 Good morning. Hi, my name is Sarah Ladisla. I'm the director of the Energy and National Security Program here at the Center for Strategic and International Studies. We're very pleased to have all of you here in the room and the folks that are joining us on the web for what is one of our favorite events of the year. We have Fatih Baroul here with us today from the International Energy Agency. Fatih is the chief economist at the IEA and also sort of the lead author on the World Energy Outlook, a publication that we know all of you have come to count on as a source of insights and analysis on some of the key energy trends facing the energy sector and some of the sort of ongoing political and these days geopolitical issues that we're discussing on a day-to-day basis. We're very, very pleased to have Fatih here. This is, I don't even know how long we've been hosting the WIO and it is always one of our consistently very, very popular events. So we're very pleased to have all of you here today. It's actually quite shocking to have as many of you here on a Thanksgiving week as this, so that is a real true testament to the work that Fatih and his team put together. So without further ado, we'll have Fatih give his presentation of this year's World Energy Outlook. It has a focus on nuclear energy and also a special report that you all put out in October on Sub-Saharan Africa. But then also just the insights on sort of the policy direction, impacts on climate change, oil markets and all of the things that we've come to really appreciate about the work that Fatih's team puts together in each of these reports. So we'll have a bit of a presentation and then we'll have a discussion with all of you looking forward to it. So please join me in welcoming Fatih Barul. So thank you very much, Sarah and a very good morning to you ladies and gentlemen. It is always a great pleasure to come back to CSIS. Sarah said it's one of our favorite events and I can assure you that CSIS is one of our most favorite venues to present our outlook. We are always very happy to have this warm welcome from Sarah, Frank, Mr. Hamre and others. Now today, I would like to take you through our last virtual 2014 that we published two weeks ago. And I will first try to take you through what is the energy context we are in, we believe and then try to give a look at the future. And after the presentation, as Sarah mentioned, we will be very happy to get your questions, comments, suggestions. I should also thank, there are many colleagues here who gave a hand to our work colleagues from DOEIC here, Matt and I have my colleagues here, Brent and Ali helping us. Mr. Hamre, Frank, Sarah gave a very good contribution. Thank you very much to all of them. Now where are we today? First of all, the current calm in the energy markets, we believe, should not mask the challenges we have in front of us. We believe energy security set the move high up in the international policy agenda very soon, higher than it is today. We see oil prices coming to $80 in terms of the Brent prices, lots of oil in the markets, supply is plenty, demand is weak. But what is happening in Middle East may well have major implications, as I will try to highlight in a minute, for the oil markets sometime soon. In terms of gas markets, we are seeing the same moving third time in Europe especially. We see that the gas security is a permanent and a serious issue, and putting these two things together, looking at the countries where today we see some tensions, such as Iraq, other Middle East countries, Libya, Russia, Ukraine, our first thesis is, despite the slow down in the prices, prices coming down, despite the less tension visible today, oil and gas security will be crucial for the international policy agenda in the next years to come. The second point, which is a stress point in our energy system is about the climate change. We have mixed signals, we are getting mixed signals about climate change. Of course, one very good news, and I will count it in a minute, U.S.-China joint commitment, in terms of reducing these U.S. emissions, following the European Union's leaders having a 40% reduction 2030 commitment. This is, of course, a good one. But when we look at the numbers, our report shows that last year, COT emissions increased again 2.6%, which puts the world perfectly in line with a temperature increase about 3.6 degrees Celsius, which would have devastating implications for all of us. And of this growth, about 60% of that growth came from one country last year, which is China. Second, a rather important issue that we highlight every year and we follow up very closely and providing policy recommendations is the fossil fuel subsidies for the consumers. In many countries, consumers at the pump station, electricity bill, and so on, pay artificially low prices, extremely cheap prices, much, much, much cheaper than their economic value. And this is mainly in Middle East countries, in Russia, Caspian countries, in Asia, China, India, Indonesia. What does this mean? To put a subsidy to make the coal-oil-yarn gas prices much cheaper than what the governments are saying. The governments are saying to the consumers, to their citizens, please do dirty the world. If you do so, I will pay you money. This is more or less the translation of it. Or another translation would be giving money to making the things much cheaper than what they are. Please don't worry. Use the energy in an inefficient manner. Don't care about the efficiency. You use it as much as you can. This is the messages are given by the governments to their citizens. But in line with our recommendations and the recommendation of others, some countries now are taking the lower oil prices as an opportunity to phase out those subsidies, such as one in Indonesia. Now there's a major reform process in Indonesia and some other countries. But this is a major problem. Third, I think a good news is about an efficiency front. There are colleagues who are much more experienced than me and worked in the governments. They all knew, would tell us, that efficiency is a concept, is a statement. Came out in almost every government's programs, leaders' speeches, the modest presentations like this, and so on, many, many years. But for the first term, we are seeing significant impact of efficiency policies on trends, on numbers, the concrete effect in terms of slowing down the energy demand growth in the countries, in the areas where those policies are introduced. This is extremely good and I will give you some examples on that. But one number that is, I believe, is a very interesting number. Today, in the world, three out of four new cars