 My name is Guy Caruso, part of the energy and the national security team here at CSIS. Many of you might be your first introduction to the new building, so it is a double pleasure to have you all here. We are going to launch right into it with an extra pleasure of introducing, to start off the session, Adam Saminsky, who is the current administrator of the energy information administration, and he is going to introduce Fatih Birol, who will be our main speaker at this point. Adam, thank you very much for doing this, and thank you for the great work you are doing at EIA. Guy, thanks very much. It is really a pleasure to be here with you and Fatih. I am really looking forward to increased cooperation between the Energy Information Administration and the International Energy Agency in Paris. Fatih and I have been personally working very hard to do that, and I really appreciate Fatih's efforts in that regard. Fatih Birol is the chief economist that says it there on the screen at the IEA, but he is also the director of the Global Energy Economics area at the International Energy Agency. He is the chairman of the World Economic Forum, Davos, as you know it, the Energy Advisory Board, and he is also a member of the United Nations Secretary General's Sustainable Energy Advisory Board. He is smart. He is fair-minded. He's good-natured, and best of all, he's got a five-page bio in Wikipedia. That made Guy Spill his water. Fatih is best known as the analyst responsible for the IEA's World Energy Outlook publication, which is one of the most authoritative sources for strategic analysis of the global energy markets. He's also the founder and the chair of the IEA's Energy Business Council, which provides a forum to enhance cooperation between the energy industry and energy policymakers. As I said earlier, I'm really looking forward to hearing Fatih's views on the World Energy Outlook and then sharing over the course of the next months and three-and-a-half years for me, Fatih, continuing work at the IEA and the EIA on these very important global energy matters. So Fatih, please come up. Good morning, ladies and gentlemen. It is a great, great pleasure to be back to CSIS. We were used to present our World Energy Outlook every year. We made a break, and we are back here after two years, and I am delighted to come back to CSIS. Thank you very much for your kind words, Adam, in his previous job as well. He was a very good supporter of our work, from whom I and my colleagues learned a lot, and his work at the EIA is definitely very helpful for us, inspirational, and we learned from the EIA outlooks a lot. There may be small differences in the numbers, but the trends, issues, challenges are described in a similar way, and definitely one of the sources of inspiration for our work, and thank you very much for the good work at the EIA and the cooperation that Adam and his colleagues provide with us in Paris. Thank you very much again to many colleagues here who were the peer reviewers of the World Energy Outlook, so I see many faces who gave us a contribution for that. And once again, my last thank you to Guy Caruso for, first of all, chairing this meeting and to repeat, to be consistent with myself, with my previous presentations, to thank Guy Caruso for giving the EIA, Matt Frank from the CSIS group, that he's becoming one of the key pillars of the World Energy Outlook team, and thank you very much for that as well. Now I wanted to today tell you what are the some of the key findings of our study, the World Energy Outlook we published a couple of weeks ago. So first of all, where are we today in terms of the global energy picture? I want to start from there before looking at the future, where are we today? One issue that comes from our analysis is that the job descriptions of many energy players are being rewritten, redefined. What I mean with that, some countries which have the job description originally being energy importers are now being energy exporters, such as U.S. in the natural gas, Brazil is emerging very soon, as I will tell you in a minute, as an important oil exporter after being an oil importer for many years. Some countries who were affecting the global energy markets as an exporter, they are now becoming an important consumers and as such they have an effect on the global energy markets, such as Middle East countries. They are important, very important exporters, but at the same time as I will try to show you in a minute, the energy consumption is coming to such a level that they will be affecting the energy markets from a consumption point of view, again a change in the job description. Third, trade patterns are changing, energy trade patterns. Canada, years and years the life was very easy for Canadians, they produced energy and they didn't need to think so hard, they send it to South, but looking at the future options, future expansion of Canadian energy exports, I think Canada is and will more and more look at Asia, a new dimension for trade. Russia has a very loyal long-standing client, namely Europe, but now looking at the energy demand trends in Europe, looking at the other options of energy imports for Europe, Russia for the expansion plans need to look at also Asia as a new direction of trade, not only China but maybe Japan and others. West Africa, West African oil may need to look for other destinations as well as a result of the light-tight oil developments in the United States. So as a result of that, the trade destinations are being also redefined and changed. While these are changing and giving a new picture to the energy landscape, there are certain things which needs to change and are not changing. One of them is the increase in the CO2 emissions. Last year, once again, we have seen a significant increase, 1.4% increase in the CO2 emissions and energy sector is at the heart of this problem. Because two-thirds of the emissions leading to climate change come from the energy sector. And as such, if you want to change this problem, change this situation, energy sector is at the heart of this change. Fossil fuel subsidies, more than half a trillion US dollar for oil, coal and gas, which artificially put the prices of these fuels down and give way to wasteful consumption, increase of those fossil fuels. In Middle East, in Asia, and this is one of the main reasons why we see such a strong increase in these countries. For me, fossil fuel subsidies are public enemy number one when it comes to the sustainable development issue. Another problem, another thing which needs to change and doesn't change is an issue that we have been underlining in the World Climate Dialogue since 10 years, which is the very fact that today 1.3 billion people, every fifth person in the planet, they have no access to electricity, mainly in Sub-Saharan Africa, India, Pakistan, Bangladesh. This is definitely an energy issue, but also an economic and maybe a moral issue. So these are the things to be changed, but they are not changing and in fact in many cases it is becoming worse. Another dimension of the current energy picture is on the prices. We got used to that, but it is really interesting that since three years, Brent, the international oil prices, are about $100 and above, and we have been thinking years and years what happens if we come to $100, the oil prices, and we got used to that. There were many thoughts that the prices will go up but then it will significantly come down and this $100 oil