Nov 12: The global energy map is changing in dramatic fashion, the International Energy Agency (IEA) said as it launched the 2012 edition of the World Energy Outlook (WEO). The Agency's flagship publication, released in London, said the changes will recast expectations about the role of different countries, regions and fuels in the global energy system over the coming decades.
IEA Executive Director Maria van der Hoeven said, "North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency. This year's World Energy Outlook shows that by 2035, we can achieve energy savings equivalent to nearly a fifth of global demand in 2010. In other words, energy efficiency is just as important as unconstrained energy supply, and increased action on efficiency can serve as a unifying energy policy that brings multiple benefits."
WEO finds that the extraordinary growth in oil and natural gas output in the United States will mean "a sea-change in global energy flows." In the New Policies Scenario, the WEO's central scenario, the United States becomes a net exporter of natural gas by 2020, and is almost self-sufficient in energy, in net terms, by 2035. North America emerges as a net oil exporter, accelerating the switch in direction of international oil trade, with almost 90% of Middle Eastern oil exports being drawn to Asia by 2035. Links between regional gas markets will strengthen as liquefied natural gas trade becomes more flexible and contract terms evolve. While regional dynamics change, global energy demand will push ever higher, growing by more than one-third to 2035. China, India and the Middle East account for 60% of the growth; demand barely rises in the OECD, but there is a pronounced shift towards gas and renewables.
Fossil fuels will remain dominant in the global energy mix, supported by subsidies that, in 2011, jumped by almost 30% to $523 billion, due mainly to increases in the Middle East and North Africa. Global oil demand grows by 7 mb/d to 2020 and exceeds 99 mb/d in 2035, by which time oil prices reach $125/barrel in real terms (over $215/barrel in nominal terms). A surge in unconventional and deepwater oil boosts non-OPEC supply over the current decade, but the world relies increasingly on OPEC after 2020. Iraq accounts for 45% of the growth in global oil production to 2035 and becomes the second-largest global oil exporter, overtaking Russia.
While the regional picture for natural gas varies, the global outlook over the coming decades looks to be bright, as demand increases by 50% to 5 trillion cubic metres in 2035. Nearly half of the increase in production to 2035 is from unconventional gas, with most of this coming from the United States, Australia and China. Whether demand for coal carries on rising strongly or changes course radically will depend on the strength of policy decisions around lower-emissions energy sources and changes in the price of coal relative to natural gas. In the New Policies Scenario, global coal demand increases by 21% and is heavily focused in China and India.
Renewables become the world's second-largest source of power generation by 2015 and close in on coal as the primary source by 2035. However, this rapid increase hinges critically on continued subsidies. In 2011, these subsidies (including for biofuels) amounted to $88 billion, but over the period to 2035 need to amount to $4.8 trillion; over half of this has already been committed to existing projects or is needed to meet 2020 targets. Ambitions for nuclear have been scaled back as countries have reviewed policies following the accident at Fukushima Daiichi, but capacity is still projected to rise, led by China, Korea, India and Russia.
Fatih Birol, IEA Chief Economist and the WEO's lead author said, "Our analysis shows that in the absence of a concerted policy push, two-thirds of the economically viable potential to improve energy efficiency will remain unrealized through to 2035. Action to improve energy efficiency could delay the complete 'lock-in' of the allowable emissions of carbon dioxide under a 2oC trajectory -- which is currently set to happen in 2017 -- until 2022, buying time to secure a much-needed global climate agreement. It would also bring substantial energy security and economic benefits, including cutting fuel bills by 20% on average."
WEO-2012 also presents the results of an Efficient World Scenario, which shows what energy efficiency improvements can be achieved simply by adopting measures that are justified in economic terms. Greater efforts on energy efficiency would cut the growth in global energy demand by half. Global oil demand would peak before 2020 and be almost 13 mb/d lower by 2035, a reduction equal to the current production of Russia and Norway combined. The accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest gains in India, China, the United States and Europe.
IEA Executive Director Maria van der Hoeven said, "North America is at the forefront of a sweeping transformation in oil and gas production that will affect all regions of the world, yet the potential also exists for a similarly transformative shift in global energy efficiency. This year's World Energy Outlook shows that by 2035, we can achieve energy savings equivalent to nearly a fifth of global demand in 2010. In other words, energy efficiency is just as important as unconstrained energy supply, and increased action on efficiency can serve as a unifying energy policy that brings multiple benefits."
WEO finds that the extraordinary growth in oil and natural gas output in the United States will mean "a sea-change in global energy flows." In the New Policies Scenario, the WEO's central scenario, the United States becomes a net exporter of natural gas by 2020, and is almost self-sufficient in energy, in net terms, by 2035. North America emerges as a net oil exporter, accelerating the switch in direction of international oil trade, with almost 90% of Middle Eastern oil exports being drawn to Asia by 2035. Links between regional gas markets will strengthen as liquefied natural gas trade becomes more flexible and contract terms evolve. While regional dynamics change, global energy demand will push ever higher, growing by more than one-third to 2035. China, India and the Middle East account for 60% of the growth; demand barely rises in the OECD, but there is a pronounced shift towards gas and renewables.
Fossil fuels will remain dominant in the global energy mix, supported by subsidies that, in 2011, jumped by almost 30% to $523 billion, due mainly to increases in the Middle East and North Africa. Global oil demand grows by 7 mb/d to 2020 and exceeds 99 mb/d in 2035, by which time oil prices reach $125/barrel in real terms (over $215/barrel in nominal terms). A surge in unconventional and deepwater oil boosts non-OPEC supply over the current decade, but the world relies increasingly on OPEC after 2020. Iraq accounts for 45% of the growth in global oil production to 2035 and becomes the second-largest global oil exporter, overtaking Russia.
