Atlantic Council
2020 Global Energy Forum
Setting the Scene: Energy Security, Energy Access, and Clean Air: Meeting the Challenges
Speaker:
Fatih Birol,
Executive Director,
International Energy Agency
Location: Abu Dhabi, United Arab Emirates
Time: 10:15 a.m. Local
Date: Saturday, January 11, 2020
FATIH BIROL: Excellencies, dear colleagues, a very good morning to all of you. It’s a great pleasure and privilege to be here at the Atlantic Council meeting in Abu Dhabi. It is getting stronger and stronger, so congratulations to Fred and all the colleagues contributing, but a special congratulation to United Arab Emirates, not for organizing meetings – organizing meetings is very good; we organize meeting ourselves – but realizing, in today’s world, a major and very difficult project, which is the nuclear power project. It’s a big achievement. I can tell you, as somebody who works on all the fuels, all the technologies, with almost all the countries around the world, all the governments, this is a major achievement. I know the challenges – economic, technical, and other challenges – it’s a big success so congratulations to our colleagues in Emirates.
What I thought, ladies and gentlemen, as soon as my slides come, I will try to give you a couple of perspectives – only a few – about, as you discussed, setting the global energy scene 2020. Let me start with the context. When I look at the energy world today, ladies and gentlemen, if I have to characterize with one word only, this is for me disparities. I see it as three major and deep disparities in the global energy picture.
Number one, in the oil markets. Last year when we met here in January, February, global – the international oil prices were about $62, $63, which is more or less what we have today, which was more or less in the same price band throughout the year. And I wanted to remind you a few things what happened in the year 2019. Venezuela, one of the largest oil producer of the world, producing significant amount of oil 2019 beginning, now almost collapsed the production. Iran – as a result of sanctions, Iran exports beginning of the last year, was 2.8 million barrels per day; today only 0.3 million barrels per day.
Attack on Saudi Arabia – Saudi oil facilities – recent killing of the Iranian general – despite all of this, we have seen there is a calmness in the oil markets, and prices remain where they are. I don’t even count the unrest in Libya, challenges in Nigeria, Iraq, and elsewhere.
Many of you know much better – there are many, many distinguished colleagues here – if only one of them, the events I mentioned, would have happened in the past, we would have seen prices going up substantially. This is something that we are to take note, and this is something, I would say, a major disparity between the geopolitical tensions and uncertainties around the world and the calmness in the oil markets.
Second one, climate change. In 2019, we have heard so many international summit on climate change; many, many governments setting targets, urging their citizens, and making very strong pledges. Scientists tell us day by day the risks that humanity is facing, and we are seeing several extreme weather events, as Fred mentioned in the beginning.
On one hand, we have these evidences and political statements. On the other hand, global CO2 emissions last year reached a historical high – completely two different perspectives. And I see that there is a big, big, big risk in the climate change debate. I think the risk is not looking at the numbers carefully; looking at the numbers that we like to see rather than the entire numbers. I want to give you one of them, as I believe there will be a lot of discussion on that: what is happening in the car industry. When you open the newspapers around the world, anything about climate change – (inaudible) – to electric cars; electric cars pushing this record, putting that record, which is very important in the fight against climate change – electric cars. And today, we have about six million electric cars in the world. And when you look at the newspapers or look at the TVs, you would believe electric cars is changing the entire auto manufacturing industry, which they are, but when you look at the size of the cars – which we do at IEA – the champion of the car industry in the last few years was not necessarily electric cars; it was the SUVs, by far – by far.
In the year 2010, only 18 percent of all the cars sold in the world were SUVs – 18 percent SUVs of all the cars, 2010 – and today, 43 percent of all the cars sold in the world are SUVs. Almost every second car sold in the world is a SUV. And one SUV emits 25 percent, on average, more emissions than a normal car – internal combustion engine. So electric cars is good, but when you look at the numbers, today SUVs are the second-largest driver of CO2 emissions growth after the power plants, putting the things in this way. So therefore, I want – what I wanted to say is that we see a disparity between the statements, goals, scientists’ goals, and what is happening in the real life.
The third disparity I see is on the side of the access to electricity. The United Nations, all the world leaders consider the access to electricity as a human right, but today, still 850 million people have no access to electricity.
It was a(n) issue of India and Africa, but India – I am just coming this morning from India. India is fixing the problem – already fixed the problem. Now the electricity access issue is almost exclusively a sub-Saharan Africa issue, which for me is a critical one.
There are some – of course, some good news: cost reductions in renewables, solar wind – excellent – and we are seeing that the digitalization of our energy systems are changing a lot of dynamics, both on the consumption and production side. It is very good the renewable side penetrating, but we still need to support them, as we are doing in many countries represented in this meeting.
And looking at the challenges we are facing – in fact, Fred mentioned this very well, as well – the climate pressures, economic pressures, geopolitical pressures, and energy security – I will comment in a moment; I think I want to talk about energy security – means that the decision makers, policy makers are facing very, very tough choices which could have long-lasting implications.