price is not a very easy economic fact to deal with for many energy important countries, especially when the global economy is going through such a fragile process and especially in countries where the gas prices are indexed to oil prices. When I say gas prices, another interesting phenomena of the energy prices today is that in many countries, between different countries, there are significant differences in terms of gas prices. US versus Europe, Japan versus United States, there are significant price differences and this is rather new and this is definitely significant implications. So this is the picture where we are today. When we look at the future from today, which countries contribute and how much to the global energy demand growth? What we see is that the so-called rich countries, so-called industrious countries, US, Europe, Japan, their contribution to global energy demand growth is almost negligible, 4%. Where does the growth come from? It comes mainly from Asia. About two-thirds of the growth in global energy demand growth comes from Asia. And when I say Asia, we all have been talking about China many, many years, but what we see in our numbers is that the energy demand growth in China is slowing down around 2020s and then after that India becomes a large source of energy demand growth. Why it is slowing down in China? Mainly as a result of the economic growth slowing down, maturation of energy demand in many sectors and at the same time efficiency improvements and the demographic trends. And India is coming around 2020s as an important energy demand center. And Middle East, I mentioned Middle East in the beginning. In terms of oil consumption, we think around 2035, Middle East oil consumption, and it's a very moderate one by the way, our expectation is about 10 millimbers per day, which is equal to the consumption of China of today. So in 20 years of time, Middle East will consume as much as China does today. Also in terms of the electricity sector, Middle East will add about 380 gigawatts of new capacity power plants. And this is equal to the current capacity, power capacity of Japan plus Korea. So Middle East will add one Japan plus one Korea to its existing electricity power plants fleet. Again highlighting the very fact that Middle East is becoming, in addition to being an exporter, as a consumer important player in the energy markets. And of course we have other regions to contribute to the growth of global energy demand. So what are the fuels which are dominating the energy mix in the next years to come? In terms of fossil fuels, since 25 years, the work is trying to reduce the share of fossil fuels, many countries through renewables, nuclear and other efforts. But if I can share with you one data, which I find interesting, 25 years ago when the work has started these efforts to reduce the share of fossil fuels in the global energy mix, the share of fossil fuels was 82%, 25 years ago, and today the share of fossil fuels in the energy mix is still 82%. So no change compared to 25 years ago, and perhaps if those efforts were not in place, we would have seen perhaps even higher share of fossil fuels in the global energy mix. And looking at the future, we think that they are still going to be dominated, the energy mix will be dominated by fossil fuels, even though we expect the share of renewables are growing, mainly as a result of government support, renewable energies. In terms of fossil fuels, the major growth will come from natural gas, and we expect the growth from natural gas will be more or less equal to the growth coming from coal plus oil put together. And this growth of fossil fuels has several implications, and one of them is under carbon dioxide emissions. When we look at the carbon dioxide emissions from energy sector, we see an increase, significant increase, and the world temperature increase is perfectly in line with the trajectory in our projections, with the temperature increase about 3.6 degrees Celsius, which is about 7 degrees Fahrenheit. And this is significantly higher than the internationally agreed maximum temperature increase of 2 degrees Celsius or 3.5 degrees Fahrenheit, so there is a significant gap. And this difference, which may seem small, is not something that you just take your jacket off and the life continues as it is, it will have devastating implications for our planet, increased frequency of extreme weather events, sea level rise, heat waves, and others. There was a major meeting in Warsaw, and all the countries came together and tried to find a paved way for a critical meeting in Paris in 2015, as critical as the Copenhagen meeting in 2009. And there, and in many other places, the main topic is, of course, who is responsible for these emissions. Many countries, developing countries say, you OECD countries, rich countries, don't look at the emissions of today only and for the tomorrow, look at the emissions of the past as well. And they have a point in that, because the US, Europe, during the industrial revolution, use a lot of coal and put a lot of carbon in the atmosphere and accumulation of the carbon there, and one has to look at from a historical perspective. So it is what we did, we look at the last 100 years and also the future, and what we see is that the contribution of the COT emissions going to atmosphere, OECD versus non-OECD, or developing versus developed countries are now being more or less equal. So that argument of historical emissions will not hold anymore very soon. Another argument that some developing countries have, don't look at the emissions only in terms of volumes, gigatons, megatons and so on, look from a per capita basis. For China says, my population is 1.3 billion, you can't compare my emissions with the country, which is 10, 15 million of population, which there is a pointer as well. But even in that case, our numbers show that the Chinese per capita emissions 2015 are catching up and exceeding that of European per capita emissions and getting very close to the OECD average per capita emissions. So that issue per capita emissions perspective will not hold anymore very soon as well. And it is the very reason that looking at these issues and China taking a rather proactive role in terms of the environment, both in terms of climate change and the local pollution, and plus the developments in the United States and in Europe gives us hope that we may see some type of agreement in Paris in 2015 because the numbers and the policies are giving some courage to us to think that way. Now every year in the World Trade Organization, we focus on a fuel in depth. Last year, we looked at all the fuels, but one fuel in depth. Last year, we look at efficiency. This year, we look at oil, and next year, we will be working on nuclear power. In terms of oil, first on demand, couple of things on oil demand. In terms of oil demand, we expected, oh, this is too strong growth. Okay. In terms of oil demand, we expect in the OECD countries, oil demand will continue to decline. U.S., Europe, and Japan mainly as a result of the saturation effect. So in OECD countries, when people got rich, they bought a car, filled the oil demand when they got richer. Second car, third car, but they cannot buy 25 cars. There are some limitations there, so even in the United States. So therefore, there is a saturation effect and the number of transportation, the vehicles are being limited. Second, we are using cars or the transportation