Energy Perspectives 2015 Long-term macro and market outlook

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1 Energy Perspectives 215 Long-term macro and market outlook IGU workshop, «What Does COP 21 Mean for the Role of gas? Cartagena, Columbia, 22 October 215 Runar Tjersland, Special Advisor

2 Energy Perspectives 215 Macro and market outlook to

3 A world of volatility and change Hope to be vaguely right, not precisely wrong 8 Commodity prices (real Apr 215, indexed Feb 1997=1) 15 Supply and demand factors (indexed 22=1) 5 6 Brent HH NBP Coal 12 9 Chinese int. tourists New Chinese cars Chinese air passengers US shale oil prod. 3 Solar generation (rhs) Sources: Thomson Reuters Datastream, DOE, CEIC, IEA

4 Long-term forecasts are uncertain Climate change, policy, technology, consumers and economy will decide Some known unknowns handled by constructing scenarios Energy and climate policies Economic growth Energy efficiency Relative costs and prices driving fuel mix A large number of other known unknowns: Consumer behaviour Cold fusion Natural disasters (volcanoes etc.) Climate change impact as well as the unknown unknowns Sources: The Economist, Financial Times, Google, UN, Statoil, McKinsey & Company, National Geographic, twistedsifter.com

5 Several futures are possible 2 Three scenarios stories about the future have been established Reform 12 Energy intensity in different scenarios Index, 212=1 12 CO 2 emissions/tped Index, 212= Reform 6 Reform Source: IEA (history), Statoil (projections)

6 One of the known knowns: Asia matters Economic gravity moves (back) to the east, and so does energy demand The global centre is in Asia World energy demand per region Bn toe 2 16 Rest of world China OECD Europe 212 India OECD Pacific OECD North America Ref Ren Riv Ref Ren Riv Sources: Reddit, IEA, Statoil (projections)

7 Growth is a key driver for energy demand and is different in alternative scenarios World GDP growth rates 1-year annual growth average, % World GDP growth rates 1-year annual growth average, % Reform Reform 2 2 '13-2 '21-3 '31- '13-2 '21-3 '31- Source: IEA (history), Statoil (projections)

8 Energy demand and energy mix differ depending on growth, efficiency, technology and policies World energy mix Share of total energy demand in 212 and 2 (TPED), % 22% 1% 1% 2% 5% 31% 29% % % 1% World energy demand per fuel Bn toe New renewables Hydro Gas Coal % 1% Biomass and waste Nuclear Oil 22 2 Ref Ren Riv Ref Ren Riv Source: IEA (history), Statoil (projections)

9 Energy demand and energy mix differ depending on growth, efficiency, technology and policies World energy mix Share of total energy demand in 212 and 2 (TPED), % 6% 3% 9% 22% 7% 1% 1% 2% 5% 31% 29% 25% Reform % % 1% World energy demand per fuel Bn toe New renewables Hydro Gas Coal % 1% Biomass and waste Nuclear Oil % 27% Ref Ren Riv Ref Ren Riv Source: IEA (history), Statoil (projections)

10 Energy demand and energy mix differ depending on growth, efficiency, technology and policies World energy mix Share of total energy demand in 212 and 2 (TPED), % 6% 3% 9% 13% % 1% 22% 7% 11% 1% 1% 2% 5% 31% 1% 29% 25% % % 1% World energy demand per fuel Bn toe New renewables Hydro Gas Coal % 1% Biomass and waste Nuclear Oil % 27% Ref Ren Riv Ref Ren Riv Source: IEA (history), Statoil (projections)

11 Energy demand and energy mix differ depending on growth, efficiency, technology and policies World energy mix Share of total energy demand in 212 and 2 (TPED), % 6% 3% 9% 5% 23% 3% 22% 13% % 1% 1% 22% 7% 11% % 1% 1% 2% 5% 31% 1% 29% 27% 3% 25% 27% % % 1% World energy demand per fuel Bn toe New renewables Hydro Gas Coal % 1% Biomass and waste Nuclear Oil 22 2 Ref Ren Riv Ref Ren Riv Source: IEA (history), Statoil (projections)

12 Oil and gas are here to stay Considerable need for new investments, irrespective of scenario Global oil demand* Mbd International bunkers Other non-oecd Non-OECD Asia OECD 3-6% decline 6 5 Global gas demand Bcm International bunkers Non-OECD Asia 3-6% decline Other non-oecd OECD * Excl. Bio-fuels Source: IEA (history), Statoil (projections)

13 requires large changes in particular in transport and power this is no walk in the park! 3 Energy use in transport Bn toe Biofuels Electricity Gas Oil Coal Fuel shares in private road transport (%) Biofuels Electricity Gas Oil Electricity and renewables Thousand TWh and % New RES* New RES share in el (rhs) El share in final energy (rhs) Ref Ren Ref Ren Ref Ren Ref Ren Ref Ren Ref Ren * incl. Biomass Source: IHS Global Insight and International Energy Agency (history), Statoil (projections)

14 Energy related CO 2 emissions vary considerably driven by policy, energy intensity, and fuel mix World CO 2 emissions Bn tons China CO 2 emissions Bn tons 5 Reform 15 Reform IEA NP IEA 5 IEA NP IEA Source: Statoil, IEA WEO

15 So, in summary Three very different scenarios developed delivers on sustainability in several dimensions VERY challenging requires huge investments Reform degree target achieved Transformation of private transportation and electricity generation Radical assumptions coal significantly reduced, but oil and gas are here to stay, for decades Oil and gas demand in 2 ~ today s level Reform and imply higher oil and gas demand, but an unsustainable development