sold are subject to fuel efficiency standards. And it's new. And it's very good. A force that started in Japan, in Europe, followed by in the US, especially first Obama administration, putting the new standards, and then followed by China and now in India. Now, we are going to see all these two stress points under climate change and under energy security. They are both very important stress points and complex, the lots of interwoven aspects there. The question is, this change to address them, are they going to be changed by the government policies and steer them in the right direction or the change will be driven by the events themselves? And we do believe the first one may well be better. So looking at the future. In the future, we see a change about the contribution of different countries in the global energy demand. When you look at the last 10 years, global energy demand increased by 30% in 10 years. It's a big increase. And about half that growth came from one country, which is China. And in those countries, US, Japan, European countries put together, their energy demand was more or less flat. And we expect this to be flat for the next years to come. There's upward pressure on with the economic growth. But also strong downward pressure on the efficiency gains, so more or less flat. The news is, at least for me, is that we expect China to slow down. And this says, ladies and gentlemen, effect on everything, oil, coal, investments, CO2, and everything, it will have major effects. And why China is slowing down? There are three reasons. One, I mentioned the efficiency policies. If there is one country I have to pick up and say, this country has very ambitious policies, plus, more importantly, implements them and monitors the results. It is China, by far. Second reason is the Chinese economy is slowing down and changes the nature, moving from a heavy industry-based economy to a slowly but surely a lighter economy. This is the second reason why we see a slow down energy demand growth. And third, Chinese population, it is coming to a peak sometime soon and then will decline, the aging process following the example of Japan. As a result of these three reasons, we expect the dragon will slow down with all its implications on the energy markets and climate change. But there is a new driver now of the global energy demand growth, which is India plus East Asia and the Middle East countries. They are the engine of the global energy demand growth. And we are already seeing in the last two or three years the numbers are changing while China, when you look at the last two years, China energy demand got slowed down considerably and the others are growing very strongly. Now something on the costs, which is a major issue in Europe, in Japan, and other countries, are we going to lose our competitiveness vis-à-vis United States because of the cost of energy? And our answer is most likely yes. With the current policies in place, with the current trends in place, most likely yes. What we have done, we look at the average cost of energy a consumer pays in different countries, a household, an industry, what they pay for one unit of energy in the past and in the future. How does it change in different countries the cost of energy to the economy, the consumers? When we look at the 2008, there was only the some difference between Europe, Japan, and the United States in favor of US. And after the Shade Revolution, while we see the cost of energy for one unit of energy decline in the United States, it increase almost everywhere else, which puts the United States in a very advantageous position. And the question is, what is in the future? What we expect is it will still be a significant gap in terms of cost of energy between US versus Japan and Europe. But more importantly, perhaps much more importantly, we expect Chinese cost of energy will be higher than even the United States. This is mainly as a result of China declining to reducing the share of dirty but cheap coal and replacing it with other fuels. This is, of course, an issue which is a good news for the United States. We hold a strong position with almost all other major players here, and therefore something to take note of. Of course, distance may well change as a result of efficiency policies. If we use energy more efficiently, we can lower the cost of energy down. Now, an issue about oil markets, something that we feel, we need to put the things a bit in a perspective after the Shade Revolution in the United States. Many colleagues, many commentators, many of us think that as a result of the Shade Oil Revolution in the United States now, and the price are going down, then the situation looks much, much better and more comfortable for the many years to come, a view that we strongly disagree. For the following reason, first of all, between now and the next 2 and 1 half decades, global oil demand will increase 14 millimbares per day, a modest but a healthy increase, global oil demand. The question is, who is going to meet that demand growth? Which countries? When we look at it, when we look around, there are four strong shoulders. US, Canada, Brazil, and Middle East. All the other countries put together, North Sea, Russia, Mexico, some increase a bit, some decrease a bit, but in total, in some, they see a bit of a there, total production, a bit of a decline. So how are we going to meet that demand growth? United States, we expect the oil production mainly coming from Shade will increase through 2020s, a very good increase, which is a very good news for the global markets. I think today the consumers in the world, all of the United States, that the price of oil recently and now are kept in a level which is providing a comfort zone for the consumers, a very good news. But when we look at the deposits of the Shade oil, we expect the growth will be significant, but this is far from meeting the entire global oil demand growth, and we expect, as our colleagues from the EIA, sometime soon that growth will come to a plateau. From Canada, we also expect strong growth coming from oil sands, even though there are some challenges, we believe those challenges can be overcome, and we may well see a growth coming from Canada, which makes an important contribution. And the third strong shoulder is Brazil. Offshore production, when we look at all these projects, we can see expect a significant growth coming from Brazil. But there is a big gap, especially around 2020s when the production growth from, yes, slows down. Where will the oil come from? And there is only one address, which is the Middle East. If you know anything else, any problems that we forgot, please let us