International Energy Markets

1. International Energy Markets Calvin Kent Ph.D. AAS Marshall University

2. World Energy Consumption • Will grow by 56 percent between 2013-2040 • (630 QBtu-820 QBtu) • Most of the growth will be in other than the developed nations (OECD) • 90 percent growth in the developing world • Only 17 percent in the OECD

4. Energy Production Trends • Renewable and nuclear are the fastest growing sources at 2.5 percent a year • But unless there is dramatic changes in fossil fuel policy, 80 percent will come from coal, oil and natural gas • While natural gas will show the greatest growth, coal and oil will continue to dominate due to demand in China and India

6. Background on Growth Trends • The recent recession slowed the rate of growth in all developing nations reducing the growth rate for energy consumption • US had very low growth in 2011-2012 • Other European nations actually remained in recession (Japan, Spain, Italy) or showed very sub par growth. • Growth in China was 10.4 percent and India was 6.4 percent a year for the past 20 years but did slow during the recession.

8. Demand Patterns: Oil and Other Liquids • Demand for liquids increases by75 percent by 2040 • Transportation demand dominates with few alternatives becoming feasible over the forecast period • Industrial demand slows due to use of substitute fuels

9. Technology and Supply • Technology innovation, particularly fracking and enhanced oil recovery, are significant adding to supply • As these technologies spread to the developing world, supply will continue to expand • Expansion will depend on high and stable prices

10. Sources of Uncertainty: Oil • Political unrest in the middle east has disrupted oil production • Sanctions against Iranian oil exports have further reduced supply of oil • Low growth in OECD countries plus political deadlock in US cloud the demand picture • Oil prices projected to go to $165 per barrel in real terms by 2040 increasing demand for alternatives

11. Alternative Liquid Fuels • NGL • CTL • Biofuels • Growth will be centered in the OECD nations where the technology is available and the costs of infra-structure can be covered

12. Demand Patterns for Natural Gas • Natural gas consumption increases by 64 percent by 2040 • Natural gas is now the “fuel of choice” for electrical generation due to lower carbon intensity. • 77 percent of the world demand for natural gas will be from electrical generation • In developed nations government policies favor natural gas over other fossil fuels

13. Supply Considerations • Robust increases in supply primarily from horizontal drilling and fracking. • While the attention has been on US most of the growth from technology is occurring in non-developed Europe and the Soviet Union • Natural gas supply depends on transportation • Most will move by pipeline • Significant expansion of LNG

14. Sources of Uncertainty for Natural Gas • Potential oversupply in the short run could keep prices sufficient low to “lock in” potential supply • Transportation issues • Siting of pipelines • Construction of LNG facilities for export and import

15. Demand Patterns for Coal • Assumes no significant “greenhouse gas” legislation except what is on the books • Growth will be only 1.4 percent annual with most occurring in the early years and then declining as replaced by natural gas • China 47 percent US 14 percent and India 9 percent constitute 70 percent of the world demand for coal over the forecast period

16. Supply Considerations for Coal • 80 percent of all coal production is from: • China (52 percent) • US, India, Australia and Indonesia account for the remainder • US coal production will become less as a percentage due to environmental considerations

17. Sources of Uncertainty for Coal • Governmental policy • CO2 emission fees • Cap and trade • Renewable fuel portfolios • Ability to develop export facilities • Cost of converting coal to liquids • Technology and cost of Carbon Capture and Sequestration

18. Electricity • Economic growth depends on abundant, low cost electricity • Tight connection between energy use and economic growth although the use of electricity per unit of output is falling worldwide. • World wide demand for electricity will increase by 93 percent by 2040

19. Supply Considerations for Electricity • Greatest growth in demand will be in the developing nations where significant portions of the population have either no or no reliable electricity • Government policies favor use of natural gas, hydro, wind and solar. • Much of this expansion will come from small scale “distributed” energy system which will “skip” the necessity of national grids

20. Nuclear Power • Nuclear power will more than double between now and 2040. • This will be base load generation primarily in Europe • Concerns after the Japanese earthquake will slow the growth but will not stop it.

21. Sources of Uncertainty for Electricity • Ability to find investors to finance expansion in the less developed nation particularly for small scale projects • Reliability of the grid in developed nations • Problems of “intermittence” of wind and solar will limit their geographic use • Safety concerns will restrict financing of nuclear plants by private investors

22. Energy and CO2 Emissions • Energy use is the primary element in the “climate change” debate • CO2 emissions (without significant new restrictions) will increase from 31.2 billion metric tons to 36.4 in 2040 • 93 percent of the increase will come from the use of fossil fuels in the developing world

24. Conclusions • The world is going to demand increasing amounts of energy to continue to raise its living standards • Most of the growth will be in the less developed world • CO2 emissions will increase • Developed world must to cautious about “environmental colonialism”