© OECD/IEA 2011
Oil in the global energy mix:Oil in the global energy mix:Climate policies can drive an early peak in oil demand Climate policies can drive an early peak in oil demand
Nobuo TanakaNobuo TanakaExecutive DirectorExecutive DirectorInternational Energy AgencyInternational Energy Agency
Bridge Forum Dialogue, LuxembourgBridge Forum Dialogue, Luxembourg13 April 2011 13 April 2011
© OECD/IEA 2011
Oil prices break out to the upside after over a Oil prices break out to the upside after over a year within a $65-$85/bbl rangeyear within a $65-$85/bbl range
-2.0
-1.5
-1.0
-0.5
0.0
0.5
1.0
1.5
83
84
85
86
87
88
89
90
1Q07 1Q08 1Q09 1Q10 1Q11
mb/dmb/dPrice Surge Kick-Started by Tighter
2H10 Fundamentals
Implied Stock Ch.&Misc to Bal (RHS)Oil DemandOil Supply
60
70
80
90
100
110
120
130
Dec 09 Apr 10 Aug 10 Dec 10 Apr 11
$/bbl Benchmark Crude Prices
WTI Cushing Dated Brent Dubai
Source: Platts
© OECD/IEA 2011
Further oil Further oil market market tightening tightening
0
1
2
3
4
5
6
7
8
9
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011
mb/d OPEC Spare Crude Oil Production Capacity
Saudi Arabia other OPEC Effective Spare Capacity (w/S.A.) Ven/Nig Iraq Libya
OPEC effective spare capacity in decline since October 2010
© OECD/IEA 2011
World oil intensity is declining… World oil intensity is declining…
Global oil intensity – oil consumption per unit of GDP – has declined at 1.7% p.a. since 1971 thanks
to efficiency improvements & changes to the structure of economic output
0
50
100
150
200
250
300
350
1970 1975 1980 1985 1990 1995 2000 2005 2010
India
China
World
United StatesJapan
EU27
© OECD/IEA 2011
But oil prices still affect the global economy …But oil prices still affect the global economy …
Oil price spikes have preceded each global recession since the early 1970’s
0
30
60
90
120
-2%
0%
2%
4%
6%
8%
1970 1980 1990 2000 2010
Annual GDP growth
Recession
Avg. IEA oil import price in real $2009(right axis)
© OECD/IEA 2011
Annual expenditure on net imports of oilAnnual expenditure on net imports of oil
If oil prices average US$100 a barrel in 2011, spending on oil imports in many countries will reach or surpass the record levels of 2008* Projections made prior to events of 11 March
0
100
200
300
400
500
US EU J apan China India
Bill
ion
dol
lars
(200
9)
1971-2008 average
2008
2011
1.4%
2.8%2.6%
1.0%
2.2%2.2%
1.8%
3.0%2.8%
0.9%
3.0%
3.2%
2.8%
6.6%5.4%
© OECD/IEA 2011
-
12
24
36
48
60
1 2 3 4 5 6
draw rate (mb/d)
dura
tion
(mon
ths)
Public Stocks: A Clear Safety NetPublic Stocks: A Clear Safety Net
2 Sep. 2005 decision, 2 mb/d
Theoretical decision, 4 mb/d
1.56 billion barrels of Public stocks
IEA Public Stocks alone could replace an oil supply disruption of 4 mb/d for 1 year
7
IEA public stocks (as of end-Dec. 2010)
= 1.6 billion barrels of oil = 72 days of Total IEA net imports
© OECD/IEA 2011
Need for cooperation Need for cooperation during oil supply disruptionsduring oil supply disruptions
IEA stockholding cover of global oil demand
Growing share of non-OECD oil demand results in declining global demand cover from IEA oil stocks
-
5
10
15
20
25
30
35
40
0%
10%
20%
30%
40%
50%
60%
days
of
wor
ld o
il de
man
d co
ver
% sh
are
of w
orld
oil
dem
and
IEA 90 days of stockholding, share of world demand with Chinawith Indiawith ASEANShare of non-OECD in global oil demand
© OECD/IEA 2011
The context: A time of unprecedented The context: A time of unprecedented uncertaintyuncertainty
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 ?
Emerging economies will shape the global energy future – where will their policy decisions lead us ?
Tightening oil market plus political unrest in producing regions – how vulnerable is the market to even small disruptions?
