 So good morning and welcome. I hope everyone took advantage of the coffee out in front For a nice early start. I'm Frank for Astro. I'm a senior vice president here And I have the Schlesinger chair the honor of having this lesson to chair and for this morning's meeting I'm also going to be your safety officer. So For 30 seconds just to the admin side. This is actually pretty easy since most of you came in the front door There's two exits out of the building in the unlikely event that we're asked to evacuate If you follow the signs on the exit side to go downstairs through the back, it takes you out through the alley Behind the Jefferson hotel and dumps you out on Amstreet If you come back on the front side down the stairs or down the ramp out the front door and across the street to the Park next to the Beacon Hotel and that'll work just fine Or I'll set but you can also follow me on the way out or you can follow Dr. Hammery on the way out because he always is good at leading them We're very excited this morning. There's a number of times that we do outlooks Where we like to see companies perspectives on what's going on So in addition to EIA and Adams here this morning or the IEA When companies have a different perspective on investment and they go out either 2040 or 2050 You can start to see the changes because that's where the money's put and today We're just extremely excited to have Eric awareness with us So Eric is the chief economist at stat oil His vice president he has a most impressive resume. He's done macro economics investment and technology Has hit government positions as well as industry positions within stat oil itself He's been head of corporate planning head of global strategy and now in the chief economist role He actually has the opportunity to produce and edit this trends outlook to 2040 And there's some interesting things here that you really want to take because stat oil is viewed when we look at The American companies the European companies and then some of the other International folks from different places around the world the perspective is really important So we're excited to have Eric back here. He's been here before and we want to have a lively discussion So we're gonna lot, you know first 35 40 minutes of presentation and then we'll engage in exchange of questions So that's okay, but Eric wonderful to have you join us and please Thank you started Thank you, thanks for the kind introduction, thanks for having me here. Good morning everyone. It's nice to be back Good weather. We don't have that in Norway might be this today, but we haven't had good weather at all this year So it's nice to nice to be here and I Will try and present some of the headlines of our energy perspectives outlook. This is an annual thing This is where we summarize work that we have to do as Part of giving advice to our corporate decision makers in terms of what the world will look like and and ultimately also what price assumptions to use for different types of crude oils and different types of products and different types of gas I Will not tell you the price forecast today, but I'll tell you the basis for for for our demand supply and demand balances as they come out and and give you the forecast for for global energy The forecast goes to 2040 Some people are now starting to talk about 2100 even even our decision makers are political decision makers are talking about 2100 and Looking that far into the future is difficult. It's difficult to forecast The foreign exchange rate than the oil price tomorrow. So it is so it is difficult to forecast to 2040 But given that we are an energy company which makes investments that Possibly starts producing 2025 if we make the discovery today and then they might produce for 50 60 years If it's big enough like the ones valve field we have in in the Norway for instance, then we are bound to have it We need to have a view at least as far out as we think we can have some clarity in what we're what we're seeing 2100 is beyond that I should say but 2040 is something we hope to be, you know, at least have some look at But as you will see, let's see. I'll do this. That works. Yeah Reflecting upon the uncertainties We have both last year and this year decided that we developed three scenarios. So we present three different development paths We do not assign Specific probabilities for any of those old outcomes if you take any of them At the detailed level for granted then the the point probability of exactly that happening is very low for all the three scenarios But what we hope to do is we span out an outcome space and then possibly the Hopefully the the actual development will take place within within that outcome space spanned out by the three scenarios It's very much an energy Publication that's what it is. This is word cloud behind me shows Shows the the size of the letters is proportional to the number of times. It's mentioned in the report It's about economic growth It's about more about demand and supply even though I mean we present relatively detailed supply forecast for oil and also for gas but but there is sufficient amounts of energy available to us and and the fuel makes and and The level of energy Produced and consumed will be in that sense be more driven by demand factors We think if we had done this ten years ago when more people were concerned by about peak oil supply We might have the report might have looked slightly differently We're looking at looking at scenarios as I said we're talking about large regions like China like always a D And that's that's what this report is is about Then when we do these forecasts It's important to think or to be aware that that and there's a lot of uncertainty and that uncertainty is not going to go away And we show this by on the left side here. We have Fossil fuel prices over the last 18 years since since we started quoting a natural gas price in the UK the NBP that's the the European equivalent of the Henry hub gas price So here we have the two gas price to central gas prices We have the cold price and we have the Brent oil price over the last 18 years And it's it's a history of volatility and change and that's gonna that's gonna stay there for us so what we're what what what we have to prepare for both consumers and and Producers is a world where the prices go up and down like in all commodity markets Relatively low price elasticity on the in the short term both on the supply and demand and if you have a change in the Fundamentals like we had last year when shale oil Surprised on the upside and Saudi Arabia surprised us on on their policy stance and then the demand side surprised negatively those three factors together a very small change in in actual supply and demand about a million barrels out of 90 million barrels But the price crashed and that's what happens in these types of markets. That's gonna continue So what we can hope to do is to be robust through these cycles and then try and estimate You know being vaguely right and avoid being precisely wrong in terms of where we're going Another side of Forecasting is to be able to or not being able to forecast things that change rapidly IA EIA and us are Challenged and criticized by NGOs in particular in Norway but also elsewhere That we are underestimating growth in new renewables We're not able to capture the the rapid growth rates, and that's true and then by implication They say that we underestimate the growth going to 2040 and with this chart shows a couple of those factors And the yellow one which you might not see. Yeah, you see it. It's pretty good It's the 50 doubling of solar generation globally from nothing to a little something It I have to show it on the right-hand scale it needs a separate axis because it's 50 doubled over the last 10 to 15 years But there's also other factors on the supply side. I have surprised shale oil is already mentioned 13 times as high shale oil production