Our Global Energy Future Looking beyond the economic crisis Mr. Nobuo Tanaka Executive Director International Energy Agency Ministry of Economy Warsaw 12 May 2009

Weakening economy drives oil demand revisions IEA April 2008 Oil Market Report Two year demand contraction in 08/09 first since early-1980s OECD hit hard, but clear signs that non-OECD is slowing now too Latest GDP estimates suggest -1.4% for 2009, with consensus of gradual recovery in 2010 Prices bottoming-out in the face of OPEC supply cuts, and a degree of post-G20 ‘bounce’

Evaluating oil supply-side impacts Supply also affected, on weak demand, low prices, credit crunch & investment slippage、 2009 forecast already down by 1.7 mb/d since July 2008, excluding 2008 baseline changes Canada & Russia taking a hit in terms of investment & likely output $50/bbl oil unlikely to see extensive shut-ins of current output per se But impact of lower spend on new projects and prevailing decline rates at mature fields 3

World Oil Production by Source IEA’s World Energy Outlook 2008 Business as Usual Scenario 20 mb/d 45 mb/d IEA World Energy Outlook 2008 Around 65 mb/d of gross capacity needs to be installed between 2007 & 2030 – six times the current capacity of Saudi Arabia – to meet demand growth and offset decline

Long-term oil-supply cost curve (with $50 per tonne of CO2) A carbon price of $50 per tonne of CO2 would increase the cost of producing non-conventional oil the most – by as much as $30 per barrel – due to its higher energy intensity

European Responses to January 2009 Gas Supply Disruption Timeline of Actions 7 Jan (immediate) 10 Jan. 16 Jan. 18 Jan. Yamal increase BBL NL-UK reduced Interconnector UK-BE reversed Reverse flow Czech to Slovakia Blue Stream increase Hungary increase to Serbia & Bosnia Increase Germany -Croatia Increasing Croatian production share off-take Reverse flow from Greece to Bulgaria Additional spot LNG to Greece & Turkey

Cumulative energy supply investment in Business as Usual, 2007-2030 Coal 3% Biofuels <1% $0.7 trillion $0.2 trillion Power 52% Oil 24% Gas 21% $13.6 trillion $6.3 trillion $5.5 trillion Shipping 4% Shipping & Refining ports 16% Transmission 9% Transmission Power & distribution Exploration & & distribution generation 31% development 50% 50% Exploration and 61% development LNG chain Mining 80% 8% 91% Investment of $26 trillion, or over $1 trillion/year, is needed, but the credit squeeze could delay spending, potentially setting up a supply-crunch once the economy recovers

Energy-related CO2 emissions Business as Usual Scenario 5 10 15 20 25 30 35 40 45 1980 1990 2000 2010 2020 2030 Gigatonnes International marine bunkers and aviation OECD - gas OECD - oil OECD - coal Non-OECD - gas Non-OECD - oil Non-OECD - coal 97% of the projected increase in emissions between 2006 & 2030 comes from non-OECD countries – three-quarters from China, India & the Middle East alone

Energy-related CO2 emissions 450 Policy Scenario International marine bunkers Gigatonnes and aviation 40 OECD - gas OECD - oil 35 OECD - coal Non-OECD - gas 30 Non-OECD - oil Non-OECD - coal 25 20 15 10 5 1980 1990 2000 2010 2020 2030 In the 450 Policy Scenario emissions peak around 2020,and then decline by more than 1/3 to reach 26 Gt in 2030

Reductions in energy-related CO2 emissions in the 450 Policy Scenario World total Gigatonnes Reference Scenario 40 CCS - 21% Energy Efficiency 54% CCS 14% Nuclear 9% Renewables & biofuels 23% Nuclear - 14% 35% (5.2 Gt reduction) Renewables & biofuels - 18% OECD+ Energy efficiency - 47% 35 CCS - 10% Nuclear - 6% Renewables & biofuels - 25% Non-OECD 30 65% (9.5 Gt reduction) Energy efficiency - 59% 450 Policy Scenario 25 20 2005 2010 2015 2020 2025 2030 OECD and non-OECD countries must both work towards reducing CO2 emissions Energy efficiency plays a key role for both OECD and non-OECD countries To inform the international climate negotiations, the IEA will release an early excerpt of the WEO 2009 climate change analysis, to coincide with post-Kyoto negotiations this September

Total power generation capacity today and in 2030 by scenario Coal 1.2 x today 1.5 x today Gas Nuclear 13.5 x today 2.1 x today 1.8 x today 12.5 x today 15% of today’s coal & gas capacity Hydro Wind Other renewables Coal and gas with CCS 1 000 2 000 3 000 GW Today Reference Scenario 2030 450 Policy Scenario 2030 In the 450 Policy Scenario, the power sector undergoes a dramatic change – with CCS, renewables and nuclear each playing a crucial role

Roadmaps can accelerate deployment of key clean energy technologies Demand side Energy efficiency in buildings Energy efficient motor systems Efficient ICEs Heat pumps Plug-ins and electric vehicles Fuel cell vehicles Industrial CCS Solar heating Efficient industry processes (starting with Cement) Supply side CCS power generation Coal – IGCC Coal – USCSC Nuclear III + IV Solar – PV Solar – CSP Wind Biomass – IGCC & co-combustion Electricity networks 2nd generation biofuels Work has already begun on technologies shown in green, and these roadmaps will be launched later in 2009.

