2003 INSIGHTS WORLD ENERGY INVESTMENT OUTLOOK INTERNATIONAL ENERGY AGENCY
2003 INSIGHTS
WORLDENERGYINVESTMENTOUTLOOK
INTERNATIONALENERGYAGENCY
Global Strategic Challenges
� Security of energy supplies
� Threat of environmental damage caused byenergy use
� Uneven access of the world’s population tomodern energy
� Investment in energy-supply infrastructure
Global Energy Global Energy
Investment OutlookInvestment Outlook
World Energy Investment
2001-2030
Total investment: 16 trillion dollars
Oil 19%
Electricity60%
Coal 2%Gas 19%
OtherRefining
E&D 72%
13%15%Other
Refining
E&D 72%
13%15%
E&D
LNG Chain
T&D andStorage
55%
37%
8%
E&D
LNG Chain
T&D andStorage
55%
37%
8%
Powergeneration
T&D54%
46% Powergeneration
T&D54%
46%
Mining
Shippingand ports
12%
88% Mining
Shippingand ports
12%
88%
Production accounts for the majority of investment in the supplychain – except for electricity
Energy Investment by Region 2001-2030
0
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
OECD
North
America
China OECD
Europe
Other Asia Africa Russia Middle East OECD
Pacific
Other Latin
America
India Other
transition
economies
Brazil
cum
ulat
ive
inve
stm
ent(
billi
ondo
llars
)
0
5
10
15
20 sharein
globalinvestment(%
)
OECD Europe will account for around 15% of global energyinvestment needs of $16 trillion
Energy Investment Share in GDP2001-2030
0 1 2 3 4 5 6
OECD
Latin America
Other Asia
India
China
Middle East
Other transition economies
Africa
Russia
per cent
World average
The share of energy investment in the economy is much higher indeveloping countries and the transition economies than in the OECD
Global Oil Investment Global Oil Investment
World Oil Production
0
20
40
60
80
100
120
1980 1990 2000 2010 2020 2030
mb/
d
OPEC - Middle East OPEC - OtherNon-OPEC Non-conventional oil
OPEC countries – mainly in Middle East – will account for almostall the increase in world oil production to 2030
World Oil Investment
0
200
400
600
800
1,000
1,200
2001-2010 2011-2020 2021-2030
billi
ondo
llars
Exploration & development Non-conventional oil GTLRefineries Tankers Pipelines
Upstream will continue to dominate oil investment, but the sharesof tankers and GTL increase over projection period
Oil Investment by Region
Most investment outside the OECD will be needed in the MiddleEast and the transition economies – mainly in the upstream
0 5 10 15 20 25 30 35
OECD
Middle East
Transition economies
Africa
Latin America
Asia
billion dollars per year
Exploration & development Non-conventional oil Refineries
Oil Production and Capacity
Additions
0
50
100
150
200
250
2000 2030 2001-2030
mb/
d
Production Expansion to meet demand growth Replacement to maintain capacity
The bulk of additions to crude oil production capacity will beneeded simply to maintain capacity
Investment Investment
Uncertainties & Uncertainties &
ChallengesChallenges
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
Global Upstream Oil and Gas
Investment & Crude Oil Price
0
50
100
150
1985
1986
1987
1988
1989
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
billi
ondo
llars
0
5
10
15
20
25
30
35
$/barrel
Investment WTI price (right axis)
Upstream investment is sensitive – with a lag of a year or so – tomovements in oil prices
Access to Oil Reserves
Nationalcompanies only(Saudi Arabia,
Kuwait, Mexico)35%
Limited access -National
companies22%
Productionsharing
12%
Concession21%
Iraq10%
1,032 billion barrels
Access to much of the world’s remaining oil reserves is restricted
Iraq Oil Investment Scenarios
0
10
20
30
40
50
60
2 3 4 5 6 7 8 9 10
production (mb/d)
cum
ulat
ive
inve
stm
ent(
billi
ondo
llars
Restoration of production capacity Slow production expansion
Reference Scenario Rapid production expansion
2010
2010
2010
2020 2020
20202030
2030
2030
0
10
20
30
40
50
60
2 3 4 5 6 7 8 9 10
production (mb/d)
cum
ulat
ive
inve
stm
ent(
billi
ondo
llars
Restoration of production capacity Slow production expansion
Reference Scenario Rapid production expansion
2010
2010
2010
2020 2020
20202030
2030
2030
Iraq will need to invest around $5 billion to raise oil productioncapacity to almost 4mb/d by 2010 in the Reference Scenario
Restricted Middle East Restricted Middle East
Oil Investment Oil Investment
ScenarioScenario
Restricted Middle East
Oil Investment Scenario
OPEC Middle East Share in Global Oil Supply
0
10
20
30
40
50
1970 1980 1990 2000 2010 2020 2030
perc
ent
Restricted Investment Scenario Reference Scenario
OPEC Middle East’s share of global oil production is assumed toremain flat at under 30% in Restricted Investment Scenario
OPEC Oil Revenues, 2001- 2030
Restricted Investment vs Reference Scenario
6,000
8,000
10,000
12,000
OPEC OPEC Middle East
billi
ondo
llars
Reference Scenario Restricted Investment Scenario
Oil revenues in OPEC Middle East producers are substantiallylower in the Restricted Investment Scenario
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 maintaincurrent production level
� Major uncertainties about opportunities and incentives toinvest, 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 globalinvestment needs, lower OPEC revenues & harm globaleconomy