vehicles more efficiently, and the demographics also tell us that the oil demand in the OECD countries are going to decline. Growth will come again from China, India, and Middle East countries, and as such, we expect the oil demand will be around 100 million dollars per day in the next years to come around 2035, in fact. Which sectors are contributing to that? We have been talking about all the time and the transportation sector. This is the first one. But within the transportation sector, we think more and more demand for diesel coming in the picture vis-a-vis the gasoline. Diesel is very strong and one of the reasons is the growing share of freight in the transportation. Just to give you one number again from our analysis, about one-third of the global oil demand growth will come from the Asian trucks. Trucks in Asia will be responsible about one-third of the global oil demand growth. And this is important to note, not only because of the products, but also when we discuss about the efficiency measures in the transportation sector in many countries, we are only or mainly focusing on the private cars and the policies for trucks and freight is not very much followed. Another sector which is also very important or becoming more and more important is petrochemicals. They are using a lot of oil and their growth is going to increase. And this is mainly driven by the growing demand for plastics worldwide, for the bottles, water bottles, for the packaging, for industry, consumer goods, for the electronic devices we have. The demand for plastic is increasing and therefore petrochemical, in addition to transport, becomes a major energy or oil consuming sector. Now, we also look at the refinery sector. This is a sector that doesn't get so much attention in many discussions, but even with us, with the IEA, we thought we should give a look at this issue. And we think many refineries, especially in the OECD world, is facing challenges, at least for three reasons. The first one is, in the past, what we used to know is that there is a crude oil, comes to a refinery, and being refined then becomes a diesel or gasoline and goes to the consumer. But now we see a significant portion of oil or liquid supply in terms of the natural gas liquids. They do bypass the refineries. They go directly to the consumers without needing to be refined, such as going from NGOs to petrochemical industry. And this is a bit of a new phenomena when you look at the history of the refineries. This is rather a challenge. Second, in the OECD world, there is already significant amount of spare capacity or idle capacity. It's already there. And third, a substantial amount of new capacity expansion is underway. China, India, they do want to import crude and refine at home and use it at home, or even perhaps export. Middle East, they do not want to import products. They want to use their crude, refine at home, and at the same time use the products at home, and they want to export. So this is the third, as a result of this third factor, namely additional refineries on top of the idle refineries in OECD world. Plus the NGOs' new dimension means many refineries in the OECD world are facing challenges, and we think up to 10 million dollars per day of refinery capacity may face challenges, especially in Europe in the next years to come. And oil supply. Now, in terms of oil supply, some of you may remember that last year, when we published the World Energy Network, we said around 2017, United States will be the largest oil producer of the world. And our analysis this year does confirm that finding, and even we think in terms of oil, United States may well be even one or two years earlier, around 2015, the largest oil producer of the world. And this is definitely a very good news for the United States and for the rest of the world. But there are some thoughts, discussions whether or not as a result of this growth from the U.S., mainly the light-tight oil, we would still need Middle East oil, significant growth from Middle East oil. And our answer is definitely yes. When we look at the oil markets in the next 20 years, we see two distinct chapters. For the next 10 years, we expect a substantial increase coming from U.S., the light-tight oil alone coming to about 4.5 million miles per day, and then followed by Brazil, and some increase from Middle East mainly from Iraq. But after that, when we look at the after 2020s, we think that the U.S. production will plateau and the U.S. oil will be used mainly, perhaps exclusively we don't know, for the U.S. own consumption. U.S. will be a top oil producer, but U.S., according to our analysis, will not be a top oil exporter. There are two different stories. And there is a huge demand coming from Asia, and this demand can be met primarily by the Middle East oil. And there will be a growing iron energy trade between Middle East and Asia. Therefore, to question the need of Middle East oil growing may definitely be misleading and giving wrong signals to the Middle East producers, and which may lead them to lose their appetite for investments. We think what is happening in the United States is very important, very good for U.S. and everybody else, but the world will need, continue to need Middle East oil for many years to come, therefore we need investments in that very important region. Every year we focus on a country. Last year we made the analysis of Iraq. This year it is Brazil, and next year we will work on Africa. But with Brazil, we expect Brazil production to increase significantly in the next years to come, even though they are a bit lower than the Brazilian official estimates. We think around 2015 Brazil will be an oil exporter, and very soon one of the top six oil producers of the world following U.S., Saudi Arabia, Iraq, Russia and Canada. So a very important play. Of course, in order to this production grow up to see, again, which is lower than the government's target, we need to see the investment and the projects to be mobilized in a timely manner. Some of the restrictions, some of the regulations for the investments may put a lot of burden on the shoulders of Petrobras, and we hope to see that it is not too much so that the investments are carried out in a timely manner. But we need significant investments in Brazil in terms of the amount of money. According to our numbers, it is 1.4 trillion U.S. dollars in the next 20 years, which is higher than the total investment in Middle East countries. In terms of electricity generation, again, if you look at Brazil, very, very clean. Lots of hydropower, lots of renewable sources, and as a result of that, the carbon print is continuing to be very low, but the issue is the electricity pricing. I think it is important that prices should be at a level which would provide revenues for the utilities to make the investments in a timely manner. Now when we talk about renewables, everybody loves renewables. Renewables are growing throughout the world, again as a result of mainly government support in many cases. Europe, Japan, U.S. see significant growth in renewable electricity generation and other countries as well, but the biggest growth of renewable electricity generation comes from China alone. Growth coming from China, the electricity generation of renewables is bigger, larger than all European countries plus Japan plus U.S. put together. And this is definitely the implication on the cost of technology, especially in China, which may have implications for the manufacturing of renewable technologies in the future. So today I mentioned to you that the fossil fuel subsidies are about half a trillion, slightly higher than half a trillion USD. Renewable subsidies are 100 billion USD value, and about 60% of this is in Europe. And in Europe it is a hot topic for discussion for governments, for industry and others, whether or not the renewable subsidies should be kept or reduced in the light of the implications for the electricity prices and other economic variables. When we talk about renewables, most of the case we think about solar and wind, but about half of the renewables in 2035 will be still hydropower. 