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Er policies and objectives
 
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Summer Seminar

Summer Seminar
IEA Role in Global Energy Security
Martin Young
Head, Emergency Policy Division, IEA

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  • IEA was established in 1974 as a response to the oil crisis. The objective was to establish a mechanism for coordination in oil supply emergencies.What brought our Member countries together: believe that cooperation, collective action could provide something that no country could achieve on its own: enhanced energy security.Autonomous body within the OECD framework: own decision-making body: Governing Board decides on policy, budget and elects the Executive Director, 4 meetings a yearInitial role was to co-ordinate measures in times of oil supply emergencies but has developed with the IEA now a major advisor on many energy subject for our 28 member countries.
  • Well functioning markets are important for energy security. But what are well functioning markets?->Market balances supply and demand->Sufficient interconnections->Diversity of supply->Robust infrastructure for seasonal fluctuations (pipes, storage)->Governmentregulations(e.g. Public Service Obligations)
  • Oil response measures not directly transferrable
  • Oil imports to the United States, currently the world’s biggest importer, drop as efficiency gains reduce demand and new supplies such as light tight oil are developed.However, increasing reliance on oil imports elsewhere heightens concerns about the cost of imports and supply security. Imports to the EU overtake those to the US around 2015 and then China becomes the largest global importers after 2020. Four-fifths of oil consumed in non-OECD Asia comes from imports in 2035, compared with just over half in 2010. On the supply side, crude oil production from existing fields declines by 47 million barrels per day by 2035. Making up for this decline will require new production capacity equal to twice the current total oil production of all OPEC countries in the Middle East. In addition to conventional crude oil, the contributions of natural gas liquids and unconventional oil expand to supply one-quarter of the market by 2035. Overall, the largest production increases come from Iraq, adding 5 million barrels per day, Saudi Arabia almost 4 million and Brazil 3 million. Over time, oil supply becomes more concentrated in OPEC countries, mainly in the Middle East and North Africa. OPEC accounts for more than half of production in 2035.
  • Oil security remains at the core of the IEA mission and it is has become a global concern as oil markets tightenFor more serious disruptions, changing global consumption patterns require global cooperation for emergency response.IEA is increasing its cooperation with non-IEA countries which account of a growing share of global oil demand: non-IEA members participating in Emergency Response Exercises, and several have nominated a contact person in the case of emergencies.The IEA has also begun to run remote EREs designed specifically for non-member countries.
  • In 2011, the IEA developed the Model of Short-Term Energy Security (MOSES) to evaluate short-term security of energy supply in IEA countries. Although energy security was primarily associated with oil supply historically, the increasing complexity of energy systems requires systematic and rigorous understanding of a wider range of vulnerabilities. This is a tool to inform energy-security policies through quantifying vulnerabilities of energy systems. It is based on a set of quantitative indicators that measures two aspects of energy security: risks of energy supply disruptions; and resilience, or the ability of a national energy system to cope with such disruptions. It provides a sound platform for monitoring and assessing energy security performance across the IEA.MOSES Phase 1 focused on upstream energy supply and the oil supply chain (colored boxes). MOSES Phase 2 will extend the model to downstream aspects of the stationary energy sector (white boxes). In the planned phase 2, the IEA will develop the model for electricity security. MOSES does not aim to rank countries on the basis of their energy security. Instead, it identifies ‘energy security profiles’ of individual countries based on their risks and resilience capacities.
  • Rising non-OECD oil demand – Reinforces need to work with key emerging large consumers such as China & India;Existing outreach programme on energy security (e.g. Indian Emergency Response Assessment).Refining - need to do more?Individual countries should consider implications but also should we reflect more widely, possibly linking up with others (EU Refining Roundtable)?National choice on how to meet IEP stocking obligation but checked via ERR process so systems remain effective & evolve with market conditions as appropriate.  Possible issue with off-shoring refining & new market participants with differing incentives may not align with existing national policies or international mechanisms. Issue not simply European - Australia & Japan are facing similar such issues.LNG bottlenecks – monitoring:Gas markets predominantly regionalised with LNG offering the potential to globalise;SEQ-SOM should monitor via regular gas market updates & share views / plans.

