INTERNATIONAL ENERGY AGENCY
World Energy Outlook 2006 Hideshi EMOTO Senior Energy Analyst Economic Analysis Division International Energy Agency Š OECD/IEA - 2006
The Context The world is facing twin energy threats Inadequate and insecure supplies Environmental damage, including climate change
There is an urgent need to curb the growth in fossil-fuel demand & related emissions WEO-2006 is a direct response to G8 request for advice on alternative energy scenarios Two scenarios depict markedly different energy futures to 2030 Reference Scenario: No new government policies are adopted Alternative Policy Scenario: Energy-security & climate-change policies now under consideration are adopted © OECD/IEA - 2006
Reference Scenario: World Primary Energy Demand 18 000
Other renewables Nuclear Biomass
16 000 14 000
Gas
Mtoe
12 000 10 000 8 000
Coal
6 000 4 000
Oil
2 000 0 1970
1980
1990
2000
2010
2020
2030
Global demand grows by more than half over the next quarter of a century, with coal use rising most in absolute terms Š OECD/IEA - 2006
Reference Scenario:
Primary Oil Demand 120 100
mb/d
80 60 40 20 0 1980 OECD
Transition economies
2005
2015
Developing Asia
2030
Other developing countries
Most of the increase in oil demand comes from developing countries, where economic growth – the main driver of oil demand – is most rapid © OECD/IEA - 2006
Reference Scenario:
Share of Transport in Total Oil use 70% 60% 50% 40% 30% 20% 10% World
OECD
1980
Non-OECD
2004
China
Rest of Transition developing economies countries 2030
The rising share of transport – which is relatively price inelastic – makes oil demand less responsive to movements in international oil prices © OECD/IEA - 2006
Economic Value of Energy Subsidies in non-OECD Countries, 2005 Russia Iran China Saudi Arabia India Indonesia Ukraine Egypt Venezuela Kazakhstan 0
5
10
Oil products
15
20 25 30 35 billion dollars Natural gas Electricity
40
45 Coal
World subsidies amount to well over $250 billion per year – Russia has the largest subsidies, amounting to $40 billion per year Š OECD/IEA - 2006
Proven Oil Reserves
Saudi Arabia 20%
Iran 10%
Iraq 9% Kuwait 8% Other Middle East 10%
Rest of the world 43%
The Middle East’s share of global oil reserves is much higher than its share of current production, suggesting strong potential for growth Š OECD/IEA - 2006
Reference Scenario:
World Primary Oil Supply 120
50%
100
45%
mb/d
80 60
40%
40 35%
20 0
30% 2000 2005 Middle East OPEC crude* Non-OPEC crude* OPEC market share
2015
2030 Other OPEC crude* Non-conventional oil * Including NGLs
OPEC takes the lion’s share of oil market growth as conventional non-OPEC production peaks, but non-conventional oil plays a growing role © OECD/IEA - 2006
Reference Scenario:
World Primary Natural Gas Demand by Sector 5 000 4 000
67% growth
bcm
3 000 2 000 1 000 0 1990 Power generation
2000 GTL
2004 Industry
2010
2015
Residential and services
2030 Other sectors
The power sector accounts for more than half of the increase in primary gas demand worldwide Š OECD/IEA - 2006
Increase in the Net Oil Import Bill in 2005 over 2002
OECD North America OECD Europe OECD Pacific Developing Asia Oil-importing SubSaharan Africa -1%
0% Oil
1% share of GDP in 2002
2%
3%
Gas
The increase in international energy prices raised the cost of net oil and gas imports in developing countries Š OECD/IEA - 2006
Trends in Coal Demand
800 700 million tonnes
600 500 400 300 200 100 0
World Increase 1993-2003
China Increase 2003-2005
Global coal demand in the last two years has grown much faster than previously – mainly driven by China Š OECD/IEA - 2006
Reference Scenario:
Energy-Related CO2 Emissions by Fuel 50
billion tonnes
40 30
Increase of 14.3 Gt (55%)
20 10 0 1990
2004 Coal
2010 Oil