While the regional picture for natural gas varies, the global outlook over the coming decades looks to be bright, as demand increases by 50% to 5 trillion cubic metres in 2035. Nearly half of the increase in production to 2035 is from unconventional gas, with most of this coming from the United States, Australia and China. Whether demand for coal carries on rising strongly or changes course radically will depend on the strength of policy decisions around lower-emissions energy sources and changes in the price of coal relative to natural gas. In the New Policies Scenario, global coal demand increases by 21% and is heavily focused in China and India.
Renewables become the world's second-largest source of power generation by 2015 and close in on coal as the primary source by 2035. However, this rapid increase hinges critically on continued subsidies. In 2011, these subsidies (including for biofuels) amounted to $88 billion, but over the period to 2035 need to amount to $4.8 trillion; over half of this has already been committed to existing projects or is needed to meet 2020 targets. Ambitions for nuclear have been scaled back as countries have reviewed policies following the accident at Fukushima Daiichi, but capacity is still projected to rise, led by China, Korea, India and Russia.
Water is essential to the production of energy, and the energy sector already accounts for 15% of the world's total water use. Its needs are set to grow, making water an increasingly important criterion for assessing the viability of energy projects. In some regions, water constraints are already affecting the reliability of existing operations and they will introduce additional costs. Expanding power generation and biofuels output underpin an 85% increase in the amount consumed (the volume of water that is not returned to its source after use) through to 2035.
Fatih Birol, IEA Chief Economist and the WEO's lead author said, "Our analysis shows that in the absence of a concerted policy push, two-thirds of the economically viable potential to improve energy efficiency will remain unrealized through to 2035. Action to improve energy efficiency could delay the complete 'lock-in' of the allowable emissions of carbon dioxide under a 2oC trajectory -- which is currently set to happen in 2017 -- until 2022, buying time to secure a much-needed global climate agreement. It would also bring substantial energy security and economic benefits, including cutting fuel bills by 20% on average."
WEO-2012 also presents the results of an Efficient World Scenario, which shows what energy efficiency improvements can be achieved simply by adopting measures that are justified in economic terms. Greater efforts on energy efficiency would cut the growth in global energy demand by half. Global oil demand would peak before 2020 and be almost 13 mb/d lower by 2035, a reduction equal to the current production of Russia and Norway combined. The accrued resources would facilitate a gradual reorientation of the global economy, boosting cumulative economic output to 2035 by $18 trillion, with the biggest gains in India, China, the United States and Europe.
The American Chemistry Council (ACC) issued a release lauding the new IEA projections. Cal Dooley, president and CEO of the ACC said, "Today's IEA World Energy Outlook 2012 reiterates the importance of capitalizing on vast new supplies of natural gas from shale formations in the United States to meet our future energy demands and to fuel a resurgence in American manufacturing." He said further, "The IEA projections, which come after a recent analysis by IHS CERA that also showed increasing domestic natural gas production, underscore the importance of sound regulatory policies at the state level that will determine whether natural gas from shale remains a 'game changer' for America's energy security and for our manufacturing sector or a sorely missed opportunity to generate economic growth and jobs."
Dooley indicated that chemical manufacturers have already announced 50 new chemical projects to take advantage of new supplies of natural gas and expand their production. A recent ACC study found that the expected increase in natural gas production is not just revitalizing the chemical industry but could create 1.2 million new jobs across a broad sector of America's manufacturing base.
The American Petroleum Institute (API) Chief Economist John Felmy also commented on the IEA report saying, "Today's IEA announcement affirms that the United States can use its ample supply of oil and natural gas to be a world leader on energy. This opportunity is driven by American ingenuity that has advanced technologies to safely develop energy from shale. The shale revolution in America is just beginning. We have an unprecedented opportunity to create millions of new jobs and generate hundreds of billions of dollars for our government. With the right public policies and government leadership, this could be a game changer for the United States and the global energy landscape.
"In order to move forward with this remarkable opportunity, we must avoid public policies that raise taxes, impose burdensome and unnecessary regulations, or pit one energy source against another. The administration must acknowledge the effective role states are already playing in regulating oil and natural gas production and avoid the temptation to impose unnecessary and duplicative federal regulations on hydraulic fracturing. By following through on his own executive order to eliminate overly burdensome regulations, President Obama can rein in plans to impose regulatory burdens that could cost businesses hundreds of billions of dollars and chill economic growth."
"In order to move forward with this remarkable opportunity, we must avoid public policies that raise taxes, impose burdensome and unnecessary regulations, or pit one energy source against another. The administration must acknowledge the effective role states are already playing in regulating oil and natural gas production and avoid the temptation to impose unnecessary and duplicative federal regulations on hydraulic fracturing. By following through on his own executive order to eliminate overly burdensome regulations, President Obama can rein in plans to impose regulatory burdens that could cost businesses hundreds of billions of dollars and chill economic growth."
Access a release from IEA (click here). Access a 12-page executive summary (click here). Access links to fact sheets, videos, presentation, Q&As, and related information (click here). Access information on purchasing the complete 690-page report in paper, pdf, CD (click here). Access a release from ACC with links to related information including the IHS and ACC reports (click here). Access the API statement (click here). [#Energy]
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