17-Nov-08

©OECD/IEA
© OECD/IEA - 2008
- 2008

The context

z Soaring energy prices to mid-2008, followed by a collapse –

what will it mean for demand?
z How will the financial crisis & economic slowdown affect
energy demand & investment?
z Will economic worries divert attention from strategic
energy-security & environmental challenges?
z Are we setting ourselves up for a supply-crunch once the
economy is back on its feet?
z Will negotiators at COP-15 in Copenhagen in 2009 have the
political support needed to succeed?

© OECD/IEA - 2008

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 17-Nov-08

World primary energy demand in tthehe

Reference Scenario: this is unsustainable!

18 000
Mtoe

Other renewables
16 000
Hydro
14 000
Nuclear
12 000
10 000 Biomass

8 000 Gas

6 000 Coal
4 000 Oil
2 000
0
1980 1990 2000 2010 2020 2030

World energy demand expands by 45% between now and 2030 – an average rate of increase
of 1.6% per year – with coal accounting for more than a third of the overall rise
© OECD/IEA - 2008

The continuing importance of coal in

world primary energy demand
Shares of incremental energy demand
Increase in primary demand, 2000 - 2007 Reference Scenario, 2006 - 2030
1 000 100%
Mtoe

Coal
% = average annual rate of growth
4.8% All other fuels
900

800 80%

700

600 60%

500
1.6%
2.6%
400 40%

300
2.2%
200 20%

100
0.8%
0 0%
Coal Oil Gas Renewables Nuclear Non-OECD OECD

Demand for coal has been growing faster than any other energy source & is projected to
account for more than a third of incremental global energy demand to 2030
© OECD/IEA - 2008

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Share of renewables in electricity

generation in the Reference Scenario

Hydro
2006
Other (wind, solar, etc)
World

2015

2030

2006
OECD

2015

2030

2006
Non-OECD

2015

2030

0% 5% 10% 15% 20% 25% 30%

Soon after 2010, renewables become the 2nd-largest source of electricity behind coal, thanks
to government support, prospects for higher fossil-fuel prices & declining investment costs
© OECD/IEA - 2008

Change in oil demand by region

in the Reference Scenario, 2007-
2007-2030

OECD Pacific
OECD Europe
OECD North America
Africa
E. Europe/Eurasia
Latin America
Other Asia
India
Middle East
China
-2 0 2 4 6 8 10
mb/d

All of the growth in oil demand comes from non-OECD, with China contributing 43%, the
Middle East & India each about 20% & other emerging Asian economies most of the rest
© OECD/IEA - 2008

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Energy subsidies in non-

non-OECD
countries, 2007
Iran Oil
Russia
China Gas
Saudi Arabia Coal
India Electricity
Venezuela
Indonesia
Egypt
Ukraine
Argentina
South Africa
Kazakhstan
Pakistan
Malaysia
Thailand
Nigeria
Chinese Taipei
Vietnam
Brazil
0 10 20 30 40 50 60
Billion dollars

Energy subsidies in the 20 largest non-OECD countries hit $310 billion in 2007 – creating, in
many cases, an unsustainable economic burden & exacerbating environmental effects
© OECD/IEA - 2008

Incremental world fossil-

fossil-fuel
production in the Reference Scenario

25 Non-OECD
mb/d

1 600 3 000
Mtce
Bcm

OECD
1 400
20 2 500
1 200
2 000
15 1 000

800 1 500
10
600
1 000
400
5
500
200

0
1980-2007 2007-2030 1980-2006 2006-2030 1980-2006 2006-2030
- 200
Oil Gas Coal

Almost all incremental oil & gas comes from non-OECD regions, resulting in major structural
changes to the industry with implications for global energy markets
© OECD/IEA - 2008

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Cumulative energy-
energy-supply investment
in the Reference Scenario,
Scenario, 2007
2007--2030
Coal Biofuels
3% <1%
$0.7 trillion $0.2 trillion

Power Oil Gas

52% 24% 21%
$13.6 trillion $6.3 trillion $5.5 trillion

Shipping
4% Shipping &
Refining ports
16% Transmission 9%
Transmission Power & distribution
31% Exploration &
& distribution generation
development
50% 50% Exploration and 61%
LNG chain Mining
development
8% 91%
80%

Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could
delay spending, potentially setting up a supply-crunch once the economy recovers
© OECD/IEA - 2008

©OECD/IEA
© OECD/IEA - 2008
- 2008

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 17-Nov-08

World oil production by OPEC/non-

OPEC/non-OPEC
in the Reference Scenario

120 52%
mb/d

OPEC - other

100 50%
OPEC - Middle East
48%
80
Non-OPEC - non-
46% conventional
60
Non-OPEC -
44%
conventional
40
42% OPEC share

20 40%

0 38%
2000 2007 2015 2030

Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion’s share of oil
market growth as conventional non-OPEC production declines
© OECD/IEA - 2008

World oil production by source

in the Reference Scenario
120
mb/d

Natural gas liquids

Non-conventional oil
100
Crude oil - yet to be
developed (inc. EOR)
80 or found
Crude oil - currently
producing fields
60

40

20

0
1990 2000 2010 2020 2030

64 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current
capacity of Saudi Arabia – to meet demand growth & offset decline
© OECD/IEA - 2008

