 I recommend it in case you get tired legs. Thank you all for sparing the time to come this morning. This is sort of I think of this as the US launch of the BPs, a statistical review. We launched it in London yesterday and I think the hellish and the appropriate tradition is that we then launch it the following day in Washington DC. So it's really nice, it's a real pleasure to be here. Although I had 25 years at the Bank of England, I had two years at the Federal Reserve and so spent two years in Washington 2006 i 2008. I love coming back to Washington. It's a real pleasure. It's been this hot in June when I came. I was here in February, as Guy said, presenting then BPs' energy outlook 2035. So then, the task was to look forward 20 years. The task for today sort of was somewhat more limited, sydd yn wedi bod yn iawn yn ffascinatol, sydd yn ei wneud i gyd-dweud y cyfaint gyda'r review y BPs. Fe fyddwn i chi'n gwybod, mae'n ffasgwch. Rwy'n ymwneud eich gwaith y banc, ac yn y gweithio'r bwysig yn y bwysig, mae'r hyn yn cael ei gilydd i'r cyfaint. Mae'r cyfaint o ddweud i gydag i'r review y PPs yn ychydig ar gyfer y Llyfrideg ymgyrchu, ymgyrchu a'r cyfaint wedi'i gilyniadau ac yn gallu bod yn lampiau'r cyfaint. For me this was really brought home to me when I was having a conversation with Dan Jurgen. Now, you all know who Dan Jurgen is, you know, author of the prize, surely the sort of the king of energy market analysts. And Dan said to me, you know, he says, I always keep two things in my brief case, just in case. My passport and a copy of the BP stats review. I think, well, look, hey, he was good enough for Dan. He's certainly good enough for me. Byddai'n gweld eu gweithio i'n gwneud y pethau 2014. Mae'r cyfnod yn ystod i'r eistedd yma, yn y gallu ddechrau sydd arall. Ysgol yn gyfrifol, gyda'r newydd, mewn cyfnodol a'r prysau oedl. Yn amlwg cyfrifol ar ei wneud yw'r cyfrifol yw'r rhagor y rhan o'r rai ar y 15 yma. Mae'r cyfrifol i'r cyfrifol, ac yn y gallwch wedi cael Mae'r panfaith y Cwestof y Rhywblygu'r ffrif wedi ei unedigau yng Nghymru. Cwestof ymgyrchu'r mynd i'r eu wahan hefyd yggorff honno yng nghymru ar ddiwethaf 11 yng nghymiad. Y dynSec yn holl o'r tawr, yn ei wahan hefyd, nad o holl o diwethaf lle'r arnaf, mae'r ffaith. Yn dangos a'r bobl o'r normau, nid o'r tynnol yn bobl sy'n hyffordd i gyrfa hwnnw Mae'r cyfnodd a'r wyf yn ymdweud o'r cyfnoddau ar gyfer y Llywodraeth Gweithgol yn 2014 yn ymdweud ar gweithio'r ffactorau o'r rhan o'r ffactorau, ac mae'r ffactorau sy'n cymryd i'r ffactorau, i'r ffwrdd, i'r ffwrdd, i'r ffwrdd. Ond mae'r ffwrdd yn dda i ddweud yn dda i ddim yn ei dda i gydag, mae'r ffordd yn gweithio'r ffordd yn gweithgol, ddweud o'r gweithgol a'r gweithgol, o gweld eu bodi'r llunio yn cael eu llunio. Rydw i'n mynd i'n mynd i'r 3 yn y bwysig. First was the continuing shower revolution in the US. In China 2014 was the year of the horse. In energy, I think 2014 was the year of the American Eagle as the US shower industry went from strength to strength. Mae'r hollwyr yma yma, yn ym 1800, yn yma'r cyflawn i'r gwasio yma yn Ym Mwysol Gwyrdraethol, yn ydyn ni'n ddweud 40,000 rhai New World. Llanfaith cyflawn i'r cyflwynt yn Llanfaith cyflwynt wedi'u cyflwynt yn yma'r cyflwynt yw'r 1,220billion, mae'r cyflwynt yn ddweud 5 yma yn ddweud. Mae'r cyflwynt yn cyflwynt wedi'u cyflwynt yn ymgyrchau, ac yn yma ymddi'i cyflwynt yn cyflwynt yn y Llanfaith cyflwynt yn yr ysgol, er mwynhau, ac yn cyfnodd cyd-dwylliant, cyfnodd 7 oed ar 2007. Rhywbeth yw'r ysgol yn ymgyrch yn ymddiol. Ysgol ymddiol yn ymgyrch yn 1,6 miliwn arwain yn 2014, yn ymgyrch ar gael y peth yn y rhai, ac mae'r ystod yn ymddiol yn ymgyrch yn ymgyrch yn ymgyrch yn ymgyrch yn ymgyrch yn 1 miliwn arwain ar y ddweud yn 3 oed. As a gyn nhw, US oil production in 2014 exceeded its previous peak level set in 1970. So, I think that peak oil really does go in that sense, and perhaps most important of all was shown here in this chart. The US shown here in the green line leaped frog both Saudi Arabia and Russia to become the world's largest oil producer for the first time since 1975. USA Shell Gas US continue to grow strongly with US production accounting for nearly 80% of the total increase in global gas supplies in 2014. If we look back over the past ten years, U.S. Shell Gas has accounted for almost half of the total increase in global supplies of natural gas. The revised data in this year's review suggested the US overtook Russia in 2013 to be the world's largest producer of oil and gas combined. So we are truly witnessing a changing of the guard in terms of global energy suppliers. The implications of the shower revolution for the US are profound. US net imports of oil in 2014 were less than half the 2005 peak levels. The US is no longer the world's largest oil importer. That dubious honour now belongs to China. In 2007, just prior to the financial crisis, the US was running a current account deficit of around 5% of GDP. For those of you who think back to that period of time, that current account deficit was a key part of the so-called global imbalances which many economists think underpinned the financial crisis. Importantly, US energy imports accounted for almost half of that deficit. They are a major part of that. Just seven years later in 2014, US energy imports comprised just 1% of GDP. And US production, shown here in the chart, accounted for almost 90% of its energy needs, a level not reached since the mid-80s. So profound effects for the US, and as we have come on to see, the impact of the US shower revolution spread far beyond the lower 48. The second factor I would highlight, driving global energy markets last year, were developments in China. So if the American eagle soared in 2014, the Chinese horse quickened its pace of adjustment. The Chinese GDP growth slowed to 7.4% in 2014, significantly weaker than the double digit growth rates we'd become used to in the first 10 years or so of this century. This slowing was accompanied by a continuing shift in the pattern of growth, and it's that pattern of growth, which I think is really important here, with some parts of industrial production, and in particular real estate investment, decelerating sharply. As a consequence, growth in some of China's most energy intensive sectors, shown here steel, iron, cement, these are sectors which had really thrived during China's rapid industrialisation. Growth rates in those sectors virtually collapsed in 2014. You look at these growth rates here, these growth rates are around 1% or 2% for an economy which was growing 7 or 8, where these growth rates in the past had outstripped GDP. And they collapsed as more service-orientated parts of the economy came to the fore. This changing in the pattern of Chinese economic growth caused the growth of China's energy consumption to slow very sharply to just 2.6% in 2014. That's less than half its average over the past 10 years, and the weakest rate of growth seen since the late 90s. Although the extent of the slowdown in Chinese energy growth to as low as 2.6% is striking, the implied reduction in energy intensity, i.e. the amount of energy needed to produce each unit of GDP, shown here in the chart on the left, if you look at the most recent reading, although you see this step down, that degree, that reduction in energy intensity doesn't look extraordinary or without precedent. So in that sense, the data doesn't look particularly odd in some sense. But even so, I think there are good reasons for thinking that this faster pace of energy reduction may not signal the beginning of a new trend. In part, there must be a question of whether those exceptional low levels of growth reached in those energy thirsty sectors like iron, steel and cement will be sustained and suggesting there may be some sort of bounce back as growth rates in those sectors pick up. More generally, we might expect to see the rate of decline in energy intensity in China, shown here in the chart on the right here, that rate of energy intensity in China to start to decline and taper off as it