know. But this is the Middle East. And it is the very reason why we are very worried, among other things, about the current developments in Middle East. Because of this growth in Middle East, half of it needs to come from one country, which is Iraq. When you look at the size of the reserves, when you look at the ongoing plans, when you look at the virginity of the fields, it is Iraq. It's not only our view, it's a view of almost many serious organizations working on that. And in Iraq, of course, very easy geology, chip to produce the oil, everything is OK. And the only thing is that you have to invest every year, $15 billion to make that oil come to the markets. But today, in this security situation, I think the appetite to invest in Iraq and Middle East countries, many Middle East countries, are close to zero. And assuming that the issue of the security issue today in Iraq and elsewhere will not be resolved tomorrow, will be with us for some time to come, this is, we believe, a major issue. Because if you want to see a production growth in 2020's Middle East, we have to invest today. It is not like electricity button, you just push the button and the light comes out. There are many oil colleagues here who know it better than me. You need at least five, six years of a lead time of a project. And if you aren't able to invest now, how are we going to see the production growth, which is a badly needed in 2020's, unless there is a major economic problem which would push the demand down? So from that point of view, we are very worried. And here, the energy security is not only a problem for the IEA countries, our own countries. Because today, a bit more than 50% of the Middle East oil goes to Asia. And tomorrow, it will be more than 90% of the Middle East oil will go to Asia. So therefore, there is a very strong common denominator between the Western countries and the Asian consumers, namely stability and the investment in the Middle East countries to increase the production growth when we need it badly around 2020's. Now, how does the current oil markets fit into this picture? First of all, why do we have the lower price? We think there may be many reasons, but two of them are key, lots of supply coming from US, very successful growth of US oil production, and at the same time, weak demand. Mainly, European economy is weak, China is slowing down, Japan is in a recession. But the question is, will it be down now, prices for very, very long time? Our answer is, we don't think that it will be like this for a very, very long time, but there will be a downward pressure on the prices in the next couple of years. And this downward pressure may well mean that many companies may give a second look at their spending plans with the lower price levels. And especially, the countries or the deposits fields which require certain level of prices can be more affected than the others. We may well see in North America current price levels, and especially if there is a downward pressure further on, may push the companies to look at the capital expenditures next year. There are already some signs from some major companies to cut the spending plan 2015, and this may well continue. In Brazil, a big part of the investments are carried out as a result of the cash flows coming to the Petrobras. And if they go down as a result of lower prices, this may well have an effect on their investment plans. So the very first effect of the lower prices is putting a downward pressure on the investment plans. And second, if the prices stay at these levels, $80 today, while it gives a breathing space for the consumers, a comfort zone, this is very good, but when the prices go down, we may see an upward pressure on the demand growth if the economy is in a normal trajectory. So going from 110s to 80s may well give upward pressure on the demand side. So putting these two things together, lower prices, putting a downward pressure on the investments and the production growth, especially in the high cost areas. Second, putting a upward pressure on the demand growth may well mean that we will need in a lower price environment perhaps more reliance on the Middle East oil, which once again makes our security concerns even much stronger coupled with the investment challenges we are facing today. Now a couple of words on natural gas. We see that the natural gas is growing strongly almost everywhere in the world. And sometime soon, we'll overtake oil as the number one fuel in the global energy mix in the case of time or so. Now, I said everywhere, but there is one exception. It doesn't grow, which is Europe. In Europe, natural gas is in a winter sleep. We think natural gas consumption in Europe will go back to 2010 levels only around 2030s. So therefore, there is a big gap there. So and for Europe, while the European demand will stay more or less stable, European import needs will increase significantly as a result of the huge declines in the domestic gas production. And the question is, while Europe is now today, is very that they are getting a big chunk of their gas from one single source, with the growing import needs what to do. And one of the options here in the medium and longer term is LNG. We see that the LNG trade is increasing substantially. Today, 50% of the gas state is made by pipelines, 50% by LNG. And we think this will grow significantly in favor of LNG. Mainly, as a result of many LNG projects are coming to a completion sometimes soon. And not only the amount of LNG is increasing, providing flexibility to the markets from 300 to almost 600 BCM, but perhaps more importantly, the countries which produce LNG are increasing. So double flexibility. Lots of LNG providing flexibility, plus the number of countries are growing. To the current ones, we expect the US, Canada, African countries, Mozambique, Tanzania, and big projects from Australia, lots of LNG coming to the markets. This will make the hands of the consumers stronger in terms of the options they have in front of them if they use their carts cleverly. However, we do not believe that so much LNG coming to the markets will bring the gas process down to the, as many people hope, to the US gas price levels. That will be still a major price gap between US and the rest of Europe or Japan for two reasons. One, the capital costs of LNG, we have colleagues from LNG companies here, are going up. And second, shipping gas from point A to point B is a costly business. So to bring the US gas to Europe costs about $657, just to bring it here, plus the price about $4 is already $11. So this is, growing LNG is a very important trend, a good news for the consumers from a flexibility point of