World Energy Outlook Key Challenges Ahead of us Energy Risk Europe 2006 3 October 2006, London International Energy Agency © OECD/IEA (2006)

Challenge 1: Security of Supply © OECD/IEA (2006)

International Crude Oil Prices, WTI Crude oil prices has risen since 2002, reaching new highs in 2004 and 2005 – the price of WTI hit $78 in August 2006 © OECD/IEA (2006)

Spare Refinery Capacity Significant amount of investment is needed to reverse the downward trend in global oil refining spare capacity © OECD/IEA (2006)

World Primary Oil Demand, 1971-2005 1970 1975 1980 1985 1990 1995 2000 2005 10 20 30 40 50 60 70 80 90 mb/d Total Non-transport sectors Transport sector The share of transport is increasing at the cost of all other sectors. © OECD/IEA (2006)

OECD Oil Demand Growth by Sector, 1999 - 2005 -1.5 -1 -0.5 0.5 1 1.5 2 2.5 Power Generation Industry Transport mb/d In the OECD, the transport sector accounted for almost all the oil demand growth © OECD/IEA (2006)

Vehicle Ownership, 2004 5000 10000 15000 20000 25000 30000 35000 40000 GDP per capita (dollars) 100 200 300 400 500 600 700 800 900 vehicles per thousand people USA Italy Germany France Canada Japan UK Poland Korea Israel Russia Malaysia Mexico Brazil Thailand Indonesia China India The potential for increased vehicle ownership in emerging markets is enormous © OECD/IEA (2006)

New Car Registrations, 2004 Non-OECD markets currently account for one-third of global new car sales – but the share is growing rapidly © OECD/IEA (2006)

Pump Price of Diesel in Developing Asian Countries, February 2006 Indicative average delivered cost of imported diesel *Nov. 2004 data for the Philippines Most developing Asian countries subsidise diesel, cushioning demand from rises in international prices © OECD/IEA (2006)

World Primary Energy Demand 18 000 16 000 Oil 14 000 12 000 10 000 Gas Mtoe 8 000 6 000 Coal 4 000 Other renewables 2 000 Nuclear Hydro 1971 1980 1990 2000 2010 2020 2030 Oil, gas and coal together account for 83% of the growth in energy demand between now and 2030 in the Reference Scenario

Regional Shares in World Primary Energy Demand Two-thirds of the increase in world demand between 2003 and 2030 comes from developing countries, especially in Asia

Incremental World Primary Oil Demand by Sector, 2005-2015 Transport will account for the bulk of the increase in oil demand through 2015, making demand less sensitive to crude oil prices © OECD/IEA (2006)

World Oil Production Shifts Away from OECD Global oil production climbs from 82 mb/d in 2004 to 115 mb/d in 2030; OECD share falls from 25% to 12% © OECD/IEA (2006)

World Proven Oil Reserves MENA share of global oil reserves is much higher than its share of current production, suggesting strong potential for growth © OECD/IEA (2006)

MENA Net Oil Exports mb/d MENA plays an increasingly important role in international trade, its net exports surging from 22 mb/d in 2004 to 39 mb/d in 2030

Net Oil Imports by OECD Regions OECD North America OECD Europe OECD Pacific 3 6 9 12 15 18 2004 2030 mb/d MENA non MENA OECD Europe will rely more on MENA oil – imports from MENA reach 8.5 mb/d, or nearly two-thirds of total imports in 2030

Proven Natural Gas Reserves Gas reserves, concentrated in the Middle East & the transition economies, are equal to 66 years of current production © OECD/IEA (2006)

MENA Natural Gas Exports Billion cubic metres MENA becomes the world’s leading gas exporter, with most of the increase in exports meeting surging European & US LNG demand © OECD/IEA (2006)

Net Natural Gas Imports by OECD Regions OECD Europe will see its net imports grow from 200 bcm in 2003 to 500 bcm in 2030, meeting 64% of the region’s total gas demand

EU Gas Supply Balance 800 600 bcm 400 200 1980 1990 2004 2010 2020 2030 Production Net imports Rising demand – mainly for power generation – and declining output will cause net imports to surge © OECD/IEA (2006)

EU Power Generation Capacity Increases, 2004-2030 1200 1000 800 GW 600 400 200 2005 2010 2015 2020 2025 2030 Existing New More than half of the existing capacity will need to be replaced by 2030 © OECD/IEA (2006)

Challenge 2: Carbon Dioxide Emissions © OECD/IEA (2006)