now in the United States as 10 to 15 years ago. That's the blue line there and If I showed shale gas, which is not in the in the chart that would be seven times as high as only eight years ago And we haven't been able to forecast those either But then in in energy is not only about supplies also at demand And there's a couple of other factors that have been difficult to estimate and I'll just point to one of them And that's the growth in international Chinese tourism It's the blue No, it's the light blue light the light blue line That's grown from and the good thing about China is that they have good statistics They I mean everybody and everybody in the Chinese authorities know when a Chinese leaves the country right then comes back So 10 million Chinese tourists by 2000 110 last year if you extrapolate that growth rate to 2040 you'll have nine billion Chinese tourists traveling. It's like Norwegians traveling abroad seven or eight times a year everyone That's a lot of energy demand. We don't believe that exponential growth is going to continue either But it might it's gonna be it might be high and might and it contributes to a lot of energy demand growth It contributes to air traffic So don't take short relatively short exponential growth rates for granted. We're talking about s curves here which Grow rapidly for a while and then they peak That goes for solar energy and it goes for Chinese tourism But we might be wrong on some of these Then we would look at drivers for the different scenarios We focus both on on climate change climate change policies We focus on technology. We focus on on behavior and economic growth and those Combinations in addition to geopolitics will decide and affect where we're going and here I we've just listed in some pictures showing, you know The relationship between Russia and the West is an important driver together with other geopolitical and certain factors in one of the scenarios that we have and technology development in in the new renewable energy Electrification of transportation are the two two key factors in arriving at the two-degree Trajectory for CO2 emissions. So we'll look at that in one of the scenarios and then fundamentally one big question is of course Consumer behavior the need for electricity. We've shown a Rio de Janeiro during during a night They need electricity and they're close relatively close to equator. What happens at equator when when it gets dark If they're all on solar panels Efficiency of a solar panel around equator goes from a hundred percent to zero Within 20 minutes In northern Norway during this armor. We can have produced solar energy at midnight But around equator that the system Characteristics when you have intermittent renewable is something that is difficult to handle because solar energy rapidly falls off exactly during the same 20 minutes that everybody turns on the light and Some of us have been in Africa and experience what happens in an African city when everybody turns on the light The electricity vanishes So the system characteristics of producing electricity in large populations with intermittent renewables is a challenge It can be handled, but it's a challenge and it requires backup and investments And that's some of the things that would drive the development as well And then finally this famous picture from from a National Geographic where they took all the products in a normal American home in Ohio out of the home that all the products that are made of oil and gas and If you foresee Chinese and Indian consumers becoming part of the old world middle class Over the next 35 years An important driver for oil and gas demand is as feedstock into consumer products I'm not saying that that the average OECD consumer will produce consume as much plastic as the average American in Ohio, but still it's an important driver for so we have to remember that oil and gas and also coal Is an important feedstock in manufacturing production is not only about energy and electricity That will also limit How how quickly you can get out of for the fossil fuels? And finally there with a big picture of the of a UN assembly here and of course arriving at anything Close to a two-degree scenario requires a form of global decision-making global cooperation That is to put it mildly challenging But it has to happen So then doing this we have scenarios. We call them renewal reform and rivalry The renewal scenario is so now it's that's a it's constructed in a different way than the other scenarios That's a back casting scenario what we've done there is we've taken the the co2 emissions necessary to arrive at the two-degree Target in 2040 and then we back cast that and found one possible way of arriving there There are many ways we can arrive there, but this is one The reform scenario and the rivalry scenario are forecasting scenarios where we change assumptions going forward Then we end up where we are or where we end up in terms of co2 emissions energy demand, etc The reform scenario is a scenario where we we take the signals given by governments before the Paris climate Conventions and we assume a gradual tightening of energy and climate policies in line with that and beyond Much tougher energy and climate policies than what we see currently in the world that goes with carbon pricing energy Efficiency standards emission standards, etc, etc We have a GDP growth forecast. I'll come back to that But it's slightly lower than last year's forecast to 2040 is likely lower than the IA 2.8% per year on average to 2040 And combine that with with the with the energy efficiency assumptions that come out of this With 2.8% economic growth, we will be more than twice as rich in 2040 as a whole as we are then we are today But we will only use 30% more energy So the energy intensity chart which I showed to the left here where the reform scenario is the is the blue triangles show that On as a whole the globe the globe is 40% more energy efficient in 2040 than today That's a more rapid much more rapid energy Efficiency development than what we've seen historically over the last decades and in particular particular over the last 15 years But because of the heavy energy content in the Chinese economic development The rivalry scenario is a scenario where we build upon geopolitical conditions we start out with that The permanent unrest more or less in Middle East and North Africa The relationship between China and its neighbors in the Asia in Asia in the Asian region and then the relationship or non relationship between Russia and West as Indicators of the potential development of the world in a direction where we do not trust each other as well as we have Done or as we would wish more focus on energy Security like in Europe at the moment instead of common solutions Which means that that different regions of the world will use more of its own energy sources instead of importing from a neighbor They don't trust and result of that would be in our minds Still focus on renewable energy but also a lot more use of coal in particular in the regions where you need to import gas Which is Asia and? Europe so the energy mix in that scenario Much darker much more fossil let much more co2 intensive and you see that on the orange lines Or orange dots in the in the in the chart to the right So that's a scenario where economic growth is 2% not 2.8 So the energy demand is lower, but energy demand is more co2 intensive That's that kind of world and then reforms and then as I said the renewal scenario with Two-degree target take it for granted find a way there one of the ways is an even tougher assumption on energy efficiency In that scenario, we have the same or even slightly higher growth on average to 2040 2.9% one of the reasons being that for in the reform and arrival reason rios We have taken into account that if we don't reach the two-degree target. We will gradually see increasing climate costs So we have explicitly