incorporated herein by reference to Exhibit (10)(ii)(14) of the Company's Annual Report on Form 10-K for the year
ended December 31, 1989 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |     
| |  |       |  |     |  | (15) |  | Amendment to Alberta Crown Agreement, dated August 1, 1991 (Incorporated herein by reference to Exhibit (10)(ii)(15) of the Company's Annual Report on Form 10-K for the year ended December 31,
 1991 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                              |  |     
| |  |       |  |     |  | (16) |  | Norman Wells Settlement Agreement, dated July 31, 1996. (Incorporated herein by reference to Exhibit (10)(ii)(16) of the Company's Annual Report on Form 10-K for the year ended December 31, 1996
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |     
| |  |       |  |     |  | (17) |  | Amendment to Alberta Crown Agreement, dated January 1, 1997. (Incorporated herein by reference to Exhibit (10)(ii)(17) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1996 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             |  |     
| |  |       |  |     |  | (18) |  | Norman Wells Pipeline Amending Agreement, dated December 12, 1997. (Incorporated herein by reference to Exhibit (10)(ii)(18) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1998 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     
| |  |       |  |     |  | (19) |  | Norman Wells Pipeline 1999 Amending Agreement, dated May 1, 1999. (Incorporated herein by reference to Exhibit (10)(ii)(19) of the Company's Annual Report on Form 10-K for the year ended
December 31, 1999 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        |  |     
| |  |       |  |     |  | (20) |  | Alberta Cold Lake Transition Agreement, effective January 1, 2000, relating to the royalties payable in respect of the Cold Lake production project and terminating the Alberta Cold Lake Crown Agreement. (Incorporated
herein by reference to Exhibit (10)(ii)(20) of the Company's Annual Report on Form 10-K for the year ended December 31, 2001 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |     
| |  |       |  |     |  | (21) |  | Amendment to Alberta Crown Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(21) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         |  |     
| |  |       |  |     |  | (22) |  | Amendment to Syncrude Ownership and Management Agreement effective January 1, 2001 (Incorporated herein by reference to Exhibit (10)(ii)(22) of the Company's Quarterly Report on Form 10-Q for the
quarter ended June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     |  |     
| |  |       |  |     |  | (23) |  | Amendment to Syncrude Ownership and Management Agreement effective September 16, 1994 (Incorporated herein by reference to Exhibit (10)(ii)(23) of the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  |  |     
| |  |       |  |     |  | (24) |  | Amendment to Alberta Crown Agreement dated November 29, 1995 (Incorporated herein by reference to Exhibit (10)(ii)(24) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  |     
| |  | (iii) |  | (A) |  | (1)  |  | Form of Letter relating to Supplemental Retirement Income (Incorporated herein by reference to Exhibit (10)(c)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1980
(File No. 2-9259)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   |  |     
| |  |       |  |     |  | (2)  |  | Incentive Share Unit Plan and Incentive Share Units granted in 2001 are incorporated herein by reference to Exhibit (10)(iii)(A)(2) of the Company's Annual Report on Form 10-K for the year ended
December 31, 2001. Units granted in 2000 are incorporated herein by reference to Exhibit (10)(iii)(A)(2) of the Company's Annual Report on Form 10-K for the year ended December 31, 2000 (File No. 0-12014); units
granted in 1999 are incorporated herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1999 (File No. 0-12014); units granted in 1998 are incorporated
herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998 (File No. 0-12014); units granted in 1997 are incorporated herein by reference to
Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1997 (File No. 0-12014); units granted in 1996 are incorporated |  |     

E-2

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|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  |                                        |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           |  | Page
|---- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | --- |  | -------------------------------------- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ----
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  |                                        |  | herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 (File No. 0-12014); units granted in 1995 are incorporated
herein by reference to Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1995 (File No. 0-12014); units granted in 1994 are incorporated herein by reference to
Exhibit (10)(iii)(A)(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1994 (File No. 0-12014); and units granted in 1993 are incorporated herein by reference to Exhibit (10)(iii)(A)
(3) of the Company's Annual Report on Form 10-K for the year ended December 31, 1993 (File No. 0-12014). |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (3)                                    |  | Deferred Share Unit Plan. (Incorporated herein by reference to Exhibit(10)(iii)(A)(5) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (4)                                    |  | Deferred Share Unit Plan for Nonemployee Directors. (Incorporated herein by reference to Exhibit (10)(iii)(A)(6) of the Company's Annual Report on Form 10-K for the year ended December 31, 1998
(File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (5)                                    |  | Earnings Bonus Unit Plan and Earnings Bonus Units granted in 2002. Units granted in 2001 are incorporated herein by reference to Exhibit (10)(iii)(5) of the Company's Annual Report on Form 10-K for the year
ended December 31, 2000 (File No. 0-12014).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  | E-4 
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (6)                                    |  | Incentive Stock Option Plan and Incentive Stock Option granted in 2002 (Incorporated herein by reference to Exhibit(10)(iii)(A)(6) of the Company's Quarterly Report on Form 10-Q for the quarter ended
June 30, 2002 (File No. 0-12014)).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                |  |     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  |     |  | (7)                                    |  | Restricted Stock Unit Plan and Restricted Stock Units granted in 2002.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    |  | E-7 
|(21) |  | Imperial Oil Resources Limited, McColl-Frontenac Petroleum Inc., Imperial Oil Resources N.W.T. Limited and Imperial Oil Resources Ventures Limited, all incorporated in Canada, are wholly-owned subsidiaries of the
Company. The names of all other subsidiaries of the Company are omitted because, considered in the aggregate as a single subsidiary, they would not constitute a significant subsidiary as of December 31, 2002. |  |    
|(23) |  | (ii)                                                                                                                                                                                                                                                                                                                                                                                                                                  |  | (A) |  | Consent of PricewaterhouseCoopers LLP. |  | E-18                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|     |  |                                                                                                                                                                                                                                                                                                                                                                                                                                       |  | (B) |  | Consent of Chief Engineering Officer.  |  | E-19                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     

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