 Thank you all for coming. We're delighted to have you here. My name is John Hamery. I'm the president of CSS. Just wanted to say Word of welcome. I usually try to horn in on every successful conference. We have it makes me look better And I'm really delighted that we can have you here today And of course this is a continuation of a series that I think this is a fifth or sixth time that we've had We've had the opportunity to hear hear from the the world Energy outlook I mean it's become kind of a feature in Washington. It's and very important You know because you know, Washington is a place that it'll debate anything, but it and it doesn't need many facts, you know And so it's always helpful when we can put facts into the middle of a debate and You know actually I think this is really the What the International Energy Agency does for all of us it gives us all an honest grounding Where we can talk about these matters, and I think it's a it's such an important service that they render to the global community And to us and for those reasons that we've we've treasured and valued The opportunity to work with them and I especially want to say words of welcome and thanks to Tanaka son Who has been leading so ably these years and we're very fortunate to have him in this position and Although I do resent the fact every time he comes he poaches yet one more of my staff and I've so the agreement this time Was no more poaching you can't have him. We need him here But we are delighted to to welcome him here we welcome all of you to this this is a very important discussion we're the front end of probably another Debate in the United States on energy policy it hasn't been working out that well because we keep getting distracted and So I think we're hoping that we can make this again the starting point for the kind of serious reasoned discussion that we need to have and this report is an enormously important contribution I think that there's a very important new work in this section on subsidies, which is Important contribution when you think about the distortion that is coming in into energy markets globally Thankfully, we've got again a good solid dispassionate basis where we can talk about it and I Welcome that and I'm grateful for that Guy Caruso is going to do the real work as I said I've gotten all the credit I'm going to get out of this and if I stay sitting here one more minute I'm going to run out of my knowledge and show how unprepared I am to lead this discussion So I'm going to turn it to guy Caruso guy is his senior fellow with us here at CSI's very fortunate He was of course Assistant secretary at the energy department where he was kind of the counterpart and and was providing this so it's this it's fitting That you would do this guy. Thank you very much. Thank you all for coming. We're delighted. You're here Thank you. Thank you John very much and it's a great honor to work for such a thoughtful and insightful Leader as John Hamery Only one one Very infrigally Have to say anything that might be construed as disagreeing with John, but the one thing one of my Successors at EIAs said was there are no facts about the future and I think you know The outlook that we'll hear from The IEA leadership today on Sets a baseline from which to think about the future, but as I think all of the IEA presenters will mention it's mainly designed to Provoke our thinking about policy and Potential policy changes whether it has to do with Economic efficiency Environment or energy security and I think that comes up through very clearly in this report and we're very honored and pleased to once again collaborate with our friends In the IEA The senior leadership of which we will have with us today and I think this year It's particularly complex and challenging To think about where we're headed over the next 20 to 25 years as the world energy outlook does Partly because we're coming out of such a horrendous global economic downturn, and we really don't know What the next Years will bring in that respect Secondly compounded by the financial difficulties the global financial system going through Continued turmoil and that has such an important impact on energy investment, which is a big part of the story That we'll hear today including the subsidies that John mentioned the IEA has been at the forefront of Some of the work that's being done Through the G8 and G20 particularly on the subsidies for G20 and Also on the environmental issues both in the Copenhagen meeting and Cancun meetings that are going on right now IEA plays an important role and Something like the world energy outlook does provide an analytical framework to think about These and and other things that related to both Environment and energy security You know one of the critical Strengths of the IEA it's his ability to adapt One of our colleagues here at the energy and national security program Led by Frank Verastro Bob Ebel Was one of the first Authors of what what's now become the world energy outlook when it was IEA didn't even exist and that at that time the OECD and IEA countries represented about two-thirds of world energy as We look at this 2010 outlook. We're now looking at IEA membership that's less than 50% of world energy and declining as the report says So IEA has had to adapt and they've done so I think Remarkably well and under the leadership of Anakasan and his predecessors More and more is being done that brings in non OECD members into the work of the IEA and I think that's obviously a critical important critically important part of this outlook and I won't Go go into more depth because I Won't leave plenty of time for our presenters You have their biographies in more detail. So I won't go into great depth Well in order of of presenters this morning first, we're going to have executive director Nabuotanaka who has been as John said leading the IEA now for More than three years coming in September of 07 Prior to that he had a senior leadership position in the OECD and Then as well with the Japanese government in ministry of Economics trade and industry for many years he has Tirelessly tirelessly been devoted to getting this word out Ever since the Arriving at the IEA keeps him on the road all the time as As as I know it's very difficult and then after Director Tanaka Fatih Bureau the chief economist of the IEA will Go into a bit more drill down a bit more depth into this report Fatih has been with the IEA since 1995 and Is the chief economist? prior to coming to the IEA he was with OPEC in Vienna and Spent a number of years teaching at the University of Vienna and now become one of Most influential people when it comes to you can energy economics around the world and Then the third speaker will be ambassador Richard Jones whose deputy executive director of the IEA We're about it's been about a year and a half now dick So over two years time is flying Dick has had a distinguished career in the US foreign service Having served as ambassador to four different countries US ambassador to Israel Kazakhstan Lebanon and Kuwait so he's had deep interactions in the energy part of the geopolitics of this story and and is extremely well placed to wrap up this session and Give us some takeaways and then we'll follow that with Qs and a's and there's such a distinguished and Experienced audience here. I know they'll be They'll be as challenging as it was to put the wheel together the question. So just one Housekeeping word if you just if you could turn off Your cell phones or turn them to to silent that would be really appreciated. So without Further ado, let me ask Executive director Tanaka to Provide a overview of this year's world energy outlook and once again, thank him and his team for Not only the wheel work, but the work you do all year long to inform this extremely Challenging energy debate the bull. Thank you very much for coming Thank you very much guy And thank you. Dr. Hamre for a very nice kind word. I really appreciate Well, I if I lose a job in IA I'm delighted to come back to Washington to work for CSI Much better pay I guess Well, good morning, ladies and gentlemen, welcome And thank you for joining us today for this world energy outlook 2010 Just I will make a short brief introduction before I'll pass the floor to Fatih our chief economist who did all the Good works behind the scene and also