reduced economic development in those two scenarios in the 30s Towards 2040 taken down economic growth because we have to hand increasingly have to handle climate costs in the renewal scenarios Scenario, we don't So that's one of the reasons why the economic development there is slightly faster than in the reform scenario Much higher energy efficiency. We assume almost no growth in energy demand That means that the world is more than twice as rich in 2040, but we don't use more energy That's not a walk in the park That's a hugely challenging assumption And then we have much tighter energy and climate policies rapidly increasing carbon pricing and We've also looked specifically at how can you get there by we more or less revolutionizing global transport private transport and The electricity sector I'll come back to what that means That's one way of doing it and then we get the CO2 intensity down as you see Then same story as several years new map this year the global center is in Asia More than half of the global population lives Within 4,000 kilometers of Hong Kong and they are becoming always the city citizens in terms of average per capita income during this period So what happens there will affect everything including energy demand the map here shows areas of the world where there Where there's currently living a billion people and there are three of those areas in Southeast Asia So an indication of the population density And then you see can you see the energy demand development in the three scenarios for for different regions and note that the three OZD Regions at the bottom they we don't have any growth in OZD energy demand in any of the scenarios And we have a reduction in the renewal scenario So all energy demand growth takes place in the emerging economies in particular in Asia, but also gradually in in Africa and in Latin America So handling also the these three different scenarios handling global growth in CO2 emissions is a lot about Changing the energy mix in the OZD countries, but it's even more so avoiding The consequences of relatively rapid energy demand growth in particular in middle in the Middle East and in Asia And we cannot Tell these people that they cannot have the economic development that we've had So we have to find a solution where they can grow their economies and using the energy required to do that and at the same time solve the sustainability issues If we don't we meet sustainability problems long before 2040 Yeah, this is the the GDP trajectory So I'm not gonna spend much time on them just suffice to say and you see it clearly that the difference between the reform and the renewal scenario Is first that since the renewal scenario is a huge transition of our energy systems It in practical terms it would mean dismantling of perfectly functioning coal-fired power plants and Replacing that with something else then for a while that transition is gonna cost us money in terms of lower GDP growth We have lower GDP growth in that scenario compared to the reform scenario for a while But then towards the end of the period as the economy has become more efficient We have eliminated all fossil fuel subsidies the green technology is working and We don't meet increasing climate costs then GDP growth in that scenario is assumed to be higher than in the reform scenario That's that trajectory and then we have the rivalry scenario lower all throughout the period and in particular in the beginning And then I'm gonna show you now a series of relatively complicated charts But I but we build them up So I think it's gonna be understandable the chart to the right shows the composition of energy demand in the different scenarios Across fuels. It's the same chart that I showed per region a couple of slides back You have 20 the 2012 mix the energy mix there where you see and then we have the shares in in the doughnuts to the left currently fossil fuels are 80% of Current energy mix more than 80% Relatively even the distributed on coal and and oil and then slightly lower for gas Fossil fuel share of global energy mix has been above 80% since 19 well before 1970 In 1972 it was about 85% of was before the first oil crisis It was at 85 86% and currently it's still about 80% 40 years later It serves to show that Changing the global energy mix that in particular in the situation where engine demand is growing and we're using two and a half times more Energy now than we did in 1970 Changing that takes time. It's a huge system that has to change And then when we look at the changes that we're now forecasting or back casting for the renewal and and the two other scenarios Those are relatively large and I'll come back to that the 50 time doubling of solar energy that I showed you The yellow line in one of the first charts is Half of the sliver at the top of the doughnut roughly It's one it's it's less than that's about a half of a percent of global energy demand today That's the 50 the result of the 50 doubling So it's grown from nothing to a little something in global in a global setting So so what we're talking about in new renewables is this pink part at the top and that's growing rapidly Much more rapidly in all scenarios than any other energy source But it is it starts out at the very low level That's why it doesn't grow more to the end of the period and then it does So and then in the reform scenario We have relatively significant changes in the fuel mix the fossil fuel mix becomes Less carbon intensive because gas grows at the expense of coal and oil and you see that the coal share is down to 25 the oil share is slightly slightly down and And the gas share is slightly growing We still have 75 percent of the fossil of the energy mix being fossil Rapid growth in new renewables will takes that new that share to seven percent Small changes in the other types of energy nuclear hydro and what we call old renewables, which is biomass But that is not sufficient to lead to a two-degree CO2 emission target then You need to go to the renewal scenario That has much lower energy demand. You see that in the in the columns to the right and it has relatively Much larger changes in the fuel mix, but we still Have more than 60 percent of the overall energy mix being fossil We don't have to go to zero by 2040 or 2050 or 2060 to reach the two-degree target But in that scenario what we've done is we've reduced coal demand by 50 percent Overall energy demand doesn't grow and we're taking the coal shared or the coal share comes out that Less than 15 percent, but we still have 60 percent fossil fuels In a two-degree scenario that is really really important. I'll come back to that and for an oil company It's very very important Because it tells us something about what to do going forward And then the rivalry scenario the final one note that the coal share there is actually increasing Uh, it serves to show that the world we're in is an important driver for what energy mix will end up with if If we are to reach something that is good for all of us in terms of sustainability We need to cooperate It's going to be extremely difficult to do that in a situation where we don't trust each other like in the rivalry scenario Because then we will use more of our own resources and that's coal and we don't have the money To to transform the technology to change the economy in a way that is needed because economic growth will be lower And in that scenario renewable New renewals new renewable energy it grows much more than the other sources as well But but it only constituted four percent of the energy mix by the end of the period Then as I said very important message In all these scenarios Oil and gas are here to stay There is some coal left also in a renewable scenario, but that there we've taken out a lot because In order to maximize the energy The size of the energy that we can use within the given co2 budget Taking out coal is a good idea because you get twice as much