Can Canada compete on the global stage? Have our climate policies put us at a competitive disadvantage? What can we do about our landlocked natural gas resources? International energy consultant Robert Johnston provides his take on these questions and more.
Johnston is the head of Eurasia Group, an international consulting firm that provides advice to investors and business decision-makers looking to understand the impact of politics on risks and opportunities in foreign markets. Johnston attended the CAPP-Scotiabank Investment Symposium in April, 2017, and in this interview, he answers questions on how Canada can compete with the U.S. and around the world.
My name is Robert Johnston; I’m the CEO of Eurasia Group based in Washington, D.C. I’ve been working with CAPP for several years. Our firm specializes in the geopolitics of energy and policy, and regulatory issues around the world.
How can Canada stay competitive on the global stage?
A lot of our clients are asking us, “How can Canada remain competitive with the U.S?” and I think it’s important also that it’s not just the U.S., but it’s really global competition for upstream capital. I think in the short cycle, the shale plays, the conventional plays, it is tough for Canada right now. I think the U.S. is attracting most of the capital and I think [U.S. President] Trump is really taking things from “strength to strength” as we like to say, but in the longer-cycle projects like deep water and things that are more long term, I think the oil sands particularly will continue to compete quite well.
Is there anything that Canada can do, other than approving pipelines to stay competitive?
I think that’s certainly an important factor. Approving pipelines will help the competitiveness overall. I think we have to look at fiscal issues. I think we have to look at carbon policy. I think we have to look at labour. We have to look at productivity. But I think more important than all of that, is our technology. If you look at what’s made the U.S. shale so successful, it’s really been the application of technology. I think in the Canadian case, having our Canadian companies really focus on how to improve productivity in the context of oil prices that are fairly low and carbon prices that are going up, that will really be the key to success.
Is Canada at a disadvantage because we have a climate policy in effect?
Climate is a global movement and it is true that the U.S. right now is in a pause on climate policy, but I think it’s more likely to be a pause rather than a correction. I think that longer term, big U.S. businesses, state governments, cities are still moving forward to a low-carbon transition, and certainly other countries around the world are, such as China, Germany, Europe, etc. So I think it’s important for Canada to keep pace with that, even though it does cause some short-term competitiveness pressure. The positive side is it’s helping getting pipelines built and it will also help keep attracting capital from international investors who are quite focused on climate policy.
Natural gas is abundant in Canada but is landlocked. What can Canada do to improve its situation?
I think it’s going to be tough in the U.S. I mean the U.S. production of shale gas is really going to continue to grow under Trump for sure. He’ll probably have more success getting pipelines built. He’s providing some regulatory relief. But I think the key is LNG (liquefied natural gas) and getting export terminals built on the West Coast. The sooner we can do that the better, because the faster growth markets will be in Asia.
What are you hearing from people about Canada in a global perspective?
I think there’s a sense that we’re high-cost, uncompetitive and sometimes I think Canadians add to that narrative. And I think we should be emphasizing the fact that our costs are coming down, that we are applying technology and that we’re actually competing with other longer-cycle plays like the deep water in places like Brazil and Mexico, and we compete quite favourably with most places in the world. Yes, the U.S. has a lot of advantages, especially for short-cycle investment, but I think we’re not doing enough to emphasize the advantage we have versus other markets around the world.