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Ministerial Session:Ministerial Session:Responding to the newResponding to the new

challenges of the oilchallenges of the oilsectorsector

OECD/IEA 2008

Nobuo TanakaNobuo TanakaExecutive DirectorExecutive Director

International Energy AgencyInternational Energy Agency

99ththInternational Oil SummitInternational Oil SummitParis, 10 April 2008Paris, 10 April 2008

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What is driving high oil prices.What is driving high oil prices.

0.1

0.3

0.5

0.7

0.9

1.1

60

70

80

90

100

110

RSQ

0.80

$/bbl

Periods of strong correlation between gross index fund flows and oil price(RSQ>0.80)=1

Price

Periods withRSQ>80

OECD/IEA 2008 Source: IEA Oil Market Report2

The IEA views current prices as too high, especially for developingcountries 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

More work needed

-0.150

3-Jan-06 3-Apr-06 3-Jul-06 3-Oct-06 3-Jan-07 3-Apr-07 3-Jul-07 3-Oct-07 3-Jan-08

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The Outlook for Spare CapacityThe Outlook for Spare Capacity

Medium-Term Growth Balance

1.0

2.0

3.0

mb/d

OECD/IEA 2008

Global oil demand-supply balance projected to tighten through

the medium-term

0.0

2007 2008 2009 2010 2011 2012

No n-OP EC Gro wth (excl. B io fuels) B io fuels Gro wth

OPEC NGLs Growth OPEC Capacity Growth

World Demand Growth High Demand

Low Demand 2

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Reference Scenario:

New Light-Duty Vehicle Sales in China

10

12

1416

18

lion

Overtake US sales

OECD/IEA - 2008

Chinas oil imports jump from 3.5 mb/d in 2006 to 13 mb/d in 2030 as car ownership increase 7-fold to 140 per 1 000 people

2

4

68

1995 2000 2005 2010 2015 2020 2025 2030

m

il

Overtake Japan sales

0

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Key Challenges to the Oil SectorKey Challenges to the Oil Sector

Huge Capital Investment Requirements

Mounting Above-Ground Risks

OECD/IEA 2008Slide 5 of 12

The Response to Climate Change

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Reference Scenario:

Cumulative Investment in Energy-Supply

Infrastructure, 2006-2030

Electricity53%Oil

24%

Power

generation

51%

49%

Other

Refining

73%

22%5%

$5.4 $11.6

Exploration anddevelopmentTransmissionanddistribution

OECD/IEA - 2008

Almost half of all investment needs to 2030 of $22 trillion are inthe oil and gas sectors, primarily upstream.

Gas19%

Coal

3%

Biofuels

1%

Exploration anddevelopment

LNG chainTransmission

and distribution

55%

37%

8%

Mining

Shippingand ports10%

90%

trillion r on

$4.2trillion

Total investment = $21.9 trillion (in $2006)

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AboveAbove--ground Risks are Mountingground Risks are Mounting

WeatherRebel

attacks

Industrialunrest

Accessrestrictions

Reserverisk

Decline

rates

Complexreservoirs

Ab ove groundrisks a re key in

c urrent ma rket

FORCEMAJEURE

BELOW-GROUND

OECD/IEA 2008

Slowercapacity

expansion

Fiscalchanges

Environ-mental

regulation

Outputpolicy

Pipeline

delaysCreditsqueeze?

Labour &raw

materialshortage

Tightdrilling &servicecapacity

Ageinginfra-

structure &outages

Projectcomplexity

m pa c s e

sam e - higherc osts, p rojec t

delays and

low er outp ut

but someab ove g round

risks a re

reversible

HOSTGOVERNMEN

T

INDUSTRYCYCLE

SECTORMATURITY

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The Impact of Possible New Policies toImprove Energy Security and Sustainability

Scenarios forScenarios forOPECs Oil Production to 2030OPECs Oil Production to 2030

40

50

60

70

mb/d

Worldoilproduction

48%

50%

52%

54%

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 willdeliver supply at that time need not be taken today.

Reference Scenario Alternative Policy Scenario

Market Share Reference Scenario Market Share Alternative Policy Scenario

0

10

20

2007 2015 2030 shareofOPEC

i

40%

42%

44%

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A New Energy Revolution.A New Energy Revolution.Cutting Energy Related COCutting Energy Related CO

22

emissionsemissions

40

50

60

70

tCO2/yr

CCS industry

and transformation 9%

CCS power generation 10%

Nuclear 6%Renewables 21%

End-use fuel switching 11%

Power generation efficiency

& fuel switching 7%

62 Gt

INTERNATIONAL ENERGY AGENCY AGENCE INTERNATIONALE DE LENERGIE

OECD/IEA 2008

0

10

20

2005 2010 2015 2020 2025 2030 2035 2040 2045 2050

End use electricity

efficiency 12%

End use fuel

efficiency 24%

Improved efficiency and decarbonising the power sector could bringemissions back to current levels by 2050. To achieve a 50% cut we would also

have to revolutionise the transport sector.

27 Gt

14 Gt

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The world is facing twin energy-related challenges: ensuring secure, affordable energy; and

managing the environmental consequences of producing,transforming and using that energy

These challenges can be overcome through: Boosting energy sector investment

Key MessagesKey Messages

OECD/IEA 2008

Improve energy efficiency and promoting new energytechnologies

Committing to producer-consumer dialogue

In any feasible scenario, there will be demand for

oil, and new opportunities will emerge for the oilindustry in a low carbon economy

WEO-2008 will examine mid-to-long term oil and

gas supply prospects and uncertainties