converges on the rates seen in more advanced economies. So monitoring those developments will be a key task for future statistical reviews. For this year's review, the focus is on tracing out the implications of this sharp slowing in the growth of the world's largest energy market. The third factor, the overarching factor that I'd highlight acting across the global energy landscape in 2014, was a continuing focus on climate and environmental issues. Climate concerns were an obvious focus in 2014 as global leaders and campaigners mapped their course to the Paris meetings at the end of this year. Considerable attention was also placed on broader environmental concerns with a number of significant regulatory announcements, including here in the US and in China. These policy initiatives together with changing societal preferences and technological improvements have, as I'll come on to show you, an important bearing on the fuel mix and the role of non-fossil fuels. The focus on climate and environmental issues also garners significant attention for developments in reserves of fossil fuels. Total-proof reserves of fossil fuels were essentially unchanged last year, and the big picture remains one of abundant reserves, with new sources of energy being discovered more quickly they are consumed. For example, total-proof reserves of oil and gas in 2014 were more than double their level in 1980 when our data began. The issue is not whether we will run out of fossil fuels, but rather how we should use those ample reserves in an efficient and sustainable way. And when thinking about that challenge, I think it's important to remember that over one billion people on our planet don't currently have access to electricity. For those most affected regions, particularly in Africa and India, policy makers face the pressing need to improve the accessibility and the availability of energy necessary for the wellbeing of their citizens and for the strength of their economies. And that imperative in those regions will have an important bearing on energy developments there. So the question is, how did those three different forces, which I think were sitting over the global energy markets in 2014, the strength of US shale, the rebalancing of China's economy, the continued focus on climate and environmental issues, how did those three factors play out last year across the global energy markets? If you stand back for a moment from the details of the particular gales affecting some markets or the dark clouds sitting over other fuels, the big overriding picture of 2014 was one of surprisingly weak growth in energy demand coupled with greater resilience in production growth and as a consequence, weakening in energy prices. Growth of primary energy consumption shown here in this chart slowed to just 0.9% last year, which absent the financial crisis is the slowest growth of energy demand since the late 90s. So this is unusually weak growth in energy demand. As in much of the past decade, all of the increase in energy demand was from emerging economies, with energy consumption and the OECD continuing to fall. I spoke about some of that weakness in energy demand coming from China, but it wasn't solely restricted to China. Energy consumption grew more slowly than recent averages in all regions except North America, as we just discussed, and Africa, and were the particularly notable weakness in EU demand, which I'll come on to say. As you can see here, that sharp deceleration in energy demand wasn't a GDP story. Global GDP growth in 2014 grew at 3.3% unchanged in what it was in 2013. So this is not a GDP driven story, this is an energy intensity story shown here by those green bars where you saw this sharp fall in energy intensity. A significant part of that reduction can be related to one-off weather-related effects, particularly in the EU, and I'll come back to that. But over and above that was that impact from the rebalancing of the Chinese economy, driving this improvements in energy intensity. In terms of the fuel mix, the green at the top here was the fastest growing fossil fuel for the first time since 1997. Even so, oil still lost share within primary energy for the 15th consecutive year. Coal and gas also lost ground. The share of non-fossil fuels, shown at the bottom of this chart, reached an all-time high of almost 14%, with the shares of hydro, nuclear and renewables all increasing. On the supply side, energy production grew by 1.4% in 2014, so greater resilience on the supply side. That's a similar growth rate to 2013, although a weaker than its 10-year average. The relative stability in aggregate supply growth masked significant differences across fuels, however, with a sharp acceleration in oil supply offset by the first decline in coal production seen since the financial crisis in 1998. Although developing economies accounted for all the increased energy demand, all the increased energy demand came from developing economies. However, in terms of supply growth, supply growth was dominated by the OECD, which accounted for over 80% of the increase in supply. So all of the demands coming from developing economies, 80% of the supply coming from the OECD. Over the past 10 years or so, the OECD, shown by the darker green line here, has had a significant improvement in its energy balance. I'm using here net exports of energy as a percentage of consumption. You can see this improving energy balance of the OECD economies and a deteriorating energy balance of the non-OECD. So that, if you like, provides a sort of 10,000 feet overview of the 2014 data. To get at the stories underpinning those data, you need to get closer to the ground by looking at the individual fuels. So we start with oil. Oil was at the epicenter of the 2014 energy storm as a number of those overarching forces came together. Just before we came down over breakfast, Guy was saying, sometimes just seeing the data for the year as a whole just makes clear what was really going on at the time. I think that's true in terms of the oil market. It may just confirm to many people what we already know. The data for 2014 as a whole made clear that the sharp fall in oil prices last year was largely a supply story. The increase in oil consumption in 2014, if you look at the oil consumption bars, was very close to its recent historical average. There was nothing particularly exceptional about demand growth in 2014. In contrast, if you look at the supply charts at the bar to the right, supply growth last year was almost off the charts, with global production increasing by over 2 million barrels a day. More than double its 10-year average. Again, if you look at that non-OPEC split, it's clear that that strength was driven by non-OPEC production, which increased by 2.1 million barrels a day in 2014, which is the largest increase we've seen ever on record. Exceptional strength within supply, particularly non-OPEC supply. US production predictably set the pace of its disgust, but that strength wasn't solely restricted to the US. With both Canada and Brazil also enjoying record increases in production, with output in both those countries reaching record high levels. In contrast, OPEC production was broadly unchanged, although the share of production across OPEC countries continued to be affected by supply disruptions in the wake of the Arab Spring. On the demand side, as you can see here, oil consumption grew by 0.8 million barrels a day. In 2014, without entirely driven by increases in non-OPEC demand, which we see OPEC demand falling, particularly within China. The growth in Chinese consumption was a little below its recent historical average, but still accounted for almost half of the increase in global oil demand. As in 2013, the gains in Chinese oil demand were driven by gasoline consumption, supported by the increasing purchasing power of Chinese households. In contrast, growth in demand for fuel such as obviously diesel, which are more exposed to the rebalancing of the Chinese economy away from heavy industry, away from infrastructure spending, they