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World Energy Outlook Energy trends and challenges to 2030

World Energy Outlook Energy trends and challenges to 2030. Dr. Fabien Roques fabien.roques@iea.org Economic Analysis Division International Energy Agency Presentation to the French-Serbian European Summer University 20 October 2006. Outline.

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World Energy Outlook Energy trends and challenges to 2030

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  1. World Energy Outlook Energy trends and challenges to 2030 Dr. Fabien Roques fabien.roques@iea.org Economic Analysis Division International Energy Agency Presentation to the French-Serbian European Summer University 20 October 2006

  2. Outline • Energy trends and strategic challenges – ‘Reference Scenario’ • Secuity of supply • CO2 emissions • Energy and development • Impact of supply side ‘Deferred investment’ scenario • World ‘Alternative Policies Scenario’ • Impact of policies under consideration

  3. The Context • The world is facing twin energy threats • Inadequate and insecure supplies • Environmental damage, including climate change • There is an urgent need to curb the growth in fossil-fuel demand & related emissions • WEO-2006 is a direct response to G8 request for advice on alternative energy scenarios • WEO-2006 will be released on 7 November => All numbers presented are based on WEO 2004 and WEO 2005

  4. Scenario Approach • Two scenarios depict markedly different energy futures • Reference Scenario • Incorporates assumptions about economic & population growth, energy prices, technology & public policies • Does not take account of any possible, potential or even likely new energy & environment policies • World Alternative Policy Scenario • Assumes environmental & energy-security policies now under consideration are adopted • Impact on prices, global energy balance & call on MENA oil/ gas

  5. Energy Trends & Strategic ChallengesReference Scenario

  6. 18 000 16 000 14 000 Oil 12 000 10 000 Mtoe 8 000 Gas 6 000 Coal 4 000 2 000 Other renewables Nuclear Hydro 0 1970 1980 1990 2000 2010 2020 2030 1971 World Primary Energy Demand Oil and gas together account for more than 60% of the growth in energy demand between now and 2030 in the Reference Scenario

  7. World Primary Energy Demand by Fuel 6 000 Oil 5 000 4 000 Natural gas Coal Mtoe 3 000 Other renewables 2 000 Nuclear power 1 000 Hydro power 0 1970 1980 1990 2000 2010 2020 2030 Oil, gas and coal together account for 83% of the growth in energy demand between now and 2030 in the Reference Scenario

  8. Regional Shares in World Primary Energy Demand 100% 22% 39% 80% 49% 16% 60% 10% 9% 40% 62% 51% 42% 20% 0% 1971 2003 2030 OECD Transition economies Developing countries Two-thirds of the increase in world demand between 2003 and 2030 comes from developing countries, especially in Asia

  9. Challenge 1:Security of Supply

  10. Reference Scenario:Implications for Energy Security • The threat to the world’s energy security is real & growing • The share of transport in total oil use rises in all regions • Reliance on a small number of oil producers – notably in OPEC Middle East increases sharply • OECD & developing Asian oil & gas imports set to grow further • Will the investment come?

  11. 140 120 100 80 Oil GW Gas Coal 60 Nuclear 40 20 0 10 - 20 years > 30 years 20 - 30 years < 10 years Age of Installed Capacity in Europe Europe's power plants are ageing: more than half the current capacity could be retired by 2030

  12. OECD North America OECD Europe OECD Pacific Transition economies China Other Asia Latin America North Africa Other Africa Middle East 0 1 000 2 000 3 000 4 000 billion dollars (2004) Oil Gas Electricity Coal Cumulative Energy Investment in the Reference Scenario, 2004-2030 More than 60% of total energy supply investments will go into the power sector

  13. 4500 4000 3500 3000 2500 2000 1500 1000 500 0 1990 1995 2000 2005 2010 2015 2020 2025 2030 Coal Oil Gas Nuclear Hydro Wind Other renewables EU-25 Electricity Generation, 1990-2030

  14. 25% 20% 15% 10% 5% 0% 1990 1992 1994 1996 1998 2000 2002 2010 2020 2030 Other renewables Hydro World Renewables Electricity Generation The share of non-hydro renewables will triple by 2030, while hydropower will grow modestly

  15. 800 600 bcm 400 200 0 1980 1990 2004 2010 2020 2030 Production Net imports EU Gas Supply Balance Rising demand – mainly for power generation – and declining output will cause net imports to surge

  16. 1 500 1 200 900 Mtoe 600 300 0 1990 2002 2010 2020 2030 Coal Oil Gas EU Fossil Fuel Net Imports The EU will become increasingly dependent on energy imports, especially oil and natural gas

