Global and Russian Energy Outlook

The Energy Research Institute of the Russian Academy of Sciences
Analytical Centre of the Government of the Russian Federation

GLOBAL AND RUSSIAN ENERGY
OUTLOOK UP TO 2040
THE OUTLOOK WAS PREPARED BY:
The Energy Research Institute of the Russian Academy of Sciences (ERI RAS)
and the Analytical Centre of the Government of the Russian Federation (AC)
Scentc Advscr: A. A. Makarcv, academcan, drectcr cf LPl PAS
Prc|ect Manager: 1. A. Mtrcva, PhD, Head cf Ol and Cas Department, LPl PAS
L. M. Crgcryev, PhD, Prcfesscr and Sencr Advscr tc the Head cf AC
S. P. Flppcv, ccrrespcndng member cf the Pussan Academy cf Scences,
Deputy Drectcr cf LPl PAS
CORPORATE AUTHORS:
N. Arckhpcv, Pesearcher, LPl PAS
O. Llseeva, PhD, Head cf LPl PAS Labcratcry
A. Calkna, Pesearcher, LPl PAS
L. Cavrlcva, Pesearcher, LPl PAS
L. Celler, Pesearcher, LPl PAS
S. Ccryacheva, Pesearcher, LPl PAS
L. Crushevenkc, Pesearcher, LPl PAS
D. Crushevenkc, Pesearcher, LPl PAS
A. Hcrshev, PhD, Head cf the Labcratcry, LPl PAS
A. lvashchenkc, lndependent Lxpert cn Macrceccncmcs
L. Kczna, Pesearcher, LPl PAS
\. Kulagn, Head cf the Centre fcr Clcbal Lnergy Markets, LPl PAS
A. Kurdn, Head cf the Drectcrate cf the AC
A. Makarcva, PhD, Head cf the Labcratcry, LPl PAS
\. Malakhcv, PhD, Head cf the Department cf Lnergy Ccnsumptcn, LPl PAS
S. Melnkcva, Pesearcher, LPl PAS
l. Mrcncva, Pesearcher, LPl PAS
S. Scrckn, Pesearcher, LPl PAS
\. Strukcva, Pesearcher, LPl PAS
A. 1arascv, PhD, Sencr Pesearch Scentst, LPl PAS
L. Urvantsev, Sencr Pesearch Scentst, LPl PAS
KEY FINDINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3
Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .5
i. 8aselne Scenarc - Lnergy Ccncumptcn . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Long-term trends of the world energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9
Demcgraphy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
Economic Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .14
Prmary Lnergy Ccnsumptcn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Develcpment cf Llectrcty Ceneratcn. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
International Trade . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23
CO
2
Emissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24
2. 8aselne Scenarc - Lnergy Markets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Lqud Fuel Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Cas Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41
Scld Fuel Market . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .51
Nuclear Energy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 56
Penewable Lnergy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 58
3. 1he lmpact cf 1echnclcgcal 8reakthrcughs cn the Lnergy Markets . . 63
1he Pcle cf 1echnclcges n the Develcpment cf the Lnergy Sectcr . . 63
Shale 8reakthrcugh . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 65
Shale Falure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 71
Cas Use n 1ranspcrtatcn . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .76
Liquid Biofuels . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 78
Electric vehicles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
Gas Hydrates . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Biogas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
4. 1he lmpact cf Clcbal Lnergy Markets cn Pussa's Lccncmy
and Energy Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
1he lntal Scenarc fcr the Develcpment cf the Pussan
Economy and Energy Sector . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Pussan rescurces n the wcrld energy markets:
external ccnstrants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
1he Fcrecast Scenarc cf Pussa's Lccncmy and Lnergy Sectcr
Develcpment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 92
Appendxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 95
Appendx i. Methcdclcgy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 96
Appendx 2. Pegcnal 8alances . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 98
Appendx 3. Ccmparscn wth Other Fcrecasts . . . . . . . . . . . . . . . . . . . . . 104
8blcgraphy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 105
OUTLINE
GLOBAL AND RUSSIAN ENERGY OUTLOOK UP TO 2040
ERI RAS AC of the Government of the Russian Federation
2
Key Findings
3
KEY FINDINGS
1he prctracted nature cf the current glcbal nancal crss has led tc
reduced forecasts of economic and energy consumption growth acccmpaned
by an cbvcus accelerated ncrease n the share taken by develcpng
ccuntres.
ln the lcng term, fcssl fuels wll reman dcmnant, aganst the backgrcund
of a slower growth in the share of non-hydrocarbon energy resources
than was estmated n the prevcus Outlcck. 1he `shale breakthrcugh'
has pcstpcned fcr twc cr three decades the threat cf runnng cut cf
eccncmcally vable cl and gas reserves - whch had seemed sc clcse
|ust ve tc seven years agc - and has secured the predcmnantly
hydrccarbcn character cf the wcrld's energy sectcr. 1he share cf cl
and gas n wcrld prmary energy ccnsumptcn wll reman practcally
unchanged (53.6 per cent n 20i0 and 5i.4 per cent by 2040).
1he study cf cl and gas prce dynamcs n dfferent scenarcs did not
show fundamental cause for alarmist forecasts predicting either too high, or
extremely low, prices within the period under review. ln all cases - rangng
frcm future success tc pcssble falure cf shale technclcges - cl prces
n 2040 wll nct mcve cut cf the range $i00-i30/bbl. Cas prces wll
be clcsely ccrrelated wth cl prces, but alsc strcngly dfferentated by
regcn (whch dces nct exclude large shcrt-term uctuatcns n prces
under the nuence cf pcltcal and speculatve factcrs).
Despte the ntegratcn cf cl and gas markets, as nternatcnal trade n cl
and lqueed natural gas (LNC) expands, the trend towards regionalization
of prices, resultng n ccnsderable dfferences n prce levels, wll gan
mcmentum.
Natural gas wll acccunt fcr the mcst substantal ncrease n absclute
vclumes cf ccnsumptcn, and the share taken by gas n prmary energy
ccnsumptcn wll ncrease mcre than that cf any cther fuel. The next 30
years could, quite reasonably, be considered as the era of gas. But Russia
runs the risk of missing the resulting opportunities.
1he ccnsequences cf the expected transfcrmatcn cf wcrld energy and,
especally, hydrccarbcn markets wll nct sgncantly change the fuel
markets themselves, but the positions of the leading market participants
will clearly be rebalanced, whle scme glcbal players wll be able tc
gan nuence. 1he results cf cur research clearly shcw that Russia will
be more susceptible to adverse changes in market conditions during the
fcrecast percd. ln the 8aselne Scenarc, Pussan cl and gas expcrts tc
fcregn markets appear tc be sgncantly lcwer than the cfcal natcnal
prc|ectcns.
Hgh ccsts and the current taxatcn system bcth lmt the ccmpettveness
cf Pussan energy rescurces n glcbal markets. 1he Pussan fuel and
energy ccmplex cculd face severe restrctcns cn external demand fcr
energy rescurces at prces acceptable tc Pussa, resultng n addtcnal
rsks fcr Pussa's energy sectcr and eccncmy. This research provides
preliminary estimates of the consequences of this impact on the countrys
economic growth (one percentage point slowdown per year) and possible
measures to compensate for it.
4
Introduction
5
Pussa s a leadng fcrce n wcrld energy and a ma|cr partcpant n
nternatcnal energy markets. 1he ccuntry's energy sectcr, tcgether wth
expcrts cf ts prcducts, s unquely mpcrtant; ts dynamcs drectly mpact
the stablty cf the natcnal eccncmy. 1hus, a satsfactcry vscn pertanng
tc the lcng-term develcpment cf ths sectcr s cf great mpcrtance
n predctng and plannng the ccuntry's eccncmc develcpment. 1he
study cf the wcrld's energy future s cne cf the mcst mpcrtant external
parameters that help tc shape the ccuntry's strategy fcr the develcpment
cf ts eccncmy and energy sectcr.
1he wcrld's energy stuatcn has undergcne sgncant transfcrmatcns
snce the 2008 glcbal nancal crss: prces fcr hydrccarbcns have shcwn
strcng vclatlty; there has been a nctceable slcwdcwn n demand and
ncreased ccmpettcn n tradtcnal energy markets; mcst mpcrtantly,
new technclcges have already started tc push nternatcnal energy
markets n a drectcn unfavcurable fcr Pussa. 1herefcre, ncw mcre than
ever, we need tc make a fundamental study cf pcssble turbulence n wcrld
energy markets and develcp regular wcrld energy cutlccks, based cn cur
cwn research pctental.
lt was ths vew that gave mpetus tc the Lnergy Pesearch lnsttute cf
the Russian Academy of Sciences (ERI RAS) and the Analytical Centre of
the PF Ccvernment (AC) tc prepare `Clcbal and Pussa Lnergy Outlcck
up tc 2040'. Publcatcn cf the 20i2 Lnergy Outlcck shcwed hcw much
demand there was fcr Pussa tc prcduce ts cwn revew cf the future cf
wcrld energy. Last year, ths nfcrmatcn was wdely used n the repcrts
cf federal gcvernment cfcals and the tcp management cf ma|cr Pussan
ccmpanes, and t was alsc dscussed at scentc and cther expert events
n Pussa and abrcad.
1he new Outlcck has an extended tme hcrzcn, and a sgncantly
upgraded mcdellng and methcdclcgcal apprcach. lt manly fccuses cn
the study cf the fuel market stuatcn (lqud, gas, and scld fuels) nct |ust cn
fcrecastng the prcductcn and ccnsumptcn cf dfferent energy rescurces,
whch s mcre apprcprate gven ncreasng nterfuel ccmpettcn.
1he man purpcse cf Outlcck-20i3 s the evaluatcn cf actual trends n
glcbal hydrccarbcn markets, and cf the changes resultng frcm antcpated
technclcgcal breakthrcughs, gvng the resultng mplcatcns fcr Pussa's
eccncmy and energy sectcr. ln ths regard, the fcllcwng are ncluded:
1) A Baseline Scenario which shows the evolution of world energy and fuel
markets based prmarly cn exstng develcped energy technclcges;
2) Versions cf the 8aselne Scenarc, whcse dfferences relate tc the
success cf requred technclcgcal breakthrcughs n the prcductcn and
ccnsumptcn cf hydrccarbcns and ther substtutes;
3) Forecasts for the development of Russias energy sector under certain
hypcthetcal transfcrmatcns cf wcrld fuel markets, and the assessment
cf ther mpact cn the natcnal eccncmy.
The Baseline Scenario for the evolution of fuel markets was develcped
usng the wcrld energy mcdel nccrpcrated n the SCANLP mcdellng
and nfcrmatcn ccmplex |i], wth substantally upgraded mcdels cf cl
|2, 3] and gas |4] markets. New features cf nterfuel ccmpettcn n the
INTRODUCTION
6
transpcrtatcn and pcwer sectcrs are descrbed wth reference tc 86
pcnts cf lqud fuel ccnsumptcn (76 ccuntres) and i2 pcnts cf gas
ccnsumptcn (i47 ccuntres). Prcductcn and prccessng cf ccnventcnal
and unccnventcnal hydrccarbcn rescurces frcm 778 cl elds and 504
gas elds were mcdelled. 1he balance cf prcductcn and ccnsumptcn and
balancng fuel prces were calculated fcr all the regcnal fuel markets; ther
senstvty tc changes n the mcst mpcrtant rescurce and technclcgcal
factcrs was analysed; and the rcles cf key market players, n partcular
Pussa, were estmated.
For the assessment of potential technological breakthroughs, the model includes
varants cf changes n vclumes cf prcductcn, ccnsumptcn, and substtutcn
(fcr all types cf energy rescurces) relatng tc the mplementatcn cf new
technclcges fcr: prcductcn cf unccnventcnal cl and gas; prcductcn cf
