World Energy Outlook Dr. Fatih Birol IEA Chief Economist Rome, 18 November 2009

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1 World Energy Outlook 29 Dr. Fatih Birol IEA Chief Economist Rome, 18 November 29

2 Change in primary energy demand in the Reference Scenario, Coal Oil Gas Nuclear OECD Non-OECD Hydro Biomass Other renewables Mtoe Fossil fuels account for 77% of the increase in world primary energy demand in 27-23, with oil demand rising from 85 mb/d in 28 to 88 mb/d in 215 & 15 mb/d in 23

3 Billion dollars Worldwide upstream oil & gas capital expenditures * * Budgeted spending Global upstream spending (excluding acquisitions) is budgeted to fall by over $9 billion, or 19%, in 29 the first fall in a decade

4 mb/d Oil production in the Reference Scenario NGLs Unconventional oil Crude oil fields yet to be developed or found Crude oil currently producing fields Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost two-thirds by 23

5 tcm Impact of decline on world natural gas production in the Reference Scenario % 8% 6% 4% Fields yet to be developed or found Currently producing fields Share from fields not yet producing (right axis) 1 2% % Additional capacity of around 2 7 bcm, or 4 times current Russian capacity, is needed by 23 half to offset decline at existing fields & half to meet the increase in demand

6 bcm US natural gas supply in the Reference Scenario Net imports Conventional Unconventional Thanks mainly to shale gas, US gas output grows gradually through to 23, outstripping demand & squeezing imports

7 bcm Natural gas transportation capacity % Unutilised LNG liquefaction & pipeline capacity % LNG trade Pipeline trade % Capacity utilisation rate A glut of gas is developing reaching 2 bcm by 215 due to weaker than expected demand & plentiful US unconventional supply, with far-reaching implications for gas pricing

8 Indicative costs for potential new sources of gas delivered to Europe, 22 ($/MBtu) Although indigenous resources are limited & output is declining, Europe is geographically well placed to secure gas supplies from a variety of external sources

9 Billion dollars (28) Average annual expenditure on net imports of oil & gas in the Reference Scenario 6 5 2% % % Share of GDP 3 3% 2 1 1% 1% 1% 2% 3% 6% 3% 3%.4% European Union United States China Japan India ASEAN The Reference Scenario implies persistently high spending on oil & gas imports, with China overtaking the United States by around 225 to become the world's biggest spender

10 Number of people without access to electricity in the Reference Scenario (millions) World population without access to electricity 28: 1.5 billion people 23: 1.3 billion people $35 billion per year more investment than in the Reference Scenario would be needed to 23 equivalent to just 5% of global power-sector investment to ensure universal access

11 The policy mechanisms in the 45 Scenario A combination of policy mechanisms, which best reflects nations varied circumstances & negotiating positions We differentiate on the basis of three country groupings > OECD+: OECD & other non-oecd EU countries > Other Major Economies (OME): Brazil, China, Middle East, Russia & South Africa > Other Countries (OC): all other countries, including India A graduated approach > Up to 22, only OECD+ have national emissions caps > After 22, Other Major Economies are also assumed to adopt emissions caps > Through to 23, Other Countries continue to focus on national measures Emissions peaking by 22 will require > A CO 2 price of $5 per tonne for power generation & industry in OECD+ > Investment needs in non-oecd countries of $2 billion in 22, supported by OECD+ through carbon markets & co-financing

12 Mtoe World primary energy demand by fuel in the 45 Scenario % Fossil fuels 3% 24% 18% 12% 6% Zero-carbon fuels Share of zero- carbon fuels (right axis) % In the 45 Scenario, demand for fossil fuels peaks by 22, and by 23 zero-carbon fuels make up a third of the world's primary sources of energy demand

13 Trillion dollars (28) Cumulative OPEC oil export revenues by scenario Reference Scenario 45 Scenario Though slightly lower than in the Reference Scenario, OPEC revenues in the 45 Scenario are over four times as high as in the last 2 years

14 Bcm EU primary natural gas imports by scenario % (24 bcm) Reference Scenario 45 Scenario +37% (116 bcm) EU gas imports continue to grow in the 45 Scenario, but plateaus by around mid-22s

15 Gt World abatement of energy-related CO 2 emissions in the 45 Scenario 42 4 Reference Scenario World abatement by technology, OECD+ Efficiency - 57% Gt Gt OME 3 28 OC Scenario Renewables & biofuels - 23% Nuclear - 1% CCS - 1% An additional $1.5 trillion of investment is needed in total in the 45 Scenario, with measures to boost energy efficiency accounting for most of the abatement through to 23

16 Gt Abatement in the 45 Scenario by key emitters, CDM Cap & trade in power & industry sectors International sectoral standards in transport & industry National policies China United States European Union India China, the United States, the European Union & India account for almost 7% of the 3.8 Gt reduction in the 45 Scenario

17 TWh Incremental EU electricity production by scenario, Reference Scenario 45 Scenario Coal Gas Oil Nuclear Hydro Wind Biomass Solar Other renewables Renewables, nuclear and plants fitted with CCS account for 8% of electricity generation in EU in 23 in the 45 Scenario, up from 44% today

18 Grammes per kilometre European Union passenger vehicle sales & average new vehicle CO 2 intensity in the 45 Scenario 1% 8% 6% Electric vehicles Plug-in hybrids Hybrid vehicles ICE vehicles CO 2 intensity (right axis) 4% 1 2% % The already strong policy action to reduce CO 2 emissions in EU road transport must be further strengthened in order to reach a 45 trajectory.

19 Summary & conclusions The financial crisis has halted the rise in global fossil-energy use, but its long-term upward path will resume soon on current policies Tackling climate change & enhancing energy security require a massive decarbonisation of the energy system > We are now on course for a 6 C temperature rise & rising energy costs > Limiting temperature rise to 2 C will require big emission reductions in all regions A 45 path towards Green Growth would bring substantial benefits > Avoiding the worst effects & costs of climate change > Energy-security benefits, lower oil & gas imports bills > Much less air pollution & huge health benefits Natural gas can play a key role as a bridge to a cleaner energy future The challenge is enormous but it can and must be met > Improved energy efficiency & technology deployment are critical > Each year of delay adds $5 billion to mitigation costs