Transcript Oil in the global energy mix: Climate policies can drive

Oil in the global energy mix:
Climate policies can drive an early peak in oil demand
Nobuo Tanaka
Executive Director
International Energy Agency
Bridge Forum Dialogue, Luxembourg
13 April 2011
© OECD/IEA 2011
Oil prices break out to the upside after over a
year within a $65-$85/bbl range
$/bbl
130
Benchmark Crude Prices
120
110
100
90
80
70
Source: Platts
60
Dec 09
Apr 10
WTI Cushing
Aug 10
Dec 10
Dated Brent
Apr 11
Dubai
mb/d
90
89
88
87
86
85
84
83
Price Surge Kick-Started by Tighter
mb/d
2H10 Fundamentals
1Q07
1.5
1.0
0.5
0.0
-0.5
-1.0
-1.5
-2.0
1Q08
1Q09
1Q10
1Q11
Implied Stock Ch.&Misc to Bal (RHS)
Oil Demand
Oil Supply
© OECD/IEA 2011
Further oil
market
tightening
OPEC Spare Crude Oil Production Capacity
mb/d
OPEC effective spare capacity
in decline since October 2010
9
8
7
6
5
4
3
2
1
0
2000
2001
2002
Saudi Arabia
2003
2004
2005
2006
2007
other OPEC Effective Spare Capacity (w/S.A.)
2008
2009
Ven/Nig
2010
Iraq
2011
Libya
© OECD/IEA 2011
350
India
300
China
($2009, MER
)
toe per million dollars of GDP
World oil intensity is declining…
250
World
200
150
United
States
Japan
100
EU27
50
0
1970
1975
1980
1985
1990
1995
2000
2005
2010
Global oil intensity – oil consumption per unit of GDP – has declined at
1.7% p.a. since 1971 thanks to efficiency improvements & changes to
the structure of economic output
© OECD/IEA 2011
World GDP ($2009, MER) growth
But oil prices still affect the global economy …
8%
120
6%
90
4%
60
2%
30
0%
0
-2%
1970
1980
1990
2000
Annual GDP
growth
Recession
Avg. IEA oil
import price in
real $2009
(right axis)
2010
Oil price spikes have preceded each global recession since the early
1970’s
© OECD/IEA 2011
Billion dollars (2009)
Annual expenditure on net imports of oil
500
1971-2008 average
2.8%
400
2.6%
2.2%
2.2%
2008
300
2011
3.2%
200
3.0%
1.0%
1.4%
100
2.8%
3.0%
6.6% 5.4%
1.8%
0.9%
2.8%
0
US
EU
Japan
China
India
If oil prices average US$100 a barrel in 2011, spending on oil imports in many countries will
reach or surpass the record levels of 2008
* Projections made prior to events of 11 March
© OECD/IEA 2011
Public Stocks: A Clear Safety Net
60
duration (months)
48
IEA
public
stocks
(as of stocks
end-Dec. 2010)
1.56
billion
barrels
of Public
36
= 1.6 billion barrels of oil
= 72 days of Total IEA net imports
24
2 Sep. 2005
decision, 2 mb/d
12
Theoretical decision,
4 mb/d
1
2
3
4
draw rate (mb/d)
5
6
IEA Public Stocks alone could replace an oil supply disruption
of 4 mb/d for 1 year
7
© OECD/IEA 2011
Need for cooperation
during oil supply disruptions
IEA stockholding cover of global oil demand
40
60%
% share of world oil demand
30
40%
25
20
30%
15
20%
10
10%
days of world oil demand cover
35
50%
5
-
0%
IEA 90 days of stockholding, share of world demand
with China
with India
with ASEAN
Share of non-OECD in global oil demand
Growing share of non-OECD oil demand results in declining
global demand cover from IEA oil stocks
© OECD/IEA 2011
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 ?
 Emerging economies will shape the global energy future – where will
their policy decisions lead us ?
 Tightening oil market plus political unrest in producing regions – how
vulnerable is the market to even small disruptions?
© OECD/IEA 2011
Overview of WEO-2010 scenarios
 New Policies Scenario is the central scenario in WEO-2010
> assumes cautious implementation of recently announced commitments &
plans, even if yet to be formally adopted
> provides benchmark to assess achievements & limitations of recent
developments in climate & energy policy
 Current Policies Scenario takes into consideration only those policies
that had been formally adopted by mid-2010
> equivalent to the Reference Scenario of past Outlooks
 The 450 Scenario sets out an energy pathway consistent with the goal of
limiting increase in average temperature to 2OC
© OECD/IEA 2011
Dollars per barrel (2009)
International oil price assumptions
140
Current Policies Scenario
120
New Policies Scenario
100
450 Scenario
80
60
40
20
0
1980
1990
2000
2010
2020
20302035
Current Policies
New Policies
CO2 price
in 2035
($/ tCO2)
42 in EU
50 in OECD
International oil price
in 2035
($/bbl)
135
113
Effective oil price
in 2035
($/bbl)
152 in EU
134 in OECD
450 Scenario
120 in OECD
90
139 in OECD
Scenario
The age of cheap oil is over, though policy action could bring lower international prices than
would otherwise be the case
© OECD/IEA 2011
Mtoe
Primary energy demand by fuel in the New
Policies Scenario
18 000
International Bunkers
16 000
Non-OECD Renewables
Non-OECD Nuclear
14 000
Non-OECD Gas
12 000
Non-OECD Oil
Non-OECD Coal
10 000
OECD Renewables
8 000
OECD Nuclear
6 000
OECD Gas
4 000
OECD Oil
OECD Coal
2 000
0
2008
2015
2020
2025
2030
2035
Non-OECD energy demand increases by 64% in 2008-2035, compared with a rise of just 3%
in the OECD. Demand for all types of energy increases in non-OECD countries, while
demand for coal & oil declines in the OECD.