in front of everybody of this world energy outlook. I Talk with David Palmfrey and Frank Barrister about why this world energy outlook this year is so popular That is true here. We have more than 300 people in Japan We had 400 people in Beijing quite a number of people Everywhere this world energy outlook 2010 is really popular And we concluded that maybe the Uncertainty around the world on the energy sphere is so big that everybody wants to know what will happen in the future Probably that is very Let's say convincing argument why this world energy outlook is it's such a very good say attract lots of attention and Interest from people. Yes, we know the global recession is Is now coming? Say be recovered recovery stages happening the government is putting the Economic stimulus is and but also the sustainability challenge is still there and Notable steps Horde have been taken in the past 12 months is by the different I mean all the government's economic recovery front and also in the Copenhagen the pledges For the climate conference in the last year certainly made a difference The expectation was too high in the Copenhagen. So as some disappointment happens But we are we calculated that the pledges if it is installed quickly It's covers about 70% of the necessary CO2 reduction toward 2020. So it's a it's a good they start but father Implementation of the policies of Development deployment of this secure low-carbon technologies is is is is the issue How can we really achieve this because still it's not binding? G20 commitments For example in in to reform wasteful and insufficient fossil fuel subsidies, which Mr. Tamre as well as guy touched up on and in this Issue the GT in the G20 group the United States is leading in This exercise. I had a very good chat. Just I show you for I Had a good chat with your president In Yokohama in a peck meeting about subsidy He really appreciate our work and our contribution to the process. I really appreciate I really thank him for using us in that sense and These policies definitely could make a difference, but still it's not binding and with what level of Ambition and commitment will they be pursued and How far can they take us toward a sustainable energy future? our latest World Energy Outlook wrestles with these questions and we have Departed from the practice of building projections only on the majors that governments have already taken we call it reference scenario the current policy Scenario in this world energy outlook the focal point of our presentation is now the new policy scenario which takes account of broad policy commitments and Plans even in the absence of the clear pathway for implementation That is one big difference from the Previous world energy outlooks The report assesses what it could would take to reach the 450 ppm stabilization scenario In the aftermath of Copenhagen cop 15 Well, we still this is still achievable still doable but The 450 scenario is now very very and very difficult To achieve and globally we find that it will require even more much more aggressive emission reductions post 2020 and will at will cost at least an Additional one trillion US dollars Compared with our last estimate in the world energy outlook 2009 Expanding renewable energy supply remains indispensable in efforts to improve our energy security and combat Climate change our timely analysis of the prospect of renewables Explore us the critical role of government support in Improving their cost competitiveness and stimulating further technological advances, but it cost us 300 billion US dollars in 2030 to achieve this 450 ppm scenario Through several unique studies where seeks to deepen our understanding of the trends that will shape our common energy security The report includes a comprehensive survey of energy in the Caspian region Where domestic energy policies and market trend bear strong influence on its potential for exports and to diversify global oil and gas supply But whether These gas or oil goes to east or west from Caspian is a very interesting question We asked the question Will peak oil will peak oil be a guest or specter at the feast The global oil production will surely peak one day, but it may not be only a consequence of resource constraints Factors affecting both supply and demand Including government policies will determine that peak So 450 scenario gives you a very interesting answer for this question Even beyond security of oil and gas supply for several billion people Energy security is simply about having access to the most basic of Modern energy services electricity and clean cooking facilities We know us secretary of state Clinton takes the good initiative of this cream cooking facilities We set out what it would take to end global energy poverty by 2030 the cost is 30 billion US dollars a year not a big deal compared to the other amounts of investment Significant changes are also taking place in energy sector and this world energy outlook is very rich in new data and Analysis to describe them. We see a number of possible game changers for the global energy market including for example China In our analysis China is the largest energy consumer in 2009 and Chinese Decision and especially government decision in energy in each of the energy Sector will make a big impacts globally Another game changer is natural gas The shale gas revolution That has been underway in the United States has certainly serves as a very important impetus for the global market and Our world energy outlook team is going to develop a high gas Usage or high gas utilization scenario to investigate the impact of stronger than expected gas supply and demand and This report will be released Middle of next year in May June next year Well to elaborate I the key findings and message in this year's world energy outlook I will now turn the floor to the fatty the chief economist, but I really thank all of you to come Even in a very busy time to listen to us. Thank you very much so Good morning, ladies and gentlemen. Thank you very much Mr. Tanaka and guy for the introduction Just a couple of words before This book is I mean it has been peer reviewed about 200 people experts in the world depending on their Expertties which is extremely useful for us and I should mention that the guy Caruso the Frank Varastro over the Etcho Adam Siemensky couple of the colleagues who Who are here with us helped us a lot to put the ideas together and give us very good Comments Also, I see colleagues from the EIA here just to mention to you that the EIA is International energy outlook and the energy outlook for us is very helpful for us very inspirational to understand the US and the the international energy markets and one final thanks to Frank Varastro here, it is very difficult to find young very good energy experts to work in Paris, so They don't want to come to Paris and I am very thankful to Frank and also guy Caruso to have a Given me the opportunity to work together with Matt Frank who is outside. I think trying to put the things together. Thank you very much for the CSS that very nice present. Okay Frank is just coming entering the room now. You can look at him, so Who just got married last week Okay, let me go to a bit of a Uncertainties Now Mr. Tracker mentioned that there are uncertainties around the energy world and many of you know much better than us that this energy World is always surrounded with uncertainties, but what we think Or what our numbers show us that the uncertainties we are surrounded now are Both in terms of their debt and in terms of the numbers are unprecedented I Would like to share with you at least five of them that I think are crucial today The first one Everybody knows it is the economy How the economy will evolve in the next years to come especially the recovery especially in the OECD countries and especially in Europe and as far a economy is the main driver of the demand supply investments for financing and there are significant questions about the Economic growth and this is a major uncertainty the second one a Trant that very is us a lot When we look at the oil demand and the supply picture They are becoming less and less sensitive to the changes in the international oil prices the effect of the international oil price on the demand creating a response and Also bringing new oil to the markets is a bit less