IEEJ:October 2012 All Right Reserved

IEA Medium-Term Market Reports
IEEJ Seminar
Tokyo, 20 September 2012
Didier Houssin
Director, Energy Markets and Security
International Energy Agency© OECD/IEA 2011

IEEJ:October 2012 All Right Reserved

Introduction to medium term reports

 Based on the most recent data available 5 years outlook is important for policy making
 Natural gas and renewables are growing fastest© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Gas: global developments© OECD/IEA 2012

Key messages – natural gas

IEEJ:October 2012 All Right Reserved Natural gas demand is expected to increase by 576 bcm

to reach 3937 bcm by 2017 (2.7%/y) 69% of demand will come from non-OECD countries
 With 37% originating from Asian countries
 No Golden Age of Gas in Europe

 FSU and North America are the largest contributors toglobal supply Global gas trade expands by one-third over 2011-17
 Trade is shifting to Asia
 LNG markets will be tightening over 2012-14
 The next wave of LNG exports starts only at end 2014
 China becomes the third largest importer after Europe and Asia
Oceania© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Gas demand is projected to grow by 2.7%/yover 2011-17

 Gas demand is projected to reach around 3940 bcm from 3361 bcm

in 2011 (+576 bcm)
 69% of the growth will come from non-OECD regions (+400 bcm)
 OECD demand only increases by 180 bcm© OECD/IEA 2012

FSU and North America are set to be thelargest contributors to additional supply

IEEJ:October 2012 All Right Reserved

Incremental gas production, 2011-17

 FSU is growing fast driven by incremental exports, notably to China
 North America’s gas production meets booming demand and some LNG exports
 China and Australia become significant gas producers
 European domestic production continues to decline© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Unconventional gas
Already 16% of global gas supply

North America

EuropeFSU

Tight ~ 221 bcm
Shale ~ 197 bcm
CBM ~ 59 bcm

CBM < 1 bcm

Tight ~ 20 bcm
CBM < 1 bcm

Asia
Middle East & Africa Tight ~ 35 bcm
Tight gas > 3 bcm

CBM ~ 2 bcm

Latin America
Tight ~ 2 bcm

Australia
CBM ~ 6 bcm

 Half of the world’s unconventional gas production comes from tightgas; shale gas is a North American story
 Environmental aspects as well as infrastructure, pricing, policy issues
need to be tackled© OECD/IEA 2012

IEEJ:October 2012 All Right ReservedRussia and the Caspian
The interest is shifting to Asia

2017+

2017+

2017+

Yamal expected to start producing in 2012 with a potential to produce 115bcm/yby 2017
 Far East/East Siberian projects for China/Korea/LNG export await FID
 Turkmenistan is increasing exports to China (possibly to 65 bcm by 2020)
 FEED on Shah Deniz-II started in 2012, production might begin 2018

© OECD/IEA 2012

Asia’s gas production growth supported byChina

IEEJ:October 2012 All Right Reserved

 China production rises strongly but is insufficient to meet demand India’s gas production struggles to grow
 New gas production in Papua New Guinea to support LNG exports
 Relatively flat production in Malaysia© OECD/IEA 2012

Regional gas prices are drifting further
apart

IEEJ:October 2012 All Right Reserved

Avg. gap in 2011:
USD 5.8/MBtu

Avg. gap in 2011
USD 5.0 /MBtu

Source: ICE, EIA, IEA, German Customs, Japanese Customs, McCloskey

 There are widening disparities between regional gas prices, which

are increasingly determined by their respective regional dynamics
 Asian price development closely connected to oil price North America is totally disconnected from other regions© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

LNG markets: a healthy growth
LNG trade growth (2006 to 2011)
400350300

bcm

250
200
150

LNG Trade
LNG Liquefaction Capacity
Change in LNG trade %25%
20%
15%
10%5%

1005000%-5% Global LNG demand grew by 9.4% to reach 327 bcm (240 mtpa) in2011, slowed down from the record increase of 21% in 2010.
 Thailand and the Netherlands started importing LNG
 Asia continues to be the most rapidly growing LNG market with 206bcm (63% of global LNG trade) imported in 2011
 Japan needs more LNG in 2012 to compensate for low nuclear
production© OECD/IEA 2012

Global gas trade in 2017


IEEJ:October 2012 All Right ReservedOECD Europe, OECD Asia Oceania and China are all net importers, both OECD regions
also export LNG
The trade balance is shifting to Asia, notably China, OECD Asia Oceania and other
Asian countries
North America is a net exporter© OECD/IEA 2012

