World Energy Outlook 2010

Presentation to the press

London, 9 November 2010

© OECD/IEA 2010
The context: A time of unprecedented
uncertainty
 The worst of the global economic crisis appears to be over –
but is the recovery sustainable?

 Oil demand & supply are becoming less sensitive to price –

what does this mean for future price movements?

 Natural gas markets are in the midst of a revolution –

will it herald a golden era for gas?

 Copenhagen Accord & G-20 subsidy reforms are key advances –

but do they go far enough & will they be fully implemented?

 China & other emerging economies will shape the global energy
future – where will their policy decisions lead us?

© OECD/IEA 2010
International oil price assumptions

140
ars per barrel (2009)
Current Policies Scenario
120
New Policies Scenario
100
450 Scenario
80
Dolla

60

40

20

0
1980 1990 2000 2010 2020 2030 2035

The age of cheap oil is over, though policy action could bring lower international prices
than would otherwise be the case
© OECD/IEA 2010
Recent policy commitments,
if implemented, would make a difference

World primary energy demand by region in the New Policies Scenario

18 000
Mtoe

Rest of world
16 000 China
14 000 OECD
12 000 WEO-2009:
Reference Scenario
10 000
8 000

6 000

4 000
2 000

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Global energy use grows by 36%, with non-OECD countries – led by China,
where demand surges by 75% – accounting for almost all of the increase
© OECD/IEA 2010
Emerging economies dominate
the growth in demand for all fuels

Incremental primary energy demand in the New Policies Scenario, 2008-2035

OECD
Coal
China
Oil Rest of world

Gas

Nuclear

Hydro

Other renewables

- 600 - 300 0 300 600 900 1 200 1 500

Mtoe

Demand for all types of energy increases in non-OECD countries,

while demand for coal & oil declines in the OECD
© OECD/IEA 2010
Fossil-fuel subsidies are distorting
Fossil-
price signals
Economic value of fossil-fuel consumption subsidies by country, 2009
70
Billion dollars

Electricity
(generated from
60 fossil fuels)
Gas
50
Oil
Coal
40

30

20

10

Turkmenistan
South Africa
Saudi Arabia

Bangladesh

Kazakhstan
Uzbekistan
Venezuela

Argentina
Indonesia

Thailand
Malaysia
Pakistan

Ukraine

Mexico
Algeria
Kuwait
Russia

Egypt
China

Qatar

Libya
India

UAE

Iraq
Iran

Fossil-fuel consumption subsidies amounted to $312 billion in 2009, down from

$558 billion in 2008, with the bulk of the fall due to lower international prices
© OECD/IEA 2010
Booming demand for mobility in the
emerging economies drives up oil use

Passenger vehicles in the New Policies Scenario

1 600
Million
China
1 400 Other non-OECD
1 200 United States
1 000 Other OECD

800
600

400

200

0
1980 1990 2000 2008 2020 2035

The global car fleet will continue to surge as more & more people in China & other
emerging economies buy a car, overshadowing modest growth in the OECD
© OECD/IEA 2010
Oil production becomes less crude

World oil production by type in the New Policies Scenario

100
mb/d

Unconventional oil
80 Natural gas liquids
Crude oil - fields yet
60 to be developed or found
Crude oil – currently
40 producing fields
Total crude oil
20

0
1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Global oil production reaches 96 mb/d in 2035 on the back of rising output of
natural gas liquids & unconventional oil, as crude oil production plateaus
© OECD/IEA 2010
More oil from fewer producers

Incremental oil production by key country in the New Policies Scenario, 2009-2035

Saudi Arabia OPEC

Iraq
Non-OPEC
Brazil
Kazakhstan
Canada
Venezuela
UAE
Kuwait
Iran
Qatar
Nigeria
Libya
Algeria

0 1 2 3 4 5 6
mb/d

Production rises most in Saudi Arabia & Iraq, helping to push OPEC’s market share from
41% today to 52% by 2035, a level last seen prior to the first oil shock of 1973-1974
© OECD/IEA 2010
A golden age for gas?

 Gas is set to play a key role in meeting the world’s energy needs
> demand rises by 44%, led by China & Middle East

 Unconventional gas accounts for 35% of the increase in global

supply to 2035, with new non-US producers emerging

 Gas glut will peak soon, but may dissipate only very slowly

 The glut will keep pressure on gas exporters to move away from
oil-price indexation, notably in Europe

 Lower prices could lead to stronger demand for gas, backing out
renewables & coal in power generation

© OECD/IEA 2010
Coal remains the backbone of global
electricity generation

Coal-fired electricity generation by region in the New Policies Scenario

12 000
TWh

China

10 000 India

Other non-OECD
8 000
OECD
6 000

4 000

2 000

1990 2000 2010 2020 2030 2035

A drop in coal-fired generation in the OECD is offset by big increases elsewhere, especially
China, where 600 GW of new capacity exceeds the current capacity of the US, EU & Japan
© OECD/IEA 2010
Renewables enter the mainstream….

