© OECD/IEA - 2006

INTERNATIONAL ENERGY AGENCY

World Energy World Energy Outlook Outlook

Energy trends Energy trends and and

challenges to challenges to 20302030 Dr. Fabien Roques

fabien.roques@iea.orgEconomic Analysis Division

International Energy Agency

Presentation to the French-Serbian European Summer University

20 October 2006

© OECD/IEA - 2006

Outline

Energy trends and strategic challenges – ‘Reference Scenario’Secuity of supplyCO2 emissionsEnergy and development Impact of supply side ‘Deferred investment’

scenario

World ‘Alternative Policies Scenario’ Impact of policies under consideration

© OECD/IEA - 2006

The Context

The world is facing twin energy threatsInadequate and insecure suppliesEnvironmental damage, including climate

changeThere is an urgent need to curb the growth

in fossil-fuel demand & related emissionsWEO-2006 is a direct response to G8 request

for advice on alternative energy scenariosWEO-2006 will be released on 7 November

=> All numbers presented are based on WEO 2004 and WEO 2005

© OECD/IEA - 2006

Scenario Approach

Two scenarios depict markedly different energy futures

Reference Scenario Incorporates assumptions about economic & population

growth, energy prices, technology & public policies Does not take account of any possible, potential or even

likely new energy & environment policies

World Alternative Policy Scenario Assumes environmental & energy-security policies now

under consideration are adopted Impact on prices, global energy balance & call on MENA

oil/ gas

© OECD/IEA - 2006

Energy Trends & Strategic ChallengesReference Scenario

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World Primary Energy Demand

Oil and gas together account for more than 60% of the growth in energy demand between now and 2030 in the Reference Scenario

Coal

Oil

Gas

Other renewables Nuclear Hydro 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

1971

© OECD/IEA - 2006

World Primary Energy Demand by Fuel

Oil, gas and coal together account for 83% of the growth in energy

demand between now and 2030 in the Reference Scenario

Oil

Natural gas

Coal

Nuclear power

Hydro power

Other renewables

0

1 000

2 000

3 000

4 000

5 000

6 000

1970 1980 1990 2000 2010 2020 2030

Mto

e

© OECD/IEA - 2006

Regional Shares in World Primary Energy Demand

Two-thirds of the increase in world demand between 2003 and 2030 comes from developing countries, especially in Asia

62%51%

42%

16%

10%

9%

22%

39%49%

0%

20%

40%

60%

80%

100%

1971 2003 2030

OECD Transition economies Developing countries

© OECD/IEA - 2006

Challenge 1:Security of Supply

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Reference Scenario:

Implications for Energy Security

The threat to the world’s energy security is real & growing The share of transport in total oil use rises in all

regions Reliance on a small number of oil producers –

notably in OPEC Middle East increases sharply OECD & developing Asian oil & gas imports set to

grow further

Will the investment come?

© OECD/IEA - 2006

Age of Installed Capacity in Europe

0

20

40

60

80

100

120

140G

W

Oil

Gas

Coal

Nuclear

< 10 years 10 - 20 years 20 - 30 years > 30 years

Europe's power plants are ageing: more than half thecurrent capacity could be retired by 2030

© OECD/IEA - 2006

Cumulative Energy Investment in the Reference Scenario, 2004-2030

More than 60% of total energy supply investments will go into the power sector

0 1 000 2 000 3 000 4 000

OECD North America

OECD Europe

OECD Pacific

Transition economies

China

Other Asia

Latin America

North Africa

Other Africa

Middle East

billion dollars (2004)

Oil Gas Electricity Coal

© OECD/IEA - 2006

EU-25 Electricity Generation, 1990-2030

0

500

1000

1500

2000

2500

3000

3500

4000

4500

1990 1995 2000 2005 2010 2015 2020 2025 2030

Coal Oil Gas Nuclear Hydro Wind Other renewables

© OECD/IEA - 2006

World Renewables Electricity

Generation

The share of non-hydro renewables will triple by 2030, while hydropower will grow modestly

