Jim Prentice on State of Banking (Audio)

in Canada. As we step back and look at this conference, though, what is the big issue for investors in Canada, within Canada, Canada, Canadians themselves and people who are looking to invest in Canada. Well, I think I think the big issue UM, over the longer term is making sure that Canadian energy resources are connected to global markets and UM. You know, the development of Canada's energy resources has depended very heavily on foreign investment,

in particular investment from American energy companies. UH. The challenge that we face today is is, as I said at the conference above the ground, it's it's not a question of the quality of the resource base, whether you speak of oil or natural gas. Canada's energy resources are amongst the largest and most competitive in the world, but we have become divorced from global markets and that's beginning to

affectum capital flows. It's beginning to affect the desire of many of the larger low cost capital providers to stay in the Canadian basin. And we're seeing even as commodity prices begin to write themselves, we're seeing many of the largest energy companies starting to exit Canada for the reason that, you know, we're not focused enough on competitiveness, and we

also don't have access to global markets. So if we if you had access to those global markets, what would give us an example of what would be different today about the Canadian energy sector. Well, the Canada does not realize global prices for its resources. Our oil and our not tro gas are sold into the continental marketplace. Canada

is at the end of the pipe. The pipelines are often constricted in terms of their supply capacity, and so the result is something called the differential, which is the differential is the lower price that Canada realizes for its resources when they're sold into the continental market place. Just because that's how markets work. And so we need to access global markets. This is Taking Stock with Pim Box and Kathleen Hays on Bloomberg Radio. We are broadcasting live

from Bloomberg World Headquarters. We are at the fourth annual Canadian Fixed Income Conference. It is sponsored by National Bank of Canada Financial Markets. Joining us is the Honorable Jim Prentice. He is industry Adviser for the Energy Group at Warburg Pinkus. He is the former Premier of Alberta and former member

of the Canadian Parliament. Jim Prentice, One of the things I want to get your thoughts about has to do with the relationship between the value of the Canadian dollar, which seemed to start at to fall around two thousand fifteen, and it dropped about maybe at that time. Many people thought that that would make Canadian investments much more appealing to American or ex Canada companies, and yet Enbridge, um Trans Canada they're the ones making the big deals, they're

coming south. What happened that? What happened with that decline and the attractiveness of Canadian assets. That's a great question and it speaks to exactly the issue. You know, you would think that Canadian assets would be competitive because of

the pricing, as you say, of the dollar. In fact, what's happened is that UM Canadian companies have been frustrated in their ability to develop pipelines UM for the reasons that we can discuss, and so to pursue growth, they've begun to look elsewhere and they've looked south to the

United States. They've redeployed their capital. Both of our major Canadian pipeline companies have followed that strategy, deploying their capital into the United States through acquisition rather than through growth in Canada, because frankly, they've been unable to get approvals in Canada to build anything. So what is the problem with pipeline approvals? Is it mainly environmental groups who don't want oil transported because they don't want more oil used.

Are there some native peoples who feel that this is treading on sacred ground and therefore saying no, no, you can't do this. Well, they've been both both challenges, and you know, I don't suggest that these are easy issues. We have to find UM permanent UH solutions that will stand the test of time. But where we find ourselves today is that Canada is one of the world's largest

oil producers with no access to global markets. Essentially, we produce about four point three million barrels of oil to day, which would make us the world's fourth largest supplier. UM. Three point seven five billion million of that goes per day goes to the United States, and we don't access global markets at all. We have no pipelines or reports that allows us to export Canadian oil and so um. You know, increasingly our industry has become disconnected from global

markets with all the capital consequences that would follow from that. Now, there are a couple of decisions that we may look to the Canadian government for related to access to these global markets. There's pipelines for Kingdom Morgan, there's the Northern Gateway Project, there's the Northwest Natural Gas Project, and then TransCanada's got that Energy East pipeline. Which of those, if any, do you believe that the Trudeau government will actually approve

so that we can see some results on the ground. Well, it seems as though from the Prime Minister's comments just an hour or so go actually that the government has headed towards an approval of the Kinder Morgan project, which is a good thing and everyone should applaud that it'll it will help, but the Kinder Morgan pipeline exits into the Port of Coouver and so that port's unable to basically handle the large tankers that are needed to go to the Asia Pacific. I mean, certainly, it'll tie us

more more strongly to global markets. It will facilitate Canadian oil moving down the west coast of North America. But what Canada really needs to take advantage of its opportunity is to ship a million to two million barrels a day into the Asia Pacific base and that's where the market is, That's where the incremental demand is. I think most people don't realize that that so little of Canadian oil is exported directly to the rest of the world. I think many people understand that a lot of oil

comes through from Canada through the United States. Oil is fungible, so it ends up in someplace, not all of it in the US. In terms of what kind of policy changes would be needed, what are you pushing for. You've got a book coming out, You've written op eds. What what's the number one thing Canadas you down connect to global markets? If we don't connect to global market but what does that mean pipelines. What appines to the West coast,

it means sports. It means that the government needs governments plural need to be focused on our competitiveness and UM. If we are going to uh simply be a continental supplier realizing lower prices, we're beginning to see the consequences of that, which is a lower level of activity, fewer jobs, fewer revenue streams, less government revenue, less private income UM. And so we need to access global markets and governments

need to focus on that. You have done stints not only as the Premier of Alberta, but you've also been the Industry Minister, Environment Minister, Minister of Indian Affairs Northern Development in the Stephen Harper's cabinets. He's got a more in a lot of different hats. What would you like to accomplish A who do you want to have the dialogue with directly, let's say, in the next six to twelve months, that would advance this entry of Canadian energy

into the global markets. Is there a group or someone that you would like to say, all right, here's the plan, here's what we're gonna do. Well, so you know, certainly industry is is focused on this UM there's a new Canadian government. They're sensitive to these issues. They in particular have a sensitivity to environmental issues and working with first nations um both of which I think are key to

the solution here. And so my hope is that the Canada's national government, working together with the provincial governments, will focus on that agenda, working together with first nations who are critical to the solution. And that's part of what the book that I've written over the course of this winter really deals with Canada Energy and the environment. Is the name of the book. It's coming out after the

first year. That's the working title. But the hardest thing about writing in the book is actually it's finally to agree on the title with your publisher. Well, and titles are important, well, Jim Pretis. We'll look forward to you having to come again on taking Stock when we can talk about that book. Wonderful to be here, Thank you. Yes, we're continuing to broadcast live today from the Canadian Fixed Income Conference here at Bloomberg World headquarters. Just taking a

check of the markets. Now, look at this. Pim fox Bear said to propose improved Monsanto offer of a hundred dollars a share. This is big news on the terminal, on the Bloomberg and this is taking stock, and this is Bloomberg