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Hideshi EMOTO Senior Energy Analyst Economic Analysis Division International Energy Agency INTERNATIONAL ENERGY AGENCY © OECD/IEA 2006 Reference Scenario: No new government policies are adopted Alternative Policy Scenario: Energysecurity & climatechange policies now under consideration are adopted The world is facing twin energy threats Inadequate and insecure supplies Environmental damage, including climate change © OECD/IEA 2006
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© OECD/IEA - 2006
INTERNATIONAL ENERGY AGENCY
World Energy World Energy Outlook 2006Outlook 2006
Hideshi EMOTOSenior Energy Analyst
Economic Analysis DivisionInternational Energy Agency
© OECD/IEA - 2006
The Context
The world is facing twin energy threats Inadequate and insecure supplies Environmental damage, including climate change
There is an urgent need to curb the growth in fossil-fuel demand & related emissions
WEO-2006 is a direct response to G8 request for advice on alternative energy scenarios
Two scenarios depict markedly different energy futures to 2030 Reference Scenario: No new government
policies are adopted Alternative Policy Scenario: Energy-security &
climate-change policies now under consideration are adopted
© OECD/IEA - 2006
Reference Scenario: World Primary Energy Demand
Global demand grows by more than half over the next quarter of a century, 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 2015 2030
mb/
d
OECD Transition economies Developing Asia Other developing countries
© OECD/IEA - 2006
Reference Scenario: Share of Transport in Total Oil use
The rising share of transport – which is relatively price inelastic – makes oil demand less responsive to movements in
international oil prices
10%
20%
30%
40%
50%
60%
70%
World OECD Non-OECD China Rest ofdevelopingcountries
Transitioneconomies
1980 2004 2030
© OECD/IEA - 2006
Economic Value of Energy Subsidies in non-OECD Countries, 2005
World subsidies amount to well over $250 billion per year – Russia has the largest subsidies, amounting to $40 billion per
year
0 5 10 15 20 25 30 35 40 45
Kazakhstan
Venezuela
Egypt
Ukraine
Indonesia
India
Saudi Arabia
China
Iran
Russia
billion dollarsOil products Natural gas Electricity Coal
© OECD/IEA - 2006
Proven Oil Reserves
The Middle East’s share of global oil reserves is much higher than its share of current production, suggesting strong potential
for growth
Iraq9%
Kuwait8%
Saudi Arabia20%
Iran10%
Rest of the world43%
Other Middle East10%
© OECD/IEA - 2006
Reference Scenario: World Primary Oil Supply
OPEC takes the lion’s share of oil market growth as conventional non-OPEC production peaks, but non-conventional oil plays a
growing role
* Including NGLs
0
20
40
60
80
100
120
2000 2005 2015 2030
mb/
d
30%
35%
40%
45%
50%
Middle East OPEC crude* Other OPEC crude*Non-OPEC crude* Non-conventional oilOPEC market share
© OECD/IEA - 2006
Reference Scenario: World Primary Natural Gas Demand by Sector
The power sector accounts for more than half of the increase in primary gas demand worldwide
67% growth
0
1 000
2 000
3 000
4 000
5 000
1990 2000 2004 2010 2015 2030
bcm
Power generation GTL Industry Residential and services Other sectors
© OECD/IEA - 2006
Increase in the Net Oil Import Bill in 2005 over 2002
The increase in international energy prices raised the cost of net oil and gas imports in developing countries
-1% 0% 1% 2% 3%
Oil-importing Sub-Saharan Africa
Developing Asia
OECD Pacific
OECD Europe
OECD North America
share of GDP in 2002GasOil
© OECD/IEA - 2006
Trends in Coal Demand
Global coal demand in the last two years has grown much faster than previously – mainly driven by China
World China0
100
200
300
400
500
600
700
800m
illion
tonn
es
Increase 1993-2003 Increase 2003-2005
© OECD/IEA - 2006
Reference Scenario: Energy-Related CO2 Emissions by Fuel
Half of the projected increase in emissions comes from new power stations, 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 to
nnes
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
Gig
aton
nes
of C
O 2
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
200
250
300
2000 2002 2004 2006 2008 2010
inde
x (y
ear 2
000
= 10
0)
Nominal Adjusted for cost inflation
© OECD/IEA - 2006
Access to oil reserves
Access to much of the world’s remaining oil reserves is restricted
Total reserves = 1 290 billion barrels
Production sharing11%
Iraq9%
Limited access - national companies
dominant 13%
Concession30%
National companies only37%
© OECD/IEA - 2006
Energy Poverty: Annual Deaths from Indoor Air Pollution
The number of people using dirty traditional biomass for cooking is set to grow from 2.5 billion now to 2.7 billion in 2030 absent