0%

5%

10%

15%

20%

25%

1990 1992 1994 1996 1998 2000 2002 2010 2020 2030

Other renewables Hydro

© OECD/IEA - 2006

EU Gas Supply Balance

Rising demand – mainly for power generation – and declining output will cause net imports to surge

0

200

400

600

800

1980 1990 2004 2010 2020 2030

bcm

Production Net imports

© OECD/IEA - 2006

EU Fossil Fuel Net Imports

The EU will become increasingly dependent on energy imports, especially oil and natural gas

0

300

600

900

1 200

1 500

1990 2002 2010 2020 2030

Mto

e

Coal Oil Gas

© OECD/IEA - 2006

World Oil Production Shifts Away from OECD

Global oil production climbs from 82 mb/d in 2004 to 115 mb/d in 2030; OECD share falls from 25% to 12%

OECD

MENA

Other

NCO

41.2 mb/ d

50.5 mb/ d

13.5 mb/ d

30.9 mb/ d

29.0 mb/ d

20.2 mb/ d

2004 2030

2.2 mb/ d10.2 mb/ d

© OECD/IEA - 2006

MENA Net Oil Exports

MENA plays an increasingly important role in international trade, its net exports surging from 22 mb/d in 2004 to 39 mb/d

in 2030

mb/d

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MENA Crude Oil & NGL Production by Country

MENA’s share of world oil production rises from 35% in 2004 to 44% in 2030 in the RS, with Saudi production rising to over 18 mb/d

0

10

20

30

40

50

1970 1980 1990 2000 2010 2020 2030

mb/

d

Iran Iraq Kuwait Other Middle East Saudi Arabia UAE North Africa

© OECD/IEA - 2006

Saudi Arabia’s Oil Production by Source in the Reference Scenario

Based on its reserves and global demand trends, Saudi oil production is projected to reach 18 mb/d in 2030

0

4

8

12

16

20

1970 1980 1990 2000 2010 2020 2030

mb

/d

Currently producing fields Fields awaiting development

Reserve additions and new discoveries Total production

© OECD/IEA - 2006

MENA Oil Exports through the “Dire Straits”

Much of the additional oil and LNG exports from MENA in the future will be shipped through just three maritime routes

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World Proven Oil and Gas Reserves

MENA share of global oil and gas reserves is much higher than its share of current production, suggesting strong potential for

growth

Natural gas

Other non-MENA28%

Iran16%

Other MENA8%

Saudi Arabia

4%

Qatar14%

UAE8%

Russia27%

Oil

Iraq9%

Iran10%

Kuwait8%

Other MENA14%

Saudi Arabia20%

Non-MENA39%

© OECD/IEA - 2006

Proven Natural Gas Reserves

Gas reserves, concentrated in the Middle East & the transition economies, are equal to 66 years of current

production

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Major Net Inter-Regional Gas Trade Flows

Inter-regional gas trade triples by 2030, with most new exports coming from the Middle East, Africa and

Russia

© OECD/IEA - 2006

Challenge 2:Carbon Dioxide Emissions

© OECD/IEA - 2006

0

4 000

8 000

12 000

16 000

20 000

1970 1980 1990 2000 2010 2020 2030

Mt o

f CO

2

OECD Transition economies Developing countries

Global emissions grow 50% between now and 2030, and developing countries’ emissions will overtake OECD’s in

the 2020s

World Energy-Related CO2 Emissions

© OECD/IEA - 2006

CO2 Increase, 2003-2030

OECD CO2 additions only three quarters of Chinese CO2 rise, but OECD emissions per capita still two times higher in 2030

0

1 000

2 000

3 000

4 000

China OECD

million

ton

nes

NorthAmerica

Pacific

Europe

0

3

6

9

12

15to

nn

es p

er c

ap

ita

2003

2030

2003

2030

© OECD/IEA - 2006

Energy-Related CO2 Emissions by Region

Global emissions grow by just over half between 2003 & 2030, with the bulk of the increase coming from developing countries

