11

IEA and Four Challenges

April 2008 at TokyoApril 2008 at Tokyo

NobuoNobuo TANAKATANAKA

Director for Science, Technology and Industry, Director for Science, Technology and Industry, OECDOECD

11

22

I use these slides to present my personal views which I prescribed in the campaign. This presentation is not necessarily reflecting the IEA’sofficial views. Nobuo TANAKA

I use these slides to present my personal views I use these slides to present my personal views which I prescribed in the campaign. This which I prescribed in the campaign. This presentation is not necessarily reflecting the presentation is not necessarily reflecting the IEAIEA’’ssofficial views. Nobuo TANAKAofficial views. Nobuo TANAKA

22

33

Challenge 1. Emerging Major Players

33

44

-

12

24

36

48

60

1 2 3 4 5 6draw rate (mb/d)

dura

tion

(mon

ths)

A Safety Net: Emergency Preparedness A Safety Net: Emergency Preparedness Remains CrucialRemains Crucial

2 Sep. 2005 decision, 2 mb/d

Theoretical decision, 4 mb/d

1.48 billion barrels of Public stocks

IEA Public Stocks could replace an oil supply disruption of 2 mb/d for nearly 2 years 44

55

62%51%

42%

16%

10%

9%

22%

39%49%

0%

20%

40%

60%

80%

100%

1971 2003 2030

OECD Transition economies Developing countries

About 70% of the increase in energy demand will come from develoAbout 70% of the increase in energy demand will come from developing ping countries due to their more rapid economic and population growthcountries due to their more rapid economic and population growth

5

Changing Pattern of Energy DemandChanging Pattern of Energy Demand

5

66

China Oil OutlookChina Oil Outlook

0

3

6

9

12

15

18

1990 2000 2010 2020 2030

mbd

0%

10%

20%

30%

40%

50%

60%

70%

80%

%

Production Demand Imports as a % of demand (right scale)

China’s oil imports will soar from around 3 mbd today to almost 12 mbd in 2030

66

77

Outreach increasingly importantOutreach increasingly important

Expected Total Oil Net Imports (mb¥d)

0

5

10

15

20

25

30

35

40

OECD India+

China

mill

ion

barr

els

per d

ay

2000 2005 2010 2015 2030

Stocks: - China: 14 Mt for the first phase- India: 5 Mt for the first phase

(plan to triple such capacity at later phases)77

88

Reference Scenario: Reference Scenario: Increase in World Oil Supply, 2004Increase in World Oil Supply, 2004--20302030

The share of OPEC in world oil supply increases sharply as conventional non-OPEC production peaks towards the middle of next decade

S.Arabia

Iraq

Iran

Other

0

5

10

15

20

25

OPEC conventional Non-conventional Non-OPECconventional

mb/d

99

Exports through the Exports through the ““Dire StraitsDire Straits””

Much of the additional oil and LNG exports from the Middle East will be shipped through just three maritime routes

1010

Challenge 2. Natural Gas

1111

Reference Scenario: World Primary Energy Demand

Global demand grows by more than half over the next quarter of acentury, with coal use rising most in absolute terms

Oil

Coal

Gas

BiomassNuclear

Other renewables

0

2 000

4 000

6 000

8 000

10 000

12 000

14 000

16 000

18 000

1970 1980 1990 2000 2010 2020 2030

Mto

e

1212

0

200

400

600

800

1 000

2000 2004 2010 2015 2020 2030

bcm

Pipelines LNG

Reference Scenario:World Inter-regional Natural Gas Trade

Global gas trade expands by 1.5 times, with two-thirds of the increase coming from Russia, the Middle East & North Africa – mostly as LNG

1313

Reference Scenario: Reference Scenario: Increase in World Gas Supply, Increase in World Gas Supply,

20042004--20302030

The Middle East and North Africa account for the bulk of the growth in global gas production.

