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World Energy Outlook 2010


Washington, D.C.
3 December 2010

                            © OECD/IEA 2010
The context:
a 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 –
  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?

                                                                 © OECD/IEA 2010
Recent policy commitments,
if implemented, would make a difference

           World primary energy demand by region in the New Policies Scenario

         18 000
  Mtoe




                                                                    Rest of world
         16 000                                                     China
         14 000                                                     OECD
         12 000

         10 000
         8 000

         6 000

         4 000
         2 000

             0
              1990 1995 2000 2005 2010 2015 2020 2025 2030 2035


         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
                                                                                    © OECD/IEA 2010
Emerging economies dominate
the growth in demand for all fuels

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

                                                                   OECD
                 Coal
                                                                   China
                  Oil                                              Rest of world

                 Gas

              Nuclear

               Hydro

     Other renewables


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


         Demand for all types of energy increases in non-OECD countries,
               while demand for coal & oil declines in the OECD
                                                                                   © OECD/IEA 2010
Fossil-
Fossil-fuel subsidies are distorting
price signals
                       Economic value of fossil-fuel consumption subsidies by country, 2009
                  70
                                                                                              Electricity
Billion dollars




                                                                                              (generated from
                  60                                                                          fossil fuels)
                                                                                              Gas
                  50
                                                                                              Oil
                                                                                              Coal
                  40

                  30

                  20

                  10

                  0




                       Turkmenistan
                         Uzbekistan




                        South Africa
                         Bangladesh




                         Kazakhstan
                          Venezuela
                        Saudi Arabia




                           Indonesia




                          Argentina




                            Thailand
                            Pakistan




                            Malaysia



                              Mexico
                             Ukraine
                             Algeria
                              Kuwait
                               Russia



                               Egypt
                               China
                                India




                               Qatar

                                Libya
                                 UAE
                                 Iran




                                 Iraq




                   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
                                                                                                        © OECD/IEA 2010
Booming demand for mobility in the
emerging economies drives up oil use

                           Passenger vehicles in the New Policies Scenario

                   1 600
         Million
                                                                    China
                   1 400                                            Other non-OECD
                   1 200                                            United States
                   1 000                                            Other OECD

                    800
                    600

                    400

                    200

                      0
                           1980 1990 2000 2008 2020 2035



  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
                                                                                       © OECD/IEA 2010
Oil production becomes less crude

                 World oil production by type in the New Policies Scenario


           100
    mb/d




                                                                 Unconventional oil
           80                                                    Natural gas liquids
                                                                 Crude oil - fields yet
           60                                                    to be developed or found
                                                                 Crude oil – currently
           40                                                    producing fields
                                                                 Total crude oil
           20


            0
             1990 1995 2000 2005 2010 2015 2020 2025 2030 2035




   Global oil production reaches 96 mb/d in 2035 on the back of rising output of
    natural gas liquids & unconventional oil, as crude oil production plateaus
                                                                                            © OECD/IEA 2010
More oil from fewer producers

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

    Saudi Arabia                                                            OPEC
             Iraq
                                                                            Non-OPEC
           Brazil
     Kazakhstan
        Canada
      Venezuela
            UAE
         Kuwait
             Iran
           Qatar
         Nigeria
           Libya
         Algeria

                    0   1        2        3        4         5        6
                                                                  mb/d


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
                                                                                    © 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% 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

 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
Coal remains the backbone of global
electricity generation

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

            12 000
      TWh




                                                                        China

            10 000                                                      India

                                                                        Other non-OECD
             8 000
                                                                        OECD
             6 000

             4 000

             2 000

                 0

                 1990      2000       2010       2020       2030 2035


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
                                                                                         © OECD/IEA 2010
Renewables enter the mainstream….