50% hydropower and 50% all other renewables put together, but of course the major growth is coming from wind and solar in the OECD countries. Now in the beginning of my words I mentioned to you that there is a price disparity between the countries, especially for natural gas. Before the shale gas evolution, even the year 2009, natural gas prices in three different regions of the world, US, Europe and Japan, they were more or less equal. And 10 years ago US gas prices were more or less the same in Europe or in Japan. The ratio was 1 to 1 or 1 to 0.9, 1 to 1.1, they are more or less equal, but now there is a big difference. In Europe gas prices are three times higher than in the United States and in Japan they are five times higher than in the United States. I don't know any other commodity who is strategically so important where you see such major price discrepancies. And our assumption is so that even in the future, even there may be some narrowing down of this gap, there will be, this is rapid growth. Even in the future we expect there will be still significant price differences between Europe, US and Japan. And as such what we want to say is that this is not an issue of only one year, but this may well be a structural issue for many years to come. The picture is not very different in terms of electricity prices as natural gas is a major input for electricity generation in many countries and for other reasons including the renewable subsidies and taxes. We see that the electricity prices in many other regions in the world will be higher than in the United States. So what we did is that we look at what does this mean for the energy intensive industries, because this price differential they have three major economic implications. One is on the trade balance. Japan, 14 months in a row, Japan has significant trade deficits for the first time after the Second World War. After Fukushima, in order to compensate the nuclear power plants which are shut down, the imports of LNG increase with the higher LNG prices and Japan is seeing a substantial trade deficit on the trade balance. Second on the share of energy expenses in the household budgets. As you may see in a book in Europe and in Japan these are coming to very significant levels. The money paid for heating, transportation and lighting in many families, households. And the third one is it may be important for the industries where the cost of energy makes a significant portion of the total production costs. What are these sectors which we look, these are petrochemicals, aluminium, iron steel, cement, fertilizers, where the cost of energy makes a significant part of the total production costs. So this price differential in different countries therefore has implications of different regions, different countries share in the international trade of energy intensive products. And we look at that different countries we see that in U.S., China, Middle East they share in terms of these sectors their international trade is increasing whereas we see a decline in Europe and in Japan. Especially for the petrochemical sector, iron steel and fertilizers. Of course this is a good news for some and rather not a good news for others. I can tell you that in Europe today European energy and economic debate is mainly dominated by the competitiveness concerns and it is not very different in Japan. One point that it is very much highlighted or discussed in Europe and Japan is about the U.S. LNG exports. Many people think in Europe or in Japan if the U.S. people were kind enough and export a lot of LNG we could see a convergence of the gas prices. So called the great convergence of natural gas prices and therefore the U.S. would not export so much gas in order to keep the debt differential in place. And of course the hope is to see like the oil prices one natural, international natural gas price. We looked at it is it possible to see even if U.S. was to export let's say 100 BCM of LNG is it possible to see one international gas price. As it is hoped in the other parts of the world and our answer is absolutely not. And this is mainly as a result of the substantial cost of liquefaction and shipping and gasification costs. Let's assume that in Europe for example U.S. exports substantial amount of gas to Europe today the U.S. gas prices are about four dollars and if you want to send it to Europe you need about 5.56 dollars cost for shipping liquefaction and gasification which brings the prices about ten dollars. And which is the European gas prices are today about 11 dollars anyways. So the room is not very big. It is a bit bigger in Asia because the Asian gas prices are about 15, 16 dollars. But in any case even though U.S. exports may provide more liquidity to markets makes the hands of the importers stronger in terms of negotiation with the gas exporters. But to expect that the gas prices in these two regions Europe and Asia to collapse may be a rather optimistic way of interpreting the gas markets. So it is the very reason we believe that with the current policies in place it will be rather realistic to believe that there will be structural price differences in the next 20 years between U.S. and the other parts of the world. So if I can finish our presentation by trying to put our thoughts together. First of all what we say, what we think is that the energy markets are changing very, very fast on the supply side but also on the demand side especially on the energy efficient side. Many new policies are put in place but on the supply side with the unconvention revolution we see significant developments there and the companies, countries who are not able to see those changes, read those changes may well be losers. And the ones who are able to read those changes and position themselves accordingly can benefit from this very change. And therefore we believe it is very important that the organizations like the EIA, IEA and the others provide the orientation with the facts and data to the energy sector and beyond. When we look at the next years as I said the China, followed by India will be the engines of energy demand growth. In terms of trade we see a major shift. Today about one third of the oil trade is taking place in Asia Pacific. In 20 years of time it will be more than two thirds of the oil trade will be in the Pacific region. This will have implications for the trade but also for oil security and other issues. Second, in terms of oil technology is opening up new oil resources such as the Shell Oil or Oil Sands or Deepwater offshore but looking at the resource base, looking at the huge demand growth coming from Asia, one should definitely put in perspective that the Middle East is and will remain important for the global oil markets for many years to come. So we have to be very careful about