OECD52%

China16%

India4%

Other11%

MENA6%

Transition

economies

11%OECD42%

China19%

India6%

Other16%

Transition

economies

9%

MENA8%

24 Gt

20302003

37 Gt

© OECD/IEA - 2006

Challenge 3:Energy and Poverty

© OECD/IEA - 2006

Energy Use & Human Development

Energy is a prerequisite to economic & human development, but the relationship is very complex

In practice, the level of human development is

linked to Absolute amount of energy used per capita Share of modern energy services – especially

electricity – in energy use

© OECD/IEA - 2006

HDI & Primary Energy Demand per Capita, 2002

There is a strong link between per capita energy use & the UN’s HDI - particularly for the least developed countries

0.0

0.2

0.4

0.6

0.8

1.0

0 2 4 6 8 10 12 14

Primary energy demand per capita (toe/cap)

HD

I

OECDNon-OECD

© OECD/IEA - 2006

Per Capita Primary Energy Use, 2030

Per capita energy use remains much lower in developing countries

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Bringing Modern Energy to the World’s Poor

Many poor households will still be using dirty & inefficient traditional fuels for cooking in 2030 Number of people rises from 2.5 billion today to 2.7

billion UN Millennium Project recommendation to halve number

by 2015 will not be met on current trends

Access to electricity is set to improve, but not fast enough 1.6 billion people have no access today, falling only

slightly to 1.5 billion in 2015 & 1.4 billion in 2030 Needs to fall to 1 billion to achieve Millennium

Development Goal

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Electricity Deprivation

In 2030, if no new policies are implemented, there will still be 1.4 billion people without electricity

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Implications of deferred investment in MENA countries

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Deferred Investment Scenario

How would global energy markets evolve if investment MENA upstream oil industry grew slower than in the Reference Scenario?

Investment is assumed to remain constant at its share of historical GDP in each country

MENA oil production is lower compared to the Reference Scenario, and the gap is widening over time

Oil prices are driven higher - an increase of 32% over the Reference Scenario in 2030 - dragging up gas, coal and electricity prices

MENA gas production is also lower compared to the Reference Scenario due to Reduced global gas demand & call on MENA gas Lower associated oil/gas output

© OECD/IEA - 2006

MENA Crude Oil Production (including NGLs)

MENA’s share of global oil production falls from 35% in 2004 to 33% in the DIS. Saudi production reaches 14 mb/d in 2030

Difference

0

10

20

30

40

50

60

1970 1980 1990 2000 2010 2020 2030

mb/

d

Reference Scenario Deferred Investment Scenario

© OECD/IEA - 2006

MENA Net Natural Gas Exports

MENA gas exports are much lower in the DIS, as higher gas prices & lower GDP choke off demand in the main importing

regions

0

100

200

300

400

500

2003 2010 2020 2030

bcm

Reference Scenario

24 bcm

116 bcm

206 bcm

Deferred Investment Scenario

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World Alternative Policies Scenario

© OECD/IEA - 2006

Mapping Out an Alternative Energy Future

Reference Scenario trends are not set in stoneThe Alternative Policy Scenario analyses

impact of government policies under consideration

Responds to call to IEA from G8 & IEA ministers To “advise on alternative energy scenarios and

strategies aimed at a clean, clever and competitive energy future"

1 400+ different policies worldwide to Improve efficiency in energy production & use Increase reliance on non-fossil fuels Bolster output of oil & gas in net importing countries

Macroeconomic, population & oil/gas price assumptions are as per the Reference Scenario

© OECD/IEA - 2006

Examples of Policies included in the Alternative Scenario

Power generation Renewable energy (e.g., EU renewables directive) Cleaner coal technology (e.g., China and India) Nuclear

Transport sector Improve vehicle fuel efficiency (e.g. strengthening of US

CAFE standards, extension of Chinese standards) Increased sales of alternative fuel vehicles and fuels

