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Jim Prentice on State of Banking (Audio) · Bloomberg Intelligence

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  Speaker 1: Now we want to turn our attention solidue the Canadian
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  Speaker 1: Fixed Income Conference. Here a Bloomberg World Headquarters. Jim Apprentice
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  Speaker 1: joins us. Now he is wearing many hats these days.
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  Speaker 1: He is the former Premier of Alberta. That's what we
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  Speaker 1: call him, the Honorable Jim Prentice, Industry Advisor at the
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  Speaker 1: Energy Group at Warburg Pincas and also UM he is
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  Speaker 1: a Global Fellow at the Wilson Senators Canada Institute in Washington. Jim, welcome.
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  Speaker 1: So we want to talk about oil and oil policy
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  Speaker 1: in Canada. As we step back and look at this conference, though,
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  Speaker 1: what is the big issue for investors in Canada, within Canada, Canada,
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  Speaker 1: Canadians themselves and people who are looking to invest in Canada. Well,
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  Speaker 1: I think I think the big issue UM, over the
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  Speaker 1: longer term is making sure that Canadian energy resources are
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  Speaker 1: connected to global markets and UM. You know, the development
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  Speaker 1: of Canada's energy resources has depended very heavily on foreign investment,
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  Speaker 1: in particular investment from American energy companies. UH. The challenge
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  Speaker 1: that we face today is is, as I said at
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  Speaker 1: the conference above the ground, it's it's not a question
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  Speaker 1: of the quality of the resource base, whether you speak
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  Speaker 1: of oil or natural gas. Canada's energy resources are amongst
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  Speaker 1: the largest and most competitive in the world, but we
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  Speaker 1: have become divorced from global markets and that's beginning to
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  Speaker 1: affectum capital flows. It's beginning to affect the desire of
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  Speaker 1: many of the larger low cost capital providers to stay
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  Speaker 1: in the Canadian basin. And we're seeing even as commodity
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  Speaker 1: prices begin to write themselves, we're seeing many of the
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  Speaker 1: largest energy companies starting to exit Canada for the reason that,
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  Speaker 1: you know, we're not focused enough on competitiveness, and we
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  Speaker 1: also don't have access to global markets. So if we
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  Speaker 1: if you had access to those global markets, what would
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  Speaker 1: give us an example of what would be different today
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  Speaker 1: about the Canadian energy sector. Well, the Canada does not
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  Speaker 1: realize global prices for its resources. Our oil and our
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  Speaker 1: not tro gas are sold into the continental marketplace. Canada
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  Speaker 1: is at the end of the pipe. The pipelines are
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  Speaker 1: often constricted in terms of their supply capacity, and so
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  Speaker 1: the result is something called the differential, which is the
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  Speaker 1: differential is the lower price that Canada realizes for its
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  Speaker 1: resources when they're sold into the continental market place. Just
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  Speaker 1: because that's how markets work. And so we need to
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  Speaker 1: access global markets. This is Taking Stock with Pim Box
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  Speaker 1: and Kathleen Hays on Bloomberg Radio. We are broadcasting live
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  Speaker 1: from Bloomberg World Headquarters. We are at the fourth annual
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  Speaker 1: Canadian Fixed Income Conference. It is sponsored by National Bank
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  Speaker 1: of Canada Financial Markets. Joining us is the Honorable Jim Prentice.
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  Speaker 1: He is industry Adviser for the Energy Group at Warburg Pinkus.
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  Speaker 1: He is the former Premier of Alberta and former member
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  Speaker 1: of the Canadian Parliament. Jim Prentice, One of the things
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  Speaker 1: I want to get your thoughts about has to do
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  Speaker 1: with the relationship between the value of the Canadian dollar,
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  Speaker 1: which seemed to start at to fall around two thousand fifteen,
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  Speaker 1: and it dropped about maybe at that time. Many people
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  Speaker 1: thought that that would make Canadian investments much more appealing
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  Speaker 1: to American or ex Canada companies, and yet Enbridge, um
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  Speaker 1: Trans Canada they're the ones making the big deals, they're
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  Speaker 1: coming south. What happened that? What happened with that decline
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  Speaker 1: and the attractiveness of Canadian assets. That's a great question
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  Speaker 1: and it speaks to exactly the issue. You know, you
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  Speaker 1: would think that Canadian assets would be competitive because of
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  Speaker 1: the pricing, as you say, of the dollar. In fact,
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  Speaker 1: what's happened is that UM Canadian companies have been frustrated
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  Speaker 1: in their ability to develop pipelines UM for the reasons
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  Speaker 1: that we can discuss, and so to pursue growth, they've
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  Speaker 1: begun to look elsewhere and they've looked south to the
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  Speaker 1: United States. They've redeployed their capital. Both of our major
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  Speaker 1: Canadian pipeline companies have followed that strategy, deploying their capital
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  Speaker 1: into the United States through acquisition rather than through growth
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  Speaker 1: in Canada, because frankly, they've been unable to get approvals
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  Speaker 1: in Canada to build anything. So what is the problem
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  Speaker 1: with pipeline approvals? Is it mainly environmental groups who don't
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  Speaker 1: want oil transported because they don't want more oil used.
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  Speaker 1: Are there some native peoples who feel that this is
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  Speaker 1: treading on sacred ground and therefore saying no, no, you
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  Speaker 1: can't do this. Well, they've been both both challenges, and
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  Speaker 1: you know, I don't suggest that these are easy issues.
