OECD/IEA World Energy Outlook 2011 focus on oil, gas and coal

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1 World Energy Outlook 2011 focus on oil, gas and coal

2 The context: fresh challenges add to already worrying trends Economic concerns have diverted attention from energy policy and limited the means of intervention Post-Fukushima, nuclear is facing uncertainty MENA turmoil raised questions about region s investment plans Some key trends are pointing in worrying directions: CO 2 emissions rebounded to a record high energy efficiency of global economy worsened for 2 nd straight year spending on oil imports is near record highs

3 Policies could radically alter the long-term energy outlook Mtoe World primary energy demand by scenario Current Policies Scenario New Policies Scenario 450 Scenario In the New Policies Scenario, demand increases by 40% between 2009 & 2035

4 Emerging economies continue to drive global energy demand Mtoe Growth in primary energy demand in the New Policies Scenario China India Other developing Asia Russia Middle East Rest of world OECD Global energy demand increases by one-third from 2010 to 2035, with China & India accounting for 50% of the growth

5 Natural gas & renewables become increasingly important Mtoe World primary energy demand by fuel in the New Policies Scenario Additional to Oil Coal Gas Renewables Nuclear Renewables & natural gas collectively meet almost two-thirds of incremental energy demand in

6 The age of fossil fuels is far from over, but their dominance declines Shares of energy sources in world primary energy demand in the New Policies Scenario 50% 40% 30% 20% 10% Oil Coal Gas Biomass Nuclear Other renewables Hydro 0% Oil remains the leading fuel though natural gas demand rises the most in absolute terms

7 Chapter 3 Oil market outlook

8 Vehicles per thousand people Oil demand is driven higher by soaring car ownership 800 Car ownership in selected markets in the New Policies Scenario United States European Union China India Middle East World The passenger vehicle fleet doubles to 1.7 billion in 2035; most cars are sold outside the OECD by 2020, making non-oecd policies key to global oil demand

9 Oil demand is driven higher by soaring car ownership Total Number of Vehicles (in Mio) in Selected Markets (NPS) United States European Union China India Middle East The passenger vehicle fleet doubles to 1.7 billion in 2035; most cars are sold outside the OECD by 2020, making non-oecd policies key to global oil demand

10 Oil use in cars grows much less than the number of cars mb/d World PLDV oil demand in the New Policies Scenario Oil demand Increase due to: Fleet expansion Decrease due to: Improvement in fuel economy Lower average vehicle usage Use of alternative fuels Oil use by cars expands by only 15% between 2010 & 2035, with more efficient vehicles, less usage & switching to non-oil fuels offsetting most of the impact of a doubling of the fleet

11 Iraq is the largest source of supply growth Major changes in world liquids supply in the New Policies Scenario, Iraq Saudi Arabia Brazil Canada Kazakhstan Venezuela UAE Kuwait United States Biofuels OPEC Non-OPEC The rise in MENA production is over 90% of the growth in global oil output to 2035 while companies operating elsewhere turn increasingly to more difficult & costly sources mb/d

12 mb/d Most new oil production capacity is needed to offset decline World liquids supply by type in the New Policies Scenario Biofuels Processing gains Unconventional oil Natural gas liquids Crude oil: Yet to be found Yet to be developed Currently producing Decline at existing conventional fields amounts to 47 mb/d, twice current OPEC Middle East production; NGLs and unconventional production are the main sources of growth

13 Qatar Kuwait Dollars per barrel UAE Libya Algeria Angola Nigeria Ecuador Venezuela Fiscal needs of key producing countries keep pressure on oil prices Breakeven costs, budget breakeven and commercially attractive prices for current oil production for selected producers, mid Saudi Arabia Iraq Iran Russia Super majors Budget breakeven Commercially attractive Breakeven production cost Oil production (mb/d) Middle East oil resources remain the cheapest, although cost pressures are increasing even there & governments need ever higher prices to meet their public spending needs