Er policies and objectives Er policies and objectives Presentation Transcript

  • SUMMER SEMINAR: IEA Role in Global Energy Security Martin Young Head, Emergency Policy Division, IEA
  • © OECD/IEA 2013 IEA Role in Global Energy Security Martin Young Head, Emergency Policy Division, IEA Madrid, 5th July 2013
  • © OECD/IEA 20133 What is the International Energy Agency?  Autonomous agency linked to Organisation for Economic Co-operation & Development (OECD);  28 Member Countries; o Asia Pacific: Australia, Japan, Republic of Korea & New Zealand o North America: United States, Canada o Europe: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Luxembourg, Netherlands, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, Turkey & United Kingdom o European Commission also participates in IEA work / committees o IEA Candidate Countries: Chile & Estonia  Acts as energy policy advisor with some 230 staff based in Paris.
  • © OECD/IEA 20134 Goals: o Energy security o Environmental protection o Economic growth o Engagement worldwide Activities: o Co-ordinates efforts to ensure energy security o Conducts policy analysis o Links research activities and governmental directives o Compiles energy statistics o Reviews energy policies and programs o Convenes, mobilizes science and technology experts o Promotes co-operation with key non-member countries IEA – the “4Es”
  • © OECD/IEA 20135 Energy security relies upon well functioning markets  Market balances supply & demand smoothly  Sufficient interconnections  Diversity of supply (countries & fuels)  Robust infrastructure for seasonal fluctuations (ports, pipelines, storage)  Appropriate Government regulations (e.g. Public Service Obligations)
  • © OECD/IEA 20136 1973/74 oil crisis  Avoid competition for limited supplies o “Go-it-alone”, uncoordinated policy ineffective  Coordinated action o Mechanism for response  Safety net o Emergency reserves ≥ 90 days of net oil imports o Demand restraint measures Impetus to Establish the IEA
  • © OECD/IEA 20137 IEA - operational role for oil security  Emergency response to oil supply disruptions - raison d'être for IEA & remains core IEA mission o IEA Countries obligation to hold 90 days of net-imports o Mandate to coordinate stock release in global supply disruption  Emergency oil stocks cannot effectively replace market mechanisms, only mitigate short-term supply disruptions o Provide liquidity for markets to recover  Emergency stocks are not for price management o Finite so ineffective over time o Distort market signals / discourage investment making longer term tighter demand/supply balance o Reduce cover for genuine emergencies  Only 3 IEA coordinated releases - 1991, 2005 & 2011 o But emergency stocks used for individual domestic crises
  • © OECD/IEA 20138 Member Gov. Responsibilities  Legislation: oto ensure participation in IEA decisions with appropriate emergency measures  National Emergency Strategy Organisation (NESO) oCo-ordinate emergency operations oInterface with domestic oil industry oInterface with IEA emergency operations  Data collection oMonthly Oil Statistics oEmergency questionnaire 8
  • © OECD/IEA 20139 Production Surge Emergency Response Measures Supply Side Stock-draw Demand Side Demand Restraint Fuel Switching 9
  • © OECD/IEA 201310 Light-handed Medium Heavy-handed Persuasion/ Public campaigns Multi-fired installations Driving restrictions, speed reductions Driving bans, rationing Demand restraint Fuel switching Demand Side Emergency Response Measures 2
  • © OECD/IEA 20131111 Stockholding Options  Industry stocks o Compulsory stocks & commercial stocks held by companies  Public stocks o Government stocks held exclusively for emergency purposes o Financed with central government budget  Agency stocks o Maintained for emergency purposes o Held/controlled by public bodies or agencies
  • © OECD/IEA 201312 Germany Hungary Ireland Agency Czech Republic Slovak Republic New Zealand USA Government Industry obligation Luxembourg Greece Italy Norway Sweden Turkey UK Austria Belgium Denmark Netherlands Portugal Switzerland Finland France Spain Japan Korea Poland Stockholding Options 2 Different Stockholding Structures in IEA Countries Commercial & operational stocks
  • © OECD/IEA 201313 Design of Emergency Stock System What is pipeline & transportation capability? Where are refineries? Where are demand centres? Where do imports come from & where are delivery points? What is inventory in supply system? How much domestic refining capacity is available? What will demand be for each major product? What is risk of contamination? Where to hold storage? Required release capacity? Crude or products?