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  Speaker 1: We have to find UM permanent UH solutions that will
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  Speaker 1: stand the test of time. But where we find ourselves
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  Speaker 1: today is that Canada is one of the world's largest
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  Speaker 1: oil producers with no access to global markets. Essentially, we
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  Speaker 1: produce about four point three million barrels of oil to day,
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  Speaker 1: which would make us the world's fourth largest supplier. UM.
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  Speaker 1: Three point seven five billion million of that goes per
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  Speaker 1: day goes to the United States, and we don't access
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  Speaker 1: global markets at all. We have no pipelines or reports
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  Speaker 1: that allows us to export Canadian oil and so um.
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  Speaker 1: You know, increasingly our industry has become disconnected from global
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  Speaker 1: markets with all the capital consequences that would follow from that. Now,
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  Speaker 1: there are a couple of decisions that we may look
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  Speaker 1: to the Canadian government for related to access to these
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  Speaker 1: global markets. There's pipelines for Kingdom Morgan, there's the Northern
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  Speaker 1: Gateway Project, there's the Northwest Natural Gas Project, and then
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  Speaker 1: TransCanada's got that Energy East pipeline. Which of those, if any,
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  Speaker 1: do you believe that the Trudeau government will actually approve
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  Speaker 1: so that we can see some results on the ground. Well,
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  Speaker 1: it seems as though from the Prime Minister's comments just
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  Speaker 1: an hour or so go actually that the government has
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  Speaker 1: headed towards an approval of the Kinder Morgan project, which
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  Speaker 1: is a good thing and everyone should applaud that it'll
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  Speaker 1: it will help, but the Kinder Morgan pipeline exits into
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  Speaker 1: the Port of Coouver and so that port's unable to
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  Speaker 1: basically handle the large tankers that are needed to go
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  Speaker 1: to the Asia Pacific. I mean, certainly, it'll tie us
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  Speaker 1: more more strongly to global markets. It will facilitate Canadian
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  Speaker 1: oil moving down the west coast of North America. But
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  Speaker 1: what Canada really needs to take advantage of its opportunity
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  Speaker 1: is to ship a million to two million barrels a
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  Speaker 1: day into the Asia Pacific base and that's where the
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  Speaker 1: market is, That's where the incremental demand is. I think
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  Speaker 1: most people don't realize that that so little of Canadian
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  Speaker 1: oil is exported directly to the rest of the world.
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  Speaker 1: I think many people understand that a lot of oil
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  Speaker 1: comes through from Canada through the United States. Oil is fungible,
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  Speaker 1: so it ends up in someplace, not all of it
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  Speaker 1: in the US. In terms of what kind of policy
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  Speaker 1: changes would be needed, what are you pushing for. You've
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  Speaker 1: got a book coming out, You've written op eds. What
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  Speaker 1: what's the number one thing Canadas you down connect to
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  Speaker 1: global markets? If we don't connect to global market but
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  Speaker 1: what does that mean pipelines. What appines to the West coast,
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  Speaker 1: it means sports. It means that the government needs governments
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  Speaker 1: plural need to be focused on our competitiveness and UM.
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  Speaker 1: If we are going to uh simply be a continental
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  Speaker 1: supplier realizing lower prices, we're beginning to see the consequences
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  Speaker 1: of that, which is a lower level of activity, fewer jobs,
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  Speaker 1: fewer revenue streams, less government revenue, less private income UM.
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  Speaker 1: And so we need to access global markets and governments
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  Speaker 1: need to focus on that. You have done stints not
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  Speaker 1: only as the Premier of Alberta, but you've also been
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  Speaker 1: the Industry Minister, Environment Minister, Minister of Indian Affairs Northern
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  Speaker 1: Development in the Stephen Harper's cabinets. He's got a more
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  Speaker 1: in a lot of different hats. What would you like
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  Speaker 1: to accomplish A who do you want to have the
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  Speaker 1: dialogue with directly, let's say, in the next six to
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  Speaker 1: twelve months, that would advance this entry of Canadian energy
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  Speaker 1: into the global markets. Is there a group or someone
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  Speaker 1: that you would like to say, all right, here's the plan,
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  Speaker 1: here's what we're gonna do. Well, so you know, certainly
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  Speaker 1: industry is is focused on this UM there's a new
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  Speaker 1: Canadian government. They're sensitive to these issues. They in particular
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  Speaker 1: have a sensitivity to environmental issues and working with first
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  Speaker 1: nations um both of which I think are key to
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  Speaker 1: the solution here. And so my hope is that the
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  Speaker 1: Canada's national government, working together with the provincial governments, will
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  Speaker 1: focus on that agenda, working together with first nations who
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  Speaker 1: are critical to the solution. And that's part of what
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  Speaker 1: the book that I've written over the course of this
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  Speaker 1: winter really deals with Canada Energy and the environment. Is
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  Speaker 1: the name of the book. It's coming out after the
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  Speaker 1: first year. That's the working title. But the hardest thing
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  Speaker 1: about writing in the book is actually it's finally to
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  Speaker 1: agree on the title with your publisher. Well, and titles
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  Speaker 1: are important, well, Jim Pretis. We'll look forward to you
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  Speaker 1: having to come again on taking Stock when we can
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  Speaker 1: talk about that book. Wonderful to be here, Thank you. Yes,
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  Speaker 1: we're continuing to broadcast live today from the Canadian Fixed
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  Speaker 1: Income Conference here at Bloomberg World headquarters. Just taking a
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  Speaker 1: check of the markets. Now, look at this. Pim fox
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  Speaker 1: Bear said to propose improved Monsanto offer of a hundred
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  Speaker 1: dollars a share. This is big news on the terminal,
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  Speaker 1: on the Bloomberg and this is taking stock, and this
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  Speaker 1: is Bloomberg