the Middle East investment trends. Third, we think that there will be still many years the price gaps between the regions and in optimistic terms for the non-Americans in optimistic terms the price gap will narrow down but will be with us for many years to come. And this may well have implications on the competitiveness of those countries, industries and their economies. There are of course many ways to address this problem from those countries point of view and one of them is using energy more efficiently. High energy prices do not necessarily mean high energy costs. If you use energy more efficiently one can reduce the cost of energy down. And finally, we are worldwide going through very difficult times in terms of the global economic recovery in Europe, in Asia, in other parts of the world. But looking at the very important, perhaps the most important collective challenge of our times, climate change and the issue of urgency there, we do not think that this should be an excuse not to act there. There are certain national policies and measures which can be put in place without harming the economic growth which can still make us buying time and to keep our targets alive to address the climate change. In the context of competitiveness there will be definitely winners and losers but in the context of climate change if you are not able to address the challenge we believe there will be only losers. So with these words I wanted to thank you for your attention and thank you for the question and answer session. Thank you very much. Thank you very much, Fatih, for that wide ranging and comprehensive view of the IEA's latest outlook and just picking up on that last slide, the fast changing world and the challenges that you started out with in your first slide. IEA has just concluded a ministerial less than two weeks ago and one of the challenges that many of us are concerned about are the institutions that deal with energy and environment keeping up with this fast changing world. Can you say something a little bit about the results of that ministerial and how it might relate to this picture we've just seen? Thank you very much, Guy, and this is a very good question because one of the first slides I show is that the contribution of the IEA countries to global energy demand is negligible. COT emissions are happening somewhere else so this means that our relevance is very much related to how much we can engage with the emerging countries. So in that respect, I would like to quote three outcomes of our ministerial. First, in addition to our ministers, including the Secretary Moniz, we had seven other major emerging countries such as China, India, Brazil, Russia, Indonesia, and Mexico joining our meeting and discussing with us about the global energy future, their concerns, their preoccupations, and how we can work together. And at the end of the meeting there was an agreement signed for enhancing partnership between IEA and those seven countries of those governments. So this was definitely one of the good results of our ministerial. IEA Secretary with those seven emerging countries for a way forward for the partnership development. Second, just to perhaps give a number, we have all of our ministers, the ministries, plus the seven countries, but we had throughout the meeting the CEOs of 30 largest energy companies of the world. The energy business community was with us throughout the meeting. This is the oil producing companies, electricity generating companies, but as well as major energy consuming companies such as the iron steel, car manufacturers, and others which provide the business view and which gave a more perhaps the realistic view of the energy world. This is the second one. Third and finally, as I said, we see one of the major challenges today, climate change. And IEA ministers for the first time in the history signed a climate statement. It was an agreement on that. What kind of measures can be put in place in order to buy time without harming the economic growth and this message has been sent to Warsaw and it will be for the next two years. It will pave the way for the IEA countries climate efforts. What are those four policies? One, improving energy efficiency in industry and transportation sectors where the payback periods are less than five years identified. Second, banning the inefficient coal-fired power plants. Third, limitation of methane emissions from oil and gas production. And fourth, gradual fossil fuel subsidy reform. And there was a climate statement of the energy ministers. This was the third outcome. So partnership agreement with the seven countries, energy business community being a part of the discussion and deliberations. And the climate statement are three major outcomes. Thank you very much, Fatih. Now we've got about a half an hour for questions and I'm going to just repeat the ground rules which are please state your name and affiliation. And I want to group three questions together so that we can maybe use best to start here in the front row with the first question. Here he comes. Thank you. Robert Charette, international investor. You mentioned that you're going to hold off Africa for the next year. But I wonder if in addition to the nations you highlighted today you could give us a little bit of a sense of new discoveries that we see occurring around the world. Not just in Africa, but Latin America, off the coast of Southeast Asia, et cetera. Are you surprised by the diversity of new discoveries? Maybe you could just highlight some. Thanks. We'll take a couple more and then Fatih will answer though is John Shagas. Thank you. John Shagas, strategic petroleum consulting. I know you didn't address price in this, but with the ebbs and flows on the call from OPEC between now and 2035, do you expect oil prices to be more volatile, less volatile, or about the same as they have been historically? Thank you. About one more. Yes. Fernando. Thank you. Salme Saleh, Julie. Could you comment on the importance of Central Asia in the gas market and supplying going to India and China through Central Asia like Turkmenistan? Thank you. Now, first of all, the new discoveries, am I surprised? Of course, I am surprised because I don't work on those discoveries when they are made. It's a very good news for all of us. But one shouldn't perhaps mix two things, discover a resource and to produce oil or gas from that. There's a lot of things between those, lots of phases between those two points. And especially in Africa, we see both in West Africa and East Africa in oil and gas major discoveries. And this will definitely help to contribute to the global oil and gas production and hopefully will help those countries wealth to improve. In fact, our study in Africa will not only look at oil and gas production prospects, which is very important, but how that money best can be used for improving their economy. And at the same time, it will also look at the electricity sector. For example, how gas to power can be a very important part of the energy policies and what can be done to design the electricity markets to work properly. So this is the area that we are going to look into, but I'm sure as long as the prices remain at these levels, we will see discoveries, many parts of the world, but this will not change the main statement I tried to make, is that the large resource base, low cost resource base, Middle East will be still a key region to keep an eye on. Oil prices, are they