1. © OECD/IEA 2013 Global Energy Dynamics: Outlook for the Future Dr Fatih Birol Chief Economist, IEA 10 April 2014

2. © OECD/IEA 2013 The world energy scene today Some long-held tenets of the energy sector are being rewritten  Countries are switching roles: importers are becoming exporters…  … and exporters are among the major sources of growing demand  New supply options re-orientate the energy trade map But long-term solutions to global challenges remain scarce  Renewed focus on energy efficiency, but CO 2 emissions continue to rise  Fossil-fuel subsidies increased to $544 billion in 2012  1.3 billion people lack electricity Energy prices add to the pressure on policymakers  Sustained period of high oil prices without parallel in market history  Large, persistent regional price differences for gas & electricity

3. © OECD/IEA 2013 25 years ago the share of fossil fuels in the global mix was 82%; it is the same today & the strong rise of renewables in the future only reduces this to around 75% in 2035 The energy mix is slow to change Growth in total primary energy demand 5001 0001 5002 0002 5003 000 Nuclear Oil Renewables Coal Gas Mtoe 1987-2011 2011-2035

4. © OECD/IEA 2013 Growth in US shale gas output since 2005 is equivalent to the total production of Qatar, Kuwait, UAE and Iraq combined; while shale oil output is equal to that of Iraq Unconventional oil and gas has made a major contribution to global production 0 50 100 150 200 250 300 Gas bcm 0.0 0.5 1.0 1.5 2.0 2.5 3.0 Oil mb/d US shale gas and shale oil production increases: 2005-2014 while shale oil output is equal to that of Iraq

5. © OECD/IEA 2013 US oil imports are shrinking rapidly – thanks to shale oil only? Reductions in US oil imports in 2035 relative to today Increased oil supply Natural gas use in transport Biofuels use in transport Demand-side efficiency 35% 8% 18% 39% US oil imports are set to plummet due to increasing oil supplies and recently adopted policies to improve efficiency of cars and trucks

6. © OECD/IEA 2013 -202468 Rest of the world United States Brazil Middle East mb/d Two chapters to the oil production story Contributions to global oil production growth The United States (light tight oil) & Brazil (deepwater) step up until the mid-2020s, but the Middle East is critical to the longer-term oil outlook 2013-2025 2025-2035

7. © OECD/IEA 2013 2013 Regional natural gas prices: who has the energy to compete? 0 2 4 6 8 10 12 14 16 18 20 European UnionJapanUnited States $/MBtu Regional differences in natural gas prices narrow from today’s very high levels but remain large 2035 Natural gas prices by region

8. © OECD/IEA 2013 Energy-intensive industries need to count their costs Share of energy in total production costs for selected industries Energy-intensive sectors worldwide account for around one-fifth of industrial value added, one-quarter of industrial employment and 70% of industrial energy use. 10%20%30%40%50%60%70%80%90% Glass Pulp & paper Iron & steel Cement Aluminium Fertilisers Petrochemicals

9. © OECD/IEA 2013 US emissions on a downward trend Energy-related CO 2 emissions in the United States CO 2 emissions fell sharply since the shale gas revolution, but rebounded last year on the back of a partial gas-coal switch and increased industrial activity 4.0 4.5 5.0 5.5 6.0 6.5 199019952000200720122013 Gt CO 2

10. © OECD/IEA 2013 Who has flooded the markets? Incremental steam coal exports The US accounted for only 7% of the increase in global steam coal exports since 2007 0 20 40 60 80 100 120 140 160 180 200 20092010201120122013 Mt Indonesia United States Australia

11. © OECD/IEA 2013 The slowdown in Chinese demand caught the industry off-guard Coal demand in China: real demand vs historical trend China’s move away from coal will be a far greater determinant of the direction of the coal markets than the shale gas revolution in the US 3000 3200 3400 3600 3800 4000 4200 4400 2010201120122013 Mt Real consumption Historical trend Curbing in China ≈ 20 times US exports increase in 2012

12. © OECD/IEA 2013 LNG from the United States can alleviate strain on the gas markets, but is no silver bullet Indicative economics of LNG export from the US Gulf Coast New LNG supplies accelerate movement towards a more interconnected global market, but high costs of transport between regions mean no single global gas price Average import price Liquefaction, shipping & regasification United States price 3 6 9 12 15 18 To Asia $/MBtu 3 6 9 12 To Europe $/MBtu but high costs of transport between regions mean no single global gas price

13. © OECD/IEA 2013 Concluding remarks The shale revolution is having an unprecedented impact on the global energy landscape, economy and geopolitics While US natural gas prices may rise, large disparities between regions will persist Middle East oil will continue to be indispensible to world markets – the right signals to invest must be sent US energy policy must guard against complacency – not to forget importance of energy efficiency, nuclear power and clean coal How will the United States adapt its energy strategy and foreign policy to the reality of a richer resource base?