World primary energy demand in the Reference Scenario: an unsustainable path

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2 The context Soaring energy prices to mid-2008, followed by a drop what will it mean for demand? How will the financial crisis & economic slowdown affect energy demand & investment? Will economic worries divert attention from strategic energy security & environmental challenges? Are we setting ourselves up for a supply crunch once the economy is back on its feet? Will negotiators at COP-15 in Copenhagen in 2009 have the political support needed to succeed?

3 Mtoe World primary energy demand in the Reference Scenario: an unsustainable path Other renewables Hydro Nuclear Biomass Gas Coal Oil World energy demand expands by 45% between now and 2030 an average rate of increase of 1.6% per year with coal accounting for more than a third of the overall rise

4 Mtoe The continuing importance of coal in world primary energy demand Increase in primary demand, % % = average annual rate of growth 100% Shares of incremental energy demand Reference Scenario, Coal All other fuels % % % 2.6% 40% % 20% % Coal Oil Gas Renewables Nuclear 0% Non-OECD OECD Demand for coal has been growing faster than any other energy source & is projected to account for more than a third of incremental global energy demand to 2030

5 Change in oil demand by region in the Reference Scenario, OECD Pacific OECD Europe OECD North America Africa E. Europe/Eurasia Latin America Other Asia India Middle East China mb/d All of the growth in oil demand comes from non-oecd, with China contributing 43%, the Middle East & India each about 20% & other emerging Asian economies most of the rest

6 Non-OECD OECD World Share of renewables in electricity generation in the Reference Scenario Hydro Other (wind, solar, etc) % 5% 10% 15% 20% 25% 30% Soon after 2010, renewables become the 2 nd -largest source of electricity behind coal, thanks to government support, prospects for higher fossil-fuel prices & declining investment costs

7 Oil-import dependence in the Reference Scenario OECD North America 2007 United States China Other Asia OECD Europe OECD Pacific European Union India 20% 30% 40% 50% 60% 70% 80% 90% 100% 2030 OECD Europe & Asia become even more dependent on oil imports, but import dependence drops in North America & OECD Pacific

8 Energy subsidies in non-oecd countries, 2007 Iran Russia China Saudi Arabia India Venezuela Indonesia Egypt Ukraine Argentina South Africa Kazakhstan Pakistan Malaysia Thailand Nigeria Chinese Taipei Vietnam Brazil Oil Gas Coal Electricity Billion dollars Energy subsidies in the 20 largest non-oecd countries hit $310 billion in 2007 creating, in many cases, an unsustainable economic burden & exacerbating environmental effects

9 Cumulative energy supply investment in the Reference Scenario, Coal 3% $0.7 trillion Biofuels <1% $0.2 trillion Power 52% $13.6 trillion Oil 24% $6.3 trillion Gas 21% $5.5 trillion Transmission & distribution 50% Power generation 50% Shipping 4% Refining 16% Exploration and development 80% Transmission & distribution 31% LNG chain 8% Exploration & development 61% Shipping & ports 9% Mining 91% Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers


11 mb/d World oil production by OPEC/non-OPEC in the Reference Scenario % OPEC - other % OPEC - Middle East % 46% 44% 42% Non-OPEC - nonconventional Non-OPEC - conventional OPEC share 20 40% % Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion s share of oil market growth as conventional non-opec production declines

12 mb/d World oil production by source in the Reference Scenario Natural gas liquids Non-conventional oil Crude oil - yet to be developed (inc. EOR) or found Crude oil - currently producing fields mb/d of gross capacity needs to be installed between 2007 & 2030 six times the current capacity of Saudi Arabia to meet demand growth & offset decline

13 Average observed oilfield decline rates 16% 14% 12% OPEC Non-OPEC 10% 8% 6% 4% 2% 0% Pre-1970s 1970s 1980s 1990s Year production started The production-weighted average decline rate worldwide is projected to rise from 6.7% in 2007 to 8.6% in 2030 as productions shifts to smaller oilfields, which tend to decline faster