0

200

400

600

800

1000

Middle Eastand North

Africa

TransitionEconomies

DevelopingAsia

Latin America OECD

Incr

ease

in P

rodu

ctio

n (B

cm)

1414

Russian Gas Supply Outlook

0

100

200

300

400

500

600

700

800

900

1990 1995 2000 2005 2010 2015 2020

Gazprom Outlook

Bcm

Non-Gazprom Production (Independents and Central Asian Imports)

Medvezhye

Yamburg

Urengoy

Other Gazprom fieldsZapolyarnoye

New Fields

to meet Gazprom Outlook

New Fields to meet Gazprom Outlook

PlusExports to

Asia-Pacific

An apparent growing gap in Russian gas supply underscores the need for investment in new production capacity, an improvement in efficiency and a reduction in flaring.

1515

Challenge 3. Lack of Investment

1616

Oil 21%

Electricity56%

Coal 3%Gas 19%

$4.3 trillion$11.3 trillion

$3.9 trillion$0.6 trillion

Biofuels 1%

Reference Scenario:Cumulative Investment, 2005-2030

Investment needs exceed $20 trillion – $3 trillion more than previously projected, mainly because of higher unit costs

$20.2 trillion (in $2005)

1717

Global Upstream Oil & Gas Investment: Impact of Cost Inflation

Annual upstream investment doubled to $225 billion between 2000 and 2005, but most of the increase was due to cost inflation

actual forecast

Year 2000

50

100

150

200

250

300

2000 2002 2004 2006 2008 2010

index

(yea

r 200

0 = 10

0)

Nominal Adjusted for cost inflation

1818

Investment: Spare Oil Production CapacityInvestment: Spare Oil Production Capacity

Growthkb/d

0.0

1.0

2.0

3.0

2006 2007 2008 2009 2010 2011

mb/d

Non-OPEC Growth (excl. Biofuels) Biofuels GrowthOPEC NGLs Growth OPEC Capacity GrowthWorld Demand Growth

Based on current projects and plans, the level of spare production capacity should rise but the quality of this incremental crude will have important

implications for the refining industry and product markets.

1919

Impact of Deferred Investment on SupplyImpact of Deferred Investment on Supply(Versus a 22 (Versus a 22 mb/dmb/d rise in the Reference Scenario)rise in the Reference Scenario)

Deferred investment in OPEC countries lowers their market share and pushes up prices. Higher prices stimulate higher investment in non-OPEC countries, driving up their

conventional & non-conventional output

-12

-8

-4

0

4mb

/d

OPEC Non-OPEC: conventional Non-OPEC: non-conventional2015 2030

2020

Challenge 4. Climate Change

2121

EnergyEnergy--Related CORelated CO2 2 EmissionsEmissions

0

3

6

9

12

15

1990 2000 2010 2020 2030

Gt of

CO 2

United States China India Rest of non-OECD Rest of OECD

United States

China

Rest of non-OECD

Rest of OECD

India

Developing countries account for over three-quarters of the increase in emissions to 2030 however their per-capita emissions still remain well below those of the OECD.

2222

Annual Increase in Coal Demand

Global coal demand in the recent years has grown much faster than previously – mainly driven by China

-100

0

100

200

300

400

500

1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005China Rest of the world

millio

n ton

nes

2323

Reference Scenario:Energy-Related CO2 Emissions by Fuel

Half of the projected increase in emissions come from new power stations, mainly using coal & mainly located in China & India

Increase of 14.3 Gt (55%)

0

10

20

30

40

50

1990 2004 2010 2015 2030

billio

n ton

nes

Coal Oil Gas

2424

Reference Scenario: Reference Scenario: Increase in Power Sector COIncrease in Power Sector CO22 EmissionsEmissions

by Fuel, 2004by Fuel, 2004--20302030

- 500

0

500

1 000

1 500

2 000

2 500

3 000

3 500

OECD Transitioneconomies

China India Rest ofdevelopingcountries

millio

n to

nnes

Coal Oil Gas

China and India account for 58% of the increase in power sector CO2 emissions to 2030

2525

The answer of the IEA is The answer of the IEA is ““the Alternative Policy Scenario.the Alternative Policy Scenario.””

