1. © OECD/IEA 2014 Dr. Fatih BIROL IEA Chief Economist Prague, 11 December 2014

2. © OECD/IEA 2014 Signs of stress in the global energy system Current calm in markets should not disguise difficult road ahead  Turmoil in the Middle East raises doubts over future oil balance  Resurgent debate over the security of gas supply to Europe Mixed signals in run-up to crucial climate summit in Paris in 2015  Global CO 2 emissions still rising, with most emitters on an upward path  Increasing emphasis on energy efficiency starting to bring results Will change in global energy be led by policies, or driven by events?

3. © OECD/IEA 2014 Changing dynamics of global demand Energy demand by region As China slows, then India, Southeast Asia, the Middle East and parts of Africa & Latin America take over as the engines of global energy demand growth. 2 000 4 000 6 000 8 000 10 000 199020002010202020302040 Mtoe OECD Rest of world China Rest of world OECD

4. © OECD/IEA 2014 United States holds a strong position on energy costs Weighted average cost of energy paid by consumers Economies face higher costs, but the pace of change varies: China overtakes the US, costs double in India & remain high in the European Union & Japan United States 500 1 000 1 500 2 000 European Union JapanChinaIndia $/toe 2008 2013 2040

5. © OECD/IEA 2014 20132020203020402015 Instability in the Middle East a major risk to oil markets Oil production growth The short-term picture of a well-supplied market should not obscure future risks as demand rises to 104 mb/d & reliance grows on Iraq & the rest of the Middle East +5 +10 +15 -5 20132020203020402015 Net decline in output from other producers Increase to 2040: 14 mb/d mb/d Increase to 2040: 14 mb/d Middle East Brazil Canada United States & reliance grows on Iraq & the rest of the Middle East in United States, Canada, Brazil & the Middle East

6. © OECD/IEA 2014 Looking ahead on the oil price Against a backdrop of weaker demand, buoyant supply in North America has brought prices down – but can it keep them down? Lower prices are starting to curtail upstream spending plans, with implications for future supply Over time, squeezed cash flow would constrain the capacity of North America & Brazil to act as engines of global supply growth Current oil price levels could provide some breathing space to major oil importers, boosting demand & GDP It would also accelerate reliance on low-cost producers in the Middle East, some of which face major investment challenges

7. © OECD/IEA 2014 Gas on the way to become first fuel, with role of LNG on the rise Main sources of regional LNG supply Share of LNG rises in global gas trade, pushed by a near-tripling in liquefaction sites: LNG brings more integrated & secure gas markets, but only limited relief on prices Middle East Australia US & Canada East Africa Russia North Africa West Africa Other Middle East Southeast Asia West Africa Australia North Africa Other 100 200 300 400 500 600 bcm 20122040

8. © OECD/IEA 2014 India World Global coal demand leveling off Global coal demand by key region Global coal demand growth slows rapidly due to more stringent environmental policies, underlining the importance of high-efficiency plant & CCS to coal’s future 1 000 2 000 3 000 4 000 5 000 6 000 7 000 1980199020002010202020302040 Mtce 1987: European coal demand peak 2005: US coal demand peak Chinese coal demand plateau India: 2 nd largest coal consumer by 2020 Other India China United States Europe

9. © OECD/IEA 2014 Retirements add to the investment challenge in the power sector Power capacity by source, 2013-2040 Despite limited demand growth, OECD countries account for one-third of capacity additions – to compensate for retirements & to decarbonise 2013 RetirementsAdditions 2040 2 000 4 000 6 000 8 000 10 000 12 000GW Renewables Nuclear Oil Gas Coal

10. © OECD/IEA 2014 Nuclear capacity grows by 60%, but no nuclear renaissance in sight Net capacity change in key regions, 2013-2040 By 2040, an expanded nuclear fleet has saved almost 4 years of current CO 2 emissions & for some countries has improved energy security & balances of energy trade -20020406080100120140 European Union Japan United States Russia India China GW

11. © OECD/IEA 2014 50 100 150 200 199020002010202020302040 GW 2013 Nuclear power: public concerns must be heard and addressed Retirements of nuclear power capacity 1990-2040 Key public concerns include plant operation, decommissioning & waste management; Spent nuclear fuel European UnionUnited StatesJapanOthers 38% of today’s capacity to retire by 2040 1971-2012 350 thousand tonnes 1971-2040 705 thousand tonnes 1971-2040: 705 thousand tonnes United States European Union JapanChina Canada RussiaKorea India Other By 2040, almost 200 reactors are retired & the amount of spent fuel doubles & the amount of spent fuel doubles

12. © OECD/IEA 2014 Nuclear power can play a role in CO 2 abatement & energy security Share of energy demand met by domestic sources and nuclear power in 2040 0.5 1.0 1.5 2.0 2.5 197120202040 Gt 19802000 CO 2 emissions avoided annually by nuclear power 1971-2040 20% 40% 60% 80% 100% ChinaUnited States European Union JapanKorea Net importsIndigenous production & nuclear NuclearIndigenous production By 2040, an expanded nuclear fleet has saved almost 4 years of current CO 2 emissions & for some countries has improved energy security & balances of energy trade

13. © OECD/IEA 2014 Navigating a stormy energy future Geopolitical & market uncertainties are set to propel energy security high up the global energy agenda Volatility in the Middle East raises short-term doubts on investment & spells trouble for future oil supply Nuclear power can play a role in energy security, carbon abatement and economic goals Far-sighted government policies are essential to steer the global energy system on to a safer course Reconciling competitiveness, the imperatives of energy security and climate change will be critical for European policy-makers in 2015

14. © OECD/IEA 2014 www.worldenergyoutlook.org email: weo@iea.org