pronounced than in the past Then which may mean that we may see higher prices in the future than we did in the past And how high these prices will be and what kind of responses will come from the governments to those high prices is another uncertainty third gas markets a Last year when we hit the honor to present the world energy outlook here, which was focused on the natural gas markets we came up with a conclusion that the a gas glut is coming so it is now with us and The how strong the penetration of gas will be is a question mark Another one is that if it is very strong what will be the implications of the that strong gas penetration on the other fuels not only for gas other fuels plus the Existing gas pricing regimes and also on the climate front. What to be the implications of that this again and another uncertainty The fourth one is on climate change Again last year we said that we would hope to see an agreement in in Copenhagen which would give a signal to the energy sector so that energy sector can Transform itself in order to reduce the carbon dioxide emissions However, we did not see a legally binding agreement after Copenhagen modern hundred countries Put some targets pledges submitted to the United Nations, but they are not legally binding So if they don't the countries don't not fulfill those targets Nobody can hold them Responsible so now the question is how important the climate will be in The next year's in the government's agenda and what kind of policies they will take which would have Implications for the energy sector climate and energy nexus. It is now a redder and uncertainty the fifth one is For me the most perhaps the biggest uncertainty is China and other Emerging countries what kind of policies they are going to follow Is of crucial importance as you will see in a minute the charts We are going to show you decisions, which will be taken in Beijing for the Chinese energy sector will have overwhelming implications for the international energy markets for all of us and And not only for the producers but also consumers for all of us for the industry and What kind of policies they are going to follow will be therefore of crucial importance and there are many question marks about those policies now Let's start with the how the global energy picture would look like with the In the next 25 years OECD countries namely the countries of the u.s. Canada Europe Japan Australia New Zealand and Korea put together Their energy demand will be more or less stable in aggregate terms. The growth comes from outside of the OECD For me there are five countries which are the drivers of the global energy demand growth namely China China China India and Middle East these are the in the order of magnitude is this way So this is three times a China one time India and one time the Middle East. They are the drivers The rest is also important, but Less less important. But having said that we should be fair with those countries today a Chinese person consumes Only one third of the energy that an OECD person consumes 25 years of time when China becomes Even a much bigger than now an energy consumer Still a Chinese person would be consuming only two-thirds of the energy compared to an OECD person So from one third to two-thirds and which huge growth in China in volume volumetric terms and with major implications when we look at the fuel by fuel basis we see that the In terms of coal and oil we do not expect the OECD countries consumption as a group We see that the levels we we were observing in 2007 2008 again There will be a Ready a saturation, but we see that the gas is growing in all the countries and Gases the only fossil fuels grows in the OECD countries and bulk of the growth in all fuels come China and rest of the emerging countries So again highlighting this issue Now why the growth is coming from there? There are at least three reasons I should say two plus one The one is Economies growing and growing economy needs energy and energy is Unlike some of us a thing is a very good thing. In fact, it makes the life easier more convenient More comfortable and it increase the productivity. It is those countries with the growing economies. They need energy second Population more people More energy population growth is very strong in those countries These are all good and well justified reasons why the bulk of the growth and in fact almost all the growth comes from the developing countries but but There is another reason which is not well justified and which is not a good one namely as was mentioned by Mr. Tanaka a subsidies There are substantial fossil fuel subsidies in many emerging countries and This subsidies lead to wasteful use of energy If something is cheap Below it is a real value. We tend to use this without paying too much attention. How much we use of that? so currently we think the subsidies are about 300 billion us a dollar fossil fuel subsidies in the year 2009 where we hit the low oil prices and We expect subsidies in 2015 to reach about 600 billion US dollar if the governments do not change their policies and This is a huge amount of money and It is a burden for many countries as well who are subsidizing for example Iran According to our analysis a Uses about one third of the government budget to cover the subsidies where you have the a Gasoline price about eight cents per per liter. So very very low even lower than the United States So if you look at the oil exporting countries and their station, some of them are phasing major challenges Which is the following? Since the domestic demand goes very strong the availability of export is shrinking and Pushing countries to make investments in order to keep the same export levels In fact in many of many many countries if they were to If they were to phase out the subsidies the export availability will go up Substantially and they would be able to export a lot of oil gas and cash a lot of hard currency so this is one of the issues and as a Mr. Taraka mentioned we made together with other international organizations a report to G20 summit in Seoul and we were happy to see that the communique of the G20 refer to the Addressing the fossil fuel subsidies issue Now moving to oil markets slowly One structural change in the oil markets we see that almost all the growth in global oil demand is Coming from the transportation sector cars trucks and jets and This is really an important trend we think to identify Because in the transportation sector even though The prices go up We do not have readily available alternatives to oil for the time being It's a bit of a captive Demand unlike the for example electricity Generation we use a lot of oil in the next generation in the past, but when the prices went up we were able to move from oil to Nuclear power or coal or renewables or gas we were using a lot of oil in the heating I don't know yes, but in my Home country in Turkey we were using a lot of fuel oil and when the prices went up we switched to Natural gas electricity and the other things, but in case of transportation our Maneuver room is limited So and on top of that bulk of the this growth in the transportation comes from developing countries in which Prices are as I said heavily subsidized So there is not a Direct effect on the consumers to change their behavior and here again China is the Driver of the transportation sector and This is again very well justified According to our statistics today in the United States More than 700 people out of 1000 people own a car in Europe About 500 people out of 1000 on the car and in China it is 30 person 30 person out of 1000 person on the car and in 2035 when China becomes a oil consuming giant and Many people think that our oil demand numbers for China's Jada modest, but again if China becomes a big oil giant Still Chinese car ownership level Will be about 240 person out of 1000 person it means More or less one-third of United States of today When China becomes this giant So it may well be the case. It is very Luckily that the Chinese car ownership can even Increase stronger than what we have in our calculations Which may well mean that the demand will be even higher So The oil demand will be strong Mainly driven by transportation sector and developing countries led by China. What about the production site? We think that the in many non OPEC fields we say