Current challenges and opportunities in energy and uncertain futures

Transcription

1 Current challenges and opportunities in energy and uncertain futures ACCESSING OIL, GAS AND MINERALS IN A CHANGING WORLD From the Final Conference of the EU research project POLINARES: EU POLicy for NAtural RESources Coby van der Linde, CIEP (Netherlands) (Alban Kitous EC JRC) 1

2 Agenda Future trends Main challenges in oil and gas Future risks Challenges and opportunities for Europe 2

3 Future trends Bandwidth of trends of the near future 4 Future world images #1 Bretton Woods 3.0 #2 Celestial Dragon #3 Rubik s Cube #4 Fracture 3

4 Future; European energy and mineral markets rely on the existence of a renewed Bretton Woods type of world, with free trade and investments. Such a world is less certain to emerge. Only S1 would rely on free trade and multilateral institutions and matches the institutional construction of the EU In S2 and S3 the interests of the national state(s) prevail, in S4 the state is weak Europe and Asia will be large energy importers, they can both gain from collaboration and convergence. However, much will depend on the US-China relations : North America is rich in resources, has a competitive advantage in energy; China and others continue to rely on vertical integration of their state controlled companies and manage their foreign assets to secure supply; European actors might not be big enough to compete or gain access to resources in a more geopolitically oriented world; European market might not be attractive for suppliers due to uncertainties: regulatory frame and post-2020 energy mix. 4

5 Main trends; high oil prices and limited access in period unlocked new dynamism in upstream oil Oil: Upstream investments shifted to frontier developments: tar sands (Canada), deep offshore (US, Brazil, Australia), Arctic (US, Russia), tight oil (US) IOCs focus on upstream business, where economic rents are high despite higher production costs (but access to resources is available and the market is close) Chinese companies active in Africa, Australia, and attempt to move into frontier developments in North America and to get closer to Arctic As a result: North America Oil and gas prices in US significantly lower than in rest of the world Projected to become, sooner or later, an net exporter in oil (products) and natural gas, with major implications for energy flows, competitive position in the world and the geopolitics of energy 5

6 Downstream Europe Downstream oil sector under pressure of decline of local demand and US imports Limited access and ability to compete in expanding markets in Middle East and Asia Closures of refining capacities in Europe could lead to a rethink of security of supply policies if products markets would become less open in world images S2 and S3 Asia Will become large importer of oil May face more difficulty to diversify supply than in the past Will increasingly have an interest to collaborate and keep markets open 6

7 Oil Trade S1 : imports in % GDP history forecast S1 : exports in % GDP Source: POLES model 7

8 Dashed: S1 / Plain: S1 + Global climate policy ( 450 ) Effect of climate policy on oil trade Large impact of CO2 policies on trade value (both Q and P) Source: POLES model NB: future GDP is considered identical with & w/o CO2 policy 8

9 Main trends; high gas prices in period unlocked new dynamism in upstream gas In Gas: The development of US shale gas has upturned expectations about international gas markets developments; US is self-sufficient in natural gas and may become an exporter rather than the projected LNG importer US natural gas prices have declined and created a rapid switch of coal to gas in power and lower CO2 emissions OECD Asia is attracting most of the LNG flows, and has higher prices (so far China and India not willing to pay as much); The Middle East has an increasing demand for gas, but the market is fragmented and inefficient: flaring, no pipelines connecting countries, domestic pricing and competition with cheap oil 9

10 Trends in Europe Perfect Storm for gas in Europe Economic downturn Low incentive from EU-ETS Competition from renewables in power that go on the system first Lower gas prices in Europe than Asia but higher than US LNG flows did not come to Europe and impacted diversity of supply policies With uncertainties Although the reserve base of natural gas has grown significantly.... constraints to and uncertainty on the development of this resource in Europe (shale) What future supply routes? North Stream, Nabucco vs. South Stream, North Africa, LNG.... when Europe is signalling a low gas future post-2030, making investors reluctant to develop flows for Europe due to longer term ROI for these investments than the projections warrant 10

11 Incentives to invest in shale gas development in Europe? Is the difference enough to pay for the uncertainty on US production cost (/price) and European development costs? 11

12 Main trends; energy mix in some members states driven by preference for domestically produced renewables New energies: We do not yet fully understand the implications of variability of supply, and how to manage their development in a mature power market We still need to design the policy architecture to introduce them in an internal market without disruptions or 27 different (national) policy repairs As a conclusion, we need: To better understand the implications of European energy strategies against the background of international market developments and the impact on the competitive position of European economies in the future Currently imports of coal are up, gas is backed out of the system, EU-ETS is not fully functional and energy efficiency not really a priority because some resources (renewables) are apparently perceived as plentiful. 12