2626

Alternative Policy Scenario: Mapping a Better Energy Future

• Analyses impact of government policies under consideration to enhance security & curb emissions

• Demonstrates that we can significantly reduce growth in energy demand & emissions and stimulate alternative energy production

Oil demand is reduced by 13 mb/d in 2030 - equivalent to current output of Saudi Arabia & IranOil savings in 2015 savings reach 5 mb/d CO2 emissions are 6.3 Gt (16%) lower in 2030 – equivalent to the current emissions of US and Canada

• Delaying action by 10 years would reduce the impact on emissions in 2030 by three-quarters

2727

26

28

30

32

34

36

2005 2010 2015 2020 2025 2030

mb/d

Reference Scenario Alternative Policy Scenario

1.8 mb/d

5.2 mb/d

Alternative Policy Scenario: OECD Oil Imports

In stark contrast with the Reference Scenario, OECD oil imports level off soon after 2015 & then begin to decline

2828

Alternative Policy Scenario:Global Oil Supply

OPEC’s share of global oil production rises from 40% now to 43% in 2030 in the APS, compared with a jump to 49% in the RS

0

20

40

60

80

100

120

2005 2015 2030

mb/d

35%

40%

45%

50%OPEC market share

Alternative Policy Scenario Reduction compared with Reference ScenarioOPEC share in APS (right axis) OPEC share in RS (right axis)

2929

Alternative Policy Scenario:Gas Imports, 2004-2030

Gas imports in the main consuming regions are significantly lower in the APS compared with the RS

- 46 bcm

- 90 bcm

- 33 bcm

0

200

400

600

800

United States European Union Japan

bcm

2004 Reference Scenario 2030 Alternative Policy Scenario 2030

3030Improved end-use efficiency accounts for over two-thirds of avoided

emissions in 2030 in the APS

Alternative Policy Scenario

Reference Scenario

Increased nuclear (10%)Increased renewables (12%)Power sector efficiency & fuel (13%) Electricity end-use efficiency (29%)

Fossil-fuel end-use efficiency (36%)

26

30

34

38

42

2004 2010 2015 2020 2025 2030

Gtof

CO2

Alternative Policy Scenario:Key Policies for CO2 Reduction

3131

Scenarios for Global COScenarios for Global CO22 Emissions 2003Emissions 2003--20502050Mt CO2

0

10 000

20 000

30 000

40 000

50 000

60 000

2003 Baseline2030

(WEO 2005)

Baseline2050

Map No CCS LowEfficiency

TECH Plus2050

Other

Buildings

Transport

Industry

Transformation

PowerGeneration

ACT Scenarios 2050

-16%

+137%

+6%+21%

+27%

Technology holds the promise of returning soaring energy-related CO2 emissions to today’s levels by 2050

Energy Technology Perspectives Scenarios & Strategies to 2050Energy Technology Perspectives Scenarios & Strategies to 2050Energy Technology Perspectives Scenarios & Strategies to 2050

3232Improved end-use energy efficiency

is the most important contributor to reduced emissions!

Emission Reduction by Technology AreaEmission Reduction by Technology AreaACT Map ScenarioACT Map Scenario

Power Generation

CCS

Hydropower

Coal to gas

Nuclear

Fossil fuel generation efficiency

Biomass

Other renewables

End-use efficiency

Biofuels in transport

Fuel mix in buildings and industry

CCS in fuel transformation

CCS in industry

Energy Technology Perspectives Scenarios & Strategies to 2050Energy Technology Perspectives Scenarios & Strategies to 2050Energy Technology Perspectives Scenarios & Strategies to 2050

3333

Alternative Policy Scenario :Key policies that Make a Global Difference

A dozen policies in the US, EU & China account for around 40% of the global emissions reduction in 2030 in the Alternative Policy Scenario

Energy efficiency Power generation

US

• Tighter CAFE standards• Improved efficiency in residential & commercial sectors

• Increased use of renewables

EU

• Increased vehicle fuel economy• Improved efficiency in electricity use in the commercial sector

