Dominic Barton, incoming Chair of global mining giant Rio Tinto, former Managing Partner at McKinsey, and (most recently) former Canadian Ambassador to China, sat down with the Canadian Gas Association’s (CGA) President and CEO, Timothy M. Egan, to discuss the LNG opportunity for Canada in China and the broader Asian market. A longer interview was part of CGA’s Canadian Gas Dialogues event, held in Calgary on March 30th. The following builds on that exchange.
Timothy M. Egan (TME): Mr. Barton, you contacted CGA some months ago further to a meeting you had with Beijing Gas about the Canadian LNG opportunity. Can you tell us the back story?
Dominic Barton (DB): As you know there were a whole number of different things we were focused on when I was Ambassador, including the two Michaels file and the broader human rights agenda, but trade and investment were always a priority — we were looking for signature areas where the Canada-China relationship could make a big difference to both countries. Energy was seen as key, particularly liquefied natural gas (LNG). LNG is central to China’s energy transition plan as the country looks to move away from coal. Canada had not been part of this LNG conversation and Li Yalan, Chair of Beijing Gas, wanted to discuss the reasons why. She noted China wanted reliable suppliers who can deliver at scale and thought Canada could.
TME: Were you surprised by the contact by Li Yalan?
DM: Honestly, I was. The relationship was in the doghouse at the time, so the proactive outreach surprised me. But the Chinese are always looking to diversify supply. As I mentioned earlier, they want to diversify from coal to meet their climate targets while meeting their energy needs but want different suppliers for all their energy needs, including LNG. They recently signed a big contract with Russia which we can discuss but they would not want to be solely dependent on Russia. I asked, “what if Canada could meet 15 per cent of China’s LNG needs?” just to throw out a number, and Madame Li replied, “it is not up to us, it is up to Canada to demonstrate it can deliver.” I got a sense that there was a great deal of respect for Canada, but there was a question of whether we could be depended upon to meet the markets’ needs.
TME: You’ve worked across Asia in your career — do you think this Chinese interest in Canadian LNG is shared across the region?
DM: I do. Remember, this is the fastest-growing region in the world. By 2030, two-thirds of the world’s middle-class will be in Asia. Think about the scope and scale of the energy needs of this population in so many countries — Malaysia, Indonesia, India, others — for industry, transportation, residential use, and more. The demand will be extraordinary. And the region wants to transition to using more natural gas.
TME: Li Yalan of Beijing Gas is the incoming President of the International Gas Union — the global industry association. She knows the gas world well, and that we’ve been talking a big LNG story in Canada for a long time but have delivered little. Can you comment on how the Chinese and Asian markets, in general, react to that reality?
DB: Again, the overall sense I get is that there is great respect for Canada, for the quality of life we have achieved, for the resource wealth we have managed so well, and more. But there is a real perception that we can’t build things. We had a series of events at the Embassy about Canada and the potential to build trade relationships and I remember how people would just shake their heads at the challenges we seem to have. On one occasion I remember one participant was getting apoplectic: “why can’t you build things?” we would explain the political and jurisdictional and environmental challenges, but people would say “how can it be that complicated? It can happen elsewhere.” And the point was made that if we couldn’t supply the needs people had, they would go elsewhere because they were determined to meet the energy needs of their people.
TME: What response would you get when you communicated the frustration to Ottawa?
DB: I think people in Ottawa were a bit surprised by how much interest there was.
What I was focused on was communicating that our exports could serve to help effect the kind of energy transition that would deliver real results and quickly for countries like China. There was no pushback from Ottawa on my argument, but as I say there was a surprise in the level of interest from the Chinese.
TME: Do you think Ottawa has worked itself into a jam because it is taking so long on these projects, and are we missing an opportunity?
DB: I think the opportunity remains enormous for Canada. Russia’s invasion of Ukraine only amplifies the value proposition of Canada and getting resources from Canada. The world wants cleaner resources from reliable suppliers and Canada should be able to deliver. We need to not double down but triple down on delivery. Sometimes I think we fall victim to a “Dudley do-right” kind of thinking where we demand unrealistic performance levels — this is when the levels we already meet exceed those of most of our competitors. And we lose market opportunities because of it — and the world loses because they aren’t getting Canadian products.
“The world wants cleaner resources from reliable suppliers and Canada should be able to deliver.”
– Dominic Barton, former Canadian Ambassador to China
TME: You referenced the Russian attack on Ukraine. This has changed energy geopolitics. And you noted earlier, on the eve of the attack China and Russia signed a major LNG deal. Despite China’s interest in diversity, couldn’t this signal an exclusive arrangement going forward?
DB: I don’t think so. Yes, China and Russia negotiated a significant LNG contract, and they are aligned in various ways at present. But this newfound alignment shouldn’t make people forget that historically it has not always been so, and there are significant underlying tensions. I doubt either party wants to get too embedded with the other. So, I don’t see any exclusive energy supply arrangement here.
TME: In your new role at Rio Tinto, Australia will be a big part of your work. Australia is another resource-rich country like Canada and seems to have gotten things right so far on LNG. What do you think we can learn from them?
DB: I don’t pretend to be an expert on this, but at a high level what I have observed is ambitious plans were laid out early, and then there was an effort to show how broad the benefit would be and to communicate that benefit. They have many of the same challenges in Australia as we have in Canada, but it seems to me there was an effort to say “hey, let’s not think about carving up the pie yet, let’s think about the size of the pie first.” You get a sense there was cooperation between the government, the industry, and the Aboriginal community and there was recognition that this would be very important for Australia’s future, so we’d better figure it out.
TME: Last question. Energy issues are at the very centre of geopolitics today. What should Canada do to help our allies?
DB: Canada should be extremely important in this very tough period. The world needs more energy from reliable partners, and we can and should step up. We need to find that lever to crank up what we supply. Our energy resources can address geopolitical concerns, global growth needs, and inflationary pressures worldwide (that worry me a great deal). Our clean resources can help with the global transition to cleaner energy, and we should realize the opportunity. It is not about taking advantage of a horrible situation but about making things better for people by giving them access to the energy they need.