new policies
Source: World Health Organization
2.8
1.6
1.2 1.3
0
1
2
3
Malaria Smoke frombiomass
Tuberculosis HIV/AIDS
milli
ons
© OECD/IEA - 2006
The Energy Future Absent New Policies
Security of oil supply is threatened Oil production in non-OPEC countries is set to peak Production will be increasingly concentrated in a
small number of countriesGas security is also a growing concern
Europe’s production has already peaked - US to follow
Import dependence in both regions & other key regions will grow absent new policies
Global energy-related carbon-dioxide emissions will accelerate
© OECD/IEA - 2006
INTERNATIONAL ENERGY AGENCY
Alternative Policy Alternative Policy Scenario Scenario
© OECD/IEA - 2006
Alternative Policy Scenario: Mapping a Better Energy Future
Analyses impact of government policies under consideration to enhance security & curb emissions
Demonstrates 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 & Iran Oil 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 CanadaDelaying 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
Alternative Policy Scenario: Oil and Gas Imports, 2004-2030
OECD countries see their increase in oil and gas import requirements substantially reduced in the APS
-10%
0%
10%
20%
30%
40%
50%
United States European Union Japan
Reference Scenario Alternative Policy Scenario
© 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
Gt o
f CO
2
Alternative Policy Scenario: Key Policies for CO2 Reduction
© OECD/IEA - 2006
Alternative Policy Scenario: Change in Cumulative Energy-Related Investment, 2005-2030
Avoided supply-side investment more than outweighs the additional investment by consumers in more expensive end-use
capital stock
-4 000
-3 000
-2 000
-1 000
0
1 000
2 000
3 000
Additional demand-side investment
Avoided supply-sideinvestment
Net change inenergy investment
billio
n do
llars
(200
5)
© OECD/IEA - 2006
Alternative Policy Scenario: Investment Payback Periods
The payback periods of new policies are very short, especially in non-OECD countries for policies introduced before 2015
OECD Non-OECD
0
1
2
3
4
5
6
7
8
9
2005-2015 2016-2030 2005-2015 2016-2030
year
s
CarsElectrical equipment (refrigerators, washing machines, lighting, air conditioning)
Motors in industy
© OECD/IEA - 2006
Renewed Interest in Nuclear Power
Growing concerns over energy security, surging fossil-fuel prices & rising carbon emissions
Positive aspects of nuclear power proven technology for large-scale baseload electricity
generation reduce dependence on imported gas no emissions of greenhouse gases or local pollutants produces electricity at competitive & stable cost uranium resources abundant & widespread
But governments need to play a stronger role in facilitating investment where nuclear is accepted
© OECD/IEA - 2006
0%
10%
20%
30%
40%
Wind Nuclear IGCC Coal steam CCGT
incr
ease
in g
ener
atin
g co
st
Impact of a 50% Increase in Fuel Price on Generating Costs
Nuclear generating costs are far less sensitive to fuel price increases than gas or coal plants
© 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 sources Lower greenhouse-gas emissions - depending on
how they are producedHigher oil prices have made biofuels more
competitive, but further cost reductions are needed
Availability of arable land will constrain biofuels potential in the medium term
Long-term prospects hinge on new technology
© OECD/IEA - 2006
Share of Biofuels in Road-Transport Fuel Demand
0%
4%
8%
12%
16%
20%
24%
28%
32%
World United States European Union Brazil
2004 2030 Reference Scenario 2030 Alternative Policy Scenario
Biofuels are set to play a much larger role in meeting world road-transport fuel demand
© 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 will to push through those policies
Private-sector support & international cooperation will be essential
Action is needed urgently Investment over the next decade will lock in
technology that will remain in use for up to 60 years Delaying implementation by a decade would reduce
cut in cumulative emissions to 2030 from 8% to 2% R&D in carbon capture & storage is particularly
crucial to scope for cutting emissions beyond 2030
© OECD/IEA - 2006
Summing Up
The need to diversify energy sources & mitigate emissions is more urgent than ever
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
WEO-2006 sets out the essential 1st steps towards a clean, clever & competitive energy future
In the longer term, technology development will be critical to a sustainable global energy system
© OECD/IEA - 2006
INTERNATIONAL ENERGY AGENCY
Thank you
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