a strong decline in North Sea in United States and elsewhere, but we expected the crude oil Production will be about 68 69 million breaths with a plateau and Most of the oil will need to come from the members of OPEC However, there is one issue here according to our projections we have to About 30 million bars per day in the year 2035 between now and 2035 about 30 million bars per day Develop the fields which are already discovered and About 60 million bars per day. We have to discover the fields So it's a huge task and to discover the fields you have to make Exploration activity Especially in the countries where the resources are namely Middle East and you can only discover something You cannot find something if you look for So if you don't look for you cannot find it and sometimes even if you look for you cannot find it But to find it is you have to look for it that that it means a lot of Expression activity needs to take place in those countries We expect the NGL in natural gas liquids at type of a byproduct by when producing a Gas it is going to increase in the in the future From Middle East countries, but also from Russia United States and as far and also oil sense Will play a growingly important role, especially oil sense from Canada Then we look at the country by country basis These are the countries for the growth of the oil production will come from Most of them are again OPEC countries and OPEC's market share will increase substantially We think about over 50 percent a level that we have only seen once before the first oil price shock and Saudi Arabia Iraq are Very important in terms of the leading to growth Iraq is According to our analysis is crucial if we do not if we're not able to get the production growth in in Iraq to From 2.5 today. We expect to come around 7 million buyers per day in the next 25 years of time if we don't see that production growth coming We may well have difficulties balanced the markets in a way that we would like to see So perhaps if I can get all the countries most crucial one is that we have to have a success story in Iraq and we all know that there are some challenges to get that Production growth happening and just for the sake of the records our expectation of growth From Iraq is much much modest than the government's official expectations both in terms of the Timing and in terms of the levels Brazil and Kazakhstan Especially Brazil the offshore we expect a strong growth from Brazil Kazakhstan I will come in a minute in detail But again Canadian oil science will be also very important to balance the markets and helping and addressing the energy security situation couple of words about guests so We think that the gas demand will grow Strongly and the main drivers will be in terms of volumes edition volumes will come from China and Middle East especially in China it is a We expected the Chinese consumption around 2020 maybe Coming close to 250 BCM a very strong growth and we do not and I want to underline we do not exclude the Possibility that the China gas growth Maybe a similar growth that we have seen a few years ago in the oil markets This is especially in the coastal region where the bulk of the industry and economy and the growth take place and it is getting more and more difficult and costly to bring the a call from in our Mongolia or Western China to bring to the Coastal region especially when you compare which we did with the gas coming from Countries in that very region including Australia and Middle East we expect more and more since a combined cycle gas turbines in in Middle East both for electricity and also in the context of destination more gas to be used and also for the petrochemicals unconventional gas We expect about one third of the growth in the Total gas production to come from unconventional gas in addition to US and Canada China Australia are key candidates and not only in shale gas, but also in terms of Colbert methane So last year when we were here as I said we predicted a gas glut to come Which is now with us today And now we think that this gas glut or oversupply of gas in global terms can be with us for a few years About ten years the size of the glut may be not as thick as now we have but we think about Two times the normal levels about 150 BCM 2020 to see a gas Surplus may not be surprising What could change this game? It could be many things, but one of them would be a Stronger than expected economic recovery in key regions such as in in Europe as a gas consumers But this oversupply of gas Lots of and another cheap gas has major implications Some of them are good. Some of them are Perhaps unintendedly negative for some others But everybody will be affected from the strong penetration of gas The first one is we already see We already saw namely especially in Europe many of the long-term gas contracts are indexed to oil prices and with the increasing oil prices The gas prices in low-term contracts are increasing and on the other hand you have a lot of cheap gas as LNG looking for buyers in the markets and there is a growing divorce or at least a separation between these two gas prices and what we have seen lastly in Europe and we have been We were already predicting this and we mentioned this before that the even in the existing long-term contracts At least three countries in Europe were able to Get some improvements in the existing long-term contracts Which is a big thing with a major gas exporter to Europe Second perhaps it is more importantly. We are seeing the these signs of new long-term gas contracts to be a Made on a more creative way Reflecting the markets rather than only indexing to oil and one shouldn't be surprised And this could be our prediction for 2011 perhaps because 2010 we said there will be a gas glutton 2011 our prediction could be we may see a new regime for the long-term gas contracts where we see more and more elements of market included implications of strong gas use is Of course good for gas, but gas there is a in the energy mix We have hundred percent and the if the share of something goes up the share of others will need to go down So there is no other way around so what we see is in many countries especially renewables are In difficulty because of the cheap gas prices For the next power plant to be built there is a very typical Competition between the CCGT and between a wind turbine and Cheap and available gas lots of gas in many countries as mr. Tanaka mentioned we are visiting many countries and talk with the governments and industry there is a strong Competition and I will come in the renewables more on that the same happens to in some countries for coal we see a replacement of Coal by a gas and of course in the United States Most of the colleagues know much better than me here There will be a series of retirements of the coal-fired power plants soon according to our estimations about hundred ninety gigawatts in the next 25 years and gas may be a very good candidate to be a Replacement for that, but also some new technologies Such as the carbon capture storage for coal there may be in fact to be more to the point there is a loss of appetite For CCS for coal as the gas becomes cheaper and available if the trend continues We may see it more and more challenges CCS for coal to be a part of the Game and to come to the market Sooner rather than later Now talking about coal Coal despite everything remains the backbone of electricity generation in OECD countries is going down in In non-OECD countries especially in India we expect a growth, but The main growth comes from China It's about 600 gigawatts which is equal to the Current coal capacity of US all European countries plus Japan put together So this is tremendous and this is again. This is our numbers may be on the modded site Here and you may I don't know if there are colleagues who follow the coal markets here If you look at the coal prices recently we see an increase in the coal prices and Few reasons, but most important one being China importing coal and China today imports only 2.8 percent of it is coal use only 2.8 percent. So it's a very small portion, but big for the International markets and we expect China remain to be a coal importer at least for the next few years to come One other implication for this the growth of coal plants in China is a Only the CO2 emissions coming from Chinese