Now, one word that all of us are using more and more: energy transitions. In fact, ladies and gentlemen, energy transitions are already happening and has happened. The issue is in which direction at which speed. Before looking at the future, I would like to show a bit the past.
A hundred years ago, our energy system was dominated by coal and wood. Coal – after the industrial revolution, you remember the books of Charles Dickens, Emile Zola, the industrial revolution, and coal and wood, they were the dominant ones. Then after that, 1950, we have seen U.S. and Venezuela – thanks to them, oil is becoming part of our energy mix – more and more oil. And at that time Venezuela – by the year 1950, Venezuela was producing oil two times they are producing today, just to put it in context.
Then 1974, Middle East is coming as a major oil producer, and together with Russia. And U.S. is still producing, and in 1974, it was announced that U.S. oil production has peaked – which was not true, by the way. Yet after the oil price shocks, we have seen nuclear power becoming a part of the energy mix in U.S., Europe, and Japan, and natural gas – slowly but surely, penetrating the energy mix. And today we see the effects of developing world, especially China and India, as well as renewables – solar and wind – slowly but surely penetrating the markets.
One final note on coal: as I said, people see data that they would like to see. I want to give you one coal data. Global coal consumption today, ladies and gentlemen, compared to year 2000, it increased by 65 percent. So today’s coal consumption is 65 percent higher than the year 2000. If we say these numbers, we are considered to be – (inaudible) – but I’m here to tell the numbers; it’s the data. Coal consumption is growing, mainly coming from the Asian countries I will cover in a moment, which is a critical – in my view, critical topic when it comes to climate change.
Another critical topic for us – for the International Energy Agency, as many of you know, is the energy security, especially oil security. Now when we look at the oil demand around the world, we think that the oil security, despite that this year, last year prices remained stable, shouldn’t be taken for granted. There are many reasons for that. There are – there may be natural disasters, hurricanes. When we talk about the climate change and extreme weather events, those issues may be even more important for the oil security. There may be technical disruptions which could have implications for the supply of oil.
Then you may have political (deceptions ?), which we are seeing, and we all know. We heard from the colleagues, including General Jones, that the world is becoming a more dangerous place, and this will definitely have implications for the global oil markets. And we know that there are certain straits, chokepoints which are extremely important for everybody. I want to say everybody. In today’s energy world, oil, natural gas, climate change – no country, but no country, is an energy island. We are all affected from the developments through prices, through CO2 emissions, through technological developments.
When we’re talking about the chokepoints, one of them is the Straits – very important, of course, we all know – which is the Strait of Hormuz. Why it is important, and especially for Asia? Many countries in Asia getting their oil in big time through Hormuz – China, India, Japan, Korea. The key question – I was in Delhi in the last two, three days – from media was, again, as you expect, implications of Middle East developments, especially in Iraq and so on the deliveries, the security of supply. Key issue. And let’s don’t forget, ladies and gentlemen, these countries are the engine of the global economy, global economic growth I should say.
But it’s also important, Hormuz, for the exporters. Most of the exporters bring their oil through this Hormuz Strait, which underlines the critical importance of the security of that very strait for the global markets. And here, of course, I should mention that in addition to oil LNG more and more going to Asia from the Hormuz Strait.
So my humble suggestion is oil security, very important, and the availability of oil around the world is good. It is something. But these possible unforeseen issues should make us not to forget that the oil security is something important, and there may be rainy days in the oil markets, and therefore we should be all ready for those rainy days.
Now, moving from oil to natural gas, we see natural gas growing very strongly – very, very strongly – and the engine of the natural gas growth is Asia by far and China. And there are two reasons for that. First, we have abundance of natural gas coming from different countries around the world. And second, in line with that, prices are very, very mild, very competitive. If we look at the last two or three years, we have seen the LNG prices coming down substantially, which is very good news at least for the importers. This is – in addition to that, natural gas providing a(n) important solution to climate change and the air pollution is extremely important in the Asian countries. These are three drivers.
And many of us think that the natural gas growth is driven by the power sector, which is wrong. It is mainly driven by the industrial sector in those countries, large manufacturing. What are those? Textile, food, fertilizers. And these are the drivers of the natural gas demand growth in Asia, which is the driver of the global demand growth.
And I can tell you that our India numbers, I can tell you, are definitely on the very conservative side. Discussing long time with minister of petroleum of – minister of petroleum, of natural gas, I believe India numbers – our consumption of India gas numbers are on the low side. Huge, huge, huge move India, making the India – (inaudible) – a major gas hub.
Now, gas consumption is good, but where did this gas come from? Domestic production in those countries are very, very limited. And it will be basically LNG, basically LNG. The share of LNG vis-à-vis pipeline in the international gas trade is growing very, very stronger. The United States, Australia, Qatar, Russia, Mozambique, significant of LNG coming to markets. And this is definitely very good news, at least I believe so, for the gas security, for the energy security of the world.
