Energy Perspectives 2013 Long-run macro and market outlook

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1 Energy Perspectives 213 Long-run macro and market outlook Eirik Wærness, Chief Economist Security Classificatio n: Internal Status: Draft

2 Energy Perspectives Outlook to 24 The global economy Growth close to historic average (2.8%) Two speeds non-oecd catching up Overall energy market outlook 1.3% annual growth (oil.5%, coal:.7%) Moderate greening of energy mix Global oil and gas markets Oil demand peaks around 23 Gas demand increasing (1.6% per year) Strong growth in new renewables but CO 2 emissions grow until 23 2

3 A world of uncertainty framing the development Difficult to predict a number of outcomes are possible The world is characterized by Volatility, Uncertainty, Complexity, and Ambiguity Conflicts are difficult to solve Growth is difficult to generate Sustainability is very difficult to ensure 3

4 A world of uncertainty framing the development Difficult to predict a number of outcomes are possible The world is characterized by Volatility, Uncertainty, Complexity, and Ambiguity Conflicts are difficult to solve Growth is difficult to generate Sustainability very difficult to ensure but also by High growth in emerging economies Movement out of poverty and into affluence Increasing life expectancy Technological progress and opportunities 4

5 16 The world s most important commodity is notoriously difficult to predict Mar 11 Aug Aug 5 May Mar 99 Dec 1 Oct 3 4 Apr

6 Short-/medium-term global economic outlook Still on the path to recovery, but pace is slower than expected Economic growth Annual change in GDP (%) OECD Non-OECD USA China US economy Weaker 1H213 growth than expected Private consumption will lift growth, while fiscal consolidation continues Eurozone Out of recession, finally Germany and France driving the recovery Japan sees temporary boom China s rebalancing is a difficult feat Risk and uncertainty remain elevated, especially in key emerging markets Source: IHS Global Insight and Statoil 6 Classification:

7 A strong trend affecting economics and energy Economic gravity moves (back) to the east, and so does energy demand The global economic centre of gravity Based on geographical weighting of GDP 1 Shifting energy demand Share in global energy demand, % Rest of world India China OECD Pacific OECD Europe OECD North America Source: McKinsey (map), IEA, Statoil

8 Growth, efficiency and energy demand Non-OECD driving growth, energy efficiency to improve by almost 4% 8 6 Economic growth Annual change in GDP (%) '91- ' '31-4 Growth and energy intensity Growth (%) and toe/million 25-USD Global energy demand TPED, bn toe International bunkers Other non-oecd Non-OECD Asia OECD OECD Non- OECD Asia Other non- OECD TPED GDP Energy intensity (rhs) Source: IHS Global Insight and IEA, Statoil 8

9 Gradual greening of energy mix but fossil fuels constitute 72% of total energy demand in World energy mix Share of total energy demand (TPED, %) Energy mix Shareof total energydemand (TPED, %) North America Europe China Coal Oil Natural gas Nuclear Renewables Coal Oil Natural gas Nuclear Renewables Source: IEA, Statoil 9

10 Fossil fuels are here to stay Emerging economies drive demand growth oil demand peaks ~ Global oil demand ex bio fuels, mbd International bunkers Other non-oecd Non-OECD Asia OECD Global gas demand 1 bcm International bunkers Other non-oecd Non-OECD Asia OECD Source: IEA, Statoil 1

11 Global oil supply from different sources Opec crude regaining importance, eventually 8 6 Non-Opec production Mbd Other sources* Oil sands Non-Opec NGL Non-Opec Tight oil Non-Opec Conv. crude 5 4 Opec oil production Mbd Opec NGL Saudi Arabia crude Iraq crude Other crude *Biofuels, GTL, processing gains Source: IEA, Statoil

12 Technology and prices affect new oil supplies New sources of oil are not cheap economics and finance matter Break-even prices for new developments USD/bbl Source: IEA, WoodMac, various research institutions, Statoil

13 Global gas markets long-term growth Gas is the winner among fossil fuels - growing 1.6% per year Global gas demand Bcm International bunkers Middle East India OECD Pacific Russia OECD Europe OECD North America Africa Other non-oecd Asia China Other FSU Non-OECD Europe Latin America LNG supply Bcm Africa Asia Europe FSU Latin America Middle East North America Oceania Source: IEA, Statoil

14 CO 2 emissions level out around 23 Lower growth, fuel efficiency, electrification, CCS Regional change in energy demand 21-4 Bn toe 3 2 Rest of the world OECD Europe World China OECD North America 6 4 Global CO 2 emissions billion tonnes International bunkers Non-OECD Asia IEA NP IEA 45 Other non-oecd OECD IEA CP Coal Oil Gas Nuclear Renewables Source: IEA, Statoil 14

15 Energy demand and mix in North America Moderate growth energy efficiency and greener energy mix Total primary energy demand bn toe Renewables Nuclear Gas Oil Coal % average GDP growth Overall energy demand growth.5% per year 16% overall increase Increase for renewables and gas at the expense of coal and oil 8.5% annual growth in new renewables Both coal and oil market share down by around 1 %-points Gas (1.1% annual growth) to Power Industrial use Transport Moderate growth in LNG exports Source: IEA, Statoil 15

16 Comparing different forecasts Assumptions on economic and energy demand growth differ, Total primary energy demand CAGR, % Total oil demand CAGR, %

17 Thank you! 17