WEBVTT - Jim Prentice on State of Banking (Audio)

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<v Speaker 1>Now we want to turn our attention solidue the Canadian

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<v Speaker 1>Fixed Income Conference. Here a Bloomberg World Headquarters. Jim Apprentice

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<v Speaker 1>joins us. Now he is wearing many hats these days.

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<v Speaker 1>He is the former Premier of Alberta. That's what we

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<v Speaker 1>call him, the Honorable Jim Prentice, Industry Advisor at the

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<v Speaker 1>Energy Group at Warburg Pincas and also UM he is

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<v Speaker 1>a Global Fellow at the Wilson Senators Canada Institute in Washington. Jim, welcome.

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<v Speaker 1>So we want to talk about oil and oil policy

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<v Speaker 1>in Canada. As we step back and look at this conference, though,

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<v Speaker 1>what is the big issue for investors in Canada, within Canada, Canada,

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<v Speaker 1>Canadians themselves and people who are looking to invest in Canada. Well,

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<v Speaker 1>I think I think the big issue UM, over the

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<v Speaker 1>longer term is making sure that Canadian energy resources are

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<v Speaker 1>connected to global markets and UM. You know, the development

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<v Speaker 1>of Canada's energy resources has depended very heavily on foreign investment,

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<v Speaker 1>in particular investment from American energy companies. UH. The challenge

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<v Speaker 1>that we face today is is, as I said at

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<v Speaker 1>the conference above the ground, it's it's not a question

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<v Speaker 1>of the quality of the resource base, whether you speak

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<v Speaker 1>of oil or natural gas. Canada's energy resources are amongst

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<v Speaker 1>the largest and most competitive in the world, but we

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<v Speaker 1>have become divorced from global markets and that's beginning to

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<v Speaker 1>affectum capital flows. It's beginning to affect the desire of

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<v Speaker 1>many of the larger low cost capital providers to stay

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<v Speaker 1>in the Canadian basin. And we're seeing even as commodity

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<v Speaker 1>prices begin to write themselves, we're seeing many of the

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<v Speaker 1>largest energy companies starting to exit Canada for the reason that,

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<v Speaker 1>you know, we're not focused enough on competitiveness, and we

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<v Speaker 1>also don't have access to global markets. So if we

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<v Speaker 1>if you had access to those global markets, what would

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<v Speaker 1>give us an example of what would be different today

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<v Speaker 1>about the Canadian energy sector. Well, the Canada does not

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<v Speaker 1>realize global prices for its resources. Our oil and our

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<v Speaker 1>not tro gas are sold into the continental marketplace. Canada

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<v Speaker 1>is at the end of the pipe. The pipelines are

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<v Speaker 1>often constricted in terms of their supply capacity, and so

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<v Speaker 1>the result is something called the differential, which is the

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<v Speaker 1>differential is the lower price that Canada realizes for its

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<v Speaker 1>resources when they're sold into the continental market place. Just

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<v Speaker 1>because that's how markets work. And so we need to

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<v Speaker 1>access global markets. This is Taking Stock with Pim Box

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<v Speaker 1>and Kathleen Hays on Bloomberg Radio. We are broadcasting live

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<v Speaker 1>from Bloomberg World Headquarters. We are at the fourth annual

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<v Speaker 1>Canadian Fixed Income Conference. It is sponsored by National Bank

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<v Speaker 1>of Canada Financial Markets. Joining us is the Honorable Jim Prentice.

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<v Speaker 1>He is industry Adviser for the Energy Group at Warburg Pinkus.

