If Wayne Gretzky were asked how to position Canada’s energy trade relations for the future, he would likely say, “Skate to where the puck is going to be, not where it’s been.”

Following that advice leads us to Asia, which will account for the vast majority of growth in energy demand over the next quarter century, and the diversification of Canadian energy exports away from exclusive reliance on the U.S. market.

The United States is rightly concerned with having a reliable supplier of energy at the lowest cost possible. Canada, a large net energy exporter, wants a stable export market for our growing reserves, but also one that will pay as much as we can charge. Our complete dependence on U.S. markets won’t be enough, given projected declines in U.S. import demand for oil and gas, U.S. public resistance to importing Canadian oil and large price discounts for Canadian oil in the United States. Meanwhile, countries outside those in the Organization of Economic Co-operation and Development – generally considered our economic peers – are expected to generate 90% of global energy growth over the next 25 years, with China alone expected to consume 70% more energy than the United States by 2035. These countries will pay far more for Canadian oil than our American neighbours.

Through diversification, Canada can align its abundant energy resources with rapidly growing demand in Asia, provided we have the energy transport infrastructure to reach these markets and we recognize that other countries are anxious to supply Asian demands. There is a national interest in pursuing a broadbased Canada-Asia energy strategy. The full potential of the Canada-Asia energy relationship is unlikely to be realized on an ad hoc, project-byproject, basis.

In fall 2011, the Asia Pacific Foundation and the Canada West Foundation established a task force to explore how to build the Canada-Asia energy relationship. The task force members, with expertise in the energy industry, business, government policy, environmental protection and aboriginal affairs, identified four major elements to anchor such a Canada-Asia energy framework:

  • Think big on diversification: Canada should diversify its energy relationship toward Asia, using energy trade as a beachhead to a broader economic relationship. Energy trade should include the full range of our resources and expertise, including renewable and clean technologies. We also need to diversify through innovation, helping Canadian producers to move up the value-added chain to build Canada’s status as an energy powerhouse. A network of world-class innovation institutes would further this goal.
  • Strong leadership: Canada’s biggest risk may be complacency. An expanded Canada-Asia energy relationship can benefit Canadians broadly, but involves many jurisdictions, private-sector interests, civil society groups and First Nations communities whose interests and perspectives may differ. Leadership by federal and provincial governments, the private sector, First Nations governments and environmental groups must embody the inherent national interest and encompass a spirit of consultation, inclusion and co-operation.
  • Advisory council: To fast track the deepening of our relationship with key Asian countries, a Canada Council on Asia, comprised of senior leaders in the public and private sectors from Canada and Asia, should be established. Reflecting the national interest in the expanding this relationship, Canada’s prime minister would be the ideal chair.
  • Develop the necessary energy export infrastructure: Governments and industry need to canvas all infrastructure options, and commit to developing energy transport infrastructure in a way that balances the interests and concerns of affected stakeholders, and in a time frame that reflects the urgency of the competitive opportunity. This could include a public energy transportation corridor constituted by government, regulated as a kind of public utility, and operated by the private sector.

The alignment of energy trade interests between Canada and Asian countries is compelling. However, the opportunity is not open-ended; the competition to meet Asia’s energy demands is fierce and there are first-mover advantages. Canada’s starting point should be establishing an over-arching energy framework that assembles the diverse interests and perspectives across the country around a common purpose.

Published in the National Post on June 6, 2012

Kevin G. Lynch

The Honourable Kevin G. Lynch, P.C., O.C., PH.D, LL.D was appointed Vice Chair of BMO Financial Group in early 2010.

Dr. Lynch began his career in 1976 as an economist with the Bank of Canada. Throughout a storied career, Dr. Lynch served as Deputy Minister of Industry and Deputy Minister of Finance. He then served as Executive Director, the International Monetary Fund until early 2006, when he was appointed the 20thClerk of the Privy Council, Secretary to the Cabinet and Head of the Public Service of Canada. In July 2009, after a long and distinguished career, Dr. Lynch retired from the Government of Canada.

Dr. Lynch earned his BA from Mount Allison University, his Masters in Economics from the University of Manchester and a doctorate in Economics from McMaster University. Dr. Lynch also holds honourary degrees from seven Canadian universities.

He is also Chair of the Board of Governors of the University of Waterloo, and serves on several other boards, including those of the Gairdner Foundation, the Perimeter Institute, U.K. Ditchley, the Learning Partnership, the Samara Foundation, the Shannon School of Business and the Accounting Standards Oversight Council.

The Honourable Kevin G. Lynch was made a Member of the Queen’s Privy Council for Canada in 2009, and an Officer of the Order of Canada in 2011. He has been awarded the Distinguished Alumni Award from McMaster University and the Queen’s Golden Jubilee Medal.

Kathleen Sendall

Kathleen Sendall is Executive in Residence and co-chair for the Asia Pacific Foundation-Canada West Foundation task force on the Asia-Canada energy relationship.

Ms. Sendall is a Director of CGG Veritas, a Paris-based international geophysical company that serves customers in the oil and gas industry. She chairs the Health Safety and Environment, Sustainability and Corporate Social Responsibility Committee and is a member of the Technology Committee. In addition, Ms. Sendall is Director and Vice Chair of Alberta Innovates – Energy and Environment Solutions, a provincial corporation that supports provincial research and innovation activities. She also chairs the Advisory Council to the Alberta Minister of Energy, and has served in various other advisory capacities to both federal and provincial governments in the areas of climate change, carbon capture and storage, environmental legislation and Arctic foreign policy.

Ms. Sendall was previously the Senior Vice-President of Petro-Canada’s North American Natural Gas Business Unit and was responsible for the company’s conventional oil and gas production and exploration in North America.

By: Kevin Lynch and Kathy Sendall