energy per co2 unit if you use gas instead But in all these scenarios We have oil and gas being here in the in the reform scenario We have a peak in oil demand not everybody who does these types of forecasts have that we have At around 108 million barrels per day in 2030 and then it gradually tapers off as the transportation sector in the emerging economies Is saturating so we end up with some 103 million barrels per day And then per region you can see that in the The columns there is the regional distribution of the demand in the reform scenario Then you have the global gas demand that continues to grow in reform scenario as well Slightly more than than overall energy demand so by more than 30 percent throughout the period And then I'll focus on two things. One is to look at the light blue squares That's the oil demand in the renewal scenario. This is the scenario where we rapidly change global energy and climate policies We I'll come back to what we do here, but we we assume a rapid electrification of transportation Then all the man comes down quickly But only by 15 to 2040 we still need close to 80 million barrels per day of oil in 2040 in that scenario In spite of this electrification of the transportation sector And one of the reasons is that the transportation is not only private cars It's these aircraft flying all the chinese tourists that I talked about right It's the trucking needed to transport consumption goods IEA last year presented when they presented their forecast they show that 30 percent of the growth in global oil demand from now to 2030 Is chinese trucking alone And then you can add on india pakistan indonesia latin america. So and trucking is not that easily electrified Shipping is not that easily electrified. And then we also need oil for petrochemical industries, which will be growing When everybody gets richer So 80 million barrels and 15 percent more gas. We need more gas in the two degrees scenario than today So in total oil and gas Will be roughly equal oil and gas demand will be almost the same As today in that scenario And then we have added some pink lines ranges Which shows how much can we potentially produce from existing fields of oil and producing oil and gas today? When you take account of decline rates That's the part part of the oil and gas industry is to fight decline every year and decline in oil every year is More than the total shale oil production in the united states. It puts the shale oil revolution into perspective If we were to stop doing anything now Two years down the road we would Almost have to replace the whole of sodium arabia's production Because of demand growth and decline So in 2040 we cannot the most produce somewhere between 20 and 40 million barrels per day from existing fields Even though we even if we work these fields to maintain and et cetera et cetera We have to invest In keeping production as high as possible We have to explore to find new resources and we have to take existing resources and make them into reserves through investments And the difference between 30 million, which is the middle of that range in 2040 And 80 is 50 million barrels per day. That's five times the current us total oil production It's five times Saudi Arabia and it's five times russia It's a huge challenge To be able to deliver the the oil and gas that is necessary in a two-degree scenario And if you don't believe in a two-degree scenario and you think about the reform scenario We need to give to produce even more That's why a company like startle will continue to explore for oil and gas Even though we everybody wishes the two-degree scenario not everybody believes in it But if we were able to deliver a scenario where we economic growth is higher than in the other scenarios And we achieve the two-degree target everybody should wish for that. It's a pretty nice future Even if we believe in that we we have to continue to explore for oil and gas Because we have to deliver that energy It's going to be more challenging because the prices will be lower in that scenario than in the other one But it's a job we have to do Then I'll I'm approaching the end here, but I'll show you Just as an example how what we did with this renewal scenario and and how tough it is look at the middle chart This is what we end up with in private road transportation. That's basically light utility vehicles The result here if you look at the at the column to the right is that we go from virtually nothing In terms of electricity as a fuel share, you wouldn't believe this if you were in the bus lanes in the western part of Oslo because Because we have a we have a phenomenal increase in electric vehicles, but it's in Oslo only or in Norway only California you see them and you see if you if you come to to Amsterdam and you take a taxi You'll see that they've subsidized the Tesla. So so there's a line of Teslas lining up for you as a taxi But the electricity is virtually nothing in the current Fleet of light utility vehicles. You don't see it. There is a there's a slightly Light purple line there, but if you go to 2040 what we've done here is we have 35 percent of the 36 percent of the fuel mix in 2040 In that part of the transportation sector being electricity one way or the other either full electric hybrids or hydrogen or whatever globally I'll come back to what that means for the you for ozd, but it's in the ozd area We have almost a hundred percent of the new car sales by 2040 being electric And that that then transfers to the left you'll see the electric share in the transportation sector as a whole much lower And then also lower demand there Because because we take out oil of the transportation sector and and we make it much more energy efficient But but there's still a lot of oil demand for aircraft chipping and trucking So that's one part of it One way of doing this is basically to revolutionize transport or private light duty vehicles private road transport But it doesn't help to put an electric vehicle into China or Latvia If you're concerned with co2 emissions in Latvia 100 percent of the electricity generation is based on coal So putting an electric vehicle in there and especially if it's a Fantastically much more efficient combustion engine that you replace it with which you will do in 2040 would increase co2 emissions So you have to decarbonize the power sector for this policy to make sense And that's what we also do so on the right side there You'll see a couple of data on the electricity sector First of all when you electrify transport the share of electricity in final energy consumption goes up And those are that's the squares the purple squares Going from some 20 percent today in overall use of energy only 20 percent is electricity To in the renewal scenario We go to more than 30 percent globally And then we also have to decarbonize the the sector so we'd go from less than 5 percent new renewal new renewable share today, which is these circles the the Pink circles less than 5 percent today to more than 40 percent If we do that we reach the two-degree target So we have more than 40 percent of global electricity generation coming from sun And wind it's not capacity is generation Then we reach to see the two-degree target You could have a different combination much more nuclear energy would also deliver the same thing more ccs could also deliver Carbon capture and storage, but this is one combination and just to illustrate the challenge look at the right one here This is north america Here we go. We assume in the renewal scenario 50 percent of electricity generation in north america is sand or wind Or geothermal which is relatively small here This is what it takes currently you have four or five percent. It's a challenge to be put it mildly and then just to finalize If some of you just Bought a new suv which I see that Americans are increasingly doing because the gasoline price is low At the moment. Well, it might