Challenges to the Energy Security in Asia

“Navigating a stormy energy future” :Messages from the IEA World Energy Outlook 2014

2015-2-6Myanmar International Seminar

Nobuo TANAKAFormer Executive Director, IEA

Signs of stress in the global energy system

• Current calm in markets should not disguise difficult road ahead

– Turmoil in the Middle East raises doubts over future oil balance

– Resurgent debate over the security of gas supply to Europe

• Mixed signals in run-up to crucial climate summit in Paris in 2015

– Global CO2 emissions still rising, with most emitters on an upward path

– At $550 billion, fossil fuel subsidies over four-times those to renewables

– Increasing emphasis on energy efficiency starting to bring results

• Will change in global energy be led by policies, or driven by events?

WEO2014

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No.1 Risk : Iraq

3

IEA Oil Market Report November 2014

No2. Risk: Ukraine and Russia

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536

20

13

18

24

29

Azerbaijan 4

Iran 9

30

41

30

27 7

Major physical flows in 2013 in bcm

LNG 5

LNG 1LNG 6

4

Russian gas exports to Europe

Data from IEA 20144

Shinzo Abe has the best chance in decades of changing Japan for the

better. He seems poised to take it ( June 28th 2014 )

No3. Risk : Japan

5

Final Draft (7 June 2013) Technical Summary IPCC WGI Fifth Assessment Report

Do Not Cite, Quote or Distribute TS-119 Total pages: 127

TFE.8, Figure 1: Global mean temperature increase since 1861–1880 as a function of cumulative total global CO2

emissions from various lines of evidence. (a) Decadal average results are shown over all CMIP5 EMIC and ESMs for

each RCP respectively, with coloured lines (multi-model average), decadal markers (dots) and with three decades

(2001–2010, 2041–2050 and 2091–2100) highlighted with a star, square and diamond, respectively. The historical time

period up to decade 2001–2010 is taken from the CMIP5 historical runs prolonged by RCP8.5 for 2005–2010 and is

indicated with a black thick line and black symbols. Coloured ranges illustrate the model spread (90% range) over all

CMIP5 ESMs and EMICs and do not represent a formal uncertainty assessment. Ranges are filled as long as data of all

models is available and until peak temperature. They are faded out for illustrative purposes afterward. CMIP5

simulations with 1% yr–1 CO2 increase only are illustrated by the dark grey area (range definition similar to RCPs

above) and the black thin line (multi-model average). The light grey cone represents this report’s assessment of the

transient climate response to emissions (TCRE) from CO2 only. Estimated cumulative historical CO2 emissions from

1850 to 2011 with associated uncertainties are illustrated by the grey bar at the bottom of panel a. (b) Comparison of

historical model results with observations. The magenta line and uncertainty ranges are based on observed emissions

from CDIAC extended by values of the Global Carbon project until 2010 and observed temperature estimates of

HadCRUT4. The uncertainties in the last decade of observations are based on the assessment in this report. The black

thick line is identical to the one in panel a. The thin green line with crosses is as the black line but for ESMs only. The

yellow-brown line and range show these ESM results until 2010, when corrected for HadCRUT4’s incomplete

geographical coverage over time. All values are given relative to the 1861–1880 base period. All time-series are derived

Carbon Budget

515Gt had been emitted by 2011.2C scenario needs to stop at 790Gt.(66%).790-515=275Gt budget left.

Annual 2012 =9.7Gt

275/9.7=Only 28 years to go!

IPCC WGI Fifth Assessment Report No.4 Risk: Climate Change

6

Changing dynamics of global demand

Energy demand by region

As China slows, then India, Southeast Asia, the Middle East and parts of Africa & Latin America take over as the engines of global energy demand growth.

2 000

4 000

6 000

8 000

10 000

1990 2000 2010 2020 2030 2040

Mtoe

OECD

Rest of world

China

China

Rest of world

OECD

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Geopolitics of the Shale Revolution: Dichotomy

between Oil / Gas exporters and importers.

