© OECD/IEA 2013

World Energy Outlook 2013

Dr Fatih Birol Chief Economist, IEA

Istanbul, 20 December

© OECD/IEA 2013

The world energy scene today

Some long-held tenets of the energy sector are being rewritten

Countries are switching roles: importers are becoming exporters…

… and exporters are among the major sources of growing demand

New supply options reshape ideas about distribution of resources

But long-term solutions to global challenges remain scarce

Renewed focus on energy efficiency, but CO2 emissions continue to rise

Fossil-fuel subsidies increased to $544 billion in 2012

1.3 billion people still lack electricity – in Africa and South Asia

Energy prices add to the pressure on policymakers

Sustained period of high oil prices without parallel in market history

Large, persistent regional price differences for gas & electricity

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The engine of energy demand growth moves to South Asia

Primary energy demand, 2035 (Mtoe)

China is the main driver of increasing energy demand in the current decade, but India takes over in the 2020s as the principal source of growth

4%

65%

10%

8%

8% 5%

OECD

Non-OECD Asia

Middle East

Africa

Latin America

Eurasia

Share of global growth 2012-2035

480

Brazil 1 540

India

1 000 Southeast

Asia

4 060

China

1 030

Africa

2 240 United States 440

Japan

1 710

Europe 1 370

Eurasia

1 050 Middle East

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A mix that is slow to change

Growth in total primary energy demand

Today's share of fossil fuels in the global mix, at 82%, is the same as it was 25 years ago; the strong rise of renewables only reduces this to around 75% in 2035

500 1 000 1 500 2 000 2 500 3 000

Nuclear

Oil

Renewables

Coal

Gas

Mtoe

1987-2011

2011-2035

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Non-OECD

OECD

Emissions off track in the run-up to the 2015 climate summit in Paris

Cumulative energy-related CO2 emissions

Non-OECD countries account for a rising share of emissions, although 2035 per capita levels are only half of OECD

200

400

600

800 Gt

1900 -1929

1930 -1959

1960 -1989

1990 -2012

2013 -2035

OECD

Non-OECD

Total emissions 1900-2035

51%

49%

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China becomes the largest consumer of oil by 2030, as OECD oil use drops; demand is concentrated in transport, where diesel use surges by 5.5 mb/d, & petrochemicals

China becomes the largest consumer of oil by 2030, as OECD oil use drops;

Oil demand by region sector

Oil use grows, but in a narrowing set of markets

75

80

85

90

95

100

105

2012 2035

mb/d

China

India

Middle East

Other

Transport Petrochemicals Other sectors

OECD

Diesel

Gasoline

Other

80

85

90

95

100

105

2012 2035

mb/d

Transport Petrochemicals Other sectors

Diesel

Gasoline

Other

, & petrochemicals

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More oil bypassing the refining system and new capacity in growing non-OECD markets piles pressure on existing refiners, especially in Europe

Oil demand Oil processed by refineries

New refinery capacity China

India

Middle East

Other

Turbulent times for the refining sector

Refinery capacity and operation

More oil bypassing the refining system

75

80

85

90

95

100

105

2012 2035

mb/d Oil bypassing refineries

Existing spare & excess

capacity

Spare & excess

capacity

with 10 mb/d at risk of closure by 2035

70

65

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-2 0 2 4 6 8

Rest of the world

United States

Brazil

Middle East

mb/d

Two chapters to the oil production story

Contributions to global oil production growth

The United States (light tight oil) & Brazil (deepwater) step up until the mid-2020s,

2013-2025

2025-2035

but the Middle East is critical to the longer-term oil outlook

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300

600

900

1 200

1 500

1 800

2 100 TWh

India

Latin America

Africa

ASEAN

Hydro

Other renewables

Wind

Solar PV

China

Hydro

Other renewables

Wind

Solar PV

Renewables power up around the world

Growth in electricity generation from renewable sources, 2011-2035

European Union

United States

Japan

Europe, Japan & United States

China India, Latin America, ASEAN & Africa

Hydro

Other renewables

Wind

Solar PV

The expansion of non-hydro renewables depends on subsidies that more than double to 2035; additions of wind & solar have implications for power market design & costs additions of wind & solar have implications for power market design & costs

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3×

4×

5×

2003

Regional differences in natural gas prices narrow from today’s very high levels but remain large through to 2035; electricity price differentials also persist electricity price differentials also persist

2013 2035

Reduction from 2013

Who has the energy to compete?

Ratio of industrial energy prices relative to the United States

United States

2×

Japan European Union

China

Electricity Natural gas

2003

Japan European Union

China

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Energy-intensive industries need to count their costs

Share of energy in total production costs for selected industries

Energy-intensive sectors worldwide account for around one-fifth of industrial value added, one-quarter of industrial employment and 70% of industrial energy use.

10% 20% 30% 40% 50% 60% 70% 80% 90%

Glass

Pulp & paper

Iron & steel

Cement

Aluminium

Fertilisers

Petrochemicals

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An energy boost to the economy?

Share of global export market for energy-intensive goods

The US, together with key emerging economies, increases its export market share for energy-intensive goods, while the EU and Japan see a sharp decline

Today 36% 10% 7% 7% 3% 2%

European Union

United States China India Middle East

Japan

-3%

-10%

+3%

+2% +2% +1%

while the EU and Japan see a sharp decline

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LNG from the United States can shake up gas markets

Indicative economics of LNG export from the US Gulf Coast (at current prices)

New LNG supplies accelerate movement towards a more interconnected global market, but high costs of transport between regions mean no single global gas price

Average import price

Liquefaction, shipping & regasification

United States price 3

6

9

12

15

18

To Asia

$/MBtu

3

6

9

12

To Europe

$/MBtu

but high costs of transport between regions mean no single global gas price

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Orientation for a fast-changing energy world

China, then India, drive the growing dominance of Asia in global energy demand & trade

Technology is opening up new oil resources, but the Middle East remains central to the longer-term outlook

Regional price gaps & concerns over competitiveness are here to stay, but there are ways to react – with efficiency first in line

The transition to a more efficient, low-carbon energy sector is more difficult in tough economic times, but no less urgent