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2 Introduction

•IEEJ Outlook 2018

- Prospects & Challenges up to 2050 –

•Today’s Topic

The Role of Coal & LNG in Asia’s Future Energy Mix

: Defying the odds?

•Introduction of Panelists

2

October 2017

The Institute of Energy Economics, Japan

IEEJ

Outlook 2018– Prospects and challenges until 2050 –

Energy, Environment and Economy

Executive summary

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3

Asia/World Energy Outlook 2018 – Prospects and Challenges up to 2050–

October 2017

The Institute of Energy Economics, Japan

IEEJ

Outlook 2018– Prospects and challenges until 2050 –

Energy, Environment and Economy

Executive summary

Available soon on our website

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4 Overview of the current global energy market

4

・Although the trend of Asia as leading the global energy market remains unchanged, developments in the US and China, which accounts for 40% of the energy market, must be carefully monitored.

・World coal demand dropped for two years in a row (US and China largely) while oil and gas grew. China’s coal consumption declined for the third consecutive year (2016, BP).

・Discussions on Peak Oil (supply) of the 2000s are now changing to Peak Demand. Note the recent movements that aim to ban the sale of internal combustion engine vehicles.

・CO2 emissions dropped in 2015 but increased again in 2016. India and ASEAN showed big increases despite the declined observed in the US and China.

・Paris Agreement calls for “Long-term low greenhouse gas emission development strategies” by 2020. This Outlook expands its estimation period to 2050.

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5 Scenarios in this Outlook

5

#Reference Scenario Reflects past trends with current energy and environment policies. Does not reflect any aggressive policies for low-carbon measures.

#Advanced Technologies Scenario Assumes the introduction of powerful policies to enhance energy security and address climate change issues. It promotes utmost penetration of low-carbon technologies.

#Oil Demand Peak Case Assumes a more rapid introduction of electric drive vehicles than in the reference scenario, to analyze the possibilities of oil demand peak.

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6 Examples for Technology

6

*1 ZEV: battery electric vehicles, plug-in hybrid electric vehicles and fuel cell battery vehicles

*2 CCT: ultra super critical, advanced-USC and integrated coal gasification combined cycle

Reference Advanced

Technologies

Peak Oil

Demand

En

erg

y e

ffic

ien

cy

Vehicle technology (ZEV*1 sales share)

9% in 2030 20％ in 2050

21％

43％

30％

100％

Coal-fired power

generation (CCT share in newly installed

capacity)

30％ in 2030

90％ in 2050

70％

100％

Sam

e a

s Refe

ren

ce

Carb

on

fr

ee

tech

no

log

y

Installed capacity

PV

Wind

Nuclear

(2015 to 2050)

0.2 to 1.5 TW

0.4 to 1.9 TW

0.4 to 0.6 TW

(2050)

2.5 TW

3.0 TW

1.0 TW

Thermal power generation with

CCS (Only countries and regions with CO2

storage potential excluding aquifers)

none Newly installed

after 2030

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Energy Outlook up to 2050

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0

50

100

150

200

250

1990 2000 2010 2020 2030 2040 2050

Y2015=100

-250 250 750

China

India

ASEAN

Other Asia

*MENA

**SS Africa

Latin America

Europe

Intl. bunkers

OECD

Non

-OEC

D

2015-2030

2030-2050

Mtoe

Energy market shifting to southern Asia

8

❖ Global Population, GDP and Energy ❖ Growth in Primary Energy

255

145

132

GDP

Energy

Population

<Reference>

* Middle East and North Africa, **Sub-Saharan Africa

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9 KAYA Identity

9

Emissions = Population X GDP X Energy X Emissions

capita GDP Energy

ZERO ZERO

SDG 32%

70%

GDP 155%

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10

21.2

32.9

44.1

0

10

20

30

40

50

1990 2010 2030 2050

GtCO2

13.6

19.8

0

5

10

15

20

2015 2050

Gtoe

-0.5 0.5 1.5 2.5

Coal

Oil

Natural Gas

Nuclear

Renewables Asia*

RoW**

Gtoe

High dependence on fossil fuels continues

10

❖ Growth in Primary Energy ❖ Energy-related CO2

<Reference>

❖ Energy Mix

* Non-OECD Asia, **Rest of the world

81%

79%

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19.8

17.2

0

5

10

15

20

25

1990 2000 2010 2020 2030 2040 2050

Reference

Advanced Technology

Gtoe

elec.

