| Editor's
Note:
The
Saudi-U.S. Relations Information Service
(SUSRIS) reported on a conference, Future
of Global Oil Supply: Saudi Arabia, hosted
at the Center for Strategic and International
Studies on Feb. 24, 2004.
A summary of the presentation by Saudi
Aramco officials began with an overview of world
energy outlook:
|
"World
energy demand is expected to increase at
an annual rate of 1% to 2% over the next
15 years, reaching an annual demand of
107 million barrels per day by 2020,
partly as an anticipated consequence of
growth in China, India and other South
East Asian economies.." |
|
The
International
Energy Outlook 2004 (IEO2004), released by the
U.S.
Energy Information Administration on April 14,
2004, provides worldwide energy growth
forecasting through 2025.
It is an additional resource for
understanding the importance of Saudi Arabia's
role in meeting global energy demand now and in
the future.
This
SUSRIS Item of Interest provides highlights from
the IEO2004 report and links to the full report
and related materials.
International
Energy Outlook 2004
Highlights
 World
energy consumption is projected to increase by
54 percent from 2001 to 2025. Much of the growth
in worldwide energy use is expected in the
developing world in the IEO2004 reference case
forecast.
In the International
Energy Outlook 2004 (IEO2004)
reference case, world marketed energy
consumption is projected to increase by 54
percent over the 24-year forecast horizon from
2001 to 2025. Worldwide, total energy use is
projected to grow from 404 quadrillion British
thermal units (Btu) in 2001 to 623 quadrillion
Btu in 2025 (Figure 2).
The IEO2004
reference case outlook shows strongest growth in
energy consumption among the developing nations
of the world, as it has in past editions of this
report (Figure 3). The fastest growth is
projected for the nations of developing Asia,
including China and India, where robust economic
growth accompanies the increase in energy
consumption over the forecast period. Gross
domestic product (GDP) in developing Asia is
expected to expand at an average annual rate of
5.1 percent, compared with 3.0 percent per year
for the world as a whole. With such strong
growth in GDP, demand for energy in developing
Asia doubles over the forecast, accounting for
40 percent of the total projected increment in
world energy consumption and 70 percent of the
increment for the developing world alone.
In contrast to
the developing world, slower growth in energy
demand is projected for the industrialized
world, averaging 1.2 percent per year over the
forecast period. Generally, the nations of the
industrialized world can be characterized as
mature energy consumers with comparatively slow
population growth. Gains in energy efficiency
and movement away from energy-intensive
manufacturing to service industries result in
the lower growth in energy consumption. In the
transitional economies of Eastern Europe and the
former Soviet Union (EE/FSU) energy demand is
projected to grow by 1.5 percent per year in the
IEO2004 reference case. Slow or declining
population growth in this region, combined with
strong projected gains in energy efficiency as
old, inefficient equipment is replaced, leads to
the projection of more modest growth in energy
use than in the developing world.
World oil prices
rose by almost $10 per barrel over the course of
2002 and remained high throughout 2003. Prices
were influenced by political unrest in Venezuela
and Nigeria, the war in Iraq, and the continued
discipline of producers in the Organization of
Petroleum Exporting Countries (OPEC) in adhering
to production cutbacks. The IEO2004
reference case expects little downward movement
in world oil prices in 2004, given low oil
inventories, a surge in developing Asia's oil
demand, and the regional uncertainty that
surrounds the situation in Iraq. The world oil
price path in the reference case is virtually
the same as in last year's forecast, with prices
projected to moderate after 2004 and then rise
slowly to 2025 (Figure 4). World oil prices are
projected to reach $27 per barrel in 2002
dollars ($51 per barrel in nominal dollars) at
the end of the forecast period. These prices are
average annual prices and exclude the volatility
that may occur as a result of weather variations
or possible disruptions in supply.
Outlook for
World Energy Demand
 The
IEO2004 reference case projects increased
consumption of all primary energy sources over
the 2001-2025 period (Figure 5). Fossil fuel
prices for electricity production are projected
to remain low relative to the costs of nuclear
power and renewable energy sources; as a result,
non-fossil fuels are not expected to be
economically competitive with fossil fuels over
the forecast. The outlook for fossil fuels
could, however, be altered by government
policies or programs, such as environmental laws
aimed at limiting or reducing pollutants from
the combustion of fossil fuel consumption and
encouraging the use of non-fossil fuels. In the
absence of such laws, consumption of oil,
natural gas, and coal is expected to supply most
of the primary energy needed to meet the
projected demand for end-use consumption.
