The Ministry of Foreign Affairs of the Republic of Turkey held a seminar on December 21, 2011, on World Energy Outlook (WEO) 2012, presented by Dr. Fatih Birol, Chief Economist and Head of the Economic Analysis Division of the Paris-based International Energy Agency (IEA) and Director of the World Energy Outlook series, a flagship publication of the International Energy Agency. All Embassies in Ankara, the Office of the Resident Coordinator of the United Nations and the Representation of the European Commission to Turkey were invited to this seminar. Dr. Jian Mardukhi attended this meeting on behalf of the SESRIC.

Dr. Birol presented a highlight of the important issues covered in the WEO 2012, starting by emphasizing that the international interest and attention to energy related issues is increasing and that that energy and geo-politics have become more interconnected than ever before. The presentation was divided into two main sections: the current situation and the future.

The current status of the key issues in the global energy sector was highlighted as follows:

• Recent economic concerns have deviated the attentions from energy policies and limited the means of intervention:
  • Governments are diverting the funds previously allocated to energy projects to cover budget deficits; and,
  • As a result of the financial crisis, recent government policy commitments with regard to climate change obligations have moved down the list of priorities.
• After the Fukushima incidence, nuclear energy is facing uncertainty and has indirect implications for other forms of energy.
• Middle-East and North Africa (MENA) turmoil has casted doubts about the needed investment in this region with regard to oil production as 90% of the growth in global oil production during 2010-2035 has to come from the MENA countries.
• Some key trends are pointing in worrying direction:
  • CO2 emissions rebounded to a record high in 2010, which is an indication of the discrepancy between governments’ programs for climate change and the reality of what is being implemented;
  • Increasing energy efficiency is a top priority in any government’s energy policy and usually global energy efficiency improves by about 1%. In the last two years, however, energy efficiency of global economy worsened;
  • Spending on oil imports is near record high.

Dr. Birol highlighted the key forecasts of the IEA for future of the global energy industry as follows:

• Global energy demand will increase by one-third during 2010-2035 with China and India accounting for about 50% of the growth. This implies that energy decisions made in Beijing or Delhi can determine the strategies and policies of the rest of countries.
• Renewable sources of energy and natural gas will collectively meet almost two-thirds of the incremental energy demand in 2010-2035.
• The US oil imports will drop due to rising domestic output and improved transportation energy efficiency. As a result, around 2015 Europe’s import of oil overtakes those of the US and by 2020 China becomes the largest importer of oil. These changes imply that the landscape of international oil security will change as the US becomes less interested in importing oil and the takeover by Europe and China brings new geopolitical implications with it.
• MENA is set to supply the bulk of the growth in oil output to 2035, requiring investment of over $100 billion per year. The political uprisings in this region however have changed the mindsets about subsidizing oil industry at the presence of immediate needs for funding in many necessary social and developmental programs. This implies that under a ‘Deferred Investment Case – where near term investments fall short of required amounts – MENA production falls 3.4 million barrel per day by 2015 and 6.2 million barrel per day by 2020. Consumers face a near-term rise in oil prices to $150 per barrel. Oil producers of the MENA region earn more revenues from oil export initially, but the revenues fall as they lose their share of the market.
• Unconventional natural gas – the natural gas deposits that have become accessible due to advancement of technology and geological knowledge and are mostly located in the US, China, Canada, Australia, and India – will supply 40% of the 1.7 trillion cubic meter increase in global supply during 2010-2035, hence the term ‘Golden Age of Natural Gas’, but best practices are essential for successfully address environmental challenges.
• Coal while absent from most international discussions, accommodated for nearly half of the increase in global energy use over the past decade, with the bulk of the growth coming from the power generation sector in emerging economies. This trend is very concerning as far as climate change is concerned.
• After the nuclear incident in Fukushima, Japan, many countries have raised concerns about the security of nuclear power plants and are revising and cutting the number of nuclear power plants previously planned to build. Under a ‘Low Nuclear Case’ – which examines the impact of nuclear component of future energy supply being cut in half – there would be higher demand for other sources of energy such as coal, natural gas, and renewable sources and raises the prices. While such a situation gives boost to the renewable sources of energy, it is predicted that it will mostly raise the cost of energy, reduce the energy diversity, and make it difficult to combat climate change.
• Renewable subsidies of $66 billion in 2010 (compared with $409 billion for fossil fuels), need to climb to $250 billion in 2035 as rising deployment costs outweighs improved competitiveness. This is while current financial crisis is not allowing for such increases in subsidies.

Dr. Birol expressed his concern about whether governments remain committed to their obligations regarding the climate change and also emphasized the direct link between energy and poverty by indicating that 1.3 billion people in the world live without electricity. In conclusion, he highlighted the following as final remarks:

• In a world full of uncertainty, one thing is certain: rising incomes and population will push energy needs higher.
• Oil supply diversity is diminishing, while new options are opening up for natural gas.
• Coal – the forgotten fuel – has underpinned growth, but the future will be shaped by uptake of clean coal technology.
• Despite steps in the right direction, the door to the target of limiting the global average temperature increase to 2^oC is closing.