I have a very boring slide, but I think it is very important. It is the share of Asia in the global coal power generation. What does it mean? It means the following. Only in 1990s the share of Asia in the world coal generation was about 20 percent, and today it is close to 80 percent. Why it is important? Because people are talking about climate change, climate change. OK, very good, but we have to look at the numbers.
Two things. First, today’s coal-fired power plants – I don’t say the entire coal, oil and steel industry and so on – only the coal power plants are by far, but by far, the number-one driver of CO2 emissions. One-third of all the world’s CO2 emissions come from coal power plants. This is number one.
Number two, as you see here, bulk of them are in Asia and – this is very important – they are – the coal fleet is extremely young, 11 years old. In Germany, German government decided to shut down coal plants in 2038. In Netherlands, it’s the same. U.S., there are economic reasons they are shutting down. But they are – the average age is 43 years old. They are only the very, very close to the end of their economic lifetime. But in Asia it is 11 years old. Who will shut it down because of the global climate reasons before the money is not paid back just to be a good global citizen? This is a very important issue.
And I’ll tell you something very scary. If we don’t build any single new coal plant in the next 30 years – let’s assume we don’t build – the plants – the emissions from today’s coal plants, as long as they continue to operate, in 2050 will be still the number-one source of global emissions, even if we don’t build any single new coal plant. To be honest with you, I don’t dare, I don’t feel comfortable, and I don’t find fair to go to Asia to tell them shut down your coal plants because we want so in Paris or in Brussels or in New York or in Copenhagen.
In Europe, I think it is come very exemplary that the countries are shutting down, phasing out the coal plants slowly but surely. But ladies and gentlemen, in Europe coal plants are generating electricity for the fourth television set in the kitchen. But in Asia, in many poor countries – in India and elsewhere – they are generating electricity for the refrigerator in the villages for the parents to keep their medication for their children. There is an equity issue here, and we have to be fair if we want to – if we want to find a real solution. We cannot put all the countries in the same basket.
And for me – but on the other hand we know that the climate change is a global issue and the one ton of CO2 going into atmosphere from Bombay or from Detroit or from Lille or from Rome, it has the same effect on everybody. This is the dilemma that we are in.
So next week in Davos – as many of you know, I am the chair of the Davos energy group – this is the issue. Coal in Asia and how we can fix it in the difficult context is something I will put on the table to discuss with the investors and others. What can we do? Of course, one of the solutions, as our colleagues from Emirates also mentioned, is carbon capture and storage, an extremely important technology. But even that one needs important financing.
So I come to my last slide, again on the climate change. I look at the energy trends for the CO2 implications. As we all know, more than 80 percent of the emissions causing climate change come from the energy sector, so we have to fix the problem in the energy sector. But with the current trends, global emissions are increasing, as I told you, 2019/18. But we know that many governments have very strong programs in terms of renewables, in terms of energy efficiency, and other clean-energy technologies. If they implement those in line with their so-called nationally determined contributions, global emissions will be more or less flat.
What does this mean? This means a global temperature increase around three degrees Celsius. And the scientists tell us that this is catastrophic, and I believe them. And they tell us if you want to be, the world, on the safe side, you have to bring the temperature below 2 degrees Celsius, towards 1.5 degrees.
So we said, what can be done? How can we from the current plans to go to the below 2 degrees? We look at every country, country by country, around the world and aggregated them, and we think we need efficiency, renewables, CCUS, nuclear, and all other technologies. It is impossible, ladies and gentlemen – it is impossible – just to stick to the technology you love. We are in love. I love solar, I love nuclear, I hate this. Impossible. Numbers don’t add up, and it is simple mathematics. There is no simple or a single solution, we believe, to address the climate change.
Some countries don’t like nuclear. It’s OK. But the others may want to make use of them. I am very surprised in United States – we have many – (inaudible) – from the United States – which is responsible more than 20 percent of current electricity generation, there are difficulties in terms of the lifetime extensions of nuclear power. This is incredible because they are – first of all, they are very cheap, no problem in terms of the – and they are a major source of CO2-free electricity. The same applies to Europe. I am not talking about building new ones, but the lifetime extension of the existing ones. For me, this is no brainer when you look at the numbers. Just looking at – we are a – we are a number organization. When I look at the numbers, nuclear.
Carbon capture and storage. This is perhaps the, looking at coal and others, most critical technology that we have in front of us. But all the others – solar, renewables, and the others – are very important.
So, therefore, my appeal – and I finish here – is we may lack this technology or that technology, but if we really love this world the issue is not how much lack we get for – to eat, how many people love us and so on. It is not – the issue is not to boost our egos, but to reduce the CO2 emissions. And I finish here. Thank you very much. (Applause.)
(END)