Global Energy Dynamics: Outlook for the Future Dr Fatih Birol
Chief Economist, IEA
18 June 2014
© OECD/IEA 2013 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 re‐orientate the energy trade map
 But there still remains a major disconnect between climate
change goals & actions being taken to meet them
 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
 The geopolitics of energy are being further complicated as new
tensions add to other unresolved concerns
© OECD/IEA 2013 The energy mix is slow to change
Growth in total primary energy demand
1987‐2011
Gas
2011‐2035
Coal
Renewables
Oil
Nuclear
500
1 000
1 500
2 000
2 500
3 000
Mtoe
25 years ago the share of fossil fuels in the global mix was 82%; it is the same today
& the strong rise of renewables in the future only reduces this to around 75% in 2035
© OECD/IEA 2013 Unconventional oil and gas has made a major contribution to global production
US shale gas and shale oil production increases: 2005‐2014
3.0 mb/d
bcm 300
250
2.5
200
2.0
150
1.5
100
1.0
50
0.5
0
0.0
Gas
Oil
Growth in US shale gas since 2005 equals the current output of Qatar + Kuwait + UAE + Iraq; while shale oil output is equal to that of Iraq
while US shale oil output is now equal to Iraqi oil production
© OECD/IEA 2013 Is shale oil the only reason why US oil imports are shrinking rapidly ?
Reductions in US oil imports in 2035 relative to today
Increased oil supply Demand‐side
policies
35%
57%
8%
Natural gas use in transport US oil imports are set to plummet due to increasing oil supplies & recently adopted policies to improve efficiency of cars and trucks
© OECD/IEA 2013 Two chapters to the oil production story
Contributions to global oil production growth
Middle East
2013‐2025
2025‐2035
Brazil
United States
Rest of the world
‐2
0
2
4
6
8
mb/d
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
© OECD/IEA 2013 Oil use grows, but in a narrowing set of markets
Oil demand by region
sector
mb/d 105
100
Other
Gasoline
95
Diesel
90
Other
Middle East
India
85
OECD
China
80
75
2012
Transport
Petrochemicals
Other
sectors
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
© OECD/IEA 2013 Turbulent times for the refining sector
Refinery capacity and operation
mb/d 105
Other
Middle East
India
New refinery
capacity
China
100
95
90
Current spare & excess capacity
85
80
Oil bypassing refineries
Spare & excess capacity, 10 mb/d at risk of closure by 2035
Oil demand
Oil processed
by refineries
75
70
2012
2035
More oil bypassing the refining system and new capacity in growing non‐OECD markets piles pressure on existing refiners, especially in Europe
© OECD/IEA 2013 Regional natural gas prices: who has the energy to compete?
Natural gas prices by region
$/MBtu
20
18
16
14
12
10
8
6
4
2
0
2013
2035
European Union
Japan
United States
Regional differences in natural gas prices narrow from today’s very high levels but remain large
© OECD/IEA 2013 Energy‐intensive industries need to count their costs
Share of energy in total production costs for selected industries
10%
20%
30%
40%
50%
60%
70%
80%
90%
Petrochemicals
Fertilisers
Aluminium
Cement
Iron & steel
Pulp & paper
Glass
Energy‐intensive sectors worldwide account for around one‐fifth of industrial value added, one‐quarter of industrial employment and 70% of industrial energy use.
© OECD/IEA 2013 LNG from the United States can alleviate strain on the gas markets, but is no silver bullet
Indicative economics of LNG export from the US Gulf Coast
$/MBtu
18
15
12
$/MBtu
12
9
9
6
6
3
3
To Asia
Average import price
Liquefaction, shipping
& regasification
United States price
To Europe
New LNG supplies accelerate movement towards a more interconnected global but high costs of transport between regions mean no single global gas price
market, but high costs of transport between regions mean no single global gas price
© OECD/IEA 2013 US emissions on a downward trend
Energy‐related CO2 emissions in the United States
Gt CO2 6.5
6.0
5.5
5.0
4.5
4.0
1990
1995
2000
2007
2012
2013
CO2 emissions fell sharply since the shale gas revolution, but rebounded last year on the back of a partial gas‐coal switch and increased industrial activity
© OECD/IEA 2013 The slowdown in Chinese coal demand caught industry off‐guard
Coal demand in China: real demand vs historical trend
Real consumption
Mt 4400
Historical trend
4200
Curbing in China ≈ 20 times the
increase in US exports in 2012
4000
3800
3600
3400
3200
3000
2010
2011
2012
2013
China’s move away from coal will have a much greater impact on global coal markets than the US shale gas revolution
© OECD/IEA 2013 Concluding remarks
 The shale revolution is having an unprecedented impact on the global energy landscape, economy and geopolitics
 Middle East oil will continue to be indispensible to world markets – the right signals to invest must be sent
 New geography and composition of oil demand and supply confront the world’s refiners with a complex set of challenges
 While US natural gas prices may rise, large disparities between regions will persist
 Europe’s energy strategy needs to focus on competitiveness & energy security, in addition to climate concerns
© OECD/IEA 2013