Energy Investment for Global Growth

Dr. Fatih Birol

Executive Director, International Energy Agency

G7 Energy Ministerial meeting 2016

Kitakyushu, Japan

1 - 2 May 2016

© IEA 2016

Global energy investment challenge

Cumulative investment in the energy sector to 2040

Energy investment of USD 2.7 trillion per year is needed to 2040; investment choices have long-term implications as sector depends on large-scale, high-cost assets

Energy efficiency

Power

Oil

Gas

Coal

Biofuels

$60 trillion

© IEA 2016

Oil markets are gradually returning to balance as low prices take their toll

In 2016 non-OPEC supply is set to drop by over 700 kb/d, the largest fall since 1992, helping to push the oil market towards balance

-2

-1

0

1

2

3

2014 2015 2016 2017 2018 2019 2020 2021

mb/

d

Demand Growth Supply Growth Stock change

Oil market balance

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World upstream oil and gas investment continues to fall

World upstream oil and gas investment continues to fall; raising the prospect of increasing reliance on the Middle East in the future

0

100

200

300

400

500

600

700

800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

-23%

-19%

ISD

billi

ons

(nom

inal

)

© IEA 2016

Cross border supply cut

Terrorist attack - sabotage

Natural disaster

Technical disruption

Tight market / shortages

Algeria 2013/2016

Egypt/Sinaï2011-2015

Libya 2011-2013

Nigeria 2014-2016Yemen 2012-2016

Argentinian -Chile 2004

Russian-Ukrainian conflict 2006/2009/2014

India-Nepal 2015Katrina & Rita

2005 Japan 2011

Argentina 2004-2015

Polar Vortex 2014-2015

Mexico 2012-2014

Italy 2006/2012

Chile 2004-2007

Brazil 2014-2015

UK 2006/ 2010/2013

China 2009/2013/2015

Indonesia 2007

Canada 2014

India 2013

Pakistan 2011-2015

Egypt2014Venezuela

2010-2011 Barbados 2015

Trinidad & Tobago 2010-2015

Unavailable LNG capacity has almost tripled over the past four years, highlighting security & investment challenges in key producer countries

Lots of new LNG is coming online, but safeguarding gas security is important

Angola 2014

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Electricity security:a multifaceted challenge

Electricity security is an emerging challenge with many dimensions; the IEA is involved in all key aspects of this issue in collaboration with the G7 and partners

Capacity adequacy and system security

Security of fuel supply

Infrastructure resilience

Grid integration of variable renewables

Cybersecurity

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2005 2014 2040

10%

20%

30%

40%

Action on energy efficiency must begin to match its potential

Energy efficiency policies are being introduced in more countries and sectors; they continue to slow demand growth, but more can be done

Share of energy consumption covered by mandatory efficiency regulations

Industry

Buildings

Transport

• Steam boilers• Process heat• Motors

• Heating / cooling• Lighting / appliances

• Cars• Trucks

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A 2°C pathway requires more technological innovation, investment & policy ambition

Massive additional investments in efficiency, renewables, nuclear power and other low-carbon technologies are required to reach a 2°C pathway

16

20

24

28

32

36

40

2010 2015 2020 2025 2030 2035 2040

Gt

Trend post-COP21

2°C Scenario

17.9 Gt

Energy efficiency

Fuel & technology switching in end-uses

Renewables

Nuclear

CCS

Other

CO2 emissions in a post-COP21 world

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G7 countries must take a long-term view on their energy systems

• Be wary of cuts in upstream oil and gas investment – they pose threats to energy security and could lead to greater price volatility

• Gas can play a critical role in low-carbon transition; do not take gas supply security for granted

• Make sure electricity systems are prepared for the future in terms of policy, regulation and infrastructure

• Mandate and incentivise energy efficiency improvements in order to harness its vast potential across all sectors of the economy

• Make all energy decisions within the context of climate change