synthetc lqud fuels and bcfuels; and the use cf efcent electrcal pcwer
stcrage n transpcrtatcn (wth estmates fcr the techncal and eccncmc
characterstcs requred fcr mplementatcn cf these new technclcges).
ln acccrdance wth the results cf these calculatcns, we have set cut the
pctental changes n fuel market dynamcs.
Projections of Russias energy development were made using the modelling
system |i] fcr the baselne and extreme scenarcs cf the develcpment
cf wcrld hydrccarbcn markets, takng ntc acccunt ther nuence cn
dcmestc demand, prcductcn and expcrt cf energy rescurces, and ther
ccnsequences fcr the eccncmy.
1he scenarcs are explcratcry n nature: they shcw the varety and, mcst
mpcrtantly, pcssble ccnsequences cf the develcpment cptcns - the sc-
called `fcrks n the rcad' - whch face the energy ndustry n bcth Pussa
and the wcrld.
Fcr several mpcrtant parameters Outlcck-20i3 gves new estmates,
whch are substantally dfferent frcm cur Outlcck-20i2 and frcm the
results cbtaned by a number cf nternatcnal crganzatcns. 1hese
dfferences are ncted and explaned n the text; the mcst mpcrtant cf
them are mentcned belcw:
1he prctracted character cf the current glcbal nancal crss has led
tc reduced fcrecasts fcr eccncmc grcwth and energy ccnsumptcn, n
such a way that last year's prcgncss fcr the percd tc 2035 has declned
slghtly tcwards 2040, n ccmbnatcn wth a smultanecus accelerated
eccncmc grcwth fcr develcpng ccuntres.
Fcssl fuels wll reman dcmnant n wcrld energy, wth the share cf ncn-
carbcn energy rescurces rsng mcre slcwly. 1he prcductcn vclumes cf
cl, natural gas, and ccal wll ccntnue tc grcw at dfferent rates.
1he `shale revclutcn' has pcstpcned the threat cf exhaustcn cf
eccncmcally vable cl and gas rescurces, whch seemed sc clcse |ust
5-7 years agc. lt has alsc wdely dversed these rescurces by wcrld
regcn, stmulatng the regcnalzatcn cf wcrld cl markets aganst
the backgrcund cf the ntegratcn cf gas markets due tc the explcsve
grcwth cf LNC trade. Under these ccndtcns, scme glcbal players wll
have addtcnal pcssbltes tc nuence hydrccarbcn markets.
Analyss cf the `hct ssue' cf cl and gas prce dynamcs has nct brcught
tc lght any |ustcatcn fcr alarmst predctcns fcr the percd revewed;
7
there wll be nc excessvely hgh, cr excessvely lcw, devatcns n
ther dynamcs. ln all scenarcs, rangng frcm the future success tc
the pcssble falure cf shale technclcges, balancng cl prces
1
do not
exceed US$i00-i30/bbl (20i0 prces) and a gccd ccrrelatcn wth gas
prces, hghly dfferentated by regcn. Hcwever, up tc 2025-30, there
cculd be wder uctuatcns cf cl prce trends.
Seen cb|ectvely, favcurable transfcrmatcns n wcrld energy, especally
hydrccarbcn, markets brng extra rsks fcr Pussa's eccncmy and energy
sectcr. Prelmnary results assessng ther mpact cn eccncmc grcwth
shcw a slcwdcwn cf cne percentage pcnt each year, due tc decreased
energy expcrts and pcssble measures fcr ts ccmpensatcn.
lt has been determned that durng the fcrecast percd Pussa wll be
mcre senstve tc negatve market uctuatcns - reduced demand,
ncreased supply and, especally, prce declne. 1herefcre, the 8aselne
Scenarc assumes cl and gas expcrt vclumes beng at sgncantly
lcwer levels than thcse determned n natcnal prc|ectcns. Hgh ccsts
and the current tax system hamper the ccmpettveness cf Pussan
energy rescurces n external markets - the rst tme the Pussan energy
sectcr has had tc wcrk under such dfcult ccndtcns.
Our prmary cb|ectve s tc prcmcte dscusscn cn the future shape cf
wcrld energy develcpment and cptcns fcr the adaptatcn cf Pussa's
eccncmy and energy sectcr tc the changng envrcnment.
Alexe Makarcv, academcan
Lecnd Crgcryev, prcfesscr
1atana Mtrcva, PhD
i 1he balance prce cf cl s a prce at whch cl prcductcn n ccnventcnal and unccnventcnal elds and the ccmmercally vable cptcns
cf cl substtutcn wll satsfy demand n the partcular year cf the fcrecast percd (factually reectng the pcnt cf ntersectcn cf supply
and demand).
8
8aselne Scenarc -
Lnergy Ccnsumptcn
9
1. BASELINE SCENARIO
ENERGY CONSUMPTION
Long-term trends of the world energy
Over the past i50 years, wcrld energy ccnsumptcn has grcwn 35 tmes and
passed thrcugh three stages cf develcpment. 1he length cf these stages
has ccnsstently fallen (frcm 70 years, tc 50, then 30 years); fuel prces have
dcubled many tmes cver; energy ccnsumptcn grcwth rates have fallen
durng each successve stage (by 4.8, 4.2, and i.6 tmes - Fgure i.i); and
there was a recesscnary drcp n demand fcr energy at the end cf each stage.
1he current slcwdcwn n glcbal energy ccnsumptcn may ndcate that t
s at the pcnt cf transtcn tc a new (fcurth) stage. 1he analyss cf results
shcwn n ths Outlcck renfcrces the vew that the next (fcurth) stage cf
wcrld energy develcpment, characterzed by a mcre mcderate rse n energy
ccnsumptcn, s apprcachng.
Figure 1.1. Stages of world energy development
4
5
6
7
8
9
10
11
12
13
14
15
16
btoe
Growth of 4 2 times
Growth of 1.6 times
in 30 years
0%
25%
50%
75%
1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Shares of fuels in primary energy production
0
1
2
3
4
1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Bioenergy Coal Oil Gas Hydro Nuclear Other renewables
Growth of 4.8 times
in 70 years
Growth of 4.2 times
in 50 years
Zcno+uor. Z3Z PA
1he key ndcatcr fcr any energy fcrecast - demand fcr energy - s
ntrnscally (but nct drectly) determned by the dynamcs cf the demcgraphy
and eccncmy cf a partcular ccuntry cr regcn, cr cf the wcrld at large. lt s
cbvcus that the key drver cf energy ccnsumptcn grcwth s mprcvement
n the welfare cf a grcwng pcpulatcn. 1he man demcgraphc ndcatcr s
the sze cf a ccuntry's pcpulatcn, whle the develcpment cf ts eccncmy
s characterzed, scmewhat relatvely, by ts grcss dcmestc prcduct (CDP).
Acccrdngly, the key specc ndcatcrs fcr cur fcrecasts are per capta energy
ccnsumptcn and CDP
1
energy ntensty.
i Usng demcgraphc and eccncmc varables whch are dened n greater detal dces nct guarantee ncreased accuracy cf energy
ccnsumptcn fcrecasts, but |ust mcves the prcblem tc the margn cf errcr cf these varables.
Transition to the next stage
(characterized by successive
doubling of prices and more
moderate growth of energy
consumption) of world energy
development is in progress.
10
Our apprcach ccmbnes demcgraphc and eccncmc prc|ectcns cf energy
ccnsumptcn. Frst, fcrecasts fcr each cf 67 grcups cf ccuntres, acccrdng
tc the UN data cn pcpulatcn dynamcs, are ccrrelated wth each cther
cn the bass cf: a) per capta energy ccnsumptcn and b) per capta CDP
and CDP energy ntensty. 1he results cf fcrecasts fcr bcth methcds are
ranges wthn whch trends devate; n ths way, the task cf cptmzng the
cbtanng cf fcrecast estmates s fullled. 1hs task ccnssts cf a search fcr
such trends n twc ranges, the dfference between whch s mnmal. 1he
sums cf the ccuntres' fcrecasts are then mutually ccrrected n acccrdance
wth the ndependent glcbal energy prc|ectcn.
The Methodology of Forecasting Energy Demand
ln fcrecastng energy ccnsumptcn, trends n pcpulatcn grcwth, eccncmy, and the energy sectcr were ccnsdered
- fcr 67 grcups cf ccuntres and fcr the wcrld as a whcle - fcr the last 30 years. 1he UN `medum scenarc' served
as the bass fcr pcpulatcn
2
fcr Outlcck-20i3 (see Fgure i.2.).
Figure1.2. Scheme of convergence of demographic and economic projections of energy consumption
4 8
5,3
5,8
6,3
6,8
7,3
7,8
8,3
8,8
bln people
Range of possible
values
Population
7000
9000
11000
13000
15000
17000
19000
21000
23000
25000
$2010/cap
Range of possible
values
GDP per capita
4,3
4,8
5,3
1980 1990 2000 2010 2020 2030 2040
1,8
1,9
2,0
2,1
2,2
toe/cap
Range of possible
5000
7000
9000
1980 1990 2000 2010 2020 2030 2040
GDP per capita
85
105
125
145
165
185
S trillion
15000
17000
19000
mtoe
1,5
1,6
1,7
1980 1990 2000 2010 2020 2030 2040
Range of possible
values
Energy consumption
per capita
25
45
65
85
1980 1990 2000 2010 2020 2030 2040
Range of possible
values
GDP
0,20
0,24
0,28
toe/ thous. $
7000
9000
11000
13000
1980 1990 2000 2010 2020 2030 2040
Range of possible
values
Energy consumption
0,08
0,12
0,16
1980 1990 2000 2010 2020 2030 2040
Range of possible
values
Energy intensity
Reported information Forecasted ranges
Soorcc. FkI kAS
8ased cn ths, and cn extrapclated trends cf per capta averages fcr each grcup cf ccuntres, statstcal trends and
ccndence ntervals cf future CDP ndcatcrs, as well as the ccnsumptcn cf prmary energy, electrcty, and cl
prcducts, were determned. Duplcate demand fcrecasts were made analcgcusly, based cn each ccuntry's trends
n CDP vclumes and energy ntensty.
2 wcrld Pcpulatcn Prcspects, the 20i0 Pevscn, UN Pcpulatcn Dvscn.
Our approach combines the
demographic and economic
projections of energy
consumption.
11
1he ndcatcrs assumed fcr Outlcck-20i3 were cbtaned by the algnment (usng the mnmum crtercn cf relatve
devatcns frcm the trends cf all fcrecastng ndcatcrs) cf energy ccnsumptcn levels wthn the ccndence
ntervals. we dd ths rst fcr each grcup cf ccuntres acccrdng tc per capta ccnsumptcn and CDP energy
ntensty; seccnd fcr tctal demand fcr all the grcups cf ccuntres and the ndependent demcgraphc and eccncmc
fcrecasts cf wcrld energy ccnsumptcn. Devatcns frcm hstcrc trends cf basc sccal characterstcs cf energy use
- per capta energy ccnsumptcn and CDP energy ntensty - cbtaned n Outlcck-20i3, have gven a satsfactcry
explanatcn fcr wcrld trends n general, and fcr key hydrccarbcn markets n partcular.
Analyss (fcr the wcrld as a whcle) cf the predctve prcpertes cf the ndcatcrs mentcned, based cn nfcrmatcn
collected since 1955
3
(the percd beng twce as lcng as that cf cur fcrecast) has hghlghted the fcllcwng
prcblems:
World population dynamics are well-descrbed by a lnear dependence, and the UN medum case scenarc (whch we
accepted as the baselne fcr the calculatcn cf energy ccnsumptcn) starts dvergng frcm t cnly after the 2030
tmestamp. 1he dynamcs cf per capta energy ccnsumptcn are best descrbed by expcnental (nct sc well by
lnear) dependence, but dvergence between the twc cnly reaches i5 per cent by 2040, whch made t mpcssble
to rely only on the demographic projection cf energy ccnsumptcn.
Ccnversely, retrospective GDP s well-characterzed by expcnental dependence, and cnly satsfactcrly sc by a
lnear cne, but these trends gve mcre than a twcfcld dvergence cf CDP ndcatcrs by 2040. 1he economic forecast
cf energy ccnsumptcn cannct be suppcrted by even an excellent predctablty cf GDP energy intensity - t has
been ccnsstently decreasng by i.2 per cent per year fcr mcre than half a century already.
Demography
Acccrdng tc the latest UN demcgraphc fcrecast, by 2040 the wcrld
pcpulatcn wll reach 8.bn and there wll be a sgncant change n ts
qualtatve patterns. 1he sc-called demographic transition from high to low
fertlty and mcrtalty rates, whch s almcst ccmplete n develcped ccuntres,
wll be cver (Fgure i.3). As a result, pcpulatcn grcwth, whch peaked n the
i70s, wll decrease twcfcld n ccmparscn wth the current rate. 1hs largely
explans the expected slcwdcwn n energy ccnsumptcn grcwth.
Figure 1.3. The worlds demographic transition
18
21
18
13
10
20
30
40
50
60
people/1000 people
11
8
6
0
10
1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
Range of birth rates by region
Range of deaths rates by region
Average birth rate in the world
Average death rate in the world
Natural growth

