International Energy Markets

Calvin Kent Ph.D. AASMarshall University

World Energy Consumption

• Will grow by 56 percent between 2013-2040• (630 QBtu-820 QBtu)• Most of the growth will be in other than the

developed nations (OECD)– 90 percent growth in the developing world– Only 17 percent in the OECD

Energy Production Trends

• Renewable and nuclear are the fastest growing sources at 2.5 percent a year

• But unless there is dramatic changes in fossil fuel policy, 80 percent will come from coal, oil and natural gas

• While natural gas will show the greatest growth, coal and oil will continue to dominate due to demand in China and India

Background on Growth Trends• The recent recession slowed the rate of

growth in all developing nations reducing the growth rate for energy consumption– US had very low growth in 2011-2012– Other European nations actually remained in

recession (Japan, Spain, Italy) or showed very sub par growth.

– Growth in China was 10.4 percent and India was 6.4 percent a year for the past 20 years but did slow during the recession.

Demand Patterns: Oil and Other Liquids

• Demand for liquids increases by75 percent by 2040

• Transportation demand dominates with few alternatives becoming feasible over the forecast period

• Industrial demand slows due to use of substitute fuels

Technology and Supply

• Technology innovation, particularly fracking and enhanced oil recovery, are significant adding to supply

• As these technologies spread to the developing world, supply will continue to expand

• Expansion will depend on high and stable prices

Sources of Uncertainty: Oil

• Political unrest in the middle east has disrupted oil production

• Sanctions against Iranian oil exports have further reduced supply of oil

• Low growth in OECD countries plus political deadlock in US cloud the demand picture

• Oil prices projected to go to $165 per barrel in real terms by 2040 increasing demand for alternatives

Alternative Liquid Fuels

• NGL• CTL• Biofuels• Growth will be centered in the OECD nations

where the technology is available and the costs of infra-structure can be covered

Demand Patterns for Natural Gas

• Natural gas consumption increases by 64 percent by 2040

• Natural gas is now the “fuel of choice” for electrical generation due to lower carbon intensity.

• 77 percent of the world demand for natural gas will be from electrical generation

• In developed nations government policies favor natural gas over other fossil fuels

Supply Considerations

• Robust increases in supply primarily from horizontal drilling and fracking.

• While the attention has been on US most of the growth from technology is occurring in non-developed Europe and the Soviet Union

• Natural gas supply depends on transportation– Most will move by pipeline– Significant expansion of LNG

Sources of Uncertainty for Natural Gas

• Potential oversupply in the short run could keep prices sufficient low to “lock in” potential supply

• Transportation issues– Siting of pipelines–Construction of LNG facilities for export

and import

Demand Patterns for Coal

• Assumes no significant “greenhouse gas” legislation except what is on the books

• Growth will be only 1.4 percent annual with most occurring in the early years and then declining as replaced by natural gas

• China 47 percent US 14 percent and India 9 percent constitute 70 percent of the world demand for coal over the forecast period

Supply Considerations for Coal

• 80 percent of all coal production is from:– China (52 percent)– US, India, Australia and Indonesia account for the

remainder• US coal production will become less as a

percentage due to environmental considerations

Sources of Uncertainty for Coal

• Governmental policy–CO2 emission fees–Cap and trade–Renewable fuel portfolios

• Ability to develop export facilities• Cost of converting coal to liquids• Technology and cost of Carbon Capture and

Sequestration

Electricity

• Economic growth depends on abundant, low cost electricity

• Tight connection between energy use and economic growth although the use of electricity per unit of output is falling worldwide.

• World wide demand for electricity will increase by 93 percent by 2040

Supply Considerations for Electricity

• Greatest growth in demand will be in the developing nations where significant portions of the population have either no or no reliable electricity

• Government policies favor use of natural gas, hydro, wind and solar.

• Much of this expansion will come from small scale “distributed” energy system which will “skip” the necessity of national grids

Nuclear Power

• Nuclear power will more than double between now and 2040.

• This will be base load generation primarily in Europe

• Concerns after the Japanese earthquake will slow the growth but will not stop it.

Sources of Uncertainty for Electricity

• Ability to find investors to finance expansion in the less developed nation particularly for small scale projects

• Reliability of the grid in developed nations• Problems of “intermittence” of wind and

solar will limit their geographic use• Safety concerns will restrict financing of

nuclear plants by private investors

Energy and CO2 Emissions

• Energy use is the primary element in the “climate change” debate

• CO2 emissions (without significant new restrictions) will increase from 31.2 billion metric tons to 36.4 in 2040

• 93 percent of the increase will come from the use of fossil fuels in the developing world

Conclusions

• The world is going to demand increasing amounts of energy to continue to raise its living standards

• Most of the growth will be in the less developed world

• CO2 emissions will increase• Developed world must to cautious about

“environmental colonialism”