Riyadh 16 February 2016

cmgmexico

Yr2AS

Paul Simons

Deputy Executive Director

International Energy Agency

Riyadh, 16 February 2016

© OECD/IEA 2015


The start of a new energy era?

• Universal agreement from COP21 is an historic milestone that can

stimulate energy sector innovation

‣ Pledges of 180+ countries account for 95% of energy-related emissions

‣ Renewables capacity additions at a record-high of 130 GW in 2014

‣ Fossil-fuel subsidy reform, led by India & Indonesia, reduces the global

subsidy bill below $500 billion in 2014

• 2015 has seen lower prices for all fossil fuels

‣ Oil & gas could face second year of falling upstream investment in 2016

‣ Coal prices remain at rock-bottom as demand slows in China

• Multiple signs of change, but are they moving the energy system

in the right direction?

© OECD/IEA 2015


Demand growth in Asia – the sequel

Change in energy demand in selected regions, 2014-2040

Mtoe

1 200

900

600

300

0

-300

European

Union

United

States

Japan

Latin

America

Middle

East

Southeast

Asia

Africa China India

By 2040, India’s energy demand closes in on that of the United States,

even though demand per capita remains 40% below the world average

© OECD/IEA 2015


Policies spur innovation and tip the

balance towards low-carbon

Costs in 2040 for different energy sources/technologies, relative to 2014

60%

40%

20%

0%

-20%

-40%

-60%

Solar PV

Onshore

wind

Efficient

lighting

Efficient industrial

heat production

Upstream

oil and gas

Innovation reduces the costs of low-carbon technologies & energy efficiency,

but – for oil & gas – the gains are offset by the move to more complex fields

© OECD/IEA 2015


A new balancing item in the oil market?

Change in production (2015-2020) of US tight oil for a range of 2020 oil prices

mb/d

2

1

0

-1

-2

-3

-4

$40/bbl $50/bbl $60/bbl $70/bbl $80/bbl $90/bbl $100/bbl

Tight oil has created more short-term supply flexibility, but there is no guarantee

that the adjustment mechanism in oil markets will be smooth

© OECD/IEA 2015


If oil prices stay lower for much longer:

what would it take, what would it mean?

• Much more resilient non-OPEC supply & higher output from a stable

Middle East could maintain downward pressure on oil prices

• Oil importers gain: each $1/bbl reduction is $15 billion off import bills;

major window of opportunity to press ahead with subsidy reform

• If lower prices persist for decades, reliance on Middle East oil gets back

to 1970s levels; risk of a sharp market rebound if investment falls short

• Reduction in revenues to key producers & boost to global oil demand

growth make a prolonged period of lower prices progressively less likely

© OECD/IEA 2015


mb/d

Sustained low oil prices, unlikely but…

Change in world oil demand by source in the Low Oil Price Scenario

relative to the New Policies Scenario, 2040

110

108

106

104

Lower GDP growth

Fossil-fuel subsidy reform

Less fuel switching away from oil

Higher energy service demand

Lower energy efficiency

102

100

2040

New Policies Scenario

2040

Low Oil Price Scenario

The increased demand for oil in a low price scenario is dominated by reduced

switching to alternatives

© OECD/IEA 2015


A significant increase

in OPEC market share

mb/d

Change in non-OPEC and OPEC oil production by five-year periods

in the Low Oil Price Scenario

8

60% Non-OPEC

6

4

2

0

-2

50%

40%

30%

20%

OPEC

Share of OPEC

at end of interval

(right axis)

-4

2000-

2005

2005-

2010

2010-

2015

2015-

2020

2020-

2025

2025-

2030

2030-

2035

2035-

2040

Some non-OPEC producers manage to keep production levels above those of the

New Policies Scenario, but OPEC’s share still rises to levels not seen since the 1970s

© OECD/IEA 2015


Mtoe

Lower oil prices affect the

competitiveness of fuels

Change in global primary energy demand by fuel in the Low Oil Price Scenario

relative to the New Policies Scenario

300

200

100

Oil

Gas

Coal

Renewable

0

-100

-200

-300

-400

2015 2020 2025 2030 2035 2040

As well as increases in oil, natural gas benefits (for a while), particularly in regions

where import prices are indexed to oil: with coal pushed out in the power sector

© OECD/IEA 2015


The big opportunities & uncertainties

for natural gas are in Asia

Natural gas demand and supply in developing Asia

, 2014 2040 & 2040

bcm

1 500

1 200

900

600

300

Imports

Conventional

Unconventional

Additional

to 2040

2014

Demand

Production

Developing Asia accounts for almost half of the rise in global gas demand & 75% of

the increase in imports, but gas faces strong competition from renewables & coal

© OECD/IEA 2015


Energy demand (Mtoe)

GDP (trillion dollars, PPP)