© OECD/IEA 2011
Emerging economies dominate the growth in
demand for all fuels
Incremental primary energy demand in the New Policies Scenario, 2008-2035
Coal
OECD
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 2011
Fossil-fuel subsidies are distorting price
signals
100
Additional
subsidy in 2008
80
Electricity
60
Gas
Oil
Coal
(generated from
fossil fuels)
40
20
0
Iran
Saudi Arabia
Russia
India
China
Egypt
Venezuela
Indonesia
UAE
Uzbekistan
Iraq
Kuwait
Pakistan
Argentina
Ukraine
Algeria
Malaysia
Thailand
Bangladesh
Mexico
Turkmenistan
South Africa
Qatar
Kazakhstan
Libya
Billion dollars
Economic value of fossil-fuel consumption subsidies by country, 2009
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 2011
Booming demand for mobility in the
emerging economies drives up oil use
Million
Passenger vehicles in the New Policies Scenario
1 600
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 2011
Oil production becomes less crude
mb/d
World oil production by type in the New Policies Scenario
100
Unconventional oil
80
Natural gas liquids
60
Crude oil:
fields yet to be found
40
Crude oil:
fields yet to be developed
20
Crude oil:
currently producing fields
Total crude oil
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 2011
More oil from fewer producers
Incremental oil production by key country in the New Policies Scenario, 2009-2035
Saudi Arabia
Iraq
Brazil
Kazakhstan
Canada
Venezuela
UAE
Kuwait
Iran
Qatar
Nigeria
Libya
Algeria
OPEC
Non-OPEC
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 2011
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
 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 2011
Coal remains the backbone of global
electricity generation
TWh
Coal-fired electricity generation by region in the New Policies Scenario
12 000
China
India
10 000
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 coal-fired
capacity of the US, EU & Japan
© OECD/IEA 2011
Renewables enter the mainstream….
Renewable primary energy demand in the New Policies Scenario
OECD Pacific
2008
2035
Africa
India
Brazil
China
United States
European Union
0
100
200
300
400
500
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 2011
….but only if there is enough government
support
Billion dollars (2009)
Annual global support for renewables in the New Policies Scenario
210
Biofuels
180
Renewables-based
electricity
150
120
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 2011
Ambitious nuclear growth plans are now in
doubt
Figure 17: Nuclear capacity under construction and number of reactors
30
27
25
GWe
20
15
11
10
5
6
5
1
1
2
1
1
2
1
1
2
2
2
1
0
Most of the planned-for growth is in non-OECD countries
Source: IAEA PRIS Database
© OECD/IEA 2011
China becomes the market leader in
low-carbon technologies
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
vehicles
85 GW
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 2011
The 450 Scenario:
A roadmap from 3.5C to 2C
 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:
> 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 2011
Low ambition to 2020 makes faster and
deeper cuts necessary afterwards
2015
2020
2025
2030
7.0
34
6.0
32
5.0
30
4.0
28
3.0
26
2.0
24
1.0
22
0
20
20102015
20162020
20212025
20262030
WEO-2009:
2035
Gt CO2
Trillion dollars (2009)
2010
Investment
Emissions
(right axis)
WEO-2010:
Investment
Emissions
(right axis)
20312035
Overall, this year’s 450 Scenario will cost $1 trillion more than last year’s by 2030,
and requires a total of $18 trillion in investment by 2035
© OECD/IEA 2011
The 450 Scenario:
Abatement by country
Gt
World energy-related CO2 emission savings by country in the 450 Scenario
relative to the Current Policies Scenario
45
Current Policies
Scenario
40
42.6 Gt
35
20.9 Gt
30
25
450 Scenario
20
2008
2015
2020
2025
2030
21.7 Gt
Share of cumulative abatement
between 2010-2035
China
United States
European Union
India
Middle East
Russia
Japan
Rest of world
33%
15%
9%
8%
5%
3%
3%
24%
2035
In the 450 Scenario, compared with the Current Policies Scenario, China & the US account
for 48% of the cumulative emission abatement that is needed in 2010-2035
© OECD/IEA 2011
The 450 Scenario:
Abatement by technology
Gt
World energy-related CO2 emission savings by technology in the
450 Scenario relative to the New Policies Scenario
45
Current Policies
Scenario
40
42.6 Gt
New Policies
Scenario
35
7.1 Gt
35.4 Gt
30
13.7 Gt
Share of cumulative abatement
between 2010-2035
Efficiency
Renewables
Biofuels
Nuclear
CCS
50%
18%
4%
9%
20%
25
450 Scenario
20
2008
2015
2020
2025
2030
21.7 Gt
2035
In moving from the New Policies Scenario to the 450 Scenario, more expensive abatement
options such as CCS play a growing role
© OECD/IEA 2011
Achieving the 2°C goal will require rapid
decarbonisation of global energy
Average annual change in CO2 intensity in the 450 scenario
6%
5%
4%
A four-fold
increase needed
3%
2%
1%
0%
1990-2008
2008-2020
2020-2035
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 2011
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 450 Scenario
60%
Fossil-fuel fired generation
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 2011
TWh
Decarbonisation of power generation in OECD
Europe
6000
Imports
Other
5000
Solar
Wind
4000
Biomass+CCS
Biomass and waste
3000
Hydro
Nuclear
2000
Natural gas+CCS
Natural gas
1000
Oil
Coal+CCS
0
Coal
2007
Baseline 2050
BLUE Map
2050
BLUE High BLUE High Ren
Nuclear 2050
2050
A mix of nuclear, renewables and fossil-fuels with CCS will be needed
to decarbonise the electricity sector.