Renewable primary energy demand in the New Policies Scenario

OECD Pacific 2008

2035
Africa

India

Brazil

China

United States

European Union

0 100 200 300 400 500

Mtoe

The use of renewable energy triples between 2008 & 2035, driven by the power sector
where their share in electricity supply rises from 19% in 2008 to 32% in 2035
© OECD/IEA 2010
….but only if there is enough
government support
Annual global support for renewables in the New Policies Scenario

210
n dollars (2009)

Biofuels
180
Renewables-based electricity
150

120
Billion

90

60

30

0
2007 2008 2009 2015 2020 2025 2030 2035

Government support remains the key driver – rising from $57 billion in 2009 to $205 billion
in 2035 – but higher fossil-fuel prices & declining investment costs also spur growth
© OECD/IEA 2010
China becomes the market leader
in low
low--carbon technologies

China’s share of cumulative global additions to 2035 for selected technologies

30%
Capacity additions
105 GW
Passenger car sales
335 GW
20%
8.5 million
85 GW vehicles
h l

10%

0%
Solar PV Wind Nuclear Electric &
plug-in hybrids

Given the sheer scale of China’s market, its push to expand the role of low-carbon energy
technologies is poised to play a key role in driving down costs, to the benefit of all countries
© OECD/IEA 2010
Caspian energy riches could enhance
global energy security
Caspian oil & gas outlook in the New Policies Scenario

6 350

bcm
mb/d

5 300

250
4
200
3
150
2
100
1
50
0 0
2000 2009 2020 2035 2000 2009 2020 2035
Oil net exports Inland oil consumption Gas net exports Inland gas consumption

Kazakhstan drives an increase in Caspian oil production to 5.2 mb/d by 2035,

while Turkmenistan & Azerbaijan push up gas production to over 310 bcm
© OECD/IEA 2010
The 450 Scenario:
3.5°C to 2°
A roadmap from 3.5° 2°C
 The 450 Scenario sets out an energy pathway consistent with
limiting the increase in temperature to 2°C

 Assumes vigorous implementation of Copenhagen Accord

pledges to 2020 & much stronger action thereafter

 The failure of the Copenhagen Accord pledges:

pledges
> As many lack transparency, there is 3.9 Gt of uncertainty over the
level of abatement pledged to 2020
> As many lack ambition, the cost of achieving the 2° C goal has
increased by $1 trillion in 2010-2030 compared with WEO-2009

© OECD/IEA 2010
The 450 Scenario:
How do we get there now?

World energy-related CO2 emission savings by country in the 450 Scenario

38
Gt

36 35.4 Gt Share of cumulative abatement

New Policies Scenario
between 2010-2035
34
China 32%
32
United States 18%
30
European Union 8%
28 13.7 Gt
India 7%
26 Middle East 4%
24 Russia 4%
450 Scenario Rest of world 27%
22
21.7 Gt
20
2008 2015 2020 2025 2030 2035

In the 450 Scenario, China & the US together account for 50% of the cumulative emission
abatement that is needed in 2010-2035
© OECD/IEA 2010
Achieving the 2°
2°C goal will require rapid
decarbonisation of global energy

Average annual change in CO2 intensity in the 450 scenario

6%

5%
A four-fold
4% increase needed

3%

2%

1%

0%
1990-2008 2008-2020 2020-2035

Carbon intensity would have to fall at twice the rate of 1990-2008 in the period 2008-2020
& almost four times faster in 2020-2035
© OECD/IEA 2010
A fundamental change is needed
in power generation

Share of world electricity generation by type and scenario

100%
Low-carbon generation in the NPS
80% Additional low-carbon generation
in the 450 Scenario
60% Fossil-fuel fired g
generation
in the 450 Scenario
40%

20%

0%
2010 2015 2020 2025 2030 2035

Low-carbon technologies account for over three-quarters of global power generation by 2035
in the 450 Scenario, a four-fold increase on today
© OECD/IEA 2010
 … and also in transport

Sales of plug-in hybrid and electric vehicles in the 450 Scenario

& CO2 intensity of the power sector

70 700 Plug-in hybrids

mes per kWh

Million

60 600 Electric vehicles

50 500 CO2 intensity in
power generation

Gramm
40 400 (right axis)
30 300

20 200

10 100

0 0
2010 2015 2020 2025 2030 2035

Plug-in hybrids & electric vehicles reach 39% of new sales by 2035, making a big contribution
to emissions abatement, thanks to a major decarbonisation of the power sector
© OECD/IEA 2010
Will peak oil be a guest or the spectre
at the feast?

Oil demand in the 450 Scenario

100 16

mb/d
mb/d

World demand in
96 12 450 Scenario

92 8
Right axis:
88 4
Inter regional
Inter-regional
84 0 (bunkers)
Other non-OECD
80 -4
India
76 -8 China
72 -12 OECD

68 -16
2009 2015 2020 2025 2030 2035

Oil demand peaks at 88 mb/d before 2020 & falls to 81 mb/d in 2035, with a plunge
in OECD demand more than offsetting continuing growth in non-OECD demand
© OECD/IEA 2010
Combating climate change will bring
economic benefits as well as costs

Oil-import bills as share of GDP in selected countries

5% 2009
2035: New Policies Scenario
4% 2035: 450 Scenario

3%

2%

1%

0%
European United Japan China India
Union States

In the 450 Scenario, annual spending on oil imports in 2035 by the five largest importers
is around $560 billion, or one-third, lower than in the New Policies Scenario
© OECD/IEA 2010
Summary & conclusions

 Recently announced policies can make a difference, but fall well

short of what is needed for a secure & sustainable energy future
 Lack of ambition in Copenhagen has increased the cost of
achieving the 2°C goal & made it less likely to happen
> Unless commitments are fully implemented by 2020, it will be all
but impossible to achieve the goal
 The age of cheap oil is over, though policy action could bring
lower international prices than would otherwise be the case
 Renewables are entering the mainstream, but long-term
support is needed to boost their competitiveness
 Getting the prices right, by phasing-out fossil-fuel subsidies,
is the single most effective measure to cut energy demand

© OECD/IEA 2010