  • © OECD/IEA 201314 Stockholding in IEA Regions 14
  • © OECD/IEA 201315 Oil emergency response – key considerations for action  Need to respond promptly to those oil supply disruptions which appear capable of causing severe economic harm  Market will always balance supply & demand, given time & freedom of price movement… But will disruption cause severe economic harm?  Need to understand market context of disruption: o Analysis helps answer whether market can cope with disruption using available resources (commercial stocks and/or OPEC spare capacity)?  If action is needed, speed & unity of response are key factors o Delayed/hesitant response can exacerbate situation o Decision on action will likely need to be made before all necessary information is available
  • © OECD/IEA 201316 Key Elements of IEA Response  Continuous assessment of oil market o Monthly Oil Market Report (OMR) but monitor market daily o Size of disruption; OPEC spare capacity; stocks in OECD o Necessity of IEA action, impact on market  Rapid decision making framework o Need for fast & decisive response as market reaction immediate o Delayed, weak or uncoordinated response can cause market confusion & exacerbate problem  Flexibility in response measures o Stocks are key, but other measures possible o Make oil available to market, not directing – market allocates oil  Communication o Dialogue with Members, key NMCs & OPEC o Media strategy to deal with markets
  • © OECD/IEA 201317 But the world has changed since 1974… Oil remains lead fuel but increasing importance of natural gas & renewables that collectively meet almost two-thirds of incremental energy demand in 2010-2035 Source: WEO 2012 World primary energy demand by fuel
  • © OECD/IEA 201318 US/Gulf of Mexico Hurricanes ’05 & ‘08 Venezuela Resource Nationalism since ‘02 Nigeria Civil Unrest since ‘03 Brazil Hydro Power ‘09 Iraq Sabotage since ‘03 North America Blackout ‘01 &‘03 Italy Blackout ‘03 Thailand Gas Supply ‘09 Belarus Transit Jan ‘07 & ‘10 Ukraine Transit Jan ‘06 & ‘09 Iran Nuclear Ambition since ‘02 Strait of Malacca Piracy Strait of Hormuz Chokepoint Norway Hydro Power ’03/04 Germany Wind Power ‘05 18 Libya Political Unrest ‘11 Japan Nuclear Accidents‘11 Chile Gas pipelines cut since ‘04 Somalia Piracy Energy security remains key & concept has broadened 18
  • © OECD/IEA 201319 Energy security wider than oil  IEA has broadened concept of energy security to cover natural gas & electricity  Similar to oil security framework, emergency policies for gas & electricity need to be: o For defined emergencies only o Not for seasonal fluctuations o Designed for specific situations of country / region o Set out in Code of Operations or equivalent  But significant differences: o Regional rather than global markets o Regulation of distribution / public service obligations  IEA working with member countries on emergency response policies for gas & will extend into electricity later this year
  • © OECD/IEA 201320 Gas Emergency Response Measures  Use of alternative supply routes  Diversity of supply routes & sources is key  Pipeline (inc reverse capacity), LNG (spot cargoes)  Stocks (storage)  Industry and/or public stocks  Underground and/or LNG storage  Spare capacity  Domestic production, gas in pipelines)  Demand-side measures  Interruptible contracts (pre-negotiated)  Public appeal (Government campaigns)  Fuel-switching 20
  • © OECD/IEA 201321 Power system security  Ability of power system to maintain reliable power supplies in face of unexpected shocks & sudden disruptions in real-time, such as unanticipated loss of largest generation or network components or rapid changes in aggregate, load & fuel supply conditions.
  • © OECD/IEA 201322 Strengthening Emergency Response Systems  Emergency Response Reviews (ERR)  Country peer reviews on emergency preparedness  Checks procedures & institutional arrangements  Contributes to identify & improve weak points  Emergency Response Exercises (ERE)  Test processes for: decision making, communicating, hypothetical release  Broadening of energy security concept  Emergency policies for natural gas  Electricity security issues 22
  • © OECD/IEA 201323 ERR Stockholding Regime , Legislation & Financing Location & Quality of Oil Stock Drawdown Procedures Other Response Measures (Demand Restraint, etc.) Emergency Response Policy & Legislation Stockholding Regime & Legislation Data System Emergency Response Organisation (NESO) Emergency Response Policy & Legislation Infrastructure (Storage capacity, pipelines, ports) Refining Capacity Supply & Demand Emergency Oil Reserves Domestic Oil & Gas Markets Natural Gas Emergency Policy Policy & Organisation 23 Emergency Response Reviews (Oil/gas)