remained very weak by historical standards. That eerie calm that I mentioned earlier that pervaded oil markets during 2011 to 2013 reflected two powerful forces operating at the same time but coincidentally offsetting each other. On the one hand, you had US tight oil powering away throughout much of that period, but at the same time, Middle East and North African supply was retarded by the events surrounding the Arab Spring. The net effect of those two effects was a global oil supply increased by an annual average at just over 1 million barrels a day in 2011 to 2013, pretty much in line with global consumption. That precarious balancing act came to an abrupt end last year. The exceptional growth in non-opec supply far exceeded incremental supply disruptions, which together with a softening in the growth of oil consumption relative to 2013 led to a growing supply imbalance and a consequent build-up of inventories. As you can see here, OECD oil inventories began the year at relatively low levels, but they rose steadily through the year, increasing by almost 150 million barrels over 2014 as a whole. More recent data suggest this stock build continued through the first part of this year with OECD stocks close to a 10-year high. Not surprisingly, given the source of that supply strength, this build-up of stocks was most pronounced here in the US with US commercial crude stocks at their highest levels since 1930. The price impact of this supply imbalance grew only gradually, so it's a dated Brent average to $109 in the first half of 2014, which is close to its 2013 average. But as that supply imbalance widened and stocks accumulated, prices began to fall. Dated Brent, shown here on the chart on the right, peaked in the second half of June and Brent forward markets, which had generally been backwardated since early 2011, moved into Catango in July. The possibility that OECD may respond to the growing abundance of supply by reducing production targets probably provided some support to prices through the summer and autumn of last year, with dated Brent drifting down to around $80 by the time of the OPEC meeting in late November. But the decision by OPEC to maintain its production levels and protect its market share broke the markets back. Prices fell sharply with dated Brent ending the year at around $55 and reaching a daily low of $45 in mid January. One key message I take from these events is that even in the oil market prices work. So the high levels of innovation and investment driving the record supply gains which underpin the current surplus were set in motion by a decade of high oil prices. Likewise, the market now appears to be responding to the prompt of lower oil prices. Data so far this year point to a strengthening of demand growth and the number of U.S. oil rigs has more than halved since its peak in October last year. The exceptional strength of crude supply spurred a notable increase in refinery runs shown here in the chart on the left which were up over 1 million barrels a day in 2014, more than double their 10-year average. Refinery runs outstripped the increase in product demand as refineries were incentivised to increase their product stocks and so reduced pressure on crude storage. As this chart makes clear here in terms of those green bars U.S. refineries led the way with throughputs increasing by over half a million barrels a day. The largest annual increase since the mid 1980s for U.S. refineries was driven by the strength of U.S. supplies and the consequent discounting of U.S. crude prices. This lengthening in refinery runs was broadly matched by expansion in refining capacity. Even with material reductions in the OECD capacity still increased by 1.3 million barrels a day last year. As you can see on the chart on the right, spare capacity within the refining sector edged to almost 7 million barrels a day above its level in 2005 and we think it's sort of a good benchmark for when global utilisation rate was close to its effective maximum. Improvements within the U.S. infrastructure meant that despite the bumper growth in North American supply crude differentials narrowed last year. The average Brent WTI differential failed to around $5.5 in 2014 almost half its level in 2013 and the spread between WTI and Western Canadian Select WCS narrowed from almost $25 a barrel to less than $20 a barrel in 2014 as you can see has continued to fall through the beginning of this year. I'm sure we want to come back to ask questions on oil but that's all I was going to say in terms of the 2014 story on oil. We turn next to natural gas. The main story on natural gas was one of exceptionally weak demand. Global gas consumption grew by just 0.4% in 2014 which with the exception of the financial crisis is the weakest rate of growth for almost 20 years. In contrast, growth in global gas production was relatively robust causing gas prices across the globe to decline through the course of the year showing here on the chart on the right. The weakness in global gas consumption in 2014 was driven in large part by a foreign EU demand which as you can see here as long as the lectern is not in the way EU demand fell by almost 12% in 2014 which is the largest decline in EU demand on record. What was going on and I personally can't remember this but it turns out apparently that it was an exceptionally mild winter in Europe last year. I can't remember being exceptionally mild winter in Europe last year but it was an exceptionally mild winter in Europe last year and if you look at a measure of heating degree days which if you like is a weighted measure of how many days we actually had to turn on the heating in Europe because the weather was very cold that was at one of those record low levels. This chart here just sort of plots a sensitivity of gas demand to temperature variations through time and based on that sort of past sensitivity last year's mild winter would suggest if you just use that sensitivity to the gauge probably accounts for the lion's share of the decline in EU demand. So when we're trying to think about why was gas demand so weak a big part of that was Europe. What's going on in Europe? Were there some deep structural thing going on? No, I think the weather was just a little bit warmer during the winter than normal and the sensitivities here means that that can account for a lot. But over and above that the weakness in European demand was compounded to a little extent more by gas continues to lose share in the power sector particularly to non-fossil fuels. So there was some structural component going on in terms of that losing share within the power sector but the big story was a temperature story. On the supply side, US gas production which is shown here by these brown bars US gas production fell by almost 10% last year which took European production to its lowest level since the 1970s. But despite that foreign production the extent of the fall in demand meant that gas imports to the EU also declined sharply with pipeline imports from Russia and elsewhere falling by almost 9% their largest decline on record. The weakness in pipeline gas trade was compounded by the dispute between Russia and Ukraine which resulted in Russia's gas exports to Ukraine being turned off between June and December last year. All told, global gas pipeline trade fell by over 6% in 2014. The largest decline since our trade data began in 1989 causing total gas trade shown here on the chart on the right to fall for only the second time on record so falling global trade in gas. If you move outside of Europe gas consumption in Asia Pacific was also relatively subdued with growth slowing to 2% in 2014 significantly weaker than its 10-year average. You won't be surprised when I say what's going on in Asia Pacific you would know the answer already. That slowing can be counted in net terms to a very large extent by Chinese energy demand which saw growth in Chinese gas consumption decline from over 13% in 2013 to just 8.6% last year. So slow down in Chinese gas consumption but still growing in absolute