© OECD/IEA 2011
Overview of WEO-2010 scenariosOverview of WEO-2010 scenarios
New Policies Scenario is the central scenario in WEO-2010> assumes cautious implementation of recently announced commitments &
plans, even if yet to be formally adopted > provides benchmark to assess achievements & limitations of recent
developments in climate & energy policy
Current Policies Scenario takes into consideration only those policies that had been formally adopted by mid-2010> equivalent to the Reference Scenario of past Outlooks
The 450 Scenario sets out an energy pathway consistent with the goal of limiting increase in average temperature to 2OC
© OECD/IEA 2011
International oil price assumptions International oil price assumptions
The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case
Scenario
CO2 price in 2035 ($/ tCO2)
International oil price
in 2035($/bbl)
Effective oil price
in 2035($/bbl)
Current Policies
42 in EU 135 152 in EU
New Policies 50 in OECD 113 134 in OECD450 Scenario 120 in OECD 90 139 in OECD
0
20
40
60
80
100
120
140
1980 1990 2000 2010 2020 20302035
Dolla
rs p
er
barr
el (2
009)
Current Policies Scenario
New Policies Scenario
450 Scenario
© OECD/IEA 2011
Primary energy demand by fuel in the New Primary energy demand by fuel in the New Policies ScenarioPolicies Scenario
Non-OECD energy demand increases by 64% in 2008-2035, compared with a rise of just 3% in the OECD. Demand for all types of energy increases in non-OECD countries, while demand for coal & oil
declines in the OECD.
0
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
2008 2015 2020 2025 2030 2035
Mto
e
International Bunkers
Non-OECD Renewables
Non-OECD Nuclear
Non-OECD Gas
Non-OECD Oil
Non-OECD Coal
OECD Renewables
OECD Nuclear
OECD Gas
OECD Oil
OECD Coal
© OECD/IEA 2011
Emerging economies dominate the growth in Emerging economies dominate the growth in demand for all fuels demand for all fuels
Demand for all types of energy increases in non-OECD countries, while demand for coal & oil declines in the OECD
Incremental primary energy demand in the New Policies Scenario, 2008-2035
- 600 - 300 0 300 600 900 1 200 1 500
Other renewables
Hydro
Nuclear
Gas
Oil
Coal
Mtoe
OECD
China
Rest of world
© OECD/IEA 2011
Fossil-fuel subsidies are distorting price Fossil-fuel subsidies are distorting price signals signals
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
Economic value of fossil-fuel consumption subsidies by country, 2009
Turk
men
ista
n
Electricity(generated from fossil fuels)GasOilCoal
Additional subsidy in 2008
Iran
Saud
i A
rabia
Russ
iaIn
dia
Chin
aEg
ypt
Ven
ezu
ela
Ind
onesi
aU
AE
Uzb
ekis
tan
Iraq
Kuw
ait
Pakis
tan
Arg
enti
na
Ukra
ine
Alg
eri
aM
ala
ysi
aThaila
nd
Ban
gla
desh
Mexic
o
South
Afr
ica
Qata
rK
aza
khst
an
Libya
0
Bill
ion
dolla
rs
20
40
60
80
100
© OECD/IEA 2011
Booming demand for mobility in the Booming demand for mobility in the emerging economies drives up oil use emerging economies drives up oil use
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
0
200
400
600
800
1 000
1 200
1 400
1 600
1980 1990 2000 2008 2020 2035
Mill
ion China
Other non-OECD
United States
Other OECD
Passenger vehicles in the New Policies Scenario
© OECD/IEA 2011
0
20
40
60
80
100
1990199520002005201020152020202520302035
mb/d
Crude oil:fields yet to be developed
Crude oil: currently producing fields
Total crude oil
Oil production becomes less crudeOil production becomes less crude
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
World oil production by type in the New Policies Scenario
Unconventional oil
Natural gas liquids
Crude oil:fields yet to be found
© OECD/IEA 2011
More oil from fewer producers More oil from fewer producers
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
Incremental oil production by key country in the New Policies Scenario, 2009-2035
0 1 2 3 4 5 6
AlgeriaLibya
NigeriaQatar
IranKuwait
UAEVenezuela
CanadaKazakhstan
BrazilIraq
Saudi Arabia
mb/d
OPEC
Non-OPEC
© OECD/IEA 2011
A golden age for gas?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 2011
Coal remains the backbone of global Coal remains the backbone of global electricity generationelectricity generation
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 coal-fired capacity of the US, EU & Japan
0
2 000
4 000
6 000
8 000
10 000
12 000
1990 2000 2010 2020 2030 2035
TW
h China
India
Other non-OECD
OECD
Coal-fired electricity generation by region in the New Policies Scenario
© OECD/IEA 2011
Renewables enter the mainstream…. Renewables enter the mainstream….
