World Energy Outlook 2009

© OECD/IEA - 2009

Presentation to the PressLondon, 10 November 2009

The contextThe context

The worst economic slump since the 2nd World War & signs of recovery – but how fast?

An oil price collapse & then a rebound – rising marginal costs point to higher prices in the longer term but are current levels sustainable?

© OECD/IEA - 2009

higher prices in the longer term, but are current levels sustainable?

A slump in energy investment due to the financial & economic crisis –will it bounce back quickly enough to avert a supply squeeze later?

Difficult negotiations on a post-2012 climate deal leading up to Copenhagen – what is needed to avert catastrophic climate change?

World primary energy demand World primary energy demand in the Reference Scenario in the Reference Scenario

8 000

10 000

12 000

Mto

e China and India

Rest of non-OECD

OECD

© OECD/IEA - 2009

Non-OECD countries account for 93% of the increase in global demand between 2007 & 2030, driven largely by China & India

0

2 000

4 000

6 000

1980 1990 2000 2010 2020 2030

Change in primary energy demandChange in primary energy demandin the Reference Scenario, 2007in the Reference Scenario, 2007--20302030

N l

Gas

Oil

Coal OECD

Non-OECD

© OECD/IEA - 2009

Fossil fuels account for 77% of the increase in world primary energy demand in 2007-2030, with oil demand rising from 85 mb/d in 2008 to 88 mb/d in 2015 & 105 mb/d in 2030

- 500 0 500 1 000 1 500 2 000

Other renewables

Biomass

Hydro

Nuclear

Mtoe

Worldwide upstream oil & gas Worldwide upstream oil & gas capital expenditurescapital expenditures

300

400

500

Billi

on d

olla

rs

© OECD/IEA - 2009

Global upstream spending (excluding acquisitions) is budgeted to fall by over $90 billion, or 19%, in 2009 – the first fall in a decade

0

100

200

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009*

* Budgeted spending

Oil productionOil productionin the Reference Scenarioin the Reference Scenario

NGLs

Unconventional oil

Crude oil – fields yet to be developedor foundCrude oil – currently producing fields

80

100

120m

b/d

© OECD/IEA - 2009

Sustained investment is needed mainly to combat the decline in output at existing fields, which will drop by almost two-thirds by 2030

0

20

40

60

2000 2008 2030

Impact of decline on world natural gas productionImpact of decline on world natural gas productionin the Reference Scenarioin the Reference Scenario

3

4

5

tcm Fields yet to be developed or found

Currently producing fields

60%

80%

100%

Share from fields not yet producing

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Additional capacity of around 2 700 bcm, or 4 times current Russian capacity, is needed by 2030 – half to offset decline at existing fields & half to meet the increase in demand

0

1

2

3

2007 2015 2020 2025 20300%

20%

40%

60%(right axis)

US natural gas supply US natural gas supply in the Reference Scenarioin the Reference Scenario

400

500

600

700

bcm Net imports

Conventional

Unconventional

40%

50%

60%

70%

Share of unconventionall l

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Thanks mainly to shale gas, US gas output grows gradually through to 2030,outstripping demand & squeezing imports

0

100

200

300

400

1990 1995 2000 2005 2008 2015 2020 2025 20300%

10%

20%

30%

40% in total supply

Natural gas transportation capacity Natural gas transportation capacity

500

600

700

800

bcm Unutilised LNG liquefaction

& pipeline capacity

LNG trade

73%

88%

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A glut of gas is developing – reaching 200 bcm by 2015 – due to weaker than expected demand & plentiful US unconventional supply, with far-reaching implications for gas pricing

0

100

200

300

400

500

2007 2015

Pipeline trade

% Capacity utilisation rate

Indicative costs for potential new sources of gas Indicative costs for potential new sources of gas delivered to Europe, 2020 ($/delivered to Europe, 2020 ($/MBtuMBtu))

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Although indigenous resources are limited & output is declining, Europe isgeographically well placed to secure gas supplies from a variety of external sources

Average annual expenditure on net imports Average annual expenditure on net imports of oil & gas in the Reference Scenarioof oil & gas in the Reference Scenario

400

500

600

on d

olla

rs (

2008

)

1971-2008

2008-2030

% Share of GDP

2%

2%

3%

© OECD/IEA - 2009

The Reference Scenario implies persistently high spending on oil & gas imports, with China overtaking the United States by around 2025 to become the world's biggest spender

0

100

200

300

EuropeanUnion

UnitedStates

China Japan India ASEAN

Billi

o

1%1%

1%2%

3%

3%

3% 6%

3%

0.4%

Number of people without access to electricityNumber of people without access to electricityin the Reference Scenario (millions)in the Reference Scenario (millions)

© OECD/IEA - 2009

$35 billion per year more investment than in the Reference Scenario would be needed to 2030 – equivalent to just 5% of global power-sector investment – to ensure universal access

World population withoutaccess to electricity

2008: 1.5 billion people2030: 1.3 billion people

The policy mechanismsThe policy mechanismsin the 450 Scenarioin the 450 Scenario

A combination of policy mechanisms, which best reflects nations’ varied circumstances & negotiating positionsWe differentiate on the basis of three country groupings> OECD+: OECD & other non-OECD EU countries> Other Major Economies (OME): Brazil, China, Middle East, Russia & South Africa

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j , , , f> Other Countries (OC): all other countries, including India & ASEAN

A graduated approach> Up to 2020, only OECD+ have national emissions caps> After 2020, Other Major Economies are also assumed to adopt emissions caps> Through to 2030, Other Countries continue to focus on national measures

Emissions peaking by 2020 will require> A CO2 price of $50 per tonne for power generation & industry in OECD+> Investment needs in non-OECD countries of $200 billion in 2020, supported by