A new chapter in China’s growth story

Total primary Energy energy demand demand in China & GDP in China

49 000

60

3 000

6 000

2 000

3 000

1 000

Energy

demand

GDP

Renewables

Nuclear

GDP

Gas

Energy Oil

demand

Coal

40

20

2000 2010 2020 2030 2040

Along with energy efficiency, structural shifts in China’s economy favouring

expansion of services, mean less energy is required to generate economic growth

© OECD/IEA 2015


India moving to the centre

of the world energy stage

Change in demand for selected fuels, 2014-2040

1 500

Coal

(Mtce)

24

Oil

(mb/d)

1 500

Solar PV

(TWh)

1 000

Africa

Southeast

Asia

16

Southeast Asia

Africa

Middle East

1 000

Japan

Middle East

Africa

European Union

United States

500

0

-500

India

European

Union

United States

8

0

-8

China

India

United

States

European

Union

Japan

500

0

India

China

-1 000

-16

New infrastructure, an expanding middle class & 600 million new electricity

consumers mean a large rise in the energy required to fuel India’s development

© OECD/IEA 2015


Power is leading the transformation

of the energy system

Global electricity generation by source

TWh

3 000 6 000 9 000 12 000 15 000

Renewables

Coal

Gas

Nuclear

Oil

2014

Change

to 2040

Of which:

Hydro

Wind

Solar

Other

renewables

Driven by continued policy support, renewables account for half of additional global

generation, overtaking coal around 2030 to become the largest power source

© OECD/IEA 2015


Efficiency measures on the rise,

but significant potential still exists

Share of global mandatory efficiency regulation of final energy consumption

40%

30%

20%

10%

Industry

‣ Steam boilers

‣ Process heat

‣ Motors

Buildings

‣ Heating/Cooling

‣ Lighting/Appliances

Transport

‣ Cars

‣ Trucks

‣ Ships

2005 2014 2040

Energy efficiency policies are introduced in more countries and sectors;

they continue to slow demand growth but more can be done

© OECD/IEA 2015


…the global coverage of climate

pledges is impressive

Russia and Caspian

Europe

North America

2.0 Gt

China

3.8 Gt

Middle East

6.1 Gt

Africa

2.0 Gt

India

8.6 Gt

Other Asia

OECD Asia

Oceania

South America

1.1 Gt

1.9 Gt

1.7 Gt

2.2 Gt

1.2 Gt

Pledges submitted

Pledges from countries that account for 95% of global energy-related GHG emissions;

their full implementation would be consistent with a temperature rise of 2.7 °C

© OECD/IEA 2015 The boundaries and names shown and the designations used on maps included in this publication do not imply official endorsement or acceptance by the IEA.


COP21: a historic milestone for the

global energy sector

• Sends a clear message that there is global engagement on the shift to lowcarbon

energy systems, with 187 countries having submitted pledges and 150

world leaders coming to Paris to support the agreement.

• Strengthened global temperature goal “well below 2°C […] and to pursue

efforts to limit the temperature increase to 1.5°C”. To achieve this, Parties aim

to peak global emissions as soon as possible and make rapid reductions

thereafter.

• Each Party will submit a Nationally Determined Contribution (NDC, i.e.

emissions reduction goal/actions) every five years. Implementation of NDCs will

be tracked and reviewed. Support for implementation of developing country

NDCs will be provided in finance, technology and capacity building.

• The Paris Agreement sets a framework enabling a below-2°C future, but success

will ultimately depend on countries’ actions through their successive NDCs.

© OECD/IEA 2015


A 2 °C pathway is still some

further efforts away

Gt

40

Baseline

36

32

28

24

450 Scenario

20

17.9 Gt

Energy efficiency

Fuel & technology

switching in end-uses

Renewables

Nuclear

CCS

Other

16

2010 2015 2020 2025 2030 2035 2040

A peak in emissions by around 2020 is possible using existing policies & technologies;

technology innovation and RD&D will be key to achieving the longer-term goal.

© OECD/IEA 2015


Climate pledges decouple power sector

emissions from electricity demand

Generation (thousand TWh)

Emissions (Gt)

World electricity generation

and related CO 2 emissions

40

30

Electricity

generation

Electricity

generation

20

15

20

10

10

CO 2 emissions

CO 2 emissions

5

1990 2000 2010 2020 2030

The share of low-carbon power generation grows to almost 45% in 2030 so that

power emissions remain flat, while electricity demand grows by more than 40%

© OECD/IEA 2015


Conclusions

• Low prices bring gains to consumers, but can also sow the seeds

of future risks to energy security: no room for complacency

• India’s energy needs are huge: there is a strong shared interest

to support India’s push for clean & efficient technologies

• China’s transition to a more diversified & much less energyintensive

model for growth re-shapes energy markets

• The energy transition is underway, aided by a strong signal from

Paris: governments must ring-fence policies against market swings

• With looming energy security & environmental challenges,

international cooperation on energy has never been more vital

© OECD/IEA 2015


www.worldenergyoutlook.org

© OECD/IEA 2015

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