terms at very strong rates but just less strong than seen in previous years. The main exception to this story of global gas weakness was of course the US where gas production in the US grew by over 6% almost double its 10-year average and as you can see here on the chart on the right accounted for almost 80% of the increase in global gas production. All of that growth was due to increases in shale gas shown here by the green bars which grew by over 13% last year with the vast majority of that growth stemming from Marcellus and Utica shale. So again, China big impact on the demand side US big impact on the supply side. Return next to coal for many years the fortunes of coal have been inextricably linked to China to a large extent China is coal. As this chart makes clear that was true as China industrialized rapidly causing coal to be the fastest growing fossil fuel over the first 10 years or so of this century and it was equally true in 2014 as Chinese demand break sharply and coal became the slowest growing fossil fuel in 2014. For me, when you sort of search through the statistical review it's sort of thousands of data points in it I think for me the single most striking number in the whole of this year's stats review is China's coal consumption which is estimated to have almost stored in 2014 grown by just 0.1%. That compares with 2% in 2013 and an average of almost 6% over the past 10 years. So what drove this pause in China's coal consumption? So this next chart compares the growth of Chinese coal in 2013 with this pause in 2014 and tries to decompose the factors driving that slowdown. In part the slowdown is a natural consequence of the generalised slowdown in China's energy demand. As the growth in China's energy demand slowed the growth in coal consumption naturally slowed with it. And we think this generalised weakening can account for around two thirds of the slowdown in China's coal consumption shown here by the purple bar. Over and above that coal lost out relative to other fuels in China. Some of that lost ground reflects the fact that coal was disproportionately exposed to the industrial sectors most severely affected by economic rebalancing. Those iron steel construction cement sectors we looked at a moment ago. Coal also lost share in the power sector in part as a result of exceptionally strong growth in Chinese hydropower as new capacity came on stream and high levels of rainfall, buoyed utilisation rates. So in answer to the question what drove this pause in China's coal consumption it looks like a mix of both structural both structural effects and a number of one-off effects. Outside of China India provided the main source of strength for the global coal market where both consumption and production grew strongly and posted the largest increments to the global demand and supply of coal. The vast majority of the increased demand for coal in India came from the power sector enabling total power generation in India to increase by almost 10% in 2014 the strongest rate of increase since 1989. In that context it's worth remembering that India has one of the largest numbers of people without access to electricity. In a similar vein Africa also increased its consumption of coal in 2014. We have to be careful about being too sweeping in our judgments about the use of coal. Return to non-fossil fuels despite a backdrop of slowing energy demand and weak growth in fossil fuels non-fossil fuels continue to grow robustly increasing by 3.7% in 2014 comfortably above their 10-year average. As you can see here if you look at the 2014 bar and compare the contribution of non-fossil fuels with fossil fuels non-fossil fuels provided a bigger contribution to global energy growth in 2014 than fossil fuels. That's the first time this has happened for over 20 years other than when the world economy has been in recession. This despite the fact that non-fossil fuels accounted for less than 15% of total primary energy. Global hydropower grew by 2% in 2014 slower than its 10-year average and nuclear power grew by 1.8% with the biggest boost provided by South Korea as three nuclear reactors were restarted. For renewable energy shown here in the orange bar there's both a half-full and a half-empty story. So the half-full story is that growth in renewables accounted for almost a third of the total increase in primary energy. It's got to think that I'm bombarding you with numbers. So renewable energy accounted for almost a third of the total increase in total primary energy in 2014 and provided more than 40% of the increase in power generation. So these are really quite significant contributions from non-fossil fuels. Added to that solar power continued to grow at breakneck speeds in 2014. The half-empty story is that although the growth of renewables remained robust in 2014 it was below its 10-year average and in fact was its slowest rate of growth since 2003 with its slowdown being driven by wind which grew at less than half its 10-year rate in part reflecting less public policy support in both the EU and the US. The half-empty interpretation is reinforced by the fact that despite this strong growth renewables accounted for only 3% of primary energy in 2014. So what's going on? Half-empty or half-full? I think you can reconcile the half-full and half-empty stories by the fact that the year-to-year growth of renewable energy is relatively insensitive to changes in demand conditions. So you can see here on this chart on the right renewables continued to grow relatively robustly in 2014 despite the sharp slowdown in overall energy demand and that's such that renewable energy accounted for a bigger proportion of this smaller increase. Or put differently, and you can see it again you can see it very clearly here by looking at the black logs the greater sensitivity of fossil fuels to market conditions meant that in effect they acted as a swing energy source in response to the slowdown in energy demand. The final thing I want to touch on and I know I'm going on far too long is on carbon emissions. The slower growth of energy demand together with the shift in the fuel mix had important implications for the growth of carbon emissions in 2014. In particular, global carbon emissions from energy use we estimate rose by just 0.5% in 2014. The slowest rate of growth for over 15 years other than an immediate aftermath of the financial crisis. That 0.5% growth last year compares with an average annual growth rate over the past 10 years of 2%. What this next chart does is it compares that average 10-year average of 2% and compares it with the 0.5% in 2014 and tries to ask a question of what drove this slowdown in 2014 relative to that 10-year average. We think around a quarter of that slower rate of carbon emissions in 2014 relative to the 10-year average can be contributed to weaker GDP growth. Global GDP on a PPP basis grew by 3.3% in 2014 compared with a 10-year average of 3.7%. That's shown here by the orange bar. The most important driver accounting for around half of the slower rate of emissions was the faster rate of improvement in energy intensity shown here by the purple bar. That largely reflects the changing structure of the Chinese economy together with last year's unusually mild winter causing that one-off fall in heating demand. The remainder of the slower growth reflects the greater-than-average reduction in carbon intensity associated with the changing fuel mix in 2014 particularly the slowdown in coal and the greater contributions from non-fossil fuels. If you look at that same comparison comparing a 10-year average relative to what happened in comparison of the growth rate in 2014 to the 10-year average but this time think about it in terms of the contribution from different parts of the world it is clear that the vast majority of the slowdown in carbon emissions can be attributed to China reflecting both the sharp slowdown in consumption growth and that shift in the fuel mix away from coal. The one trillion ton question, if you like is whether these developments in China