14 Long-term oil-supply cost curve OECD/IEA The total recoverable oil-resource base is estimated at 9 trillion barrels (including 2.5 trillion barrel of GTL/CTL) of which we have so far produced 1.1 Tb

15 Changing oil import needs are set to shift concerns about oil security mb/d Net imports of oil in the New Policies Scenario China India European Union United States Japan US oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake those of the US around 2015; China becomes the largest importer around 2020

16 What impact would deferred investment in MENA have on markets? The Middle East and North Africa (MENA) is set to supply the bulk of the growth in oil output to 2035, requiring investment of over $100 billion/annum A Deferred Investment Case looks at near-term investment falling short by one-third possible drivers include new spending priorities, higher perceived risks, etc MENA output falls 3.4 mb/d by 2015 and 6.2 mb/d by 2020 Consumers face a near-term rise in oil prices to $150/barrel MENA earns more initially, but then less as market share is lost

17 Chapter 4 Natural gas market outlook

18 Natural gas use will grow regardless of the policy landscape bcm World primary natural gas demand by scenario Current Policies Scenario New Policies Scenario 450 Scenario In the New Policies Scenario, demand grows from 3.1 tcm in 2009 to 4.8 tcm in 2035; an increase of 55% or 1.7% per year

19 Are we entering a Golden Age of Gas? Natural gas can enhance security of supply: global resources exceed 250 years of current production; while in each region, resources exceed 75 years of current consumption

20 Unconventional gas takes a growing share Largest natural gas producers in 2035 in the New Policies Scenario Russia United States China Iran Qatar Canada Algeria Australia India Norway Conventional Unconventional bcm Unconventional natural gas supplies 40% of the 1.7 tcm increase in global supply, but best practices are essential to successfully address environmental challenges

21 Inter-regional gas trade booms Net gas trade by major region in the New Policies Scenario E.Europe/Eurasia Africa Middle East OECD Oceania Latin America OECD Americas India OECD Asia China OECD Europe Importers Exporters bcm Gas trade doubles from 590 bcm in 2009 to almost bcm in 2035, with China s imports increasing the most

22 Realising Russia s potential for energy savings would have a big impact Natural gas savings from raising efficiency (to comparable OECD levels) bcm Domestic gas demand Net exports / potential savings bcm bcm Russia s total energy savings potential is close to the primary energy used in a year by the UK; new efficiency policies bring results, but the savings potential remains large even in 2035

23 Chapters Outlook for coal markets

24 Coal won the energy race in the first decade of the 21st century Mtoe Growth in global energy demand, Nuclear Renewables Oil Natural gas 0 Total non-coal Coal Coal accounted for nearly half of the increase in global energy use over the past decade, with the bulk of the growth coming from the power sector in emerging economies

25 Mtce Coal is now at a crossroads World primary coal demand by region and scenario Rest of world India China Current Policies Scenario New Policies Scenario 450 Scenario 14% 47% 14% 50% Mtce Mtce Coal demand is set to slow just how much depends critically on government energy & environmental policies, especially in China

26 China will remain the world s largest coal producer Current Policies Scenario New Policies Scenario 450 Scenario Incremental coal production by scenario and region, China Rest of world China Rest of world China Rest of world China United States Australia South Africa Russia Indonesia India Other Mtce China contributes most to growth in global production in the Current & New Policies Scenarios & accounts for a big chunk of the drop in the 450 Scenario

27 Less nuclear means more of everything else TWh Power generation by fuel in the New Policies Scenario and Low Nuclear Case : New Policies Scenario 2035: Low Nuclear Case Nuclear Coal Gas Renewables The biggest chunk of the lost nuclear generation is replaced by power generation from coal, leading to a 6% increase in CO 2 emissions in the power sector

28 Questions?

OECD/IEA World Energy Outlook 2011

OECD/IEA World Energy Outlook 2011 World Energy Outlook 211 The context: fresh challenges add to already worrying trends Economic concerns have diverted attention from energy policy and limited the means of intervention Post-Fukushima,