Oil
is expected to remain the dominant energy source
worldwide through 2025. In the IEO2004
reference case, world oil demand increases by
1.9 percent annually over the 24-year projection
period, from 77 million barrels per day in 2001
to 121 million barrels per day in 2025. Much of
the increase in oil demand is projected to occur
in the United States and in developing Asia. The
United States, China, and the other nations of
developing Asia account for nearly 60 percent of
the increment in world oil demand in the IEO2004
reference case.
The
projected increment in worldwide oil use would
require an increment to world productive
capacity of more than 44 million barrels per day
over current levels. Although OPEC producers are
expected to be the major suppliers of increased
production requirements, non-OPEC supply is
expected to remain competitive, with major
increments in supply coming from offshore
resources, especially in the Caspian Basin,
Latin America, and deepwater West Africa.
 Over
the past several decades, oil has been the
world's foremost source of primary energy
consumption, and it is expected to remain in
that position throughout the 2001 to 2025
period. Oil's share of world energy is
maintained throughout the forecast, at 39
percent, despite expectations that countries in
many parts of the world will be switching from
oil to natural gas and other fuels for their
electricity generation (Figure 6). Robust growth
in transportation energy use-overwhelmingly
fueled by petroleum products-is expected to
continue over the 24-year forecast period. As a
result, oil is projected to retain its
predominance in the global energy mix,
notwithstanding increases in the penetration of
new technologies such as hydrogen-fueled
vehicles.
Although
the nations of the industrialized world continue
to consume more of the world's petroleum
products than do those of the developing world,
the gap is projected to narrow considerably over
the forecast period. In 2001, developing nations
consumed about two-thirds (64 percent) as much
oil as the industrialized nations; by 2025 they
are expected to consume 94 percent as much as
the industrialized nations. In the
industrialized world, increases in oil use are
expected mainly in the transportation sector,
where there are few economically competitive
alternatives at present. In the developing
world, oil demand is projected to grow in all
end-use sectors. As the energy infrastructures
of emerging economies improve, people are
turning from traditional fuels for residential
and commercial uses-such as wood burning for
heating and cooking-to diesel-fired electricity,
and industrial demand for petrochemical
feedstocks is increasing.
 The
fastest growing source of primary energy in the IEO2004
reference case is natural gas. Over the
2001-2025 forecast period, consumption of
natural gas is projected to increase by 67
percent in the reference case, to 151 trillion
cubic feet in 2025. The projection for natural
gas consumption is lower than in last year's
report, which showed worldwide demand for gas at
176 trillion cubic feet in 2025 (Figure 7). The
lower forecast this year is the result of
slightly lower assumptions for worldwide
economic growth, a slower projected decline in
nuclear power generation (which competes with
natural gas in the power sector), and concerns
about the long-term ability of natural gas
producers to bring sufficient resources to
market at prices competitive with those of other
fuels. Natural gas use is expected to equal coal
use (on a Btu basis) by 2010, and by 2025 it is
expected to exceed coal use by 12 percent
(Figure 5).
Natural
gas is expected to remain an important supply
source for new electric power generation in the
future. It is seen as the desired option for
electric power, given its relative efficiency
and environmental advantages in comparison with
other fossil energy sources. Natural gas burns
more cleanly than either coal or oil, making it
a more attractive choice for countries seeking
to reduce greenhouse gas emissions.
The
growing importance of natural gas in the
electric power sector is more pronounced in the
industrialized and EE/FSU regions than in the
developing world. In the industrialized nations
and the EE/FSU, for the most part the natural
gas infrastructure is considered mature, and the
gas share of total electricity generation is
projected to grow from 20 percent in 2001 to 30
percent in 2025. In the developing world, the
natural gas infrastructure has not yet been as
widely established. As a result, the projected
increase in the natural gas share of total
generation in the developing world is smaller-
from 14 percent in 2001 to 17 percent in 2025.
Coal
remains an important fuel in the world's
electricity markets and is expected to continue
to dominate energy markets in developing Asia.
World coal use has been in a period of generally
slow growth since the 1980s, and that trend is
expected to continue through the projection
period. With the projected growth in coal
consumption averaging 1.5 percent per year
through 2025, coal's share of total world energy
consumption declines slightly in the IEO2004
reference case forecast, from 24 percent in 2001
to 23 percent in 2025.