  • © OECD/IEA 201324 ERR- Electricity Security  System Security Assessment Checklist o Rules & standards o Asset management o Emergency response resources o System operating practices o Situational awareness o Coordination o Communication o Training & capacity building
  • © OECD/IEA 201325 Emergency Response Exercise  Biannual exercises continue (ERE6 took place in Paris in November 2012; ERE7 being planned for 2014)  Specific workshops for new or complex issues/policy  Rollout of EREs to key Non-Member Countries 25
  • © OECD/IEA 201326 1974 – the IEA Treaty Oil market in early-70s 26
  • © OECD/IEA 201327 Countries outside IEA Membership 27 OECD Total 51% Non-OECD Total 49% WorldOil Demand in 2011 89.1 million barrels per day Growing importance of consuming countries outside IEA
  • © OECD/IEA 201328 Emerging economies continue to drive global energy demand Growth in primary energy demand in WEO New Policies Scenario Global energy demand increases by one-third from 2010 to 2035, with China & India accounting for 50% of growth 0 500 1 000 1 500 2 000 2 500 3 000 3 500 4 000 4 500 2010 2015 2020 2025 2030 2035 Mtoe China India Other dev. Asia Russia Middle East Rest of world OECD
  • © OECD/IEA 201329 Demand growth driven by non-OECD economies Global energy demand rises by over one-third in period to 2035, underpinned by rising living standards in China, India & Middle East Source: WEO 2012 20% 40% 60% 80% 100% 1975 2010 2035 Middle East India China OECD Rest of non-OECD 6 030 Mtoe 12 380 Mtoe 16 730 Mtoe
  • © OECD/IEA 201330 Different trends in oil & gas import dependency Net oil & gas import dependency in selected countries While dependence on imported oil & gas rises in many countries, the United States swims against the tide Source: WEO 2012
  • © OECD/IEA 201331 Changing oil import needs to shift concerns about oil security Net imports of oil in WEO New Policies Scenario US oil imports drop due to rising domestic output & improved transport efficiency: EU imports overtake US around 2015; China becomes largest importer around 2020 0 2 4 6 8 10 12 14 China India European Union United States Japan mb/d 2000 2010 2035
  • © OECD/IEA 201332 Increasing need for cooperation during oil supply disruptions 0% 10% 20% 30% 40% 50% 60% 70% - 10 20 30 40 50 60 70 daysofworldoildemandcover IEA stocks in terms of global oil demand with China with India with ASEAN Share of non-OECD in global oil demand Growing share of non-OECD oil demand results in declining global demand cover from IEA emergency oil stocks
  • © OECD/IEA 201333 Work with Partner Countries  Active programme with non-member countries (joint statements/ MoU/ work programmes): o China (workshops, possible ERE) o India (workshops, ERE, ERA) o ASEAN/APEC (workshops, ERE) o Thailand (workshops, ERE, ERA) o Indonesia (planned ERA) o Others (other PC, accession).
  • © OECD/IEA 201334 Energy security framework Model of Short-Term Energy Security (MOSES) • MOSES identifies set of indicators for risks & resilience • MOSES aims to help IEA countries understand their energy security profiles in order to identify energy policy priorities IEA has developed model to assess short-term energy security
  • © OECD/IEA 201335 MOSES output %TPES Group 100% Oil Fuel Percentage Motor Gasoline 4% A Motor Gasoline 3.9% Middle Distillate 21% A Middle Distillate 21.3% Other oil prods 19% B Other oil prods 19.3% Natural Gas 20.0% B Natural Gas 20.0% Coal 12.5% C Coal 12.5% Biomass & Waste 4.5% C Biomass & Waste 4.5% Bio-ethanol 0.2% B Other 3.4% Bio-diesel 1.2% B Bio-diesel 1.2% Hydro 2.1% C Hydro 2.1% Nuclear 11.9% D Nuclear 11.9% Geothermal 0.0% Other 3.2% Maritime Entry Points Diversity of suppliers Proportion Offshore production Storage Capacity Natural Gas Intensity FINAL Motor Gasoline Middle Distillate Other oil prods Natural Gas Coal Biomass & Waste Other Bio-diesel Hydro Nuclear A B C D E Other: Bio-ethanol, Geothermal, and other smaller fuels
  • © OECD/IEA 201336 Summary Messages  Demand growth driven by non-OECD – changing energy security perspectives  Global & more integrated energy markets create new energy security challenges  Need for greater dialogue & cooperation  Threats to energy security come from many sources  Flexibility is crucial with efficient & transparent markets  Government policies must complement efficient markets o Policy, legal & regulatory certainty / consistency o Support for clean & innovative technologies o Promotion of energy efficiency & demand response o Effective emergency response varies by energy source
  • © OECD/IEA 201337 Issues to think about 1. Rising non-OECD oil demand with supply being shifted to east of Suez; 2. Refinery consolidation & its implications; and 3. Increasing gas use & potential LNG infrastructure bottlenecks.
  • © OECD/IEA 2013 Thank you epd@iea.org