2015
2030 Gas
Half of the projected increase in emissions comes from new power stations, mainly using coal & mainly located in China & India Š OECD/IEA - 2006
Reference Scenario:
Energy-Related CO2 emissions by Region
15
Rest of non-OECD
Gigatonnes of CO2
12 China
9 6
Rest of OECD
United States
3 0 1990
2000
2010
2020
2030
China overtakes the US as the world’s biggest emitter before 2010, though its per capita emissions reach just 60% of those of the OECD in 2030 Š OECD/IEA - 2006
Reference Scenario:
Cumulative Investment, 2005-2030 $20.2 trillion (in $2005) Electricity 56%
Oil 21% $4.3 trillion
$3.9 trillion Gas 19%
rillion $0.6 t
Biofuels 1%
$11.3 trillion
Coal 3%
Investment needs exceed $20 trillion – $3 trillion more than previously projected, mainly because of higher unit costs Š OECD/IEA - 2006
Global Upstream Oil & Gas Investment: Impact of Cost Inflation 300
index (year 2000 = 100)
actual
forecast
250 200 150 100 Year 2000
50 2000
2002 Nominal
2004
2006
2008
2010
Adjusted for cost inflation
Annual upstream investment doubled to $225 billion between 2000 and 2005, but most of the increase was due to cost inflation Š OECD/IEA - 2006
Access to oil reserves
National companies only 37%
Limited access national companies dominant 13%
Production sharing 11% Iraq 9% Concession 30%
Total reserves = 1 290 billion barrels
Access to much of the world’s remaining oil reserves is restricted Š OECD/IEA - 2006
Energy Poverty: Annual Deaths from Indoor Air Pollution 3
2.8
2 millions
1.6 1.2
1.3
Malaria
Smoke from biomass
1
0 Tuberculosis
HIV/AIDS
Source: World Health Organization
The number of people using dirty traditional biomass for cooking is set to grow from 2.5 billion now to 2.7 billion in 2030 absent new policies Š OECD/IEA - 2006
The Energy Future Absent New Policies Security of oil supply is threatened Oil production in non-OPEC countries is set to peak Production will be increasingly concentrated in a small
number of countries
Gas security is also a growing concern Europe’s production has already peaked - US to follow Import dependence in both regions & other key regions
will grow absent new policies
Global energy-related carbon-dioxide emissions will accelerate
© OECD/IEA - 2006
INTERNATIONAL ENERGY AGENCY
Alternative Policy Scenario
© OECD/IEA - 2006
Alternative Policy Scenario: Mapping a Better Energy Future Analyses impact of government policies under consideration to enhance security & curb emissions Demonstrates that we can significantly reduce growth in energy demand & emissions and stimulate alternative energy production Oil demand is reduced by 13 mb/d in 2030 - equivalent to current output of Saudi Arabia & Iran Oil savings in 2015 savings reach 5 mb/d CO2 emissions are 6.3 Gt (16%) lower in 2030 – equivalent to the current emissions of US and Canada
Delaying action by 10 years would reduce the impact on emissions in 2030 by three-quarters
© OECD/IEA - 2006
Alternative Policy Scenario:
OECD Oil Imports 36 34
mb/d
5.2 mb/d 32
1.8 mb/d
30 28 26 2005
2010
2015
Reference Scenario
2020
2025
2030
Alternative Policy Scenario
In stark contrast with the Reference Scenario, OECD oil imports level off soon after 2015 & then begin to decline Š OECD/IEA - 2006
Alternative Policy Scenario:
Oil and Gas Imports, 2004-2030 50% 40% 30% 20% 10% 0% -10% United States
European Union
Reference Scenario
Japan
Alternative Policy Scenario
OECD countries see their increase in oil and gas import requirements substantially reduced in the APS Š OECD/IEA - 2006
Alternative Policy Scenario:
Key Policies for CO2 Reduction 42 Increased nuclear (10%) Increased renewables (12%) Power sector efficiency & fuel (13%) Electricity end-use efficiency (29%)
38 Gt of CO2
Reference Scenario
