World Energy Outlook
Presented to the International Energy Forum
September 9, 2018
Adam Sieminski
..
.
About KAPSARC
Establishment Mission Governance
By a Ministerial Council Order in 2007, To advance the understanding of Funded by an endowment to foster
to create a non-profit global institution energy challenges and opportunities, objective research, supervised by a
dedicated to independent research into through unbiased, independent, and respected Board of Trustees, and
economics, policy, technology and the high-caliber research for the benefit guided by a globally recognized
environment, across all types of energy. of society. Advisory Council.
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KAPSARC studies topics of global scope with a particular focus on the Kingdom
of Saudi Arabia, the GCC, China and India.
KAPSARC research initiatives
Research Initiatives 2018
1. Productivity 5. Future of Global Oil 8. Electricity Sector
and Economic Markets Transitions
Diversification in
Saudi Arabia
6. Future of Natural Gas Markets 9. Climate Change Policies
Including Potential Saudi and Governance
2. Energy and Economic Linkages to Global Markets
Vulnerability
10. Models, Data and Tools
7. Regional Energy ● KGEMM model for policy
3. Evaluation of Public Markets: GCC Market analysis in the Kingdom
Investment Projects: The Integration and Policy ● KEM model for policy
Opportunity Costs of Oil Drivers of Demand in analysis in the Kingdom
and Gas in Saudi Arabia China and India ● KTAB toolkit - models
● GCC Market Integration of collective decision-
making processes
● Policy Drivers of
4. Future of Transportation ● Energy data portal and
Demand in China
and Fuel Demand web apps
● Policy Drivers of
● Freight Movement Demand in India
● Personal Mobility
KAPSARC QuarterlyIssue 6 37
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KAPSARC today
140 KAPSARC professionals
20 Nationalities
30 % Women
80 Researchers
45 Active projects
50 Journal articles
120 Discussion papers
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Insights into the Energy Future
Economic growth expected to be strong,
especially in the non-OECD nations
Average annual percent change in real GDP by region, 2015–40
Source: EIA, IEO 2018 – Reference Case
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Energy consumption generally grows with GDP
Source: OPEC World Oil Outlook 2017
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Energy use rises for all fuels other than coal
Petroleum and natural gas dominate the outlook – unless technology surprises
World energy consumption by energy source
quadrillion Btu
Source: Energy Information Administration, International Energy Outlook 2018 – Reference Case
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Electricity demand dominates growth
Electricity makes up 40% of the rise in final consumption to 2040 – the same share of growth
that oil took for the last 25 years; China and India lead the regional pattern
Electricity demand growth by selected region
Source: International Energy Agency, World Energy Outlook 2017
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Renewables and natural gas provide much of the growth
in electricity generation
World net electricity generation by fuel Share of net electricity generation
trillion kilowatthours percent
History Projections 100%
40 liquids
90% nuclear
35
80%
30 natural gas
70%
25 60%
20 50%
coal
40%
15
30%
10
20% renewables
5 10%
0 0%
2010 2015 2020 2025 2030 2035 2040 2010 2015 2020 2025 2030 2035 2040
Source: EIA, IEO 2017 - Reference Case
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Global oil demand forecasts vary widely
Uncertainties in policy choices, economic outlook, technology shifts, and resource estimates
lead to large variations in oil demand forecasts
120 EIA (Low Oil Price) IEEJ (Ref Case)
EIA(Ref)
110 OPEC (Ref Case)
EIA(High Oil Price)
100 BP
IEA(New Policy)
Oil Demand (MMbbl/d)
90
Shell (Sky)
80
IEA (Sustainbale Dev.)
70
60
50
40 Natural Decline from
Existing Fields and Fields
30 under Development
1990 1995 2000 2005 2010 2016 2020 2025 2030 2035 2040
Source: KAPSARC based on IEA, OPEC, IEEJ, EIA, BP, Shell, and Rystad data
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Era of oil is not yet over
If tight oil plateaus (2020s) and non-OPEC production growth as a whole slows, reliance on the
Middle East grows and the need for large-scale oil investment continues, even with electric cars
Change in global oil demand by sector
Source: International Energy Agency, World Energy Outlook 2017
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Electric car fleet – the view depends on what you include
Electric car fleet – IEA View Electric car fleet – BP View
…it looks like (and is) huge growth …don’t forget the conventional fleet
Billion vehicles
Source: International Energy Agency, World Energy Outlook 2017
Source: BP Energy Outlook 2018; ICE vehicles includes hybrid
vehicles which do not plug into the powergrid
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Oil’s role in the transition to a lower carbon economy
Transportation Factors Power Generation Industrial Factors
§ Aviation demand growing § Electricity demand § Demand for
growing indefinitely with petrochemicals is forecast
§ Shipping and heavy transport population and prosperity
exploring LNG and H2 for 3% annual growth led
§ Renewables share by emerging markets
§ Passenger vehicles increasing but seasonality § Integration of refining and
EV penetration growing but and storage are major petrochemicals is rising on
may not reduce oil demand hurdles costs, efficiency, flexibility,
significantly and security
§ Natural gas offers
Improvements in the fuel additional flexibility but oil
efficiency of (ICE) and hybrid § High level of interest from
still attractive relative to Japan to import H2 made
technologies driving down
coal from hydrocarbons
demand
Source: KAPSARC
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Insights Into Oil Inventories and
Global Oil Balances
Key messages from KAPSARC’s inventory assessment
Energy security paradigm is changing from
physical availability to price volatility
Level of inventories and net flows alone do not
indicate whether oil markets are rebalanced
§ ‘Return to rolling 5 year average’ too simplistic. Source: U.S. Energy Information Administration
§ The function of inventories, not just their level, is
changing
‘Velocity’ of oil matters – the four basic inventory
states defined by combinations of inflows and
outflows
KAPSARC developing ‘Stability of Outlook’ indicators
§ Equilibrium levels of capital expenditure ($/bbl/d of
capacity)
§ Mid-merit storage profitability relative to other
storage options
§ ‘Voice of the trader’ Source: IHS Markit and Rystad Energy
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The $200b annual value of OPEC’s spare capacity to
the global economy
The counterfactual scenario shown below is based on estimates of the monthly oil prices that
would have prevailed from 2005 to 2014 had OPEC not used its spare capacity to offset shocks
OPEC’s spare capacity reduces oil price volatility
Source: OPEC’s impact on oil price volatility: The role of spare capacity; The Energy Journal, Volume 39, Number 2, April 2018, pp. 173-196.
Axel Pierru (KAPSARC), James Smith (SMU), and Tamim Zamrik (KAPSARC)
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