|
T.J. Hearn, chairman, president and chief executive officer, Imperial Oil
Limited, addresses the Calgary Chamber of Commerce.
| | Calgary, Alberta |
October 6, 2005
| "Why a strong Alberta means a strong Canada"
Good afternoon ladies and gentlemen and thank you, Bruce, for the introduction
and welcome.
It's a great pleasure to be here. These are
exciting times for both Alberta and Imperial as we celebrate our 100th and
125th anniversaries respectively.
Many of us are new to
Calgary, but that's not to say Imperial is new to the city or Alberta. Far
from it. We have deep roots in this province.
We've been
active in Alberta since the early 1900s. We were here for the first Turner
Valley "oil boom" in 1914. We were among the first to actively explore for oil
and gas in the West in the 1920s and 1930s. We made our landmark discovery of
crude oil at Leduc in 1947. Since the 1960s, we've helped to pioneer the
development of oil sands in this province. And today Alberta is the centre of
much of our business, accounting for about half of our revenues and
three-quarters of our capital expenditures; so, in one sense, we've "come
home."
With the relocation, we are now headquartered at
the heart of Canada's energy business, and at the centre of one of the most
vibrant economies in the world. I've learned first-hand that Calgary is a
welcoming city. And on that note, let me comment on how appreciative we are of
the warm welcome and outreach by Calgarians. I want to thank all of you who've
gone out of your way to make us feel at home.
Today I would
like to discuss two Alberta-related topics:
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first, some perspectives on the world's increasing need for energy and how
that plays to Alberta's and Canada's strengths, and
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second, by discussing how a strong Alberta, supported by a strong oil and gas
industry, means a strong Canada.
First, the world's increasing need for energy is clearly a major economic
driver for Alberta. Each year the world's population is growing almost 1 per
cent annually. Today's population is about 6.3 billion and it will increase to
about 8 billion people by 2030.
At the same time, the world's
economies have been growing at about 2.8 percent GDP since the early
1980s. And as growth continues on that trend, especially strong in the
developing world, energy demand will increase by 50 percent by 2030. With 80
percent of the world's population in developing areas, more and more people
will expect a higher standard of living. Improving living standards in the
developing world is not only inevitable — it is also a moral and human
imperative. People in these areas have legitimate desires for a better life,
and to fulfill their aspirations, they will need added energy.
So, what do these numbers signify?
Very simply, increasing
population and economic growth lead directly to increased energy use. The
ratio of energy use has been moderated by improvements in energy efficiency
over the last 25 years, but the fact is the world cannot sustain a growing
population and economic expansion along with rising standards of living,
without more energy use.
And that's what is projected.
Global consumption of all forms of energy will rise by about 50 percent over
the next 25 years. Oil and gas provide about 60 percent of the world's energy
today, and they're projected to maintain this share in the future. Clearly,
all economic forms of energy will be required. However, fossil fuels will
remain the backbone of the energy supply system for decades to come.
This energy outlook is good news for Alberta and Canada.
When
it comes to oil and gas, Canada is the only G-7 country with the resource base
to support a significant growth in production. And much of Canada's energy
potential lies here in Alberta, which produces over 75 percent of the
country's oil and gas. We also have a world-class resource in the oil sands,
one of the largest undeveloped oil resources in the world – 1.7 trillion
barrels of bitumen in place.
So, the prospects for Alberta's
energy future are bright but not without challenges. Looking to the future,
global oil and gas markets will increasingly turn to Alberta and Canada as a
secure and accessible source of energy. As part of this outlook, our company
will attempt to continue to contribute and grow, whether at Cold Lake,
Syncrude, Kearl or Mackenzie Gas.
Given this future, one
would think that Canadians everywhere would feel proud of Alberta's current
prosperity and promising future. But unfortunately, that's not the case for
everyone.
In the past few months, there have been
discussions, in the national media, about Alberta's prosperity, and some
postulation about how this could be bad for the country.
As a
Canadian who's spent his career living in different parts of Canada and
working with a national company, I'd like to add some comments about Alberta's
current financial standing.
It's my view each province brings
unique gifts to Canada's strength and character as a country. And among the
many gifts Alberta brings to this country is a source of innovative thinking.
It's an example of free enterprise at work. And it's a place where a can-do
attitude has enabled it to weather one of the most challenging recessions of
modern times, and thus adapt and emerge even stronger.
As we
all know, Alberta has not always had the luxury of budget surpluses. It wasn't
very long ago that the province was recovering from crude prices in the low to
mid teens. The government made a lot of tough and difficult decisions to
balance budgets and pay down debts. Sacrifices were made that others have
either forgotten or didn't know about.
And so in my remaining
time, I'd like to share some views on why a strong and prosperous Alberta
means a stronger, more prosperous Canada.
Let me begin by
saying I understand some of the impetus for the increased anxiety in other
parts of the country. Much of the discussion so far has focused on the
revenues being created, and the potential for this to change the quality of
life dramatically — and in so doing, differentiate Albertans from the rest of
the country.
At the same time, I would argue that this
concern is misplaced.
The revenues that are being generated
in the province are just one small piece of the overall benefits that the
Alberta oil and gas industry contributes to our country. I might also quickly
add that the current higher price structure is far from assured; as you well
know, our history is one of highly cyclical prices.
The value
of the petroleum industry comes in many forms. It provides resources that are
turned into high quality products, used by Canadians every day, in every part
of our lives. In transportation fuels, for heating and cooling, to medical
supplies, clothing, agriculture, paved roads, automobile parts, electrical
wiring, packaged products, paints, computers, and on and on — virtually
everywhere in our daily lives — all from a petroleum-petrochemical base.