coal plants I'm not saying from China total only the Chinese coal power plant CO2 emissions are About 30 percent of the total world CO2 emissions of everything So this is just to put in a context how important the Chinese Electricity sector is for the climate change debate. Of course as well as other countries Renewable energies meeting renewables Both in terms of the electricity generation and biofuels are entering the Mainstream they are becoming more and more important mainly due to the Government policies to address the climate change and energy security problems Because renewables are in in theory. They are very good to address both of these challenges in front of us but The problem is they need substantial support Without that support financial support, they will not be able to grow as Much as the governments or the many of us would like to see And we have also calculated renewable subsidies worldwide. It's about 57 billion US dollar today and it will grow in the future This is of course as I said a Keep discussion in many countries now renewable Subsidies especially given the context we are in two elements one many countries Have difficulties in terms of their budget deficits and there is a growing discussions between the finance ministers and energy and environmental ministers what to do with those subsidies Second as I said in a minute ago in cheap gas lower gas prices make the life also difficult for Renewable justify the renewable subsidies given the gas rather Positive environmental performance a In many countries including United States. We see the renewable energy investments not in a good shape our Analysis is that the renewable energy investments in the United States in 2010 will be about minus 50 percent lower than in the year 2009 and There are many factors there, but these two I mentioned to you are also there in terms of the a When we look at the country's companies in Europe many renewable companies their share prices Not the brightest in the last quarter we saw so renewable energies will go through difficult times and especially when the economy is weak and the Competitors are cheap if the governments are serious about the having a substantial share of Renewable energies they have to make up their mind how they go with those subsidy regimes Now one point on another point on China up to now I told you China's likely implications on the commodity markets oil gas and coal putting a pressure in a justified manner putting a pressure in the in the markets but There is a another Side of the coin Namely when we look at the clean energy technology investments or growth in terms of capacity in the next 25 years or so we see that the bulk of it is Going to take place in China in terms of solar wind nuclear power even in the context of advanced car technologies And this is in fact a good news for For us because the the issue is China by doing a lot of or building a lot of new capacity there Will be able to bring the cost of those new technologies down There's a thing called learning by doing the more you do the new technologies the more you bring the prices down Even though the trend may not be so steep So this is a good news making them a Lower than today the cost. It's a good service for many of us for the rest of the world but there's other part of the issue namely For example in the car technology if China becomes as we say here the leader of the advanced car technologies The champion of it then what happens with the current champions So in terms of we know that the car industry car manufacturing is one of the crucial Elements of the OECD countries economy today if and it is about 3% of the GDP comes from car manufacturing What will be the implications of that? And the OECD countries the China's growth in that demand in that respect is Something to be seen what will be the implications in terms of economy trade and the others I think an important element Now, let me move very briefly to the Caspian region, which we look very carefully. I will go very quickly this Even though it's a very important region. We look at country by country Especially four of them Kazakhstan, Azerbaijan, Turkmenistan Uzbekistan We see that the Kazakhstan will play a crucial role in terms of total oil production increase About they make up around 5 million barrels per day Especially due to the spread giant fields in Kazakhstan and in terms of gas In terms of gas the production from the region thanks to Turkmenistan mainly can come about 300 BCM For those who know Europe for Norway is very important for the European gas picture This means three times the Europe three times the Norway 300 BCM means three times new Norway coming to the gas picture I Say three times to Norway, but it is in Europe. We discussed since 20 years How to bring that gas to? to Europe almost 20 years two decades route a or b or c or d and the different Philosophical and economical discussions we have and China Only three and a half years ago start to discuss with Turkmenistan for a gas pipeline and The discussion started financing pipeline late and today the gas is flowing to China the Turkmen gas so Just to say to our European colleagues and we say also this the same thing to you in Europe as well Not only in the United States that the the there may be a competitor for the Slowly but surely to the Caspian and Russian gas and oil Visually Europe it is not to be a under estimated Another point trust before finishing the a Caspian part here is Very important at least we think so because we look at the domestic markets there The efficiency is terrible the efficiency levels if the those countries would bring their efficiency levels to the level of OECD countries they would cut half of the their domestic demand Which could be a very good news for? exporting that energy outside So let me finish this part and brief the talk a bit on Climate change We thought it was timely why we have the discussions in Cancun going on this week and We thought it is important to bring you some facts that we thought Important to consider the picture the energy picture I show you up to now Oil gas coal etc. Brings us a trajectory Which ends up a temperature increase? 3.5 degrees Celsius So according to the scientists and they call the United Nations and everybody who knows these things allowed They say it is definitely unacceptable with huge implications in terms of the sea levels in terms of availability of water a migration Species and and so on completely unacceptable So we looked what needs to be done in order to come from 3.5 degrees Which is unacceptable for by everybody to a two degrees which is considered to be the the limit to a To hinder major catastrophical implications of climate change what needs to be done So we build a scenario, which we call 450 scenario as Mr. Tanaka said 450 is the number of Particles carbon particles in the atmosphere which makes sure that we remain in the two degrees trajectory and it assumes the Very strong implementation of the pledges targets after Copenaga Now I would like to share something with you here, which was a big surprise for me when we were preparing the word energy outlook We look at these pledges made by the countries after the Copenaga more than 100 countries OECD and non OECD countries and I am not a Environmental economists at all and scientists at all I look at those pledges one by one. I was very much surprised Because some of the pledges are extremely extremely vague For example, one country says a very big country with lots of emissions It says I am going to reduce my emissions in 2020 X percent compared to my business as usual case But you don't know what is the business as your case There is no hint about it and they can change the business as your case every year or what is the assumption? Some other countries say I am going to reduce my emissions in 2020 between X percent and Y percent and the difference between X and Y is so big that it doesn't have any sense to have any target there so there is a need for a transparency and a Contability on those pledges and it doesn't exist today at least as a simple Person looking at those numbers. I really don't see that they are As credible as they need to be and we also saw that the those pledges even if they were to be Implemented and as I said they are voluntary and nobody can Hold them had them