© OECD/IEA 2016 © OECD/IEA 2016

Dr. Fatih Birol Executive Director International Energy Agency Brisbane, 24 February 2017

© OECD/IEA 2016

Key points of orientation:

Middle East share of oil production at highest level in 40yrs

Transformation in gas markets deepening with a 30% rise in LNG

Additions of renewable capacity in the power sector higher in 2015 than coal, gas, oil and nuclear combined

Energy sector in the spotlight as the Paris Agreement enters into force

Billions remain without basic energy services

There is no single story about the future of global energy; policies will determine where we go from here

The global energy context today

© OECD/IEA 2016

Change in total primary energy demand

Low-carbon fuels & technologies, mostly renewables, supply nearly half of the increase in energy demand to 2040

Low- carbon

Oil Gas Coal

A new ‘fuel’ in pole position

500

1 000

1 500

2 000 1990-2015 2015-2040

Mto

e

Low- carbon

Oil Gas Coal

Nuclear

Nuclear

Ren

ewab

les

Ren

ewab

les

Rest of world

European Union Latin

America

India

US

Africa

China

© OECD/IEA 2016

1 000

2 000

3 000

4 000

TWh

1 500

3 000

4 500

6 000

TWh

Greater policy support boosts prospects for solar PV and wind

Solar PV and wind generation, 2040

Stronger policies on solar PV and wind help renewables make up 37% of electricity generation in 2040 in our main scenario – & nearly 60% in the 2 °C scenario

Additional in the 2 °C scenario

Rest of world

United States

China

WEO-2015

Increase in WEO-2016:

Solar PV Wind power

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Net oil imports

The energy transition provides instruments to address traditional energy security concerns, while shifting attention to electricity supply

A suite of tools to address energy security

5

10

15

20

2014 2040

mb

/d

Switch to electric and natural gas vehicles Switch to renewables Efficiency improvements

Increase in oil production 2014-2040

Net oil imports

United States

2014 2040

European Union

2014 2040

China

2014 2040

India

Reduction in net oil imports due to:

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Approvals of new conventional crude oil projects in 2015-2016 have fallen to the lowest level since the 1950s

If approvals remains low in 2017, an unprecedented effort will be needed to avoid a supply-demand gap in a few years’ time

US tight oil provides a potential lifeline, but cannot be relied upon to cover a major shortfall in the ‘baseload’ of oil supply

Without a pick-up in investment, or a rapid slowdown in demand growth, the stage is set for the next boom-and-bust cycle for oil

Entering a period of greater oil market volatility

© OECD/IEA 2016

-3

0

3

6 mb/d

The global car fleet doubles, but efficiency gains, biofuels & electric cars reduce oil

Change in oil demand by sector, 2015-2040

No peak yet in sight, but a slowdown in growth for oil demand

Power generation

Buildings Passenger cars

Maritime Freight Aviation Petrochemicals

demand for passenger cars;

growth elsewhere pushes total demand higher

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A wave of LNG spurs a second natural gas revolution

Share of LNG in global long-distance gas trade

Contractual terms and pricing arrangements are all being tested as new LNG from Australia, the US & others collides into an already well-supplied market

2014 685 bcm

2040 1 150 bcm

2000 525 bcm

LNG 53%

Pipeline Pipeline LNG 42% Pipeline

LNG 26%

© OECD/IEA 2016

The need for new investment

Average annual oil and gas upstream investment 2017-2040, by scenario

Upstream oil & gas investment remains significant even in a decarbonisation scenario to 2040, to compensate for major declines in output from existing fields

0

100

200

300

400

500

600

700

800

2016 Central scenario 2 Degree scenario

USD

bill

ion

© OECD/IEA 2016

Coal demand in key regions

The peak in Chinese demand is an inflexion point for coal; held back by concerns over air pollution & carbon emissions, global coal use is overtaken by gas in the 2030s

Coal: a rock in a hard place

500 1 000 1 500 2 000 2 500 3 000

Southeast Asia

European Union

India

United States

China

Mtce

2014

Decreasing demand

Change 2014-2040:

Increasing demand

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Cost of clean energy continues to fall

Indexed cost of onshore wind, utility scale PV, batteries and LED lighting

The falling cost of clean energies opens new opportunities but appropriate market design and regulatory frameworks remain critically important

0

20

40

60

80

100

120

2008 2009 2010 2011 2012 2013 2014 2015 2016

20

08

= 1

00

Onshorewind

Solar PV -utility scale

Grid-scalebatteries

LEDs

© OECD/IEA 2016

Efficiency and renewables key to climate change mitigation

Global CO2 emissions reductions in the Central & 2 °C Scenario by technology

Improvements in energy efficiency and faster deployment of low-carbon technologies will be critical to achieving climate goals

Gt

18

22

26

30

34

38

2010 2020 2030 2040

Central Scenario

Efficiency

Renewables

CCS Nuclear Fuel switching

Other

2 °C Scenario

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Energy security remains a major concern; potential vulnerabilities are growing, so too is the range of tools available to address them

A wave of LNG is the catalyst for a second natural gas revolution, with far-reaching implications for gas pricing & contracts

The next chapter in the rise of renewables requires policies to push their role in heat & transport & changes in power market design

The Paris Agreement is a framework; its impact on energy depends on how its goals are translated into real government policy actions

Digital technologies & electrification are opening up new challenges & opportunities across the energy system

Conclusions