          Renewable primary energy demand in the New Policies Scenario


                 OECD Pacific                                         2008

                       Africa                                         2035

                        India

                       Brazil

                       China

                United States

               European Union


                                0   100    200      300     400
                                                           Mtoe



 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
                                                                                  © OECD/IEA 2010
….but only if there is enough
government support
                                Annual global support for renewables in the New Policies Scenario

                                210
       Billion dollars (2009)




                                                                                     Biofuels
                                180
                                                                                     Renewables-based electricity
                                150

                                120
             n




                                 90

                                 60

                                 30

                                  0
                                       2007 2008 2009    2015 2020 2025 2030 2035




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
                                                                                                           © OECD/IEA 2010
China becomes the market leader
in low-carbon technologies
   low-

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


     30%
                                                                               Capacity additions
                                              105 GW
                                                                               Passenger car sales
                              335 GW
     20%
                                                             8.5 million
               85 GW                                          vehicles
                                                                 h l

     10%



      0%
              Solar PV         Wind           Nuclear        Electric &
                                                           plug-in hybrids




 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
                                                                                            © OECD/IEA 2010
Caspian energy riches could enhance
global energy security
                      Caspian oil & gas outlook in the New Policies Scenario

       6                                                 350




                                                       bcm
mb/d




       5                                                 300

                                                         250
       4
                                                         200
       3
                                                         150
       2
                                                         100
       1
                                                             50
       0                                                      0
            2000       2009       2020      2035                     2000     2009      2020      2035
           Oil net exports    Inland oil consumption              Gas net exports    Inland gas consumption



           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
                                                                                                         © OECD/IEA 2010
The 450 Scenario:
a roadmap from 3.5°C to 2°C
                3.5°    2°
 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:
                                       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
Achieving the 2°C goal will require rapid
              2°
decarbonisation of global energy

                  Average annual change in CO2 intensity in the 450 scenario

                         1990-2008            2008-2020         2020-2035
             0%

            -1%

            -2%
             2%

            -3%

            -4%
                                   A four-fold
                                increase needed
            -5%

            -6%




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
                                                                                      © OECD/IEA 2010
A fundamental change is needed
in power generation

                Share of world electricity generation by type and scenario


            100%
                                                          Low-carbon generation in the NPS
             80%                                          Additional low-carbon generation
                                                          in the 450 Scenario
             60%                                          Fossil-fuel fired generation
                                                                            g
                                                          in the 450 Scenario
             40%

             20%

              0%
                2010   2015   2020   2025   2030   2035




Low-carbon technologies account for over three-quarters of global power generation by 2035
                     in the 450 Scenario, a four-fold increase on today
                                                                                             © OECD/IEA 2010
… and also in transport

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

              Million   70                                             Plug-in hybrids

                        60                                             Electric vehicles

                        50

                        40

                        30

                        20

                        10

                         0
                         2010   2015   2020   2025     2030     2035

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
                                                                                           © OECD/IEA 2010
Climate policies can improve oil security

                            World oil demand by scenario

        100                                                          New Policies Scenario
 mb/d




        96                                                           450 Scenario

        92

        88

        84


        80
              2009   2015    2020      2025      2030     2035



  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

                                                                                       © OECD/IEA 2010
Number of people without access to electricity
(million)




  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
                                                                               © OECD/IEA 2010
Concluding 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
 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

