Prentice Pitches Environment, Climate Policies as Pipeline Fix

  • Former Alberta premier says Canada needs market access to Asia
  • Warburg Pincus adviser sees capital fleeing Canadian energy

Canada needs to be a leader on policies for the environment, climate change and aboriginal relations for its energy industry to compete globally, said Jim Prentice, a former premier of oil-rich Alberta. 

The country, which has yet to advance proposed crude pipelines to its Pacific Coast, can benefit from sound policy as a way to win favor for the projects so it can export to Asia, he said on Tuesday. Prentice, also a former federal environment minister who’s now an energy adviser to private-equity firm Warburg Pincus LLC, was speaking at the Bloomberg Canada Fixed Income Conference in New York.

“Canada needs to lead in the development of our resources, and we need to do that in a responsible way,” Prentice said at the conference. “We’ve found ourselves in a continental trap that ties us into being a discounted energy provider to the United States.” He applauded that Prime Minister Justin Trudeau is supportive of building a pipeline to the Pacific Coast.

Two years into a commodity-price downturn, executives in Canada’s oil and natural gas hub have slowed drilling, sold assets, raised equity and debt and focused on cost-cutting. Investment since the slump began in 2014 has been slashed the most since 1947, according to the Canadian Association of Petroleum Producers.

Asset Sales

A decline in drilling shows that low-cost capital is fleeing the country’s oil and gas industry because of high costs and a lack of pipeline access to ship products to Asia, Prentice said. He cited recent asset sales or shelved projects in the country by ConocoPhillips, Statoil ASA, Total SA, Royal Dutch Shell Plc, Devon Energy Corp. and Apache Corp.

“As commodity prices return, if we don’t address some of those underlying issues, we’re going to find ourselves further down on capital allocation and we’re going to miss out,” Prentice said.

Prentice lost in Alberta’s 2015 election to current Premier Rachel Notley’s New Democratic Party, which overturned more than four decades of Progressive Conservative rule. Notley’s government boosted corporate taxes and introduced a wide-ranging carbon price. The province is now in its second year of recession, after leading the country in economic growth in previous years.

Oil futures in New York have recovered about 70 percent from a February low and are hovering around $45 a barrel. Many companies say they need prices to rise to between $50 and $60 before new investment can be considered.