Towards a More Secure and Sustainable Energy Future
INTERNATIONAL ENERGY AGENCY
The 14th Asia Oil & Gas Conference, Kuala Lumpur, Malaysia 8 June 2009 Special Address: Towards a More Secure and Sustainable E Energy F Future t –What is happening and what is needed Nobuo Tanaka Executive Director I t International ti l Energy E Agency A © OECD/IEA - 2009
Topics
Recent Energy Market Developments
Long-Term Perspective toward 2030 Business as Usual Scenario and Climate Change Mitigation Policy Scenario
–
© OECD/IEA - 2009
–
Impact of the Recent Financial and Economic Crisis on Energy Investments From the IEA’s Report p at the Rome G8 Energy gy Ministers Meeting g on May 24-25
Weak economy is currently the main story m b/d 89 88 87 86
Y-o-Y Y-o-Y 5 % 5 4 World GDP Grow th 4 3 Total Dem and 3 2 2 1
OMR 2009 Oil Demand & GDP Forecast Evolution
85
0
0
-1
84
-1
-2
WORLD Real GDP Grow th (%)
83
-2
-3
WORLD Oil Dem and Grow th (%)
Ju l-0 8 A ug -0 Se 8 p08 O ct -0 N 8 ov -0 D 8 ec -0 Ja 8 n0 Fe 9 b0 M 9 ar -0 9 A pr -0 9 © OECD/IEA - 2009
z z z z
1
Global Oil Demand vs GDP Growth
-4 1981
1985
1989
1993
1997
2001
2005
2009
Two year demand contraction in 08/09 is the first since early-1980s OECD hit hard, but non-OECD is now clearly slowing too Latest GDP estimates around -1.4% for 2009, but 2010 recovery ‘Green shoots’ of recovery not evident in early-09 demand data (-2.6 mb/d forecast year-on-year in 2009) z But B t prices i have h strengthened t th d on OPEC cuts, t weakening k i d dollar ll and d more optimistic equity markets.
Medium term demand trends
20 15
z
OECD vs. Non-OECD Cumulative Oil Demand Growth by Use 1997-2014
m b/d 25
Non-OECD - Other Non-OECD - Transportation OECD - Other OECD - Transportation
z
10 5
z
(5)
z
(10) 1997
1999
2001
2003
2005
2007
2009
2011
2013
z
Oil Intensity (1995 = 100) 100 OECD
Non-OECD
95 90
Global economy assumed to begin to recover from 2010 onwards, reverting to oil growth >1.1 mb/d annually Sectoral shift: transport (and petrochemicals) account for the bulk of demand growth Growth will continue to come from non-OECD, notably Asia & Middle East Oil intensity to continue to diminish on policy measures and efficiency i improvements t If GDP growth weaker than trend and/or efficiency accelerates, 2014 demand could be 4 mb/d lower ?
6
85
4
80
© OECD/IEA - 2009
75
2 70 65
-
GDP growth, % Base
60 1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
(2) 2008
2009
2010
2011
2012
2013
2014
Gas markets could be more or less similar 140
25
120
20 15 10 5 Apr-09 9
Jan-09 9
Oct-08 8
Jul-08 8
Apr-08 8
Jan-08 8
Oct-07 7
Jul-07 7
Apr-07 7
Jan-07 7
0
NBP (monthly average) Henry Hub (monthly average)
© OECD/IEA - 2009
German Border Price Japanese LNG
Billion Cubic B c Meters
Prices s [USD/MBtu u]
30
100 80 60 40 20 0 2009
2010
Algeria A Australia li Malaysia Indonesia Russia
2011
2012
2013
Angola P Peru Yemen Qatar
Japanese Spot LNG
Spot prices have halved and are still going down. Oil-linked gas prices have also started to come down.
Significant Liquefaction capacity will start operating in 2009-13 but FID are needed in 2009-10 for projects to start in 2015.