• Increased use of renewables• Nuclear plant lifetime extensions

China

• Improved efficiency in electricity use in industry• Improved efficiency in electricity use in the residential sector

• Increased efficiency of coal-fired plants• Increased use of renewables• Increased reliance on nuclear

3434

Alternative Policy Scenario:Cost Effectiveness of Policies

• Total energy investment – from production to consumption – is lower than in the RS

• Consumers spend $2.4 trillion more in 2005-2030 in more efficient cars, refrigerators etc

• ..but $3 trillion less investment is required on the supply side

– Each $1 invested in more efficient electrical appliances saves $2.2 in investment in power plants & networks

– Each $1 invested in more efficient oil-consuming equipment (mainly cars) saves $2.4 in oil imports to 2030

• The higher initial investment by consumers is more than offset by fuel-cost savings / THIS IS THE DEMAND-SIDE APPROACH for ENERGY POLICY.

3535

Compact Fluorescent Lamps

LED traffic lights

Super windows & daylighting

Reducing standby power consumption

Efficient information and communication technologies

Energy efficiency offers•• substantial energy and greenhouse substantial energy and greenhouse

gas savings at low or negative costgas savings at low or negative cost

•• energy security and reliability benefitsenergy security and reliability benefits

•• enhanced business competitiveness enhanced business competitiveness and social welfareand social welfare

Energy Efficiency Has A Key Role To PlayEnergy Efficiency Has A Key Role To PlayAnd Is Available In The Short TermAnd Is Available In The Short Term

High performance buildings

Least life-cycle cost appliances

ABCDEFG

Labelling and certification

3636

Renewed Interest in Nuclear Power

• Growing concerns over energy security, surging fossil-fuel prices & rising carbon emissions

• Positive aspects of nuclear powerproven technology for large-scale baseload electricity generation reduce dependence on imported gas no emissions of greenhouse gases or local pollutantsproduces electricity at competitive & stable costuranium resources abundant & widespread

• But governments need to play a stronger role in facilitating investment where nuclear is accepted

3737

0%

10%

20%

30%

40%

Wind Nuclear IGCC Coal steam CCGT

incre

ase

in ge

nera

ting

cost

Impact of a 50% Increase in Fuel Price on Generating Costs

Nuclear generating costs are far less sensitive to fuel price increases than gas or coal plants

3838

Outlook for Biofuels

• Interest in biofuels is soaring• Biofuels can help address growing energy security &

climate change threats by:Increasing diversity of geographic & fuel sourcesLowering greenhouse-gas emissions - depending on how they are produced

• Higher oil prices have made biofuels more competitive, but further cost reductions are needed

• Availability of arable land will constrain biofuels potential medium term

• Long-term prospects hinge on new technology

3939

Share of Biofuels in Road-Transport Fuel Consumption

Biofuels are set to play a much larger role in meeting world road-transport fuel demand

0%

4%

8%

12%

16%

20%

24%

28%

32%

World United States European Union Brazil2004 2030 Reference Scenario 2030 Alternative Policy Scenario

4040

Summing Up

• On current trends, we are on course for an unstable, dirty & expensive energy future

• In response, urgent government policy action is required in two key areas:– Promoting energy investment / Comprehensive energy

security– Promoting energy efficiency / Demand-side approach

• In addition to improving energy security and the environment, these policies also make economic sense ( Addressing three E’s all together )

• The WEO sets out the essential first steps on a path towards a clean, clever and competitive energy future

• For a truly sustainable energy system, technologicalbreakthroughs will also be needed

• Need for Enhanced International / Cross Disciplinary Cooperation

4141

IEA and G8 Summit

• In July 2005, the G8 invited the IEA to attend its Summit in Gleneagles. The Gleneagles Plan of Action mandated the IEA to identify pathways for G8 policy makers to realise a “clean, clever and competitive energy future.”

• At St. Petersburg G8 Summit 2006, the IEA recommended four points; – Stanby power use in appliances and equipment, – Program for tyres, – Television set top boxes – and Energy efficient lighting.