© OECD/IEA - 2008

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(2)

The context

 Soaring energy prices to mid-2008, followed by a drop – what will it mean for demand?

 How will the financial crisis & economic slowdown affect energy demand & investment?

 Will economic worries divert attention from strategic energy security & environmental challenges?

 Are we setting ourselves up for a supply crunch once the economy is back on its feet?

 Will negotiators at COP-15 in Copenhagen in 2009 have the

political support needed to succeed?

(3)

0 2 000 4 000 6 000 8 000 10 000 12 000 14 000 16 000 18 000

1980 1990 2000 2010 2020 2030

Mtoe Other renewables

Hydro Nuclear Biomass Gas Coal Oil

World energy demand expands by 45% between now and 2030 – an average rate of increase of 1.6% per year – with coal accounting for more than a third of the overall rise

World primary energy demand in the

Reference Scenario: an unsustainable path

(4)

The continuing importance of coal in world primary energy demand

0%

20%

40%

60%

80%

100%

Non-OECD OECD

All other fuels Coal

Shares of incremental energy demand Reference Scenario, 2006 - 2030 Increase in primary demand, 2000 - 2007

Demand for coal has been growing faster than any other energy source & is projected to account for more than a third of incremental global energy demand to 2030

Mtoe

0 100 200 300 400 500 600 700 800 900 1 000

Coal Oil Gas Renewables Nuclear

4.8%

1.6% 2.6%

2.2%

0.8%

% = average annual rate of growth

(5)

Change in oil demand by region

in the Reference Scenario, 2007-2030

-2 0 2 4 6 8 10

China Middle East India Other Asia Latin America E. Europe/Eurasia Africa OECD North America OECD Europe OECD Pacific

mb/d

All of the growth in oil demand comes from non-OECD, with China contributing 43%, the Middle East & India each about 20% & other emerging Asian economies most of the rest

(6)

Share of renewables in electricity

generation in the Reference Scenario

0% 5% 10% 15% 20% 25% 30%

2030 2015 2006 2030 2015 2006 2030 2015 2006

Non-OECDOECDWorld

Hydro

Other (wind, solar, etc)

Soon after 2010, renewables become the 2^nd-largest source of electricity behind coal, thanks to government support, prospects for higher fossil-fuel prices & declining investment costs

(7)

Oil-import dependence in the Reference Scenario

20% 30% 40% 50% 60% 70% 80% 90% 100%

India European Union OECD Pacific OECD Europe Other Asia China United States

OECD North America 2007

2030

OECD Europe & Asia become even more dependent on oil imports, but import dependence drops in North America & OECD Pacific

(8)

Energy subsidies in non-OECD countries, 2007

0 10 20 30 40 50 60

Brazil Vietnam Chinese Taipei Nigeria Thailand Malaysia Pakistan Kazakhstan South Africa ArgentinaUkraineEgypt Indonesia Venezuela India Saudi Arabia China RussiaIran

Billion dollars

Oil Gas Coal Electricity

Energy subsidies in the 20 largest non-OECD countries hit $310 billion in 2007 – creating, in many cases, an unsustainable economic burden & exacerbating environmental effects

(9)

Cumulative energy supply investment in the Reference Scenario, 2007-2030

Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers

Power generation

50%

Transmission

& distribution 50%

Mining 91%

Shipping &

ports 9%

Exploration and development

80%

Refining 16%

Shipping 4%

Exploration &

development LNG chain 61%

8%

Transmission

& distribution 31%

Power

52%

$13.6 trillion

Oil

24%

$6.3 trillion

Gas

21%

$5.5 trillion

Coal

3%

$0.7 trillion

Biofuels

<1%

$0.2 trillion

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World oil production by OPEC/non-OPEC in the Reference Scenario

Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion’s share of oil market growth as conventional non-OPEC production declines

0 20 40 60 80 100 120

2000 2007 2015 2030

OPEC - other

OPEC - Middle East Non-OPEC - non- conventional Non-OPEC - conventional OPEC share

mb/d

38%

40%

42%

44%

46%

48%

50%

52%

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0 20 40 60 80 100 120

1990 2000 2010 2020 2030

mb/d Natural gas liquids

Non-conventional oil Crude oil - yet to be developed (inc. EOR) or found

Crude oil - currently producing fields

World oil production by source in the Reference Scenario

64 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth & offset decline

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Average observed oilfield decline rates

The production-weighted average decline rate worldwide is projected to rise from 6.7% in 2007 to 8.6% in 2030 as productions shifts to smaller oilfields, which tend to decline faster

0%

2%

4%

6%

8%

10%

12%

14%

16%

Pre-1970s 1970s 1980s 1990s 2000 - 2007

OPEC Non-OPEC

Year production started

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A sea change: world oil & gas production by company type in the Reference Scenario

