WORLD ENERGY OUTLOOK - INSIGHTS Assessing Today's Supplies to Fuel Tomorrow's Growth Dr. Fatih Birol Head, Economic Analysis Division International Agency / OECD
World Series World 1998 World 1999 Looking at Subsidies: Getting the Prices Right World 2000 World Assessing Today s Supplies to Fuel Tomorrow s Growth World 2002 (forthcoming) World 2003 Global Investment (planned)
Why this study? growing concerns over energy security, resource availability, supply costs and investments Objectives identify and analyse factors behind medium/longterm energy supply trends cost drivers at global and regional levels - backbone of the study fuel-neutral - no recommendation for fuel mix no new set of projections
Outline of the Study Executive Summary I. Background to the Study II. Oil III. Gas IV. Coal V. Renewables VI. Nuclear Fuels VII. Beyond 2020
Increase in Total World Production 5,000 Mtoe 4,000 3,000 2,000 OECD Non-OECD 1,000 0 1980-2000 2000-2020 Between now and 2020, nearly all increase in world energy production will come from outside the OECD
Global Oil Supply Main Findings (1) Conventional reserves adequate to meet demand to 2020 and beyond More oil will be extracted from existing reservoirs, and more oil will be found Price stability and security of supply will depend on timely and massive investment
Global Oil Supply Main Findings (2) Investment and costs will depend on sources of supply upstream technology government policies and industry developments Much of the long-term supply growth will come from the Middle East and the FSU Unconventional oil could play an increasingly important role
billion barrels USGS Resource Estimates 4,000 3,500 3,000 2,500 2,000 1,500 1,000 500 0 1984 1987 1.1.81 1.1.85 1.1.90 1.1.93 1.1.96 effective assessment date Cumulative production Reserves growth 1991 1994 2000 940 960 Remaining reserves Undiscovered recoverable resources Year of Publication Remaining reserves assessments in billion barrels: 1,100 IHS ; 1,078 OPEC; 1,051 WEC 730 720
Longer Term Scenarios for Different Resource Estimates Billion Barrels per Year 70 60 50 40 30 20 (high) 2047 (mean) 2037 (low) 2026 2 % demand growth Decline: R/P = 10 10 0 1900 1925 1950 1975 2000 2025 2050 2075 2100 2125 History Low (2,248) Mean (3,003) High (3,896) Year of peak production varies with resource estimate and
Impact of Decline Rate on Investment 120 mb/d 100 80 60 40 20 Cumulative new production required Natural production decline Global production 0 1996 1998 2000 2002 2004 2006 2008 2010 Decline rate assumption 5%; demand growth 2% around 60 mb/d of additional production capacity
Oil Total Supply Costs Major Middle East Producers Russia Canada Unconventional Oil International Majors Gas-To-Liquids outlook Gas-To-Liquids 0 2 4 6 8 10 12 14 16 $/boe Major Middle East oil producers have a supply cost
OPEC Annual Oil Revenues 700 600 500 $ billion 400 300 200 100 0 1997 2010 2020 Low price Reference scenario High price High prices reduce demand, increase non-opec and unconventional oil production and lower OPEC annual
The 20 Largest Oil Producing Companies 50 45 40 35 41% Others mb/d 30 25 20 15 10 97% 59%? Companies Owned by OPEC Countries 5 0 3% 1972 2000 2020 The majority of the Top 20 oil production is now operated by companies owned by OPEC countries.
Growing Oil Import Dependence in Asia (%) 1975 1999 2010 OECD Pacific 92 90 92 China 0 28 61 India 58 62 85 In all key Asian regions, reliance on imported oil, in particular from the Middle East, will increase significantly.
Global Gas Supply Gas markets poised for rapid growth Resources are abundant....but getting the gas to market could involve rising costs Costs will depend on distance to market upstream and transport technology government policies New supply chains will promote market integration
Proven Gas Reserves 6.4 7.7 56.7 58.5 8.2 11.6 14.9 World total: 164 tcm at 1 January Ultimate remaining resources (including proven reserves) are an estimated 453-527 tcm
Gas Transport Costs Distances between reserves and markets Labour, rights-of-way and siting costs Pipeline Costs Stronger steels HP technology Deepwater pipe-laying LNG Costs Larger trains High-efficiency turbines de-bottlenecking Transport costs likely to rise in many cases as supply chains lengthen
Europe: Increase in Natural Gas Transportation 3,500 Trillion Cubic Meters - km 3,000 2,500 2,000 1,500 1,000 500 0 2000 2020 Gas transportation distance will increase and security will become more important.