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United States holds a strong position on energy costs

Weighted average cost of energy paid by consumers

Economies face higher costs, but the pace of change varies: China overtakes the US, costs double in India & remain high in the European Union & Japan

UnitedStates

500

1 000

1 500

2 000

EuropeanUnion

Japan China India

$/toe

2008

2013

2040

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2013 2020 2030 20402015

Instability in the Middle Easta major risk to oil markets

Oil production growth

The short-term picture of a well-supplied market should not obscure future risks as demand rises to 104 mb/d & reliance grows on Iraq & the rest of the Middle East

+5

+10

+15

-5

2013 2020 2030 20402015

Net decline in output from other producers

Increase to 2040: 14 mb/d

mb/d

Increase to 2040:14 mb/d

Middle East

Brazil

CanadaUnited States

& reliance grows on Iraq & the rest of the Middle East

in United States, Canada, Brazil & the Middle East

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Oil price will rise in the longer term.

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So does Gas price .

11

Gas on the way to become first fuel,with role of LNG on the rise

Main sources of regional LNG supply

Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices

Middle East

Australia

US & Canada

East Africa

Russia

North AfricaWest Africa

Other

Middle East

Southeast Asia

West AfricaAustralia

North AfricaOther

100

200

300

400

500

600bcm

2012 2040

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Wide price gap has been seen for several years among major regional gas markets with no convergence.

Not only as being the fastest-growing gas market, Asia is even more attractive for producers as Asian buyers pay the highest prices.

What is making Asian gas price so high?

Evolution of regional gas prices

0

2

4

6

8

10

12

14

16

18

20

USD/

MBtu

HH

NBP

Asian LNG

(average)

German border

price

13

Henry Hub indexation in new contracts is not the final solution

Oil indexation

HH indexation

Asian hub indexation

US Henry Hub reached as high as USD 8/Mbtu in early 2014, whereas Asian spot prices went down to below USD 11/Mbtu during this summer.

In longer term, a mix of oil, Henry Hub and Asian hub indexation could govern LNG contracts.

Time

Relevance

The Asian Quest for LNG in a Globalising Market14

Trading hub – Asian-tailored solution?

Southeast Asian countries are already interlinked by pipeline and plan to increase these linkages through Trans ASEAN Gas Pipeline (TAGP) and LNG.

TAGP and LNG terminals in Southeast Asia

The Asian Quest for LNG in a Globalising Market

15

China’s Oil & Gas Import Transit Routes

USDOD China Report 2014 16

Figure 2: China’s Import Transit Routes.

Chinese shale gas: the No 1 uncertainty in global energy markets

0

100

200

300

400

500

600

Low unconventional WEO 2013 NPS Golden rules case

Domestic supply

Net imports

IEA scenarios for China's gas balance

Australian coal exports

143bcm = Qatar + Malaysia LNG exports

The Asian Quest for LNG in a Globalising Market17

Mid-Term Oil & Gas Market 2010, IEA

Russian Gas Pipelines Will Extend to the East: Recent China Deal

18

Possible Pipeline Project from Russia to Japan

Estimated volume of 8bcm pa

19

20

The entire global CO2 budget to 2100 is used up by 2040 – Paris must send a strong signal for increasing low-carbon investment four times beyond current levels

The 2 °C goal – last chance in Paris?

World CO2 budget for 2 °C~2300 Gt

25%

50%

75%

100%

Share of budget used in Central Scenario

1900-2012

2012-2040

Average annual low-carbon investment, 2014-2040

Central Scenario

For 2°C target

2013

CCS

Nuclear

Renewables

Efficiency

The entire global CO2 budget to 2100 is used up by 2040

0.5

1.0

1.5

2.0

Trill

ion

do

llars

(20

13

)

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Global Electricity Generation grows by 77%Renewables will be No. 1 source.

22

Retirements add to the investment challenge in the power sector

Power capacity by source, 2013-2040

Despite limited demand growth, OECD countries account for one-third of capacity additions – to compensate for retirements & to decarbonise

2013

Retirements Additions

2040

2 000

4 000

6 000

8 000

10 000

12 000GW

Renewables

Nuclear

Oil

Gas

Coal

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Is coal an option?

