The document discusses the state of the global economy and gas market. It notes that economic concerns have limited energy policy intervention and diverted attention. Post-Fukushima, nuclear faces uncertainty while MENA turmoil raises questions about regional investment plans. CO2 emissions reached record highs in 2011. Global gas demand is growing fastest in China, India, and the Middle East while declining in Europe. Adoption of "Golden Rules" could help unconventional gas resources bring a "Golden Age of Gas" while mitigating environmental risks.

1. The Global Economy & The State Of The
Gas Market
Dr. Fatih Birol
Chief Economist
International Energy Agency
© OECD/IEA 2012

2. The context: fresh challenges
add to already worrying trends
 Economic concerns have diverted attention from energy policy &
limited the means of intervention
 Post-Fukushima, nuclear is facing uncertainty
 MENA turmoil raised questions about region’s investment plans
 CO2 emissions rebounded to a record high
 Durban was a step forward, but is yet to make a noticeable impact on investment
© OECD/IEA 2011

3. Energy efficiency offers real gains for energy
security, economic growth & the environment
Change in global energy intensity for selected periods
1.0%
Annual change in global energy intensity
0.5%
0.0%
-0.5%
-1.0%
-1.5%
1971-1980 1981-1990 1991-2000 2001-2008 2009 2010
Global energy efficiency development is going in the wrong direction
© OECD/IEA 2011

4. Coal won the energy race in the
first decade of the 21st century
Growth in global energy demand, 2000-2010
1 600
Mtoe
1 400 Nuclear
1 200 Renewables
1 000
800 Oil
600
400 Natural gas
200
0
Total non-coal Coal
Coal accounted for nearly half of the increase in global energy use over the past decade,
with the bulk of the growth coming from the power sector in emerging economies
© OECD/IEA 2011

5. Europe: rising energy prices compound the
pain of austerity
Cost of net imports of oil and gas in the European Union
700
Billion USD
600 3.3%
Debt of Greek government
500 (end of 2011)
2.7%
400
2.1%
EU’s net import bills
300 Gas
200 Oil
% Share of GDP
100
0
2009 2010 2011
EU spending on imports was almost two-thirds higher in 2011 than 2009 as a result of
higher international oil prices & oil-indexed gas prices
© OECD/IEA 2011

6. Fukushima adds to the economic
impact of higher energy prices in Japan
Cost of net imports of oil and gas in Japan
250 Japan’s net import bills
Billion USD
3.9%
Gas
200 Oil
2.9% % Share of GDP
150
2.4%
100
50
0
2009 2010 2011
The shutdown of most nuclear plants has created electricity shortages & pushed up
spending on oil & gas imports, which in turn has led to Japan’s 1st trade deficit in decades
© OECD/IEA 2011

7. OPEC revenues on track to reach
another record high
OPEC oil-export revenues
1 400 Net oil export
Billion USD
revenues
1 200
1 000 * Assuming average crude
oil price of $120/barrel
800
600
400
200
0
2009 2010 2011 2012*
If prices average $120/bbl in 2012, OPEC is set to earn oil export revenues of $1.2 trillion;
And Russian oil & gas export revenues would reach $400 billion, or 25% of GDP
© OECD/IEA 2011

8. Natural gas becoming the
“default fuel”
 The weak economy weighs on demand for all fuels, including natural
gas, but its competitors face other problems
 Renewables: subsidy programs uncertain in this age of austerity
 Nuclear : renewed debate post-Fukushima
 Coal: deployment of CCS is disappointingly slow
 Further opportunities for natural gas arise from concerns about local
pollution & lack of clarity over climate policy
 On the supply side, natural gas is becoming increasingly available &
often less expensive compared to other fuels
 In many cases, this adds up to natural gas becoming the “default fuel”,
although uncertainties remain
© OECD/IEA 2011

9. European natural gas demand fell sharply in
2011, but other regions saw growth
Change in gas demand (bcm)
40 2010
bcm
2011
20
0
-20
-40
-60
European Union United States Japan China
Based on preliminary estimates, EU27 natural gas demand fell by almost 11% in 2011
returning to levels last seen in 2000, while demand in China & Japan rose sharply
© OECD/IEA 2011

10. Gas demand growth comes from
China, Middle East, India
Projected natural gas demand by region, 2009 and 2035
1 000 Additional
bcm
to 2035
800
2009
600
400
200
0
North European Middle Russia China India Japan
America Union East
Gas demand grows fastest in the non-OECD regions, led by China, which accounts for
more than a quarter of the worldwide increase in demand between 2009 & 2035
© OECD/IEA 2011

11. Global gas resources represent 250 years
of current production
Natural gas can enhance security of supply: global resources exceed 250 years of current
production; while in each region, resources exceed 75 years of current consumption
© OECD/IEA 2011

12. Natural gas supply outlook
Largest natural gas producers in 2035
Russia Conventional
United States Unconventional
China
Iran
Qatar
Canada
Algeria
Australia
India
Norway
0 200 400 600 800 1 000
bcm
Gas supply rises by 1.7 tcm by 2035 with Russia, the United States & China being the largest
producers
© OECD/IEA 2011

13. “Golden Rules“
for a “Golden Age of Gas”
 The unconventional gas boom could transform markets if the US success
is matched elsewhere, but challenges need to be overcome
 land use, water use, risk of water contamination, methane emissions
 “Golden Rules” to support a potential “Golden Age of Gas” to be
published as a WEO-2012 special report on 29 May
 Confirms environmental concerns can be mitigated using available
technologies – if companies follow best practices
 “Golden Rules” covering:…….
 Public engagement & disclosure  Controlling air emissions
 Managing water use & the risk  Project planning & regulatory
of contamination control
© OECD/IEA 2011

14. Concluding remarks
 High oil prices are contributing to the economic malaise; further rises
could plunge the global economy back into recession
 Market uncertainties are creating opportunities for natural gas
 We may see a more competitive LNG market & less pronounced price divergence
 Gas has a key role to play in in enhancing energy security, reducing
local pollution & in moving to a low-carbon energy economy
 Unconventional resources could revolutionise energy markets
 but “Golden Rules” are essential to mitigate environmental risks
© OECD/IEA 2011