14 mb/d Bcm A sea change: world oil & gas production by company type in the Reference Scenario 120 Oil Gas NOCs 0 Private companies Almost 80% of the projected increase in output of both oil & gas comes from national companies on the assumption that investment is forthcoming

15 Long-term oil-supply cost curve The total recoverable oil-resource base is estimated at 9 trillion barrels (including 2.5 trillion barrel of GTL/CTL) of which we have so far produced 1.1 Tb

16 Post-2012 climate-policy scenarios OECD/IEA OECD/IEA

17 Gigatonnes Energy-related CO 2 emissions in the Reference Scenario International marine bunkers and aviation Non-OECD - gas Non-OECD - oil Non-OECD - coal OECD - gas OECD - oil OECD - coal 97% of the projected increase in emissions between now & 2030 comes from non-oecd countries three-quarters from China, India & the Middle East alone

18 Gigatonnes World energy-related CO 2 emissions in 2030 by scenario OECD Non-OECD World World Reference Scenario 550 Policy Scenario 450 Policy Scenario OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero

19 Copenhagen: a plausible post-2012 global climate-change policy regime The Policy Scenario OECD+ Other Major Economies Other Countries Power generation Cap and trade National Cap and trade policies and measures Industry Transport International sectoral approaches International sectoral approaches National policies and measures Buildings National policies and measures A combination of policy mechanisms reflecting nations varied circumstances & current negotiating positions is a realistic outcome at the Copenhagen COP at end-2009

20 Gigatonnes Reductions in energy-related CO 2 emissions in the climate-policy scenarios Policy Scenario 450 Policy Scenario 9% 14% 23% Nuclear CCS Renewables & biofuels Energy efficiency 30 54% Reference Scenario 550 Policy Scenario 450 Policy Scenario While technological progress is needed to achieve some emissions reductions, efficiency gains and deployment of existing low-carbon energy accounts for most of the savings

21 Total power generation capacity today and in 2030 by scenario Coal Gas Nuclear 1.2 x today 1.5 x today 1.8 x today Hydro 2.1 x today Wind 13.5 x today Other renewables 12.5 x today Coal and gas with CCS 15% of today s coal & gas capacity GW Today Reference Scenario Policy Scenario 2030 In the 450 Policy Scenario, the power sector undergoes a dramatic change with CCS, renewables and nuclear each playing a crucial role

22 Total oil production in 2030 by scenario 120 Non-OPEC OPEC mb/d 16 mb/d Reference Scenario Policy Scenario Policy Scenario 2030 Curbing CO 2 emissions would improve energy security by cutting demand for fossil fuels, but even in the 450 Policy Scenario, OPEC production increases by 12 mb/d from now to 2030

23 Key results of the post-2012 climate-policy analysis 550 Policy Scenario Corresponds to a c.3 C global temperature rise Energy demand continues to expand, but fuel mix is markedly different CO 2 price in OECD countries reaches $90/tonne in 2030 Additional investment equal to 0.25% of GDP 450 Policy Scenario Corresponds to a c.2 C global temperature rise Energy demand grows, but half as fast as in Reference Scenario Rapid deployment of low-carbon technologies particularly CCS Big fall in non-oecd emissions CO 2 price in 2030 reaches $180/tonne Additional investment equal to 0.6% of GDP


25 Summary & conclusions Current energy trends are unsustainable socially, environmentally AND economically Oil will remain the leading energy source but... > The era of cheap oil is over, although price volatility will remain > Oilfield decline is the key determinant of investment needs > The oil market is undergoing major and lasting structural change, with national companies in the ascendancy To avoid "abrupt and irreversible" climate change we need a major decarbonisation of the world s energy system > Copenhagen must deliver a credible post-2012 climate regime > Limiting temperature rise to 2 C will require significant emission reductions in all regions & technological breakthroughs > Mitigating climate change will substantially improve energy security The present economic worries do not excuse back-tracking or delays in taking action to address energy challenges