  17. World Oil Production Shifts Away from OECD Global oil production climbs from 82 mb/d in 2004 to 115 mb/d in 2030; OECD share falls from 25% to 12%

  18. MENA Net Oil Exports mb/d MENA plays an increasingly important role in international trade, its net exports surging from 22 mb/d in 2004 to 39 mb/d in 2030

  19. 50 40 30 mb/d 20 10 0 1970 1980 1990 2000 2010 2020 2030 Iran Iraq Kuwait Other Middle East Saudi Arabia UAE North Africa MENA Crude Oil & NGL Production by Country MENA’s share of world oil production rises from 35% in 2004 to 44% in 2030 in the RS, with Saudi production rising to over 18 mb/d

  20. Saudi Arabia’s Oil Production by Source in the Reference Scenario Based on its reserves and global demand trends, Saudi oil production is projected to reach 18 mb/d in 2030

  21. MENA Oil Exports through the “Dire Straits” Much of the additional oil and LNG exports from MENA in the future will be shipped through just three maritime routes

  22. Oil Non-MENA 39% Saudi Arabia Natural gas 20% Other MENA Other non- Kuwait Iraq 14% MENA Iran Russia 8% 9% 28% 10% 27% Other MENA Iran 8% 16% UAE Saudi 8% Qatar Arabia 14% 4% World Proven Oil and Gas Reserves MENA share of global oil and gas reserves is much higher than its share of current production, suggesting strong potential for growth

  23. Proven Natural Gas Reserves Gas reserves, concentrated in the Middle East & the transition economies, are equal to 66 years of current production

  24. Major Net Inter-Regional Gas Trade Flows Inter-regional gas trade triples by 2030, with most new exports coming from the Middle East, Africa and Russia

  25. Challenge 2:Carbon Dioxide Emissions

  26. World Energy-Related CO2 Emissions Global emissions grow 50% between now and 2030, and developing countries’ emissions will overtake OECD’s in the 2020s

  27. 4 000 15 2030 12 3 000 2003 9 Pacific tonnes per capita Europe 2 000 million tonnes 6 2030 North 1 000 America 3 2003 0 0 China OECD CO2 Increase, 2003-2030 OECD CO2 additions only three quarters of Chinese CO2 rise, but OECD emissions per capita still two times higher in 2030

  28. Energy-Related CO2 Emissions by Region 2030 2003 24 Gt 37 Gt Global emissions grow by just over half between 2003 & 2030, with the bulk of the increase coming from developing countries

  29. Challenge 3:Energy and Poverty

  30. Energy Use & Human Development • Energy is a prerequisite to economic & human development, but the relationship is very complex • In practice, the level of human development is linked to • Absolute amount of energy used per capita • Share of modern energy services – especially electricity – in energy use

  31. 1.0 0.8 0.6 HDI 0.4 0.2 OECD Non-OECD 0.0 0 2 4 6 8 10 12 14 Primary energy demand per capita (toe/cap) HDI & Primary Energy Demand per Capita, 2002 There is a strong link between per capita energy use & the UN’s HDI - particularly for the least developed countries

  32. Per Capita Primary Energy Use, 2030 Per capita energy use remains much lower in developing countries

  33. Bringing Modern Energy to the World’s Poor • Many poor households will still be using dirty & inefficient traditional fuels for cooking in 2030 • Number of people rises from 2.5 billion today to 2.7 billion • UN Millennium Project recommendation to halve number by 2015 will not be met on current trends • Access to electricity is set to improve, but not fast enough • 1.6 billion people have no access today, falling only slightly to 1.5 billion in 2015 & 1.4 billion in 2030 • Needs to fall to 1 billion to achieve Millennium Development Goal

  34. Electricity Deprivation In 2030, if no new policies are implemented, there will still be 1.4 billion people without electricity

  35. Implications of deferred investment in MENA countries

  36. Deferred Investment Scenario • How would global energy markets evolve if investment MENA upstream oil industry grew slower than in the Reference Scenario? • Investment is assumed to remain constant at its share of historical GDP in each country • MENA oil production is lower compared to the Reference Scenario, and the gap is widening over time • Oil prices are driven higher - an increase of 32% over the Reference Scenario in 2030 - dragging up gas, coal and electricity prices • MENA gas production is also lower compared to the Reference Scenario due to • Reduced global gas demand & call on MENA gas • Lower associated oil/gas output

  37. 60 50 40 mb/d 30 20 10 0 1970 1980 1990 2000 2010 2020 2030 Reference Scenario Deferred Investment Scenario Difference MENA Crude Oil Production (including NGLs) MENA’s share of global oil production falls from 35% in 2004 to 33% in the DIS. Saudi production reaches 14 mb/d in 2030

