World Energy Outlook 2010World Energy Outlook 2010

© OECD/IEA 2010

Washington, D.C.3 December 2010

The context:The context:a time of unprecedented uncertaintya time of unprecedented uncertainty

The worst of the global economic crisis appears to be over –but is the recovery sustainable?

Oil demand & supply are becoming less sensitive to price –what does this mean for future price movements?

Natural gas markets are in the midst of a revolution

© OECD/IEA 2010

Natural gas markets are in the midst of a revolution –will it herald a golden era for gas?

Copenhagen Accord & G-20 subsidy reforms are key advances –but do they go far enough & will they be fully implemented?

China & other emerging economies will shape the global energy future – where will their policy decisions lead us?

Recent policy commitments,Recent policy commitments,if implemented, would make a differenceif implemented, would make a difference

World primary energy demand by region in the New Policies Scenario

12 000

14 000

16 000

18 000

Mto

e

Rest of world

China

OECD

© OECD/IEA 2010

Global energy use grows by 36%, with non-OECD countries – led by China,where demand surges by 75% – accounting for almost all of the increase

0

2 000

4 000

6 000

8 000

10 000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Emerging economies dominateEmerging economies dominatethe growth in demand for all fuels the growth in demand for all fuels

Incremental primary energy demand in the New Policies Scenario, 2008-2035

Gas

Oil

CoalOECD

China

Rest of world

© OECD/IEA 2010

Demand for all types of energy increases in non-OECD countries,while demand for coal & oil declines in the OECD

- 600 - 300 0 300 600 900 1 200 1 500

Other renewables

Hydro

Nuclear

Mtoe

FossilFossil--fuel subsidies are distortingfuel subsidies are distortingprice signals price signals

Economic value of fossil-fuel consumption subsidies by country, 2009

30

40

50

60

70

Billi

on d

olla

rs Electricity(generated from fossil fuels)

GasOilCoal

© OECD/IEA 2010

Fossil-fuel consumption subsidies amounted to $312 billion in 2009, down from $558 billion in 2008, with the bulk of the fall due to lower international prices

Iran

Saud

i Ara

bia

Russ

iaIn

dia

Chin

aEg

ypt

Vene

zuel

aIn

done

sia

UAE

Uzb

ekis

tan

Iraq

Kuw

ait

Paki

stan

Arge

ntin

aU

krai

neAl

geri

aM

alay

sia

Thai

land

Bang

lade

shM

exic

oTu

rkm

enis

tan

Sout

h Af

rica

Qat

arKa

zakh

stan

Liby

a

0

10

20

30

Booming demand for mobility in the Booming demand for mobility in the emerging economies drives up oil use emerging economies drives up oil use

1 000

1 200

1 400

1 600

Mill

ion China

Other non-OECD

United States

Other OECD

Passenger vehicles in the New Policies Scenario

© OECD/IEA 2010

The global car fleet will continue to surge as more & more people in China & other emerging economies buy a car, overshadowing modest growth in the OECD

0

200

400

600

800

1980 1990 2000 2008 2020 2035

Oil production becomes less crudeOil production becomes less crude

World oil production by type in the New Policies Scenario

60

80

100

mb/

d

Crude oil - fields yetto be developed or found

Unconventional oil

Natural gas liquids

© OECD/IEA 2010

Global oil production reaches 96 mb/d in 2035 on the back of rising output ofnatural gas liquids & unconventional oil, as crude oil production plateaus

0

20

40

60

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

to be developed or found

Crude oil – currentlyproducing fields

Total crude oil

More oil from fewer producers More oil from fewer producers

Incremental oil production by key country in the New Policies Scenario, 2009-2035

VenezuelaCanada

KazakhstanBrazil

IraqSaudi Arabia OPEC

Non-OPEC

© OECD/IEA 2010

Production rises most in Saudi Arabia & Iraq, helping to push OPEC’s market share from 41% today to 52% by 2035, a level last seen prior to the first oil shock of 1973-1974

0 1 2 3 4 5 6

AlgeriaLibya

NigeriaQatar

IranKuwait

UAEVenezuela

mb/d

A golden age for gas?A golden age for gas?

Gas is set to play a key role in meeting the world’s energy needs

> demand rises by 44% to 2035, led by China & Middle East

Unconventional gas accounts for 35% of the increase in global supply to 2035, with new non-US producers emerging

© OECD/IEA 2010

Gas glut will peak soon, but may dissipate only very slowly

The glut will keep pressure on gas exporters to move away from oil-price indexation, notably in Europe

Lower prices could lead to stronger demand for gas, backing out renewables & coal in power generation

Coal remains the backbone of global Coal remains the backbone of global electricity generationelectricity generation

8 000

10 000

12 000

TWh China

India

Other non-OECD

OECD

Coal-fired electricity generation by region in the New Policies Scenario

© OECD/IEA 2010

A drop in coal-fired generation in the OECD is offset by big increases elsewhere, especially China, where 600 GW of new capacity exceeds the current capacity of the US, EU & Japan

0

2 000

4 000

6 000

1990 2000 2010 2020 2030 2035

OECD

Renewables enter the mainstream…. Renewables enter the mainstream….

