Global Energy Transition Risk and Opportunities

4th Russian Energy Forum| London 22 June 2017

Dr Sun XianshengSecretary General, IEF Riyadh

Flow

1. Where are we on the transition pathway?

2. What are the risks and opportunities?

3. Russia’s role in transition?

4. Key IEF Initiatives

Transition PathwaysMedium-term oil demand growth picks up in lower price environment to 2020

86

88

90

92

94

96

98

100

102

104

106

2015 2016 2017 2018 2019 2020 2021 2022

Medium Term World Oil Demand Projections

IEA 2017 IEA 2016 OPEC 2016

Mb/d

+ 1 Mb/d

+ 1.2 Mb/d

Sources: IEA Oil 2017 Analysis and forecasts to 2022, IEA Medium Term Oil Market Report 2016, OPEC World Oil Outlook 2016

When is the turning point?Demand, technology, and transition policy, increase uncertainty after 2020s

80

85

90

95

100

105

110

115

120

125

IEA Current Policies IEA New Policies IEA 450 ppm

OPEC Reference Scenario A Scenario B

2015 20302020 2040

Uncertainty threshold

IEA OPEC Long-term Liquids Demand Projections

Sources: IEF-Resources for the Future Introductory Paper for the Sixth IEA-IEF-OPEC Symposium on Energy Outlooks February 2016

36 Mb/din question

Mb/d

Russian outlooks show less variationRussian energy outlooks see less uncertainty in oil demand growth

Sources: Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation; Global and Russian Energy Outlook 2016

75

80

85

90

95

100

2013 2020 2025 2030 2035 2040

Long-term Russian Oil Demand Projections

Probable Scenario Critical Scenario Favourable Scenario

7.5 Mb/din question

Mb/d

Slower demand growth looks certain…Main pathways point at demand plateau in 2050s

Mb/d

Based on extrapolation of 2016 IEA, OPEC and Russian Long Term Projections

Role of Biofuels and

NGLs

0

20

40

60

80

100

120

2013 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 3000

Indicative Extra Long-term Projections

IEA New Policies OPEC Reference Russia Probable Scenario

Slower demand growth? Declining demand?

Plateau threshold

Policy and Technology CooperationDepth and breath of new policy and technology deployment is key

Mb/d

Based on extrapolation of 2016 IEA, OPEC and Russian Long Term Projections

Role of Biofuels and

NGLs

0

20

40

60

80

100

120

2013 2015 2020 2025 2030 2035 2040 2045 2050 2055 2060 2065 2070 2075 2080 2085 2090 2095 3000

Indicative Extra Long-term Projections

IEA New Policies OPEC Reference Russia Probable Scenario

Rapid and Broad New Policy and Technology Deployment

Slow and Partial New Policy and Technology Deployment

Plateau threshold

Flow

1. Where are we on the transition pathway?

2. What are the risks and opportunities?

3. Russia’s role in transition?

4. Key IEF Initiatives

Energy Security Rests on FossilFossils amount to 74%, 77% and 76% in key 2040 scenarios, and to 57%, 71% and 74% in alternative 2040 scenarios of IEA, OPEC, and Russia

Sources: Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation; Global and Russian Energy Outlook 2016, IEF-RFF Comparative Analysis of IEA World Energy Outlook 2016 and OPEC World Oil Outlook 2016

29% 28% 29% 27% 23% 13% 24% 22% 21% 25% 26% 24%

31% 31% 31%28%

27%

22%

26% 26% 25%27% 27% 26%

21% 22% 21%24%

24%

22%

27% 26% 25%24% 23% 24%

5% 5% 5% 5%7%

11%

6% 7% 8%6% 6.50% 7%

2% 2% 3%3%

3%

4%

3%3%

3%3% 3% 3%

10% 10% 10%9% 11%

16%

10% 11% 12%11% 11% 11%

4% 6%12%

5% 6% 7% 4% 3% 4%

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

IEA OPEC Russia IEA CPS IEA NPS IEA 450 OPEC Ref OPEC A OPEC B RussiaProbable

RussiaCritical

RussiaFavourable

2013 2040

Fuel Shares in IEA, OPEC, and Russian Outlook Scenarios to 2040

Coal Oil Gas Nuclear Hydro Biomass Other renewables Total fossil Total renewables