going to be more volatile? For me it is impossible to guess more volatile or less volatile, but I'm sure it is easy to say they will continue to be volatile. But what I can tell you is that when we look at our price assumptions in the outlook, we see oil prices still remain $100 level in real terms, which means that we do not expect a major drop of oil prices for a long sustained time. The days of $50, $60 of oil prices we got used to in the past, we believe they are passe, they are over. And even in the context of the shale oil or the projects, the deep water offshore and others, we need significant amount of prices in order to make those investments profitable. Central Asia, yes, again this comes to the first thing I said, the availability of resources and to make production from it and market them is different things. In Central Asia there are significant, especially in Kazakhstan and Azerbaijan, significant amount of oil and gas resources and their direction need to be Asia, China and India, because even though we may expect, and we do expect some oil and gas going to Europe, this will not be in the long term a main client of Central Asia. It will be more the emerging countries, China and India. Of course, this has also several challenges in front of that, including the infrastructure, political and commercial challenges. But the direction will need to be Asia, given the options we have in hand. Fatih, can I follow up on John Shagas's volatility question? Last year we did an excellent paper on or study on Iraq in depth. And I think it was pretty moderate in terms of your expectations. If I may remember correctly, 6 million barrels a day by 2020. Seems like the last year hasn't been a lot of good news coming out of Iraq with respect to governance and some of the technical problems of Kurdish issue. One year later would you give us a three sentence update on where you think that outlook would be if you were to do it today? Lastly, it was 6 million barrels per day and this year 5.9, so this is... No, no, I'm serious, more seriously. So I still believe in Iraq potential to play a very critical role in the next 20 years. And the only problem, we have two problems now. One is the problem of the security or political stability. The other one is a technical problem which can be easily dealt with if the investments are there. So if the security issue is solved, we may, with increasing revenues, those technical issues can be solved without any problem. I can tell you that perhaps we don't see this part of the world, but Chinese, Russian, many other countries, companies are in a queue to be active in the Iraqi oil sector. So next year there will be elections in Iraq. And after that elections, if these elections are carried out as they are planned, and a bit of a stability in the country may well mean significant amount of oil coming to Iraq. So I don't have major reasons to change my views about the substantial role Iraq will play in the next years to come in the oil markets. There will be ups and downs, but the general trend is Iraq will be a critical player. Thank you, Fatih. Sarah? Then second. Sarah Ladisla from the Energy Program here at CSIS. Fatih, thank you so much for a really excellent presentation. I just wanted to follow up with two questions. The first about subsidies, which you brought up as being sort of enemy number one of demand response to prices and good investment and things like that. How do you work in your view on subsidies, especially into the outlook, especially in light of all of the focus that the G20 and other organizations have on subsidy reform and it being such a key priority and a lot of other countries as well seeking to phase in subsidy reform over the long term? How do you factor that into your analysis? And then the second one is if you could just expand a little bit on the work that you plan on doing on nuclear next year and which issues you plan on looking at. And I'm sort of curious as to whether or not it will feed over into the non-proliferation realm as well and that kind of thing. So those two questions, thanks. Good morning, Mr. Birol. Great to have you back in Washington. Ariel Cohen, the Heritage Foundation. Two questions, one on Russia. Russia did well in the 2000s and now the economic growth is slowing down. I'm reading my friends on Russian Facebook and they're panicking with the recent Ministry of Economy report predicting continuous stagnation. Do you think the Russian energy model that is heavily relying on state ownership had outlived its growth potential and Russia should consider bringing more foreign capital into its oil and gas? And the second question on Iran. In view of the recent developments in terms of the temporary accord reached in Geneva, what are your senses in terms of Iranian infrastructure, both legal and regulatory, as well as physical, and the Iranian production both in oil and gas? Thank you. We have four there. Sorry. With subsidies, first of all, half of the subsidies I mentioned are in Middle East. Now in Middle East, they make the energy sector so inefficient and put so much burden on the government's budgets that I believe soon there will be a very careful look at those subsidy regimes. And before the Arab Spring, there were already some reform plans but they slow down now and hope to see that they will be put in place sometime soon as in some countries oil consumption is growing so much that the countries available of exports are being squeezed, which is a major problem for that. Just to give you one number, in our book you will see, we look at the use of oil for electricity generation in Middle East. Today one third of the electricity generation in Middle East comes from oil and this is an economically a crime from economic point of view. It is more expensive than gas, than nuclear, than even expensive than concentrated solar power. It doesn't make any sense to use that one. It is something like using a Chanel perfume to fill your car. It is in the same order of matter in terms of economics sense. So therefore I expect that this will be revised and our assumptions are not immediately but slowly there will be gradual elimination of those subsidies. In the rest of the world, especially in Asia and in Africa, the motto that the subsidies are put there in order to protect the poor doesn't hold according to our analysis. We have calculated that only 8% of the subsidies go to 20% lower income groups and more than 90% of the subsidies go to medium and higher income groups. So it doesn't protect the poor directly. There may be other means to help the poor but not overall across the board subsidies. So therefore we are pushing this agenda in the context of G20, APEC and others and we will continue to do so and there is already some momentum building not because that we are pushing only but that there is a pressure on the government budgets. Significant pressure. Second issue, the nuclear. Every year we look at the fuel in the energy outlook in depth. This year oil last year, efficiency before last year it was coal and next year we want to look at nuclear power for the following reason. It will be now two years after Fukushima. It is perhaps time to give a calm look at the facts about nuclear power. We are not going to do it to push nuclear or pull nuclear. We think it is important to put the technological and economics facts about nuclear on the table than the countries or the companies make their own decisions. Nuclear