view, but the hope that the gas prices will go down is not a view that we subscribe. Now, a few things on coal markets. We see that the coal demand is slowing down with all its implications. Now, we have seen the coal demand peaking in the Europe in the mid-1980s, then the US mid-2005. And now, the most important thing is we see a Chinese coal demand per doing. This is extremely important. Even if you don't have anything to do with coal in your life, it is important for you, because you have to do something with gas. And this will affect coal gas price competition worldwide. This will affect the COT emission trends. This will affect the investment in renewable trends. And this is what we are projecting, and I can tell you, leave aside our projections. Until the last two years, Chinese coal demand increased 10% per year on average, like an automatic pilot. In the last two years, the growth rate in 2013 was about 5% per year. So you may say 10%, 5%, what is the difference? The difference is, given the size of China, 10% versus 5%, in one year, is equal to all the ASEAN Asian countries coal consumption put together. So all put the ASEAN countries there, Thailand, Philippine, Indonesia, all of them is equal to that 5%. So this is very, very important trend. And this is mainly driven by local pollution concerns. But we expect India to move up in terms of coal consumption very strongly, and soon overtake US as the second largest coal consumer, second after China. And as I said, we see a coal slowing down, and we have already the first signals of that. If the coal industry would like to see the trend going up, still the buttons to be pushed are on the technology front. How to use coal through CCS, through other technologies in an environmentally friendly way. But this will have implications for the market equilibrium in many aspects. Now coming back to power sector, we again wanted to challenge one issue. Many colleagues think, many government think that the demand growth in the OECD countries are more or less flat, electricity demand growth. So electricity sector is not such an important sector anymore because our demand slows down. This is again an idea we don't agree with. Because in the OECD countries today, the need for building new power plants are not coming from the fact that the demand is growing, but mainly the existing capacity is retiring, and we have to replace them. Today, worldwide, we have about 6,000 gigawatts of power plants, the entire world. And within the next two decades, we see 40% of the existing capacity will leave us. They will retire. Power plants are like the human beings. They produce power, come to a certain age, and then retire. This is the unfortunate destiny. So this is what happens. And then they are thrown out, the power plants. So here, what happens is that in the OECD countries, even though the demand growth is almost zero, we have to build a lot of power plants to replace especially the terminal capacity. And what is the terminal capacity, what is the new capacity coming from in the future? This will be mainly renewable energies as a result of government support. And this is subsidies. About half of the growth of the new capacity worldwide will be renewables. But when I say renewables, mainly hydropower followed by wind and solar. And we see also a significant amount of natural gas. So we see more and more an approach in many countries between renewables and natural gas. So the point is, this retirement issue, especially in OECD countries, while it poses an important challenge in terms of finding the money, et cetera, it at the same time gives you an opportunity if you want to give a new shape to your power system. Going from coal to gas, or from coal to gas to renewables, from central gas to the central gas, whatever you want. You have now a chance to mix the cards again in the OECD countries. And another challenge, especially for Europe, this is a major problem, and perhaps in the US as well. The penetration of renewables are so strong that you do not have enough reliable power to support the renewable energies. In Europe, in the next 10 years, we need to build 100 gigawatts of uninterruptible power, which can be large hydro, gas, or whatever, and the appetite for investment is close to zero now. And this is a major issue from a security of supply point of view. So therefore, to find the balance between the renewable policies and the system reliability remains a challenge for Europe and perhaps in other countries as well. Now renewables, as I said, they are growing very strongly. And the good news is a big chunk of the renewables are coming from wind and solar in addition to hydropower. And the amount of subsidies we are paying them will soon come down as a result of cost reductions. So this is definitely a very, very good development that the cost of renewables in some cases are coming down onshore wind and some solar technologies, which is good from the economics point of view. But from a system reliable to the point of view, we still need a reliable supply there. As Sarah mentioned, every year we look at all the fuels in general, but one fuel in particular, in depth. It can be one year oil, one year efficiency, one year coal. And this year we look at the nuclear power. We see that many countries in the world are still interested in building nuclear power plants after Fukushima. We expect there be a strong growth. And this growth will come mainly from nano-ECD countries, mainly, but not exclusively. And they are driven by three factors. Renewables, many countries believe it is good for energy security. Second, it is a reliable base load generation of electricity. And third, a very important tool to reduce carbon dioxide emissions. So as a result of these drivers, energy security, economics, and the climate change, we expect the renewables will grow. But with the current policies, we do not see a nuclear renaissance in sight. In Europe, we are seeing a big decline of nuclear capacity, mainly as a result of retirements, because of their age come to a certain level, because we built most of the nuclear power plants in Europe 60, 50, 60 years ago. And as a result of some governments, such as Germany, Belgium, and others, want to phase out the nuclear plants in a premature way. And of course, with all respect to all the governments to choose this way or that way, I personally believe it is the government's responsibility if they phase out one technology, they have to make sure that how this gap with which technology it is going to be compensated, filled, and what are the economic energy security and climate change implications of this new plan. I think this is