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<v Speaker 1>He is the former Premier of Alberta and former member

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<v Speaker 1>of the Canadian Parliament. Jim Prentice, One of the things

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<v Speaker 1>I want to get your thoughts about has to do

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<v Speaker 1>with the relationship between the value of the Canadian dollar,

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<v Speaker 1>which seemed to start at to fall around two thousand fifteen,

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<v Speaker 1>and it dropped about maybe at that time. Many people

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<v Speaker 1>thought that that would make Canadian investments much more appealing

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<v Speaker 1>to American or ex Canada companies, and yet Enbridge, um

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<v Speaker 1>Trans Canada they're the ones making the big deals, they're

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<v Speaker 1>coming south. What happened that? What happened with that decline

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<v Speaker 1>and the attractiveness of Canadian assets. That's a great question

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<v Speaker 1>and it speaks to exactly the issue. You know, you

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<v Speaker 1>would think that Canadian assets would be competitive because of

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<v Speaker 1>the pricing, as you say, of the dollar. In fact,

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<v Speaker 1>what's happened is that UM Canadian companies have been frustrated

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<v Speaker 1>in their ability to develop pipelines UM for the reasons

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<v Speaker 1>that we can discuss, and so to pursue growth, they've

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<v Speaker 1>begun to look elsewhere and they've looked south to the

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<v Speaker 1>United States. They've redeployed their capital. Both of our major

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<v Speaker 1>Canadian pipeline companies have followed that strategy, deploying their capital

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<v Speaker 1>into the United States through acquisition rather than through growth

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<v Speaker 1>in Canada, because frankly, they've been unable to get approvals

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<v Speaker 1>in Canada to build anything. So what is the problem

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<v Speaker 1>with pipeline approvals? Is it mainly environmental groups who don't

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<v Speaker 1>want oil transported because they don't want more oil used.

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<v Speaker 1>Are there some native peoples who feel that this is

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<v Speaker 1>treading on sacred ground and therefore saying no, no, you

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<v Speaker 1>can't do this. Well, they've been both both challenges, and

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<v Speaker 1>you know, I don't suggest that these are easy issues.

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<v Speaker 1>We have to find UM permanent UH solutions that will

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<v Speaker 1>stand the test of time. But where we find ourselves

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<v Speaker 1>today is that Canada is one of the world's largest

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<v Speaker 1>oil producers with no access to global markets. Essentially, we

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<v Speaker 1>produce about four point three million barrels of oil to day,

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<v Speaker 1>which would make us the world's fourth largest supplier. UM.

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<v Speaker 1>Three point seven five billion million of that goes per

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<v Speaker 1>day goes to the United States, and we don't access

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<v Speaker 1>global markets at all. We have no pipelines or reports

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<v Speaker 1>that allows us to export Canadian oil and so um.

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<v Speaker 1>You know, increasingly our industry has become disconnected from global

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<v Speaker 1>markets with all the capital consequences that would follow from that. Now,

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<v Speaker 1>there are a couple of decisions that we may look

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<v Speaker 1>to the Canadian government for related to access to these

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<v Speaker 1>global markets. There's pipelines for Kingdom Morgan, there's the Northern

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<v Speaker 1>Gateway Project, there's the Northwest Natural Gas Project, and then

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<v Speaker 1>TransCanada's got that Energy East pipeline. Which of those, if any,

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<v Speaker 1>do you believe that the Trudeau government will actually approve

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<v Speaker 1>so that we can see some results on the ground. Well,

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<v Speaker 1>it seems as though from the Prime Minister's comments just

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<v Speaker 1>an hour or so go actually that the government has

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<v Speaker 1>headed towards an approval of the Kinder Morgan project, which

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<v Speaker 1>is a good thing and everyone should applaud that it'll

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<v Speaker 1>it will help, but the Kinder Morgan pipeline exits into

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<v Speaker 1>the Port of Coouver and so that port's unable to

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<v Speaker 1>basically handle the large tankers that are needed to go

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<v Speaker 1>to the Asia Pacific. I mean, certainly, it'll tie us

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<v Speaker 1>more more strongly to global markets. It will facilitate Canadian

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<v Speaker 1>oil moving down the west coast of North America. But

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<v Speaker 1>what Canada really needs to take advantage of its opportunity

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<v Speaker 1>is to ship a million to two million barrels a

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<v Speaker 1>day into the Asia Pacific base and that's where the

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<v Speaker 1>market is, That's where the incremental demand is. I think

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<v Speaker 1>most people don't realize that that so little of Canadian

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<v Speaker 1>oil is exported directly to the rest of the world.

