Governments across Canada must find a way to align on an economic strategy that reduces the length of time it takes to get major projects such as pipelines approved and built, Brian Porter, chief executive officer of Bank of Nova Scotia, said on Thursday.
A national strategy would attract foreign capital back to the oil and gas industry and allow the benefits to accrue across the country, Mr. Porter told a Calgary Chamber of Commerce audience. Besides lessening regulatory burdens, lower corporate tax rates would also help to bring investment back, he said.
“We have to get big projects done. There has to be expedited treatment for some of these things in a fair, transparent way where environmental, regulatory – everything – is done in a transparent fashion,” Mr. Porter told reporters. “But we can’t take 10 and 12 years to do some of these projects. It just doesn’t work.”
As Canada’s oil sector has struggled, U.S. shale plays, such as the Permian Basin in Texas and New Mexico, have had a rush of investment.
By suggesting a national strategy – one that brings together businesses, governments and universities – Mr. Porter is adding his voice to several successive premiers of Alberta who have tried to align the interests of the provinces, territories and the federal government, so far unsuccessfully.
Bank of Nova Scotia, Canada’s third-largest bank by assets, has more than national pride riding on the success of the oil patch. It has the largest exposure to the industry among Canadian banks, Mr. Porter said. Energy loans constituted 2.5 per cent of its loans as of Jan. 31, 2019, totalling $15-billion, according to the bank’s financial disclosures. The bank is also active in merger and acquisition advisory and equity financing.
Mr. Porter declined to blame any one government for standing in the way of major projects the industry says would let it thrive, such as the Trans Mountain pipeline expansion.
“It takes longer-term planning, strategic thought in terms of building these. You can talk about the Permian Basin, and there’s always going to be a hot play that comes and goes," he said. “But the world needs Canada’s energy. We have to get it to tidewater, get it to the people that need it, whether it’s Korea, Japan, China, India. I think the LNG plant in Kitimat is a very important step in that direction.”
Canada’s oil industry has seen an a mass exit of foreign energy companies. Royal Dutch Shell PLC, Norway’s Equinor ASA (formerly called Statoil), as well as U.S. producers ConocoPhillips, Murphy Oil Corp. and Marathon Oil Corp. have all jettisoned their oil sands assets in recent years. Last month, Oklahoma-based Devon Energy Corp. put its remaining Canadian assets on the auction block. Meanwhile, the S&P/TSX capped energy index is down 42 per cent from its level of five years ago, and analysts have said much of the drop is due to an exodus of U.S. and overseas investment in the sector.
Despite the energy industry’s current woes, Mr. Porter said in his address he remains bullish on its prospects, and believes Trans Mountain as well as TransCanada Corp.’s Keystone XL and Enbridge Inc.'s Line 3 replacement pipeline projects will get built.
“That will certainly ease pressure, obviously. They’ll be done in different sequences and probably take longer than anyone in this room wants, but I believe they’ll get done,” he said.
With a report from James Bradshaw
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Jeffrey Jones