are likely to persist so possibly signalling the beginning of a lower trend in emissions growth or whether they are likely to reverse in the near future. As we saw earlier, I think there are good reasons for thinking that some of the slowdown in the growth of China's carbon emissions were part of a broader structure rebalancing of the economy that is taking place and is likely to continue. The extent of the slowdown in 2014 also reflected a number of one-off and erratic factors unlikely to be repeated and which may even be partially reversed. Let me wrap up and conclude. Following the earlier calm more normal stormy conditions returned to the world of energy last year. I wonder if in years to come we may look back at 2014 and I wonder whether 2014 will come to be seen as something of a watershed for the energy industry. That's not because of the near-term volatility associated with the sharp fall in oil prices and the various adjustments that's triggered. I think to a very large extent that volatility is more a return to business as usual. But rather because some of the longer-term trends trends which are likely to have a huge bearing on the shape of the energy sector over coming years came to the fore. The heights scaled by the US Shell Revolution sparking a new world order of energy supplies, the rebalancing of the Chinese economy and its implications for global energy demand and the increasing focus on climate and environmental issues as we all try to tackle the twin challenges of using energy efficiently and sustainably whilst ensuring it is available and affordable to those that need it most. So lots of interesting issues for future additions of BP stats with you which means I can keep coming back to Washington. Thank you. You're open in your remarks. Every year while at the same time crude oil excess capacity remains relatively low there's a little bit of a conundrum for us fundamentalists so we have to blame the financial market of China and the coal is probably the most remarkable number that the saw presented over the non-fossil I mean among the non-oil numbers. So I'm going to open up the floor relatively quickly because we promised Spencer he would be out of here he was very busy, scheduled by 10 o'clock and we want to keep our commitment to all of you as well. First of all, I'll let you answer the question if you agree that it was more of a supply story on the price side in 2014 than it was at the man's story and then when you're finished answering I'll open it up to you. Yes, I do think it is. Well, I kept this one on. In terms of just what was exceptional relative to averages that chart, I think sometimes I really like simple charts and that chart was very very clear. The increase in oil consumption in 2014 was pretty much in line with what the average seen over the last 10 years. What was off the charts was supply and I've been in many conversations with macro guys and they go, I think there's a big demand story going on. Well, just look at the data. The data tell you what was exceptional what was truly exceptional in 2013 relative to sort of recent history was a supply story. It was a non-opec supply story. It was very much a North American story in terms of US, Canada and Brazil. Now I think the price dynamics were clearly affected by the fact that growth in 2013 or demand growth was quite strong at sort of 1.3, 1.4 million barrels so you did have a slowing from year to year and that affected the dynamics but if you just look at the big picture the big picture when you look back in history is demand wasn't exceptional supply truly was exceptional and so this to me seems very clear. We lived through it it seemed quite clear but I think sometimes looking back and looking at the data as a whole makes it crystal clear this was a to my mind a non-opec North American supply story. Thank you Spencer and yes, in the third row we have microphones and please identify your self name and affiliation. Anya Grigas, Trinidad National Security Fellow I wanted to, you said that US shale has created a new world order in the global energy markets to what extent do you think this new world order will incite Russia from its position of dominance over the European, let's say energy markets and along with that it's position of geopolitical influence. Thank you. So in terms of Russia's relationship with Europe that's very much largely a gas story and the issue there at the moment is the EU currently imports around 50% of the gas it consumes. EU's, most of those fields in Europe are aging so the production levels are likely to decline over time so even if you have relatively modest increase in consumption of gas in the EU on the basis of our energy outlook we have that sort of import dependency of Europe going up to around three quarters of the gas it consumes in the next 20 years. So Europe desperately needs to import gas. Russia sits there with enormous amounts of gas relatively cheap gas with plentiful pipelines to supply into it. The issue which is most concerning for the EU and as you can see in many of the things they talk about concerns about the dependency of that and sort of the energy security associated with being so dependent on one single supplier. And I think the growth of LNG is an important sort of part of how this may well play out over the next 20 years and US gas and the fact that increasing amounts of the gas production in the US will find its way in terms of LNG plays into that. I think to my mind there's two dimensions to this. In part what you will see is the EU's imports demands increase some of that will be met by LNG rather than just further increasing amounts of Russian gas imports. But also I think what you'll see is LNG providing like an insurance policy. So when I fill my car up a petrol at the beginning of each week there's a petrol station at the end of my road. There's a petrol station two roads further down I never go to that one I always go to the one at the end of the road. Now I know if that one something happened to it I always go to the one two roads further down but I always go to the one at the end of my road because it's closest. Now am I dependent on that? No because I know I can go to the other one. So dependency you judge not by where you buy your fuel from but your ability to switch if you need to. And gas I think what dependency depends or not in terms of where you get it from. So a story here could be is you invest in LNG facilities and the ability to regassify and taking LNG within Europe and in particular you complete the internal market of pipelines within Europe to make sure all parts of Europe are able to access that gas. And then to a very large extent you don't have to use that LNG facility. You can have it there as your insurance policy you know that it's there if anything happens because it's there it means you can carry on enjoying the far cheaper gas from Russia in a confidence that you're not that dependent on it because if anything were to happen you could shift to the other way. And I think global LNG supplies in the US becoming sort of one of the three major sort of sort of supply strength in terms of LNG where we see sort of Australia, US and Africa becoming the three main sources of LNG supplies plays into that. So I think now in that our central view is Russia remains the dominant supplier of gas to the EU over the next 20 years but the confidence the EU may have in taking that gas may be enhanced by the fact that it knows the LNG supplies it has a sort of plan B if necessary. Yes sir. Thank you very much. My name is Said Bumsleim. I am from the West Asian Department at the UAE Foreign Ministry in Abu Dhabi. My question is you mentioned the gas pipelines and the reduction in gas pipelines trade due to the Ukrainian crisis. However, political analysts also see that one of the major reasons behind the Syrian crisis and Russia's reluctance to solve the crisis is due to gas pipelines, very strategic location and they don't want other foreign powers to have more influence on Syria due to gas pipelines there. What