World Energy Outlook Dr. Fatih Birol IEA Chief Economist Riyadh, 12 January 2010

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1 World Energy Outlook 29 Dr. Fatih Birol IEA Chief Economist Riyadh, 12 January 21

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 Electricity generation from combined water and power plants in Middle East and North Africa Share of total electricity generation NAFR: North 226TWh Africa 1% 1% 99% TWh 99% 6% 94% TWh Combined water and power Middle East 1% 9% TWh 68% 32% Other GW TWh Installed capacity North Africa Middle East Oil Gas By 23 almost one-third of electricity production and capacity additions in the Middle East will come from combined water and power plants.

4 Worldwide upstream oil & gas capital expenditures Billion dollars * * 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

5 Oil production in the Reference Scenario mb/d 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

6 Impact of decline on world natural gas production in the Reference Scenario tcm % 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

7 US natural gas supply in the Reference Scenario bcm Net imports Conventional Unconventional Mainly as a result of shale gas production growth, US gas output grows gradually through to 23, outstripping US demand & squeezing US net imports

8 Natural gas transportation capacity bcm % 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

9 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

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 World primary energy demand by fuel in the 45 Scenario Mtoe % 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 EU primary natural gas imports by scenario Bcm % (24 bcm) Reference Scenario 45 Scenario +37% (116 bcm) EU gas imports continue to grow in the 45 Scenario, but plateau by the mid-22s Chinese gas imports soar to 9 bcm in 23.

14 World abatement of energy-related CO 2 emissions in the 45 Scenario Gt Reference Scenario OECD+ World, abatement by technology, 23 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

15 Abatement in the 45 Scenario by key emitters, 22 Gt International carbon markets Cap & trade in power & industry sectors International sectoral standards in transport & industry National policies China United States European Union India Russia Japan China, the United States, the European Union, India, Russia & Japan account for almost three-quarters of the 3.8 Gt reduction in the 45 Scenario

16 Incremental world electricity production in the Reference and 45 Scenarios, TWh Coal Gas Oil Nuclear Hydro Wind Biomass Solar Other renewables Reference Scenario 45 Scenario Renewables, nuclear and plants fitted with CCS account for around 6% of electricity generation globally in 23 in the 45 Scenario, up from less than one-third today

17 World passenger vehicle sales & average new vehicle CO 2 intensity in the 45 Scenario Share of sales 1% 8% 6% 4% Grammes per kilometre Electric vehicles Plug-in hybrids Hybrid vehicles ICE vehicles CO 2 intensity of new vehicles (right axis) 2% 9 5 % Improvements to the internal combustion engine & the uptake of next-generation vehicles & biofuels lead to a 56% reduction in new-car emission intensity by 23

18 World abatement of energy-related CO 2 emissions in the 45 Scenario Gt 42 4 Reference Scenario Gt 35 Reference Scenario Current Pledges Gt Scenario Gt Scenario Current pledges point in the right direction but further efforts would be needed to reach the 45 Scenario

19 Summary & conclusions The financial crisis has halted the rise in global energy use, but its long-term upward path will resume soon on current policies Oil investment has fallen sharply, posing questions on medium term supply A sizable glut of natural gas is looming A 45 path requires massive investments but would bring substantial 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