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Good afternoon everyone.
I’m pleased to be a part of this prestigious gathering, which has attracted energy policy experts and some of the best business minds in North America.
It’s great to be back in Calgary, one of Canada’s most vibrant and fastest growing cities. Here in Alberta, energy projects worth about $50 billion are now under way and nearly $150 billion worth of projects are proposed for the future. All this investment potential is a boon to Calgary’s red-hot economy, the envy of the country.
This Summit gives us a unique opportunity to gain new perspectives on how to create greater energy security for both our countries.
Today, I want to talk about the special relationship between Canada and the United States, in light of breathtaking changes in the global energy market. And how Canada can play an increasingly important role globally in a resource hungry world.
Our two countries have strong ties of family and friendship, commerce and culture. At the core of our shared beliefs are liberty, democracy, and the rule of law. As well, we share a commitment to a market economy and free trade. These factors have all contributed to creating the largest bilateral commercial relationship in the world.
But my message is not just about the past we’ve shared - it’s about the future we can build together. It’s about recognizing and adapting to the changes of seismic proportions we’re witnessing in the global economy, changes that are altering world trade and investment patterns. These developments impact both our economies and will inevitably open a new chapter in Canada-U.S. relations.
My starting point in this discussion is that we cannot take our prosperity for granted. Earlier this month, the International Energy Agency released its annual report which found that the United States will be “almost self-sufficient in energy, in net terms, by 2035.”
According to the IEA, this transition to net self-sufficiency includes a decline in U.S. oil imports; from roughly 9.5 million barrels a day in 2011 to 3.5 million barrels a day in 2035. While there will be a transition period, the math clearly indicates that the United States will not be a growing market for our resource exports in the future.
This matters because 98% of Canada’s crude oil exports and 100% of Canada’s natural gas exports are to the United States. Also because resource exports fund critical social programs, including health and education, $22 billion last year.
We’ll continue to advance new projects with the United States, because they support Canadian jobs and our long term prosperity. But we must take steps to protect our economy in the long-term, and that’s what our agenda aims to do.
Canada is a country with rock solid economic and fiscal fundamentals. An ally of the U.S. that believes in free enterprise, welcomes foreign capital and is open for business. A friend with a strong and fair legal system. And a neighbour whose resource potential offers a remarkable economic opportunity in the coming decades, an opportunity based on Canada's commodity boom.
So that’s what I want to convey - Canada’s economic fundamentals are sound, our fiscal house is in order and our doors are open for business. And there’s the opportunity. The global economic influence of the commodities super-cycle is shifting regional influences, as European capital investment slips back in favour of the U.S., Asia and the Middle East.
Peak oil is now a quaint idea, so alarmists are pinning their latest apocalyptic vision on an oil and gas glut, another doomsday prediction destined for the dustbin of history.
The discovery of massive reserves of unconventional resources like shale gas and tight oil in a wide range of countries is positive for buyers needing a diversity of supply, as it obviously is for those with the new resources to sell or imports to displace.
There are important geopolitical implications flowing from these developments, which is good news for global economic growth and political stability.
We also have to acknowledge that one and a half billion of the world's poorest are still without electricity and we know that eradicating poverty cannot be achieved without access to energy. So increased energy will be crucial to fostering social development.
In this new environment, Canada is particularly fortunate, with an opportunity to assure prosperity and security for its citizens for generations to come, and to help alleviate energy scarcity internationally.
Behind the commodities supercycle of course is the rising demand and economic growth of developing economies. The next decade will likely be the first since the Industrial Revolution in which “emerging economies” will add more to global growth than all the developed countries - combined.
Within this vortex of change and challenge lies great uncertainty - and tremendous opportunity. Because the one thing that we can count on is that growing economies will need resources.
As (Brazil, Russia, India and China) the BRIC countries - as well as many nations in Asia, Africa and Eastern Europe - play a larger and larger role in the global economy, the demand for commodities will increase - dramatically. And the demand for energy will rise right along side, with 90% of that growth coming from non-OECD countries.
China alone will consume almost 70% more energy than the United States by 2035 - and energy consumption in India, Indonesia, Brazil and the Middle East is expected to grow even faster.
Driving energy demand will be a rising middle class. Both the World Bank and the OECD project that continued rapid growth in emerging markets will give rise to an unprecedented expansion of the global middle class - from less than 2 billion people in 2009, to about 5 billion in 2030.
And with a rising middle class comes increasing urbanization. McKinsey & Company reports that China is urbanizing 100 times faster than the United Kingdom did in the 19th century. By 2025, China will have an urban population of almost one billion people, requiring five million new buildings, including an astonishing 30,000 skyscrapers.
India, too, is urbanizing. In the next five years alone, the Indian government projects more than US $1 trillion in infrastructure spending.
So demand for commodities? About to explode.
