CBI NI energy conference: Alex Ferguson
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CBI NI energy conference: Alex Ferguson

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Presentation by Alex Ferguson, CBI senior policy adviser, energy, at the CBI NI energy conference. February 2012

Presentation by Alex Ferguson, CBI senior policy adviser, energy, at the CBI NI energy conference. February 2012

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  • ChinaJapanGermanyEuropeAustralian LNG
  • Arab SpringStraits of HormuzEurope
  • Oil prices have cooled a little since April 2011, but the downward trend has been sluggish and volatile. In January, the Brent price averaged €110, from €124 in April. However, that is only as low as they were in February 2011, and there was been a renewed spike in prices in recent weeks.They are now around 25% below the July 2008 peak.The International Energy Agency’s latest Oil Market Report says that global oil supply has faced some challenging “events” in the New Year, not least the EU ban on Iranian oil imports. However, OPEC raised supply targets a little in December. Stock levels were below the long-run average in November for the fifth-consecutive month, presenting a further upside risk to prices.On the demand side, the IEA reports that a softening in the wake of a general economic slowdown and, in particular, concerns about the Eurozone. This offset upward pressures on prices from supply side factors.
  • 2012 a key yearFuel costsCarbon costsPolicy costsEMR Carbon price floorEffect on SEMEPS Capacity mechanismFeed in tariffs with Contracts for DifferenceEIIs package – some alleviation. Prices on billsEnergy efficiency to override price rises? Carbon price – ITRE vote on ETS vote yesterday

Transcript

  • 1. Energy market outlook 2012Alex Fergusson | Senior Policy Adviser | EnergyFebruary 29 2012
  • 2. The UK is increasingly dependent on imported gasSource: DECC Digest of United Kingdom energy statistics 2011 2
  • 3. Gas markets: the global contextA supply side glut? Conventional gas supplies seem assured, but is Russia looking to sell eastward? Unconventional gas: a global supply glut? Shale LNG 3
  • 4. Gas markets: the global context Demand side pressures?Source: International Energy Agency: World Economic Outlook 2011 4
  • 5. Gas markets: the global context Demand side pressures?Impact of Fukushima European demand limitsGermany: extra China and the Eurozone crisis16bcm by 2020 environment Oil indexationItaly, Switzerland Economic growth and leading to decreased increased demand competitivenessJapan: what futurefor nuclear? Environmental impact Push on renewables of coal Demand increase to 500 bcm by 2035 5
  • 6. Gas markets: the global context Demand side pressures? Germany 6Source: International Energy Agency: World Economic Outlook 2011
  • 7. Gas market outlook Price prospects Past: Russia all important Future: what happens to US production and Asian demand at least as important.Source: Financial Times: Commodities Index February 20 2012 7
  • 8. Oil markets: the global contextGlobal reserves: 50 to 55 years at current consumptionSupply side ‘events’ Demand side easing?Iran and the EU embargo OPEC subsidiesThe Arab Spring China and India demand growthIraq: the supply side wildcard? Eurozone demand fragility Energy efficiency: the demand side wildcard? 8
  • 9. Oil market outlook Current prices 25% below 2008 peak Stock levels below long run average for fifth consecutive month pointing to upside price riskSource: CBI analysis 9
  • 10. Oil market outlookCurrent prices Source: Financial Times: Commodities Index February 20 2012 10
  • 11. Oil market outlook Future prices Year WTI (USD/bbl) Brent (USD/bbl) 2012 105 115 2013 113 120 2014 117 123 2015 120 125Source: CBI analysis 11
  • 12. Electricity market outlookPolicy costs: Electricity Market ReformCarbon costs: ITRE vote on ETS set aside Carbon floor price in NI?Energy efficiency? Green Investment Bank 12