© OECD/IEA - 2006

INTERNATIONAL ENERGY AGENCY

World Energy World Energy Outlook 2006Outlook 2006

Dr. Teresa MalyshevInternational Energy Agency

© OECD/IEA - 2006

The Reference Scenario: World Primary Energy Demand

Global demand grows by more than half over the next quarter of acentury, with coal use rising most in absolute terms

Oil

Coal

Gas

BiomassNuclear

Other renewables

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

1970 1980 1990 2000 2010 2020 2030

Mto

e

© OECD/IEA - 2006

Reference Scenario:

Primary Oil Demand

Most of the increase in oil demand comes from developing countries, where economic growth – the main driver of oil demand – is most rapid

0

20

40

60

80

100

120

1980 2005 2020 2030

mb/

d

OECD Transition economies Developing Asia Other developing countries

© OECD/IEA - 2006

Reference Scenario: Incremental Oil Demand, 2004-2030

Most of the increase in oil demand comes from developing countries, where economic growth – the main driver of oil demand – is most rapid

Power generation Industry Transport Other-5

0

5

10

15

20

25mb

/d

OECD Transition economiesDeveloping Asia Rest of developing countries

© OECD/IEA - 2006

Reference Scenario:Increase in World Oil Supply, 2004-2030

The share of OPEC in world oil supply increases sharply as conventional non-OPEC production peaks towards the middle of next decade

S.Arabia

Iraq

Iran

Other

0

5

10

15

20

25

OPEC conventional Non-conventional Non-OPECconventional

mb/d

© OECD/IEA - 2006

Reference Scenario:World Inter-regional Natural Gas Trade

Global gas trade doubles, with two-thirds of the increase coming from Russia, the Middle East & North Africa – mostly as LNG

0

200

400

600

800

1 000

2004 2010 2015 2020 2030

bcm

Pipelines LNG

© OECD/IEA - 2006

Reference Scenario:Annual Increase in Coal Demand

Global coal demand in the recent years has grown much faster than previously – mainly driven by China

millio

n ton

nes

-100

0

100

200

300

400

500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005China Rest of the world

© OECD/IEA - 2006

Reference Scenario:Energy-Related CO2 Emissions by Fuel

Half of the projected increase in emissions comes from new powerstations, mainly using coal & mainly located in China & India

Increase of 14.3 Gt (55%)

0

10

20

30

40

50

1990 2004 2010 2015 2030

billio

n ton

nes

Coal Oil Gas

© OECD/IEA - 2006

Reference Scenario:Energy-Related CO2 emissions by Region

China overtakes the US as the world’s biggest emitter before 2010, though its per capita emissions reach just 60% of those of the OECD in 2030

0

3

6

9

12

15

1990 2000 2010 2020 2030

Giga

tonne

sof

CO2

United States

China

Rest of non-OECD

Rest of OECD

© OECD/IEA - 2006

Oil 21%

Electricity56%

Coal 3%Gas 19%

Reference Scenario:Cumulative Investment, 2005-2030

Investment needs exceed $20 trillion – $3 trillion more than previously projected, mainly because of higher unit costs

$20.2 trillion (in $2005)

$4.3 trillion$11.3 trillion

$3.9 trillion$0.6 trillion

Biofuels 1%

© OECD/IEA - 2006

Global Upstream Oil & Gas Investment: Impact of Cost Inflation

Annual upstream investment doubled to $225 billion between 2000 and 2005, but most of the increase was due to cost inflation

actual forecast

Year 2000

50

100

150

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250

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2000 2002 2004 2006 2008 2010

index

(yea

r 200

0 = 10

0)

Nominal Adjusted for cost inflation

© OECD/IEA - 2006

The Energy Future Absent New Policies

Security of oil supply is threatenedOil production in non-OPEC countries is set to peak

Production will be increasingly concentrated in a small number of countries

Gas security is also a growing concernEurope’s production has already peaked - US to follow

Import dependence in both regions & other key regions will grow absent new policies

Investment over the next decade will lock in technology that will remain in use for up to 60 years

© OECD/IEA - 2006

Alternative Policy Scenario: Mapping a Better Energy Future

Analyses impact of government policies under consideration to enhance security & curb emissionsDemonstrates that we can significantly reduce growth in energy demand & emissions and stimulate alternative energy production

Oil demand is reduced by 13 mb/d in 2030 - equivalent to current output of Saudi Arabia & IranOil savings in 2015 savings reach 5 mb/d CO2 emissions are 6.3 Gt (16%) lower in 2030 –equivalent to the current emissions of US and Canada

Delaying action by 10 years would reduce the impact on emissions in 2030 by three-quarters

© OECD/IEA - 2006

26

28

30

32

34

36

2005 2010 2015 2020 2025 2030

mb/d

Reference Scenario Alternative Policy Scenario

1.8 mb/d

5.2 mb/d

Alternative Policy Scenario: OECD Oil Imports

In stark contrast with the Reference Scenario, OECD oil imports level off soon after 2015 & then begin to decline

© OECD/IEA - 2006

The Alternative Policy Scenario:Global Oil Supply

OPEC’s share of global oil production rises from 40% now to 43% in 2030 in the APS, compared with a jump to 49% in the RS