do you think about that? So unfortunately for me I'm an economist rather than a political scientist so I always find political science things far harder than the economic ones. In terms of economics what went on in 2014 was Russian exports to Europe fell sharply but they fell pretty much in lockstep with demand and it was demand because it was this mild and so the fall in Russian exports to Europe was about 10% the fall in EU demand, about 10%. So that was all pretty much similar. There is this dispute. There was obviously a dispute between Russia and Ukraine. Different people have different interpretations of the source of that dispute but that caused the Russia's gas exports to Ukraine to be turned off for the second half of the year which had a significant impact on both pipeline trying generally and also Russia's gas exports. Russia's made clear that it's shifting its pipeline process, its desired pipeline within Europe so it doesn't have to go through Ukraine but I think that again that's a function to do with Russia's relationship with Ukraine but that pipeline capacity will still make available in terms of bringing gas into Europe and this is the point I was saying earlier part of the security dependence on Russia at the moment is there are some parts of Europe particularly within South East Europe which are very dependent on Russian gas pipelines because they have no other source and this seems to me the importance of completing the internal market for gas pipelines. EU officials are very good and quite rightly talk about the importance of single markets and completing markets. They need to complete the market in gas pipelines as well because that's the best way in which you ensure energy security across the EU as a whole. Let's try on this side the third row. Dmitry Chudinovskyk, Moscow State University so no questions about Russia for me. I've been wondering about if there is any correlation between hydrocarbons prices and investments into renewables and how likely are major oil and gas companies such as BP to invest into renewables in the future? I think there is some evidence that there is a relationship between cost of carbon, carbon price and investment in renewables. Unfortunately we haven't had many examples of significant and meaningful carbon prices to test this out. Two points. One is a backward looking point in terms of oil and gas companies role here. In the past BP in my time others who know BP better would correct me if I wrong. We invested in some different types of renewable projects and when we invested in different types of renewable projects the business plan assumed that there would be a carbon price in five or ten years time which made that investment viable. We got to five or ten years time and there wasn't a price on carbon which we expected and so we were no longer to those investments were no longer the economic investments we thought because the carbon price that we expected the price on carbon we expected and part of the business plan didn't materialize. Sort of the moral for that looking forward is if you set the right carbon price you sort of unleash market forces and you provide the incentives for everybody to start to behave differently. One part of that sort of unleashing market forces it will change, potentially change the fuel mix on the supply side and entrepreneurs, large oil and gas companies in that sense they will try to if as soon as you put a price on carbon then you look for the cheapest way of producing fuel will be either the low carbon way and so that may encourage developments on the supply side. But it's really important here and I get sort of very frustrated when you hear these debates on climate that people go ok carbon is all on the supply side. At least as much if not more is on the demand side here. If you start pricing something you're rationing it so people will use energy far more efficiently far more improvements in those energy intensities that we were talking about and if we're going to make solutions here at least as much of the solution if not more will come from increasing improvements on demand side and it's really frustrating that people always focus immediately just on the supply side where a lot of the actions here is on the demand side and you add to that is you start putting those types of prices on you'll start to get investments in all sorts of new technologies in the potential role. So at the moment the very small contribution is being made from carbon capture and storage. You provide the right incentives to start getting serious investments in that then we don't know how far that will take. So I think the role of oil and energy companies within this will be responding to the incentives given to us by policy makers by setting those right incentives and as I say I think the right way of doing that is by setting by unleashing market forces and you unleash market forces not by regulating different paths you unleash market forces by having a market-based mechanism of rationing and at a price for carbon. Yes, the third row down here. Ken Meiercourt, World Ox. You spoke of the United States as a source strength I believe was your phrase in natural gas are you predicting that the United States will be exporting natural gas in the near future and if so will you start? Yes, our central view in the energy outlook is that the resource base for US Shell gas and the nature of the productivity and cost improvements we've seen there should support continued strong growth in US Shell gas of growth of averaging close to 5% a year each year for the next 20 years so strong supply growth and part of the economics of why that's possible is because some of that some of that gas ends up getting exported if it all had to be consumed within America that would obviously push the price down more quickly to the point where some of that gas would get trapped roughly and we think over the next 20 years in a rough rule of thumb we thought around of the increases in supplies of gas we had around a third of the increase in Shell gas eventually being exported with two thirds being consumed within the US my understanding is the first new LNG export facilities I think are on stream to start at the end of this year I think that's in terms of what the planned investments are so it starts by the end of this year and generally in terms of the global LNG market not just the US I think of the global LNG market like a young child so for those of you who have a young child this is like a toddler and it's just about to go through a growth spurt so over the next five years this market really grows very rapidly over the next five years or so and to be clear this is not based on some fancy economic model or some econometric estimates this is based on just rather laborious adding up of all the FID projects which we know have been planned what's happening now may push those projects back one or two years or so but I don't think they'll get reversed and if you just look at those projects which have been FID or in-train and they come through over the next five years that leads to a sort of step change in the global supplies of LNG over the next five years and as I said America's part of that in addition to other key parts of our Australia and sort of the East African coast Yes sir I'm sure you're retired BP and independent energy advisor Just one short question you talked about Southeast European countries being very dependent on Russian exit but where does Cyprus and the Eastern Mediterranean with its enormous gas reserves fit into the picture why is noble stuck with Israel and can't go anywhere else and why is nothing happening there so I don't know now I'm not going to speculate especially in public on Cyprus gas unless my colleague in the front he's taking his head either which must mean it's a very difficult question so I'm sorry I'm just not expert enough to have a sense about Cyprus gas outlook Apologies Teth gasgyr on the 4th 3rd row Teth gasgyr Oh actually but you'll get lost in the podcast though so people won't hear Teth gasgyr