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© OECD/IEA 2014
Dr. Fatih BIROL IEA Chief Economist
Tokyo, 17 February 2015
© OECD/IEA 2014
Signs of stress in the global energy system
Current calm in markets should not disguise difficult road ahead
Turmoil in the Middle East raises doubts over future oil balance
Resurgent debate over the security of gas supply to Europe
Mixed signals in run-up to crucial climate summit in Paris in 2015
Global CO2 emissions still rising, with most emitters on an upward path
At $550 billion, fossil fuel subsidies over four-times those to renewables
Increasing emphasis on energy efficiency starting to bring results
Will change in global energy be led by policies, or driven by events?
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Changing dynamics of global demand
Energy demand by region
As China slows, then India, Southeast Asia, the Middle East and parts of Africa & Latin America take over as the engines of global energy demand growth.
2 000
4 000
6 000
8 000
10 000
1990 2000 2010 2020 2030 2040
Mtoe
OECD
Rest of world
China
China
Rest of world
OECD
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United States holds a strong position on energy costs
Weighted average cost of energy paid by consumers
Economies face higher costs, but the pace of change varies: China overtakes the US, costs double in India & remain high in the European Union & Japan
United States
500
1 000
1 500
2 000
European Union
Japan China India
$/toe
2008
2013
2040
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2013 2020 2030 2040 2015
Instability in the Middle East a major risk to oil markets
Oil production growth
The short-term picture of a well-supplied market should not obscure future risks as demand rises to 104 mb/d & reliance grows on Iraq & the rest of the Middle East
+5
+10
+15
-5
2013 2020 2030 2040 2015
Net decline in output from other producers
Increase to 2040: 14 mb/d
mb/d
Increase to 2040: 14 mb/d
Middle East
Brazil
Canada United States
& reliance grows on Iraq & the rest of the Middle East
in United States, Canada, Brazil & the Middle East
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Looking ahead on the oil price
Against a backdrop of weaker demand, buoyant supply in North America has brought prices down – but can it keep them down?
Lower prices are starting to curtail upstream spending plans, with implications for future supply
Over time, squeezed cash flow would constrain the capacity of North America & Brazil to act as engines of global supply growth
An oil price at current levels could provide some breathing space to major oil importers, boosting demand & GDP
It would also accelerate reliance on low-cost producers in the Middle East, some of which face major investment challenges
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The oil price is hitting 2015 upstream spending plans
Global upstream oil and gas investment
Announced spending cuts for 2015 are highest (at 20-40%) in North America & Brazil; for US tight oil, a decision to stop drilling feeds through quickly into production levels
250
500
750
Bill
ion
do
llars
2012 2013 2014 2015 (est.)
17%
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Unconventional gas production a rising share of the mix
World natural gas production by type
Most of the growth in gas supply comes from unconventional sources; by 2040, more than half of total unconventional output is produced outside the US and Canada
1 000
2 000
3 000
4 000
5 000
6 000
2012 2020 2025 2030 2035 2040
bcm
10%
20%
30%
40%
50%
60% Other
Tight gas
Coalbed methane
Shale gas
Conventional
Share of unconventional (right axis)
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Gas on the way to become first fuel, with role of LNG on the rise
Main sources of regional LNG supply
Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices
Middle East
Australia
US & Canada
East Africa
Russia
North Africa West Africa
Other
Middle East
Southeast Asia
West Africa Australia
North Africa Other
100
200
300
400
500
600 bcm
2012 2040
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New markets open up in Asia
Natural gas imports by source to selected Asian markets
Asia-Pacific becomes the main destination for internationally traded gas, with existing importers being joined by China, India and a host of smaller consumers
50
100
150
200
250
2012
bcm
20%
40%
60%
80%
100% Other
Australia
North America
Middle East
Southeast Asia
Sub-Saharan Africa
North Africa
Caspian
Russia
OECD Asia China India
2012 2012 2025 2040 2025 2040 2025 2040
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Nuclear capacity grows by 60%, but no nuclear renaissance in sight
Net capacity change in key regions, 2013-2040
By 2040, an expanded nuclear fleet has saved almost 4 years of current CO2 emissions & for some countries has improved energy security & balances of energy trade
-20 0 20 40 60 80 100 120 140
European Union
Japan
United States
Russia
India
China
GW
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50
100
150
200
1990 2000 2010 2020 2030 2040
GW
2013
Nuclear power: public concerns must be heard and addressed
Retirements of nuclear power capacity 1990-2040
Key public concerns include plant operation, decommissioning & waste management;
Spent nuclear fuel
European Union United States Japan Others
38% of today’s capacity to retire
by 2040
1971-2012
350 thousand tonnes 1971-2040
705 thousand tonnes
1971-2040: 705 thousand tonnes
United States European
Union
Japan China
Can
ada Russia Korea
Ind
ia
Other
By 2040, almost 200 reactors are retired & the amount of spent fuel doubles
& the amount of spent fuel doubles
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The entire global CO2 budget to 2100 is used up by 2040 – Paris must send a strong signal for increasing low-carbon investment four times beyond current levels
The 2 °C goal – last chance in Paris?
World CO2 budget for 2 °C ~2300 Gt
25%
50%
75%
100%
Share of budget used in Central Scenario
1900-2012
2012-2040
Average annual low-carbon investment, 2014-2040
Central Scenario
For 2°C target
2013
CCS
Nuclear
Renewables
Efficiency
The entire global CO2 budget to 2100 is used up by 2040
0.5
1.0
1.5
2.0
Trill
ion
do
llars
(2
01
3)
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0.2
0.4
0.6
0.8
1.0
1.2
1990 2000 2010 2020 2030 2040
Tho
usa
nd
TW
h
Renewables
Nuclear
Oil
Gas
Coal
historical projected
Japan’s power system: moving to a more diverse & sustainable mix
100
200
300
400
500
600
CO2 electricity emissions intensity (right axis)
gCO
2/kW
h
Japan electricity generation by source and CO2 intensity
With nuclear plants expected to restart & increased use of renewables, Japan’s electricity mix becomes much more diversified by 2040
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20%
40%
60%
80%
100%
2012 CentralScenario
2040
LowNuclearCase:2040
Nuclear
Renewables
Oil
Gas
Coal
The Low Nuclear Case: implications for Japan
Change in Japan’s energy indicators in Low Nuclear Case relative to Central Scenario
In the Low Nuclear Case, Japan faces greater risks to its energy security, a $450 billion increase in fuel import bills & a 14% rise in total CO2 emissions
-50%
-40%
-30%
-20%
-10%
10%
20%
30%
40%
Net energyself-sufficiency
in 2040
Cumulativespending
on natural gasand coal imports
Energy-relatedCO2 emissions
in 2040
Power sectorCO2 emissions
in 2040
Japan’s power generation mix in the Central Scenario and Low Nuclear Case
© OECD/IEA 2014
Navigating a stormy energy future
Geopolitical & market uncertainties are set to propel energy security high up the global energy agenda
Nuclear power grows, with the increase concentrated in a few countries – costs, financing & public concerns are the key barriers
Without clear direction from Paris in 2015, the world is set for warming well beyond the 2 °C goal
The unconventional revolution will take time to spread: developments in China are critical to the global outlook
The rise in LNG is set to have a tangible impact on international
market efficiency & security