Soorcc. uN
3 8efcre ths percd demcgraphc, energy and, n partcular, eccncmc ndcatcrs (CDP) were qute tentatve and nccmplete, wcrld energy
nct beng, at that pcnt, a sngle system.
By 2040, the demographic
transition will be complete,
resulting in the twofold
decrease of natural population
growth, largely explaining the
forecast slowdown of energy
consumption growth.
12
1he man areas cf pcpulatcn grcwth are shftng tc Afrca (83 per cent
ncrease) and lnda (33 per cent), whle the number cf pecple n Chna wll
reman practcally unchanged due tc the `cne famly, cne chld' pclcy. 1he
develcpng ccuntres cf Asa wll see 0 per cent cf the absclute grcwth cf
wcrld pcpulatcn (Fgure i.4), whch wll beccme a ma|cr drver cf energy
demand. (Fgure i.5). 8y 2040, 73 per cent cf the wcrld's pcpulatcn wll
lve n the Asa-Pacc Pegcn and Afrca, wth lnda beccmng the mcst
pcpulated ccuntry n the wcrld. Out cf all OLCD ccuntres, cnly Ncrth
Amerca wll experence a sgncant ncrease n ts pcpulatcn (up by 24 per
cent). Fcr Pussa, we use cfcal prc|ectcns fcr the dynamcs cf pcpulatcn
grcwth.
Figure 1.4. Population by region, billions

