World Energy Outlook

1. World Energy Outlook Dr Fatih Birol IEA Chief Economist Prague, 7 January 2014

2. The world energy scene today • Some long-held tenets of the energy sector are being rewritten • Countries are switching roles: importers are becoming exporters… • … and exporters are among the major sources of growing demand • New supply options reshape ideas about distribution of resources • But long-term solutions to global challenges remain scarce • Renewed focus on energy efficiency, but CO2 emissions continue to rise • Fossil-fuel subsidies increased to $544 billion in 2012 • 1.3 billion people still lack electricity – in Africa and South Asia • Energy prices add to the pressure on policymakers • Sustained period of high oil prices without parallel in market history • Large, persistent regional price differences for gas & electricity

3. The engine of energy demand growth moves to South Asia Primary energy demand, 2035 (Mtoe) China is the main driver of increasing energy demand in the current decade, but India takes over in the 2020s as the principal source of growth Share of global growth2012-2035 Eurasia OECD Eurasia Latin America Europe 4% 5% 1 370 8% 1 710 China Africa 8% Japan UnitedStates 4 060 2 240 440 MiddleEast 1 050 MiddleEast 10% Southeast Asia 65% 1 000 Brazil 1 540 1 030 480 Africa India Non-OECDAsia

4. A mix that is slow to change Growth in total primary energy demand Today's share of fossil fuels in the global mix, at 82%, is the same as it was 25 years ago; the strong rise of renewables only reduces this to around 75% in 2035 1987-2011 Gas 2011-2035 Coal Renewables Oil Nuclear 500 1 000 1 500 2 000 2 500 3 000 Mtoe the strong rise of renewables only reduces this to around 75% in 2035

5. Emissions off track in the run-up to the 2015 climate summit in France Cumulative energy-related CO2emissions Non-OECD countries account for a rising share of emissions, although 2035 per capita levels are only half of OECD Total emissions 1900-2035 Gt 800 600 Non-OECD 49% 400 Non-OECD OECD 200 OECD 51% 2013 1900 1930 1960 1990 -2035 • -1929 -1959 -1989 -2012

6. Oil use grows, but in a narrowing set of markets China becomes the largest consumer of oil by 2030, as OECD oil use drops; Oil demand by region sector mb/d 105 mb/d 105 100 100 Other Other Other 95 Gasoline Gasoline 95 Middle East 90 Diesel Diesel 90 India 85 85 OECD China 80 80 75 2012 Transport Petrochemicals Othersectors 2035 2012 Transport Petrochemicals Othersectors 2035 China becomes the largest consumer of oil by 2030, as OECD oil use drops; demand is concentrated in transport, where diesel use surges by 5.5 mb/d, & petrochemicals , & petrochemicals

7. Two chapters to the oil production story Contributions to global oil production growth The United States (light tight oil) & Brazil (deepwater) step up until the mid-2020s, but the Middle East is critical to the longer-term oil outlook Middle East 2013-2025 2025-2035 Brazil United States Rest of the world -2 0 2 4 6 8 mb/d

8. Renewables power up around the world Growth in electricity generation from renewable sources, 2011-2035 TWh 2 100 ASEAN Other renewables Other renewables 1 800 Africa Solar PV UnitedStates Other renewables Solar PV 1 500 Wind Wind Latin America 1 200 Japan China Solar PV 900 European Union 600 Hydro Wind Hydro India 300 Europe, Japan and United States China India, Latin America, ASEAN and Africa Hydro The expansion of non-hydro renewables depends on subsidies that more than double to 2035; additions of wind & solar have implications for power market design & costs additions of wind & solar have implications for power market design & costs

9. Increasing subsidies for increasing renewables Renewable-energy subsidies by region in 2012 • Rest of the world $101 billion 13% • India 2% • China 7% • European Union 57% 21% • United States Renewables subsidies increased to $101 billion in 2012, Renewables subsidies increased to $101 billion in 2012, more than half of which are in the European Union; renewables subsidies are set to more than double by 2035. renewables subsidies are set to more than double by 2035

10. Who has the energy to compete? Ratio of industrial energy prices relative to the United States Regional differences in natural gas prices narrow from today’s very high levels but remain large through to 2035; electricity price differentials also persist Natural gas Electricity 5× Reductionfrom 2013 • 4× 2013 2035 • 3× 2003 2003 • 2× • United States Japan European Union China Japan European Union China electricity price differentials also persist

11. Energy-intensive industries need to count their costs Share of energy in total production costs for selected industries Energy-intensive sectors worldwide account for around one-fifth of industrial value added, one-quarter of industrial employment and 70% of industrial energy use. 10% 20% 30% 40% 50% 60% 70% 80% 90% Petrochemicals Fertilisers Aluminium Cement Iron & steel Pulp & paper Glass

12. An energy boost to the economy? Share of global export market for energy-intensive goods The US, together with key emerging economies, increases its export market share for energy-intensive goods, while the EU and Japan see a sharp decline +3% European Union +1% +2% +2% Japan Today 36% 10% 7% 7% 3% 2% India China Middle East United States -3% -10% while the EU and Japan see a sharp decline

13. LNG from the United Statescan shake up gas markets Indicative economics of LNG export from the US Gulf Coast (at current prices) $/MBtu 18 Average import price 15 $/MBtu 12 12 Liquefaction, shipping & regasification 9 9 United States price 6 6 3 3 To Asia To Europe • New LNG supplies accelerate movement towards a more interconnected global market, but high costs of transport between regions mean no single global gas price • but high costs of transport between regions mean no single global gas price

14. Orientation for a fast-changing energy world • China, then India, drive the growing dominance of Asia in global energy demand & trade • Technology is opening up new oil resources, but the Middle East remains central to the longer-term outlook • Regional price gaps & concerns over competitiveness are hereto stay, but there are ways to react – with efficiency first in line • Implementing sound energy policies in Europe has rarely been so critical for the prosperity of its people