Canada has the third largest oil reserves in the world, more than Iran, Kuwait or the United Arab Emirates. We are the third largest producer of natural gas, the second largest producer of uranium and the third largest producer of hydroelectricity.
We are also developing other renewables like wind, tidal and biomass.
Add to that liquefied natural gas. Based on potential and proposed projects on our west coast, Canada could export the equivalent of 66 million tonnes of LNG per year before the decade is out.
On a recent trip to India, the companies I met with were interested in more than just oil. They want to invest in liquefied natural gas in a big way.
There is huge interest for LNG from both Canada’s east coast, as I learned in recent visits to Japan and Korea. Our goal is to make Canada the platform for North American liquefied natural gas exports, exporting Canadian and American LNG to foreign markets. In Asia right now, LNG is trading at around $17 on the spot market. In North America it has hovered around $3.50, creating an enormous arbitrage opportunity.
So where’s the opportunity for investors? Well, Canada has embarked on an unprecedented build-out of resource projects. Over the next 10 years, more than 600 major resource projects, worth as much as $650 billion, are underway or planned. Few countries in the world are bringing on natural resource projects of this scale or at this pace - creating a truly once-in-a-generation opportunity for investors.
Let me circle back to one aspect of that opportunity - oil. According to the International Energy Agency, in 2035, fossil fuels (oil, natural gas and coal) will still be required to meet three-quarters of global energy demand. So even as the United States and Canada - and other countries - work hard to develop renewables, fossil fuels will continue to play a critical role for decades to come. The demand for oil alone is set to rise 14%, from 87 million barrels a day in 2011 to 100 million barrels a day in 2035.
Production of natural gas is set to boom around the world, with major discoveries of shale from the Marcellus field in the U.S. to the Baltic Basin in Poland. All of this is creating enormous opportunities for investors.
But on the oil side, things are very different. About 80% of the world’s oil reserves are controlled either by national governments or by state-owned oil companies. That leaves only 20% of what might be called “free enterprise oil” - fully accessible to private development. Of that 20%, Canada holds about 60% in its oil sands.
So while the oil sands might not be the only game in town, they are the biggest. And, for American investors, they are certainly the closest.
With new technology, the oil sands reserves could grow to some 315 billion barrels - surpassing Saudi Arabia and Venezuela and making Canada’s reserves the largest in the world.
The implications for America are attractive investment opportunities to develop a significant global energy resource. Already close to 1,000 American companies, large and small, from almost every state, are supplying goods and services to the oil sands. That means jobs in the U.S. As the oil sands are developed and new pipelines constructed, it could add an average of as much as $15 billion per year to American GDP through to 2035 and support 168,000 jobs.
Beyond jobs and growth, Canadian oil can reduce American reliance on unfriendly and potentially unreliable countries, so there is a critical national security dimension, at least in the intermediate term, and possibly longer.
Canadian production is expected to double to six million barrels per day by 2035 and our natural gas production is expected to rise, from 14 billion cubic feet per day to 18 billion cubic feet by 2035.
The strategic value of Canada as a reliable and friendly source of oil and gas to the United States and the world cannot be understated, particularly in light of continuing instability in the Middle East and North Africa.
Therefore, we strongly support the construction of the Keystone XL pipeline that would take Canadian liquified bitumen to the United States, enhance US national security and generate jobs and economic growth in both our countries.
Canada knows that we’re on the brink of a fundamentally altered global supply-demand paradigm. But we also know that our opportunity will not be realized automatically.
We need to organize ourselves for success and implement the policies that will let us achieve it.
And that's exactly what we're doing.
Recently, for example, we introduced a sweeping new approach to how we regulate resource development. We call it Responsible Resource Development and it focuses on important projects and reduces duplication. The result is a predictable, transparent, timely and robust regulatory environment.
Getting the right regulatory regime in place was critical. But it isn’t enough. Canada and the United States need to develop the infrastructure - including pipelines - that will allow us to reach those dynamic global economies.
That is why there are plans to expand ports and liquification plants on the west coast and plans for Atlantic Canada as well. It is also why we need to build pipelines west, south and east - and the idea of a pipeline going east is something that our government strongly supports - and is an idea that has broad support in Canada.
Now, let me be clear. The Canada-U.S. energy relationship will continue to be an important sinew of our bilateral relationship.
Canada is the largest energy supplier to the US, 2.2 million barrels of crude a day, larger than the next two countries combined. We are knit together by a vast, interlocking network of pipelines and transmission lines.
But as America unlocks vast new supplies of domestic oil and gas Canada must broaden its market reach to match its resource potential. Industry and our government have collectively made it a strategic priority.
Canada holds great promise as a destination for capital and a source of resources for a resource hungry world. For America it is an opportunity to work with a neighbour it knows and a friend it can trust.
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