Seasonal Seminar organizado por Funseam, 05/07/2013 Madrid

1. © OECD/IEA 2013
IEA Role in Global Energy
Security
Martin Young
Head, Emergency Policy Division, IEA
Madrid, 5th July 2013

2. © OECD/IEA 20132
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.

3. © OECD/IEA 20133
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”

4. © OECD/IEA 20134
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)

5. © OECD/IEA 20135
1973/74 oil crisis
 Avoid competition for limited supplies
o“Go-it-alone”, uncoordinated policy ineffective
 Coordinated action
oMechanism for response
 Safety net
oEmergency reserves ≥ 90 days of net oil imports
oDemand restraint measures
Impetus to Establish the IEA

6. © OECD/IEA 20136
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

7. © OECD/IEA 20137
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
7

8. © OECD/IEA 20138
Production
Surge
Emergency Response Measures
Supply Side
Stock-draw
Demand Side
Demand
Restraint
Fuel
Switching
8

9. © OECD/IEA 20139
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

10. © OECD/IEA 20131010
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

11. © OECD/IEA 201311
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

12. © OECD/IEA 201312
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?

13. © OECD/IEA 201313
Stockholding in IEA Regions
13

14. © OECD/IEA 201314
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

15. © OECD/IEA 201315
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

16. © OECD/IEA 201316
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

17. © OECD/IEA 201317
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
17
Libya
Political
Unrest ‘11
Japan
Nuclear
Accidents‘11
Chile
Gas pipelines
cut since ‘04
Somalia
Piracy
Energy security remains key & concept
has broadened
17

18. © OECD/IEA 201318
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

19. © OECD/IEA 201319
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
19

20. © OECD/IEA 201320
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.

21. © OECD/IEA 201321
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
21

22. © OECD/IEA 201322
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
22
Emergency Response Reviews (Oil/gas)

23. © OECD/IEA 201323
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

24. © OECD/IEA 201324
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
24

25. © OECD/IEA 201325
1974 – the IEA Treaty
Oil market in early-70s
25

26. © OECD/IEA 201326
Countries outside IEA Membership
26
OECD Total
51%
Non-OECD
Total
49%
WorldOil Demand in 2011
89.1 million barrels per day
Growing importance of consuming countries outside IEA

27. © OECD/IEA 201327
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

28. © OECD/IEA 201328
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

29. © OECD/IEA 201329
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

30. © OECD/IEA 201330
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

31. © OECD/IEA 201331
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

32. © OECD/IEA 201332
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).

33. © OECD/IEA 201333
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

34. © OECD/IEA 201334
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%
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

35. © OECD/IEA 201335
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

36. © OECD/IEA 201336
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.

37. © OECD/IEA 2013
Thank you
epd@iea.org