Global Energy Investment Challenges Dr. Fatih Birol Chief Economist Head, Economic Analysis Division International Energy Agency
World Energy Outlook 2002: Key Strategic Challenges security of energy supplies threat of environmental damage caused by energy use uneven access of the world s population to modern energy investment in energy infrastructure
Oil
World Oil Production Capacity 250 Outlook 200 mb/d 150 100 76 120 Cumulative addition to production capacity World oil demand 50 0 2001 2030 2001-2030 Decline rates are a key long-term determinant of upstream capacity investment requirements
Gas
World Gas Upstream Investment Outlook Current production capacity: 2800 bcm Projected capacity 2030: 5300 bcm Additional capacity requirement between today and 2030: 10 000 bcm (ca. 350 bcm/year) Substantial new capacity needed to compensate the declines in existing fields- especially in US
Global Gas-Trade Flows, 2030 Bcm The Middle East overtakes the transition economies as the world s biggest gas-exporting region
World Gas Investment Outlook Global gas trade will increase by more than three times. LNG trade is set to quintuple The share of LNG in trade will grow from 30% now to 50% in 2030 assuming further cost reductions The shipping fleet will increase from 128 tankers today to over 450 in 2030- some w/o long-term contracts The length of gas transmission and distribution pipelines will double
Electricity
Electricity consumption (TWh) World Electricity Consumption vs. GDP 1971-2001 14000 12000 10000 8000 6000 4000 1971 2000 2001 Electricity Demand 2001 to 2030: OECD: 1.5% Transition Economies: 2.0% Developing Countries: 4.1% WORLD: 2.4% 15000 20000 25000 30000 35000 40000 45000 GDP (billion $(1995) using PPPs) World electricity demand is set to increase rapidly
World Electricity Investment Outlook to 2030 Refurbishment 5% CHP 1% Distribution 37% Generation 42% Transmission 15% Massive investment will be required in the power sector to meet demand growth and to replace/maintain existing infrastructure
World Installed Power-Generation Capacity 8,000 7,000 6,000 GW 5,000 4,000 3,000 2,000 1,000 0 2000 2003 2006 2009 2012 2015 2018 2021 2024 2027 2030 Existing capacity New capacity Nearly 5,000 GW of capacity needs to be built in 2000-2030, almost half in developing countries
$ billion (2000 dollars) 900 800 700 600 500 400 300 200 100 World Power-Generation Investment, 2000-2030 2030 0 North America Europe Pacific China E. Asia Latin America South Transition Africa Asia economies Middle East Cumulative worldwide investment in new power plants amounts to $ 4.2 trillion, more than half in developing countries
80 Size and Activity of Financial Markets by Region % (Ratio to GDP) 70 60 50 40 30 20 10 0 OECD Russia India Indonesia Brazil Africa Liquid liabilities (size of banking sector) Stock market capitalization (size of stock market) Stock market value traded (activity of stock market) Financial markets in non-oecd regions are smaller, less active and less efficient.
Investment Flows into Energy Projects with Foreign Private Participation 50 45 40 35 2001 US$ billion 30 25 20 15 10 5 0 1997 1998 1999 2000 2001 2002 (Preliminary) Electricity Natural gas distribution and transmission Sound macroeconomic management and legal/regulatory framework are needed to secure the availability of foreign capital to energy projects.
Installed Capacity in EU-15 584 GW 290 GW 618 GW Installed Capacity 2000 Retirements 2000-2030 New Capacity 2000-2030 = 901 GW Installed Capacity - 2030 Capacity additions over the next 30 years will be larger than today's installed capacity
Age of Installed Capacity in EU 15 140 120 100 GW 80 Oil Gas 60 Coal Uranium 40 20 0 < 10 years 10-20 years 20-30 years > 30 years Europe's power plants are ageing: half current capacity - mostly coal-fired - could be retired by 2030
Capacity in EU 7 Major Utilities (2002) 110 100 90 80 70 Rest of Europe Home Country GW 60 50 40 30 20 10 0 EdF E.ON RWE ENEL Vattenfall Endesa Electrabel
Concluding Remarks-1 Electricity is overwhelmingly the largest sector - and most of rest is oil and gas Bulk of energy investments will shift to developing countries and transition economies Capital is available globally but issue is cost and balance of risk/return FDI and international capital markets need to play growing role in financing non- OECD investments
Concluding Remarks- 2 Oil/Gas: Decline rates - key long-term uncertainty for upstream investment requirements Gas: Unit production/transportation costs still falling, but longer supply chains will drive up overall cost to key markets, and thereby boost investment needs Gas/Electricity: questions on overall impacts of liberalisation on investments Electricity in DCs: inadequate local capital markets- limited access to international capital