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India

World

Global coal demand leveling offGlobal coal demand by key region

Global coal demand growth slows rapidly due to more stringent environmental policies, underlining the importance of high-efficiency plant & CCS to coal’s future

1 000

2 000

3 000

4 000

5 000

6 000

7 000

1980 1990 2000 2010 2020 2030 2040

Mtce

1987: European coal demand peak2005: US coal demand peak

Chinese coal demand plateau

India: 2nd largest coal consumer by 2020

Other

India

China

United StatesEurope

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Shale revolution brought win-win-win for the US

-15% -10% -5% 0% 5% 10% 15% 20% 25%

Renewables

Coal-fired power output

Coal demand

Gas-fired power output

Gas demand

CO2 emissions

Total primary energy demand

GDP (MER)

From 2006-2011, United States CO2 emissions went down by 7% due to coal-to-gas fuel switching, power generation efficiency gains & increased renewablesoutput . It enhanced economic growth and energy security.

WEO2012Changes from 2006 to 2011

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China needs cleaner power mix with more Renewables, Nuclear and Gas.

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The centre of coal trade is shiftingto developing Asia

Major net importers of coal

The role of key OECD coal importers declines further, while Asian importers gainin importance, with India becoming the largest net importer early in the next decade

-100

0

100

200

300

400

India Rest of Asia China Japan EuropeanUnion

Korea

Mtce

Change 2011-2020

2011

Change 2020-2035

2035

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JCM Host Countries and Future Projects

Ethiopia

Kenya

Viet Nam

Indonesia

Lao PDR

Palau

Maldives

Bangladesh

(As of September, 2014)

Costa Rica

Mexico

Cambodia

＜ JCM Host Countries : 12＞

＜ Future JCM projects ＞

Mongolia

◆High Efficient Thermal Power Plant- CCGT(Combined Cycle Gas Turbine) : Natural Gas

◆Renewable Energy- Solar Power Plant

- Micro Hydro Power Plant

- Biomass Power Generation

◆Energy-Saving- Integrated Steel Works

- Building Energy Management System

- Energy Efficient Air Conditioner

◆CCS (Carbon dioxide Capture and Storage)

- CO2-EOR (Enhanced Oil Recovery)

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What enables US Energy Independence ?

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Fossil Fuels increase in NPSWEO 2013

450 ppm Scenario (2DS) enables Demand Peaks in Oil and Coal

The Stone Age didn’t end because we ran out of stones.31

Japan’s power system: moving to a more diverse & sustainable mix

0.2

0.4

0.6

0.8

1.0

1.2

1990 2000 2010 2020 2030 2040

Tho

usa

nd

TW

h Renewables

Nuclear

Oil

Gas

Coal

historical projected

100

200

300

400

500

600

CO2 electricity emissions intensity (right axis)

gCO

2/k

Wh

Japan electricity generation by source and CO2 intensity

With nuclear plants expected to restart & increased use of renewables, Japan’s electricity mix becomes much more diversified by 2040( Renewables 32%, Nuclear 21%, gas 23%, coal 22% )

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Power grid in Japan

Source: Agency for Natural Resources and Energy, The Federation of Electric Power Companies of Japan, Electric Power System Council of Japan, The International Energy Agency

Tokyo

Hokkaido

Tohoku

HokurikuKansaiChugoku

Kyushu29GW

Shikoku12GW

Chubu 40GW

Okinawa2GW

Hydro

Oil

Gas

Nuclear

Coal

Other

Power utility company

Generating company

In-house generation

--- 50 hz

60 hz <-------

33

Nuclear capacity grows by 60%, but no nuclear renaissance in sight

Net capacity change in key regions, 2013-2040

-20 0 20 40 60 80 100 120 140

European Union

Japan

United States

Russia

India

China

GW

Capacity grows by 60% to 624 GW 2040, led by China, India, Korea & Russia; yet the share of nuclear in the global power mix remains well-below its historic peak