be the last suv you buy or your kids won't because they'll buy 60 65 percent of the fleet is going to be electric vehicles in north america That's the 36 percent globally 60 65 percent in the oise of the area. That's a hundred percent of new car sales. There's one way of getting to the two-degree scenario It might still be an suv right it might be The third generation tesla suv which is supposed to the first one is supposed to come I guess, but it's going to be electric or hybrid But 65 percent of the fuel use it's a huge challenge, but it can be done and then finally Co2 emissions as I said, it's no surprise that we reached the co2 target or the co2 level that the ia says is necessary In the renewal scenario because that's what we've taken for granted. We've backcasted so in the light blue columns to the left global co2 emissions rapidly fall off And are reduced by 40 compared to today and on a trajectory down In the reform and the rivalry scenario, we don't reach them But we have a peak in co2 emissions in 20 around 2030 in the reform scenario When transportation sector and oil demand peaks And then it comes off gradually In the reform scenario in the rivalry rivalry scenario It continues to grow and in fact in the 2040 the co2 emissions in that scenario is higher than in the reform scenario because of the large coal share In spite of energy demand being lower And then I've shown for for this audience. I've taken out those of the co2 emissions in in north america. I know here you see Also part of the political challenge before paris in in the always the area always the north america included Co2 emissions will come down in any scenario We will not use more energy We become more energy efficient And we try in particularly in north america. You go away from coal Into gas and then also more renewables. So co2 emissions here will come down the challenge globally Is in the other regions of the world Including china look at the right chart of this So In order to have a more co2 efficient energy mix We have to solve as I said the problem of providing more energy to the emerging economies and at the same time Do something with the co2 mix and And in our scenarios both in the reform and rivalry scenario Co2 emissions in china peak around 2030, which by the way is When she xin ping promised barack obama that it would peak when they did their handshake in october last year The problem is of course that it peaks at much too high a level So we have to get it more down and the renewal scenario is one way of doing that so that's A quick overview of three potential paths to 2040 in terms of energy mix. Thank you Eric, thank you I your reputation around here is always that it's content rich that you're a serious and thoughtful guy And that you always come well prepared and you did not disappoint It distracts me. So two quick questions of investment needed To get to the reform or the renewal scenario, right between now and 2040 if especially if there's discontinuity in the system Though we have to Quickly change out Over 20 years a lot of existing coal plants or pipeline infrastructure You still have between 65 and 75 fossil fuel use under of all the scenarios But that you target to get the emissions reduction. What what kind of investment does that take? Well We don't have We don't model the investments Necessary, but we have looked at what ia said last year In their world energy investment outlook And they look to 20 in that scenario They look to 20 or in that book before before the light was published before the last world energy outlook They went to 2035 And they did a relative relatively thorough look at at what type of investments are needed In the different scenarios and and their scenarios are relatively similar to ours both in a new policy scenario and the 450 Um, and they conclude that around 50 000 billion dollars 50 trillion us dollars Must be invested in the global energy sector to satisfy demand by 2035 um More yeah, so 52 53 trillion in the two-degree scenario Because there we need a larger investment in renewables and we need a larger investment in energy efficiency and some 48 trillion in in the new new policy scenario What is what is and the only energy source where we can invest less On average for the next 21 years or 20 years than what we have done over the last 15 The only energy source where we sort of can relax and not invest as much as we have done is coal In all the other energy sources that be it nuclear oil gas The power sector as a whole including fossil fuels within the power sector Um, and of course renewables in itself. We need a much higher investment level um in both scenarios And what what is a bit concerning or at least gives gives gives Arguments for reflection is that uh When you look at what's happening in the oil and gas industry I mean that that's where we look at if you look at what what we've been doing the last 10 years It's it's an it's an industry that has become significantly more capital intensive We invest about four times as much as we did in 2004 As in our peer group 10 15 largest international oil companies And we produce exactly the same amount of oil and gas as we did 10 years ago So we're in in one sense four times as capital intensive And what ia tells us is that in order to deliver all these energy for the future We need to become more capital intensive and we have to do that in a world where there's a lot of uncertainty about geopolitics And there's a lot of uncertainty about future energy and climate policies not to mention that prices of oil have been reduced by 50 So it's this is not a walk in the park Exactly and then the other piece is that you alluded to it that it takes a higher carbon price As the market signal to get you there in addition to technology improvements and correct policy Do you forecast a carbon price? Yeah, yeah, it's I mean in particular in in early in terms of Both to drive the technological development on on the on carbon capture and storage But in particular to to drive the correct incentives in in decarbonizing the electricity mix We need a carbon price to correct the price between coal and gas basically And in in our scenario in in in the reform scenario, we have a gradual build-up of carbon pricing explicitly or implicitly I mean we're not very you don't have to you don't have to put in a tax And on this side of the Atlantic the word tax is Has a different connotation than in europe But but you could have a trading system or you could have implicit Carbon pricing through direct regulations, which Which is an it's an interesting phenomenon that that is liked better here than in than in europe through emission standards and so on But so what what we have is the fact of a a carbon price that is gradually increasing to some 50 dollars per tonne I think around 2030 and then you know, so And then in the renewal scenario We're talking about something and it's not in all regions that is in the key regions in the renewal scenario It's global you take out all fossil fuel subsidies and the carbon price rises to some 100 to 150 dollars So and then in our assumptions I should say that in as an example of the fact that stotto does not necessarily Build on any one of these scenarios in in our investment decisions is that for internal purposes We have a 50 dollar per tonne CO2 price on everything No matter where it is from 2020 and onwards So which is somewhere in between these two scenarios Okay, and then one final point before I open it up since we do geopolitics here Can you do a deeper dive on the rivalry scenario just a little color commentary on Beyond the specific comments about? Yeah, well, I guess we We developed the main ideas for that scenario was also included in in last year's one of the scenarios last year We call that policy paralysis We wrote the draft chapters of that or the draft ideas for that before we modeled it Couple of weeks before Putin went into the