© OECD/IEA 2011

N. Tanaka & J. CorbenWashington, 8 June 2011

© OECD/IEA 2011

The context

Mounting worries over energy security & climate change

Policy uncertainty favours gas

Renewed debate surrounding nuclear power

A transformation of natural gas markets is underway

The North American shale gas boom is spreading

Dramatic & continuing expansion of LNG trade

Increasing concerns about local pollution in emerging economies

© OECD/IEA 2011

Are we entering a Golden Age of Gas ?

Objectives of the report:

Examine factors that could result in a more prominent role for gas

Assess implications for all fuels, energy security & climate change

Key drivers of the GAS Scenario

Widespread development of unconventional gas

Lower gas prices

Gas targets in China’s 12th Five-Year Plan

Reduced growth of nuclear energy

Increased deployment of natural gas vehicles

WEO-2010 New Policies Scenario serves as benchmark for comparison

© OECD/IEA 2011

Gas grows nearly twice as fast as total energy…..

World primary energy demand by fuel in the GAS Scenario

Gas overtakes coal before 2030 and meets one quarter of global energy demand by 2035 – demand grows by 2% annually, compared with just 1.2% for total energy

Other renewables

0

1 000

2 000

3 000

4 000

5 000

1980 1990 2000 2010 2020 2030

Mto

e

Oil

Coal

Biomass

Nuclear

Gas

Hydro

2035

© OECD/IEA 2011

…..mainly displacing coal

World primary energy demand by fuel and scenario

Gas demand in 2035 is 13% higher than in the New Policies Scenario, while demand for coal, nuclear & oil declines

0

1 000

2 000

3 000

4 000

5 000

Oil Gas Coal Renewables Nuclear

Mto

e

2035 GAS Scenario

2035 New Policies

Scenario WEO-2010

2008

© OECD/IEA 2011

Consumption grows most in developing economies

Increase in natural gas consumption in the GAS scenario, 2010-2035

Non-OECD countries account for 80% of demand growth – China alone makes up nearly 30% of global growth & uses as much gas as the EU by 2035

0 100 200 300 400 500 600

Rest of the world

Africa

Russia

Latin America

India

Middle East

OECD total

China

bcm

© OECD/IEA 2011

Power sector drives gas demand

Change in power generation by fuel in the GAS scenario, 2010-2035

Total electricity demand increases 70% by 2035, underpinned by a near doubling of gas-fired generation

-1 000 0 1 000 2 000 3 000 4 000 5 000

Oil

Nuclear

Hydro

Coal

Other renewables

Wind

Gas

TWh

© OECD/IEA 2011

Natural gas: recoverable unconventional resources match conventional

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

© OECD/IEA 2011

Production of unconventional gas becomes widespread

Largest gas producers in the GAS Scenario, 2035

Unconventional gas supplies 40% of the 1.8 tcm increase in gas demand to 2035, making up nearly one quarter of total production

0 200 400 600 800 1 000

Turkmenistan

Saudi Arabia

Australia

Algeria

Canada

Qatar

Iran

China

United States

Russia Conventional

Unconventional

bcm

© OECD/IEA 2011

Growing LNG enhances supply security & market flexibility

Projected LNG liquefaction capacity by country

Trade in natural gas between major regions doubles to over 1 tcm by 2035, with Australia becoming a leading LNG supplier

0

100

200

300

400

500

600

2008 2009 2010 2011 2012 2013 2014 2015 2020

Europe

Other Africa

Other Middle East

Russia

Americas

Algeria

Indonesia

Nigeria

Other Asia

Qatar

Australia

bcm

© OECD/IEA 2011

CO2 emissions drop, but only slightly

CO2 emissions in the GAS Scenario compared with the New Policies Scenario, 2035

CO2 emissions are just 160 Mt lower than in the New Policies Scenario in 2035. Substitution of coal & oil by gas cuts emissions by 740 Mt, but this is largely offset by other effects

34.0

34.5

35.0

35.5

36.0

36.5

New

Policies

Scenario

GAS

Scenario

Gt

Less nuclear

Less renewables

Higher energy demand

Increase due to:

Reduction due to:

Substitution of coal & oil by gas

© OECD/IEA 2011

Environmental concerns with unconventional gas

Existing regulatory regimes are being tested

Hydraulic fracturing: water use, contamination & disposal

Greenhouse-gas emissions

But regulatory & operational best practices can mitigate the risks

Ensuring gas, water & chemicals cannot enter other formations

Minimising water use

Treating & disposing of water appropriately

Limiting gas venting

Using best practice, “well-to-burner” emissions from shale gas production are 3.5% higher than from conventional gas

© OECD/IEA 2011

Key messages

Market uncertainties create opportunities for natural gas

Greater gas use could enhance regional energy security

New supplies & trade routes emerge

Gas has a role to play in a low-carbon energy economy, but increased use in itself is far from sufficient to reach the 2 C goal

Unconventional resources could boost supplies substantially

But best practice regulation is essential to mitigate environmental risks

In the GAS Scenario, demand for gas grows more than 50% by 2035, providing over 25% of world energy…..

.…. surely a prospect to designate the Golden Age of Gas

© OECD/IEA 2011

N. Tanaka & J. CorbenWashington, 8 June 2011