World Energy Outlook Dr. Fatih Birol IEA Chief Economist Brussels, 29 April 2014

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 reshape ideas about distribution of resources But long-term solutions to global challenges remain scarce Renewed focus on energy efficiency, but CO2 emissions continue to rise Fossil-fuel subsidies increased to $544 billion in 2012 1.3 billion people still lack electricity – in Africa and South Asia 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

US shale gas and shale oil production increases: 2005-2014 Unconventional oil and gas has made a major contribution to global production US shale gas and shale oil production increases: 2005-2014 bcm 300 3.0 mb/d 250 2.5 200 2.0 150 1.5 100 1.0 50 0.5 0.0 Gas Oil 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 while shale oil output is equal to that of Iraq

Who has flooded the markets? Incremental steam coal exports Mt 200 Indonesia 180 Australia 160 United States 140 120 100 80 60 40 20 2009 2010 2011 2012 2013 The US accounted for only 7% of the increase in global steam coal exports since 2007

The slowdown in Chinese demand caught the industry off-guard Coal demand in China: real demand vs historical trend Real consumption Mt 4400 Historical trend 4200 4000 Curbing in China ≈ 20 times US exports increase in 2012 3800 3600 3400 3200 3000 2010 2011 2012 2013 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

A mix that is slow to change Growth in total primary energy demand 1987-2011 Gas 2011-2035 Coal Renewables Oil Nuclear 500 1 000 1 500 2 000 2 500 3 000 Mtoe Today's share of fossil fuels in the global mix, at 82%, is the same as it was 25 years ago; the strong rise of renewables only reduces this to around 75% in 2035

US emissions on a downward trend Energy-related CO2 emissions in the United States Gt CO2 6.5 6.0 5.5 5.0 4.5 4.0 1990 1995 2000 2007 2012 2013 CO2 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

Emissions off track in the run-up to the 2015 climate summit in France Cumulative energy-related CO2 emissions OECD Non-OECD Total emissions 1900-2035 51% 49% Gt 800 600 Non-OECD OECD 400 200 1900 1930 1960 1990 2013 -2035 -1929 -1959 -1989 -2012 Non-OECD countries account for a rising share of emissions, although 2035 per capita levels are only half of OECD

Who has the energy to compete? Ratio of industrial energy prices relative to the United States Natural gas Electricity 3× 4× 5× Reduction from 2013 2003 2035 2013 2003 2× United States Japan European Union China Japan European Union China Regional differences in natural gas prices narrow from today’s very high levels but remain large through to 2035; electricity price differentials also persist electricity price differentials also persist

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

An energy boost to the economy? Share of global export market for energy-intensive goods European Union +3% +1% +2% +2% Japan Today 36% 10% 7% 7% 3% 2% China Middle East India United States -10% -3% The US, together with key emerging economies, increases its export market share for energy-intensive goods, while the EU and Japan see a sharp decline while the EU & Japan see a sharp decline

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

A Third Way for Europe: balancing competitiveness & sustainability The high cost of energy in Europe is a structural issue, not a one off Europe’s share of the global export market for energy-intensive goods is set to decline substantially by 2035, directly impacting 30 million jobs Both competitiveness & sustainability are crucial issues for Europe, but it must not be seen as an “either-or” choice improve energy efficiency negotiate more competitive terms for natural gas imports develop renewables, nuclear power & unconventional gas complete the internal energy market 2014 a key year for Europe energy policy, it will shape its long-term prosperity & could provide powerful inspiration for others to follow