© OECD/IEA 2011

World Energy Outlook 2011

Amos Bromhead Energy Analyst

Office of the Chief Economist Riyadh, 24 January 2012

© OECD/IEA 2011

Overview of WEO-2011 scenarios New Policies Scenario is the central scenario in WEO-2011

assumes cautious implementation of recently announced commitments & plans, even if yet to be formally adopted

provides benchmark to assess achievements & limitations of recent developments in climate & energy policy

Current Policies Scenario takes into consideration only those policies that had been formally adopted by mid-2011

equivalent to the Reference Scenario of past Outlooks

The 450 Scenario sets out an energy pathway consistent with the goal of limiting increase in average temperature to 2OC

© OECD/IEA 2011

GDP – a fundamental driver of energy demand

GDP growth assumptions by region

The rate of growth in world GDP is assumed to average 3.6% per year over the period 2009-2035 in all scenarios

0% 2% 4% 6% 8% 10% 12%

India

China

Other non-OECD Asia

ME

Africa

E. Europe/Eurasia

Latin America

OECD Americas

OECD Europe

OECD Asia Oceania 2009-2035

2000-2009

© OECD/IEA 2011

Demand for mobility and rising cost of supply keep pressure on prices

Average IEA crude oil import price

In the New Policies Scenario, the oil price in real terms is assumed to rise to $109/barrel in 2020 & $120 in 2035 (over $210 in nominal terms)

Current Policies Scenario

New Policies Scenario

450 Scenario

0

30

60

90

120

150

1980 1990 2000 2010 2020 2030 2035

Do

llars

per

bar

rel (

20

10

)

© OECD/IEA 2011

Signs of convergence but no global price for natural gas

Ratio of average natural gas and coal import prices to crude oil in the New Policies Scenario

Natural gas prices are assumed to remain low relative to oil prices, while coal prices rise much less than those of both oil & gas

Japan

Europe

United States

OECD

Gas:

Coal:

0

0.2

0.4

0.6

0.8

1.0

1.2

1.4

1990 2000 2010 2020 2030 2035

Fuel

pri

ce d

ivid

ed b

y o

il p

rice

© OECD/IEA 2011

Emerging economies continue to drive global energy demand

Growth in primary energy demand

Global energy demand increases by one-third from 2010 to 2035, with China & India accounting for 50% of the growth

0

500

1 000

1 500

2 000

2 500

3 000

3 500

4 000

4 500

2010 2015 2020 2025 2030 2035

Mto

e

China

India

Other developing Asia

Russia

Middle East

Rest of world

OECD

© OECD/IEA 2011

Natural gas & renewables become increasingly important

Renewables & natural gas collectively meet almost two-thirds of incremental energy demand in 2010-2035

Additional to 2035

2010

World primary energy demand

0

1 000

2 000

3 000

4 000

5 000

Oil Coal Gas Renewables Nuclear

Mto

e

© OECD/IEA 2011

Coal won the energy race in the first decade of the 21st century

Growth in global energy demand, 2000-2010

Coal accounted for nearly half of the increase in global energy use over the past decade, with the bulk of the growth coming from the power sector in emerging economies

Nuclear

0

200

400

600

800

1 000

1 200

1 400

1 600

Coal

Mto

e

Total non-coal

Natural gas

Oil

Renewables

© OECD/IEA 2011

World primary oil demand and oil price by scenario

Global oil use continues to expand on planned policies, reaching 99 mb/d by 2035, but would need to use less than 80 mb/d to achieve the 2-degree climate goal

0

50

100

150

Do

llars

per

bar

rel

Oil price (right axis):

Oil demand:

Current Policies Scenario

New Policies Scenario

450 Scenario

Current Policies Scenario

New Policies Scenario

450 Scenario 50

60

70

80

90

100

110

1980 1990 2000 2010 2020 2030 2035

mb

/d

© OECD/IEA 2011

Transport drives oil demand

Change in primary oil demand by sector & region, 2010-2035

Transport net demand expands by 14 mb/d between 2010 & 2035, outweighing a net fall in demand of more than 1 mb/d in other sectors

- 4 - 2 0 2 4 6 8

OECD Americas

OECD Europe OECD Asia Oceania

Latin America

E. Europe/Eurasia Africa

Other Asia Middle East

India

China

mb/d

Transport

Buildings

Industry

Other

© OECD/IEA 2011

Oil demand is driven higher by soaring car ownership

Vehicles per 1000 people in selected markets

The passenger vehicle fleet doubles to 1.7 billion in 2035; most cars are sold outside the OECD by 2020, making non-OECD policies key to global oil demand

2010

2035

United States

European Union

0

100

200

300

400

500

600

700

800

Russia Middle East China India

© OECD/IEA 2011

Oil use in cars grows much less than the number of cars

World PLDV oil demand in the New Policies Scenario

Oil use by cars expands by only 15% between 2010 & 2035, with more efficient vehicles, less usage & switching to non-oil fuels offsetting most of the impact of a doubling of the fleet

0

5

10

15

20

25

30

35

40

45

2010 2035

mb

/d

Oil demand

Fleet expansion

Decrease 2010-2035 due to:

Lower average vehicle usage

Improvement in fuel economy

Use of alternative fuels

Increase 2010-2035 due to:

© OECD/IEA 2011

Most new oil production capacity is needed to offset decline

World liquids supply by type in the New Policies Scenario

Decline at existing conventional fields amounts to 47 mb/d, twice current OPEC Middle East production; NGLs and unconventional production are the main sources of growth

0 10

20 30 40 50

60 70 80 90

100 110

1990 2000 2010 2020 2030 2035

mb

/d

Biofuels

Processing gains

Unconventional oil

Natural gas liquids

Yet to be found

Yet to be developed

Currently producing

Crude oil:

© OECD/IEA 2011

OPEC’s market share is set to expand

World oil production by source in the New Policies Scenario

Oil production grows by 13 mb/d, or 15%, reaching 96.4 mb/d in 2035, with all of the net increase coming from OPEC countries, mainly in the Middle East

Decline in production from

existing fields 2010-2035

0

20

40

60

80

100

2010 Increase in demand

2010-2035

2035

mb

/d

OPEC Middle East

OPEC Other

Non-OPEC

© OECD/IEA 2011

mb/d

Iraq

Saudi Arabia

Venezuela

UAE

Kuwait

0 1 3 4 6

OPEC

5 2

Non-OPEC

Brazil

Canada

Kazakhstan

United States

Biofuels

Iraq and Saudi Arabia the largest sources of supply growth

Major changes in supply in the New Policies Scenario, 2010-2035

The rise in MENA production is over 90% of the growth in global oil output to 2035

while companies operating elsewhere turn increasingly to more difficult & costly sources

© OECD/IEA 2011

Net imports of oil

US oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake those of the US around 2015; China becomes the largest importer around 2020

Oil import needs are changing

0

2

4

6

8

10

12

14

China India European Union

United States

Japan

mb

/d

2000

2010

2035

© OECD/IEA 2011

Conclusions

In a world full of uncertainty, one thing is sure: rising incomes & population will push energy needs higher

Non-OECD countries, China in particular, will be instrumental in shaping all energy markets.

Rising demand for mobility and reliance on more difficult and costly sources of supply keep pressure on oil prices

Stronger penetration of natural gas could have profound implications for global energy markets.

Much stronger policy action is required to move us to a secure and sustainable energy future and to provide energy for all