World Energy-Related CO2 Emissions Global emissions grow 50% between now and 2030, and developing countries’ emissions will overtake OECD’s in the 2020s © OECD/IEA (2006)

CO2 Emissions Growth 2004-2030 1 000 2 000 3 000 4 000 China OECD 1 000 2 000 3 000 4 000 China OECD million tonnes 3 6 9 12 15 tonnes per capita 2004 2030 Pacific Europe North America OECD CO2 emissions growth are about three quarters of Chinese CO2 rise, but on a per capita basis, OECD emissions will be still two times higher in 2030 © OECD/IEA (2006)

World Alternative Policy Scenario Fulfilling the G8 Mandate At the G8 Summit in July 2005, the IEA was called upon to “advise on alternative energy scenarios and strategies aimed at a clean, clever and competitive energy future”. World Alternative Policy Scenario © OECD/IEA (2006)

World Alternative Policy Scenario (WAPS) Mandate by G-8 leaders and proposal to IEA Ministers Analyses impact of new environmental & energy-security policies worldwide OECD: Policies currently under consideration Non-OECD: Also includes more rapid declines in energy intensity resulting from faster deployment of more-efficient technology Impact on fuel mix, CO2 emissions & investment needs © OECD/IEA (2006)

Key Policies in Alternative Scenario for EU More than 100 policies at EU level and 300 at country level Power Generation Renewable energy directive CHP directive ETS Transport sector Prolongation of the ACEA voluntary agreement Biofuels target Residential and commercial sectors Eco-design Energy performance in buildings directive © OECD/IEA (2006)

Oil/Gas Demand in the Reference and Alternative Policy Scenarios 20 40 60 80 100 120 140 Oil Gas mb/d 1000 2000 3000 4000 5000 6000 bcm 2030 Reference Scenario 12.1 mb/d 500 bcm 2030 Alternative Scenario 2004 Oil & gas demand in the Alternative Scenario are both 10% lower in 2030 due to significant energy savings and a shift in the energy mix © OECD/IEA (2006)

EU CO2 Emissions in the Reference & Alternative Scenarios 2 000 2 500 3 000 3 500 4 000 4 500 5 000 1990 2000 2010 2020 2030 Mt of CO 2 Reference Scenario Alternative Scenario Kyoto Target With new policies, EU CO2 emissions stabilise by 2010 and fall after 2020 © OECD/IEA (2006)

Contributory Factors in CO2 Reduction 2003-2030 0% 20% 40% 60% 80% 100% 5% Changes in the fossil-fuel mix in power generation 49% 10% 21% 12% 8% OECD 63% 1% 21% 15% Transition economies 67% 7% 17% 5% 4% Developing countries 10% Increased nuclear in power generation 20% Increased renewables in power generation 7% Fuel switching in end uses 58% World End-use efficiency gains Improvements in end-use efficiency contribute for more than half of decrease in emissions, and renewables use for 20% © OECD/IEA (2006)

Share of Non-Hydro Renewables in Electricity Generation, 2030 New policies would boost the share of non-hydro-renewables in all regions – most in the EU in absolute terms © OECD/IEA (2006)

Difference in European Electricity Investment in the Alternative vs Difference in European Electricity Investment in the Alternative vs. Reference Scenario 2003-2030 Additional investments on the demand side more than offset by lower investment on the supply side © OECD/IEA (2006)

Summary & Conclusions Projected market trends raise serious concerns Increased risk for energy security Rising environmental concerns More vigorous policies would curb rate of increase in energy demand and emission significantly But a truly sustainable energy system will call for faster technology development & deployment Urgent and decisive government action needed

WEO 2006 – Alternative Scenario World Alternative Policy Scenario a “tool for change” Deepening and broadening the analysis New analysis in World Alternative Policy Scenario Database with more than a thousand policies and measures Economic comparison (capital cost and fuel expenditure) Co-operation with World Bank, UNEP, EU, centers of excellence in key developing countries (China, India, Brazil) Beyond Alternative Policy Scenario What options to stabilise CO2 emissions by 2030 and limit oil demand growth What implications for beyond 2030 © OECD/IEA (2006)

WEO 2006 – Special chapters Impact of Higher Energy Prices Energy Price Trends and Relationships (oil, gas , coal and electricity) Impact on energy demand and macroeconomy Energy Policy Implications Role for Nuclear Availability of uranium and costs Economics of new reactors Nuclear investments in competitive markets Prospects for Biofuels Realistic outlook of how far they can take us Economics of biofuels production/consumption Reference, Alternative Scenario and Beyond © OECD/IEA (2006)