Risk and opportunities of the down cycle Global Oil and Gas Market Security

Risk Opportunities

Upstream investment deferrals

• 3 year crunch amounts to ~5mb/d loss • Impacts market stability and jobs• Strands resources

Flexibility and new business models

• Consolidation and new partnerships• Diversification to gas and renewables• Better access to resources

Market volatility

• Alternating swing suppliers (US/KSA)• Risk of shortfalls/spikes in 2020s?• Role of inventory data transparency

Resilience through enhanced performance

• Efficiency gains cost reductions• Standardisation across industry• Digitisation and Big Data

Risk and opportunities of the down cycle Global Oil and Gas Market Security

Risk Opportunities

Dependence on major producers

• Role of NOCs grows• Reduced market influence• Geopolitical risk increase

New technologies and market segments

• Carbon Capture Use and Storage• Highly Efficient Low Emissions Generation• Storage, Transport, and Petrochemicals

Energy transition uncertainty

• Leadership• Finance• Technology

Improved price signals

• Inefficient subsidy reform• Carbon pricing mechanisms• Level inter-fuel competition

Flow

1. Where are we on the transition pathway?

2. What are the risks and opportunities?

3. Russia’s role in transition?

4. Key IEF Initiatives

Russia is the 3rd largest liquid producerSharing responsibility with other key producers for global energy security

Sources: Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation; Global and Russian Energy Outlook 2016

Mtoe

0

100

200

300

400

500

600

700

800

2010 2015 2020 2025 2030 2035 2040

Liquid hydrocarbon production forecasts of key countries (probable scenario)

Russia Saudi Arabia United StatesMexico Canada BrazilVenezuela Kazakhstan Iran

Saudi Arabia

United States

Russia

Russia is the 2nd largest gas producerStrategically placed between European and Asian demand growth centers

Sources: Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation; Global and Russian Energy Outlook 2016

Bcm

0

200

400

600

800

1000

1200

2015 2020 2025 2030 2035 2040

Natural gas production forecasts for key countries (probable scenario)

Russia United States IranChina Canada QatarAustralia Norway Malaysia

Iran

United States

Russia

EU imports most oil, gas, and solids from RussiaRussia is the largest import source for hydrocarbons in Europe

Source: Eurostat 2016

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

crud

e

gas

solid

s

2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

EU 28 Oil & Gas Import Sources

Russia Norway Algeria Others

Russia gas export diversification enables transitionBoth in Europe and in Asia

Source: Tatiana Mitrova, Energy Research Institute, Russian Academy of Sciences, Cedigaz

60 62 43 49 47 47

134 147145 147 152 155

1314 18

5573

0

50

100

150

200

250

300

2000 2010 2015 2020 2025 2030

Russian gas export dynamics to 2030

CIS Europe Asia

Bcm

Flow

1. Where are we on the transition pathway?

2. What are the risks and opportunities?

3. Russia’s role in transition?

4. Key IEF Initiatives

Opportunities for Dialogue

1. 1st Asian Energy Efficiency Conference and Exposition 30 October-2 November 2017 | Riyadh, Saudi Arabia

2. 7th Asian Ministerial Energy Roundtable - Global Energy Markets in Transition: From Vision to Action 1-3 November 2017 | Bangkok, Thailand

3. 16th IEF Ministerial Energy Forum 10-12 April 2018 New Delhi, India

- SPARE SLIDES -

Natural Gas helps reliable transitionsRussia is well placed when gas and innovation can play a larger role for longer

-200 -100 0 100 200 300 400 500

Middle East

Emerging Asia

North America

Africa

CIS

South and Central America

Russia

OECD Asia

Europe

Gas Production Growth by Key Regions and Russia 2015/40

Sources: Energy Research Institute of the Russian Academy of Sciences and The Analytical Center for the Government of the Russian Federation; Global and Russian Energy Outlook 2016