0

20

40

60

80

100

120

2005 2015 2030

mb/d

35%

40%

45%

50%OPEC market share

Alternative Policy Scenario Reduction compared with Reference ScenarioOPEC share in APS (right axis) OPEC share in RS (right axis)

© OECD/IEA - 2006

The Alternative Policy Scenario:Gas Imports, 2004-2030

Gas imports in the main consuming regions are significantly lower in the APS compared with the RS

- 46 bcm

- 90 bcm

- 33 bcm

0

200

400

600

800

United States European Union Japan

bcm

2004 Reference Scenario 2030 Alternative Policy Scenario 2030

© OECD/IEA - 2006

Improved end-use efficiency accounts for over two-thirds of avoided emissions in 2030 in the APS

Alternative Policy Scenario

Reference Scenario

Increased nuclear (10%)Increased renewables (12%)Power sector efficiency & fuel (13%) Electricity end-use efficiency (29%)

Fossil-fuel end-use efficiency (36%)

26

30

34

38

42

2004 2010 2015 2020 2025 2030

Gtof

CO2

The Alternative Policy Scenario:Key Policies for CO2 Reduction

© OECD/IEA - 2006

The Alternative Policy Scenario:Cost Effectiveness of Policies

Total energy investment – from production to consumption – are lower than in the RSConsumers spend $2.4 trillion more in 2005-2030 in more efficient cars, refrigerators etc..but producers need to spend almost $3 trillion less

Each $1 invested in more efficient electrical appliances saves $2.2 in investment in power plants & networksEach $1 invested in more efficient oil-consuming equipments (mainly cars) saves $2.4 in oil imports

The higher initial investments by consumers are more than outweighed by fuel-cost savings

© OECD/IEA - 2006

Outlook for Biofuels

Interest in biofuels is soaringBiofuels can help address twin threats of growing energy insecurity & climate change through

Increased diversity of geographic & fuel sourcesLower greenhouse-gas emissions - depending on how they are produced

Higher oil prices have made biofuels more competitive, but further cost reductions are neededAvailability of arable land will constrain biofuels potential in the medium termLong-term prospects hinge on new technology

© OECD/IEA - 2006

0 2 4 6 8 10

Brazil

US

European Union

China

India

Canada

Rest of world

Mtoe

Biofuels Production in 2005

The United States is thought to have overtaken Brazil in 2006 as the world’s biggest producer of biofuels

© OECD/IEA - 2006

Share of Biofuels in Total Road-Transport Fuel Consumption, 2004

Biofuels currently meet less than 1% of road-fuel demand worldwide, but close to 14% in Brazil

0% 2% 4% 6% 8% 10% 12% 14%

Brazil

Cuba

Sweden

Germany

United States

World

France

Czech Republic

Italy

Canada

© OECD/IEA - 2006

Share of Biofuels in Road-Transport Fuel Consumption

Biofuels are set to play a much larger role in meeting world road-transport fuel demand

0%

4%

8%

12%

16%

20%

24%

28%

32%

World United States European Union Brazil2004 2030 Reference Scenario 2030 Alternative Policy Scenario

© OECD/IEA - 2006

Outlook for Biofuels Supply Costs

Significant production cost reductions are expected – especially for 2nd-generation ligno-cellulosic ethanol

Indicative Biofuels Costs vs. Gasoline and Diesel Prices

0.00

0.20

0.40

0.60

0.80

1.00

1.20

Ethanol:sugarcane

Ethanol:maize

Ethanol:beet

Ethanol:ligno-

cellulosic

Biodiesel:vegetable

oil

Biodiesel:FT

synthesis

dolla

rs pe

r litre

20052030

Range of gasoline spot price (2000-2006)

© OECD/IEA - 2006

1st-Generation Biofuels Production Costs

Production costs are expected to drop in all regions, with Brazil remaining the lowest-cost producer

0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9

20052030 Reference Scenario

2030 Alternative Policy Scenario

20052030 Reference Scenario

2030 Alternative Policy Scenario

20052030 Reference Scenario

2030 Alternative Policy Scenario

dollars (2005) per litre of gasoline equivalentFeedstock (net) Chemicals & energyOperating & maintenance Capital

European Union

United States

Brazil

© OECD/IEA - 2006

Land Requirements for Biofuels

A significant proportion of the world’s arable land is turned over to biofuels production – even in the Reference Scenario

0%

4%

8%

12%

16%

US &Canada

EU OECDPacific

DevelopingAsia

LatinAmerica

World

shar

e of

ara

ble la

nd

2004 2030 Reference Scenario2030 Alternative Policy Scenario 2030 2nd Generation Case

© OECD/IEA - 2006

Summing Up

The Reference Scenario projects a vulnerable, dirty and expensive global energy system

The WEO maps out a cleaner, cleverer and more competitive energy future based on new policies

Strong political will and urgent government action is needed to create clear incentives to change existing investment patterns

Trade and subsidy policies will be critical to further boost market share of biofuels

New technologies could allow biofuels to play a much bigger role in the longer term

© OECD/IEA - 2006

INTERNATIONAL ENERGY AGENCY

Thank you

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