is an important option to address the climate change and also a very important way of producing electricity having any interruption of a generation. So we look at it from different angles without favoring any fuels as we don't favor oil, we don't favor gas but I think there is a need to look at the nuclear after Fukushima, after the changes in the energy landscape. It is economics, it is technology, it is role in addressing the climate change. Russia is going to Russia in order to have a sustained growth in the Russian economy. There is a need for energy revenues to grow and in addition to the existing production levels there is a need for new investments and new fields to come in the stream. The fields which need to come are unfortunately more complex fields than the previous ones which need substantial amount of investment and technology and as such the involvement of the private sector within and outside of Russia will be definitely very helpful. And in terms of Russia's future trade partners, as I tried to say I think Russia will need to turn into space as an energy partner more and more to Asia, to China and others of course in addition to continuing to supply energy in Europe but Europe's energy demand growth is not growing so substantially and there are now new potential suppliers of energy to Europe as well. In terms of Iran, Iran is of course huge energy oil and gas resources but I think it is still at least for me too early to make any comments about the future role of Iran where we stand today. A follow-up on the nuclear, I know we know there are varying views among your member countries. So did the ministers take say much about nuclear during their discussions? When we told the ministers that we are going to work on nuclear power, they did take note of that. But where the dialogue comes, not as a consensus document of all the IEA member governments but it is the secretariat's own views therefore we will go ahead on the nuclear issue. Howard, Howard you're expected. Hi Fadi, thanks a lot. Great presentation as always. One thing that struck me in looking at the document itself was the view of electricity demand growth in the world and particularly in China where I think you have it growing sort of maybe 3.8% a year out to 2020 and I guess the question is sort of that's quite reduced from what we've historically seen and quite reduced from what we saw even last year which was a very slow year for them and this year probably something in excess of 7%. So again the very far future is hard to look at but when you're looking out to 2020 and you have growth of under 4% and their actual growth is north of 7%, what do you see that drives the secretariat's view of such a significant reduction? I think everyone expects it to be lower than what it's been for the last decade but 3.8 seemed quite low to me and I'm curious what you're thinking is. I was just wondering in light of this year's announcements in terms of international coal investments from the US, the World Bank and other organizations, how is that changing the ministerial's view on the outlook for coal and coal's role in generation going forward and also if missions are still supposed to grow so dramatically, where do the efficiencies and the innovation need to come from to change that? Hi, I'm Perry Olery with the Natural Gas Supply Association and I'll kind of follow up with the previous questioner's question and that is with the significant growth of coal production in Asia, how will that impact their demand for imports for natural gas and will it have an impact with all that growth? We'll do one more and then you can handle four, right? Hello, my name is Rafał Jaraszan from the Embassy of Poland and I do have a question about actually the energy outlook for the future because it looks on its outlook that the future of Europe is not very bright, actually the toughest time are coming and when you look at the industry, actually the industrial point of view we are losing the competitiveness and you mentioned here that the regional price gaps and other concerns are staying and looking at the competitiveness you mentioned about the efficiency improvement as one of the key elements but of course Europe and European countries are one of the most efficient part in the region in the world so what are the others actually ways to react, to make sure that Europe will stay competitive and will be able to compete in the future? Thank you. Thank you very much for all these questions. Let me start with Howard's question and once again as I said in the beginning Howard was not here. I think the EIA in the name of Adam for the excellent work you are doing and from which we get a lot of inspiration but of course our numbers are ours and your numbers are yours. Now in terms of the China slowing down of electricity demand there are three factors behind that. One, we expect the economic growth to slow down and as they say they may be rebalancing the economy so going more lighter economy rather than the heavy economy. This is one. Second, the electrification of the economy is also slowing down. There was a very strong growth of the electrical appliances sales and ownership numbers in China. This will continue to grow strongly but they will slow down there. Third and perhaps most importantly we expect that the China will put a lot of efficiency measures in place and this is in terms of A, the legislation's norms and standards and B in terms of the pricing practices. As a result of that we have about five percent if I'm not wrong the GDP growth vis-à-vis about four percent close to four percent electricity demand growth so this is the reason why we think there will be a slow down. Second question is about the outlook for coal. Now I will link this question with the other coal question that the lady over there asked. I don't know if you follow the discussions under East Asia. We just published a report called South East Asia Energy Outlook. Many countries there put a policy forward called green growth. But when you look at the Asia numbers, East Asia numbers, leave aside our forecasts, the power plants which are already ordered, this is not the order, money is paid for the next ten years, seventy percent of those power plants are coal-fired power plants, thirty percent are power plants such as gas, oil, et cetera all put together. Why? There is only one reason here which is the price. To produce one kilowatt hour of electricity in East Asia from gas is 2.2 times more expensive than producing from coal. So simple. Therefore unless there is a regulatory measure put in place those countries go and build coal-fired power plants. This is very simple. So therefore outlook for coal in East Asia is rather strong. But when it comes to China, I would expect that we may well see in China to put some, and there are already some work going on there, some limitations of the coal use, not because of the climate change but because of the local pollution issues. And we may see some limitations, some restrictions to put in coal in China. And this will impact of course for the entire world. When it comes to price differences today, if it is left only to the price people will go for coal in Asia. There is a big difference. Gas is about two times less CO2 emitting compared to coal, but it is expensive. So it is the reason people will not go and go for gas because it is cheaper. People go for coal because people not go for gas because it is cleaner. People