Coal
use is projected to increase in all regions
except for Western Europe and the EE/FSU
(excluding Russia), where coal is expected to be
displaced by natural gas and, in the case of
France, nuclear power for electric power
generation. Large increments in coal use are
projected for developing Asia, especially in
China and India. As very large countries in
terms of both population and land mass, and with
ample domestic coal resources, China and India
are projected to account for 67 percent of the
total increase in coal use worldwide (on a Btu
basis).
Currently,
of the coal consumed worldwide, 64 percent is
used for electricity generation; and in almost
every region, power generation accounts for most
of the projected growth in coal consumption.
Significant amounts of coal are also used for
steel production. Where coal is used in the
industrial, residential, and commercial sectors,
other energy sources-primarily, natural gas-are
expected to gain market share. One exception is
China. With China's abundant coal reserves and
limited access to other sources of energy, coal
continues to be the most widely used fuel in the
country's rapidly growing industrial sector.
Consumption of coking coal is projected to
decline slightly in most regions of the world as
a result of technological advances in
steelmaking, increasing output from electric arc
furnaces, and continuing replacement of steel by
other materials in end-use applications.
Over
the projection period, worldwide net electricity
consumption is projected to nearly double
between 2001 and 2025, from 13,290 billion
kilowatthours to 23,072 billion kilowatthours.
Strong growth in electricity use is expected in
the countries of the developing world, where
electricity demand increases by an average of
3.5 percent per year in the IEO2004 reference
case, compared with a projected average increase
of 2.3 percent per year worldwide. Robust
economic growth in many of the developing
nations is expected to boost demand for
electricity to run newly purchased home
appliances for air conditioning, cooking, space
and water heating, and refrigeration. For the
industrialized world and the transitional
economies of the EE/FSU, where electricity
markets are more mature, slower average growth
rates of 1.6 percent per year and 2.0 percent
per year, respectively, are projected.
Worldwide,
electricity generation from nuclear power is
projected to increase from 2,521 billion
kilowatthours in 2001 to 3,032 billion
kilowatthours in 2020, before declining slightly
to 2,906 billion in 2025. The nuclear power
forecast is higher than in last year's outlook,
because the prospects for nuclear power have
been reassessed in light of higher capacity
utilization rates reported for many
existing nuclear facilities and the expectation
that fewer retirements of existing plants will
occur than previously projected. Extensions of
operating licenses (or the equivalent) for
nuclear power plants are expected to be granted
among the countries of the industrialized world,
slowing the decline in nuclear generation. In
the United States, natural gas prices are
projected to be higher than in previous
forecasts, and as a result no U.S. nuclear power
units are expected to be retired in the IEO2004
reference case.
The
largest increase in nuclear generation is
expected for the developing world, where
consumption of electricity from nuclear power
increases by an average of 4.1 percent per year
from 2001 to 2025 in the reference case. In
particular, developing Asia is expected to see
the greatest increase in worldwide nuclear
generating capacity, accounting for 96 percent
of the total projected increment in nuclear
capacity in the developing world. Of the 44
gigawatts of additional installed nuclear
generating capacity projected for developing
Asia, 19 gigawatts is projected for China, 15
gigawatts for South Korea, and 6 gigawatts for
India.
In
the IEO2004 reference case, moderate
growth in the world's consumption of
hydroelectricity and other renewable energy
resources is projected over the next 24 years,
averaging 1.9 percent per year in the IEO2004
reference case. Much of the projected growth in
renewable generation is expected to result from
the completion of large hydroelectric facilities
in developing countries, particularly in
developing Asia. China, India, and other
developing Asian countries are constructing or
planning new, large-scale hydroelectric
facilities. Among the industrialized nations,
only Canada has plans to construct any sizable
hydroelectric projects over the forecast period.
Much of the expected increment in renewable
energy consumption in the industrialized world
is projected to be nonhydropower renewables,
including particularly wind energy in Western
Europe and the United States. In addition,
biomass and geothermal energy sources are
expected to grow rapidly in the United States.
Source: International
Energy Outlook 2004 - Highlights
Related
Items:
The
full HTML version of the International Energy
Outlook 2004 Report will be available by April
30, 2004.
Click
below for the Highlights section of the
International Energy Outlook 2004, which is
available in both HTML and PDF formats.
Click
here for the full International
Energy Outlook 2004 Report in PDF format.
Click
here for the archived International
Energy Outlook 2003 Report.
 Future
of Global Oil Supply: Saudi Arabia
A
Conference Hosted at the Center for
Strategic and International Studies on
Feb. 24, 2004
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