Crimea So it sort of fit very well when we finished the report and and then over the last year We've seen increasing signals as to how that Not only Russia and the west but but a sort of the whole the ongoing Insecurity unsecured situation in the Middle East is is affecting markets And and sort of the the worry is around what's happening there And then also we see we see signals of of continued Bad relations in Asia So in one sense, I mean if you read this With sort of finding out what has happened over the last year which of these scenarios Does look most likely maybe the rivalry scenario contains a lot of the variables that are that that what we see now And that scenario is as I said because because partly because of lack of trust sanctions Which we see now, right? I mean economic growth is much lower in both in russia, but also in europe because of the sanctions And you can foresee a scenario where we do military spending build-ups with with no economic return And then what we clearly see signals about is is measures Being taken to avoid depending on somebody you don't like on your energy imports And that is in europe you could foresee that that elsewhere as well And that means first of all it means the more costly energy mix to the extent that importing something is more efficient Autarchy and and and beggar thy neighbor policies are never very efficient And and and the consequence of that also is that russia will use more gas And because they have a lot of it But both europe and asia will use more coal Yeah, we've done a lot of work on Economic statecraft and this this whole notion of fragmented globalization. And is that the route we're heading? And it makes a lot of difference it does and also When i've been challenged a bit about the energy assumptions because you can what you can also foresee is that a Security of supply focus also leads to increased incentives for renewable energy So so you could you could foresee that as well, but uh, but um at least as in a period where you you cannot I mean we can't switch From a hundred percent coal to a hundred percent renewables overnight in in countries in europe, for instance So so so at least you will for a while have much more use of your own resources problem This bears more analysis. Okay questions. We have three simple rules here. Um Identify yourself wait for a microphone first since we have a bigger crowd Identify yourself and to the extent that you want to make a comment. That's fine But if you pose your question in the form of a question, we always find that helpful. So please I'm gonna start with scott and then i'll go to bill in the back scott augenbaugh csis I have two but i'll just go with one the you talked about the sort of growth and the sort of the future of asia As being one of these drivers. Well, one of the things that you see out there right now is a focus on particularly east asian growth Declining over the next decade So really it might become the scenario where it's really southeast asia and the focus on southeast asia I was wondering if you could talk a little bit more about what you see As growth factors in southeast asia that might change our perspectives on this after 2040 Should i answer or should i take that? Okay Yeah, well, um We have a relatively rapid Not rapid but a a relatively clear Slowdown in economic growth throughout this period both in both in china And in other parts of the sort of the most developed part of asia um Because there is a limit as to how how long they can they can grow with the rates that we've seen over the last couple of years Partly because the potential for moving Moving labor from relatively low Productivity industries like like agriculture into other industries is Is almost taken out The the the increased growth impetus of continued investments is slowing down and they're also changing the economic model in particular in china And then finally also as they become richer they catch up with us Right, I mean per capita income will approach in china per capita income will approach korea towards the end of the period And then the potential for For continued higher total factor productivity growth is also assumed to be sort of come down the The catch-up effect the the value of the The value of writing copyright with a space between copy and write Also becomes Becomes less and that goes also for parts of the southeast asia as well But but some of these countries will continue to grow faster India will grow much faster than china going forward On average throughout the period because the potential is much larger They start out to the much lower per capita income level and the potential for moving moving labor Increasing female participation in the labor force, etc. It's larger So and you'll see the same there. It's but of course and some of the countries in And you'll see the same effect in Indonesia. I can't remember exactly We we don't have that detailed data per country in that region, but but as a whole Their growth rates will be somewhere around that of china or slightly lower. So it's But that's and that's how it is Thanks bill headerman doe With regard to your taking a $50 per ton Carbon cost into account in your investing Have you detected differences in your investment patterns and your competitors at this point and could you talk about that at all? They're just in what's actually observable No, not really Many of our competitors do something of the same As far as as far as we don't know exactly, but at least we we hear the bus about it is that both Both BP and shell and I and in fact also ExxonMobil is is using carbon pricing Across across their portfolio at different levels, but still And of course over time it will affect our patterns and on them I mean on the margin at the margin it affects the MPV of the of a carbon intensive Type of production much more than the than a than a less carbon intensive And but given also that our so but we haven't seen that But of course we might end up quarreling in a license where we are both together And if one uses the carbon price that is higher than the others then one of the partners might be less willing to go into that So but I think I think the sort of the the composition of our portfolios is also so different still that that that those types of differences Overshadow any impact from from that, but I wouldn't yeah Maybe we might have those discussions in any given license at some point in the future Okay, yeah, I I was just expecting for example that you might be more looking towards gas resources and liquid resources Or something like that even within your own company DC Yeah, yeah on the mar I mean on the margin, of course it if if we could choose When we do exploration with on the margin it you know We would be looking for extremely carbon efficient resources and things that That are under high pressure So we don't have to use any energy to get it out And then light sweet and as light as possible is nice and then you know Then gas has some other issues in terms of Longer production profiles and less MPV so But but then the part of the game is that you know We go out and explore and we hope to find oil Most often it's water And and sometimes it's gas so it's so that's the also the nature of the game, but um, but we will Everybody's going to look for light light sweet crudes close to the market get it up comes out or the ground itself And you know, but that's not the world we're in On on demographics when you look at modeling Um So most demand is based on you know population gdp growth And then standard of living when you start looking at a new generation like in the united states That may be driving less or sharing cars or doing something else. How do you alter that curve? Well, that is one of them Sort of on a global level that I think When i'm asked which which are the sort of a couple of the most Important black swans that you have not accounted for And because if we if you