responsible if they don't do it Since they like ambition if we want to come to 450 we need to do after 2020 so Major so huge efforts that the cost of coming to a 450 or a two degrees trajectory Increased after Copenhagen by 1 trillion U.S. Dollar according to our estimations This is a huge money, but the problem is more than the money Since the cost is increasing To have an agreement will be more difficult Because normally everybody wants to have a agreement there is nobody who is against the agreement But the problem is nobody wants to have the responsibility on his or her shoulders or the minimum responsibility if the cost goes up the amount of response to be shared will go up and it will be less likely to Have an agreement and the the longer we don't have an agreement the more costly it will be to find this solution and the saga Continues I will try to show you how challenging it became now to come to 450 For me we are only a few inches away To say goodbye to 450 or two degrees only a few inches away, and I will explain you why this is the So-called carbon Intensive or the carbonization of the energy it is normally taking place in this space about 1.4 percent per year it is improving 1.4 percent per year if the most Stingest stingest interpretation of the Copenhagen pledges were to be made and they were to be fulfilled as I told their voluntary nobody knows if they're going to fulfill the the carbon intensity improvement becomes from 1.4 percent to 2.8 percent double and We have a seen only once in our lifetimes that the carbon intensity improved 2.5 percent It was right after the oil press shock, but it was only one year and this has to be about 12 years and the problem is not that the problem is after that even the carbon intensity has to improvement has to double again About a five point four percent it means compared to now we have to see a four-fold increase in the our efforts and On top of that those efforts Mostly need to take place where the climate change is not at the top of the agenda of the countries So this is where we are But if we were to still go for 450 there are two sectors which are key to implement the changes one is the electricity generation we need a much stronger penetration of the nuclear renewable and new technologies such as carbon capture and storage and The second one is a major change in the transportation sector Transportation sector sometimes escapes from our Radar in the climate change debate, but it is not a very innocent one Today a coal Is about 42 percent of the COT emissions and oil is about 38 percent so difference between those two is not huge there and We need to see to come to a 450 about 10 out of four out of four out of ten cars four out of ten cars about 40% of the new sales of cars in 2035 to comes from advanced car vehicles. I see this Transformation compared to electricity generation much harder in terms of technology, but I may be more hopeful here because China is behind the electric cars Story At least for the time being in a very solid terms But the Chinese push for electric cars is not necessarily driven by climate change it is mainly driven by the Slowing down the oil import growth But it doesn't matter. I mean this is Chinese say you don't look at the Color of the cat if it catches the mouse So it is if it helps here at this oil security and climate is at the same time It is a good thing and we think if such policies are put in place The it can have very good implications for the oil markets as well. This is the oil demand in our likely Scenario which grows and as I said can lead to higher prices than we have now in the future, but in the case of 450 a Transformation in the transportation sector. We may see that the oil demand is much weaker, which would which could comfort the markets and We think it is the only way Now that the consumer countries can have a say in the oil markets true Trans transformation in the transportation sector There is no other way in terms of the The oil markets. This is the main way to address this issue before I give the flow to Ambassador Dick Jones to talk about the policy implications I wanted to bring to attention one final issue Which is not very topical in the energy circles, but this is very topical in our hearts in the IEA As some of you may know we look each year About the energy and poor energy poverty issue and according to our analysis this year 1.4 billion people About 20 percent of the global population. They have no access to electricity and this is not only an economic issue This is a social issue and even a moral issue We believe and it is mainly in sub-Saharan Africa and in in South Asia India Pakistan Bangladesh these two regions and What does it mean not to have electricity? It is not only not being able to watch a television, but it is You cannot keep the Medication for your child in the refrigerator For example the day finishes for them much earlier than than than for us and there's a big imbalance here the amount of electricity used by 800 million people in sub-Saharan Africa 800 million people in sub-Saharan Africa is equal to the electricity used in New York Where you have 18 in New York State where you have 18 million people. So just showing you the imbalances here and I think it is very important as we have done Mr. Tanaka together with Mr. Ban Ki-moon presented this work in the the sidelines of the UN annual meeting in September and we are going to follow up this work now. I would like to now Suggested Ambassador Jones discuss the the implications of this these numbers Well, ladies and gentlemen, I think we've bombarded you with a lot of facts and figures about the analysis from our latest World Energy Outlook this morning But what does it really mean? I Think if we could leave you with one message this morning, I'll see if I can work this it would be That today's energy policies including those pledged in connection With the Copenhagen Accord, but not yet adopted Are not nearly sufficient to place the world on a path towards sustainability whether from a security Economic or an environmental perspective and you see here on the screen But of course the IA always has more than just one message. So let's see what else we've got here We believe the age of cheap energy and particularly cheap oil is over as Fatih mentioned We're seeing increasingly insensitive Responses to price. It's because everybody knows as the prices are going up Of course, we do recommend that with policy action we can lower the international price but then We believe that that would allow room for a carbon price of some form Which would keep domestic prices up? stronger penetration of natural gas can have profound implications for energy markets in the environment Fatih mentioned Some of the work that I think we'll be doing in coming in coming months to see what happens if we look at gas as a potential substitute But his question is a substitute for what it could be a substitute for coal Which would be very good, but it could also be a substitute for renewables which in the law which may Make some sense in the short run if if renewable technology isn't available But in the long run gas although it's half has half the emissions of coal Still has a lot more emissions than renewables And of course to get the renewables to enter the mainstream. We need long-term support to boost their competitiveness and ironically China's actions which are for its own self-interest may be in fact the best way that we get the economies of scale needed to Make renewables competitiveness and finally getting the price is right by phasing out fossil fuel subsidies Is a crucial measure to cut demand? But if we're going to achieve sustainability for ourselves in future generations in effect We need to begin a revolution in the way we produce transport and consume energy and we need to begin it now the 450 scenario that Fatih's Layed out briefly is Shows us the way it's a path. In fact, it's at least cost approach based on plausible assumptions The world must eliminate fossil fuel subsidies We must invest heavily in energy efficiency and I want to compliment those people who kept the temperature down in this room We're not wasting any money on heating today But we need all we need also to accelerate the deployment of low-carbon technologies With consistent and transparent policies that are