will go for coal because it is cheaper. So this is what is going to happen there unless there are some regulatory measures. It is the reason why we, hopefully some other institutions, are going to push at least the banning of inefficient coal-fired power plants, the subcritical coal-fired power plants. At least we can increase the efficiency of coal-fired power plants. Now for Europe, our colleague from Poland, what is the issue? When we look at, we have a book about 700 pages. I don't have it with me now, but when I look at that book, we look at all the fuels, oil, gas, electricity, climate change, economy, etc. I see very few, if any, good news about Europe. This is unfortunate and so, and therefore looking at the European economy where it is today and looking at the European energy station where it is today, I think 2014 will be very important for Europe to shape, implement, sound energy policies for the prospects of European economy and citizens for many years to come. And therefore, in the context of competitiveness, what can be done? One efficiency we said, but there is another issue, namely about two thirds of the European long-term gas contracts are coming to an end around 2020. Europe can well renegotiate those gas contracts, which were made several years ago when the markets were dominated by sellers. And now the rules of the game is changing a bit thanks to the shale gas and other developments. And therefore, these price levels can be brought down somewhat. This is another issue. Third, European energy system can be integrated in order to get more efficiency in Europe and putting the price down. And in the countries where it is allowed, such as Poland and the others, the production of domestic energy resources, including shale gas, can be another policy instrument which would help Europe to improve its position in the energy sector. But overall, for the Commission, for the Brussels, the message is it is critical now, 2014, to have realistic sound energy policies put in place. This is going to have to be the last round because Fathi has an event at the State Department to start over here. Hi, good morning. I'm Brenda Schaffer from Georgetown University. Two questions. One, this month we're supposed to hear the decision on the final investment decision on Chakhtani's Southern Corridor into Europe. Will this play a role in reducing coal consumption in a variety of markets in Europe? And what will be the impact in this, as you said, this critical year for 2014 in European energy policy? And second, what do you think in the era of rising gas volumes all over the world? What do you think will be the future of expensive LNG projects like floating LNG? Hello. I'm Marianne LaValle from National Geographic. I think you have a section in the World Energy Outlook that talks about U.S. industrial renaissance due to natural gas. Is it a myth or reality? I wonder if you could talk a little bit about that and why inexpensive natural gas is not causing the U.S. share of the energy-intensive industries to increase more than you foresee in your outlook. Hi, Naki Mendoza, Energy Intelligence Group. In your comments about Brazil, you talk about the need for a significant investment for the country to realize its offshore potential. The government has often come under fire for heavy regulations and sizeable takes in offshore projects. I'm wondering if you take the view that the current policies in place are conducive for realizing the potential that you're projecting. Now, of course, the project with the shaktanis and bringing Azure energy to Europe is a very good one for providing diversification for the European energy and helping to make the European energy and the general policymakers stronger. But I think in terms of the prices, if the current prices still continue as they are, I think coal will be still very cheap in Europe. Today, when you look at the 2012 numbers, we have seen in many countries in Europe the historical increase in the coal consumption, including Germany, UK, and others, mainly because of the coal being extremely cheap. Of course, how much the shaktanis gas will cost is something that we officially don't know, but I would be very surprised if in terms of the amount and in terms of the amount of gas and in terms of the price levels, it will change this main picture that the coal will be chosen for electricity generation in Europe, which was the main, the light motive for 2013, and it will be saw 2014 with the current energy picture we have. Because there could be one instrument which could help to change the picture, which is the carbon prices, but they are less than five dollars now, and it is not helpful to push the gas up. Gas consumption, according to our analysis in Europe, will go to pre-crisis levels only around 2020. So there is a long way to go there. Expensive LNG projects, I mean, they are today expensive, but with the gas prices we have now, they may well not be so expensive in the near future, but we may see some of the LNG projects to be postponed, to be delayed as a result of some other less expensive gas coming to markets, but I am sure that those projects, some of them are in Australia, some of them in Africa, and some of them may be even in East Mediterranean. They will be helpful for the global gas markets in the next years to come. We will need that gas as well. In US industrial renaissance, we think that especially in the petrochemical sector, there will be a strong boom, there is a strong impact, there will be strong boom in the US petrochemical sector, and in the other energy intensive sectors. What is happening today is that not only that the US station is improving, the station in the US competitors in Europe and Japan, they are deteriorating. The US is in an improvement situation, but the other two regions are going through very difficult times, provides a competitive edge to the US industrial renaissance, or however you call it. We see it in the petrochemical sector, and one shouldn't be surprised to see in other energy intensive sectors at varying degrees. Of course, low energy prices are not the only factor that is at stake. There are other policies and economic variables which could play a role, but keeping the other things constant, the US has a significant competitive advantage with other nations, especially OECD ones. China, Middle East, they are also increasing their market share as they have access to cheaper labor and also lower cost energy compared to Europe and Japan. Brazil, as I mentioned, is a huge resource, especially a deep water offshore, but again, a substantial amount of investments are needed, and with the current investment framework that the Brazilian government insists on, there may be some challenges, but the abilities of the petrobras may be stretched very strongly, and what we hope that those investments, despite these challenges, are mobilized, and Brazil can make this strong boom. But in our book, in addition to these numbers, we also make a low oil production case for Brazil, and we highlight in the very fact that there is a possibility that as a result of those challenges, production growth may not be as strong as we see in our essential case. Thank you. Well, two things I want to thank you all once again for coming out and attending the session and for those excellent questions, and I'd like you to join me in thanking Fatih for not only a great presentation, but answering great questions. Thanks. Thanks a lot.