Global Energy Dynamics: Outlook for the Future
Global Energy Dynamics: Outlook for the Future Dr Fatih Birol Chief Economist, IEA 10 April 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 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 lack electricity 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 © 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 output since 2005 is equivalent to the total production of Qatar, Kuwait, UAE and Iraq combined; while shale oil output is equal to that of Iraq © OECD/IEA 2013
US oil imports are shrinking rapidly – thanks to shale oil only? Reductions in US oil imports in 2035 relative to today
Increased oil supply Demand-side efficiency
35%
39%
18%
8%
Natural gas use in transport Biofuels use in transport US oil imports are set to plummet due to increasing oil supplies and 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
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
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
Who has flooded the markets? Incremental steam coal exports Mt 200
Indonesia
180
Australia
160
United States
140 120 100 80 60 40 20 0
2009
2010
2011
2012
2013
The US accounted for only 7% of the increase in global steam coal exports since 2007 © OECD/IEA 2013
The slowdown in Chinese demand caught the industry off-guard Coal demand in China: real demand vs historical trend Real consumption Mt 4400
Historical trend
4200 Curbing in China ≈ 20 times US exports increase in 2012
4000 3800 3600 3400 3200 3000
2010
2011
2012
2013
China’s move away from coal will be a far greater determinant of the direction of the coal markets than the shale gas revolution in the US © 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 market, but high costs of transport between regions mean no single global gas price © OECD/IEA 2013
Concluding remarks The shale revolution is having an unprecedented impact on the
global energy landscape, economy and geopolitics
While US natural gas prices may rise, large disparities between
regions will persist
Middle East oil will continue to be indispensible to world
markets – the right signals to invest must be sent
US energy policy must guard against complacency – not to forget
importance of energy efficiency, nuclear power and clean coal
How will the United States adapt its energy strategy and foreign
policy to the reality of a richer resource base?
© 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 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 lack electricity 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 © 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 output since 2005 is equivalent to the total production of Qatar, Kuwait, UAE and Iraq combined; while shale oil output is equal to that of Iraq © OECD/IEA 2013
US oil imports are shrinking rapidly – thanks to shale oil only? Reductions in US oil imports in 2035 relative to today
Increased oil supply Demand-side efficiency
35%
39%
18%
8%
Natural gas use in transport Biofuels use in transport US oil imports are set to plummet due to increasing oil supplies and 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
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
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
Who has flooded the markets? Incremental steam coal exports Mt 200
Indonesia
180
Australia
160
United States
140 120 100 80 60 40 20 0
2009
2010
2011
2012
2013
The US accounted for only 7% of the increase in global steam coal exports since 2007 © OECD/IEA 2013
The slowdown in Chinese demand caught the industry off-guard Coal demand in China: real demand vs historical trend Real consumption Mt 4400
Historical trend
4200 Curbing in China ≈ 20 times US exports increase in 2012
4000 3800 3600 3400 3200 3000
2010
2011
2012
2013
China’s move away from coal will be a far greater determinant of the direction of the coal markets than the shale gas revolution in the US © 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 market, but high costs of transport between regions mean no single global gas price © OECD/IEA 2013
Concluding remarks The shale revolution is having an unprecedented impact on the
global energy landscape, economy and geopolitics
While US natural gas prices may rise, large disparities between
regions will persist
Middle East oil will continue to be indispensible to world
markets – the right signals to invest must be sent
US energy policy must guard against complacency – not to forget
importance of energy efficiency, nuclear power and clean coal
How will the United States adapt its energy strategy and foreign
policy to the reality of a richer resource base?
© OECD/IEA 2013