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Average observed oilfield

decline rates

16%
OPEC
14% Non-OPEC
12%

10%

8%

6%

4%

2%

0%
Pre-1970s 1970s 1980s 1990s 2000 - 2007
Year production started

The production-weighted average decline rate worldwide is projected to rise from 6.7% in
2007 to 8.6% in 2030 as productions shifts to smaller oilfields, which tend to decline faster
© OECD/IEA - 2008

A sea change: world oil & gas production by

company type in the Reference Scenario

Oil Gas
120 4 500
Bcm
mb/d

100 3 750

80 3 000

60 2 250

40 1 500

20 750

0 0
2007 2015 2030 2006 2015 2030
NOCs Private companies

Almost 80% of the projected increase in output of both oil & gas comes from
national companies – on the assumption that investment is forthcoming
© OECD/IEA - 2008

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 17-Nov-08

Post-2012
climate-policy scenarios

©OECD/IEA
© OECD/IEA - 2008
- 2008

Energy-related CO2 emissions

Energy-
in the Reference Scenario
45
Gigatonnes

International
marine bunkers
40 and aviation
Non-OECD - gas
35
Non-OECD - oil
30 Non-OECD - coal
OECD - gas
25
OECD - oil
20 OECD - coal

15

10

0
1980 1990 2000 2010 2020 2030

97% of the projected increase in emissions between now & 2030 comes from non-OECD
countries – three-quarters from China, India & the Middle East alone
© OECD/IEA - 2008

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Copenhagen: a plausible post-

post-2012 global
climate--change policy regime
climate

550 Policy Scenario

The 450 Other Major
Economies
Other
Countries
OECD+

Power National
generation Cap and trade Cap and trade
policies and
from 2020
measures
onwards

Industry International sectoral approaches

National
policies and
measures
Transport International sectoral approaches

Buildings National policies and measures

A combination of policy mechanisms – reflecting nations’ varied circumstances & current

negotiating positions – is a realistic outcome at the Copenhagen COP at end-2009
© OECD/IEA - 2008

Reductions in energy-
energy-related CO2
emissions in the climate-
climate-policy scenarios

45 550 450
Gigatonnes

Policy Policy
Scenario Scenario
40 9% Nuclear
14% CCS
Renewables & biofuels
35 23%
Energy efficiency

30 54%

25

20
2005 2010 2015 2020 2025 2030
Reference Scenario 550 Policy Scenario 450 Policy Scenario

While technological progress is needed to achieve some emissions reductions, efficiency

gains and deployment of existing low-carbon energy accounts for most of the savings
© OECD/IEA - 2008

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Total power generation capacity today

and in 2030 by scenario

Coal 1.2 x today

Gas 1.5 x today

Nuclear 1.8 x today

Hydro 2.1 x today

Wind 13.5 x today

Other renewables 12.5 x today

Coal and gas with CCS 15% of today’s coal & gas capacity

0 1 000 2 000 3 000 GW

Today Reference Scenario 2030 450 Policy Scenario 2030

In the 450 Policy Scenario, the power sector undergoes a dramatic change – with CCS,
renewables and nuclear each playing a crucial role
© OECD/IEA - 2008

World energy
energy--related CO2 emissions
in 2030 by scenario

40
Gigatonnes

35
OECD
30

25

20
World
15
Non-OECD World
10

0
Reference Scenario 550 Policy Scenario 450 Policy Scenario

OECD countries alone cannot put the world onto a 450-ppm trajectory,
even if they were to reduce their emissions to zero
© OECD/IEA - 2008

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Total oil production in 2030 by

scenario

120
mb/d

Non-OPEC
OPEC
100 9 mb/d
16 mb/d

80

60

40

20

0
2007 Reference Scenario 550 Policy Scenario 450 Policy Scenario
2030 2030 2030

Curbing CO2 emissions would improve energy security by cutting demand for fossil fuels, but
even in the 450 Policy Scenario, OPEC production increases by 12 mb/d from now to 2030
© OECD/IEA - 2008

Key results of the post-

post-2012
climate--policy analysis
climate

550 Policy Scenario 450 Policy Scenario

z Corresponds to a c.3°C global
temperature rise
z Energy demand continues to
expand, but fuel mix is markedly
different
z CO2 price in OECD countries
reaches $90/tonne in 2030
z Additional investment equal to
0.25% of GDP
z Corresponds to a c.2°C global
temperature rise
z Energy demand grows, but half
as fast as in Reference Scenario
z Rapid deployment of low-carbon
technologies – particularly CCS
z Big fall in non-OECD emissions
z CO2 price in 2030 reaches
$180/tonne
z Additional investment equal to
0.6% of GDP

© OECD/IEA - 2008

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©OECD/IEA
© OECD/IEA - 2008
- 2008

Summary & conclusions

z Current energy trends are patently unsustainable — socially,

environmentally, economically
z Oil will remain the leading energy source but...
> The era of cheap oil is over, although price volatility will remain
> Oilfield decline is the key determinant of investment needs
> The oil market is undergoing major and lasting structural change, with
national companies in the ascendancy
z To avoid "abrupt and irreversible" climate change we need a
major decarbonisation of the world’s energy system
> Copenhagen must deliver a credible post-2012 climate regime
> Limiting temperature rise to 2°C will require significant emission
reductions in all regions & technological breakthroughs
> Mitigating climate change will substantially improve energy security
z The present economic worries do not excuse back-tracking or delays
in taking action to address energy challenges
© OECD/IEA - 2008

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