0 20 40 60 80 100 120

2007 2015 2030

mb/d

0 750 1 500 2 250 3 000 3 750 4 500

2006 2015 2030

Bcm

NOCs Private companies

Oil Gas

Almost 80% of the projected increase in output of both oil & gas comes from national companies – on the assumption that investment is forthcoming

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Long-term oil-supply cost curve

The total recoverable oil-resource base is estimated at 9 trillion barrels (including 2.5 trillion barrel of GTL/CTL) of which we have so far produced 1.1 Tb

(16)

Post-2012

climate-policy scenarios

(17)

Energy-related CO 2 emissions in the Reference Scenario

97% of the projected increase in emissions between now & 2030 comes from non-OECD countries – three-quarters from China, India & the Middle East alone

0 5 10 15 20 25 30 35 40 45

1980 1990 2000 2010 2020 2030

Gigatonnes International

marine bunkers and aviation Non-OECD - gas Non-OECD - oil Non-OECD - coal OECD - gas OECD - oil OECD - coal

(18)

World energy-related CO 2 emissions in 2030 by scenario

OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero

Non-OECD

World

World OECD

0 5 10 15 20 25 30 35 40

Reference Scenario 550 Policy Scenario 450 Policy Scenario

Gigatonnes

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National policies and

measures

The 550 Policy Scenario The 450 Policy Scenario

Cap and trade

Copenhagen: a plausible post-2012 global climate-change policy regime

A combination of policy mechanisms – reflecting nations’ varied circumstances & current negotiating positions – is a realistic outcome at the Copenhagen COP at end-2009

Cap and trade Power

generation

Buildings Transport Industry

International sectoral approaches

National policies and measures International sectoral approaches OECD+

Other Major Economies

Other Countries

National policies and

measures

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Reductions in energy-related CO 2

emissions in the climate-policy scenarios

While technological progress is needed to achieve some emissions reductions, efficiency gains and deployment of existing low-carbon energy accounts for most of the savings

20 25 30 35 40 45

2005 2010 2015 2020 2025 2030

Gigatonnes

Reference Scenario 550 Policy Scenario 450 Policy Scenario

CCS

Renewables & biofuels Nuclear

Energy efficiency 550

Policy Scenario

450 Policy Scenario

54%

23%

14%

9%

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Total power generation capacity today and in 2030 by scenario

In the 450 Policy Scenario, the power sector undergoes a dramatic change – with CCS, renewables and nuclear each playing a crucial role

0 1 000 2 000 3 000

Other renewables Wind Hydro Nuclear

Coal and gas with CCS Gas Coal

GW

1.2 x today 1.5 x today

13.5 x today 2.1 x today 1.8 x today

12.5 x today

15% of today’s coal & gas capacity

Today Reference Scenario 2030 450 Policy Scenario 2030

(22)

Total oil production in 2030 by scenario

Curbing CO₂ emissions would improve energy security by cutting demand for fossil fuels, but even in the 450 Policy Scenario, OPEC production increases by 12 mb/d from now to 2030

0 20 40 60 80 100 120

2007 Reference Scenario 2030

550 Policy Scenario 2030

450 Policy Scenario 2030

Non-OPEC OPEC 9 mb/d

16 mb/d

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Key results of the post-2012 climate-policy analysis

550 Policy Scenario

 Corresponds to a c.3C global temperature rise

 Energy demand continues to expand, but fuel mix is markedly different

 CO

₂

price in OECD countries reaches $90/tonne in 2030

 Additional investment equal to 0.25% of GDP

450 Policy Scenario

 Corresponds to a c.2C global temperature rise

 Energy demand grows, but half as fast as in Reference Scenario

 Rapid deployment of low-carbon technologies – particularly CCS

 Big fall in non-OECD emissions

 CO

₂

price in 2030 reaches

$180/tonne

 Additional investment equal to

0.6% of GDP

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Summary & conclusions

 Current energy trends are unsustainable — socially, environmentally AND economically

 Oil will remain the leading energy source but...

> The era of cheap oil is over, although price volatility will remain

> Oilfield decline is the key determinant of investment needs

> The oil market is undergoing major and lasting structural change, with national companies in the ascendancy

 To avoid "abrupt and irreversible" climate change we need a major decarbonisation of the world’s energy system

> Copenhagen must deliver a credible post-2012 climate regime

> Limiting temperature rise to 2  C will require significant emission reductions in all regions & technological breakthroughs

> Mitigating climate change will substantially improve energy security

 The present economic worries do not excuse back-tracking or delays in taking action to address energy challenges

