Hon. Jim Prentice, Vice Chairman of CIBC, tells London energy conference
that Canada needs to send the message that it is open for business
LONDON, UK, Oct. 1, 2013 /CNW/ - CIBC (TSX: CM) (NYSE: CM) - Canada's energy sector urgently needs to
reorient its focus from being a continental energy supplier to become a
global player, says the Honorable Jim Prentice, Senior Executive
Vice-President and Vice Chairman of CIBC.
Mr. Prentice told an audience at the Oil and Money 2013 Conference in
London, England that "Canada faces the imperative to change its
thinking, adjust its focus and begin to match up its energy resources
with the needs of the growth markets of the Asia-Pacific. The industry
must do the hard, urgent work of reorienting itself to serve the demand
of tomorrow - and it must do so in a climate in which other countries
are equally determined to supply these markets with oil and gas."
To succeed in this task, he said Canada must:
become more international in its ambitions, by securing trading
relationships with new partners, especially in the Asia-Pacific;
invest in and develop the infrastructure required to efficiently export
oil and gas both on the continent and around the world; and
ensure an attractive regime for foreign investment in the energy
industry, including from State-Owned Enterprises.
"When it comes to energy, Canada is not being sufficiently attentive to
its future interests," says Mr. Prentice. "Despite what some may think,
it's not as simple as getting oil to the Pacific coast and onto a
tanker. It's a fiercely competitive world out there. Relationships need
to be developed. Negotiations need to be pursued and concluded. An
energy trade agenda needs to be advanced."
To deliver on these new markets he says we need to move quickly on
building the pipelines, ports and terminals required to get our energy
to these growing markets. "Simply put, Canada lacks the pipeline
infrastructure required to handle the overall projected growth in
production beyond 2020. Pipelines are required in virtually every
direction and, at present, the only alternative available is to
transport more oil using rail cars," says Mr. Prentice.
He notes that few in Canada saw this infrastructure challenge coming
even five years ago. We were secure in knowing we had a steady, stable
client to the south that would buy all that we could produce. But with
U.S. energy independence nearing reality, Canada needs to make tangible
progress toward addressing its infrastructure problem.
To continue to grow the industry and build these facilities will require
continued foreign investment adds Mr. Prentice. "Because, simply
stated, our ambitions and resources exceed our supply of domestic
He notes that over the last five years foreign direct investment has
accounted for 26 per cent of the capital injected into Canadian energy
projects through M&A activity. But over the past year, in-bound foreign
investment in Canadian energy has dropped off dramatically.
Foreign investment is down 92 per cent this year at $2 billion, compared
with $27 billion in the same period in 2012. Mergers and acquisitions
activity in Canadian energy is similarly below historic levels - just
$8 billion in 2013, compared with $66 billion in 2012, year to date.
To address this, Mr. Prentice believes there needs to be a measure of
clarity regarding State-owned Enterprises and foreign investment.
"Canada must make clear to the world that it continues to be open for
business. Not everyone is getting the message that Canada remains open
to the world. In fact, some are coming to believe the opposite.
"There are large companies from non-market economies that have ambitions
to come to Canada. They want to be headquartered in a stable western
democracy. They want to use and benefit from Canadian technology,
labour and capital markets. These are giant, world-class opportunities
for Canada, but they don't want to be rejected. They certainly don't
want an embarrassing confrontation with a western government and right
now they are puzzled by Canada."
Mr. Prentice believes if Canada can overcome these three challenges then
the energy industry will continue to remain a driving engine of
Canadian economic growth.
A copy of Mr. Prentice's speech is available at: http://files.newswire.ca/256/PrenticeOilandMoney.pdf.
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