very important. In Japan, we expect slowly but surely we will see nuclear plants come in the command stream after the Fukushima incident. And there will be some new, a few new additions, but we will also see some retirements in Japan as well. But in some, we expect the Japanese nuclear power plants will still play an important role in the Japanese nuclear, Japanese energy future, but will be less pronounced than before Fukushima. Yes, we expect some net increase. There is six gigawatts of plants under construction, especially those areas where prices have a more regulated nature. India and Russia, they are making a significant amount of efforts to build nuclear power plants. Both of them are building today, especially India. Russia has huge plants. We are discounting their plants, taking it through a feasibility filter. But ladies and gentlemen, the biggest growth in terms of nuclear comes from one country only, which is China. About 50% of the new nuclear capacity in the world will come from China. And when you look at the effect today, today we have 80 gigawatts of plants under construction, 80 gigawatts, half of it is being constructed in China. So what are the implications of that? First one, I mean, but I want to say two of them. The first one is China is today developing its own nuclear technology. And by building, constructing a lot of nuclear power plants, bringing the cost down, and we may well see China soon to be a serious competitor to Western countries in terms of exporting the nuclear technology. Today, the main nuclear technology countries, North America, Europe, Japan, Korea, we may well see China with the new generation and lower cost may well be a serious competitor there with all its implications. Second, today in the world, 80% of the nuclear plants are in OECD countries, 20% in non-OECD countries. As a result of this picture, in two decades of time, it will be 50% OECD, 50% non-OECD countries of the nuclear power plants worldwide. And of course, this will have lots of implications in terms of climate change, in terms of energy security, and all other issues. For nuclear today, we see two major challenges. One is the finance, the process. The other one is the public concerns. And in terms of public concerns, we think governments who really seriously want to address the nuclear plan must listen to the concerns of the people and try to address them. There are two of them we want to highlight. The first one is that we expect in the next two decades or so, we will see as a result of natural and policy related retirements, we will see 200 nuclear power plants are going to retire. And up to now, we have about the experience worldwide with the retirements about 10 nuclear power plants, more or less, decommissioning. So how are we going to deal with these 200 nuclear power plants retiring? How are we going to decommission them? What to do with them? We don't have experience. And in most of the countries, we are not well-prepared how to deal with them. And this is not only for the countries who want to pursue nuclear policy, but also the ones who want to say goodbye to their nuclear policy. What are we going to do with these 200 nuclear power plants, a serious challenge in front of us? The second one is about the waste. Today, as a result of generation of nuclear power in the last few decades, we have about 350,000 tons of nuclear waste. And this will be doubled based on the projections I showed to you coming from different countries. And today, when we look at the world, the attempts to store, dispose the nuclear waste is very, very limited. There are many temporary solutions. But to have a permanent solution, the international efforts are not at their maximum what they have to be. And therefore, our call is that there is a need for concerted international efforts to find a solution to the high-level waste, once again, within the international collaboration framework. And we have enjoyed very much the proposal, the suggestions we got from Mr. Hamre in that context. So before finishing an important issue, a critical issue which is the climate change, now energy sector, as we all know, is the main responsible sector when it comes to climate change. Why? More than two-thirds of the emissions causing climate change come from the energy sector. So we wanted to look where we are today in terms of climate change. Because the scientists told us that in order to keep the world more or less like today, temperature increase should be maximum two degrees Celsius, which is, I think, if I'm not wrong, nine degrees Fahrenheit, if I'm not wrong. So how we want to see where are we today with that perspective? Modern nature told us that you human beings, I give you a budget, an allocation of dirtying the world, putting a CO2 in the atmosphere, which is 2,300 gigatons. If you emit more than this, you jump on the threshold and just get ready to be in a different world. This is our threshold. And this agreed these two degrees target by the world leaders a few years ago. And when we look at the where we are, as of today, we human beings already consumed half of the budget given to us. So the allowance of dirtying the world, half of it, is already used through the Industrial Revolution, most of it, by using a lot of coal, oil, and gas, putting a lot of carbon in the atmosphere. And if we continue with our current policies, with the projections I showed to you, which takes into account the new policies put in place, we see that around 2040, we are completely exhausting the budget given to us. So then, because the emissions in 2040, about 80% of the emissions in 2040 is already determined today, the investment we are making today. So we are looking in that future. So it means if we don't have a major change in the energy investment trends, we may well say goodbye to the world we used to have since several centuries. And in that context, to give a signal to the energy investments, clean energy investments, and efficiency, I believe we have a historical chance, which is the chance in Paris next year, 2015 Paris meeting. And before that meeting, we have heard very encouraging news. First of all, European Union made a statement, has now a package, reducing the emissions by 40% in 2030. Second, President Obama and President Xi jointly announced a commitment for both countries. And this is extremely important for three reasons. One, numbers. US plus China responsible for 45% of the emissions, plus Europe 15%, altogether 60% of the emissions. There is a political commitment at the highest level. The countries which show the responsible leadership at the international level, 28 European countries, plus United