tailored to reflect the different stages of development of a tech of technologies Two key low-carbon technology goals are the complete decarbonization of electric power Power generation by the middle of this century and an equally rapid adoption of advanced vehicle technologies including electric But also biofuels Such steps will begin to reduce our dependence on imported energy and help break the traditional link between Energy use economic output and carbon dioxide emissions What is the IAEG doing to help spark this revolution? First like any good watchdog. We bark about what we see We try to get our message out via a variety of routes To our governments and official meetings and workshops as well as in bilateral meetings to the public through publications press events and speeches at conferences like this one To non-member countries via diplomatic engagement workshops training and capacity building activities and other joint activities, but we do more than just preach We also do We've trained literally hundreds of statisticians and energy analysts from non-member countries including China and India We invite officials from non-member countries to take part in our regular emergency response Exercises we had one just last week in Paris and they come we had 34 In the exercise last week from ten different countries We also hold special exercises emergency exercises just for them. We've done it for Thailand. We're planning more We have extensive joint programs with China India and Russia Invite them to our committee meetings up to and including at the at the ministerial level So engagement is a very important topic on our agenda We are now using our data and analysis to draw plans for the low-carbon revolution in the form of roadmaps for the development demonstration and commercialization of some 20 advanced technologies between now in 2050 Seven of these roadmaps are already finished. They're on wind solar PV power a Concentrating solar power electric vehicles cement industry carbon capture storage and nuclear power They're available free of charge from our web page and several more of these studies are now underway In addition, we are doing work for the G20 on reducing fossil fuel subsidies You heard saw some of the results of our work there for the UN on alleviating energy poverty in developing countries again You saw some of that for the clean energy ministerial on research development and Deployment investment needs on electrical grids sustainable hydropower electric vehicles and to establish clean energy solution centers in several major economy and major economies We're also working on cooperative projects with other international organizations our bodies including the international energy forum and The international partnership for energy efficiency cooperation Recent outreach activities with non-member countries include a partnership meeting for energy security and sustainability As well as the creation of an international low-carbon energy technology platform Which is intended to accelerate the spread of advanced technologies around the world. I think you get the idea We are extremely busy revolutionaries Even though we wear suits Of course, nobody knows for sure if such efforts to change current trends will succeed But let us hope they do Otherwise a growing competition for resources could snuff out economic growth and make the world even more dangerous place than it is today Thank you very much Thank you, Che Dick Jones We're running a bit short on time So let me take prerogative of the moderator to give the first question to Frank Barastro. Who's My boss Tanaka son, thank you very much and Fati and Ambassador Jones. We very much appreciate having you here One of the things that we did talk about and I'm a little concerned Presentation you focused on the policy case the new policy case The history of the IEA has been the reference case and when we compare it to things like the IEO that EIA puts out I'm concerned that that some people will look at this and I know you believe that the reference case I Want to say it's irrelevant but but lacks relevance in certain ways But it seems to me that that some of the assumptions on the new policy case Also kind of strained credibility So where do you find the happy medium and for the people that use the IEA reports to kind that's the baseline Against which a lot of other analysis is measured How did they discern what the reference case and new policy case in the current policy case what they really mean? Yes, Frank. Thank you very much. That is one of the basic Let's say point and this while the energy I took make a difference from the other from the previous ones We put lots of our energy in Explaining about this new policy scenario Because we have been criticized by this current policy or reference scenario because That is not really happening. The government is taking Actions anyway, even though it's not yet the planned or budgeted as such but Energy efficiency sectors renewable energy or low carbon technologies government will take some action and Definitely the oil demand will not go up to 117 15 million barrels per day. It's impossible. So So we try to make it as realistic as possible but as you say we assumed the parameters of new policy scenario some time ago and Actual development in the different countries in including United States certainly makes our new policy scenario is a little Less updated. So we will continue to update these elements or parameters of new policy scenario to make more realistic We are not make a projection for the future This is the scenario analysis What if this scenario comes to reality the cost for that investment? Technologies or government policy necessary to achieve this scenario. So we try to show the range of What should happen in the future between new policy scenario and 450 and We say 450 is a very sustainable scenario. Of course, it's difficult and new policies Probably more or less happening. So the answer should be between these two scenarios and what the cost for that That is our basic idea. So don't think it's a projection. It's rather in case. I mean in our analysis It's more the back casting if To the degree Celsius happens what is necessary if the current policies or actions will lead us to this What is the implication for that? So Well in the interest of time, let's try to group several questions together and then ask our guests to answer them Collectively so Let's take one from each section and then then we'll ask for the a Charlie ebinger from Brookings institution Thank You guy. I was wondering with the change as you see occurring in the European gas market What do you see as the ramifications on Russian development of some of their more costly gas up in the high Arctic? game one from here, I Think in the back had a your hand up first of the microphone grant to carry Did state your name and Brian Maxwell from the Cato Institute? You talked a lot about shale gas And how that's changed the market for natural gas. There seems to be a trend now that there's actually a in in America to a shift to liquids and Shifting the horizontal drilling shifting to oil which could also radically change the equal eager forward shale in Texas For instance, I could potentially change the oil market just like the shale gas did to the natural gas market Do you have a comment on that? Okay, thank you Anyone on this and this be equal Who he had Brookings and Cato, so maybe somebody Molly Molly Williamson Middle East Institute Thank you What happens in your analysis if nothing happens just on a hunch that the United States along with other countries? Does not take Some of the efforts to produce a clean energy legislation or the like Hypothetically speaking, thank you Okay, I think that's a good set of questions to start with so the the cheap gas in Europe and availability of lot of gas in the markets make in general the gas producers worried and I see two trends which may be more or less Link to each other one on the investment side the other one on the political side on the investment side the Apatite for new investments, especially the costly investments as you have mentioned is Fading away and one may see a lot of delays as a result of Uncertainty of the need of substantial gas Production coming to the markets, which in turn is that a good news? as Ambassador Jones