Canada blew it.
The commodity boom was a once-in-a-lifetime opportunity to reap a tremendous amount of investment. Canada is incredibly rich in resources and during the boom all the low-hanging fruit was harvested.
But the boom was a chance to massively expand the productive infrastructure of the country and every level of government failed on almost every front.
There were three main failures:
1. The oilsands/Keystone XL
Yes, production was scaled up massively but almost nothing was developed in terms of refining or export capacity. The US is the sole export market for Alberta oil and it was sold at average discount of $20/barrel over the past three years. Part of the failure is that Canada relies on a single export market because it couldn’t build pipelines/export capacity to the Western coast. The other part was the failure to build refineries.
At this point, no one knows when Keystone XL will be approved/rejected but the delay is a failure of Canadian politicians to coerce the US and the government has nothing in the works aside from a smaller-scale plan to pipe oil all the way to East coast.
2. The Ring of Fire
In 2007 an estimated $60-$120 billion deposit of chromite, base metals and other minerals was discovered in the Hudson Bay lowlands. It was touted as late as last year by Canada’s Finance Minister as an economic equivalent to the oilsands.
The government failed to forge any deals to build any roads, railways or infrastructure to access the area. The CEO of Cliffs Natural Resources said today he has “zero hope” development will take place any time soon. “I don’t believe under my watch, and I plan to stay [alive] for the next 50 years… that the Ring of Fire will be developed,” he said.
3. LNG
The liquified natural gas export race is a global competition and Canada started out with an enormous advantage because until last May the US had banned exports. In 2013, Petronas said it would spend $36 billion to build a pipeline and export plant. It was one of many projects that could have easily totaled $100 billion.
Skip ahead and Shamsul Abbas, Petronas chief executive, said in September that Canada was “already 40 years behind in the game” and that its biggest buyer of gas – the US – was now not only its biggest competitor but also “leading Canada by a far stretch”.
What it means for the Canadian dollar
The good news is that Canada is so tremendously resource rich that it can survive abject mismanagement so long as price stay near these levels. But in the bigger picture, it’s an indignation of the business climate in Canada and the inability of all levels of government to “get things done”.
