© OECD/IEA - 2007

Investing in & Financing the Hydrocarbon Sector to

Enhance Global Energy Security:

Findings from the World Energy Outlook 2007

UNECE Energy Week, 28th November 2007

Trevor MorganSenior Economist

International Energy Agency

© OECD/IEA - 2007

Outline

� Global energy outlook in a business-as-usual world

� Implications for investment & energy security

� Impact of policy action to achieve a more secure & cleaner global energy system

© OECD/IEA - 2007

WEO-2007: Scope & Approach

� Focus on China & India

� Scenario approach� Reference Scenario

� High Growth Scenario (China/India)

� Alternative Policy Scenario

© OECD/IEA - 2007

Global Energy Outlook in a Business-as-Usual World

© OECD/IEA - 2007

Reference Scenario:

World Primary Energy Demand

Global demand grows by more than half over the next quarter of acentury, with oil remaining the single most importa nt fuel

0

2

4

6

8

10

12

14

16

18

1980 1990 2000 2010 2020 2030

billion tonnes of oil equivalent

Other renewablesBiomassHydroNuclearGasOilCoal

0

2

4

6

8

10

12

14

16

18

1980 1990 2000 2010 2020 2030

billion tonnes of oil equivalent

Other renewablesBiomassHydroNuclearGasOilCoal

© OECD/IEA - 2007

Reference Scenario:

Increase in World Primary Energy Demand, 2005-2030

China & India will contribute about 45% of the incr ease in global energy demand to 2030 on current trends

0%

20%

40%

60%

80%

100%

Coal Oil Gas Nuclear Hydro Rest ofrenewables

Total

Rest of the world

India

China

© OECD/IEA - 2007

Reference Scenario:

World Primary Oil Demand

Oil demand increases most rapidly in China, India & other developing countries

0

20

40

60

80

100

120

1980 1990 2000 2010 2020 2030

mb/d

Other developing countries

Middle East

India

China

Transition Economies

OECD

© OECD/IEA - 2007

Reference Scenario:

World Oil Production

0

20

40

60

80

100

120

2005 2010 2015 2020 2025 2030

mb/d

40%

44%

48%

52%

56%

market share

Total OPEC Non-OPEC non-conventional oil

Non-OPEC conventional oil

Non-OPEC conventional oil plateaus by around 2015, with OPEC providing the bulk of additional oil supply

© OECD/IEA - 2007

China sees the biggest jump in oil imports in absol ute terms, but North America remains the largest importer

Reference Scenario:

Net Oil Trade

-20 -10 0 10 20 30 40

OECD North America

China

OECD Europe

OECD Pacific

India

Rest of developing Asia

Latin America

Africa

Transition economies

Middle East

mb/d

2006

2030

© OECD/IEA - 2007

Reference Scenario:

Increase in Primary Natural Gas Demand, 2005-2030

Volume increases in gas demand are biggest in the r egions with the largest remaining reserves

250

MiddleEast

Trans.economies

OECDN.

America

OECDEurope

China LatinAmerica

Rest of Asia

AfricaPacific

India

20%

13%12% 11%

10% 10% 9%

7%

5%4%

0

50

100

150

200

300

350

400

OECD

billion cubic metres

% Share of increase in world primary natural gas demand, 2005-2030

© OECD/IEA - 2007

17%3%

Reference Scenario:

Net Natural Gas Imports

All gas-importing regions become more dependent on imports, as demand outstrips indigenous production

0

100

200

300

400

500

600

OECD North America

OECD Europe

OECD Pacific

China India

billion cubic metres

200520152030

43%

54%

67%

3%

8%

16%

68%57%

45%

21%

54%

0%

55%

17%22%

% share of imports in primary demand

0

100

200

300

400

500

600

OECD North America

OECD Europe

OECD Pacific

China India

billion cubic metres

200520152030

43%

54%

67%

8%

16%

68%57%

45%

21%

54%

0%

55%22%

% share of imports in primary demand

© OECD/IEA - 2007

Implications for Investment & Energy Security

© OECD/IEA - 2007

Implications for Investment & Energy Security

� The threat to the world’s oil & gas security is real & growing

� The share of transport in total oil use rises in all regions, reducing demand flexibility

� Doubts about adequacy of investment

� OECD & developing Asian oil & gas imports grow further

� Imports from a small number of producers – notably in OPEC Middle East – increase sharply

�Growing reliance on strategic transport channels exacerbates risk of a severe supply disruption

© OECD/IEA - 2007

Most oil & gas investment goes to the upstream, to compensate for decline at existing fields & to meet demand gro wth

Reference Scenario:

Cumulative Investment in Energy-Supply Infrastructure, 2006-2030

Gas

19%Coal

3%

Electricity

53%Oil

24%

Biofuels

1%

Other

Refining

73%

22%5%

Exploration and

development

LNG chain

Transmission

and distribution

55%

37%

8%

$5.4 trillion

$11.6 trillion

$4.2 trillion

$0.6 trillion

Exploration and

development

Total investment = $21.9 trillion (in $2006)

© OECD/IEA - 2007

Global Oil Supply Prospects to 2015

� Uncertain whether all planned capacity will be built & all investment needed will occur

� Current capacity plans are insufficient

�OPEC plans to add 11.4 mb/d & non-OPEC producers 13.6 mb/d by 2012

�Demand in Reference Scenario rises by 9.5 mb/d between by 2012

�Capacity additions insufficient to offset decline in output at existing fields & meet demand growth

� A supply crunch in the next few years cannot be ruled out

© OECD/IEA - 2007

OPEC Share of World Oil Supply

The increasing concentration of production in OPEC and other major exporters will increase their market dominanc e

2030

30%

35%

40%

45%

50%

55%

2006 2015

Reference Scenario

High Growth Scenario

Reference Scenario

© OECD/IEA - 2007

The “Dire Straits”: Oil Export Flows from the Middle East

Rising reliance on Middle East oil will increase fl ows through vulnerable chokepoints – heightening the risk of a s upply disruption

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Policies to Achieve a More Secure & Cleaner Global Energy System

© OECD/IEA - 2007

Mapping an Alternative Energy Future

� The Alternative Policy Scenario analyses impact of government policies under consideration

� >1 400+ different policies worldwide to

� Improve efficiency in energy production & use

� Increase reliance on non-fossil fuels

�Bolster output of oil & gas in net importing countries

� Macroeconomic, population & oil/gas price assumptions are as per the Reference Scenario

© OECD/IEA - 2007

Alternative Policy Scenario:

Global Primary Fossil-Fuel Demand

Oil demand is cut by 14 mb/d by 2030 compared with the Reference Scenario, but still increases

0

500

1 000

1 500

2 000

2 500

Coal Oil Gas

Mtoe 1 849 Mtce

1 154 Mtce

14.0 mb/d

17.6 mb/d

608 bcm

1 316 bcm

0

500

1 000

1 500

2 000

2 500

Coal Oil Gas

Mtoe

Savings compared with the Reference ScenarioAlternative Policy Scenario

1 849 Mtce

1 154 Mtce

14.0 mb/d

17.6 mb/d

608 bcm

1 316 bcm

© OECD/IEA - 2007

Alternative Policy Scenario:

Increase in Net Oil Imports

In contrast to the Reference Scenario, oil imports in all OECD regions peak & then begin to decline before 2030

-2

0

2

4

6

8

10

12

14

16

18

OECD

North America

OECD

Europe

OECD

Pacific

Developing

Asia

mb/d

Reference ScenarioAlternative Policy Scenario

© OECD/IEA - 2007

Alternative Policy Scenario:

Global Energy-Related CO2 Emissions

Global emissions grow less than half as fast as in the ReferenceScenario, stabilising in the 2020s

10

15

20

25

30

35

40

45

50

1980 1990 2000 2010 2020 2030

billion tonnes (Gt)

Reference Scenario 42 Gt

Alternative Policy Scenario

34 Gt

19%

27 Gt

© OECD/IEA - 2007

Implications for Global Climate

� Reference & High Growth Scenarios trends are consistent with dramatic climate effects�Atmospheric concentration of greenhouse gases would

rise to 850 - 1 130 ppm of CO2-equivalent

� Implies a rise in global average temperature of more than 4.9 - 6.1ºC above pre-industrial levels

� Increase in concentration & temperature is much less marked in the Alternative Policy Scenario�Concentration rises to 550 ppm & temperature by c.3ºC

� Our 450 Stabilisation Case is very ambitious�Would require early retirement of energy-related capital

on a large scale & at high cost

�Would hinge on much stronger policy action than

currently envisaged

© OECD/IEA - 2007

Summary & Conclusions

� Absent new policies, oil & gas demand – driven by transport & power sector – will grow further

� Middle East OPEC will meet most incremental needs, heightening worries about energy security

� Oil market prospects hinge on investment & decline rates, which remain uncertain

� Policies currently being considered would go significant way to cutting imports & emissions

� Many policy actions are triple-win, bringing joint energy-security, climate & economic benefits

© OECD/IEA - 2007

Thank you!

ttrevor.morgan@iea.orgrevor.morgan@iea.org

www.worldenergyoutlook.orgwww.worldenergyoutlook.org