Another benefit is the contribution to Canada's economic prosperity.
Consider the growth in our country's trade with our neighbor to the south.
The value of oil and gas exports to the U.S. markets has surged in recent
years. Of Canada's $26 billion record trade surplus so far this year, net
exports of energy products account for three-quarters of the surplus.
Clearly, the petroleum energy trading relationship with the U.S. is a vital
engine of our economy and a major contributor to Canadian prosperity and
living standards. Additionally, as reported last week, the Canadian Energy
Research Institute forecasted that oil sands development would create a $1
trillion economic spin-off to Canada between 2000 and 2020. Also, through a
combination of personal, corporate and indirect taxes, $50 billion would be
sent to Ottawa during the same timeframe.
Next is the level
of capital investment that has, and is being made, in Canada by the oil and
gas industry.
In 2005, forecasted investments are between $30
billion and $35 billion. This represents over one-quarter of all private
sector capital spending plans for this year. That's massive. No other industry
is putting this level of capital into the country.
Also
consider the fact that roughly half of the goods and services for Alberta's
petroleum industry is sourced in other parts of the country. That includes a
significant demand for manufacturing goods, such as steel, which is largely
produced in Ontario and Saskatchewan.
And what about the
impact on jobs?
Oil and gas investments are creating jobs in
many different sectors, and those are being filled not just by Albertans but
by people from every part of Canada. Every two jobs created in Alberta means
an additional job elsewhere in our country.
The strong
economy in this province also acts as a magnet that attracts job seekers from
other provinces. This is a good thing for the country. The Canada we know
today was built on labor mobility. Immigrants opened up the West. Declining
workforce needs on farms provided the labor needed for our industrial economy.
And Alberta's labor needs today hold the promise for high quality employment
for residents of other provinces willing to relocate. A relocation I might add
that many in this room have chosen to make.
A strong and
growing oil and gas industry benefits not only the pockets of Albertans, but
shareholders and investors from across the country. Each year the industry
pays out $9 billion in dividends and distributions. The lion's share of this
goes to Canadians outside of Alberta.
And there are
additional benefits to the rest of Canada in many other ways.
Through tax dollars, Alberta puts in $9 billion to $10 billion more into
equalization than it receives — about 50 percent more per capita versus the
next largest donor, Ontario. These are dollars that support the building of
roads, the delivery of education and the provision of hospital services — the
kinds of services that Canadians across the country count on daily for quality
of life.
I would also add that if equalization is not
working, that is not of Alberta's doing. As the federal government's recently
formed task force on equalization re-examines this question, I would strongly
encourage them to not just look at revenue sharing but other important
impacts, such as labor mobility. Another issue, which the Atlantic Institute
for Market Studies has argued, is the case that equalization's clawback
formula acts as a disincentive for have-not provinces to better themselves as
any revenue growth is returned to Ottawa.
Another benefit: as
a growing energy leader, this province has developed industry know-how and
excellent research capabilities that will be essential for the development of
new energy opportunities, across Canada, and abroad.
These
are only some examples, I know you could add more. As Alberta's energy economy
grows, so will the benefits for all of Canada.
Today, while
Canada and Alberta face many issues, they also have a significant opportunity
— that is, of realizing the full value of our energy resources, by developing
them during a period of strong and critical demand, both in the world in
general, and in North America in particular.
Seizing this
opportunity will benefit all Canadians, in all regions, at every social and
economic level. As energy and other natural resource-based industries have
been a major engine of economic growth and prosperity in the past, they can
also drive growth, increase prosperity and well-being for the future.
It's important that more Canadians and more of our leaders and commentators
realize these benefits, and, additionally, that Alberta's reserve endowment is
not a threat to Canada — just the opposite.
In sharing
this perspective, I know I'm speaking, by and large, to the converted. As
business leaders, you understand the benefits of a strong oil and gas industry
to our country's prosperity.
But do the rest of Canadians?
Unfortunately, I think the answer is primarily "no."
Even now, with higher prices in the public's awareness, most Canadians don't
fully comprehend the significance and criticality of the oil and gas industry.
Or the economic importance of a strong Alberta to a strong Canada.
So, what can we do to close the understanding gap?
The answer
starts with greater efforts to build awareness and understanding among
Canadians.
As business leaders, we can help promote an
understanding of Alberta's contributions that benefits the future of Canada.
As former Premier Peter Lougheed has suggested in the past, we can take a
pro-Canadian leadership role in promoting this awareness.
And
in exercising this leadership, I have some suggestions that we might consider
as business leaders.
First, we need to promote a better
understanding of our Canadian and world energy realities.
At
Imperial, we actively communicate the energy outlook as part of our ongoing
communications. Likewise, as a business community, we can help our
counterparts in other parts of the country understand the energy realities in
Canada and globally — and how Alberta plays a critical part of the energy
solution.
Second, we should encourage the efforts of our
industry associations to promote a greater understanding of Alberta's
contributions to the national economy.
And third, we can do
our share as individual leaders to communicate the benefits of a strong
Alberta to our contacts across the country, in our meetings with government
decision-makers, with municipal leaders, with customers, and through our other
daily contacts.
Clearly this is not an all-encompassing
blueprint, but it's a start.
As William Thorsell, past editor
of the Globe and Mail and CEO of the Royal Ontario Museum, said recently:
"It's time Canadians started realizing this province's good fortune should
make our country feel tall in the saddle."
To that, I'd
like to add: Let's help Canadians do just that.
Thank you.
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