elec.

elec.

other fuels

other fuels

other fuels

genera-tion loss

transmission

losses*

-0.8 -0.6 -0.4 -0.2 0.0

Industry

Transport

Building

PowerGeneration

Gtoe

Drawing another path – Advanced Technologies Scenario

11

❖ Global Primary Energy ❖ Reduction Effects by ATS in 2050

Up-to-date Technologies

Efficiency Improvement

Efficiency Improvement and Zero-emission Generation

* Including station service power

Cumulative Reduction 40Gt

<Advanced Technologies>

Efficiency Improvement

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0

10

20

30

40

50

Reference ATS

2015 2050

PWh

10%

28%47%

0

2

4

6

8

10

12

14

Reference ATS

2015 2050

VRE*

Other RE

Hydro

Nuclear

Gas

Oil

Coal

TW

Zero-emission Generation occupies two thirds

12

❖ Global Power Generation ❖ Global Power Capacity

* Variable Renewable Energy includes PV, CSP, wind and marine.

66% 62%

38%

34%

60%

6%

Non-fossil

Fossil with CCS

Fossil

34%

<Advanced Technologies>

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13

0

1

2

3

4

5

6

1990 2000 2010 2020 2030 2040 2050

Gtoe

Oil

Coal

Nuclear

Renewables

Gas

Genera-tion

Genera-tion

Genera-tion

Genera-tion

Trans-port

-2 -1 0 1

Coal

Oil

Gas

Nuclear

Renewables

Gtoe

Coal falls significantly and below renewables

13

❖ Primary Energy ❖ Effects by ATS in 2050

(solid line: ATS, dotted line: reference)

<Advanced Technologies>

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14

14

CO2

emissions peak in the middle of 2020s

❖ Energy-related CO2 Emissions ❖ Reductions by technology

……▲6.2Gt

………▲0.4Gt

…………▲2.2Gt

▲14.4Gt

……▲3.6Gt

…………▲0.5Gt

……………▲1.5Gt

<Advanced Technologies>

44

30

33

10

20

30

40

50

1990 2000 2010 2020 2030 2040 2050

GtCO2Energy Efficiency

Biofuels

Wind, Solar, etc.

Nuclear

Fuel Switching

CCS

Reference

ATS

Halve

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15

Peak Oil “Demand” Case

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16 Transportation, especially cars, drives oil demand

16

⛽ Oil consumption [Reference Scenario] ⛽ Oil for Road [Reference Scenario]

Others

Non-

energy

use

Other

transport30

40

45

47

Road

48

76

90

105

114122

0

20

40

60

80

100

120

2000 2015 2030 2040 2050

Mb

/d

21

19OECD

15

18

26Non-

OECD

33

0

10

20

30

40

2000 2010 2020 2030 2040 2050

Mb

/d

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17 The time for car electrification has come?

17

⛽ Selected recent movements by governments/assemblies and car makers A resolution to ban conventional car sales

in the European Union by 2030 was passed

by the Bundesrat of Germany (2016)

Germany

The ruling and opposition parties proposed

the abolition of conventional vehicles by

2025 (2016)

Norway

The Government announced that it would

ban conventional car sales by 2040 (2017)

France

The Government announced that it would

ban conventional car sales by 2040 (2017)

United Kingdom

Minister said that all new car sales after

2030 would be electric vehicles (2017)

India

Deputy Minister mentioned that the ban

on the sale of conventional vehicles was

under investigation (2017)

China

The target for FCV sales is more than

30,000/year in 2020 (2015). Reported of full-

scale entry into EVs in 2020 (2016)

Announced the strategy to increase EV share in

its total sales to 25% with more than 30

models of EVs by 2025 (2017)

Introducing 12 models of EVs by 2022. The

target of 30% of its total sales as EVs (2017)

The plan to prepare EVs at all line up by 2020

(2015)

Announced that eco-cars combined with EVs

and HEVs will be raised to 70% by 2025 (2017).

In 2030, two-thirds of automobile sales will be

electrified. EVs will be released in China in 2018

(2017).