                                                                          © OECD/IEA 2010

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World Energy Outlook 2010

  • 1. World Energy Outlook 2010 Washington, D.C. 3 December 2010 © OECD/IEA 2010
  • 2. The context: a 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 – 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? © OECD/IEA 2010
  • 3. Recent policy commitments, if implemented, would make a difference World primary energy demand by region in the New Policies Scenario 18 000 Mtoe Rest of world 16 000 China 14 000 OECD 12 000 10 000 8 000 6 000 4 000 2 000 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 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 © OECD/IEA 2010
  • 4. Emerging economies dominate the growth in demand for all fuels Incremental primary energy demand in the New Policies Scenario, 2008-2035 OECD Coal China Oil Rest of world Gas Nuclear Hydro Other renewables - 600 - 300 0 300 600 900 1 200 1 500 Mtoe Demand for all types of energy increases in non-OECD countries, while demand for coal & oil declines in the OECD © OECD/IEA 2010
  • 5. Fossil- Fossil-fuel subsidies are distorting price signals Economic value of fossil-fuel consumption subsidies by country, 2009 70 Electricity Billion dollars (generated from 60 fossil fuels) Gas 50 Oil Coal 40 30 20 10 0 Turkmenistan Uzbekistan South Africa Bangladesh Kazakhstan Venezuela Saudi Arabia Indonesia Argentina Thailand Pakistan Malaysia Mexico Ukraine Algeria Kuwait Russia Egypt China India Qatar Libya UAE Iran Iraq 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 © OECD/IEA 2010
  • 6. Booming demand for mobility in the emerging economies drives up oil use Passenger vehicles in the New Policies Scenario 1 600 Million China 1 400 Other non-OECD 1 200 United States 1 000 Other OECD 800 600 400 200 0 1980 1990 2000 2008 2020 2035 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 © OECD/IEA 2010
  • 7. Oil production becomes less crude World oil production by type in the New Policies Scenario 100 mb/d Unconventional oil 80 Natural gas liquids Crude oil - fields yet 60 to be developed or found Crude oil – currently 40 producing fields Total crude oil 20 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 Global oil production reaches 96 mb/d in 2035 on the back of rising output of natural gas liquids & unconventional oil, as crude oil production plateaus © OECD/IEA 2010
  • 8. More oil from fewer producers Incremental oil production by key country in the New Policies Scenario, 2009-2035 Saudi Arabia OPEC Iraq Non-OPEC Brazil Kazakhstan Canada Venezuela UAE Kuwait Iran Qatar Nigeria Libya Algeria 0 1 2 3 4 5 6 mb/d 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 © OECD/IEA 2010
  • 9. 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  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
  • 10. Coal remains the backbone of global electricity generation Coal-fired electricity generation by region in the New Policies Scenario 12 000 TWh China 10 000 India Other non-OECD 8 000 OECD 6 000 4 000 2 000 0 1990 2000 2010 2020 2030 2035 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 © OECD/IEA 2010
  • 11. Renewables enter the mainstream…. Renewable primary energy demand in the New Policies Scenario OECD Pacific 2008 Africa 2035 India Brazil China United States European Union 0 100 200 300 400 Mtoe 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 © OECD/IEA 2010
  • 12. ….but only if there is enough government support Annual global support for renewables in the New Policies Scenario 210 Billion dollars (2009) Biofuels 180 Renewables-based electricity 150 120 n 90 60 30 0 2007 2008 2009 2015 2020 2025 2030 2035 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 © OECD/IEA 2010
  • 13. China becomes the market leader in low-carbon technologies low- China’s share of cumulative global additions to 2035 for selected technologies 30% Capacity additions 105 GW Passenger car sales 335 GW 20% 8.5 million 85 GW vehicles h l 10% 0% Solar PV Wind Nuclear Electric & plug-in hybrids 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 © OECD/IEA 2010
  • 14. Caspian energy riches could enhance global energy security Caspian oil & gas outlook in the New Policies Scenario 6 350 bcm mb/d 5 300 250 4 200 3 150 2 100 1 50 0 0 2000 2009 2020 2035 2000 2009 2020 2035 Oil net exports Inland oil consumption Gas net exports Inland gas consumption 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 © OECD/IEA 2010
  • 15. The 450 Scenario: a roadmap from 3.5°C to 2°C 3.5° 2°  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: 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
  • 16. Achieving the 2°C goal will require rapid 2° decarbonisation of global energy Average annual change in CO2 intensity in the 450 scenario 1990-2008 2008-2020 2020-2035 0% -1% -2% 2% -3% -4% A four-fold increase needed -5% -6% 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 © OECD/IEA 2010
  • 17. A fundamental change is needed in power generation Share of world electricity generation by type and scenario 100% Low-carbon generation in the NPS 80% Additional low-carbon generation in the 450 Scenario 60% Fossil-fuel fired generation g in the 450 Scenario 40% 20% 0% 2010 2015 2020 2025 2030 2035 Low-carbon technologies account for over three-quarters of global power generation by 2035 in the 450 Scenario, a four-fold increase on today © OECD/IEA 2010
  • 18. … and also in transport Sales of plug-in hybrid and electric vehicles in the 450 Scenario Million 70 Plug-in hybrids 60 Electric vehicles 50 40 30 20 10 0 2010 2015 2020 2025 2030 2035 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 © OECD/IEA 2010
  • 19. Climate policies can improve oil security World oil demand by scenario 100 New Policies Scenario mb/d 96 450 Scenario 92 88 84 80 2009 2015 2020 2025 2030 2035 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 © OECD/IEA 2010
  • 20. Number of people without access to electricity (million) 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 © OECD/IEA 2010
  • 21. Concluding 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  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 © OECD/IEA 2010