account for blacks ones, they're not black, right? They're white But uh, but uh, that is one of them On the demand side, that is probably the biggest blacks one and that is What if future generations of consumers and then it's not always the d that's the most important But it's it's the future asian consumer Uh, what if they have a completely different attitude to consumption? Or to to pattern of life Transportation Than than we do so that they when they because they will be as rich as The average always at e citizen one time in the future 2040 2050 um What if they have a very different pattern they are they are as rich, but they don't spend their money um Partly we take that into account by by sort of macro assumptions on energy intensity energy efficiency But that because we we tend to think of that as your refrigerator becoming more energy efficient Your car becoming more energy efficient, but it could also be that we spend less time in the car We come you we live shorter distance from work, etc. So on a macro level, it's It's it's encompassed in i mean in in order for the world to become 60 or 40 more energy efficient As what we have in is models that it's partly there already, right? But you know a huge shift where it's it's also difficult to foresee. I mean last at least I check my kids You know, it's uh, I don't see a A rapidly declining use of energy in their consumption patterns Compared to to mine. They had big troubles At least my son had the youngest of these guys had big troubles Getting an agreement with it with a car driving teacher But once he got it he got the driver's license There's something about the text messaging generation not being able to to have proper dates But but they do get driver's license and and uh, you know in One of the in india India is a very small country You wouldn't believe that but if you look at 1.6 billion people living in that area, they will by 20 40 20 50 Have 15 percent higher population density than the Netherlands If they have the same car density then as korea has now each car has an area of 60 yards by 110 yards To move if you tarmac all of india, right? You won't do that But uh, but then uh, so so so they will not use cars the same way we do the cars will then They might buy a car because it you know, it might be the only place to have any privacy, but but it's But the car won't use energy because it will stand still so so But but but so but it is difficult to foresee the other blacks one is of course on the on someone the energy supply side Uh, I mean when I grew up we thought cold fusion was 35 to 40 years ahead of us I guess we still think that um, so so but but but fantastic breakthroughs on on storage um Our ability to handle large Intermittent electricity production in the grids Much much higher than what we had than the revolution we've had is also not in here the one the revolution we have modeled is not in here so but um But on that side, I mean storage and so the energy system is so huge that just trying to replace it in in this speed yeah, and uh I don't know anything about or I haven't seen anybody either trying to estimate How will the cost development of the components in a battery go When when every household in the world needs some tons of batteries one, how do you recycle them? Yeah, and Once you've tried is anybody here happy with the battery on their mobile phone once you've charged it So so and but also the size of the market and and we depend on resources that are scarce Two two of the key resources in the batteries in the tesla, which is graphite and cobalt Are produced either in china basically or in kongol and it's on the list of critical scarce resources that the eu has published So so there's something about Large-scale battery storage that we haven't seen the market implications of either And then for the renewable scenario, how if nuclear for some reason goes away Public sentiment safety, whatever costs You can't can you get there to the two degree without a big contribution from nuclear? Yeah, but then you would need something else We have put in or we have a Relative or we have a higher growth in nuclear energy in the renewable scenario than in the other ones because we think it's necessary If the world's biggest problem is is carbon Then then the emerging economies will build more nuclear energy And We have less nuclear energy than the ia has right so we are more optimistic on renewable electricity generation than ia is So if you have more nuclear you can have slightly less renewals if you have less you need either either more renewables more energy efficiency Or more ccs carbon capture and storage we have in our scenario We have we're less optimistic on carbon capture and storage than we have been historically previously And we're less optimistic than the ia is But but but the flip side of that is then that we are Even more radical on an electrification of transport and and renewable electricity I mean you have to you have to do one way or the other We've been experiencing seismicity concerns from a public standpoint and anytime you change pressure and reservoirs Taking in or taking out. I mean high pressure Disposal of anything that's going to be a problem Other questions. Yeah, go ahead Hi, I'm Eugene tan conic endowment for international peace um So I noticed then you have a newable scenario You have gas demand growing um until 2040 and I'm assuming that the purpose of the forecast is to inform your own decisions To what extent does switching from colder gas as a result of climate policies? How to what extent did that forecast affect the decision by stat oil and other european oil majors to come out and say we want an international climate agreement Well, I think uh, well first first of all You know the scenarios that I presented here are our input to Those in stato that are having the mandate to make decisions and that's not me And they use other inputs as well So so but it's but of course it's it's I get I hope it's a pretty important part of the Background for decisions, but I'm not sure it might be some other things as well And then on the on the extent sort of how how do you I mean? How does gas demand forecasts affect your policies? So I think what is important to realize is that For in our case, for instance, a very large part of our gas is delivered to europe We're we're hooked up to europe with a lot of pipelines So we so so we deliver most of our gas there all the gas that we produce in europe more or less with a few exceptions goes to europe European gas demand in our scenarios develops very slowly in older scenarios gradual decline very moderate growth And what is important for us is not necessarily the the level of demand growth It's the difference between the level of demand growth and what we potential that anybody potentially can produce from existing fields, right? So when we look at europe indigenous production is going to rapidly fall So then so the need for import of gas to europe from outside the eu is growing And even if they even if eu reaches its own targets by 2030 climate targets that they agreed upon in the fall The need for imports is rough. It's almost the same as today And then that will have to be covered by russia us or north africa basically an lng So so as as an investment signal, it's not always the top line demand growth for oil and gas that is important It's the difference between the whatever demand growth you have and what you think can be produced And in that sense Also, the renewal scenario here gives very clear investment signals for oil and gas All over Because of the need the big gap between what can be produced and what is demanded so and um and I think also that when you when you look at sort of advocating for for gas to replace coal Part of that comes from part of that or most of that comes from If you think about how to deliver as much energy as possible within a given co2 target budget ceiling Then