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Global Energy Dynamics: Outlook for the Future

Global Energy Dynamics: Outlook for the Future . Dr Fatih Birol Chief Economist, IEA 10 April 2014. The world energy scene today. Some long-held tenets of the energy sector are being rewritten Countries are switching roles: importers are becoming exporters…

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Global Energy Dynamics: Outlook for the Future

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  1. Global Energy Dynamics: Outlook for the Future Dr Fatih Birol Chief Economist, IEA 10 April 2014

  2. 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 re-orientate the energy trade map • 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 lack electricity • 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

  3. The energy mix is slow to change 25 years ago the share of fossil fuels in the global mix was 82%; Growth in total primary energy demand 1987-2011 Gas 2011-2035 Coal Renewables Oil Nuclear 500 1 000 1 500 2 000 2 500 3 000 Mtoe • it is the same today& the strong rise of renewables in the future only reduces this to around 75% in 2035

  4. Unconventional oil and gas has made a major contribution to global production Growth in US shale gas output since 2005 is equivalent to the total production of Qatar, Kuwait, UAE and Iraq combined; while shale oil output is equal to that of Iraq US shale gas and shale oil production increases: 2005-2014 mb/d 300 3.0 bcm 250 2.5 200 2.0 150 1.5 100 1.0 50 0.5 0 0.0 Gas Oil while shale oil output is equal to that of Iraq

  5. US oil imports are shrinking rapidly – thanks to shale oil only? Reductions in US oil imports in 2035 relative to today Increased oil supply Demand-side efficiency 35% 39% 8% 18% Natural gas use in transport Biofuels use in transport US oil imports are set to plummet due to increasing oil supplies and recently adopted policies to improve efficiency of cars and trucks

  6. 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, but the Middle East is critical to the longer-term oil outlook Middle East 2013-2025 2025-2035 Brazil United States Rest of the world -2 0 2 4 6 8 mb/d

  7. Regional natural gas prices: who has the energy to compete? Natural gas prices by region Regional differences in natural gas prices narrow from today’s very high levels but remain large $/MBtu 20 2013 18 2035 16 14 12 10 8 6 4 2 0 European Union Japan United States

  8. 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% Petrochemicals Fertilisers Aluminium Cement Iron & steel Pulp & paper Glass

  9. US emissions on a downward trend Energy-related CO2 emissions in the United States CO2 emissions fell sharply since the shale gas revolution, but rebounded last year on the back of a partial gas-coal switch and increased industrial activity Gt CO2 6.5 6.0 5.5 5.0 4.5 4.0 1990 1995 2000 2007 2012 2013

  10. Who has flooded the markets? Incremental steam coal exports The US accounted for only 7% of the increase in global steam coal exports since 2007 200 Mt Indonesia 180 Australia 160 United States 140 120 100 80 60 40 20 0 2009 2010 2011 2012 2013

  11. The slowdown in Chinese demand caught the industry off-guard Coal demand in China: real demand vs historical trend China’s move away from coal will be a far greater determinant of the direction of the coal markets than the shale gas revolution in the US • Real consumption 4400 Mt Historical trend 4200 Curbing in China ≈ 20 times US exports increase in 2012 4000 3800 3600 3400 3200 3000 2010 2011 2012 2013

  12. LNG from the United States can alleviate strain on the gas markets, but is no silver bullet Indicative economics of LNG export from the US Gulf Coast $/MBtu 18 Average import price 15 $/MBtu 12 12 Liquefaction, shipping & regasification 9 9 United States price 6 6 3 3 To Asia To Europe • New LNG supplies accelerate movement towards a more interconnected global market, but high costs of transport between regions mean no single global gas price • but high costs of transport between regions mean no single global gas price

  13. Concluding remarks • The shale revolution is having an unprecedented impact on the global energy landscape, economy and geopolitics • While US natural gas prices may rise, large disparities between regions will persist • Middle East oil will continue to be indispensible to world markets – the right signals to invest must be sent • US energy policy must guard against complacency – not to forget importance of energy efficiency, nuclear power and clean coal • How will the United States adapt its energy strategy and foreign policy to the reality of a richer resource base?

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