0,61
0,64
0,28 0,29 3,83
4,59
0,46
0,57
2010 2040
0,61
0,64
2010 2040
0,28 0,29
2010 2040
0,34
oth. Developing Asia
India
Europe
CIS
3,83
4,59
2010 2040
2010 2040
1,87
2010 2040
0,22
0,34
2010 2040
India
China
North America
Europe
Middl E t
CIS
1,02
1,87 2010 2040
China
Developed Asia
North America
Middle East
0,48
0,59
1,02
2010 2040
2010 2040
Developed Asia
Asia
0,48
0,59
2010 2040
2010 2040
Africa
Asia
South and
Central
2010 2040
South and
Central
America
Soorcc. uN
Figure 1.5. Population growth, GDP, and energy consumption by region

2,5
bn people
140
$ trillion
6 000
mtoe
Africa
1,5
2,0
2,5
bn people
80
100
120
140
$ trillion
4 000
5 000
6 000
mtoe
Africa
Middle East
South and Central America
CIS
0,5
1,0
1,5
20
40
60
80
100
1 000
2 000
3 000
4 000
CIS
Developing Asia
Developed Asia
Europe
0,0
0,5
Population growth
201040
0
20
40
GDP growth 2010
40
-1 000
0
1 000
2 000
Energy consumption
growth 201040
Developed Asia
Europe
North America
-0,5
0,0
Population growth
201040
0
GDP growth 2010
40
-1 000
0
Energy consumption
growth 201040
North America
Soorcc. FkI kAS
By 2040, 73 per cent of the
worlds population will live in the
Asi+-|+circ keicr +rc Alric+.
India, by that time, will be the
most populous country in the
world.
13
Impact of Demographic Factors on GDP and Energy Consumption
Amcng the demcgraphc factcrs that affect energy ccnsumptcn, a very mpcrtant rcle s played by the prcpcrtcn
cf the pcpulatcn that s cf wcrkng age (i5-64 years), as t s ths part cf the pcpulatcn that determnes the rate
cf eccncmc grcwth and, ccnsequently, the demand fcr energy (Fgure i.6).
1he wcrkng-age pcpulatcn wll fall furthest n develcped Asan ccuntres (-i8 per cent), the ClS (-8 per cent), and
Lurcpe (-6 per cent). 8y 2040, the hghest rates cf grcwth n wcrkng pcpulatcn are expected tc be: Afrca (i00
per cent), the Mddle Last (63 per cent), and Latn Amerca (25 per cent), wth a recent leader - Asan develcpng
ccuntres -cnly shcwng i per cent grcwth. Ncrth Amerca, wth ts reascnable rse n wcrkng pcpulatcn (i5 per
cent), wll face a sgncant ncrease n the number cf clder pecple (an ncrease cf ii3 per cent). Chna s expected
tc stablze, and after 2020 t wll face a declne n ts wcrkng pcpulatcn. 1hs, ccmbned wth a rapd ncrease n
the prcpcrtcn cf pecple aged cver 65, wll have sercus mplcatcns fcr the dynamcs cf Chna's eccncmy and fcr
the ccuntry's energy ccnsumptcn.
Figure 1.6. Dynamics of working population by region, millions
450
people, m.
USA
1 200
people, m.
OECD, excl. USA
1 600
people, m.
China
7 000
people, m.
non-OECD, excl. China
350
400
450
people, m.
USA
1 000
1 200
people, m.
OECD, excl. USA
1 200
1 400
1 600
people, m.
China
5 000
6 000
7 000
people, m.
200
250
300
350
400
600
800
1 000
800
1 000
1 200
1 400
3 000
4 000
5 000
6 000
65+
15-64
0-14
100
150
200
250
200
400
600
400
600
800
2 000
3 000
4 000
15-64
0-14
0
50
100
150
1980 2010 2040
0
200
400
1980 2010 2040
0
200
400
1980 2010 2040
0
1 000
2 000
1980 2010 2040
0
50
1980 2010 2040
0
1980 2010 2040
0
1980 2010 2040
0
1980 2010 2040

Soorcc. worlJ 8crk
lnternal and external mgratcn drectly relates tc the quantty and qualty cf a ccuntry's wcrkfcrce. Untl the
end cf the fcrecast percd Afrca, the develcpng ccuntres cf Asa and Latn Amerca, and the ClS, wll ccntnue
tc reman regcns cf mgratcn cutcw; Ncrth Amerca, Lurcpe and, tc a lesser extent, the Mddle Last and the
develcped ccuntres cf Asa beng recpent regcns.
Ancther sgncant factcr n the evaluatcn cf energy ccnsumptcn s urban grcwth brcught abcut by mmgratcn
frcm rural areas. 1hs changes nct cnly the sze but alsc the nature cf ccnsumptcn, resultng n greater centralzatcn
and ccncentratcn cf pcwer supply (Fgure i.7). ln the regcnal ccntext, the hghest urban pcpulatcn grcwth by
2040 wll be n develcpng ccuntres, led by Chna (24 per cent by 20i0). lnda, Afrca, and cther Asan develcpng
ccuntres wll fcllcw Chna n ths respect, but wll stay scme way behnd (i3-i4 per cent urban pcpulatcn
grcwth). 1he develcped ccuntres have vrtually exhausted ther pctental fcr urbanzatcn, and ths factcr nc
lcnger plays a sgncant rcle n predctng energy ccnsumptcn n these ccuntres.
Figure 1.7. Percentage of
urban population by region

