Scotiabank CEO Porter calls for energy export co-operation

Share

Canada's energy producers need to tap new markets abroad, but are being constrained by a frustrating pace of building the infrastructure needed to export oil and gas that is caused by bickering and political indecision, the Bank of Nova Scotia's chief executive says.

"Global market access for Canadian energy must be a common objective that we pursue vigorously," Brian Porter said in a speech on Thursday at the bank's annual general meeting in Ottawa.

"Now is the time for leaders to come together."

Mr. Porter's call to action follows a dramatic collapse in the price of crude oil that side-swiped the Canadian economy. Difficult market conditions, coupled with delays affecting energy projects such as the Keystone XL pipeline to the United States and liquefied natural gas (LNG) in British Columbia are putting Canada's goal of becoming an energy powerhouse at risk.

Earlier this year, Russ Girling, chief executive of TransCanada Corp., made a similar plea, calling on government leaders to resolve conflicts that are holding up important projects, including Keystone XL.

The obstacles include environmental groups that are trying to limit the expansion of Canada's oil patch.

In a paper released on Thursday, Environmental Defence and Greenpeace Canada said oil sands production must be curtailed if Canada is going to meet its international commitment to cut greenhouse gas emissions.

Mr. Porter also talked about the economic impact of the declining energy sector – and the opportunity cost of failing to address the shortage of ways to export oil and gas to markets that need them.

"Tax and royalty revenue from energy and energy-related businesses will be negatively impacted, regardless of commodity prices," he said. "These lower revenues will constrain our federal and provincial governments' ability to invest in important areas such as education and health care."

If Canada cannot export its energy products globally, then importing nations will get their oil elsewhere, he added, noting that the United States – Canada's biggest export market – is quickly becoming self-sufficient in energy production.

In an interview, Mr. Porter said his perspective is unique because he spends a lot of time out of the country, tending to Scotiabank's global operations.

He said some observers in the Far East describe Canada as "fat around the middle," a country that is rich in resources that it is not using to the best advantage.

"We've got all these resources, yet there is a degree of complacency about what we're going to do," he said. "I hear that, and I think it's important for me to voice that opinion."

He pointed to Australia as a country that is doing a good job expanding its infrastructure. He cited its ambitious program to privatize public assets and use the proceeds for new public initiatives such as hospitals, toll roads and airports as a "thoughtful" model.

"It comes from political will," he said. "Australia has designed a system and they have executed extremely well."

He argued in his speech that the solution to closing Canada's infrastructure gaps is largely political, comparing the challenge to the construction of the national railway in the 19th century, when strong leadership overcame obstacles.

"So today, I am calling on corporate, government and community leaders to do the same," Mr. Porter said.

He said projects must be developed responsibly, taking into consideration the environment and community needs.

He pointed to an independent study that said TransCanada's Energy East pipeline, which the company recently postponed by at least a year due to low energy prices, would add an estimated $35-billion to Canada's gross domestic product and create tens of thousands of well-paying jobs.

He added that many projects that are being contemplated, including the Northern Gateway pipeline and LNG facilities on the West Coast, would provide significant opportunities for Canada's aboriginal communities.

"I am confident that improved market access will create long-term benefits for Canada, our international markets and Scotiabank itself," Mr. Porter said.

In the interview, Mr. Porter shied away from commenting on U.S. actions, such as repeated delays in approving the Keystone XL: "I would have liked to have seen Keystone approved, but the reality is that it hasn't, and Canada has to think about alternatives," he said.

And it has to act fast.

"I'm hearing from sophisticated global investors that this is agonizing," he said. "This is taking a long time."