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
Renewable primary energy demand in the New Policies Scenario
0 100 200 300 400 500
European Union
United States
China
Brazil
India
Africa
OECD Pacific
Mtoe
2008
2035
© OECD/IEA 2011
…….but only if there is enough government .but only if there is enough government supportsupport
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
Annual global support for renewables in the New Policies Scenario
Bill
ion
dolla
rs (
2009)
Biofuels
Renewables-basedelectricity
0
30
60
90
120
150
180
210
200720082009 20152020202520302035
© OECD/IEA 2011
Ambitious nuclear growth plans are now in Ambitious nuclear growth plans are now in doubtdoubt
Most of the planned-for growth is in non-OECD countries
Figure 17: Nuclear capacity under construction and number of reactors
Source: IAEA PRIS Database
1 1 2
27
1 16
12
1
5
11
22 2 1
0
5
10
15
20
25
30
GW
e
© OECD/IEA 2011
China becomes the market leader inChina becomes the market leader inlow-carbon technologies low-carbon technologies
Passenger car sales
Capacity additions
China’s share of cumulative global additions to 2035 for selected technologies
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
85 GW
335 GW105 GW
0%
10%
20%
30%
Solar PV Wind Nuclear Electric &plug-in hybrids
8.5 million vehicles
© OECD/IEA 2011
The 450 Scenario:The 450 Scenario: A A roadmap from 3.5 roadmap from 3.5C to 2C to 2C C
The 450 Scenario sets out an energy pathway consistent with limiting the increase in temperature to 2C
Assumes vigorous implementation of Copenhagen Accord pledges to 2020 & much stronger action thereafter
The failure of the Copenhagen Accord 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 2011
Low ambition to 2020 makes faster and Low ambition to 2020 makes faster and deeper cuts necessary afterwardsdeeper cuts necessary afterwards
Overall, this year’s 450 Scenario will cost $1 trillion more than last year’s by 2030,and requires a total of $18 trillion in investment by 2035
Emissions (right axis)
Investment
WEO-2010:
Emissions(right axis)
Investment
WEO-2009:
0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
2010-2015
2021-2025
2026-2030
2031-2035
Tri
llion
dolla
rs
(200
9)
20
22
24
26
28
30
32
34
2010 2015 2020 2025 2030 2035
Gt
CO
2
2016-2020
© OECD/IEA 2011
In the 450 Scenario, compared with the Current Policies Scenario, China & the US account for 48% of the cumulative emission abatement that is needed in 2010-2035
World energy-related CO2 emission savings by country in the 450 Scenario
relative to the Current Policies Scenario
20
25
30
35
40
45
2008 2015 2020 2025 2030 2035
Gt
China 33%
United States 15%
European Union 9%
India 8%
Middle East 5%
Russia 3%
Rest of world 24%
Share of cumulative abatement
between 2010-2035
Japan 3%
42.6 Gt
21.7 Gt
Current Policies Scenario
450 Scenario
20.9 Gt
The 450 Scenario: The 450 Scenario: Abatement by country Abatement by country
© OECD/IEA 2011
The 450 Scenario: The 450 Scenario: Abatement by technology Abatement by technology
In moving from the New Policies Scenario to the 450 Scenario, more expensive abatement options such as CCS play a growing role
World energy-related CO2 emission savings by technology in the 450 Scenario relative to the New
Policies Scenario
20
25
30
35
40
45
2008 2015 2020 2025 2030 2035
Gt
Efficiency 50%
Renewables 18%
Biofuels 4%
Nuclear 9%
CCS 20%
Share of cumulative abatement
between 2010-2035
42.6 Gt
35.4 Gt
21.7 Gt
Current Policies Scenario
450 Scenario
New Policies Scenario
13.7 Gt
7.1 Gt
© OECD/IEA 2011
Achieving the 2°C goal will require rapid Achieving the 2°C goal will require rapid decarbonisation of global energydecarbonisation of global energy
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
Average annual change in CO2 intensity in the 450 scenario
0%
1%
2%
3%
4%
5%
6%
1990-2008 2008-2020 2020-2035
A four-fold increase needed
© OECD/IEA 2011
A fundamental change is needed in power A fundamental change is needed in power generation generation
Low-carbon technologies account for over three-quarters of global power generation by 2035 in the 450 Scenario, a four-fold increase on today
Share of world electricity generation by type and scenario
Additional low-carbon generationin 450 Scenario
Low-carbon generation in the NPS
Fossil-fuel fired generation
0%
20%
40%
60%
80%
100%
2010 2015 2020 2025 2030 2035
in the 450 Scenario
© OECD/IEA 2011
Decarbonisation of power generation in OECD Decarbonisation of power generation in OECD Europe Europe
0
1000
2000
3000
4000
5000
6000
2007 Baseline 2050 BLUE Map 2050
BLUE High Nuclear 2050
BLUE High Ren 2050
TWh
Imports
Other
Solar
Wind
Biomass+CCS
Biomass and waste
Hydro
Nuclear
Natural gas+CCS
Natural gas
Oil
Coal+CCS
Coal
A mix of nuclear, renewables and fossil-fuels with CCS will be needed to decarbonise the electricity sector.