Soorcc. uN, FkI kAS
40%
60%
80%
100%
0%
20%
40%
1980 1990 2000 2010 2020 2030 2040
OECD, excl. USA
USA
China
14
Economic Growth
1he fcrecast cf eccncmc develcpment was made n terms cf CDP dynamcs,
based cn pcpulatcn fcrecasts fcr the revewed grcups cf ccuntres and
cn expected changes, largely assccated wth the age and types cf human
settlement, n per capta CDP (Fgure i.2).
ln the next 30 years, there s lttle reascn tc hcpe fcr sustaned CDP
grcwth cn a wcrld scale, tc say ncthng cf any acceleratcn, ccmpared tc
the prevcus percd. Crcwth s hndered by the declnng ntensty cf the
man factcrs cf prcductcn, the slcwdcwn cf pcpulatcn grcwth, lmted
cppcrtuntes fcr terrtcral expanscn, aggravated water supply prcblems,
and rsng prces fcr ma|cr natural rescurces (n partcular, the dcublng cf
hydrccarbcn prces n ccmparscn tc the average cver the last 30 years).
lt s dcubtful that even successful technclcgcal prcgress cculd fully
ccmpensate fcr these negatve prccesses. ln ths regard, the qualtatve
and mult-drectcnal eccncmc develcpment cf certan ccuntres s cf
unquestcnable mpcrtance.
Fcrecasts cf eccncmc grcwth n develcped ccuntres are manly based cn
the ccntnuatcn cf trends and parameters cf pcst-ndustral develcpment,
tcgether wth a further shft tc servces (develcpment cf health servces,
aganst a backgrcund cf ncreasng lfe expectancy, etc.). Pelatvely slcw
grcwth rates mply the ccncentratcn cf captal cn ncreasng efcency and
prcductvty, rather than cn expandng capacty. ln the case cf adcptng
(pcltcal) cb|ectves amed at clmate prctectcn and ccnservatcn cf
rescurces, develcpment mght take the fcrm cf ccmbnng the mantenance
cf lvng standards wth mcre severe rescurce ccnstrants.
ln the lcng term, the trend tcwards a levellng-cut cf glcbal develcpment,
cn a technclcgcal base that wll ncreasngly be shared, wll ccntnue,
but the degree cf ccnvergence wll be very dfferent. ln the develcpng
wcrld, stratcatcn wll reman encrmcus. Pecent years have seen the
emergence cf a grcup cf fast-grcwng ccuntres; a grcup cf ccuntres
fcr whch take-cff s prcvng prcblematc; and abcut 30 ccuntres wth a
crtcally lcw grcwth rate n relatcn tc per capta CDP.
ln the develcpng wcrld, Chna stands cut wth ts unque mcdel cf
pcpulatcn grcwth reductcn. Cven the ccuntry's expected dcublng cf
per capta CDP, ts sccal structure s expected tc change cn the bass
cf mass `welfare' prcmsed tc ts pecple. 1he degree cf success cf the
prcpcsed mcdel cf eccncmc develcpment wll be cf crtcal mpcrtance
fcr the grcwth rates cf bcth Chna and the rest cf the wcrld.
Other develcpng ccuntres have tc be brcught tcgether fcr the sake cf
analytcal smplcty, but they are splt ntc several grcups. 1he ccmmcn
ndcatcrs cf these ccuntres are: CDP grcwth s abcve that n develcped
ccuntres, but lcwer than that n Chna (Fgure i.8). 1hese ccuntres
represent the ma|crty cf the wcrld's pcpulatcn and ther demcgraphc
grcwth ccntnues (abcve i per cent per year), as dc ther prcblems cf
acute pcverty and sccal nequalty, as well as dfcultes related tc the
transtcn tc new (hgh ccst) and effectve technclcges.
Economic growth in developed
countries is based on the
continuation of trends and
parameters of post-industrial
development, with a further shift
to services.
The future of the Chinese
economy its growth rate,
social and political stability, and
the levelling-out of its social
structure beyond 2020 is the
biggest uncertainty of long-term
economic forecasting.
15
Figure 1.8. Average GDP growth by region
4%
6%
8%
10%
12%
0%
2%
1990 2000 2010 2020 2030 2040
USA OECD, excl. USA
China non-OECD, excl. China
World

Soorcc. Arclyticcl Ccrtrc oj thc kl 6ovcrrncrt
Figure 1.9. Structure of world GDP by region

19%
31%
14%
22%
40%
USA
OECD, excl. USA
China
2010
2040
36%
14%
24%
China
8y 20i7, Chna wll beccme the wcrld's largest eccncmy, whle the USA
and cther OLCD ccuntres wll see ther share n the wcrld's CDP reduce
sgncantly (Fgure i. and 1able i.i).
wthn the fcrecast percd, Chna wll rapdly ncrease ts per capta CDP,
apprcachng that cf the OLCD ccuntres by the end cf the percd (Fgure
i.i0).
lt shculd be ncted that althcugh the fcrecast prepared fcr the glcbal
eccncmy s farly restraned, t dces nct, hcwever, dffer radcally frcm the
macrceccncmc fcrecasts cf cther nsttutcns (1able i.2).
16
Table 1.1. Changing shares of the countries in the global GDP
Patng by CDP (PPP) fcr 20i0 Patng by CDP (PPP) fcr 2040
Share n glcbal CDP
in 2010
Share n glcbal CDP
in 2040
EU-27 20% 1 China 24%
1 USA 19% 2 USA 14%
2 China 14% EU-27 12%
3 lapan 6% 3 India 10%
4 India 5% 4 8razl 3%
5 Germany 4% 5 Russia 3%
6 Russia 3% 6 lapan 3%
7 UK 3% 7 Germany 2%
8 8razl 3% 8 UK 2%
9 France 3% 9 Mexcc 2%
10 Italy 2% 10 France 2%
Figure 1.10. World and regional GDP (PPP) per capita
20 000
30 000
40 000
50 000
60 000
70 000
80 000
$2010/cap
0
10 000
1
9
8
0
1
9
8
5
1
9
9
0
1
9
9
5
2
0
0
0
2
0
0
5
2
0
1
0
2
0
1
5
2
0
2
0
2
0
2
5
2
0
3
0
2
0
3
5
2
0
4
0
USA OECD, excl. USA
World

Soorccs. FkI kAS, Arclyticcl Ccrtrc oj thc kl 6ovcrrncrt
Table 1.2. Comparison of the latest long-term forecasts for the average annual growth of world GDP
(Constant US Dollars acc. to PPP index)
Forecast Source Period Average Annual Growth Rate of the World GDP
lMF ($20i0), UN
i80-20i0 3.5%
lLA wLO New Pclces 20i2, $20ii
20i0-35 3.5%
LxxcnMcbl 20i3, $2005
20i0-35 2.8%
DOL 20ii, $2005
2008-35 3.4%
Oxfcrd Lccncmcs
20i0-35 4.0%
AC-20i3, cptmstc
20i0-35 3.7%
AC-20i3, pessmstc
20i0-40 3.3%
Outlook-2013 $2010
201035 3.4%
Outlook-2013 $2010
201040 3.4%
Soorccs. FkI kAS, Arclyticcl Ccrtrc oj thc kl 6ovcrrncrt
17
Assumptions for the Baseline Scenario
The Baseline Scenario of world energy assumes that there wi|| be ne signicant techne|egica| reve|utiens er
breakthroughs. lt s assumed that the natural ccurse cf scentc and technclcgcal prcgress - whch les behnd
the establshed dcwnward trend n CDP energy ntensty - wll ccntnue, wth a tendency fcr all ccuntres and
regcns tc ccnverge tcwards the end cf the fcrecast percd (Fgure i.ii).
Figure 1.11. Dynamics
of GDP energy intensity by
region

Soorcc. FkI kAS
The Baseline Scenario assumes that there will be no radical change of the institutions in energy markets (changes
n the `rules cf the game') apart frcm certan enhancements amed at mprcvng the functcnng cf energy markets
n the nterests cf the man players.
wthn the framewcrk cf the analyss cf the structure cf the mcst mpcrtant markets fcr Pussan hydrccarbcns (the
ClS ccuntres, Lurcpe, and ncrth-east Asa), the scenarc hghlghts the largest players (stakehclders), the prcrtes,
and strateges whch sgncantly affect the stuatcn n these markets (Fgure i.i2).
Figure 1.12. Primary
energy production and
consumption by key players
in global energy markets
in 2010

Soorcc. FkI kAS
The Baseline Scenario also assumes that the current energy policy priorities of these players, and the measures
that have already been taken to implement them, are retained. Large mpcrters (mcst cf the OLCD ccuntres,
Chna, and cther develcpng ccuntres n Asa) are nterested n mcderate energy prces, whch are helpful fcr ther
eccncmes. Lnergy expcrters, (manly ccnsstng cf the OPLC ccuntres and the ClS) seek tc maxmze ther expcrt
revenues (Fgure i.i3).
0,6
0,8
1,0
1,2
toe/$1000 of GDP
(2010 prices)
USA
China
OECD, excl. USA
World
0,0
0,2
0,4
1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 2030 2035 2040
World
3 000
4 000
5 000
6 000
7 000
8 000
mtoe
Production
Consumption
0
1 000
2 000
Russia China USA OPEC OECD, excl.
USA
non-OECD,
excl. China
18
Figure 1.13. Energy
policy priorities of energy
market players

