IEA highlights shifting energy landscape

6th December 2013

By: Jeremy Wakeford

  

Font size: - +

Last month, the International Energy Agency (IEA) released its ‘World Energy Outlook (WEO) 2013’ report. The WEO is a yearly publication that reviews recent developments in energy markets and also projects energy demand, supply and price trends over the coming two decades, based on varying assumptions about energy policies.

The overarching message in this year’s edition is that the energy landscape is changing rapidly.

On the demand side, the IEA says that “the centre of gravity of energy demand is switching decisively to the emerging economies, particularly China, India and the Middle East”. China looms large in the short term and “is about to become the largest oil- importing country”. But the agency expects that India will assume the mantle of chief energy demand growth driver after 2020.

Meanwhile, “the US moves steadily towards meeting all its energy needs from domestic resources by 2035” – thanks in part to improvements in energy efficiency. But some analysts see this energy self- sufficiency claim as overoptimistic.

On the supply side, the IEA contends that “the rise of unconventional oil and gas and of renewables is transforming our understanding of the distribution of the world’s energy resources”.

However, this year’s edition of the WEO is more circumspect about the prospects for ‘light tight oil’ (LTO) – commonly known as shale oil – compared with the 2012 report and the wild hype in the international media. Despite technological enhancements for extracting unconventional and deep-water oil, the IEA says “this does not mean that the world is on the cusp of a new era of oil abundance” and no country can emulate the success of the US in LTO production.

Significantly, the IEA is beginning to emphasise the challenges of oil depletion. It estimates that existing fields past their peak production rates are declining by 6% a year, which means that “of the 790-billion barrels of total production required to meet our projections for demand to 2035, more than half is needed just to offset declining production”.

The agency notes that world oil prices have traded at around $110/bl for nearly three years – an unprecedented spell of high prices – and expects crude prices to continue edging upwards to reach $128/bl (in 2012 money terms) by 2035.

The IEA suggests that a more globally integrated gas market – spurred by institutional reforms and the development of liquefied natural gas infrastructure – could ease some of the energy price pressures facing many countries. The agency sees some potential for expanded unconventional gas in various parts of the world, but warns that “uncertainty remains over the quality of the resources, the costs of their production and, in some countries, public acceptance”.

The agency projects that renewable energy will grow rapidly, led by China. The share of renewables in global electricity generation is seen rising to 30% by 2035, but the intermittency of solar and wind energy poses a major challenge to the power sector.

The WEO states that the energy sector accounts for two-thirds of global greenhouse-gas emissions and is thus critical for future climate change. Despite some positive policy developments aimed at limiting emissions in several major economies, the IEA expects global energy-related carbon dioxide emissions to be 20% higher in 2035, putting the planet on course for a 3.6% temperature rise later this century.

To its credit, the IEA has in recent years delivered a consistent and vital message that the world needs to change its energy course if it is to have any hope of avoiding catastrophic climate change. It also champions energy efficiency improvements and the phasing out of fossil fuel subsidies, which it estimates at $544- billion globally last year. Further, it provides a wealth of energy data that is useful for energy analysts and policymakers.

But the agency’s record on forecasting leaves a lot to be desired, particularly when it comes to global oil supplies and prices. In 2004 – when oil traded at less than $40/bll – it foresaw no peak in conventional oil production before 2030 but, by 2012, it stated that a peak had occurred in 2008.

It also tends to bury important – but politically sensitive – issues, such as peak oil, deep within its voluminous reports, while implicitly encouraging the media to seize on relatively less significant developments, such as the US energy import:export balance.

Further, it is striking that the WEO executive summary makes no mention of the critical issue of energy return on investment (EROI) – neither the declining EROI ratios for global oil and gas nor the low EROI for unconventional hydrocarbons (around 5:1) nor the surprisingly low estimates for solar photovoltaic power (less than 5:1) that have emanated from recent research.

Care therefore needs to be taken when reading the WEO, and particularly the way its messages are portrayed by most media outlets.

Edited by Martin Zhuwakinyu
Creamer Media Senior Deputy Editor

Comments

The functionality you are trying to access is only available to subscribers.

If you are already a subscriber, you can Login Here.

If you are not a subscriber, you can subscribe now, by selecting one of the below options.

For more information or assistance, please contact us at subscriptions@creamermedia.co.za.

Option 1 (equivalent of R125 a month):

Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format

Option 2 (equivalent of R375 a month):

All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.

Already a subscriber?

Forgotten your password?

MAGAZINE & ONLINE

SUBSCRIBE

RESEARCH CHANNEL AFRICA

SUBSCRIBE

CORPORATE PACKAGES

CLICK FOR A QUOTATION