World primary energy demand in the t Reference Scenario: this is unsustainable!

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Alban O’Connor’
5 years ago
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OECD/IEA OECD/IEA -29-29 World primary energy demand in the t

Mtoe 18 Other renewables 16 Hydro 14 12 Nuclear 1 Biomass 8

expands by 45% between now and 23 an average rate of increase

1 OECD/IEA OECD/IEA World primary energy demand in the t Reference Scenario: this is unsustainable! Mtoe 18 Other renewables 16 Hydro Nuclear 1 Biomass 8 Gas 6 Coal 4 Oil World energy demand expands by 45% between now and 23 an average rate of increase of 1.6% per year with coal accounting for more than a third of the overall rise OECD/IEA -29

2 The continuing importance of coal in world primary energy demand Mtoe 1 9 Increase in primary demand, % % = average annual rate of growth 1% Shares of incremental energy demand Reference Scenario, Coal All other fuels 8 8% 7 6 6% % 2.6% 4% % 2% 1.8% Coal Oil Gas Renewables Nuclear % 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 23 OECD/IEA -29 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 2% & other emerging Asian economies most of the rest OECD/IEA -29

EU natural gas market outlook Bcm 8 7 6 5 4 Imports other countries Imports Middle East Imports Africa Imports Russia and other TE Domestic production 3 2 1 27 23 OECD/IEA -29 EU import dependency

3 EU natural gas market outlook Bcm Imports other countries Imports Middle East Imports Africa Imports Russia and other TE Domestic production OECD/IEA -29 EU import dependency rises from 58% today to 86% in 23 as a result of declining domestic production and increasing demand World natural gas reserves and Gas Exporting Countries Forum (GECF) World total: 179 Tcm (28) OECD/IEA -29 The 11 members of GECF account for 2/3 of global gas reserves, while just 2 of them Russia & Iran account for over 4%.

4 Cumulative energy supply investment in the Reference Scenario,, Coal 3% $.7 trillion Biofuels <1% $.2 trillion Power 52% $13.6 trillion Oil 24% $6.3 trillion Gas 21% $5.5 trillion Transmission & distribution 5% Power generation 5% Shipping 4% Refining 16% Exploration and development 8% 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 OECD/IEA -29 OECD/IEA OECD/IEA

5 World oil production by OPEC/non OPEC in the Reference Scenario mb/d % 5% 48% 46% 44% 42% 4% OPEC other OPEC Middle East Non OPEC nonconventional Non OPEC conventional OPEC share % Production rises to 14 mb/d in 23, with Middle East OPEC taking the lion s share of oil market growth as conventional non OPEC production declines OECD/IEA -29 World oil production by source in the Reference Scenario mb/d Natural gas liquids Non conventional oil Crude oil yet to be Developed or found Crude oil currently producing fields mb/d Even if oil demand was to remain flat to 23, 45 mb/d of gross capacity roughly four times the capacity of Saudi Arabia would ne needed just to offset decline from existing fields. OECD/IEA -29

6 A sea change: world oil & gas production by company type in the Reference Scenario mb/d 12 1 Oil Bcm Gas NOCs Private companies OECD/IEA -29 Almost 8% of the projected increase in output of both oil & gas comes from national companies on the assumption that investment is forthcoming OECD/IEA OECD/IEA

7 Reductions in energy related related CO 2 emissions in the climate policy scenarios Gigatonnes Policy Scenario 45 Policy Scenario 9% 14% 23% Nuclear CCS Renewables & biofuels Energy efficiency 3 54% Reference Scenario 55 Policy Scenario 45 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 OECD/IEA -28 Total power generation capacity today and in 23 by scenario Coal Gas Nuclear 1.2 x today 1.5 x today 1.8 x today Hydro 2.1 x today Wind Other renewables 13.5 x today 12.5 x today Coal and gas with CCS 15% of today s coal & gas capacity GW OECD/IEA -29 Today Reference Scenario Policy Scenario 23 In the 45 Policy Scenario, the power sector undergoes a dramatic change with CCS, renewables and nuclear each playing a crucial role

8 Cumulative European Union CO 2 savings with 2% reduction target in 22 Office of the Chief Economist Gigatonnes 12 1 China EU 27 2 CUMULATIVE savings with 2% CO 2 emissions reduction target (28 22) ANNUAL 22 CO 2 emissions OECD/IEA -29 EU cumulative savings over would represent only 4% of China s annual CO 2 emissions in 22 Total oil production in 23 by scenario mb/d mb/d 16 mb/d Non OPEC OPEC Reference Scenario Policy Scenario Policy Scenario 23 Curbing CO 2 emissions would improve energy security by cutting demand for fossil fuels, but even in the 45 Policy Scenario, OPEC production increases by 12 mb/d from now to 23 OECD/IEA -29

9 How is the financial & economic crisis affecting energy investment? Office of the Chief Economist Difficulties in obtaining credit & higher cost of capital > Increased aversion to risk > Paralysed credit markets > Plunging share values have increased debt equity ratios Lower prices & cash flows have made new investments less attractive Falling demand caused by economic recession has reduced urgency & appetite for suppliers to invest OECD/IEA -29 Impact of financial crisis on global investment in renewable energy Office of the Chief Economist Billion dollars Investment in renewables has been hit by the rising cost of credit and the fall in oil & gas prices which has reduced the economic incentive for clean energy... since Q2 28 investment has come down to 26 levels Source: NEF OECD/IEA Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 7 Q Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1

10 Summary & conclusions Current energy trends are patently unsustainable socially, environmentally, economically Energy and geopolitics will be increasingly interconnected We need a major decarbonisation of the world s energy system Copenhagen is crucial Addressing environmental issues will substantially improve energy security Financial crisis can plant the seeds for an energy investment crisis OECD/IEA -29

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

World primary energy demand in the Reference Scenario: an unsustainable path OECD/IEA OECD/IEA - 2008-2008 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?