Toyota

Volkswagen

Renault-Nissan

Hyundai

Ford

Honda

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18 Oil peaks around 2030 by rapid penetration of ZEVs

18

⛽ Oil for Road [Peak Oil Demand Case]

Note: Dotted lines are the Reference Scenario

15

33

21

16

OECD

5

18

22

Non-

OECD

11

0

10

20

30

40

2000 2010 2020 2030 2040 2050

Mb

/d

⛽ Total Oil Consumption

8690

105

122

Advanced

Technologies

97

98

Peak Oil

Demand

89

60

80

100

120

2010 2020 2030 2040 2050

Mb

/d

Reference

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19 ⛽ While oil decreases, natural gas and coal increase

19 Note: Excluding own use

-1,846

-1,596

432

572

-1,567

-83

409

-2,000 -1,000 0

(Mt)

Oil

Coal

Natural gas

Oil

Biomass

Electricity

CO

2

Prim

ary

co

nsu

mp

tio

nRo

ad

Mtoe

2030

2050409

1004

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20 Crude oil production shifts to low-cost regions...

20

⛽ Crude oil production [Peak Oil Demand Case]

28.8

9.9

17.1

13.8

7.2 8.4

33.7

10.7

18.4

13.8

6.9 6.9

37.3

9.2

13.011.5

6.2 5.3

32.4

42.0

11.313.6

21.6 21.9

14.5 15.0

8.8

12.4

7.4 7.2

0

10

20

30

40

Middle East Others North America Former Soviet

Union

Latin America Asia

OPEC Non-OPEC

Mb

/d

2015 2030 2050 Reference

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21 ⛽ Due to lower prices, Middle East will suffer

the largest economic downturn

21

The ratio of net oil exports/imports to nominal GDP [2050]

Note: Europe excludes the former Soviet Union

ASEAN

India

Other

Asia

Japan

Europe

China

Oceania

United

States

Africa

Latin

America

Former

USSR

Canada

Middle

East

-15%

-10%

-5%

0%

5%

0 50 100 150

Ch

an

ges in

net o

il exp

ort r

atio

to

no

min

al G

DPG

DP

Real GDP ($2010 trillion)

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22 Less pollution but less revenues from excise taxes

22

⛽ Excise taxes on gasoline and diesel oil for automobiles in OECD

370

313

238

270

79

0

100

200

300

400

2030 2050 2030 2050

2015 Reference Peak Oil

Demand

$ b

illio

n

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23 What are the implications of declining oil use?

• Under certain circumstances, oil consumption can turn into a decline in

the not too distant future.

• The extreme assumption on the penetration of ZEVs is challenging.

Oil consumption may not easily peak out.

Oil is required even at the same scale of today in 2050 .

• The lack of supply investment because of pessimism could threaten

energy security and that would further decrease oil demand. The rising

dependence on the Middle East will increase geopolitical risk.

• Collaboration between consuming and producing countries will

become even more important. Supporting efforts such as Saudi Arabia’s

“Vision 2030“ is essential.

23

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24

Today’s Topic

Role of Coal & LNG in Asia’s Future Energy Mix

: Defying the odds?

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25

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1980 1990 2000 2010 2020 2030 2040 2050

Mtoe

化石燃料

85%→82%(レファレンス )

71%(技術進展)

石油

石炭

天然ガス

他再生可能

原子力

水力

Primary Energy Demand Reference Scenario ・・・Advanced Tech Scenario

World Asia

25

0

1,000

2,000

3,000

4,000

5,000

6,000

1980 1990 2000 2010 2020 2030 2040 2050

Mtoe

石油

石炭

天然ガス

他再生可能

原子力

水力

化石燃料

81%→79%(レファレンス )

68%(技術進展)

Coal

Oil

Gas

Coal

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26 Power generation mix

26

Reference Scenario

Advanced Technologies Scenario

Asia World

0

5,000

10,000

15,000

20,000

25,000

2015 2050 2030 2050

Ref Adv. Tech

Renewables

Hydro

Nuclear

Oil

Gas

Coal

TWh

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2015 2050 2030 2050

Ref Adv. Tech

GW

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2015 2050 2030 2050

Ref Adv. Tech

Renewables

Hydro

Nuclear

Oil

Gas

Coal

TWh

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2015 2050 2030 2050

Ref Adv.Tech

GW

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27 Power Generation Mix (Asia) Reference Scenario