States, plus China. This is in terms of numbers. Second, this I believe, especially China and US being a part of the game, this will inject a very strong political momentum to the Paris process. It will be more and more difficult for the countries who are other significant emitters, who will not be a part of the coalition of finding a solution. It will be very difficult for them to afford not to be part of the countries who want to find a solution. And these countries are, as I said, the 28 European countries, US and China, the political momentum, number two, all these countries. Number three, I believe the key issue here is China. In Europe, and I believe in North America, in Asia, many people who direct their feet to find a solution to climate change said and will say that we can do a lot of things to reduce the US emissions. But if China doesn't move, we cannot find a solution. So why should we punish our economy if China, the largest emitter, doesn't move? And now China moving, making such a commitment, for the first time, putting a target, if you wish we can discuss this target, what it means, is, for me, taking that argument from the hands of the people who direct their feet. To sum up, I am cautiously optimistic about this Paris event, and it may be well our last chance to give the right signal to the clean energy investment so that we can be in line with our two-degrees target, or at least we don't throw the two-degrees target in the trash. Currently, the clean energy investments for efficiency, for renewables, for a nuclear, and so on, are about $400 billion. In our central scenario, which finishes everything around 2040, the budget is closed, they are already increasing twice. But to be able to see, to save the world, if I may say so, to save the planet, we need to increase the clean energy investment four times compared to today. And this will not happen if there is not a serious signal coming to investors that they will be punished or they will be rewarded with their investments coming, depending on the technology they choose. And Paris may well be the kickoff of that very new wave or accelerating the clean energy investment trends. So, ladies and gentlemen, if I can finish up our words, I believe in terms of energy security, there is a growing risk at present in a number of parts of the world that are very important strategically for the energy sector. Iraq, Libya, other Middle East countries, Russia, North Africa, these are very crucial countries, provinces, and as such, the current lower oil prices should not disguise the challenges we have in front of us. And I believe energy security will be a crucial issue in the next years to come. What is happening in Middle East today raises concerns about the investment flow in the region as a result of lack of security, lack of predictability. And if the investments do not come in a timely manner, we may well see the future production work is very, very weak and this may bring challenges for the oil markets. Many countries believe nuclear energy can play an important role in terms of the energy security, improving energy security, addressing climate change, but the public concerns remain a major issue together with financing and this needs to be addressed if the governments take the nuclear expansion plans seriously. We are in the opinion that the success story in Paris may well change the flow of investment for clean energy technologies, renewables, efficiency, nuclear power, switch from coal to gas, but to do that we have to see an agreement, a major political will coming from Paris and as such, the recent China-US deal following the European targets is a very welcome step. And finally, we at the IEA, we believe that the market instruments are the best to address the energy sector challenges for sure, but looking at the complexity of these two major problems we are facing, energy security, oil, gas, economics, foreign policy, defense, all of these things, plus the climate change. So many things are involved. There is a need that these market policies are put in a framework by far-sighted government policies to steer us in a right direction. Thank you and thank you very much for your attention. Thank you. Fadi, thank you very much for that wonderful and comprehensive look at, well, actually, it's probably not comprehensive. There's probably a lot more in the way than what you highlighted there, but certainly a lot of issues to talk about. We have about 20 minutes for conversation. I'm going to open up to the audience in just a moment, but I thought maybe I'd start with a couple questions that I had. One is you were pretty pessimistic about the prospect for increased investment in the Middle East, given what you term as turmoil. But you were also pretty positive about investment in Brazil, which to some outside perspective could look tumultuous as well. How much of your view on both of those countries is predicated on a security environment versus the sort of investment commercial framework governance architecture that both put on the table? Because I could argue that for both of those regions, those are really the crux of the issues that dissuade investment. Thank you. For Middle East, the main reason why we are, I wouldn't say pessimistic, but we are questioning the growth from Middle East around 2020 is lack of investment, not because of the economics, but because of the security issue here. The current lack of security and the unpredictable of the Middle East may well mean that some key investments are not carried out, especially in Iraq, where we expect half of the growth come from. And when we talk with the Iraqi colleagues today, we see that the appetite for investment is almost close to zero. This is the reason why we are concerned. For Brazil, this is a different story. This is a story of the ability of Petrobras to be able to raise the necessary funds. And as we highlighted in our report and also try to do now, if the prices go to $80 and below, we may see that Brazil may be one of the regions which will have the toughest challenges because the investments are basically financed through cash flows. And if they go down, they need to go and increase their debts, which would be a major issue for Petrobras. Of course, there is an important question mark about the production growth coming from Brazil as well. Maybe turning the page a little bit on sort of the issue of subsidies, an issue that I would give you all and the IA in general tremendous credit for actually framing a lot of the debate and actually quantifying a lot of how we talk about energy subsidies on both the fossil-based and renewable energy side of the equation. You