© OECD/IEA 2011
Fundamental change also in transport
70
700
60
600
50
500
40
400
30
300
20
200
10
100
0
2010
Grammes per kWh
Million
Sales of plug-in hybrid and electric vehicles in the 450 Scenario
& CO2 intensity of the power sector
Plug-in hybrids
Electric vehicles
CO2 intensity in
power generation
(right axis)
0
2015
2020
2025
2030
2035
Plug-in hybrids & electric vehicles reach 39% of light-duty vehicle sales by 2035, making a big
contribution to CO2 abatement, thanks to a major decarbonisation of the power sector
© OECD/IEA 2011
Clean energy progress mixed
We are not on a pathway to limit global temperatures
© OECD/IEA 2011
Clean energy progress is mixed
Average annual electricity capacity additions to 2050
Present rate
Gap to reach BLUE Map
Coal-fired with CCS
35 plants (500 MW)
Gas-fired with CCS
20 plants (500 MW)
30 plants (1 000 MW)
Nuclear
Historical high
Hydro
2/3 of Three Gorges Dam
Biomass plants
200 plants (50 MW)
Wind-onshore
12 000 turbines (4 MW)
Wind-offshore
3 600 turbines (4 MW)
Geothermal
45 units (100 MW)
Solar PV
325 million m 2 solar panels
Solar CSP
55 CSP plants (250 MW)
0
10
20
30
40
50
GW/ yr
© OECD/IEA 2011
Will peak oil be a guest or the spectre at the
feast?
100
16
96
12
92
8
88
4
84
0
80
-4
76
-8
72
-12
China
68
-16
OECD
2009
2015
2020
2025
2030
mb/d
mb/d
Oil demand in the 450 Scenario
World demand in
New Policies Scenario
World demand in
450 Scenario
Peak demand
Right axis:
Inter-regional
(bunkers)
Other non-OECD
India
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 2011
Combating climate change will bring
economic benefits as well as costs
Oil-import bills as share of GDP in selected countries
8%
1980
7%
2008
6%
2009
2035: New Policies Scenario
5%
2035: 450 Scenario
4%
3%
2%
1%
0%
European
Union
United
States
Japan
China
India
In the 450 Scenario, annual spending on oil imports in 2035 by the five largest importers is
around $560 billion, or one-third, lower than in the New Policies Scenario
© OECD/IEA 2011
OPEC oil-export revenues set to rise
Trillion dollars (2009)
Cumulative OPEC oil-export revenues by scenario
35
30
25
20
15
10
5
0
New Policies
Scenario
1984-2009
450
Scenario
2010-2035
In the 450 Scenario, OPEC’s cumulative oil revenues in 2010-2035 amount to $27 trillion, or
more than a 3-fold increase compared with the last quarter century
© OECD/IEA 2011
Key messages
 The surge in oil prices poses a threat to the fragile economic recovery by
impacting balance of payments, inflation & growth
 If oil prices average $100 per barrel in 2011, OECD oil-import spending
will amount to 2.3% of GDP
 Emerging economies with high energy intensity and import dependency
are most vulnerable
 “Golden Age” of gas with supply abundance and high demand from
China and post-Fukushima
 Uncertain future Chinese policies will have huge impacts
 Policies to respond to challenges posed by climate change & energy
security by bringing the oil demand peak forward would have important
repercussions on the oil market
 With or without oil the age of cheap energy is over – but who will take
the rent?
© OECD/IEA 2011
Oil in the global energy mix:
Climate policies can drive an early peak in oil demand
Nobuo Tanaka
Executive Director
International Energy Agency
Bridge Forum Dialogue, Luxembourg
13 April 2011
© OECD/IEA 2011