© OECD/IEA 2011
Fundamental change also in transport Fundamental change also in transport
Plug-in hybrids & electric vehicles reach 39% of light-duty vehicle sales by 2035, making a big contribution to CO2 abatement, thanks to a major decarbonisation of the power sector
Sales of plug-in hybrid and electric vehicles in the 450 Scenario
CO2 intensity in power generation (right axis)
Electric vehicles
Plug-in hybrids
& CO2 intensity of the power sector
0
100
200
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500
600
700
Gra
mm
es
per
kW
h
0
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2010 2015 2020 2025 2030 2035
Mill
ion
© OECD/IEA 2011
Clean energy progress mixedClean energy progress mixed
We are not on a pathway to limit global temperatures
© OECD/IEA 2011
Clean energy progress is mixedClean energy progress is mixed
0 10 20 30 40 50
Solar CSP
Solar PV
Geothermal
Wind-offshore
Wind-onshore
Biomass plants
Hydro
Nuclear
Gas-fired with CCS
Coal-fired with CCS
GW/ yr
Present rate Gap to reach BLUE Map
30 plants (1 000 MW)
200 plants (50 MW)
12 000 turbines (4 MW)3 600 turbines (4 MW)
45 units (100 MW)
55 CSP plants (250 MW)
325 million m2 solar panels
2/3 of Three Gorges Dam
35 plants (500 MW)
20 plants (500 MW)Historical high
Average annual electricity capacity additions to 2050
© OECD/IEA 2011
Will peak oil be a guest or the spectre at the Will peak oil be a guest or the spectre at the feast?feast?
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
Oil demand
World demand in450 Scenario
Inter-regional(bunkers)
Other non-OECD
India
China
OECD
Right axis:
2009 2015 2020 2025 2030 2035
mb/d
68
72
76
80
84
88
92
96
100
mb/d
-16
-12
-8
-4
0
4
8
12
16 World demand inNew Policies Scenario
Peak demand
in the 450 Scenario
© OECD/IEA 2011
Combating climate change will bring Combating climate change will bring economic benefits as well as costseconomic benefits as well as costs
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
Oil-import bills as share of GDP in selected countries
0%
1%
2%
3%
4%
5%
6%
7%
8%
EuropeanUnion
UnitedStates
Japan China India
1980
2008
2009
2035: New Policies Scenario
2035: 450 Scenario
© OECD/IEA 2011
OPEC oil-export revenues set to rise OPEC oil-export revenues set to rise
In the 450 Scenario, OPEC’s cumulative oil revenues in 2010-2035 amount to $27 trillion, or more than a 3-fold increase compared with the last quarter century
0
5
10
15
20
25
30
35
New PoliciesScenario
450Scenario
1984-2009 2010-2035
Tri
llion
dolla
rs (
2009)
Cumulative OPEC oil-export revenues by scenario
© OECD/IEA 2011
Key Key messagesmessages
The surge in oil prices poses a threat to the fragile economic recovery by impacting balance of payments, inflation & growth
If oil prices average $100 per barrel in 2011, OECD oil-import spending will amount to 2.3% of GDP
Emerging economies with high energy intensity and import dependency are most vulnerable
“Golden Age” of gas with supply abundance and high demand from China and post-Fukushima
Uncertain future Chinese policies will have huge impacts
Policies to respond to challenges posed by climate change & energy security by bringing the oil demand peak forward would have important repercussions on the oil market
With or without oil the age of cheap energy is over – but who will take the rent?
© OECD/IEA 2011
Oil in the global energy mix:Oil in the global energy mix:Climate policies can drive an early peak in oil demand Climate policies can drive an early peak in oil demand
Nobuo TanakaNobuo TanakaExecutive DirectorExecutive DirectorInternational Energy AgencyInternational Energy Agency
Bridge Forum Dialogue, LuxembourgBridge Forum Dialogue, Luxembourg13 April 2011 13 April 2011