© O

ECD

/IEA

201

5

Budapest, 4 March 2016

© OECD/IEA 2015

The start of a new energy era?

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

Signals turn green ahead of key Paris climate summit

Pledges of 150+ countries account for 90% 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

Multiple signs of change, but are they moving the energy system in the right direction?

© OECD/IEA 2015

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

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 industrial heat production

Efficient lighting

Upstream oil and gas

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

© OECD/IEA 2015

Energy demand in China

Energy demand

GDP

A new chapter in China’s growth story

Along with energy efficiency, structural shifts in China’s economy favouring expansion of services, mean less energy is required to generate economic growth

3 000

6 000

9 000

2000 2010 2020 2030 2040

Ener

gy d

eman

d (

Mto

e)

20

40

60

GD

P (

trill

ion

do

llars

, PP

P)

Energy demand

GDP

Energy demand & GDP in China

1 000

2 000

3 000

4 000

Coal

Oil

Gas

Nuclear

Renewables

Energy demand

GDP

3 000

6 000

9 000

2000 2010 2020 2030 2040

Ener

gy d

eman

d (

Mto

e)

20

40

60

GD

P (

trill

ion

do

llars

, PP

P)

© OECD/IEA 2015

Oil use grows, but in a narrowing set of markets

Oil demand growth by selected region

Oil demand picks up to 2020, but the subsequent rise to 103.5 mb/d is moderated by higher prices, subsidy phase-out, efficiency policies & fuel switching

-200

0

200

400

Japan Africa China India

Mto

e

European

Union

United

States Southeast

Asia

Middle

East

2025-2040

2013-2025

© 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

Tight oil has created more short-term supply flexibility, but there is no guarantee that the adjustment mechanism in oil markets will be smooth

-4

-3

-2

-1

0

1

2

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

mb/d

© OECD/IEA 2015

The low oil price scenario relies on a high OPEC market share

Change in non-OPEC & OPEC oil production by five-year periods in the Low Oil Price Scenario

Some non-OPEC producers manage to keep production levels close to those of the New Policies Scenario, but OPEC’s share rises to levels not seen since the 1970s

-4

-2

0

2

4

6

8

2000- 2005

mb

/d

20%

30%

40%

50%

60% Non-OPEC

OPEC

Share of OPEC at end of interval (right axis)

2005- 2010

2010- 2015

2015- 2020

2020- 2025

2025- 2030

2030- 2035

2035- 2040

© OECD/IEA 2015

Low oil price scenario: Transport leads the ramp up in demand

Change in global oil demand by sector in the Low Oil Price Scenario relative to the New Policies Scenario

Use of cars and trucks increases, there is a slower pace of improvement in the efficiency of vehicles and aircraft, and more limited switching to alternative fuels

1

2

3

4

2020 2025 2030 2035 2040

mb

/d

Other

Power and heat generation

Buildings

Other industry

Petrochemicals

Transport

© OECD/IEA 2015

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

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

-400

-300

-200

-100

0

100

200

300

2015 2020 2025 2030 2035 2040

Mto

e Oil

Gas

Coal

Renewable

© OECD/IEA 2015

The opportunities for gas are in the developing world

Change in natural gas demand by key sectors and regions in the New Policies Scenario, 2013-2040

Continued economic growth, leading to growth in the power, industry and transport sectors account for about 75% of the global gas demand growth by 2040.

-100 0 100 200 300 400 500

European Union

Southeast Asia

United States

Latin America

India

Africa

Middle East

China

bcm

Industry* Buildings Transport Other energy sector Other** Power

© OECD/IEA 2015

Multi-speed revolution

Unconventional gas production by key country in the New Policies Scenario

The North American experience is difficult to replicate. Unconventional gas developments elsewhere are much smaller and slow to take off.

300

600

900

1 200

1 500

1 800

2013 2020 2030 2040

bcm

Rest of world

Mexico

Argentina

Australia

Canada

China

United States

© OECD/IEA 2015

Plain sailing for LNG?

LNG exports by region in the New Policies Scenario

Ample new LNG supply in the medium term from a growing set of suppliers could lead to more contract flexibility in the long term.

100

200

300

400

500

600

2000 2013 2025 2040

bcm

10%

20%

30%

40%

50%

60% Rest of world

Southeast Asia

Russia

North America

Middle East

Australia

Africa

LNG share of

inter-regional

trade (right axis)

© OECD/IEA 2015

Transformation of LNG markets a chance for Europe

Major global gas trade flows, 2010

Ample supplies of LNG & low prices are diversifying trade & opening up opportunities for gas, but – by holding back new projects – could bring tighter markets in the 2020s

Major global gas trade flows, 2040

© OECD/IEA 2015

Power is leading the transformation of the energy system

Global electricity generation by source

Driven by continued policy support, renewables account for half of additional global generation, overtaking coal around 2030 to become the largest power source

3 000 12 000 15 000

TWh

Change to 2040

2014 Renewables

Coal

Gas

Nuclear

Oil

Hydro

Wind

Solar

Other renewables

Of which:

6 000 9 000

© OECD/IEA 2015

The power sector requires the largest investment

Global power sector cumulative investment by type, 2015-2040

Power sector investment totals $19.7 trillion to 2040, over 40% of total energy supply investment, and 60 cents of every dollar in new power plants goes to renewables

Coal, 1.6

Oil, 0.1 1.5

Wind, 2.5

Hydro, 1.5

Bioenergy, 0.6 Other, 0.5

Gas, 1.1 2

4

6

8

10

Fossil Fuels Nuclear Renewables

Trill

ion

do

llars

(2

01

4)

Power plants Infrastructure

Solar PV, 2.0

T&D

8.4

© OECD/IEA 2015

Renewables become the largest source of electricity

Renewables-based electricity generation by region

Non-hydro renewables raise the share of renewables in the mix, with one-third of renewables growth in China, one-third in the OECD & one-third in other regions

2

4

6

8

10

12

14

1990 2000 2010 2020 2030 2040

Tho

usa

nd

TW

h

5%

10%

15%

20%

25%

30%

35% projected historical Other

E. Europe/Eurasia

Africa

Latin America

European Union

North America

Developing Asia:

Share of total generation (right axis):

Total renewables

Hydropower

Other Asia

India

China

© OECD/IEA 2015

A 2 °C pathway is still some further efforts away

16

20

24

28

32

36

40

2010 2015 2020 2025 2030 2035 2040

Gt

Baseline

450 Scenario

17.9 Gt

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.

Energy efficiency

Fuel & technology switching in end-uses

Renewables

Nuclear

CCS

Other

© O

ECD

/IEA

201

5

www.worldenergyoutlook.org