Renewable primary energy demand in the New Policies Scenario

India

Africa

OECD Pacific 2008

2035

© OECD/IEA 2010

The use of renewable energy triples between 2008 & 2035, driven by the power sector where their share in electricity supply rises from 19% in 2008 to 32% in 2035

0 100 200 300 400

European Union

United States

China

Brazil

Mtoe

….but only if there is enough ….but only if there is enough government supportgovernment support

Annual global support for renewables in the New Policies Scenarion

dolla

rs (

2009

)

Biofuels

Renewables-based electricity

120

150

180

210

© OECD/IEA 2010

Government support remains the key driver – rising from $57 billion in 2009 to $205 billion in 2035 – but higher fossil-fuel prices & declining investment costs also spur growth

Billi

on

0

30

60

90

120

2007 2008 2009 2015 2020 2025 2030 2035

China becomes the market leaderChina becomes the market leaderin lowin low--carbon technologies carbon technologies

Passenger car sales

Capacity additions

China’s share of cumulative global additions to 2035 for selected technologies

85 GW

335 GW105 GW

20%

30%

8.5 million h l

© OECD/IEA 2010

Given the sheer scale of China’s market, its push to expand the role of low-carbon energy technologies is poised to play a key role in driving down costs, to the benefit of all countries

85 GW

0%

10%

Solar PV Wind Nuclear Electric &plug-in hybrids

vehicles

Caspian energy riches could enhance Caspian energy riches could enhance global energy securityglobal energy security

Caspian oil & gas outlook in the New Policies Scenario

3

4

5

6

mb/

d

200

250

300

350

bcm

© OECD/IEA 2010

Kazakhstan drives an increase in Caspian oil production to 5.2 mb/d by 2035,while Turkmenistan & Azerbaijan push up gas production to over 310 bcm

0

1

2

3

2000 2009 2020 2035

Oil net exports Inland oil consumption

0

50

100

150

2000 2009 2020 2035

Gas net exports Inland gas consumption

The 450 Scenario:The 450 Scenario:aa roadmap from 3.5roadmap from 3.5°°C to 2C to 2°°C C

The 450 Scenario sets out an energy pathway consistent with limiting the increase in temperature to 2°C

Assumes vigorous implementation of Copenhagen Accord pledges to 2020 & much stronger action thereafter

The failure of the Copenhagen Accord pledges

© OECD/IEA 2010

The failure of the Copenhagen Accord pledges:

> As many lack transparency, there is 3.9 Gt of uncertainty over the level of abatement pledged to 2020

> As many lack ambition, the cost of achieving the 2° C goal has increased by $1 trillion in 2010-2030 compared with WEO-2009

Achieving the 2Achieving the 2°°C goal will require rapid C goal will require rapid decarbonisation of global energydecarbonisation of global energy

Average annual change in CO2 intensity in the 450 scenario

-2%

-1%

0%1990-2008 2008-2020 2020-2035

© OECD/IEA 2010

Carbon intensity would have to fall at twice the rate of 1990-2008 in the period 2008-2020 & almost four times faster in 2020-2035

-6%

-5%

-4%

-3%

2%

A four-fold increase needed

A fundamental change is neededA fundamental change is neededin power generation in power generation

Share of world electricity generation by type and scenario

Additional low-carbon generationin the 450 Scenario

Low-carbon generation in the NPS

Fossil-fuel fired generation60%

80%

100%

© OECD/IEA 2010

Low-carbon technologies account for over three-quarters of global power generation by 2035 in the 450 Scenario, a four-fold increase on today

g

0%

20%

40%

2010 2015 2020 2025 2030 2035

in the 450 Scenario

… and also in transport … and also in transport

Sales of plug-in hybrid and electric vehicles in the 450 Scenario

Electric vehicles

Plug-in hybrids

40

50

60

70M

illio

n

© OECD/IEA 2010

Plug-in hybrids & electric vehicles reach 39% of new sales by 2035, making a big contribution to emissions abatement – China becomes the top advanced car manufacturer

0

10

20

30

40

2010 2015 2020 2025 2030 2035

World oil demand by scenario

Climate policies can improve oil security Climate policies can improve oil security

450 Scenario

New Policies Scenario

mb/

d

92

96

100

© OECD/IEA 2010

Oil demand peaks at 88 mb/d before 2020 & falls to 81 mb/d in 2035, with a plunge in OECD demand more than offsetting continuing growth in non-OECD demand

2009 2015 2020 2025 2030 2035

80

84

88

Number of people without access to electricityNumber of people without access to electricity(million)(million)

© OECD/IEA 2010

1.4 billion people lack access to electricity – achieving universal modern energy access requires investment of only $36 billion per year over the next two decades

Concluding remarksConcluding remarks

Recently announced policies can make a difference, but fall well short of what is needed for a secure & sustainable energy future

Lack of ambition in Copenhagen has increased the cost of achieving the 2°C goal & made it less likely to happen

The age of cheap oil is over, though policy action could bring lower international prices than would otherwise be the case

© OECD/IEA 2010

lower international prices than would otherwise be the case

Stronger penetration of natural gas can have profound implications for energy markets and environment

Renewables are entering the mainstream, but long-term support is needed to boost their competitiveness

Getting the prices right, by phasing-out fossil-fuel subsidies, is a crucial measure to cut energy demand