IEEJ:October 2012 All Right ReservedRenewables© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Key messages – renewable energy As a portfolio of renewable technologies matures, global

renewable power generation is forecast to rise 40%
 Supported by policy/market frameworks and economic
attractiveness in increasing range of countries and circumstances Technology cost developments, grid/system integration,
cost/availability of financing also weigh as key variables
 High level of economic/policy uncertainty in some countries

 This projected growth is an acceleration vs previous period Growth is 60% higher over 2011-17 versus 2005-11

 Renewable deployment is projected to spread out

geographically, with increased activity in emerging markets
 Deployment spurring economies of scale in some technologies virtuous cycle of improved competition and cost reductions© OECD/IEA 2012Growth in renewable power is forecast toaccelerate

IEEJ:October 2012 All Right Reserved

 Hydropower remains the main renewable power source (+3.1% p.a.) Non-hydro renewable sources grow at double-digit annual

percentage rates (+14.3% p.a.)TWh7 000

Global renewable electricity production and forecast

6 000
5 000
4 000

3 000
2 000
1 00002005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Hydropower

Wind onshore

Bioenergy

Solar PV

GeothermalWind offshore

CSPOcean© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Growth is led by non-OECD countries
 Non-OECD accounts for two-thirds of the overall growth China, Brazil, India lead; others grow significantly as well OECD growth still largely driven by Europe but Americas andAsia-Oceania make significant contributions
TWhGlobal renewable electricity production and forecast

7 000
6 000
5 000
4 000

3 000
2 000
1 00002005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
OECD Americas

OECD Asia-Oceania

OECD Europe

China

BrazilIndia

Rest of non-OECD© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Regional analysis© OECD/IEA 2012

Gas drives coal down in Americas

IEEJ:October 2012 All Right Reserved Very low gas prices enable gas-fired plants to win market shares atthe expense of coal
 Renewables generation (excl. hydro) increases strongly but still
represents a small share of total generation (8%)© OECD/IEA 2012

US power sector can absorb more gas

IEEJ:October 2012 All Right Reserved

Gas continues growing, coal starts to fall sharply

 Despite the constraints, around 300 TWh of coal generation is to be

displaced by natural gas over 2011-17© OECD/IEA 2012

US renewable generation expected tocontinue to grow steadily
TWhIEEJ:October 2012 All Right Reserved

United States renewable generation and forecast

700600500
40030020010002005

2006

Hydropower2007

2008

Wind onshore

2009

2010

Bioenergy

2011

2012

Solar PV

2013

2014

Geothermal

2015

2016

2017

CSPWind offshore Average renewable growth of 2.4% annually over 2011-17

 Non-hydropower growth at stronger rate, + 8.4% annually
 Onshore wind, solar PV and bioenergy grow strongest
 CSP and geothermal growth are large in global terms

 % of total power gen: 9% (2005), 13% (2011), 14-15% (2017)© OECD/IEA 2012

Europe: power demand increases slower due
to low GDP growth

IEEJ:October 2012 All Right Reserved There is less room for fossil fuels
 Gas has to compete against coal-fired plants
 Gas is disadvantaged in the early period due to high gas prices© OECD/IEA 2012

Golden age of coal in Europe?

IEEJ:October 2012 All Right Reserved

1 200
1 000

TWh800Coal600

Gas

4002000

 In 2011, demand in the power generation sector dropped by 3 bcm
 Low (or negative) power demand growth Strong growth of renewables
 High gas prices with low CO2 prices make gas-fired plants uncompetitive Gas loses competitiveness in the short term, but will recover (atlower levels than 2011)© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Natural gas prices in Europe
25USD/MBtu

2015
NBP Avg. -15% of
GBP in 2011

1050NBP

GBPBrent

NW European coal marker

UK LNG European spot market prices continued to dwell below oil indexed

import prices in 2011
 Spot market prices stayed low due to overall sluggish demand fornatural gas in Europe
Source: EIA, IEA, German Customs, UK Customs, McCloskey© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

European hubs: strong growth in trade600

 Physical and traded volume in Europe

500

has continued to increase throughout
2006 -11
 Increase shows a decreasing trend incontinental Europe
 +27% Traded volume versus 2010
 +8% Physical volume versus 2010