(e.g., biofuels in Europe, Brazil)

Residential and commercial sectors Building codes (e.g., US) Efficiency standards and labelling for appliances (e.g.,

India)

© OECD/IEA - 2006

Oil/Gas Demand in the Reference and Alternative Policy Scenarios

Oil & gas demand in the Alternative Scenario are both 10% lower in 2030 due to significant energy savings and a shift in

the energy mix

2004 2030 Reference Scenario 2030 Alternative Scenario

0

20

40

60

80

100

120

140

Oil Gas

mb/

d

0

1000

2000

3000

4000

5000

6000bcm

12.1 mb/d500 bcm

© OECD/IEA - 2006

Reduction in Oil Demand in the Alternative vs. Reference Scenario, 2030

Oil savings in 2030 would be equivalent to the combined current production of Saudi Arabia, UAE

and Nigeria

Transport64%

Other4%

Industry13%

Power generation

8%

Residential and services

11%

Oil savings = 12.8 mb/d

Transport64%

Other4%

Industry13%

Power generation

8%

Residential and services

11%

Oil savings = 12.8 mb/d

© OECD/IEA - 2006

Global Energy-Related CO2 Emissions in the Reference and Alternative Policy Scenarios

20 000

25 000

30 000

35 000

40 000

1990 2000 2010 2020 2030

mill

ion

to

nn

es

of

CO

2

Coal Oil Gas Alternative Policy Scenario Reference Scenario

In 2030, CO2 emissions are 16% lower than in the Reference Scenario, but are still more than 50% higher than 1990

© OECD/IEA - 2006

Contributory Factors in CO2 Reduction 2002-2030

Improvements in end-use efficiency contribute for more than half of decrease in emissions, and renewables use

for 20%

0%

20%

40%

60%

80%

100%

49%

10%

21%

12%

8%

OECD

63%

1%

21%

15%

Transition economies

67%

7%

17%

5%4%

Developing countries

58%

World

End-use efficiency gains

7%

Fuel switching in end uses

20%

Increased renewables in power generation

10%

Increased nuclear in power generation

5%

Changes in the fossil-fuel mix in power generation

© OECD/IEA - 2006

Power Sector CO2 Emissions

In 2030, coal plants in developing countries will produce more CO2 than the entire power sector in the OECD

0 2 000 4 000 6 000 8 000 10 000 12 000

Oil

Gas

Coal

Oil

Gas

Coal

Mt of CO2

OECD Developing countries Transition economies

2002

2030

© OECD/IEA - 2006

Making the Alternative Policy Scenario a Reality

Formidable hurdles exist to the adoption & implementation of the Alternative Policy Scenario

It will require considerable political to push through those policies

Private-sector support & international cooperation will be essential

Action is needed urgently Delaying implementation by a decade would reduce cut

in cumulative emissions to 2030 from 8% to 2% Delays in stepping up R&D – particularly carbon capture

& storage – would hinder cutting emissions after 2030

© OECD/IEA - 2006

Key Results

If governments stick with current policies, global energy needs will be more than 50% higher in 2030 than today

Projected market trends raise serious concerns Increased risk for energy security Rising environmental concerns Persistent energy poverty

Further underinvestment in oil and gas would drive up prices & depress global GDP growth, eventually harming producers too

More vigorous policies would curb rate of increase in energy demand and emission significantly

© OECD/IEA - 2006

Summing Up

The need to diversify energy sources & mitigate emissions is more urgent than ever

Global energy system is on an unsustainable path Strong new policies could sharply reduce the rate of

increase in demand & emissions Economic cost of these policies would be more than

outweighed by the economic benefits alone In the longer term, technology development will be critical

to a sustainable energy system Governments also need to tackle market barriers to ensure

investment is forthcoming Rich countries need to help developing countries address

energy poverty

© OECD/IEA - 2006

INTERNATIONAL ENERGY AGENCY

Thank you

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