The World Energy Outlook Report 2013: A Review of the Recalibration of Global Energy Demand Over the Next 20 Years

    3 December 2013

    The International Energy Agency (IEA) World Energy Outlook Report 2013 (the “Report”), which was published last week, projects that global energy demand is likely to increase by one third by 2035 with low carbon energy sources accounting for 40 percent of the growth in primary energy demand.

    The Report suggests that the share of fossil fuel in the world’s energy mix will fall by some six percent over the next 22 years to 76 percent, but recognizes that government policies will play the crucial role in defining the energy mix. The President’s Action Plan on Climate Change unveiled in June of this year, and the U.S. Military’s NET ZERO initiatives, will therefore take on even more prominence as the world recalibrates its energy requirements.  The Report also echoes both the World Bank’s Turning Down the Heat Report 2012, which indicated that the world was on a four percent warming trend and the recent IPCC 5TH Assessment Report.

    Some of the Reports other projections include the following.

    THE ROLE OF DEVELOPING ECONOMIES

    The centre of gravity of global energy demand will continue to move decisively towards emerging economies – they will account for more than 90 percent of net energy demand growth to 2035. Energy demand growth in Asia is to be led by China this decade, but shifts towards India and, to a lesser extent, Southeast Asia after 2025. The Middle East emerges as a major energy consumer, with its gas demand growing by more than the entire gas demand of the OECD: the Middle East is the second-largest gas consumer by 2020 and third-largest oil consumer by 2030, redefining its role in energy markets.

    OIL PRICING AND TECHNOLOGY

    Non-OPEC supply plays the major role in meeting net oil demand growth this decade, but OPEC plays a far greater role after 2020. Technology will unlock new types of oil resources and improve recovery rates in existing fields, pushing up estimates of the amount of oil that remains to be produced. But this does not mean that the world is on the cusp of a new era of oil abundance. An oil price that rises steadily to $128 per barrel (in year-2012 dollars) in 2035 will support the development of these new resources.

    THE NATURAL GAS MARKET

    The market for natural gas will gradually become more global, with potential implications for pricing. Gas demand will rise by almost half by 2035. New sources of gas, both conventional and unconventional, will bring greater diversity to global supply. Changes in the cast of major LNG suppliers will also create new linkages between regional gas markets, notably between those of North America and the Asia-Pacific, narrowing to a degree the wide regional gas price differentials that exist today. In a Gas Price Convergence Case, convergence between regional gas prices will prove to be more rapid, pushing prices down, gas demand up (by 107 bcm in 2035) and lowering gas import bills.

    GREENHOUSE GAS AND WORLD TEMPERATUREs RISE

    As the source of two-thirds of global greenhouse-gas emissions, the energy sector will be pivotal in determining whether or not climate change goals are achieved. Energy-related carbon-dioxide emissions rise will leave the world on track for a long-term average temperature increase of 3.6 °C.

    OTHER PROJECTIONS and observations INCLUDE:

    • Achieving universal access to modern energy remains imperative; fossil-fuel subsidies will continue to distort energy markets.
    • Large differences in regional energy prices have sparked a debate about the role of energy in unleashing or frustrating economic growth.
    • Natural gas price differentials narrow in the IEA’s central scenario, though gas and industrial electricity prices in the European Union and Japan will remain around twice the level of the United States in 2035.
    • Rising energy prices across many regions have led to major shifts in energy and overall trade balances, as well as to energy expenditures taking a growing share of household income.
    • Estimates of ultimately recoverable resources of oil continue to increase as technologies unlock types of resources, such as light tight oil, that were not considered recoverable only a few years ago.
    • Based on analysis of more than 1 600 fields, the IEA estimate the observed decline rate for conventional fields that have passed their peak is around six percent per year.
    • Oil use will be increasingly concentrated in just two sectors: transport and petrochemicals.
    • The global refining sector is set for turbulent times over the coming decades as the industry is re-shaped by declining oil demand in OECD markets alongside rapid growth in demand in non-OECD Asia and the Middle East.
    • World electricity demand will increase by more than two-thirds over the period 2011-2035.
    • Fossil fuels will continue to dominate the power sector, although their share of generation will decline from 68 percent in 2011 to 57 percent in 2035.
    • The share of renewables in total power generation will rise from 20 percent in 2011 to 31 percent in 2035, as they supply nearly half of the growth in global electricity generation.
    • Global subsidies to renewables reached $101 billion in 2012, up 11 percent on 2011, and need to expand to $220 billion in 2035 to support the level of deployment in the New Policies Scenario
    • Biofuels will triple, rising from 1.3 million barrels of oil equivalent per day in 2035, by which time it represents eight percent of road-transport fuel demand.
    • Global investment in the power sector will amount to $17 trillion through to 2035, with more than 40 percent in transmission and distribution networks.