Billion dollarss
Worldwide oil & gas upstream capital expenditures 500 ‐21% 400
300
200
100
0 © OECD/IEA - 2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009*
Budgeted spending on exploration & production worldwide for 2009 currently totals $375 billion, down about $100 billion – or 21% – on 2008
Topics
Recent Energy Market Developments
Long-Term Perspective toward 2030 Business as Usual Scenario and Climate Change Mitigation Policy Scenario
–
© OECD/IEA - 2009
–
Impact of the Recent Financial and Economic Crisis on Energy Investments From the IEA’s Report p at the Rome G8 Energy gy Ministers Meeting g on May 24-25
World and Asian primary energy demand in the Reference Scenario
© OECD/IEA - 2009
Mtoe M
Mtoe
18 000 16 000 World energy demand 14 000 14 000 expands by 45% between now and 2030 – an average 12 000 rate of increase of 1.6% per 10 000 year – with coal accounting 8 000 for more than a third of the 6 000 overall rise 4 000 2 000 0 1980
Other renewables Hydro Nuclear Biomass Gas Coal Oil 1990
1980
2010
2020
2030
Korea Japan Other non‐OECD Asia I di India China
8 000 7 000 6 000 6 000 5 000 4 000 3 000 2 000 1 000 0
2000
Asian countries account for over 60% of the increase in g global demand between 2006 & 2030, driven largely by China & India 1990
2000
2010
2020
2030
World Oil Production by Source IEA’s World Energy gy Outlook 2008 Business as Usual Scenario
20 mb/d
© OECD/IEA - 2009
45 mb/d
IEA World Energy Outlook 2008
Around 65 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth and offset decline
© OECD/IEA - 2009
Long-term oil-supply cost curve (with $50 per tonne of CO2)
A carbon price of $50 per tonne of CO2 would increase the cost of producing non-conventional oil the most – by as much as $30 per barrel – due to its higher energy intensity
Cumulative energy supply investment in Business as Usual Usual, 2007 2007-2030 2030 Coal 3% $0.7 trillion
© OECD/IEA - 2009
Transmission & distribution 50%
Power
Oil
Gas
52% $13.6 trillion $13.6 trillion
24% $6 3 trillion $6.3 trillion
21% $5 5 trillion $5.5 trillion
Shipping 4% Refining 16% Power generation 50%
Exploration and development 80%
Transmission & distribution Exploration & 31% development 61% LNG chain 8%
Biofuels Increased aversion to risk > Paralysed credit markets > Plunging share values have increased debt‐equity u g g s a e a ues a e c eased debt equ ty ratios Lower prices & cash flows have made new p investments less attractive Falling demand caused by economic recession has reduced urgency & appetite for suppliers to invest
TWh h
Historical g global electricity y consumption p
Global Credit Crunch
20 000 20 000 18 000
Dot‐com Bubble Burst
16 000
Asian Economic Crisis
14 000 Black Monday Stock Market Crash 12 000
US Recession
10 000
2nd Oil Price Shock Oil P i Sh k
8 000
1st Oil Price Shock
6 000 4 000 End of World War II © OECD/IEA - 2009
2 000 0 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009
Global electricity consumption could drop by as much as 3.5% in 2009 – the first annual contraction since the end of the Second World War
Billion dollars
Asset financing for new build renewable assets 90
Geothermal
80
Marine & small‐hydro Biomass
70
‐38%
60
Solar Wind
50 40 30 20 10 0 © OECD/IEA - 2009
2004
2005
2006
2007
2008
2009
Source: NEF, IEA analysis
Renewable energy investment has collapsed due to lower fossil‐fuel prices and the financial crisis – which has dried up sources of project finance
Billion d dollars (2008)
Global investment in renewable power generation
200 180 160 140 120
6‐fold increase 450 Policy Scenario
100 80 60
Annual base
Stimulus effect
40 20 0 © OECD/IEA - 2009
2008
2009*
Annual average 2009‐2030
To achieve the 450 Policy Scenario, governments would need to increase funds committed to renewables 6‐fold relative to their recent stimulus package announcements
Billion n dollars (2008 8)
Incremental investment in the low-carbon sector
