© OECD/IEA, 2007 Security of Energy Supply in the European Union William C. RAMSAY INTERNATIONAL ENERGY AGENCY Castle Mĕlník, 31 May 2007

© OECD/IEA, 2007 The Slovak Republic and Poland are candidate countries Australia (1979) AustriaBelgium Canada Czech Republic (2001) Denmark Finland (1992) France (1992) Germany Greece (1977) Hungary (1997) Ireland Italy ( 1978) Japan Korea (2002) Luxembourg The Netherlands Norway participates in the Agency under a special Agreement Portugal (1981) Spain Switzerland Turkey (1981) United Kingdom United States Sweden New Zealand (1977) The IEA: Who are Members?

© OECD/IEA, 2007 IEA Shared Goals 1.Diversity, efficiency and flexibility in the energy sector 2.Prompt, flexible (and, when needed, collective) response to energy emergencies 3.Environmentally sustainable provision and use of energy 4.Development of more environmentally acceptable energy sources 5.Improved energy efficiency 6.Continued research, development and market deployment of new and improved energy technologies 7.Undistorted energy prices 8.Free and open trade and a secure framework for investment 9.Co-operation among all energy market participants

© OECD/IEA, 2007 Total Stocks of 4.1 billion barrels =150 days of net imports Public stocks only = 2 years of Iranian exports No emergency system exists for natural gas Public Oil Stocks Key to Preparedness

© OECD/IEA, 2007 Hurricanes Katrina & Rita This is the core task of governments 2 September IEA collective response to Hurricane Katrina

© OECD/IEA, 2007 World Energy Outlook 2006

© OECD/IEA, 2007 Reference Scenario: World Primary Energy Demand Global demand grows by more than half over the next quarter of a century, with coal use rising most in absolute terms Oil Coal Gas Biomass Nuclear Other renewables Mtoe

© OECD/IEA, 2007 New Oil & Gas Upstream Investment by Source and Destination, Oil and gas companies based on OECD countries continue to dominate global upstream investment, most of which will go to non-OECD Total investment = $306 billion Source of investment by company base Distribution of investment Rest of world 13% OPEC 7% OECD 80% Rest of world 59% OPEC 23% OECD 19 %

© OECD/IEA, % 51% 42% 16% 10% 9% 22% 39% 49% 0% 20% 40% 60% 80% 100% OECDTransition economiesDeveloping countries Changing Pattern of Energy Demand About 70% of the increase in energy demand will come from developing countries due to their more rapid economic and population growth

© OECD/IEA, 2007 China Oil Outlook China’s oil imports will soar from around 3 mbd today to almost 12 mbd in 2030 NDRC projection for 2010 in 11 th Five Year Plan = 7.7 mbd

© OECD/IEA, 2007 World Primary Coal Demand Alternative Policy Scenario Reference Scenario actual Reality? High Oil & Gas prices have prompted a phenomenal coal response Without clean coal and other technologies this is not sustainable mtoe mtce

© OECD/IEA, 2007 EU CO2 Emissions in the “Business-as-usual” Scenario 1990 = Mt Based on current trends, the EU’s emissions will be 6% and 10% above 1990 levels by 2015 and 2030 respectively

© OECD/IEA, 2007 Improving European Energy Security Means… More capacity More efficiency More diversity …in a truly integrated Internal Market

© OECD/IEA, ) Investment

© OECD/IEA, 2007 Oil 10% Electricity 68% Coal 1% Gas 17% $2.5 trillion (in $2005) $0.2 trillion $1.7 trillion $0.4 trillion Biofuels 3% In the Reference Scenario, European energy investment needs to 2030 exceed $2.5 trillion. Over two-third of this investment is needed in the electricity sector. Required Energy Investment OECD Europe

© OECD/IEA, 2007 Investment challenge in Power Generation: Ageing plants and increasing demand New investment corresponding to at least 25% of existing capacity needed by 2015

© OECD/IEA, 2007 Power Demand Growth to 2015: Gas-fired generation dominates

© OECD/IEA, 2007 Gas: Risk of Global Under-Investment to 2015

© OECD/IEA, 2007 Russian Gas Supply Outlook… Gazprom Production Outlook New Independent Russian Domestic Demand New Gazprom Region (Yamal) Existing Gazprom Region (NPT) Gap between WEO and Russian Outlook

© OECD/IEA, ) Efficiency

© OECD/IEA, 2007 Efficiency improvementsCCS 78% 22 % 20 % 34 % 46 % 6 Gt reduction of CO 2 in 2030 Cleaner energy mix 32 Gt reduction of CO 2 in 2050 More Technology: Scenarios for CO2 Emissions Improved efficiency and a diverse portfolio of new energy technologies could substantially reduce the growth in CO 2 emissions

© OECD/IEA, 2007 Compact Fluorescent Lamps LED traffic lights Super windows & daylighting Reducing standby power consumption Efficient information and communication technologies Energy efficiency offers substantial energy and greenhouse gas savings at low or negative costsubstantial energy and greenhouse gas savings at low or negative cost energy security and reliability benefitsenergy security and reliability benefits enhanced business competitiveness and social welfareenhanced business competitiveness and social welfare Energy Efficiency Has A Key Role To Play And Is Available In The Short Term High performance buildings Least life-cycle cost appliances A B C D E F G Labelling and certification

© OECD/IEA, 2007 Energy Efficiency Indicators: We must - and we can - do better! Rate of Energy Efficiency Improvements Rate of Energy Efficiency Improvements Since 1990, the rate of energy efficiency improvement in IEA countries has been less than 1% p.a. - much lower than in previous decades

© OECD/IEA, ) Diversity

© OECD/IEA, 2007 Diversity of the Energy Mix (EU 25 Primary Energy Supply in 2004) Mtoe Diversifying the fuel mix and the sources of supply are key steps in improving energy security.

© OECD/IEA, 2007 European Gas Supplies LNG Terminals from 100 Bcm/y in 2007 to > 200 Bcm/y in 2010

© OECD/IEA, 2007 Regional outlook – Central Asia

© OECD/IEA, 2007 Can the Internal Energy Market deliver?

© OECD/IEA, 2007 For timely investment we need: Open, transparent, fully functioning markets, This means: -Non-discriminatory third-party access to grids -Unbundling of transmission from generation and supply -Strong cross border transmission links -A European regulator to set clear rules and make timely decisions for cross-border energy investment and trade Policy and regulatory certainty: -Policy uncertainty (eg. over climate change) can jeopardize clever investment – that is the right amount, at the right time, in the right location, and using the right technology -It must be easier and faster to get permission to build new infrastructure

© OECD/IEA, 2007 For improved energy efficiency we need: -Cost reflective pricing so that consumers can respond appropriately to price signals -The use of strict norms and standards in cases where cost effective energy efficient choices are ignored

© OECD/IEA, 2007 For improved energy diversity we need to: -Improve the cost-competitiveness of renewables and biofuels -Develop a legal and regulatory framework that can attract private investment in LNG terminals and nuclear in those countries where it is accepted -Accelerate the development of large-scale CCS projects -Fully implement the internal market as diversity must be achieved at the European level