© OECD/IEA 2012

World Energy Outlook 2012Dr. Fatih BIROL

IEA Chief EconomistDen Haag, 15 November 2012

© OECD/IEA 2012

The context

n Foundations of global energy system shiftingØ Resurgence in oil & gas production in some countriesØ Retreat from nuclear in some othersØ Signs of increasing policy focus on energy efficiency

n All-time high oil prices acting as brake on global economyØ Divergence in natural gas prices affecting Europe (with prices

5-times US levels) and Asia (8-times)

n Symptoms of an unsustainable energy system persistØ Fossil fuel subsidies up almost 30% to $523 billion in 2011, led by MENAØ CO2 emissions at record high, while renewables industry under strainØ Despite new international efforts, 1.3 billion people still lack electricityØ Water increasingly crucial for assessing the viability of energy projects

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Emerging economies steer energy markets

Share of global energy demand

Global energy demand rises by over one-third in the period to 2035,underpinned by rising living standards in China, India & the Middle East

20%

40%

60%

80%

100%

1975 2010 2035

Middle East

India

China

OECD

Non-OECDRest of non-OECD6 030 Mtoe 12 380 Mtoe 16 730 Mtoe

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A United States oil & gas transformation

US oil and gas production

The surge in unconventional oil & gas production has implicationswell beyond the United States

Unconventional gas

Conventional gas

Unconventional oil

Conventional oil

mboe/d

5

10

15

20

25

1980 1990 2000 2010 2020 2030 2035

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Middle East oil to Asia: a new silk road

Middle East oil export by destination

By 2035, almost 90% of Middle Eastern oil exports go to Asia; North America’semergence as a net exporter accelerates the eastward shift in trade

7

United StatesJapan & Korea EuropeChina India

mb/d 2000

2011

2035

1

2

3

4

5

6

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Iraq oil poised for a major expansion

Iraq oil production

Iraq accounts for 45% of the growth in global production to 2035;by the 2030s it becomes the second-largest global oil exporter, overtaking Russia

1

2

3

4

5

6

7

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9

2012 2020 2035

mb/d NorthCentreSouth

Iraq oil exports

1

2

3

4

5

6

7

8

9

2012 2020 2035

mb/d OtherAsia

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Natural gas: towards a globalised market

Major global gas trade flows, 2010

Rising supplies of unconventional gas & LNG help to diversify trade flows,putting pressure on conventional gas suppliers & oil-linked pricing mechanisms

Major global gas trade flows, 2035

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Different trends in oil & gasimport dependency

While dependence on imported oil & gas rises in many countries,

Net oil & gas import dependency in selected countries

0%

20%

40%

60%

80%

100%

20% 40% 60% 80% 100%Oil imports

Gas Imports

United States

ChinaIndia

European Union

Japan20102035

20%Gas Exports

the United States swims against the tide

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3 000 4 000 5 000 6 000TWh

2 000

A power shift to emerging economies

The need for electricity in emerging economies drives a 70% increase in worldwidedemand, with renewables accounting for half of new global capacity

Change in power generation, 2010-2035

-1 000 0 1 000

Japan

European Union

United States

China

TWh

Coal Gas Nuclear Renewables

India

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The multiple benefits of renewablescome at a cost

Renewable subsidies were $88 billion in 2011; over half the subsidies required to2035 has been committed to existing projects or is needed to meet 2020 targets

Global renewable energy subsidies of $4.8 trillion, 2011-2035

Electricity$3.6 trillion

Biofuels$1.2 trillion

Committed toexisting projects

$1.0 trillion

Required tomeet targets2012-2020$1.6 trillion

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Wide variations in the price of power

Electricity prices are set to increase with the highest prices persisting in theEuropean Union & Japan, well above those in China & the United States

Average household electricity prices, 2035

5

10

15

20

25

China United States European Union Japan

cents/kWh

2011Non-OECDaverage

2011OECD average

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Energy efficiency: a huge opportunitygoing unrealised

20%

40%

60%

80%

100%

Industry Transport Powergeneration

Buildings

Unrealised energyefficiency potential

Realised energyefficiency potential

Two-thirds of the economic potential to improve energy efficiencyremains untapped in the period to 2035

Energy efficiency potential used by sector in the New Policies Scenario

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The Efficient World Scenario:a blueprint for an efficient world

Economically viable efficiency measures can halve energy demand growth to 2035;

Total primary energy demand

12 000

13 000

14 000

15 000

16 000

17 000

18 000

2010 2015 2020 2025 2030 2035

Mtoe

New PoliciesScenario

EfficientWorld Scenario

Reduction in 2035

Coal 1 350 Mtce

Oil 12.7 mb/d

Gas 680 bcm

Others 250 Mtoe

oil prices are $15 per barrel lower by 2035 due to oil demand savings

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Energy efficiency can help driveeconomic prosperity

Cumulative investments in energy efficiency of $12 trillion are more than offsetby fuel savings & trigger economic growth of a cumulative $18 trillion

GDP in Efficient World Scenario versus New Policies Scenario, 2035

0%

1.0%

2.0%

3.0%

4.0%

Japan & Korea OECD Europe United States China India

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Power generation

Industry

Transport

Other

Room to manoeuvre

The Efficient World Scenariodelays carbon lock-in

Energy efficiency can delay “lock-in” of CO2 emissions permitted under a 2 °Ctrajectory – which is set to happen in 2017 – until 2022, buying five extra years

5

10

15

20

25

30

2011 2015 2020 2025 2030 2035

Gt

2 °C trajectory

Lock-in of existinginfrastructure

2017

Lock-in of infrastructurein New Policies Scenarioin 2017

202235

Lock-in of infrastructurein Efficient World Scenarioin 2022

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Foundations of energy system shifting

n Policy makers face critical choices in reconciling energy,environmental & economic objectives

n Changing outlook for energy production & use may redefineglobal economic & geopolitical balances

n Iraq set to play a pivotal role in global oil markets

n As climate change slips off policy radar, the “lock-in” pointmoves closer & the costs of inaction rise

n The gains promised by energy efficiency are within reach & areessential to underpin a more secure & sustainable energy system