The Importance of Strengthened Global Energy Dialogue

THE IMPORTANCE OF STRENGTHENED GLOBAL ENERGY DIALOGUE Nobuo Tanaka Executive Director International Energy Agency Transatlantic Energy forum Paris, 16 May 2008 © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE What is driving high oil prices…. 130 120 110 100 90 80 NYMEX WTI M1 Few periods of strong correlation between oil price and fund flows But data too limited to be conclusive 70 60 50 Jan 06 Apr 06 Jul 06 Oct 06 Jan 07 Apr 07 Jul 07 Oct 07 Jan 08 Apr 08    The IEA views current prices as too high, especially for developing countries and considering threats to economic growth worldwide Little doubt that the oil market has been affected by financial crisis Weaker dollar explains some of the higher price   But oil prices are higher in all currencies Analysis of fund flows gives different results – we really do not have enough data – financial and fundamental. Source: Oil Market Report 2008 © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE The Outlook for Spare Capacity m b/ d Medium-Term Growth Balance 3.0 2.0 1.0 0.0 2007 2008 2009 2010 2011 2012 No n-OP EC Gro wth (excl. B io fuels) OP EC NGLs Gro wth Wo rld Demand Gro wth Lo w Demand 2 B io fuels Gro wth OP EC Capacity Gro wth High Demand Global oil demand-supply balance projected to tighten through the medium-term © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Reference Scenario: World Primary Energy Demand 18 billion tonnes of oil equivalent 16 14 12 10 8 6 4 Other renewables Biomass Hydro Nuclear Gas Oil Coal 2 0 1980 1990 2000 2010 2020 2030 Global demand grows by more than half over the next quarter of a century, with coal use rising most in absolute terms. © OECD/IEA 2008 Source: World Energy Outlook 2007 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Reference Scenario: The Emerging Giants of World Energy Increase in Primary Energy Demand & Investment Between 2005 & 2030 as Share of World Total 100% 80% 60% 40% 20% 0% Total energy Coal Oil Nuclear Hydro Power sector investments Rest of the world India China © OECD/IEA 2008 China & India will contribute more than 40% of the increase in global energy demand to 2030 on current trends. Source: World Energy Outlook 2007 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Reference Scenario: Cumulative Investment in Energy-Supply Infrastructure, 2006-2030 Exploration and development Refining Other 73% 22% 5% Oil 24% Electricity 53% 49% 51% Power generation Transmission and distribution $5.4 trillion Biofuels 1% $11.6 trillion Exploration and development $4.2 trillion Gas 19% Coal 3% 55% 8% 37% LNG chain Transmission and distribution 90% 10% Mining Shipping and ports Total investment = $21.9 trillion (in $2006) Just over half of all investment needs to 2030 of $22 trillion are in developing countries, 17% in China & another 6% in India alone. © OECD/IEA 2008 Source: World Energy Outlook 2007 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Global Energy-Related CO2 Emissions 50 45 billion tonnes (Gt) 40 35 Reference Scenario 42 Gt 19% 34 Gt 30 25 20 15 10 1980 1990 27 Gt Alternative Policy Scenario 2000 2010 2020 2030 Global emissions will increase by 57% in the Reference Scenario, but they level off in the Alternative Policy Scenario. © OECD/IEA 2008 Source: World Energy Outlook 2007 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE The Impact of Possible New Policies to Improve Energy Security and Sustainability Scenarios for OPEC’s Oil Production to 2030 share of OPEC in World oil production Source: World Energy Outlook 2007 70 60 50 mb/d 40 30 54% 52% 50% 48% 46% 20 10 0 2007 Reference Scenario Market Share Reference Scenario 2015 2030 44% 42% 40% Alternative Policy Scenario Market Share Alternative Policy Scenario © OECD/IEA 2008 In any feasible scenario, there will be increasing demand for OPEC oil. Although the situation in 2030 is less certain, decisions that will deliver supply at that time need not be taken today. AGENCE INTERNATIONALE DE L’ENERGIE INTERNATIONAL ENERGY AGENCY A New Energy Revolution…. Cutting Energy Related CO2 emissions Improved efficiency and decarbonising the power sector could bring emissions back to current levels by 2050. To achieve a 50% cut we would also have to © OECD/IEA 2008 revolutionise the transport sector. INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Average Annual Power Generation Capacity Additions in the “50% Cut Scenario” 2010 – 2050 Maximum rate in the past Maximum rate in the past Annual additions today © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE The IEA„s Energy Efficiency recommendations to the G8 16 New recommendations for 2008 (Hokkaido): 2006 + 2007 recommendations 5.7 billion tons of CO2 could be saved in 2030  12 new fields of action buildings; appliances; lighting; transport; industry; power sector; cross-sectoral  4 elaborate earlier measures IEA’s consolidated recommendations 2006 2007 2008 •7 priority areas •25 fields of action © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Changing Share of Global Energy Demand 1974 2004 2030 41% 59% 50% 50% 34% 66% IEA Non-Member IEA Member Global energy dialogue is crucial. Actions within IEA borders will never be enough to achieve a truly sustainable or secure energy future © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE Key Messages  The world is facing twin energy-related challenges:  ensuring secure, affordable energy; and  managing the associated environmental consequences  Challenge for all countries is to achieve transition to a more secure, lower carbon energy system  Energy efficiency is the first step available to all countries  Deep emission reductions will require unprecedented action  Emission stabilisation = decarbonising power generation  Emission halving = also revolutionising transport  We need to re-commit to producers-consumer dialogue and to focus it on delivering mutually beneficial outcomes © OECD/IEA 2008 INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE L’ENERGIE