WORLD ENERGY INVESTMENT OUTLOOK North American Energy ...
INTERNATIONAL ENERGY AGENCY
WORLD ENERGY INVESTMENT OUTLOOK North American Energy Investment Challenges 2003 INSIGHTS MR. CLAUDE MANDIL EXECUTIVE DIRECTOR INTERNATIONAL ENERGY AGENCY
Increase in World Energy Production and Consumption 7,000
1971 -2000
2001 -2030
6,000
Mtoe
5,000 4,000 3,000 2,000 1,000 0 Production
OECD
Consumption
Transition economies
Production
Consumption
Developing countries
Almost all the increase in production occurs outside the OECD, compared with 60% in 1971-2000
World Energy Investment 2001-2030 Total investment: 16 trillion dollars E&D
72%
Refining Other
13% 15%
E&D
55%
LNG Chain
8%
T&D and Storage
37%
46%
Electricity 60%
Power generation
54%
T&D
88%
Mining
12%
Shipping and ports
Oil 19%
Gas 19% Coal 2%
Production accounts for the majority of investment in the supply chain – except for electricity
Energy Investment by Region 2001-2030
3,500
20
3,000 2,500
15
2,000 10
1,500 1,000
5
share in global investment (%)
cumulative investment (billion dollars)
4,000
500 0
0 OECD North America
China
OECD Europe
Other Asia
Africa
Russia
Middle East
OECD Other Latin Pacific America
India
Other transition
Brazil
economies
OECD North America will account for over a fifth of global energy investment needs of $16 trillion – more than any other region
OECD North American Primary Energy Supply 4000 3500 3000
Mtoe
2500 2000 1500 1000 500 0 1990
2000 Coal
Oil
2010 Gas
Nuclear
2020 Hydro
2030 Other
The shares of natural gas and renewables in the primary fuel mix increases most – driven by rising power-generation demand
OECD North American Energy Investment by Fuel 2001-2030
Oil 18% Natural gas 27%
Electricity 53%
Coal 2%
Cumulative investment = $3.5 trillion Electricity dominates energy investment – even more so if investments in fossil fuels chains to supply power plants are included
Oil Investment in the U.S. & Canada 25
billion dollars per year
20
15
10
5
0 2000* Conventional oil
2001-2010
2011-2020
Non-conventional oil
2021-2030 Refining
Conventional oil investment will decline as rising costs deter drilling, partly offset by rising non-conventional spending – mainly in Canada
Gas Supply in the U.S. & Canada 900
35
700
25
bcm
15 300
per cent
500
5
100
-100
-5 1980
1990
Production
2000 Net imports
2010
2020
2030
Import dependence (right axis)
A rapidly growing share of net gas supply will come from LNG imports – either directly or via Mexico or Bahamas
Gas Investment in U.S. & Canada 35
billion dollars per year
30 25 20 15 10 5 0 2000 Exploration & development
2001-2010 LNG regasification
2011-2020
2021-2030
Transmission & storage
Distribution
E&D will remain the largest component of gas investment, though LNG regasification terminals will claim a significant share
Levelised Cost of LNG Imports into U.S. Gulf Coast 3.50 3.00
Henry-Hub average price, 19982002
$/MBtu
2.50 2.00 1.50 1.00 0.50 0.00 Trinidad Upstream
Nigeria
Venezuela
Liquefaction
Shipping
Egypt
Qatar
Regasification
Lower capital costs are making LNG imports more economic – and more competitive with domestic supply projects
Coal Investment in the U.S. & Canada by Region 16 14
billion dollars
12 10
Western US
Western US
Eastern US
Western US Eastern US
Eastern US
8 6 4
Canada
Canada
Canada
2 0 20012010 Sustaining
20112020 Mining - replacement
20212030 Mining - expansion
Sustaining production capacity at existing mines will continue to claim the largest share of coal-industry investment in all regions
Electricity Sector Investment by Region 2001-2030 2,500
billion dollars
2,000
1,500
1,000
500
0 China
Other Latin Africa Asia America
Middle East
OECD European OECD North Union Pacific America
Other OECD
Russia Rest of TE
OECD North America will need more electricity investment than any other country or region bar China
U.S. Privately Owned Utilities Profit Margin 12% 10% 8% 6% 4% 2% 0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Profit margins have fallen sharply in recent years