Power Generation Share

27

0

5,000

10,000

15,000

20,000

25,000

1980 1990 2000 2015 2030 2040 2050

Other Renewable

Hydro

Nuclear

Natural Gas

Oil

Coal

TWh

0%

20%

40%

60%

80%

100%

1980 1990 2000 2015 2030 2040 2050

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28 ASEAN Will Become Net Importer of Gas and Coal Reference scenario

Oil Gas Coal

28

91

201

395

-500

-400

-300

-200

-100

0

100

200

300

400

500

2015 2030 2050

生産

需要

純輸入

Mtoe

-46

10

72

-500

-400

-300

-200

-100

0

100

200

300

400

500

2015 2030 2050

生産

需要

純輸入

Mtoe

-163-128

50

-500

-400

-300

-200

-100

0

100

200

300

400

500

2015 2030 2050

生産

需要

純輸入

MtoeProduction

Demand

Net Import

Production

Demand

Net Import

Production

Demand

Net Import

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29

0

1,000

2,000

3,000

4,000

5,000

1980 1990 2000 2015 2030 2040 2050

Oceania

Africa

Non-OECD Europe, Central

AsiaOECD Europe

Middle East

Asia

L.America

N.America

Mtoe

0

1,000

2,000

3,000

4,000

5,000

1980 1990 2000 2015 2030 2040 2050

Transfer

Non-energy

Other

Transport

Industry

Mtoe

Coal Consumption

World

Reference Scenario

29

Asia

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1980 1990 2000 2015 2030 2040 2050

Others

Korea

Japan

ASEAN

India

China

Mtoe

0

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

1980 1990 2000 2015 2030 2040 2050

Transfer

Non-energy

Other

Transport

Industry

Mtoe

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30 Coal Questions

• Led by Europe, China and the US, global demand for coal has been declining in

recent years. Should we anticipate that the rest of Asia will soon follow a

similar trend and further decline the demand for coal? Will it be in response

to economic or environmental (local / global) concerns?

• For the fast growing countries/economies, their industrial use of coal (coking

and steam coal) , such as for steel and cement, are expected to increase. How

do you envision their transition?

• Will coal remain the cheapest energy option despite the promising or

anticipated cost decline of renewable and LNG?

• Should importing high quality coal make sense for those countries endowed

only with low calorie domestic coals? Is the timing correct for those countries

to start investing and introducing CCT such as super-critical or ultra-super

critical?

30

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31 LT LNG Supply-Demand Outlook for Asia Supply potentials can continue to exceed demand up to around 2020

0

100

200

300

400

500

600

2010

2011

2012

2013

2014

2015

2016

2017

2018

2019

2020

2021

2022

2023

2024

2025

2026

2027

2028

2029

2030

Divertable supplies from Atlantic

New projects under plannning

New projects with SPA/HOA signed

Existing projects

High demand

Low demand

Million Tonnes

Source: IEEJ

LNG will be oversupplied at least till 2020.

Timely upstream investment is required for the balance beyond 2030

High

Low

Demand

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32 LNG Questions

• Despite an increasing demand for LNG, it seems that abundant future supplies

from new projects are putting downward pressures on prices. Because of this

competitive situation, do you foresee the LNG market to eventually face a

supply shortage accompanied with price increases?

• Many refer to Natural gas and LNG as playing a major role as a “bridging fuel”;

if so, how long can it last?

• How will LNG (Natural gas) compete with the other components of the energy

mix?

32

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33 How it was and how it will look

33

Energy Transition

COAL

Biomass

Oil Gas

Wave & Wind

Other

Renewables

Source: Energy Matters website

Data from Vaclav Smil and BP as compiled by Rembrandt

Koppelaar.

Source: Staudt, Larry, “Assisting the World's Transition to

a Sustainable Energy Future

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34 Coal & LNG Questions

• Do you foresee Asia as pursuing and achieving zero-emissions?

What will be the position of coal and LNG in a de-carbonized society?

• Given the current (and anticipated) environmental policies,

is it an appropriate time to invest in either coal or LNG industry?

• If we pursue zero-emission, how big of a role can CCS play?

For example, given that one ton of coal emits more than 3 tons of CO2, is CCS

at $50 to 100 per ton CO2 still an option?

At which CCS costs will the industry remain competitive?

34

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35 We are Still in “Transition”

35

1900 1950 2000 2050 2100

Economy Energy Security Environment

Affordable Reliable Clean

Wood/Coal/Oil/Hydro/Nuclear/Gas Wind/Solar

Realistic technologies Ideal technologies