on the 4th row You noted that the WTI Brent spread narrow considerably over the last 6-8 months and in fact I guess it's in Kentango now How do you see the demand or supply situation changing where that spread is going to widen over the next few months and when will it be so exactly I mean who knows we have a BP has a team of several hundred people trading that spread and it has a team of about 12 economists talking about these things so I'll leave that to the traders about what's going to happen I think the way I think about that Brent WTI spread is it's got to a level now I think it's unlikely to go much below that rate for a sustainable period of time Now you may have periods of time where the economics are such that some people may take a loss running loss on some of the transportation costs for a period of time if they think they're going to unwind and so on but I think it's unlikely to see a significant shift down in the in that WTI for a sustained period of time based on my understanding of the two factors driving which is both the transportation costs and the sort of discount you need on WTI versus some of the imported crude so $5 seems to me about a sort of naturalish settling point there may well be spikes which cause it to jump up and down but it feels like to me if somebody had to if I was forced to put a guess about where it would be in two or three years time I think my instinct would be I'm not sure it should be significantly different from around where it is now where if you told me when it was up at only at the beginning of the year it's quite interesting only at the beginning of this year it was up into sort of $10 now that $10 thing was to do with sort of refinery what's happening to refineries both in the U.S. and in Europe at that time and those sort of near term spikes may come around but I think that sort of my guess is as we look back through time we'll see I wouldn't be surprised over the next few years it's sort of fluctuating around 5 spikes in and around often to do with sort of turnaround seasons in refineries and so on I assume that if there were some policy change like crude oil export lifting of that man that would obviously have an impact on that spread I think it would have potentially have an impact but you also have to think through that if we're shipping WTI to compete in Europe that's also going to have to discount in terms of those transportation costs and so if you work that through it's not obvious to me just taking plausible numbers it makes a significant difference WTI Brent number OK, thank you down here to the front if you raise your associates then we'll go back to Doug Thank you. My name is I work in the UAE Ministry of Foreign Affairs My question is regarding the cost effectiveness of renewables prices have been going down significantly and now reached the Dubai bit especially the 5.98 cents per kilowatt hour for the 100 megawatt that was built by Saudi based aquapower and also in other developing nations like India where prices reached 8 US cents per kilowatt hour do you think that this will encourage adoption of renewables even without a carbon price or would a carbon price be necessary in order to get the adoption that is needed in order for it to make a higher percentage points? Thank you So what we see already as you say is wind particularly in some markets is already able to compete without any form of subsidies compete against sort of coal and gas in the power sector what we'd expect to see going forward is continuing to move down on those cost curves for both wind and particularly for solar it's actually over a period of time that they become increasingly able to concretively compete without the use of subsidies and in some sense I think of there as being a sort of if it's not glass sealing is not the right word it's like a fiscal ceiling on renewables in the sense of if I'm paying a per unit subsidy on renewables when they're relatively small I don't mind paying that per unit subsidy but if the per unit subsidy doesn't change as these grow bigger and bigger then it becomes a fiscal issue and so sort of unique for the long run growth renewables you need to be able to reduce that per unit subsidy in order for that fiscal ceiling not to bind in our energy outlook we had some estimates based from our technology folk on what we thought was going to happen and you do move down those cost curves both wind and solar so they can be able to compete against coal and gas we also showed the impact in 2035 if we included a $40 price on carbon and how that affected the relative prices and obviously what it did is it put up the effective price of gas and coal fire power stations relative to that of renewables and that just particularly for coal it helped even more so could it do it without it's certainly moving in the right direction in some parts of the world definitely yes and already can do but in our sort of scenario we looked at in 2035 we had both those improvements and a gradual phasing of a carbon price which pushed it even stronger in a way of allowing wind and solar across increasing parts of the globe to compete without the need for subsidies okay let's group two questions together Doug Hangle here in the middle and then Ambassador Rich Garzano after that Doug Hangle at the German Marshall Fund could you comment about the role of financial markets and oil prices this was a big issue a few years back when the oil price was going up and a number of studies were done that seemed to indicate that it was not having a major impact now we're beginning to hear again when the oil price comes down that financial markets were driving this as opposed to supply exclusively supply and demand let's take Rich isn't that what Spencer will answer them consecutively Rich Cosler at George Mason University we're halfway through 2015 what are you going to be looking for as you look ahead to writing your statistical review for next year in terms of the major changes OPEC has obviously announced it's not going to change its production outlook where do you see the deltas coming that may change your story for next year I was really enjoying the fact that we've managed to produce this year's statistical review so in terms of financial markets so as Guy said I'm a relatively newcomer can we call it the oil family rather than any family I'm a relatively newcomer to the energy family and I spent 25 years in central banking a big chunk of that at the Bank of England and for many many years I've been told over and again that different types of markets have been driven by financial factors and it was speculated causing market prices to move away from fundamentals there's been many many studies and I've never seen one that has been able to convincingly demonstrate to me that they cause prices to move away from fundamentals for long periods of time now can I say say Brent jumped down by $2 tomorrow or WTI spiked up could that be caused by financial factors sure I think near-term volatility can clearly be driven by financial flows but why did oil prices fall from a sort of $100 we saw more in sort of the first half of sort of 2013 in the first beginning of 2014 to sort of $50, $60 it's because you know the risk is saying the obvious something like a million and a half barrels of oil being produced each day and somebody had to buy a million and a half barrels of oil I can't even compare what a million and a half barrels of oil looked like they had to stump up their capital buy it but hold up that paper storage put that paper storage tie up their capital and hold it for a period of time knowing that nobody would want to buy it for some considerable period of time I'm only going to do that if I think I can do that but sell it at some point in the future for a higher price it's not surprising to me that prices fell in sort of physical markets it seems to me quite natural with physical markets with very steep demand and supply curves it seems quite natural to me I think you need to search for theories of financial speculation to explain that Richard's