Electricity Investment Uncertainties and Challenges z Investment needs will increase over next 3 decades
Demand growth of 1.6% Many old plants – including most nuclear reactors – will be retired Shift to higher unit cost renewables Tightening reserve margins
z Gas prices and capital costs of coal stations & renewables are key drivers of future investment in generation z Wind power will be primary renewable source – calling for investment in voltage regulation & network reinforcement z New capacity investment may be delayed as investors wait to see what environmental policies – including possible climate action – are enacted z Higher investment costs for new capacity may delay decommissioning of old plants and raise emissions
Energy Challenges Facing North America z $3.5 trillion of energy investment needed in OECD North America through 2030 – more than half in or for the electricity sector z Prices will need to be high enough to support capital flows z Decline rates & drilling costs very uncertain for oil & gas z Liberalisation not expected to undermine investment, but some concerns about reliability & peak electricity capacity z Changing environmental policies are a risk to investors and a source of uncertainty for future investment New measures to boost renewables and save energy New coal-fired plants discouraged by threat of new measures
Broader Policy Implications: “Wake-Up Call” for Governments z Increasing emphasis on creating right enabling conditions – and lowering barriers to investment z Less direct intervention as lender or owner z Governments should monitor and assess the need to adjust regulatory reforms in network industries z Policymakers need to ensure basic principles of good governance are applied and respected – including cost-reflective pricing z Fiscal and regulatory incentives to develop advanced technologies – carbon sequestration, hydrogen, fuel cells, advanced nuclear reactors, etc. – could speed their deployment and dramatically alter energy investment patterns and requirements to 2030
WORLD ENERGY INVESTMENT OUTLOOK North American Energy Investment Challenges 2003 INSIGHTS MR. CLAUDE MANDIL EXECUTIVE DIRECTOR INTERNATIONAL ENERGY AGENCY
Increase in World Energy Production and Consumption 7,000
1971 -2000
2001 -2030
6,000
Mtoe
5,000 4,000 3,000 2,000 1,000 0 Production
OECD
Consumption
Transition economies
Production
Consumption
Developing countries
Almost all the increase in production occurs outside the OECD, compared with 60% in 1971-2000
World Energy Investment 2001-2030 Total investment: 16 trillion dollars E&D
72%
Refining Other
13% 15%
E&D
55%
LNG Chain
8%
T&D and Storage
37%
46%
Electricity 60%
Power generation
54%
T&D
88%
Mining
12%
Shipping and ports
Oil 19%
Gas 19% Coal 2%
Production accounts for the majority of investment in the supply chain – except for electricity
Energy Investment by Region 2001-2030
3,500
20
3,000 2,500
15
2,000 10
1,500 1,000
5
share in global investment (%)
cumulative investment (billion dollars)
4,000
500 0
0 OECD North America
China
OECD Europe
Other Asia
Africa
Russia
Middle East
OECD Other Latin Pacific America
India
Other transition
Brazil
economies
OECD North America will account for over a fifth of global energy investment needs of $16 trillion – more than any other region
OECD North American Primary Energy Supply 4000 3500 3000
Mtoe
2500 2000 1500 1000 500 0 1990
2000 Coal
Oil
2010 Gas
Nuclear
2020 Hydro
2030 Other
The shares of natural gas and renewables in the primary fuel mix increases most – driven by rising power-generation demand
OECD North American Energy Investment by Fuel 2001-2030
Oil 18% Natural gas 27%
Electricity 53%
Coal 2%
Cumulative investment = $3.5 trillion Electricity dominates energy investment – even more so if investments in fossil fuels chains to supply power plants are included
Oil Investment in the U.S. & Canada 25
billion dollars per year
20
15
10
5
0 2000* Conventional oil
2001-2010
2011-2020
Non-conventional oil
2021-2030 Refining