� Enhanced consumer-producer dialogue to help facilitatecapital flows
Natural Gas Natural Gas
Investment OutlookInvestment Outlook
Gas E&D Investment & Incremental
Production
2001 - 2030
Middle East8%
OECD48%
Othe20%
Transitioneconomies
15%
Africa9%
Africa17%
MiddleEast23%
Other32%
OECD10%
Transitioneconomies
18%
E&D Investment Incremental Production
$ 1.7 trillion 2,767 bcm
Middle East8%
OECD48%
Othe20%
Transitioneconomies
15%
Africa9%
Africa17%
MiddleEast23%
Other32%
OECD10%
Transitioneconomies
18%
E&D Investment Incremental Production
$ 1.7 trillion 2,767 bcm
OECD countries will account for almost half total upstream gasinvestment, but only 10% of additional production
Net Inter-regional Trade
& Production
0
600
1,200
1,800
2,400
3,000
3,600
4,200
4,800
5,400
2001 2010 2020 2030
bcm
Production LNG trade Pipeline trade
A growing share of gas will be traded between regions, much of itin the form of LNG
LNG Shipping Fleet
0
50
100
150
200
250
300
350
400
in operation (2001) additions 2002-2030
num
bero
fshi
ps
Liquefaction project developers LNG buyersOil & gas companies Ship ownersProjected
On orderin 2001}On orderin 2001}
A 6-fold increase in LNG trade between 2002 and 2030 will call formassive investment in new carriers
Indicative LNG Unit Capital Cost
0
100
200
300
400
500
600
700
Mid-1990s 2002 2010 2030
dolla
rspe
rton
neof
capa
city
Liquefaction Shipping Regasification
The recent dramatic fall in LNG costs is expected to continue
Levelised Cost of LNG Imports
into US Gulf Coast
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Trinidad Nigeria Venezuela Egypt Qatar
$/M
Btu
Upstream Liquefaction Shipping Regasification
Henry-Hub average price, 1998-2002
0.00
0.50
1.00
1.50
2.00
2.50
3.00
3.50
Trinidad Nigeria Venezuela Egypt Qatar
$/M
Btu
Upstream Liquefaction Shipping Regasification
Henry-Hub average price, 1998-2002
Lower capital costs are making LNG imports more economic – andmore competitive with domestic supply projects
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 newinvestment will be private
� Impact of market reforms on investment risk – long-termcontracts will remain necessary
These factors could lead to shortfall in investment, supplybottlenecks and higher prices in some cases
Electricity Investment Electricity Investment
OutlookOutlook
Electricity Sector Investment by
Region 2001-2030
China will need more electricity investment than any othercountry or region
0
500
1,000
1,500
2,000
2,500
China OtherAsia
LatinAmerica
Africa MiddleEast
US andCanada
EuropeanUnion
OECDPacific
OtherOECD
Russia Rest ofTE
billi
ondo
llars
0
500
1,000
1,500
2,000
2,500
China OtherAsia
LatinAmerica
Africa MiddleEast
US andCanada
EuropeanUnion
OECDPacific
OtherOECD
Russia Rest ofTE
billi
ondo
llars
Average Age of Power Plants Average Age of Power Plants
in the OECDin the OECD
0
200
400
600
800
1,000
<20 years >20 years
GW
Fossil Nuclear
U.S. Privately Owned Utilities
Profit Margin
0%
2%
4%
6%
8%
10%
12%
1989 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000
Profit margins have fallen sharply in recent years
Electricity Investment
Uncertainties
in 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 & renewablesare key drivers of future investment in generation
� Wind power will be primary renewable source – calling forinvestment in voltage regulation & network reinforcement
� New capacity investment may be delayed as investors waitto see what environmental policies – including possibleclimate action – are enacted
� Higher investment costs for new capacity may delaydecommissioning of old plants and raise emissions
0
200
400
600
800
1,000
1,200
1971-1980 1981-1990 1991-2000 2001-2010 2011-2020 2021-2030
GW
Power Generation Capacity
Additions in Developing Countries1971-2000
Developing countries will need to add increasing amounts of newgenerating capacity over the next three decades
Electricity Investment as Share of
GDP
0.0%
0.5%
1.0%
1.5%
2.0%
2.5%
3.0%
OECD China India Indonesia Russia Brazil Africa
1991-2000 2001-2010
Medium-term electricity sector investment needs will increaserelative to GDP in almost all non-OECD regions
Power Sector Private Investment in
Developing Countries
0
5
10
15
20
25
30
35
40
45
50
1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002
billi
ondo
llars
Developing countries will need to reverse the slump in privatecapital flows if projected investment is to be forthcoming
Energy Investment Challenge
� Total investment requirements are modest relative toworld GDP, but challenge differs by region
� Energy and financial resources are sufficient, butincreasing competition for capital and higher risk
� Capital needs are largest for electricity
� Half total energy investment is needed in developingcountries – where financing will be hardest
� Production accounts for the bulk of investment – morethan half just to replace old capacity
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 advancedtechnologies – carbon sequestration, hydrogen, fuel cells,advanced nuclear reactors, etc. – could speed theirdeployment and dramatically alter energy investmentpatterns and requirements to 2030