A Global Gas Market? Potential New Gas Supply Chains Europe North America FSU Latin America Asia/Pacific Africa Middle East Pipeline LNG Expanding pipeline networks and new LNG projects will promote regional & global gas market integration
Global Coal Supply Coal remains the largest energy source for power generation Vast and widely dispersed coal reserves contribute to energy price stability and energy security Productivity improvements and competition keep coal supply costs stable Environmental concerns pose the greatest challenge to future coal supply Sustained investment in CCT are crucial to future of coal
Middle East Proven Coal Reserves Africa Latin America South Asia East Asia China Transition Economies OECD Pacific OECD North America OECD Europe 0 50 100 150 200 250 300 billion tonnes 1999 Reserves 1978 Reserves Strong proved coal reserve growth closely correlates with strong coal production growth, which has occurred in regions with competitive commercial coal industries
Global Coal Productivity 4.5 4.0 1000 tonnes/miner/year 3.5 3.0 2.5 2.0 1.5 1.0 80 85 90 92 94 95 96 97 98 99 Advanced technology and economies of scale have reduced supply costs through improved mining productivity
Coal Productivity 12 10 8 6 4 2 0 Australia United States Canada Colombia South Africa United Kingdom Russia Poland Germany India China 1000 tonnes/miner/year Commercial Subsidised Developing Advanced mining technology and management in key coal producing countries will ensure future productivity growth
Coal Prices Less dependent on long-term contracts Rapid evolution of steam-coal spot market More flexible pricing mechanisms Sustained price increases unlikely diverse availability of competitivelypriced coal relative ease of market entry/exit for producers
Impact of Environmental Policies 1 000 900 800 gco2/kwh 700 600 500 400 300 Conventional Supercritical Ultrasupercritical PFBC IGCC CCGT Future investments in coal supply hinge upon improvement of environmental performance
Global Renewable Supply Resources are plentiful but present economic potential is limited Environmental protection and security of supply are the largest benefits Substantial cost reductions will be required Economics could improve if benefits are reflected in costs Government support will be necessary
OECD Renewable Electricity Generation 1999 2020 10% 2% 1%0% 13% 3% 8% 1% 87% 75 1 471 TWh 1 921 TWh Hydro Bioenergy Geothermal Wind Solar, Other Most renewable energy is hydro, but the shares of wind, bioenergy and solar will increase
Renewable Electricity Cost Assessment Current Cost Cost Reductions by 2020 Bioenergy High 10%-15% Wind onshore Relatively low 15%-25% Wind offshore High 20%- 30% Solar PV Very high 30%-50% Solar Thermal Very high 30%+ Geothermal High 10% Hydro Relatively low (higher for mini-hydro) 10% The cost of renewables will continue to fall but the rate and timing are uncertain
Generating Costs OECD Europe 2 1 0 2000 2010 2020 Fossil fuels Onshore high wind Onshore low wind Offshore high wind Offshore low wind Wind may compete with fossil fuels within the next decade but intermittence and site availability could limit development
cents/kwh PV Generating Costs 70 60 50 40 30 20 10 0 10 12 14 16 18 20 22 24 26 Capacity factor (%) Current cost 30% Reduction 50% Reduction 70% Reduction PV is capital intensive and large cost reductions are necessary for it to become competitive
Uranium Supply Abundant reserves No security of supply concern Key factors affecting supply Demand for nuclear fuel Secondary supplies of uranium Future production in FSU countries Government policies are key
Beyond 2020 Technology advances will affect choice & cost of future energy systems Key long-term supply uncertainties: oil - recovery rates & unconventional oil gas - transport costs & hydrates coal - combustion technologies (demand) renewables & nuclear - costs and environmental impact/policies Hydrogen & carbon capture could revolutionise energy supply
WORLD ENERGY OUTLOOK - INSIGHTS Main Conclusions
Fuelling Tomorrow s s World Proven energy reserves can meet demand to 2020 and well beyond The principal uncertainty in the energy supply outlook is cost technology will lower costs but rising demand will have to be met by more distant reserves government policies matter too Prices will also influence timing and amount of investment
Massive Investment will be Needed Acquiring capital for the expansion of energy infrastructure is a major challenge Non-OECD countries will need the bulk of investment The lowering of market barriers will stimulate investment Increased FDI and partnerships reduce investment risk and cost of capital
International Trade and Supply Security Trade in fossil fuels will grow faster than demand Oil - gas trade from Middle East and FSU to US, Europe and Asia will rise supply chains will lengthen security of international sea-lanes and pipelines will become more important Geopolitical implications
Role of Government Regulatory & market frameworks security policies & measures Research & development ENERGY SUPPLY International trade rules Environmental policies & measures Consumer-producer dialogue Government policies will shape the energy-supply landscape