Conventional oil investment will decline as rising costs deter drilling, partly offset by rising non-conventional spending – mainly in Canada
Gas Supply in the U.S. & Canada 900
35
700
25
bcm
15 300
per cent
500
5
100
-100
-5 1980
1990
Production
2000 Net imports
2010
2020
2030
Import dependence (right axis)
A rapidly growing share of net gas supply will come from LNG imports – either directly or via Mexico or Bahamas
Gas Investment in U.S. & Canada 35
billion dollars per year
30 25 20 15 10 5 0 2000 Exploration & development
2001-2010 LNG regasification
2011-2020
2021-2030
Transmission & storage
Distribution
E&D will remain the largest component of gas investment, though LNG regasification terminals will claim a significant share
Levelised Cost of LNG Imports into U.S. Gulf Coast 3.50 3.00
Henry-Hub average price, 19982002
$/MBtu
2.50 2.00 1.50 1.00 0.50 0.00 Trinidad Upstream
Nigeria
Venezuela
Liquefaction
Shipping
Egypt
Qatar
Regasification
Lower capital costs are making LNG imports more economic – and more competitive with domestic supply projects
Coal Investment in the U.S. & Canada by Region 16 14
billion dollars
12 10
Western US
Western US
Eastern US
Western US Eastern US
Eastern US
8 6 4
Canada
Canada
Canada
2 0 20012010 Sustaining
20112020 Mining - replacement
20212030 Mining - expansion
Sustaining production capacity at existing mines will continue to claim the largest share of coal-industry investment in all regions
Electricity Sector Investment by Region 2001-2030 2,500
billion dollars
2,000
1,500
1,000
500
0 China
Other Latin Africa Asia America
Middle East
OECD European OECD North Union Pacific America
Other OECD
Russia Rest of TE
OECD North America will need more electricity investment than any other country or region bar China
U.S. Privately Owned Utilities Profit Margin 12% 10% 8% 6% 4% 2% 0% 1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Profit margins have fallen sharply in recent years
Electricity Investment Uncertainties and Challenges z Investment needs will increase over next 3 decades
Demand growth of 1.6% Many old plants – including most nuclear reactors – will be retired Shift to higher unit cost renewables Tightening reserve margins
z Gas prices and capital costs of coal stations & renewables are key drivers of future investment in generation z Wind power will be primary renewable source – calling for investment in voltage regulation & network reinforcement z New capacity investment may be delayed as investors wait to see what environmental policies – including possible climate action – are enacted z Higher investment costs for new capacity may delay decommissioning of old plants and raise emissions
Energy Challenges Facing North America z $3.5 trillion of energy investment needed in OECD North America through 2030 – more than half in or for the electricity sector z Prices will need to be high enough to support capital flows z Decline rates & drilling costs very uncertain for oil & gas z Liberalisation not expected to undermine investment, but some concerns about reliability & peak electricity capacity z Changing environmental policies are a risk to investors and a source of uncertainty for future investment New measures to boost renewables and save energy New coal-fired plants discouraged by threat of new measures
Broader Policy Implications: “Wake-Up Call” for Governments z Increasing emphasis on creating right enabling conditions – and lowering barriers to investment z Less direct intervention as lender or owner z Governments should monitor and assess the need to adjust regulatory reforms in network industries z Policymakers need to ensure basic principles of good governance are applied and respected – including cost-reflective pricing z Fiscal and regulatory incentives to develop advanced technologies – carbon sequestration, hydrogen, fuel cells, advanced nuclear reactors, etc. – could speed their deployment and dramatically alter energy investment patterns and requirements to 2030