Soorcc. FkI kAS
Primary Energy Consumption
1he dynamcs cf energy ccnsumptcn, by grcups cf ccuntres and the whcle
wcrld, were determned by reccnclng demcgraphc fcrecasts (based cn
pcpulatcn sze and per capta energy ccnsumptcn) and eccncmc fcrecasts
(based cn CDP grcwth and ts energy ntensty). 1he ccnsumptcn cf prmary
energy n the wcrld wll ncrease by 40 per cent between 20i0 and 2040
(i.i per cent per year cn average), whch s three tmes less than the average
annual ncrease n CDP and s sgncantly slcwer than the grcwth n energy
ccnsumptcn seen fcr the last 30 years (Fgure i.i4).
Figure 1.14. Primary energy consumption by region, Baseline Scenario
8 000
10 000
12 000
14 000
16 000
18 000
20 000
mtoe
Africa
Middle East
CIS
0
2 000
4 000
6 000
8 000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Developing Asia
Developed Asia
Europe
North America

Soorcc. FkI kAS
Developed Asia
Developing Asia
African and Middle East exporters
CIS exporters
Developing countries importers
0% 20% 40% 60% 80% 100%
EU
USA
Cheap energy on world markets Expensive energy on world markets
Domestic market with prices below world averge Environment
Security of energy supply Support for renewable energy
19
whle the USA and cther develcped ccuntres wll reduce ther per capta
energy ccnsumptcn, Chna's gure, cn the cther hand, wll rapdly ncrease
(Fgure i.i5).
Figure 1.15. Per capita energy consumption by country groups and the
world
0
2
4
6
8
10
0505050505050
toe/cap
1
9
8
0
1
9
8
5
1
9
9
0
1
9
9
5
2
0
0
0
2
0
0
5
2
0
1
0
2
0
1
5
2
0
2
0
2
0
2
5
2
0
3
0
2
0
3
5
2
0
4
0
USA OECD, excl. USA
World

Soorcc. FkI kAS
Centres cf energy ccnsumptcn nctably change ther lccatcn (Fgure i.i4):
pcpulatcn grcwth n develcpng ccuntres s fcllcwed by an ncreasng
shft n the centre cf energy ccnsumptcn tcwards these ccuntres, whle
develcped ccuntres wll cnly ncrease ther energy ccnsumptcn by 3 per
cent by 2040. ln the USA and cther OLCD ccuntres, the ncrease n energy
demand wll practcally ccme tc a halt after 2020.
ln Chna, absclute grcwth wll ccntnue: whle tctal ncremental energy
ccnsumptcn grcwth fcr i80-20i0 and 20i0-40 s almcst equal (i873 and
i847 mtce, respectvely), average annual grcwth rates wll drcp frcm 4.8
per cent tc i. per cent. ln the cther develcpng ccuntres, prmary energy
ccnsumptcn wll ncrease by cne and a half tmes: at deceleratng grcwth
rates, absclute grcwth wll ncrease frcm 2283 mtce (i80-20i0) tc 3i20
mtce by 2040, whch represents 60 per cent cf the glcbal ccnsumptcn
grcwth cf prmary energy. Meetng regcnal prmary energy demand wll
requre ncreased ccnsumptcn cf all types cf fuel (Fgure i.i6).
Figure 1.16. The growth of primary energy consumption by region and type of fuel, Baseline Scenario

4 000
5 000
6 000
7 000
8 000
9 000
mtoe
USA
Bioenergy
Other renewables
Hydro
Nuclear
OECD, excl. USA China non-OECD, excl. China
0
1 000
2 000
3 000
4 000
1980 2010 2040 1980 2010 2040 1980 2010 2040 1980 2010 2040
Coal
Gas
Oil
Soorcc. FkI kAS
20
1he structure cf wcrld energy ccnsumptcn wll beccme mcre dversed
and balanced: by 2040 there wll be a gradual algnment cf the shares cf
the fcssl fuels (cl: 27 per cent; gas: 25 per cent; ccal: 25 per cent) and ncn-
fcssl fuels (23 per cent n tctal), ndcatng the develcpment cf nterfuel
ccmpettcn and mprcved sustanablty cf supply.
At the same tme, cver the next 30 years, the glcbal fuel mx dces nct appear
tc shcw radcal changes - the wcrld wll stll nct be ready tc reduce ts
dependence cn fcssl fuels (Fgures i.i7 and i.i8). Hydrccarbcns wll retan
absclute dcmnance n the fuel mx - by 2040 ther share wll amcunt tc
5i.4 per cent, n ccmparscn tc 53.6 per cent n 20i0. Hcwever, there wll be
sercus changes n ccnsumptcn cf certan types cf hydrccarbcns. 1hese wll
strcngly affect cl - ts share n prmary energy ccnsumptcn wll be reduced
frcm 32 per cent tc 27 per cent durng ths percd.
Figure 1.17. World primary energy consumption by fuel type, Baseline Scenario

10 000
12 000
14 000
16 000
18 000
20 000
mtoe
Bioenergy
Other renewables
Hydro
Nuclear
Coal
0
2 000
4 000
6 000
8 000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Coal
Gas
Oil
Soorcc. FkI kAS
Figure 1.18. Structure of world primary energy consumption by fuel type
in 2010 and 2040, Baseline Scenario
32% 6%
10%
27%
6%
3%
4%
10%
2010
2040
21%
28%
25%
25%

Oil
Gas
Coal
Nuclear
Hydro
Other renewables
Bioenergy
Soorcc. FkI kAS
In the long term, the unequivocal
dominance of fossil fuels will
remain unchallenged; the share
of oil and gas in global primary
energy consumption will also be
practically unaffected (53.6 per
cent in 2010 and 51.4 per cent
by 2040).
21
1he share cf prmary energy ccnsumptcn taken by ccal - whch shcwed
the hghest ccnsumptcn grcwth rates n the rst decade cf the 2ist century
- wll declne frcm 28 per cent tc 25 per cent. 1hs change s manly due
tc envrcnmental ccncerns that wculd lmt the use cf ccal, nct cnly n
develcped ccuntres but alsc n develcpng cnes.
As far as the develcpment cf nuclear energy s ccncerned, we make a
mcderately cptmstc fcrecast: ts share (6 per cent) wll nct change and
there wll be a marked ncrease n absclute vclumes.
1he hghest ccnsumptcn grcwth rates n the fcrecast percd wll be fcr
renewable energy (ncludng bcfuels but excludng hydrcpcwer): by 2040
ts share n glcbal energy ccnsumptcn wll reach i3.8 per cent, whle
electrc pcwer generatcn wll use i2.5 per cent cf renewables (ccmpared
wth gures cf i0. per cent and 3.7 per cent fcr 20i0). 1hs new trend wll
be suppcrted by cheaper technclcges and by actve gcvernment suppcrt n
develcpng ccuntres.
Hcwever, natural gas wll take rst place n the absclute vclumes cf
ccnsumptcn grcwth, and t wll have the largest nche n the fuel mx (Fgure
i.i), makng t the mcst demanded type cf fuel fcr the next 30 years.
Figure 1.19. The growth of primary energy consumption by fuel type,
Baseline Scenario
2 000
3 000
4 000
5 000
6 000
mtoe
Absolute growth
2010
0
1 000

Soorcc. FkI kAS
lt s cbvcus that the fuel mxes cf scme ccuntres and regcns wll be
sgncantly dfferent (Fgure i.i6). Develcped ccuntres wll reduce
ther shares cf ccal and cl supply, ncreasng the ccnsumptcn cf gas and
renewables. Chna wll ncrease ts ccnsumptcn cf all energy rescurces and,
n the rst place, ccal, whle cther develcpng ccuntres wll ccnsume rcughly
equal vclumes cf cl, gas, and ccal.
Development of Electricity Generation
Due tc ncreased electrcatcn cf human actvtes, the share cf prmary
energy used fcr generatng electrcty wll rse sgncantly, reachng 47 per
cent by 2040, n ccmparscn tc 36 per cent n 20i0. Develcpng ccuntres
wll acccunt fcr mcst cf the grcwth cf wcrld electrcty prcductcn (84 per
cent) (Fgure i.20).
Gas will have the highest
demand of any type of fuel over
the next 30 years.
22
Figure 1.20. Electricity generation by region, Baseline Scenario
20 000
25 000
30 000
35 000
40 000
45 000
50 000
TWh
Africa
Middle East
CIS
Developing Asia
0
5 000
10 000
15 000
20 000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Developing Asia
Developed Asia
Europe
North America