mentioned that there was progress being made on sort of the subsidies issue. How can you characterize a little bit the sort of nature of that progress? Because I think one of the ways you talked about it was sending a signal about sort of using energy inefficiently or using sort of one kind of energy versus another. For a lot of the countries where these subsidies exist, one of the real political challenges of getting them removed is they see them as sort of an access issue or an equitability issue. Are we becoming smarter about how we implement sanctions? And are you guys seeing evidence of that in your research? I think the subsidies, exactly. Subsidies are being questioned by many governments, mainly because of the pressure on the budget. Because governments are feeling this big pressure on their budget and it is becoming, even for the oil producing countries, becoming a major, major problem. In Indonesia, the main reason that they move ahead is because of the government budget cannot afford anymore and there was a new government, a freshly elected government has the strong confidence of the waters and they took a very good step in the right direction, very much in line with our suggestions. In Middle East, many governments are taking steps, especially in power generation. Today in Middle East, we use two million bottles per day of oil to generate electricity. From an economic point of view, this is not economic, I should say, I didn't want to say something. It is something like that. You, to run your car, you use Chanel, Sank Parfum, so this is to run your car. This is, it has no economic value at all. So, but the governments are seeing it and they are moving to gas, especially, and others. Again in Middle East, I say Middle East because half of those subsidies are in Middle East countries. It is, for me, it is unbelievable that on one hand, governments want to improve the renewable energies, they have a market share. On the other hand, they are putting substantial subsidies for fossil fuels. This is, I mean, this is unbelievable because you pushed renewables in order to have a better chance to compete in terms of prices to give them new subsidies, but you give more subsidies to fossil fuels and you have no chance. This is definitely not the right way. And as you said, we work on Africa this year and one of the reasons why people say we have subsidies for energy is to protect the poor. And our numbers show that out of this money, 550 billion, only 80% of the subsidies go to 20% lowest income groups and more than 90% of the subsidies go to medium and high income groups. So it doesn't, at the end, have to pull, it has more than medium and high income levels. So therefore, we have some suggestions with the, in the context with the G20, how to realize these subsidy reforms and we'll be working also this year with the Turkish G20 presidency to move the subsidy program further. Okay, one final question for me and then we'll open it up to the audience. And I, you know, I can't get away with not asking sort of a climate change question. And one of the interesting things, you know, for those of us who've read your report for the, you know, years upon years and look at sort of the climate messages that you've brought, I think one year it was sort of the door is almost closed and then sort of the next year it was, well, just avoid the lock-in. And you've basically said, you know, last chance for two degrees? Is that how you really characterizing Paris and putting your long-term forecasting hat on? What happens if, what needs to happen in Paris to feel confident that we're on that path and if we're not, what comes next? I mean, you think is if, we have to understand one thing in the energy sector, it is very different than the others. The tomorrow's, in 20, 30 years of oil, gas, coal, CO2 trends are determined by today's investments. So it doesn't, in the, there's a long lead time. The decision and the impact, there's a big time lag here. So the 20, 40 trends, 20, 40 CO2 emissions are determined today's investments. So if we are not able to get the, our acts together and give a new impetus to clean energy investments, unless, as I said, unless there is a major economic downturn, we will, we have to say goodbye to the two degrees world. This is what we are seeing and to be very frank, we then, if we are not able to get the Paris Agreement, which is the one which could give a signal to all the countries, investors and others that a climate change is a major issue when you make your business plans. If it doesn't go through, it can be through international agreement, through a ceiling, through some type of allocation of responsibilities, then we better try to find out what are the ways to get used to in a different planet. Okay, we're gonna take some questions now. We've only got about 10, 15 minutes left. So I'm gonna group them in threes. Please wait for the mic, identify yourself and put your question in the form of a question. Please, we'll start right here. Brian Beery, Washington correspondent for EuroPolitics. Just a Europe question about the price differential you mentioned and the competitiveness issue. Is there a possibility that if Europe increased its own shale gas production, that some of that competitiveness issue would be addressed? Hi, Chen Weihua, China Daily. However, do you have any China-specific recommendation or comments on its sort of a nuclear energy plan? Actually, specifically, I mean, the government announced last week to triple the nuclear power generation capacity by 2020 and more will be in the construction. Thank you. Thank you. Fata, thanks so much for your comments. In the short term, this week is the OPEC meeting and you are unique in that you have worked for both OPEC and now at the IEA. How much do you think that the U.S. shale boom is going to end up complicating, if at all, that OPEC decision, both just this meeting, but also over the next year to two years? Okay, and one final question. I have Will Cole, Johns Hopkins question on nuclear power. Some industry people would contend that the prospect of SMR, small modular reactors, could give a very positive stimulus to the industry because they would be cheaper, shorter construction times, safety, et cetera. Yet, none of these have been licensed so far. I'm just curious, how did you treat that issue in your analysis going forward? In Europe, we have today a significant amount of shale gas deposits in Poland, Germany, France, UK, if you consider Ukraine, but we cannot expect that in the next 10 years, it will bring a major contribution to European gas supply. Having said that, if we start to work very hard and