© OECD/IEA 2015

Addressing global energy and climate change challenges

Dr. Fatih BIROL IEA Executive Director

The University of Tokyo16 September 2015

© OECD/IEA 2015

Signs of stress in the energy system

Today’s market conditions a welcome boost to consumers, but

should not disguise difficult road ahead

Cutbacks & cost-efficiency the new watchwords for the upstream

Turmoil in the Middle East raises doubts over future oil balance

Mixed signals in run-up to crucial climate summit in Paris in 2015

Flattening in global CO2 emissions a turning point, or a pause?

Increased emphasis on energy efficiency starting to bring results

Will change in global energy be led by policies, or driven by events?

© OECD/IEA 2015

Changing dynamics of global demand

Energy demand by region

As China slows, then India, Southeast Asia, the Middle East and parts of Africa & Latin America take over as the engines of global energy demand growth.

2 000

4 000

6 000

8 000

10 000

1990 2000 2010 2020 2030 2040

Mtoe

OECD

Rest of world

China

China

Rest of world

OECD

© OECD/IEA 2015

Who is driving change in oil markets?

Oil consumption

-3

-2

-1

0

1

2

3

4

mb

/d

IEA

OPEC

Oil production

Net oil production and consumption changes, 2008-2014

OPEC remains central to the global oil outlook, but over the past 6 years it is the IEA that has freed up more than 6 mb/d to fuel rising consumption in other markets

5

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The price is hitting upstream spending

Global upstream oil and gas investment

Announced capex cuts for 2015 are highest (at up to 40%) in North America & Brazil; for tight oil, a decision to stop drilling feeds through more quickly to production levels

250

500

750

Bill

ion

do

llars

2012 2013 2014 2015 (est.)

20%

© OECD/IEA 2015

Gas on the way to become first fuel,with role of LNG on the rise

Main sources of regional LNG supply

Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices

Middle East

Australia

US & Canada

East Africa

Russia

North AfricaWest Africa

Other

Middle East

Southeast Asia

West AfricaAustralia

North AfricaOther

100

200

300

400

500

600bcm

2012 2040

© OECD/IEA 2015

Energy & climate change today

A major milestone in efforts to combat climate change is fast approaching – COP21 in Paris in December 2015

Momentum is building:

Historic US-China joint announcement; EU 2030 targets agreed

Developed & developing countries are putting forward new pledges

Many energy companies & investors are starting to engage

Energy production & use accounts for two-thirds of global greenhouse-gas emissions

Energy sector must cut emissions, while powering economic growth, boosting energy security & increasing energy access

© OECD/IEA 2015

National pledges build towards a global agreement

Submitted INDCs cover 70% of energy-related GHG emissions, with implications for future energy & emissions trends

Submitted INDCs

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Conclusions

Geopolitical & market uncertainties are set to propel energy security high up the global energy agenda

The rise in LNG – notably from the US – is set to have a positive impact on international gas market efficiency & security

For COP21, the IEA proposes four key energy sector outcomes:

1. Target a near-term peak in emissions

2. Five-year revision, to test the scope for raising ambition

3. Lock in the vision by setting a long-term emissions goal

4. Track the transition in the energy sector

Key priority as the new IEA Executive Director is to modernise the Agency