500 400 300
4‐fold increase fold increase 450 Policy Scenario
200 100 Stimulus effect
0
© OECD/IEA - 2009
2009
Annual average 2009‐2030
To achieve the 450 Policy Scenario, To achieve the 450 Policy Scenario governments would need to increase funds committed to the low‐carbon energy sector 4‐fold relative to their recent stimulus package
© OECD/IEA - 2009
Conclusions
The twin challenges of climate change and energy security are two t off th the key k policy li issues i off our time ti
The economic & financial crisis has sharply reduced investment all the way down the energy supply chain, from production to end use – for both conventional energy sources and renewables
This will have far-reaching effects on energy security and climate change
A Clean Energy New Deal – governments must ensure that there is sufficient investment in all stimulus packages
The 14th Asia Oil & Gas Conference, Kuala Lumpur, Malaysia 8 June 2009 Special Address: Towards a More Secure and Sustainable E Energy F Future t –What is happening and what is needed Nobuo Tanaka Executive Director I t International ti l Energy E Agency A © OECD/IEA - 2009
Topics
Recent Energy Market Developments
Long-Term Perspective toward 2030 Business as Usual Scenario and Climate Change Mitigation Policy Scenario
–
© OECD/IEA - 2009
–
Impact of the Recent Financial and Economic Crisis on Energy Investments From the IEA’s Report p at the Rome G8 Energy gy Ministers Meeting g on May 24-25
Weak economy is currently the main story m b/d 89 88 87 86
Y-o-Y Y-o-Y 5 % 5 4 World GDP Grow th 4 3 Total Dem and 3 2 2 1
OMR 2009 Oil Demand & GDP Forecast Evolution
85
0
0
-1
84
-1
-2
WORLD Real GDP Grow th (%)
83
-2
-3
WORLD Oil Dem and Grow th (%)
Ju l-0 8 A ug -0 Se 8 p08 O ct -0 N 8 ov -0 D 8 ec -0 Ja 8 n0 Fe 9 b0 M 9 ar -0 9 A pr -0 9 © OECD/IEA - 2009
z z z z
1
Global Oil Demand vs GDP Growth
-4 1981
1985
1989
1993
1997
2001
2005
2009
Two year demand contraction in 08/09 is the first since early-1980s OECD hit hard, but non-OECD is now clearly slowing too Latest GDP estimates around -1.4% for 2009, but 2010 recovery ‘Green shoots’ of recovery not evident in early-09 demand data (-2.6 mb/d forecast year-on-year in 2009) z But B t prices i have h strengthened t th d on OPEC cuts, t weakening k i d dollar ll and d more optimistic equity markets.
Medium term demand trends
20 15
z
OECD vs. Non-OECD Cumulative Oil Demand Growth by Use 1997-2014
m b/d 25
Non-OECD - Other Non-OECD - Transportation OECD - Other OECD - Transportation
z
10 5
z
(5)
z
(10) 1997
1999
2001
2003
2005
2007
2009
2011
2013
z
Oil Intensity (1995 = 100) 100 OECD
Non-OECD
95 90
Global economy assumed to begin to recover from 2010 onwards, reverting to oil growth >1.1 mb/d annually Sectoral shift: transport (and petrochemicals) account for the bulk of demand growth Growth will continue to come from non-OECD, notably Asia & Middle East Oil intensity to continue to diminish on policy measures and efficiency i improvements t If GDP growth weaker than trend and/or efficiency accelerates, 2014 demand could be 4 mb/d lower ?
6
85
4
80
© OECD/IEA - 2009
75
2 70 65
-
GDP growth, % Base
60 1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
(2) 2008
2009
2010
2011
2012
2013
2014
Gas markets could be more or less similar 140
25
120
20 15 10 5 Apr-09 9
Jan-09 9
Oct-08 8
Jul-08 8
Apr-08 8
Jan-08 8
Oct-07 7
Jul-07 7
Apr-07 7
Jan-07 7
0
NBP (monthly average) Henry Hub (monthly average)
© OECD/IEA - 2009
German Border Price Japanese LNG
Billion Cubic B c Meters
Prices s [USD/MBtu u]
30
100 80 60 40 20 0 2009
2010
Algeria A Australia li Malaysia Indonesia Russia
2011
2012
2013
Angola P Peru Yemen Qatar
Japanese Spot LNG
Spot prices have halved and are still going down. Oil-linked gas prices have also started to come down.
Significant Liquefaction capacity will start operating in 2009-13 but FID are needed in 2009-10 for projects to start in 2015.
