World Energy Outlook 2008

1. World Energy Outlook 2008 Dr. Fatih Birol Chief Economist International Energy Agency

2. The context • Soaring energy prices to mid-2008, followed by a collapse – what will it mean for demand? • How will the financial crisis & economic slowdown affect energy demand & investment? • Will economic worries divert attention from strategic energy-security & environmental challenges? • Are we setting ourselves up for a supply-crunch once the economy is back on its feet? • Will negotiators at COP-15 in Copenhagen in 2009 have the political support needed to succeed?

3. World primary energy demand in the Reference Scenario: this is unsustainable! 18 000 Mtoe Other renewables 16 000 Hydro 14 000 Nuclear 12 000 Biomass 10 000 Gas 8 000 6 000 Coal 4 000 Oil 2 000 0 1980 1990 2000 2010 2020 2030 World energy demand expands by 45% between now and 2030 – an average rate of increase of 1.6% per year – with coal accounting for more than a third of the overall rise

4. The continuing importance of coal in world primary energy demand Shares of incremental energy demand Reference Scenario, 2006 - 2030 Increase in primary demand, 2000 - 2007 100% 1 000 Coal Mtoe % = average annual rate of growth 4.8% All other fuels 900 80% 800 700 60% 600 500 1.6% 2.6% 40% 400 300 2.2% 20% 200 100 0.8% 0% 0 Coal Oil Gas Renewables Nuclear Non-OECD OECD Demand for coal has been growing faster than any other energy source & is projected to account for more than a third of incremental global energy demand to 2030

5. Hydro 2006 Other World 2030 2006 EU 2030 2006 Non-EU OECD 2030 2006 Rest of the World 2030 0% 5% 10% 15% 20% 25% 30% 35% Share of renewables in electricity generation in the Reference Scenario Soon after 2010, renewables become the world’s 2nd-largest source of electricity behind coal, thanks to government support, prospects for higher fossil-fuel prices & declining investment costs

6. Change in oil demand by region in the Reference Scenario, 2007-2030 OECD Pacific OECD Europe OECD North America Africa E. Europe/Eurasia Latin America Other Asia India Middle East China -2 0 2 4 6 8 10 mb/d All of the growth in oil demand comes from non-OECD, with China contributing 43%, the Middle East & India each about 20% & other emerging Asian economies most of the rest

7. Cumulative energy-supply investment in the Reference Scenario, 2007-2030 Coal 3% Biofuels <1% $0.7 trillion $0.2 trillion Gas 21% Oil 24% Power 52% $13.6 trillion $5.5 trillion $6.3 trillion Shipping Shipping & 4% Refining ports Transmission 16% 9% Transmission & distribution Power Exploration & 31% & distribution generation development 50% 50% Exploration and 61% Mining LNG chain development 91% 8% 80% Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers

8. Oil and Gas supply prospects

9. World oil production by OPEC/non-OPEC in the Reference Scenario 120 52% OPEC - other mb/d 50% 100 OPEC - Middle East 48% 80 Non-OPEC - non- 46% conventional 60 Non-OPEC - 44% conventional 40 OPEC share 42% 20 40% 0 38% 2000 2007 2015 2030 Production rises to 104 mb/d in 2030, with Middle East OPEC taking the lion’s share of oil market growth as conventional non-OPEC production declines

10. World oil production by source in the Reference Scenario 120 Natural gas liquids mb/d Non-conventional oil 100 Crude oil - yet to be developed (inc. EOR) or found 80 Crude oil - currently producing fields 60 40 20 0 1990 2000 2010 2020 2030 64 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth & offset decline

11. Oil Gas 120 4 500 Bcm mb/d 100 3 750 80 3 000 60 2 250 40 1 500 20 750 0 0 2006 2007 2015 2030 2030 2015 NOCs Private companies A sea change: world oil & gas production by company type in the Reference Scenario Almost 80% of the projected increase in output of both oil & gas comes from national companies – on the assumption that investment is forthcoming

12. EU natural gas market outlook 800 Imports - other countries Bcm 700 Imports - Middle East Imports - Africa 600 Imports - Russia and 500 other TE Domestic production 400 300 200 100 0 2007 2030 EU import dependency rises from 58% today to 86% in 2030 as a result of declining domestic production and increasing demand

13. World natural gas reserves and Gas Exporting Countries Forum (GECF) World total: 179 Tcm (2008) The 14 members of GECF account for three quarters of global gas reserves, while just 2 of them – Russia & Iran – account for over 40% .

14. Post-2012 climate-policy scenarios

15. Energy-related CO2 emissions in the Reference Scenario 45 International marine bunkers Gigatonnes and aviation 40 Non-OECD - gas 35 Non-OECD - oil 30 Non-OECD - coal OECD - gas 25 OECD - oil 20 OECD - coal 15 10 5 0 1980 1990 2000 2010 2020 2030 97% of the projected increase in emissions between now & 2030 comes from non-OECD countries – three-quarters from China, India & the Middle East alone

16. Reductions in energy-related CO2 emissions in the climate-policy scenarios 45 550 450 Policy Policy Gigatonnes Scenario Scenario Nuclear 40 9% CCS 14% Renewables & biofuels 23% 35 Energy efficiency 30 54% 25 20 2005 2010 2015 2020 2025 2030 Reference Scenario 550 Policy Scenario 450 Policy Scenario While technological progress is needed to achieve some emissions reductions, efficiency gains and deployment of existing low-carbon energy account for most of the savings

17. World energy-related CO2 emissionsin 2030 by scenario 40 Gigatonnes 35 OECD 30 25 20 World 15 World Non-OECD 10 5 0 Reference Scenario 550 Policy Scenario 450 Policy Scenario OECD countries alone cannot put the world onto a 450-ppm trajectory, even if they were to reduce their emissions to zero

18. Key results of the post-2012 climate-policy analysis 550 Policy Scenario 450 Policy Scenario Corresponds to a c.2C global temperature rise Energy demand grows, but half as fast as in Reference Scenario Rapid deployment of low-carbon technologies and a big fall in non-OECD emissions CO2 price in 2030 reaches $180/tonne OPEC production still 12mb/d higher in 2030 than today Additional investment equal to 0.6% of GDP • Corresponds to a c.3C global temperature rise • Energy demand continues to expand, but fuel mix is markedly different • CO2 price in OECD countries reaches $90/tonne in 2030 • Additional investment equal to 0.25% of GDP

19. Cumulative European Union CO2 savings with 20% reduction target in 2020 12 Gigatonnes China 10 8 6 EU-27 4 2 0 CUMULATIVE savings ANNUAL 2020 CO2 emissions with 20% CO2 emissions reduction target (2008 - 2020) EU cumulative savings over 2008-2020 would represent only 40% of China’s annual CO2 emissions in 2020

20. Summary & conclusions

21. Summary & conclusions • Current energy trends are patently unsustainable — socially, environmentally, economically • Oil will remain the leading energy source but... • The era of cheap oil is over, although price volatility will remain • The oil market is undergoing major and lasting structural change, with national companies in the ascendancy • Energy and geopolitics will be increasingly interconnected • We need a major decarbonisation of the world’s energy system -- Copenhagen is crucial • Addressing environmental issues will substantially improve energy security • Financial crisis can plant the seeds for an “energy investment crisis”