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<v Speaker 1>I think many people understand that a lot of oil

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<v Speaker 1>comes through from Canada through the United States. Oil is fungible,

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<v Speaker 1>so it ends up in someplace, not all of it

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<v Speaker 1>in the US. In terms of what kind of policy

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<v Speaker 1>changes would be needed, what are you pushing for. You've

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<v Speaker 1>got a book coming out, You've written op eds. What

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<v Speaker 1>what's the number one thing Canadas you down connect to

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<v Speaker 1>global markets? If we don't connect to global market but

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<v Speaker 1>what does that mean pipelines. What appines to the West coast,

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<v Speaker 1>it means sports. It means that the government needs governments

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<v Speaker 1>plural need to be focused on our competitiveness and UM.

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<v Speaker 1>If we are going to uh simply be a continental

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<v Speaker 1>supplier realizing lower prices, we're beginning to see the consequences

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<v Speaker 1>of that, which is a lower level of activity, fewer jobs,

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<v Speaker 1>fewer revenue streams, less government revenue, less private income UM.

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<v Speaker 1>And so we need to access global markets and governments

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<v Speaker 1>need to focus on that. You have done stints not

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<v Speaker 1>only as the Premier of Alberta, but you've also been

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<v Speaker 1>the Industry Minister, Environment Minister, Minister of Indian Affairs Northern

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<v Speaker 1>Development in the Stephen Harper's cabinets. He's got a more

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<v Speaker 1>in a lot of different hats. What would you like

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<v Speaker 1>to accomplish A who do you want to have the

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<v Speaker 1>dialogue with directly, let's say, in the next six to

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<v Speaker 1>twelve months, that would advance this entry of Canadian energy

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<v Speaker 1>into the global markets. Is there a group or someone

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<v Speaker 1>that you would like to say, all right, here's the plan,

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<v Speaker 1>here's what we're gonna do. Well, so you know, certainly

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<v Speaker 1>industry is is focused on this UM there's a new

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<v Speaker 1>Canadian government. They're sensitive to these issues. They in particular

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<v Speaker 1>have a sensitivity to environmental issues and working with first

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<v Speaker 1>nations um both of which I think are key to

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<v Speaker 1>the solution here. And so my hope is that the

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<v Speaker 1>Canada's national government, working together with the provincial governments, will

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<v Speaker 1>focus on that agenda, working together with first nations who

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<v Speaker 1>are critical to the solution. And that's part of what

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<v Speaker 1>the book that I've written over the course of this

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<v Speaker 1>winter really deals with Canada Energy and the environment. Is

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<v Speaker 1>the name of the book. It's coming out after the

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<v Speaker 1>first year. That's the working title. But the hardest thing

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<v Speaker 1>about writing in the book is actually it's finally to

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<v Speaker 1>agree on the title with your publisher. Well, and titles

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<v Speaker 1>are important, well, Jim Pretis. We'll look forward to you

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<v Speaker 1>having to come again on taking Stock when we can

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<v Speaker 1>talk about that book. Wonderful to be here, Thank you. Yes,

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<v Speaker 1>we're continuing to broadcast live today from the Canadian Fixed

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<v Speaker 1>Income Conference here at Bloomberg World headquarters. Just taking a

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<v Speaker 1>check of the markets. Now, look at this. Pim fox

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<v Speaker 1>Bear said to propose improved Monsanto offer of a hundred

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<v Speaker 1>dollars a share. This is big news on the terminal,

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<v Speaker 1>on the Bloomberg and this is taking stock, and this

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<v Speaker 1>is Bloomberg