Billion dollarss
Worldwide oil & gas upstream capital expenditures 500 ‐21% 400
300
200
100
0 © OECD/IEA - 2009
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009*
Budgeted spending on exploration & production worldwide for 2009 currently totals $375 billion, down about $100 billion – or 21% – on 2008
Topics
Recent Energy Market Developments
Long-Term Perspective toward 2030 Business as Usual Scenario and Climate Change Mitigation Policy Scenario
–
© OECD/IEA - 2009
–
Impact of the Recent Financial and Economic Crisis on Energy Investments From the IEA’s Report p at the Rome G8 Energy gy Ministers Meeting g on May 24-25
World and Asian primary energy demand in the Reference Scenario
© OECD/IEA - 2009
Mtoe M
Mtoe
18 000 16 000 World energy demand 14 000 14 000 expands by 45% between now and 2030 – an average 12 000 rate of increase of 1.6% per 10 000 year – with coal accounting 8 000 for more than a third of the 6 000 overall rise 4 000 2 000 0 1980
Other renewables Hydro Nuclear Biomass Gas Coal Oil 1990
1980
2010
2020
2030
Korea Japan Other non‐OECD Asia I di India China
8 000 7 000 6 000 6 000 5 000 4 000 3 000 2 000 1 000 0
2000
Asian countries account for over 60% of the increase in g global demand between 2006 & 2030, driven largely by China & India 1990
2000
2010
2020
2030
World Oil Production by Source IEA’s World Energy gy Outlook 2008 Business as Usual Scenario
20 mb/d
© OECD/IEA - 2009
45 mb/d
IEA World Energy Outlook 2008
Around 65 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth and offset decline
© OECD/IEA - 2009
Long-term oil-supply cost curve (with $50 per tonne of CO2)
A carbon price of $50 per tonne of CO2 would increase the cost of producing non-conventional oil the most – by as much as $30 per barrel – due to its higher energy intensity
Cumulative energy supply investment in Business as Usual Usual, 2007 2007-2030 2030 Coal 3% $0.7 trillion
© OECD/IEA - 2009
Transmission & distribution 50%
Power
Oil
Gas
52% $13.6 trillion $13.6 trillion
24% $6 3 trillion $6.3 trillion
21% $5 5 trillion $5.5 trillion
Shipping 4% Refining 16% Power generation 50%
Exploration and development 80%
Transmission & distribution Exploration & 31% development 61% LNG chain 8%
Biofuels Increased aversion to risk > Paralysed credit markets > Plunging share values have increased debt‐equity u g g s a e a ues a e c eased debt equ ty ratios Lower prices & cash flows have made new p investments less attractive Falling demand caused by economic recession has reduced urgency & appetite for suppliers to invest
TWh h
Historical g global electricity y consumption p
Global Credit Crunch
20 000 20 000 18 000
Dot‐com Bubble Burst
16 000
Asian Economic Crisis
14 000 Black Monday Stock Market Crash 12 000
US Recession
10 000
2nd Oil Price Shock Oil P i Sh k
8 000
1st Oil Price Shock
6 000 4 000 End of World War II © OECD/IEA - 2009
2 000 0 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2009
Global electricity consumption could drop by as much as 3.5% in 2009 – the first annual contraction since the end of the Second World War
Billion dollars
Asset financing for new build renewable assets 90
Geothermal
80
Marine & small‐hydro Biomass
70
‐38%
60
Solar Wind
50 40 30 20 10 0 © OECD/IEA - 2009
2004
2005
2006
2007
2008
2009
Source: NEF, IEA analysis
Renewable energy investment has collapsed due to lower fossil‐fuel prices and the financial crisis – which has dried up sources of project finance
Billion d dollars (2008)
Global investment in renewable power generation
200 180 160 140 120
6‐fold increase 450 Policy Scenario
100 80 60
Annual base
Stimulus effect
40 20 0 © OECD/IEA - 2009
2008
2009*
Annual average 2009‐2030
To achieve the 450 Policy Scenario, governments would need to increase funds committed to renewables 6‐fold relative to their recent stimulus package announcements
Billion n dollars (2008 8)
Incremental investment in the low-carbon sector
500 400 300
4‐fold increase fold increase 450 Policy Scenario
200 100 Stimulus effect
0
© OECD/IEA - 2009
2009
Annual average 2009‐2030
To achieve the 450 Policy Scenario, To achieve the 450 Policy Scenario governments would need to increase funds committed to the low‐carbon energy sector 4‐fold relative to their recent stimulus package
© OECD/IEA - 2009
Conclusions
The twin challenges of climate change and energy security are two t off th the key k policy li issues i off our time ti
The economic & financial crisis has sharply reduced investment all the way down the energy supply chain, from production to end use – for both conventional energy sources and renewables
This will have far-reaching effects on energy security and climate change
A Clean Energy New Deal – governments must ensure that there is sufficient investment in all stimulus packages