Fossil-fuel end-use efficiency (36%)
34
Alternative Policy Scenario
30
26 2004
2010
2015
2020
2025
2030
Improved end-use efficiency accounts for over two-thirds of avoided emissions in 2030 in the APS Š OECD/IEA - 2006
Alternative Policy Scenario:
Change in Cumulative Energy-Related Investment, 2005-2030 3 000
billion dollars (2005)
2 000 1 000 0 -1 000 -2 000 -3 000 -4 000 Additional demand- Avoided supply-side Net change in side investment investment energy investment
Avoided supply-side investment more than outweighs the additional investment by consumers in more expensive end-use capital stock Š OECD/IEA - 2006
Alternative Policy Scenario:
Investment Payback Periods 9 OECD
8
Non-OECD
7 years
6 5 4 3 2 1 0 2005-2015
2016-2030
2005-2015
2016-2030
Cars Electrical equipment (refrigerators, washing machines, lighting, air conditioning) Motors in industy
The payback periods of new policies are very short, especially in non-OECD countries for policies introduced before 2015 Š OECD/IEA - 2006
Renewed Interest in Nuclear Power Growing concerns over energy security, surging fossil-fuel prices & rising carbon emissions Positive aspects of nuclear power proven technology for large-scale baseload electricity generation reduce dependence on imported gas no emissions of greenhouse gases or local pollutants produces electricity at competitive & stable cost uranium resources abundant & widespread
But governments need to play a stronger role in facilitating investment where nuclear is accepted © OECD/IEA - 2006
Impact of a 50% Increase in Fuel Price on Generating Costs
increase in generating cost
40%
30%
20%
10%
0% Wind
Nuclear
IGCC
Coal steam
CCGT
Nuclear generating costs are far less sensitive to fuel price increases than gas or coal plants Š OECD/IEA - 2006
Outlook for Biofuels Interest in biofuels is soaring Biofuels can help address twin threats of growing energy insecurity & climate change through Increased diversity of geographic & fuel sources Lower greenhouse-gas emissions - depending on how they are produced
Higher oil prices have made biofuels more competitive, but further cost reductions are needed Availability of arable land will constrain biofuels potential in the medium term Long-term prospects hinge on new technology
© OECD/IEA - 2006
Share of Biofuels in Road-Transport Fuel Demand 32% 28% 24% 20% 16% 12% 8% 4% 0% World 2004
United States European Union
2030 Reference Scenario
Brazil
2030 Alternative Policy Scenario
Biofuels are set to play a much larger role in meeting world roadtransport fuel demand Š OECD/IEA - 2006
Making the Alternative Policy Scenario a Reality Formidable hurdles exist to the adoption & implementation of the Alternative Policy Scenario It will require considerable political will to push through those policies Private-sector support & international cooperation will be essential Action is needed urgently Investment over the next decade will lock in technology that will remain in use for up to 60 years Delaying implementation by a decade would reduce cut in cumulative emissions to 2030 from 8% to 2% R&D in carbon capture & storage is particularly crucial to scope for cutting emissions beyond 2030 © OECD/IEA - 2006
Summing Up The need to diversify energy sources & mitigate emissions is more urgent than ever Strong new policies could sharply reduce the rate of increase in demand & emissions Economic cost of these policies would be more than outweighed by the economic benefits alone WEO-2006 sets out the essential 1st steps towards a clean, clever & competitive energy future In the longer term, technology development will be critical to a sustainable global energy system
© OECD/IEA - 2006
INTERNATIONAL ENERGY AGENCY
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