Dr' Fatih Birol

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WORLDENERGYINVESTMENTOUTLOOK

• Dr. Fatih Birol
• Chief Economist
• Head, Economic Analysis Division
• International Energy Agency / OECD

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Global Strategic Challenges

• Security of energy supplies
• Threat of environmental damage caused by energy
  use
• Uneven access of the worlds population to modern
  energy
• Investment in energy-supply infrastructure

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Global Energy Investment Outlook
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Global Oil Investment
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Investment Uncertainties Challenges
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Uncertainties Challenges

• Opportunities and incentives to invest
• Oil prices and rates of return
• Investment regime and risk
• Access to reserves
• Role of NOCs
• Restrictions on foreign investment
• Licensing, fiscal and commercial terms
• Environmental regulations and ethical concerns
• Demand-side impact
• Impact on access to reserves and drilling costs
• Remaining resources and technology
• Iraqi production prospects
• Middle East production and investment policies

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Restricted Middle East Oil Investment Scenario
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Oil Concluding Remarks

• Global investment of 3 trillion needed in
  2001-2030
• Investment more sensitive to decline rate than
  rate of demand growth most investment needed
  just to maintain current production level
• Major uncertainties about opportunities and
  incentives to invest, notably
• Access to reserves and production policies OPEC
  (and Iraq)
• Oil prices
• Production costs and investment risks
• Lower investment in Middle East oil would raise
  global investment needs, lower OPEC revenues
  harm global economy
• Enhanced consumer-producer dialogue to help
  facilitate capital flows

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Natural Gas Investment Outlook
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Gas Investment Uncertainties

• Balance of risk and return price is key
• Complexity of financing very large-scale projects
  especially in developing countries
• Access to reserves and fiscal regime most new
  investment will be private
• Impact of market reforms on investment risk
  long-term contracts will remain necessary

These factors could lead to shortfall in
investment, supply bottlenecks and higher prices
in some cases
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Electricity Investment Outlook
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Average Age of Power Plants in the OECD
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Electricity Investment Uncertaintiesin US

• Investment needs will increase over next 3
  decades
• Demand growth of 1.6
• Many old plants including most nuclear reactors
  will be retired
• Shift to higher unit cost renewables
• Tightening reserve margins
• Gas prices and capital costs of coal stations
  renewables are key drivers of future investment
  in generation
• Wind power will be primary renewable source
  calling for investment in voltage regulation
  network reinforcement
• New capacity investment may be delayed as
  investors wait to see what environmental policies
  including possible climate action are enacted
• Higher investment costs for new capacity may
  delay decommissioning of old plants and raise
  emissions

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Energy Investment Challenge

• Total investment requirements are modest relative
  to world GDP, but challenge differs by region
• Energy and financial resources are sufficient,
  but increasing competition for capital and higher
  risk
• Capital needs are largest for electricity
• Half total energy investment is needed in
  developing countries where financing will be
  hardest
• Production accounts for the bulk of investment
  more than half just to replace old capacity

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Broader Policy Implications Wake-Up Call for
Governments

• Increasing emphasis on creating right enabling
  conditions and lowering barriers to investment
• Less direct intervention as lender or owner
• Governments should monitor and assess the need to
  adjust regulatory reforms in network industries
• Policymakers need to ensure basic principles of
  good governance are applied and respected
  including cost-reflective pricing
• Fiscal and regulatory incentives to develop
  advanced technologies carbon sequestration,
  hydrogen, fuel cells, advanced nuclear reactors,
  etc. could speed their deployment and
  dramatically alter energy investment patterns and
  requirements to 2030