Soorcc. FkI kAS
1he pcwer sectcr, whch s the man eld cf ccmpettcn between all energy
rescurces and numercus technclcges, wll alsc dversfy ts fuel mx: ts gas
ccnsumptcn wll ncrease by 2.5 tmes and gas wll prcvde mcre cf the
expected ncrease n electrc pcwer generatcn than any cther type cf fuel.
1he use cf ncn-carbcn energy rescurces wll alsc grcw rapdly, ncreasng by
mcre than 40 per cent by 2040 (Fgure i.2i).
Figure 1.21. World electricity generation by fuel type, Baseline Scenario
20 000
25 000
30 000
35 000
40 000
45 000
50 000
1wh
8cenergy
Other renewables
Hydrc
Nuclear
0
5 000
i0 000
i5 000
20 000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Ccal
Cas
Ol
Soorcc. FkI kAS
Lxstng dfferences n the structure cf electrcty generatcn between OLCD
ccuntres and ncn-OLCD ccuntres wll reman (Fgure i.22). whle OLCD
ccuntres wll be able tc shft ther fccus tcwards natural gas and ncn-carbcn
pcwer generatcn, ncn-OLCD ccuntres wll ccntnue tc depend heavly
cn ccal (facng all the envrcnmental ccnsequences), despte the rapdly
ncreasng rates at whch they wll use natural gas and renewable energy fcr
pcwer generatcn.
23
Figure 1.22. Electricity generation in OECD and non-OECD countries by fuel type, Baseline Scenario
8 000
i0 000
i2 000
i4 000
i6 000
1wh

8cenergy
Other renewables
Hydrc
Nuclear
0
2 000
4 000
6 000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Nuclear
Ccal
Cas
Ol
i5 000
20 000
25 000
30 000
35 000
1wh
8cenergy
Other renewables
Hydrc
Nuclear
0
5 000
i0 000
i5 000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Ccal
Cas
Ol

Soorcc. FkI kAS
International Trade
1he develcpment cf the wcrld's energy trade wll ccntnue aganst the
backgrcund cf Ncrth Amerca's grcwng self-sufcency, due tc unccnventcnal
cl and gas rescurces. A sgncant ncrease n supply va the Pacc and
Indian oceans will change the directions and volumes of inter-regional trade
n energy rescurces.
8y 2040, Ncrth Amerca wll mcve frcm beng a net mpcrter cf cl, ccal, and
gas tc beng a net expcrter. lmpcrts cf energy tc Lurcpe wll ncrease by 28
per cent; grcwth n Lurcpe's natural gas mpcrts wll replace ts decreased cl
demand. Develcpng ccuntres n Asa wll rapdly ncrease ther mpcrts cf
all types cf energy (Fgure i.23). LNC wll preval n nter-regcnal gas trade,
aganst the backgrcund cf rsng ppelne gas supply.
24
Figure 1.23. International energy trade, Baseline Scenario, mtoe
2010 2040
400
-200
0
2010 2040
600
900
150
300
2010 2040
-1000
-800
-600
-400
-200
0
300
600
900
2010 2040
CIS 1500
-300
-150
0
150
300
-1200
-1000
-800 0
2010 2040
Europe
CIS
900
1200
1500
-450
-300
-150
500
2010 2040
-1200
North America
Europe
0
300
600
900
1200
450
0
500
2010 2040 North America
Middle East
-300
0
300
2010 2040
-1000
-500
0
250
300
450
600
Middle East
Asia
-300
-1500
-1000
0
250
2010 2040 -150
0
150
300
450
600
2010 2040
Africa
Asia
S th d C t l
-2000
-1500
0
2010 2040 -150
0
50
2010 2040
C d Oil G C l
Africa
South and Central
Crude Oil Gas Coal
neL exporLlng reglon neL lmporLlng reglon

Soorcc. FkI kAS
C0
2
Emissions
1he vclume cf glcbal CO
2
emsscns wll ccntnue tc rse, and almcst all cf ts
grcwth wll be attrbuted tc ncn-OLCD ccuntres (especally n Asa), whch wll
beccme ncreasngly reluctant tc adhere tc glcbal envrcnmental agreements.
Develcped ccuntres wll be able tc stablze and even reduce CO
2
emsscns,
but ths wll nct change the stuatcn cn the glcbal scale (Fgure i.24).
Figure 1.24. - C0
2
emissions in the world and by country groups
20
25
30
35
40
45
bln t China
USA
OECD, excl. USA
0
5
10
15
2000 2005 2010 2015 2020 2025 2030 2035 2040

Soorcc. FkI kAS
25
8aselne Scenarc -
Lnergy Markets
26
2. BASELINE SCENARIO
ENERGY MARKETS
1he fcrecast cf prmary energy ccnsumptcn prcvdes a bass fcr fcrecasts
cf the way n whch the man energy markets (dened by the type cf energy
scurce, as shcwn n Fgure 2.i) wll evclve. Lach sectcn cf ths chapter alsc
shcws the changes n Pussa's three man regcnal expcrt markets - Lurcpe,
Ncrth Amerca, and ncrth-east Asa
1
.
Figure 2.1. Categorization of Energy Sources by Energy Market

Gaseous fuel
Natural gas
Ccalbed methane
Shale gas
Marsh gas
Biogas
Products of Solid Fuels
(Ccal, wccd, etc.)
Solid fuel
Anthracite
Bituminous coal
Lgnte / 8rcwn ccal
Coal Slate
Peat
Scld bcmass (wccd,
wccd waste / Pellets)
Other Solid Waste
Charcoal
Liquid fuel
Petroleum fuels
Gas condensate
Sprt (bcfuels)
Synthetic Liquid Fuels
(C1L - frcm ccal,
GTL - from gas)
Ccmpressed Natural Cas
RES
(ncn-fuel,ccnverted
into electricity)
Nuclear Power
RESOURCES FOR POWER GENERATION
Lnergy Pescurces Markets
Soorcc. FkI kAS
Liquid Fuels Market
Liquid Fuels Demand
1he man drver cf lqud fuels demand wll reman the grcwng transpcrtatcn
sectcr (80 per cent cf tctal cl demand by 2040), wth a large ncrease n
demand fcr transpcrtatcn servces. 1he man factcr restranng grcwth n
ccnsumptcn cf fuels fcr transpcrt wll be, as befcre, the ncreasng energy
efcency cf vehcles.
Mcdern vehcles stll have a sgncant pctental fcr energy savngs (up
tc 8i per cent cf tank-tc-wheels efcency pctental) |8]. Snce i0, the
autcmctve ndustry has undergcne a sgncant ncrease n engne pcwer and
reductcn n fuel ccnsumptcn. wcrld average car engne capacty ncreased
by 42 per cent frcm i0 tc 20i3, whle fuel ccnsumptcn decreased by mcre
than a thrd (37 per cent) at the same tme. ln addtcn tc upgradng the car
i lapan, Scuth Kcrea, Chna.
By 2040, the world and, in
particular, countries which
have large and technologically
advanced economies such as
the USA, the countries of the
European Union, and Japan are
expected to continue to reduce
t|eir specirc lae| ccrsaapticr
in the transportation sector
(by 50 per cent in the Baseline
Scenario).
27
engne frcm a gasclne tc a hybrd devce, fuel eccncmes were acheved
by mprcvng the transmsscn, reducng vehcle bcdy structure weght, and
usng advanced resns and rubbers n tyre manufacturng (Fgure 2.2).
Figure 2.2. Dynamics of light motor car fuel economy
0 04
0,05
0,06
0,07
0,08
0,0
Fuel ccnsumptcn
l/i00kmhp
0
0,0i
0,02
0,03
0,04
i80 i0 2000 20i0 2020 2030 2040 2050
Soorcc. FkI kAS
lncreased energy efcency n the transpcrt sectcr s the factcr whch affects
demand n OLCD ccuntres mcst sgncantly. Fcr develcpng ccuntres,
demand fcr lqud fuels s cften stmulated by mantanng subsdzed and
regulated prces fcr petrcleum prcducts tc the publc at a level belcw wcrld
prces (Fgure 2.3).
Figure 2.3. Regulation of petroleum products prices by country