we get you get twice as much energy If you produce electricity from gas Cold within that per unit of co2 So it's an efficient way of doing it and in particular because we think it's it's a relative I mean what we're talking about at the moment in europe is Perfectly functioning gas fire power plant being mothball it's it's uh, it's extremely expensive to replace that gas with renewables To take out coal When you already have the gas fire power plant in place So it's also that part of the equation is that the for the timing issue here is so that That gas is a rapid way of getting for a period a rapid way of getting co2 emissions down It's a cheap way And then at some point gas will also have to either be equipped with ccs and gradually be faced out But we cannot we What we're doing in europe or what the some of the european countries are doing at the moment is They're pushing in a lot of renewables subsidized renewables Eroding the price of carbon At the same time benefiting from relatively low cold prices Domestically and co2 emissions are not going down as much as they could So the sequencing is just as important as the yeah sequencing and timing and and when you look I mean we have countries that are still struggling to get out of the financial crisis There's there's not a lot of money to spend on investments that are inefficient in a sense, but we still have to do that So so so also an efficient solution is also important here And I know so you focused on 2040 longer time frames But we all know that the the current or the next five years kind of set the trajectories For what the forecast look like which is why we change these forecasts periodically But if I can ask you just to come back to the the current marketplace So what do you see in the current market it oversupply lagging demand Oversupply persists and what does this do to investment outlooks put your corporate strategy down for just a second Yeah Of course, I mean the current situation is it's It's fueling my My my theory is Is that the the oil and gas industry and probably many other commodity industries also are Permanently bipolar with either depressed or euphoric and at the moment we're depressed And and that means and if you look out I mean the signals of cost Reductions 30 percent reduction in investments both in in shale oil here and and elsewhere rig rigs are coming down We're postponing projects There is a risk, of course that we're also some companies are not but there is there is also a risk here that the exploration programs are That is a recipe for For a future much higher prices So there's no such there's no better cure for low oil prices than a period of low oil prices So because what we're doing is is we're Probably speeding up decline for a period Some of the production growth that should come in and replace decline will be postponed So within a couple of years We are talking about something that has to be much more tight And then you stress and demand growth is slightly picking up also because of low prices, right? So it's so you tighten it more and then If if we're back to our then then we're going to invest a lot as an industry again So but hopefully what we're doing now is also some of the some of the cost-cutting activities that are going on now will probably be relatively sustainable right and and the The whole sort of hope that we don't overspend again But but it's so so what is happening now will fundamentally tighten the market the the issue is of course how quickly And what happens once prices start picking up And and in this period where shale oil in particular is is on the steep part of its S curve It is very flexible So that we are speculating that you know when probably when doing WTI prices come 65 to 75 somewhere there Some rings will be put in place and start and people stop producing again And then you might get these plateaus where for a period then prices won't come up because because you have a flexible supply for a while All right, but but fundamentally we're We're talking about something that will tighten significantly going forward We are probably more cautious than Than some other people in the market in terms of that but it but it you know It's going to pick up and and you'll see the same on same on gas But but that's a slightly it takes longer slightly slower and there are other factors there We suddenly had a big chunk of lng coming out in the market at the same time as as asian demand came down So but it's um the current The current where a price around 50 is not sustainable The price around 140 which we had in 2008 is not sustainable There is a band there and then there is a gradual Increasing cost because we're talking about a non-renewal resource All right TJ Conway of energy intelligence just continuing on the uh topic of sort of the medium term Are there any particular issues or developments signposts that you're looking at during that time period that could dramatically affect the probability of One of the scenarios coming true or not coming true So just kind of taking it another step Well, uh, I mean it it's the thing about these scenarios also that yeah, of course you can Uh, I'm since they're global and they are so you know, they contain so many facets you can always find Uh, you can always find some elements in the development that Makes you believe in an increased likelihood of them Happening and and last for the last year scenario, we have, you know, the the geopolitical development looked like the the rivalry type of scenario was was increasing in likelihood But at the same time the eu was able to agree on its own climate targets We had a handshake between brock obama and she and we now see increasing signals from the g7 as well that There's an attitude that there might be an attitude change towards Global climate policies that could lead to an increased probability of the renewal scenario Uh, and at the same time individual developments in each in countries and so go in all directions. So, uh, but of course, uh, every I mean that the Paris meeting With its and and the aftermath of the Paris meeting I I think we should be careful in Estimating the importance of the meeting itself, but but things that happen around that meeting Could be important And then we're looking at some in the presidential election here might be an important signal as well in one way or the other and The potential lifting of sanctions on Iran and and and what that does to relationships between Saudi Arabia and Iran in the Middle East is also an important indicator That could go both ways but but it but it's the lifting itself is a signal that the rivalry scenario might not be the most relevant one so Yeah, there are many of these and and that's the exciting part about these scenarios is that That you you have to you have to keep reading the newspaper to find signals on which one is getting more likely and then on the on and then also something is happening on Something very exciting is happening on the technological side on renewable energy and and The unfortunate thing in one sense for at least for For the renewal scenario is that these things are still so small that it's that it that it is going to take a while until it takes Until it has significant impact globally But but there is a clear Signals there about the breakthroughs on on on the ability to store energy or to to continue to produce With with solar panels, etc. Etc. Productivity increases in that industry as well. It's It's also something that we should fall Eric, I know you've got a number of different presentations You have to do today But and now actually with the tf of the question of the changes that we're looking at we're looking forward to the 2016 version of this report But if you'll join me in thanking eric and and we want to continue this discussion So when you come back, we'll go in a smaller session or go public and Thank you so much. Thanks. Thank you. Good question