Global electricity generation (450 ppm Scenario) 1% 9% 1% 18% 16% (1%) 4% 5% 40% 15% 22% 20% 18% 6% 18% 2% 41% 21% Renewables and nuclear power will increase

Nuclear power needs to play a larger role in 2050 Energy Technology Perspectives (ETP) 2008 shows that significant increase of nuclear generation in both OECD countries and non-OECD countries is essential to halve the current level of energy related CO2 emission by 2050.

USD 128 Billion in energy efficiency stimulus from IEA Countries IEA 25 energy efficiency policy recommendations across 7 priority areas 1. Across sectors 1.1 Measures for increasing investment in energy efficiency; 1.2 National energy efficiency strategies and goals; 1.3 Compliance, monitoring, enforcement and evaluation of energy efficiency measures; 1.4 Energy efficiency indicators; 1.5 Monitoring and reporting progress with the IEA energy efficiency recommendations themselves. 2. Buildings 2.1 Building codes for new buildings; 2.2 Passive Energy Houses and Zero Energy Buildings; 2.3 Policy packages to promote energy efficiency in existing buildings; 2.4 Building certification schemes; 2.5 Energy efficiency improvements in glazed areas. 3. Appliances 3.1 Mandatory energy performance requirements or labels; 3.2 Low-power modes, including standby power, for electronic and networked equipment; 3.3 Televisions and “set-top” boxes; 3.4 Energy performance test standards and measurement protocols. 4. Lighting 4.1 Best practice lighting and the phase-out of incandescent bulbs; 4.2 Ensuring least-cost lighting in non-residential buildings and the phase-out of inefficient fuel-based lighting. 5. Transport 5.1 Fuel-efficient tyres; 5.2 Mandatory fuel efficiency standards for light-duty vehicles; 5.3 Fuel economy of heavy-duty vehicles; 5.4 Eco-driving. 6. Industry 6.1 Collection of high quality energy efficiency data for industry; 6.2 Energy performance of electric motors; 6.3 Assistance in developing energy management capability; 6.4 Policy packages to promote energy efficiency in small and medium-sized enterprises. 7. Utilities 7.1 Utility end-use energy efficiency schemes USD 128 Billion in energy efficiency stimulus from IEA Countries

Impact of financial crisis on global investment in renewable energy 90 Geothermal Billion dollars 80 -38% Marine & small-hydro Biomass 70 Solar 60 Wind 50 2009 40 30 20 10 2004 2005 2006 2007 2008 Renewable energy investment has collapsed due to the financial crisis – which has dried up sources of project finance – and lower fossil-fuel prices …. … IEA G-8 paper estimates spending in 2009 will drop by 38% relative to 2008 Source: NEF, IEA analysis

Carbon Capture and Storage – energy efficiency alone is not enough Average worldwide ~28.4% ~1110 gCO2/kWh ~36% ~880 gCO2/kWh EU average ~42% ~740 gCO2/kWh State-of-the art PC/IGCC gCO2/kWh ~48% ~665 gCO2/kWh Advanced R&D CCS <2020 but deep cuts only by adapted from VGB 2007; efficiency – HHV,net 17

Carbon Capture and Storage - only 4 full-scale projects exist today G8 goal: 20 full-scale demonstrations announced by 2010

CO2 Storage Prospectivity Source: Bradshaw, J. and Dance, T. (2004): “Mapping geological storage prospectivity of CO2 for the world’s sedimentary basins and regional source to sink matching,” in (E.S. Rubin, D.W. Keith and C.F. Gilboy eds.), GHGT-7, Proc. Seventh International Conference on Greenhouse Gas Control Technologies, Vancouver, B.C., Canada, September 5-9, 2004.

Shifting to the 450 ppm scenario requires significant investment 5 000 450 Policy Scenario (additional to 550) 4 000 550 Policy Scenario 3 000 Billion dollars (2007) 2 000 1 000 2010-2020 2021-2030 2010-2020 2021-2030 Power plants Energy efficiency Huge investment in power plants and energy efficiency is required to shift the world onto a 450 ppm trajectory

Total oil production in 2030 by scenario 120 mb/d Non-OPEC OPEC 100 9 mb/d 16 mb/d 80 60 12 mb/d 40 20 2007 Reference Scenario 550 Policy Scenario 2030 450 Policy Scenario 2030 2030 Curbing CO2 emissions would improve energy security by cutting demand for fossil fuels, but even in the 450 Policy Scenario, OPEC production increases by 12 mb/d from now to 2030

Summary For energy security need to diversify oil and gas sources must ensure continued supply-side investment to meet oil demand and address production decline in mature fields and investment throughout the gas supply chain For energy security and climate change mitigation must invest in low carbon technologies: CCS, renewables, nuclear and energy efficiency must all be embraced Economic crisis is an opportunity to place a Clean Energy New Deal at the heart of economic stimulus packages everywhere.