  38. 500 400 206 bcm 300 116 bcm bcm 200 24 bcm 100 0 2003 2010 2020 2030 Reference Scenario Deferred Investment Scenario MENA Net Natural Gas Exports MENA gas exports are much lower in the DIS, as higher gas prices & lower GDP choke off demand in the main importing regions

  39. World Alternative Policies Scenario

  40. Mapping Out an Alternative Energy Future • Reference Scenario trends are not set in stone • The Alternative Policy Scenario analyses impact of government policies under consideration • Responds to call to IEA from G8 & IEA ministers • To “advise on alternative energy scenarios and strategies aimed at a clean, clever and competitive energy future" • 1 400+ different policies worldwide to • Improve efficiency in energy production & use • Increase reliance on non-fossil fuels • Bolster output of oil & gas in net importing countries • Macroeconomic, population & oil/gas price assumptions are as per the Reference Scenario

  41. Examples of Policies included in the Alternative Scenario Power generation • Renewable energy (e.g., EU renewables directive) • Cleaner coal technology (e.g., China and India) • Nuclear Transport sector • Improve vehicle fuel efficiency (e.g. strengthening of US CAFE standards, extension of Chinese standards) • Increased sales of alternative fuel vehicles and fuels (e.g., biofuels in Europe, Brazil) Residential and commercial sectors • Building codes (e.g., US) • Efficiency standards and labelling for appliances (e.g., India)

  42. 140 6000 120 5000 12.1 mb/d 500 bcm 100 4000 80 bcm 3000 mb/d 60 2000 40 1000 20 0 0 Oil Gas 2004 2030 Reference Scenario 2030 Alternative Scenario Oil/Gas Demand in the Reference and Alternative Policy Scenarios Oil & gas demand in the Alternative Scenario are both 10% lower in 2030 due to significant energy savings and a shift in the energy mix

  43. Reduction in Oil Demand in the Alternative vs. Reference Scenario, 2030 Oil savings in 2030 would be equivalent to the combined current production of Saudi Arabia, UAE and Nigeria

  44. 40 000 35 000 2 30 000 million tonnes of CO 25 000 20 000 1990 2000 2010 2020 2030 Coal Oil Gas Alternative Policy Scenario Reference Scenario Global Energy-Related CO2 Emissions in the Reference and Alternative Policy Scenarios In 2030, CO2 emissions are 16% lower than in the Reference Scenario, but are still more than 50% higher than 1990

  45. 100% 4% 5% 8% 5% 10% 21% 12% 17% 80% 20% 15% 7% 21% 1% 7% 60% 10% 40% 67% 63% 58% 49% 20% 0% World OECD Transition economies Developing countries End-use efficiency gains Fuel switching in end uses Increased renewables in power generation Increased nuclear in power generation Changes in the fossil-fuel mix in power generation Contributory Factors in CO2 Reduction 2002-2030 Improvements in end-use efficiency contribute for more than half of decrease in emissions, and renewables use for 20%

  46. Coal 2002 Gas Oil Coal 2030 Gas Oil 0 2 000 4 000 6 000 8 000 10 000 12 000 Mt of CO2 OECD Developing countries Transition economies Power Sector CO2 Emissions In 2030, coal plants in developing countries will produce more CO2 than the entire power sector in the OECD

  47. Making the Alternative Policy Scenario a Reality • Formidable hurdles exist to the adoption & implementation of the Alternative Policy Scenario • It will require considerable political to push through those policies • Private-sector support & international cooperation will be essential • Action is needed urgently • Delaying implementation by a decade would reduce cut in cumulative emissions to 2030 from 8% to 2% • Delays in stepping up R&D – particularly carbon capture & storage – would hinder cutting emissions after 2030

  48. Key Results • If governments stick with current policies, global energy needs will be more than 50% higher in 2030 than today • Projected market trends raise serious concerns • Increased risk for energy security • Rising environmental concerns • Persistent energy poverty • Further underinvestment in oil and gas would drive up prices & depress global GDP growth, eventually harming producers too • More vigorous policies would curb rate of increase in energy demand and emission significantly

  49. Summing Up • The need to diversify energy sources & mitigate emissions is more urgent than ever • Global energy system is on an unsustainable path • Strong new policies could sharply reduce the rate of increase in demand & emissions • Economic cost of these policies would be more than outweighed by the economic benefits alone • In the longer term, technology development will be critical to a sustainable energy system • Governments also need to tackle market barriers to ensure investment is forthcoming • Rich countries need to help developing countries address energy poverty

  50. Thank you www.worldenergyoutlook.org

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