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Canada entering a transition 63% of corporate leaders see change in policy direction, away from mining, cars, oil, to info tech, renewable energy, services GARY PARK For Petroleum News
Interviews with 153 Canadian corporate leaders have pinpointed the quandary of the industrial world as it grapples with how far and how fast the economy can act to wean itself off carbon-producing resources.
In its 39th quarterly survey, 63 percent of the Gandalph Group’s so-called C-Suite - including a startling 64 percent in Alberta and 91 percent in the industrial heartland of Ontario - agreed that the Canadian economy is too closely tied to Alberta’s economy and its natural resources.
They said policy directions must change over the next decade, with the balance tilting to information technology, renewable energy and services and away from mining, automotive and oil.
David MacDonald, chief executive officer of Softchoice Corp., a Toronto-based technology services firm, said the need to shift is gaining momentum in corporate and investment circles, reflected by a record spurt in initial share offerings outside the energy sector.
He said there is clear evidence that equity markets are “starting to focus on non-resource-based companies.”
MacDonald said that even the Canadian government shares that thinking, reinforced by Prime Minister Stephen Harper’s surprising decision recently to join a Group of Seven declaration that the world should abandon fossil fuels by 2100.
But he said that decision is suspect “given the continuous focus by the government on how to export more oil.”
Still call for pipelines, refineries The dilemma among executives who participated in the survey was evident with more than half endorsing government help for energy pipelines, mining and oil refinery construction, which they believe will continue to expand.
However, Chris Dobrzanski, chief economist at the Vancouver City Savings Credit Union, said the executives appear to realize that energy alternatives to the oil sector are becoming more viable, with clean energy projects now reaching a point where they are able to make a dent in traditional power sources.
He noted that investment in renewable energy projects is expanding beyond venture capitalists to big players such as Suncor Energy, Enbridge and TransAlta, who have steadily expanding clean energy portfolios.
Dobrzanski said the executives are accepting that governments, acknowledging the imperfections of the traditional marketplace, need to play a role in advancing the lower carbon environment through offering incentives to cleaner technology, or by putting a price on carbon.
Role for natural resources Francis McGuire, chief executive officer of the Major Drilling Group International, a service firm that works closely with the mining industry, was not prepared to accept that the oil and mining sectors will disappear, arguing natural resources will always play a crucial role in the economy.
He had strong support from 57 percent of the C-Suite executives, who said oil will be oil will be a more important factor in 10 years than it is now.
McGuire said Canada’s objective should be to apply new technologies to the resource sector, if it hopes to diversify its economic base.
Willy Kruh, global chair of consumer markets at KPMG, the global professional services company, said the challenges facing Alberta’s petroleum industry will also force that province to act on its long commitment to diversification.
He said it is “vital” for Alberta to understand the global pressure to change and “truly diversifies.”
Has oil peaked? David Herle and Alex Swann, Gandalph executives, said the C-Suite executives believe that United States-China climate talks will force Canada to do more to reduce its reliance on fossil fuels.
They said most outside the petroleum industry think “oil has peaked in importance to the Canadian economy and will either remain the same or diminish in importance in the next 10 years.”
Herle and Swann said the “overwhelming consensus” in the C-Suite is that renewable energy and natural gas will play a growing role over the next 10 years as government policies give priority to a less carbon-intensive economy.
Despite the lack of enthusiasm for government support of industries, they said that almost 80 percent of the C-Suite endorse subsidies to develop clean energy technology.
On the election of the left-wing New Democratic Party government in Alberta, 70 percent of the C-Suite believe the new administration will hurt investment in the province, while 61 percent say the NDP will make it more difficult to gain approval for oil pipelines in Canada and the United States.
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