© OECD/IEA 2010

World Energy Outlook 2010

Energy Security Dialogue: Gas Resources and International Energy CooperationGeneva, 24 November 2010

Marco Baroni

Office of the Chief Economist

International Energy Agency

© OECD/IEA 2010

Recent policy commitments,if implemented, would make a difference

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

World primary energy demand by region in the New Policies Scenario

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

1990 1995 2000 2005 2010 2015 2020 2025 2030 2035

Mto

e

Rest of world

China

OECD

WEO-2009:

Reference Scenario

© OECD/IEA 2010

Emerging economies dominatethe growth in demand for all fuels

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

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

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

Other renewables

Hydro

Nuclear

Gas

Oil

Coal

Mtoe

OECD

China

Rest of world

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Fossil-fuel subsidies are distortingprice signals

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

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

an

Saudi Ara

bia

Russ

ia

India

Chin

a

Egypt

Venezuela

Indonesi

a

UAE

Uzbekis

tan

Iraq

Kuw

ait

Pakis

tan

Arg

enti

na

Ukra

ine

Alg

eri

a

Mala

ysi

a

Thailand

Bangla

desh

Mexic

o

Turk

menis

tan

South

Afr

ica

Qata

r

Kazakhst

an

Lib

ya

0

10

20

30

40

50

60

70

Billion d

ollars Electricity

(generated from

fossil fuels)

Gas

Oil

Coal

© OECD/IEA 2010

More oil from fewer producers

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

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

0 1 2 3 4 5 6

Algeria

Libya

Nigeria

Qatar

Iran

Kuwait

UAE

Venezuela

Canada

Kazakhstan

Brazil

Iraq

Saudi Arabia

mb/d

OPEC

Non-OPEC

© OECD/IEA 2010

A golden age for gas?

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

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

> LNG accounts for over half of the projected growth in global gas trade

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

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

© OECD/IEA 2010

The future is increasingly unconventional

Over a third of the increase in global gas production comes from unconventional sources, their combined share of production rising from 12% in 2008 to about 19% in 2035

0

1 000

2 000

3 000

4 000

5 000

2008 2015 2020 2025 2030 2035

bcm

0%

4%

8%

12%

16%

20% Shale

Coalbed methane

Tight

Conventional

Share of unconventional

(right axis)

World natural gas production by type in the New Policies Scenario

© OECD/IEA 2010

Coal remains the backbone of global electricity generation

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

8 000

10 000

12 000

1990 2000 2010 2020 2030 2035

TW

h China

India

Other non-OECD

OECD

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

© OECD/IEA 2010

Fossil fuel demand and import dependency

Import dependency in the European Union will increase for all fossil fuels, with gas registering growing volumes and the sharpest increase

Fossil fuel demand in the European Union in the New Policies Scenario

2008 2020 2035 2008 2020 2035 2008 2020 2035

Oil Gas Coal

0

100

200

300

400

500

600

700

Mto

e Domestic production

Imports

© OECD/IEA 2010

Renewables enter the mainstream….

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

Renewable primary energy demand in the New Policies Scenario

0 100 200 300 400 500

European Union

United States

China

Brazil

India

Africa

OECD Pacific

Mtoe

2008

2035

© OECD/IEA 2010

….but only if there is enough government support

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

Annual global support for renewables in the New Policies Scenario

Billion d

ollars

(2009)

Biofuels

Renewables-based electricity

0

30

60

90

120

150

180

210

2007 2008 2009 2015 2020 2025 2030 2035

© OECD/IEA 2010

The 450 Scenario:A roadmap from 3.5C to 2C

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

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

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

© OECD/IEA 2010

In the 450 Scenario, compared with the Current Policies Scenario, efficiency measures provide 53% of the necessary abatement, but renewables, CCS & nuclear are also crucial

World energy-related CO2 emission savings by technology in the 450 Scenario relative to the Current Policies Scenario

20

25

30

35

40

45

2008 2015 2020 2025 2030 2035

Gt

Efficiency 53%

Renewables 21%

Biofuels 3%

Nuclear 9%

CCS 15%

Share of cumulative abatement

between 2010-203542.6 Gt

21.7 Gt450 Scenario

20.9 Gt

Current Policies

Scenario

The 450 Scenario: Abatement by technology

© OECD/IEA 2010

Combating climate change will bring economic benefits as well as costs

In the 450 Scenario, annual spending on oil imports in 2035 by the five largest importersis around $560 billion, or one-third, lower than in the New Policies Scenario

Oil-import bills as share of GDP in selected countries

0%

1%

2%

3%

4%

5%

Japan IndiaUnited

States

European

Union

China

2009

2035: New Policies Scenario

2035: 450 Scenario

© OECD/IEA 2010

Summary & conclusions

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 2C goal & made it less likely to happen

> Unless commitments are fully implemented by 2020, it will be all but impossible to achieve the goal

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

Gas has a key role in meeting the world’s energy needs, with rising shares from unconventional gas

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