OECD+ through carbon markets & co-financing

Abatement by policy type in the 450 Scenario Abatement by policy type in the 450 Scenario relative to the Reference Scenario, 2020relative to the Reference Scenario, 2020

EmissionsReference ScenarioAbatement:

OECD+

Other Major Economies

Other Countries

Domestic policies and measures

Sectoral agreements

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After realising the abatement potential of policies & measures and sectoral approaches, cap-and-trade in OECD+ yields a further 1.8 Gt

30 31 32 33 34 35Gt

450 Scenario

Other CountriesOECD+ cap-and-trade for power and industry(including international credits)

World primary energy demand by fuel World primary energy demand by fuel in the 450in the 450 Scenario Scenario

8 000

10 000

12 000

Mto

e

24%

30%

36% Fossil fuels

Zero-carbon fuelsShare of zero- carbon fuels (right axis)

© OECD/IEA - 2009

In the 450 Scenario, demand for fossil fuels peaks by 2020, and by 2030 zero-carbon fuels make up a third of the world's primary sources of energy demand

0

2 000

4 000

6 000

1990 2000 2010 2020 20300%

6%

12%

18%

World oil productionWorld oil productionby scenarioby scenario

80

100

120m

b/d Non-OPEC

OPEC

16 mb/d

© OECD/IEA - 2009

Curbing CO2 emissions would also improve energy security by cutting oil demand, but even in the 450 Scenario, OPEC production increases by 11 mb/d between now and 2030

36mb/d

0

20

40

60

2008 Reference Scenario2030

450 Scenario2030

11 mb/d

Cumulative OPEC oil export revenuesCumulative OPEC oil export revenuesby scenarioby scenario

8

1216

2024

28

lion

dolla

rs (

2008

)

© OECD/IEA - 2009

Though slightly lower than in the Reference Scenario, OPEC revenues in the 450 Scenario are over four times as high as in the last 20 years

0

48

1985-2007

Reference Scenario 450 Scenario

2008-2030

Tril

World primary natural gas demand World primary natural gas demand by scenarioby scenario

3 000

3 750

4 500

bcm Reference Scenario

450 Scenario+41% (1 264 bcm)

+17% (511 bcm)

© OECD/IEA - 2009

Gas demand continues to grow in both scenarios, peaking by around 2025 in the 450 Scenario & highlighting the potential role of gas as a transition fuel to a clean energy future

0

750

1 500

2 250

2007 2015 2020 2025 2030

World abatement of energyWorld abatement of energy--related COrelated CO22 emissionsemissionsin the 450 Scenarioin the 450 Scenario

36

38

40

42Gt

Reference Scenario

OECD+

World abatement by technology

20203.8 Gt

203013.8 Gt

© OECD/IEA - 2009

An additional $10.5 trillion of investment is needed in total in the 450 Scenario, with measures to boost energy efficiency accounting for most of the abatement through to 2030

26

28

30

32

34

2007 2010 2015 2020 2025 2030

450 Scenario

OME

OC

3.8 Gt

13.8 Gt

CCSNuclear

Renewables& biofuels

Efficiency 65%

19%

13%3%

57%

23%

10%10%

Abatement in the 450 Scenario by key emitters, 2020Abatement in the 450 Scenario by key emitters, 2020

0.8

1.0

1.2

1.4Gt

International carbon markets

Cap & trade in power& industry sectorsInternation sectoral standardsin transport & industryNational policies

© OECD/IEA - 2009

China, the United States, the European Union, India, Russia & Japan account for almost three-quarters of the 3.8 Gt reduction in the 450 Scenario

0

0.2

0.4

0.6

China UnitedStates

EuropeanUnion

India Russia Japan

National policies

Incremental world electricity productionIncremental world electricity productionin the Reference and 450 Scenarios, 2007in the Reference and 450 Scenarios, 2007--20302030

4 000

5 000

6 000

7 000

TWh

Reference Scenario

450 Scenario

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Renewables, nuclear and plants fitted with CCS account for around 60% of electricity generation globally in 2030 in the 450 Scenario, up from less than one-third today

-1 000

0

1 000

2 000

3 000

Coal Gas Oil Nuclear Hydro Wind Biomass Solar Otherrenewables

World passenger vehicle sales & average new vehicle World passenger vehicle sales & average new vehicle COCO22 intensity in the 450intensity in the 450 ScenarioScenario

6

80%

100% Electric vehiclesPlug-in hybridsHybrid vehiclesICE vehicles

hare

of

sale

s

205

200

250

per

kilo

met

re

CO i i

© OECD/IEA - 2009

Improvements to the internal combustion engine & the uptake of next-generation vehicles & biofuels lead to a 56% reduction in new-car emission intensity by 2030

0%

20%

40%

60%

2007 2020 2030

S

125

90

0

50

100

150

Gra

mm

es CO2 intensity

of new vehicles(right axis)

Summary & conclusionsSummary & conclusions

The financial crisis has halted the rise in global fossil-energy use, but its long-term upward path will resume soon on current policiesTackling climate change & enhancing energy security require a massive decarbonisation of the energy system> We are now on course for a 6°C temperature rise & rising energy costs

i i i i ill i bi i i d i i ll

© OECD/IEA - 2009

> Limiting temperature rise to 2°C will require big emission reductions in allregions

A 450 path towards ‘Green Growth’ would bring substantial benefits> Avoiding the worst effects & costs of climate change> Energy-security benefits, lower oil & gas imports & reduced energy bills> Much less air pollution & huge health benefits

Natural gas can play a key role as a bridge to a cleaner energy futureThe challenge is enormous – but it can and must be met> Improved energy efficiency & technology deployment are critical > Each year of delay adds $500 bn to mitigation costs between today & 2030