© OECD/IEA NATURAL GAS MARKEREVIEW 2008 Gas and the Sustainability Drive: what will it do the fuel mix? Ian Cronshaw, Head of Energy Diversification Division International Energy Agency GIE Annual Conference, Bucharest 23 October 2008

OECD Europe--Gas Delivered

Spain’s economy slows— but not gas demand

Japan—demand growth surprises Japan Annual Totals BCM% Change % % % % % %

Increase in Global Natural Gas Demand, Natural gas demand grows by 2.1% per year through to 2030, from bcm in 2005 to bcm in 2030.

OECD Power generation growth Incremental generation

Changes in installed capacity in OECD Sources: IEA data, Platts and GWEC Policy uncertainty, especially with respect to climate change, favours gas as the short term default option for new investment

Share of gas-fired power in electricity output, and demand of gas for power (Bcm at top of bars). Source: IEA data and forecasts from national government submissions Gas-fired power in the US increased by 10% last year. All larger OECD countries foresee further increases in gas demand for power.

Monthly average prices of gas and power in the UK, coal, and CO² in EU ETS

Investment: EPC unit costs in LNG rise sharply

Investment: Pipeline projects in Eurasia

Impact of financial crisis? There is no major concern about gas consumption growth except timely construction of supply infrastructure Financial crises may cause better sentiment for tangible projects with (fairly)stable return rate Raw materials cost drop might be beneficial, but regulatory framework and formal difficulties associated with infrastructure projects that were a concern before the summer remain

Average Annual Power Generation Capacity Additions in the “50% CO 2 Reduction Scenario” 2010 – 2050

Some summary observations Demand growth still strong; both inside IEA and non member countries Gas consumption growth strong in despite slowing/zero growth Electricity and gas markets now strongly linked. LNG grows fast, but demand grows faster Europe imports by pipeline and LNG Global Gas Market Interactions Increase

Key message In all scenarios, gas is a key source of energy for the foreseeable future Gas meets some interlinked challenges: security of supply, environment, affordability Gas power generation seems to be the default option providing needed flexibility and back up to wind and hydro power generation