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Nuclear power can play a role in CO2 abatement & energy security

Share of energy demand met by domestic sources and nuclear power in 2040

0.5

1.0

1.5

2.0

2.5

1971 2020 2040

Gt

1980 2000

CO2 emissions avoided annually by nuclear power1971-2040

20%

40%

60%

80%

100%

China UnitedStates

EuropeanUnion

Japan Korea

Net importsIndigenous production & nuclearNuclear Indigenous production

By 2040, an expanded nuclear fleet has saved almost 4 years of current CO2 emissions& for some countries has improved energy security & balances of energy trade

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50

100

150

200

1990 2000 2010 2020 2030 2040

GW

2013

Nuclear power: public concerns must be heard and addressed

Retirements of nuclear power capacity1990-2040

Key public concerns include plant operation, decommissioning & waste management;

Spent nuclear fuel

European Union United States Japan Others

38% of today’s capacity to retire

by 2040

1971-2012350 thousand tonnes

1971-2040705 thousand tonnes

1971-2040: 705 thousand tonnes

United StatesEuropean

Union

JapanChina

Can

ada Russia Korea

Ind

ia

Other

By 2040, almost 200 reactors are retired & the amount of spent fuel doubles& the

amount of spent fuel doubles

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You can see it at Youtube-> https://www.youtube.com/watch?v=F0esvuLeRFI

“Pandora’s Promise”, a

movie directed by Robert

Stone, is a documentary of

environmentalists who

changed their views about

Nuclear Power.

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Time for Safer, Proliferation resistant and Easier Waste Management Paradigm:

Integral Fast Reactor and Pyroprocessing

IFR has features as Inexhaustible Energy Supply ,Inherent Passive Safety ,Long-term Waste

Management Solution , Proliferation-Resistance , Economic Fuel Cycle Closure.

High level waste reduces radioactivity in 300 years while LWR spent fuel takes 100,000 years.

Dr. YOON IL CHANG

Argonne National Laboratory

38

Energy self-sufficiency* by fuel in 2011

Source: Energy Data Center, IEA.

* Self-sufficiency =domestic production /total primary energy supply

Note: Does not include fuels not in the fossil fuels, renewables and nuclear categories.

11%

14%

15%

21%

6%

46%

12%

23%

28%

16%

9%

17%

32%

17%

10%

1%

10%

1%

1%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100%

IEA

European Union

Korea

Luxembourg

Belgium

Japan

France

Spain

Slovak Republic

Ireland

Switzerland

Italy

Portugal

Hungary

Turkey

Germany

Finland

Austria

Sweden

Greece

Czech Republic

United Kingdom

Poland

India

United States

Netherlands

China

New Zealand Fossil fuels

Renewables

Nuclear

24%

52%

96%

10%

8%

26%

14%

11%

0% 20% 40% 60% 80% 100% 120% 140%

EU28

IEA28

ASEANFossil fuelsRenewablesNuclear

Collective Energy Security and Sustainability by Diversity, Connectivity and

Nuclear

WEO 2013 basis

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Power Grid Connection in EuropePhysical energy flows between European countries, 2008 (GWh)

Source: ENTSO-E

40

Connecting MENA and Europe: " Desertec" as visionary “Energy for Peace"

Source: DESRETEC Foundation 41

ASEAN power grid connection

42

Presentation by Mr. Masayoshi SON43

“Energy for Peace in Asia” New Vision?

Natural Gas Import Infrastructure in Europe

IEA Medium Term Oil and Gas Markets 201044

Blue Print for North East Asia Gas & Pipeline Infrastructure

45

Navigating a stormy energy future

• Geopolitical & market uncertainties are set to propel energy security high up the global energy agenda

• Volatility in the Middle East raises short-term doubts on investment & spells trouble for future oil supply

• Nuclear power can play a role in energy security & carbon abatement – but financing & public concerns are key issues

• Without clear direction from Paris in 2015, the world is set for warming well beyond the 2 °C goal

• Far-sighted government policies are essential to steer the global energy system on to a safer course

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