+27%Bcm

400+46%300+56%

200+8%+46%

100
0+55%

2006

2007

2008

2009

2010

2011

2006

2007

Traded Volume
TTF

NCG

2008

2009

2010

2011

Physical volume

GASPOOL

Zeebrugge

PSV

CEGH

 Continental hubs have overtaken

PEG's

NBP in physically delivered volumes
since 2008

1800
1600
32%

1400

28%
120022%

Bcm

1000

12%

16%

 NBP continues to dominate trade

800
600with 68% of total traded volume inEurope

13%

400
200
032%

38%

50%

58%

61%

67%

2006 2007 2008 2009 2010 2011 2006 2007 2008 2009 2010 2011
Traded Volume

Source: TSO’s and regulators

Physical volumeNBPContinental© OECD/IEA 2012

Europe continues strong renewable growth,
but economic/policy uncertainties weigh

IEEJ:October 2012 All Right ReservedTWhTWhOECD Europe forecast renewable generation

Germany forecast renewable generation

200

1 400

180

1 200

160

1 000

140120

800

100

600

80
60

400

4020002011

202012

2013

2014

2015

2016

2017

02011

2012

2013

2014

2015

Hydropower

Wind onshore

BioenergySolar PVHydropower

Solar PV

Wind onshore

GeothermalWind offshore

CSP

OceanGeothermal

CSP

Wind offshore

20162017

Bioenergy

 Germany, UK and Turkey are largest growers
 Nordic countries grow steadily Economic conditions and overcapacity challenge Italy, Spain

 Eastern Europe growing despite crisis and has a long way to

go to fulfill EU 2020 goals© OECD/IEA 2012

In Asia Oceania, the key question mark isJapan’s future energy policy

IEEJ:October 2012 All Right Reserved Assumes some nuclear comes back in Japan (less than half 2010)
 Gas-fired generation set to grow, notable to replace missing nuclear But coal increases as well (Australia, Japan, Korea)
 Renewables generation doubles but represents only 6% of totalgeneration© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Japan renewable energy grows strongly withuncertain nuclear and new feed-in tariffs
TWhJapan forecast renewable generation

180160
140
120
100
80
60
40
2002011

2012

2013

2014

2015

2016

2017

Hydropower

Bioenergy

Solar PV

Wind onshore

GeothermalWind offshore Drivers:
 Uncertain nuclear restart New feed-in tariffs
 Good match of solar PV for
shaving peak load

 Challenges:
 Power system fragmentation
 Relatively high capital costs ofrenewable energy
 Location of wind and geothermal
resources far from demand centres© OECD/IEA 2012

But replacing nuclear is almost guaranteed
to boost LNG demand
TWhIEEJ:October 2012 All Right Reserved

300

Nuclear pre Fukushima
250

200150German wind100

EU solar
50

Globalgeothermal0© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

China power demand can accommodate both fast
REN and gas growth
China power demand vs GDP growth

TWh8 000

Y-o-Y
Chg
18%
16%
14%

6 000

12%10%
4 000
8%
6%
2 000

4%2%02005
Demand2008

2011
Demand, Y-o-Y (RHS)

20140%
2017
GDP, Y-o-Y (RHS)

Source:© OECD/IEA 2012

China is the fastest growing region of gas
demandIEEJ:October 2012 All Right Reserved

 Gas demand grows in all sectors, except fertiliser producers
 New sectors emerge such as transport But there remains supply constraints limiting demand China needs to solve issues such as pricing and regulation© OECD/IEA 2012

China accounts for 40% of global growth
in renewable generation
TWhIEEJ:October 2012 All Right Reserved

China forecast renewable generation

1 800
1 500
1 20090060030002011
Hydropower

2012

2013

2014

2015

2016

Wind onshore

Bioenergy

Solar PV

Wind offshore Drivers: Growing energy needs
 Diversification
 Government targets
 Ample low-cost finance Robust manufacturing

2017
CSP

 Challenges:
 Pricing framework
 Priority dispatch Grid upgrades Prohibitive licensing for smallscale systems© OECD/IEA 2012

Want to know more?

IEEJ:October 2012 All Right Reserved The Medium-Term Gas Market Report and Medium-Term Renewable Energy

Market Report 2012 can be purchased online at:www.iea.org© OECD/IEA 2012

IEEJ:October 2012 All Right Reserved

Thank you!

Contact: report@tky.ieej.or.jp
The back issues are available at the following URL
http://eneken.ieej.or.jp/en/whatsnew/JPOIEL.html© OECD/IEA 2012