if we get rid of the dogmatic barriers we have in front of us, not to make use of shale gas, it may well help us at least to compensate the decline in the European commercial gas production and as such could be an important factor in improving the competitiveness of Europe. This will not be enough to close the gap between Europe and United States, but it can definitely help in terms of narrowing that gap and also good for the gas security of Europe. Now, nuclear energy in China, this is definitely one of the most important push that China has in its energy history. When I look at our numbers, China is making a lot of efforts on efficiency and renewables, but when I look at the nuclear numbers, they are very, very impressive, which means half of the growth in the global nuclear capacity will come only from China. This reminds me, at that scale, China between mid-1980s and mid-1990s in 10 years of time brought electricity to half a billion people. There was 500 million people didn't have access to electricity, but there was a big collective action and China brought electricity to those people as a result of government decision. This at the same level, it will be very important for reducing the share of coal in the Chinese power gen mix. It will be very good for reducing the CO2 emissions and it will bring China as important nuclear power and in terms of nuclear capacity, China will overtake United States as the number one nuclear power in the world. So as such, I think the Chinese emergence as a major nuclear power producer will redefine the nuclear landscape if the other countries do not change their policies. The third question, yes, what do we expect from the next OPEC meeting? It's a question that I will not be able to comment, but I can tell you the following. Shale oil from United States, oil sands from Canada. These are extremely important developments in the hydrocarbon sector in revolutionary nature and this provide a lot of comfort. This provide the energy security zone for many people. As such, they are very, very important. However, I would highlight that we will, we shouldn't forget that even these two success stories, we will still need Middle East oil in the future. I think we should therefore view the current investment issues, current security issues in Middle East from that angle. We shouldn't be blind with the big numbers we are seeing today. There is also a tomorrow and this is very important to put things therefore I believe in a perspective. The SMRs are important especially given the growing appetite of many emerging countries who cannot finance standard big nuclear power plants, but we need to see their feasibility and transferability from one country to another. But as we have highlighted in our report, they may well play important role in the emerging countries where the finance is limited, but the electricity demand is growing and they have limited natural resources. Okay, let's take a couple more questions. We've got one time for one more quick round. So we've got one back there. We'll do one over here. Yeah, Nina Gardner, Strategy International. Hi, Fatih. Just reacting to something you just said, how do you square the whole tar sands issue with the two degree centigrade target? I don't see how you can square that whole. Just because I think your mic wasn't on, it was a question about gas price decline in Asia, okay? And then we have one more right here. Now can we go back? Jeff Bomi, a private investor. How certain are you or confident are you that CO2 is the most important, it's the most important, but how confident are you the other gaseous pollutants are contributing to global warming? Thank you. So oil sands or as you describe tar sands, they do emit more emissions than a convention oil. This is true, but if you put them, if you put it in a context, how much additional CO2 comes from oil sands vis-a-vis convention oil, the difference is really, really very limited. I will tell you the numbers. In our report, we expect that the oil sands will increase about three million barrels per day, okay? If we assume this three million barrels per day wouldn't come from oil sands, but would come from average convention oil somewhere else, the three million barrels per day. In oil sands, it stays as it is. The difference of additional CO2 oil sands versus convention is equal to the not even one day of emissions of China in an entire year, very 23 hours, very small additional CO2 emissions growth. Yes, there is an increase there, but it is very, very small if you put it in a context. And if you want to see oil sands to play a role from energy security or for something else, then we have to find a way to compensate this 23 hours of China's daily CO2 emissions growth. It can be carbon capture storage, it can be efficiency, it can be renewables through other technologies. Gas price in Asia, I didn't say that it will not be a downward pressure on the prices, but what I said is that we shouldn't expect that it will be the US prices everywhere. There will be at least a downward pressure if it comes there, but we shouldn't also forget that the cost of capital of building LNG facilities are going up. And therefore, perhaps we will not see today's $16, $17, but we will see a downward pressure, but it will be very much far from what we have in the United States today. But the US gas will definitely help to provide some flexibility in the markets in Asia. It would also bring a downward pressure on the prices. There are other gases than CO2, methane is another gas and there are many other gases, but CO2, when we talk about the energy sector, CO2 is one of the most potent gas together with methane and that is the reason since about more than two-thirds of the emissions of CO2 comes from the energy sector. It is the very reason we look at CO2, but other gas that are on methane and for methane, there are many initiatives, one of them belongs to us, have to reduce them and it is really compared to CO2, easier to fix to balance it through some technical and regulatory measures. Okay, well, I think we've come to the end of our time. I just wanted to thank Fatih for being here. I know you've got to go to New York and continue the WIO tour. But given your description of retirement in the power generation sector, we know there's no risk of you retiring anytime soon, so we'll hope to see you again here sometime in the very near future. I want to thank you and your team for just the excellent work that you bring to the broader energy discussion. On our side, I want to thank Annie Hudson on our team for putting together today's event and please join me in thanking Fatih. Thank you. Thank you.