said as the dogs we bark we again bark because we think that if then the gas glad finishes That to make an investment at that time We have very little time a typical gas field unit is six seven years in optimistic terms to develop so the a fading away of this Investment for the a green fields is not good, especially the ones and the costly ones I think we will see some delays there the second implication under gas producer exporters is the Coming together and building a gas exporting Countries forum and to make them steps in that direction. We are following that those developments closely we are Happy if that organization brings information discussion transparency in the markets But I think today everything is going very well for the gas producers so I hope nobody will Take steps in order to give wrong signals to the gas market developments in the next years to come the I think the in the gas markets the main issue The oversupply is not only because of shale gas, but at the same time Lots of LNG is coming the amount of LNG between 2010 and 2013 the capacity growth new LNG is about 50 percent So whatever we built in the last 40 years We are going to increase this by 50 percent only in the next three years So let's don't forget the the LNG part of it and for the US We expected the US production Can easily grow about five six dollar MB2 terms in real terms in the next 20 years and US will not need to Import a guess even though there may be switches from gas to oil and again back from oil to gas depending on the gas oil price Differentials but on top of that I would like to highlight one thing that I didn't mention much When we say unconventional oil we shouldn't only fix to the shale gas One could see some surprises from Asia in terms of Colbert methane especially in in China and in Australia some Grote one may see in those countries on top of the shale gas What happens if nothing happens then this is exactly the question coming from Frank. This is our Reference scenario we call it or the we called current police scenarios and our I yoko IE EIA colleagues say their reference case no policy change if no policy change is of 2010 Continuous 25 years of time. We will have a Temperature increase about six degrees Celsius. We are heading to that and there is no Delta, but this is a definitely a catastrophic Way and I am More hopeful than previous years that something will happen But this something is not the thing that we would like to see It is the reason just to address what At what mr. Tanaka said We have up to now a policy scenario, which we called what happens if nothing happens We all know that something will happen It cannot go it cannot go this and we see the governments are putting some new efforts there Under the video scenario, which we called 450 we Presented today. It doesn't seem as we stand now are the most likely case So governments and industry ask us can you make a set another baseline between the what happens if nothing happens? And the what happens if you go to 450 these are both seems to be not the most likely cases So we developed another scenario as mr. Tanaka said we call the new policies scenario, which takes into account the Likely new policies coming from the governments not as aggressive as the 450 But also not just the time stops like in the reference scenario But finishing that question if nothing happens This is really the worst thing that we can see a climate change and lots of troubles in the oil markets as well there And just to add a briefly to what Fatis just said. I mean one of the virtues of the new policy scenario is to keep governments from becoming complacent Because it's not only just what happens if nothing happens, but what happens if we actually Do achieve what people have pledged and it's not enough So that's what we have to keep in mind. We not only have to do more than nothing We have to do more than what they pledged already Yeah, good point Who's I think there was one question here that and then you'll be you'll be next Yes, thank you. My name is Kevin the cool. I have basically three questions to dr. Birol One is as a third person that is not completely in the gas world Could you give a specific definition what conventional gas unconventional gas and natural gas exactly is and where these are? geographically concentrated at the global level and The second question is basically to add on the discussion about the base nice and I don't what happens if nothing happens Wouldn't it be? Necessary to do next to an economic analysis of what happens if we don't reach the 450 so really coming to a dollar sign to also balance the The fact of how much you will have to invest to achieve the 450 and Then the third question is wise hydrogen not mentioned in the overall long-term outlook. Thank you Take one more Michael Ratner with Congressional Research Service, how did you factor in? You kind of in an early slide alluded to the delinking of oil and gas How do you factor that into looking at future gas supplies if there is a delinking in the next couple of years? If we can sit there for there we can okay now The both in oil sector and in the gas sector the what is convention what's unconventional it is becoming less and less Clear what was a distinction point, but how we do it in the gas is that more the extraction technologies? The we use more unconventional Technologies to extract the shale gas or a different Colbert methane and others Compared to the conversion that is the the technology that you use that you employ where they are concentrated This is the big countries are here Russia I mean Russia Iran and Qatar this tree make about 50 percent half of the global gas Reserves in fact when you look at it and followed by other Middle East countries and North American countries the economic analysis of what happens if we don't reach to 450 we have a There are many implications of that in terms of economy in terms of demography in terms of climate and so on but we are Not the organization that look after those issues. We are more looking at the energy sector What what we know is that from the studies? Which were carried out a few percentage points of the GDP equivalent Money is needed to adapt to the Implications to address the implications of the climate change the temperature increase So the one is instead it says 6% of the GDP, but it's not our number. This is a number that is Made by others But you don't need to be a scientist to know or that such a six degrees temperature increase Will have substantial not only economic but also demographic and immigration and demographic implications Hydrogen yes, we didn't mention hydrogen In fact, we didn't mention many things to be honest with you the book is was somewhere here 700 pages. So we talk about I don't know 45 minutes or so therefore hydrogen is there, but it is hydrogen is we think is a as a Technology it may be difficult to see a major penetration of the hydrogen in the time frame We are looking into it is the next 25 years, but in terms of fuel cells We may see especially in the transportation sector more and more use future of gas Supplies in the context of new gas to oil The new gas contracts if they are decoupled from oil prices. First of all, I do believe that we will still need Long-term contracts. I think we should distinguish two things one to have long-term contracts in a flexible way and Not to need long-term contracts. I believe we need still long-term gas contracts but what I believe is they should be a Reflecting the realities of the market much better than they are today The as we all know why they were in text oil prices in the past because one of the main reasons is that they were Substituting each other now the substitution effect is more or less gone now guys as an oil. They are delivering energy for different sectors and Therefore, yes for the long-term contracts because you need huge investments and in most cases a huge transportation Pipelines and that is which needs some type of insurance and But they should reflect the market realities and of course in addition to long-term contracts We would like to see more and more markets gas to sell sold as a commodity in the in the markets Well, thank you very much and I'm afraid that's going to have to be all given our guests Scheduled today, so thank you all for coming and please join me in thanking