question on major change in the delta so I think obviously a fascinating issue is just what will happen to the US shale in terms of low prices but I think the issue there is how I think it would be important that don't finish the story when we write the 2015 review but to also do the 2016 and 2017 review the way I'm thinking about shale is if you like we all went to school we were taught that supply curve for oil was very steep it wasn't very sensitive to price and it wasn't very sensitive to price because big oil companies like BP would take several years sink huge amounts of money doing a platform in the middle of the ocean somewhere drilling a hole and once that world had been drilled and oil was being extracted it wasn't going to turn it off even if the price of oil dropped by 10% and so supply was relatively sensitive over any short period of time shale completely changed that it's like a manufacturing investment you have to keep on investing to produce and as a result of which you've introduced to my mind a kink in the supply curve in terms of that very steep supply curve in the middle of that supply curve there's a kink in that supply curve which is a piece of supply which is far more price sensitive now if the point of saying don't stop the story at the end of 2015 I can quite imagine we've seen rigs fall off very sharply this year and we're starting to see production at least flatter now if not starting to fall off a little bit and so I guess my point would be there is don't then say oh there it is that's the death of the shale industry I think that's one part of it and then as prices come back up then let's see what happens in 2016 and 2017 when I was a child in England, I'm not sure if you had them here in England there was something called weebles and a weeble was a toy which you used to push and because it had a weighted bottom you pushed it down and it bounced up again and it was very resilient you kept pushing it down and this is how I think of the US shale industry if the prices fall it will come off and as it comes off that will act to dampen the extent to which prices need to fall but likewise as prices come back up it will come back up more quickly and that will then dampen the price to the extent to which prices will need to rise other things equal now OPEC can obviously overwrite all of that but in terms of just the pure supply curve that's how I think so I think understanding this will be fascinating just how resilient is it how quickly can it come off I think it will be fascinating I think the other one and so this may be a bit boring but this is sort of my point I guess my thesis is some of these big trends are the ones which will persist for a long period of time so it will be updating those trends I think the other one was how much of what we saw in China is erratic and how much of it is sort of signal and telling us about it when I was in China a month or so ago I was really struck by the commitment there by sort of people not at sort of very senior levels but sort of working level people the commitment to sort of transform their energy system to transfer their mix of energy and transform some of these their energy consumption and so just understanding updating year by year in terms of that getting a better sense about what's going on in China as well I think it would also be very important a first and third thing sorry is to point that was made yesterday in London when thinking about the response to oil prices it's really easy to think about if you like the 5 million barrels associated with shale in terms of non-opex supply and missing the 45 million barrels in terms of outside of the US shale so what we have seen is companies large companies all announce non-opex cuts if you add up all the announcements you can get to reductions in capital expenditure by major oil and gas companies of sort of 120, 130 billion dollars of announcements how will that start to play out in non-opex supply now again I think it would be too early to see in terms of the 2015 data but trying to start to learn about that I think will be another key thing over the next couple of years okay well we have time for one more question and if you find this guy whenever you ask one last question nearly always never get one to your attention well Mike always wants to prove me exceptions all right I'm Mike Keynes with the Logistics Management Institute I'd really like you to elaborate a little more on that China question the number was very striking on the coal the reduction in the coal consumption increase from year to year a lot of this was due to structural change in the economy but some of it was due to one-off factors which might not be repeated and some of which might be reversed so I'd like you to elaborate a little on that and also on the extent to which the Chinese are focused on local air pollution problems and how that might play in to what will happen to their coal consumption thank you so the erratic factors I point to are sort of two or three fold so one is remember to that coal story there's a bit of a sort of chasing the tale of a story here why did coal consumption slow to a two-thirds of it looked like because energy consumption slow so you then have to say well why did energy consumption slow and so there some of that does look like there's this trend this movement essentially away from the industrial sector towards the service sector but then I'd say but look at what's happening to some of those growth rates so iron steel cement growth rates are one or two percent is that really conceivable can that continue year after year if the economy keeps growing at seven and a half percent or sevens and six percent and they start to move out in terms of their urbanisation into the interior of China I'm not sure er so perhaps some of those things annual growth rates can jump around for all sorts of reasons so that I'd say just some of those numbers look quite extreme and as I said improvements in energy intensity will be harder to achieve as you start to come down to the sort of industrialised countries norm so I'd point there within the outside of that in terms of coal losing share within the fuel mix or the other components so not the generalised slow down a big chunk of what happened in the power sector was this extraordinary growth in hydropower and the numbers here are quite chunky and so what happened in hydropower is sort of the perfect storm came along is quite a significant amount of capacity came on stream and you had high rainfalls boosting utilisation rates I don't think you'll get that sort of growth in hydropower this year and conceivably you may even get some reduction in hydropower if you don't get such plentiful rain supplies so that's sort of another erratic factor so I guess my instinct would be we are seeing a slowing trend in Chinese energy demand but that will be a wiggly line and I think my hunch is when we look back over four or five years this may be a particular one where it spiked down low in 2014 it may go the other way I think environmental concerns really do matter and sort of their quality do matter and part of another reason why coal lost share in the power sector and it's not I don't think that the numbers are as big but it's sort of indicative of your question is some sort of the aging power sector coal fire power stations particularly close to very sensitive urban areas were closed down and so you can this is not a generalised policy this was there are some particular power stations which are causing air pollution very close to sort of deep pockets of urban population and you saw those closed and that was part of that loss of power there and again anybody's being to China recently you're very aware that that local air pollution issue is a very significant political issue for the Chinese and it's one of the drivers which is driving some of this movement away from coal into alternative fuels thank you and thank you audience for coming today and we're excellent questions and please join me in saying thank you to Spencer Gale thank you