OECD/IEA 2012

World Energy Outlook 2012 Presentation to the press

London, 12 November 2012

OECD/IEA 2012

The context

Foundations of global energy system shifting

Resurgence in oil & gas production in some countries

Retreat from nuclear in some others

Signs of increasing policy focus on energy efficiency

All-time high oil prices acting as brake on global economy

Divergence in natural gas prices affecting Europe (with prices 5-times US levels) and Asia (8-times)

Symptoms of an unsustainable energy system persist

Fossil fuel subsidies up almost 30% to $523 billion in 2011, led by MENA

CO2 emissions at record high, while renewables industry under strain

Despite new international efforts, 1.3 billion people still lack electricity

OECD/IEA 2012

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-OECD Rest of non-OECD 6 030 Mtoe 12 380 Mtoe 16 730 Mtoe

OECD/IEA 2012

A United States oil & gas transformation

US oil and gas production

The surge in unconventional oil & gas production has implications well 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

OECD/IEA 2012

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

8

9

2012 2020 2035

mb/d North

Centre

South

Iraq oil exports

1

2

3

4

5

6

7

8

9

2012 2020 2035

mb/d Other

Asia

OECD/IEA 2012

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 Americas emergence as a net exporter accelerates the eastward shift in trade

7

United States Japan & Korea Europe China India

mb/d 2000

2011

2035

1

2

3

4

5

6

OECD/IEA 2012

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

OECD/IEA 2012

Different trends in oil & gas import 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

China India

European Union

Japan

2010

2035

20% Gas Exports

the United States swims against the tide

OECD/IEA 2012

3 000 4 000 5 000 6 000

TWh

2 000

A power shift to emerging economies

The need for electricity in emerging economies drives a 70% increase in worldwide demand, 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

OECD/IEA 2012

The multiple benefits of renewables come at a cost

Renewable subsidies were $88 billion in 2011; over half the $4.8 trillion required to 2035 has been committed to existing projects or is needed to meet 2020 targets

Global renewable energy subsidies

$50

$100

$150

$200

$250

2011 2015 2020 2025 2030 2035

Billion

2012-2035

$960 billion

$2 600 billion

$1 200 billion

Existing capacity

Electricity:

2011-2035

Biofuels:

OECD/IEA 2012

Wide variations in the price of power

Electricity prices are set to increase with the highest prices persisting in the European 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

2011 Non-OECD average

2011 OECD average

OECD/IEA 2012

2010

Energy is becoming thirstier in the face of growing water constraints

The energy sectors water needs are set to grow, making water an increasingly important criterion for assessing the viability of energy projects

20%

40%

60%

80%

100%

2010

Coal

Nuclear

Other

Energy

Biofuels Fossil fuels

Power

Global water use Water for energy

OECD/IEA 2012

Energy efficiency: a huge opportunity going unrealised

20%

40%

60%

80%

100%

Industry Transport Power generation

Buildings

Unrealised energy efficiency potential

Realised energy efficiency potential

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

Energy efficiency potential used by sector in the New Policies Scenario

OECD/IEA 2012

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 Policies Scenario

Efficient World Scenario

Reduction in 2035

Coal 1 350 Mtce

Oil 12.7 mb/d

Gas 680 bcm

Others 250 Mtoe

oil demand savings equal the current production of Russia & Norway

OECD/IEA 2012

Energy efficiency brings economic gains

In addition to cutting energy expenditures by an average of 20%, improved efficiency brings wider economic gains, particularly for India, China, the United States & Europe

Energy expenditure in 2035 compared with 2010

Trillion

Efficient World Scenario

New Policies Scenario Additional in the New Policies Scenario

-$0.3

$0

$0.3

$0.6

$0.9

$1.2

$1.5

China India European Union

United States

Japan

OECD/IEA 2012

Room to manoeuvre

The Efficient World Scenario delays carbon lock-in

Energy efficiency can delay lock-in of CO2 emissions permitted under a 2 C trajectory 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 existing infrastructure

2017

Lock-in of infrastructure in New Policies Scenario in 2017

2022 35

Lock-in of infrastructure in Efficient World Scenario in 2022

OECD/IEA 2012

Foundations of energy system shifting

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

Changing outlook for energy production & use may redefine global economic & geopolitical balances

Iraq set to play a pivotal role in global oil markets

As climate change slips off policy radar, the lock-in point moves closer & the costs of inaction rise

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