Price linked to stock quote
Regulated pricing
Price linked to stock quote
Regulated pricing
Pricing transformation
Soorcc. FkI kAS
11 l
i00 km
8 l
i00 km
4 l
i00 km
Gasoline ICE and
transmission (autotransmission)
mcdernzatcn
diesel ICE introduction
bcdy weght reductcn
Deselzatcn
rcbctzed transmsscn,
increased transmission levels
hybrdes develcpment
smart starting systems
ccmpcstes

Hybrdzatcn
electrc transpcrt develcpment
smart controlling systems
reduction of weight
28
Cven the relatvely lcw cl prces n the 8aselne Scenarc, demand fcr
lqud ncn-petrcleum fuels wll reman lcw due tc ther hgh ccsts. 1he cnly
exceptcn s bcfuels, demand fcr whch ccntnues tc grcw due tc measures
stmulatng ccnsumptcn n Lurcpe, and the lcw ccst cf ther prcductcn n
8razl, Malaysa, and lndcnesa.
ln the 8aselne Scenarc, up tc 2040, glcbal demand fcr lqud fuels wll
grcw cn average by 0.5 per cent per year, reachng 5.ibn tcns (26 per cent
ncrease) (Fgure 2.4). Accelerated grcwth n lqud fuels demand s expected
n develcpng ccuntres. OLCD ccuntres wll fcllcw an cppcste trend: lqud
fuels demand grcwth wll ccme tc a halt n the USA and Lurcpe, whle OLCD-
Asa (lapan, n partcular) wll prcbably reduce ts ccnsumptcn sgncantly.
Figure 2.4. Liquid fuel supply and demand balance, Baseline Scenario

5 100
mtoe
Demand Supp|y
2040 Level
4 900
5 100
2040 Level
4 500
4 700
4 900
4 300
4 500
4 100
4 300
3 900
4 100
3 900
2
0
1
0
E
u
r
o
p
e
e
v
e
l
o
p
e
d

A
s
i
a
N
o
r
t
h

A
m
e
r
i
c
a
C
I
S
n
t
r
a
l

A
m
e
r
i
c
a
M
i
d
d
l
e

E
a
s
t
A
f
r
i
c
a
v
e
l
o
p
i
n
g

A
s
i
a
2
0
1
0
n
v
e
n
t
i
o
n
a
l

o
i
l
C
T
L
G
T
L
H
e
a
v
y

o
i
l
B
i
o
f
u
e
l
s
O
i
l

s
a
n
d
s
e

a
n
d

t
i
g
h
t

o
i
l
E
D
e
v
e
l
o
p
e
N
o
r
t
h

A
m
u
t
h

a
n
d

C
e
n
t
r
a
l

A
m
M
i
d
d
l
D
e
v
e
l
o
p
i
n
C
o
n
v
e
n
t
i
o
H
e
a
B
i
O
i
l

S
h
a
l
e

a
n
d

t
i
g
S
o
u
t
h

a
n
d
C
S
h
Soorcc. FkI kAS
Liquid Fuels Supply
ln the 8aselne Scenarc, t s assumed that prcductcn cf lqud fuels wll
reach 5.ibn tcns per year by 2040, cf whch cl and gas ccndensate prcduced
frcm tradtcnal reserves wll acccunt fcr 77 per cent. A sgncant ncrease
n the rcle cf unccnventcnal cl (shale cl, tar sands cl, etc.) wll lve up
tc expectatcns |] and reach i6.4 per cent cf tctal prcductcn, whch wll
amcunt tc 837m tcns by 2040. 1he remanng supply vclumes n 2040 wll be
dvded between bcfuel (5. per cent) and lqud fuels prcduced frcm natural
gas and ccal, whch wll amcunt tc |ust 23m tcns (Fgure 2.5).
29
Figure 2.5. Dynamics of liquid fuels supply structure, Baseline Scenario
40%
50%
60%
70%
80%
90%
100%
2 000
3 000
4 000
5 000
6 000
mtoe
GTL
CTL
Heavy oil
Biofuels
EOR
Oil sands
Shale and tight oil
N ti l fi ld
0%
10%
20%
30%
0
1 000
2 000
2010 2015 2020 2025 2030 2035 2040
New conventional fields
Operational fields
Share of OPEC in Baseline Scenario

Soorcc. FkI kAS
Oil Production from Shale formations in the USA
1he pctental cf unccnventcnal cl, especally that fcund n lcw-permeablty fcrmatcns cf US shale fcrmatcns,
has been evdently underestmated by the expert ccmmunty (Fgure 2.6).
Figure 2.6. Evaluated and
actual shale oil production
in the USA in 2012

Soorcc. FkI kAS, 00F AF0 2011, IFA wF0 2011.
ln 20i2, prcductcn cf these types cf cl, acccrdng tc the US Department cf Lnergy, was abcut i00m tcns |i0],
and by 2030 the USA wll ccme clcse tc the vclumes cf cl prcductcn acheved by Saud Araba. Such a pace n the
develcpment cf unccnventcnal cl turns yesterday's `shale' scenarcs ntc tcday's `baselne' cnes.
wth ths perspectve, acccrdng tc the 8aselne Scenarc, cl prcductcn n the USA wll ncrease ccnsderably,
reachng 54m tcns per year by 2040. 1hs grcwth wll be prcvded by shale cl prcductcn reachng 4i6m tcns
per year (Fgure 2.7). After 2030, ccnventcnal cl prcductcn s expected tc grcw, almcst exclusvely due tc gas
ccndensate prcductcn.
Figure 2.7. US oil
production outlook,
Baseline Scenario

Soorcc. FkI kAS
60
80
100
120
mtoe
0
20
40
DOE 2011 IEA WEO 2011 ERI RAS 2011 Actual production
300
400
500
600
700
mtce
Other unccnventcnal cl
Shale and tght cl
0
i00
200
20i0 20i5 2020 2025 2030 2035 2040
Ccnventcnal cl
30
ln the 8aselne Scenarc, glcbal cl prcductcn frcm shale plays s estmated
tc reach 420m tcns by the end cf the fcrecast percd, and t wll be mcstly
prcvded by the Ncrth Amercan plays. 1he vclumes cf cl and gas ccndensate
prcduced frcm shale plays wll be sufcent fcr the wcrld market nct tc
swtch tc alternatve lqud fuels, derved frcm natural gas cr ccal.
Oil Prices
Ol prces, lke cther prmary ccmmcdty prces, are fcrmed by many
ccuntervalng factcrs (Fgure 2.8) such as: the fundamental relatcnshp
between supply and demand, the pcstcns cf cl market partcpants, and
ncn-market factcrs manly affectng the market n the shcrt term.
Figure 2.8. - Facters affecting the price ef ei| (the mest signicant facters marked in red, |east
important in blue)
PRICE
DEMAND
EXTERNAL FACTORS
Environmental policy
Energy saving state policy/Promotion of
particular energy source consumption
New technologies of energy consumption
Economic changes
Demographic changes
New production technologies
kescarce |+se cee|cpaert
Political constraints on production
Environmental policy
Jec|ric+| +rc eccrcaic prcrt+|i|it] cl
new resources
Natural disasters
Technogenic disasters
Mi|it+r] ccrlicts +rc arrest
Geopolitics: elections, political
agreements
Psychological features of market players
Large number of players
Peak oil expectations
Informational white noise
SUPPLY
EXPECTATIONS OF MARKET
PARTICIPANTS

Soorcc. FkI kAS
The fundamental factors of
supply and demand have a long-
term impact on oil prices, other
l+ctcrs irlaerce t|e a+r|et cr|]
in the short term.
31
Long-Term Trends of Oil Pricing
Ol became a dcmnant rescurce n wcrld energy at the seccnd stage cf ts develcpment (i30-70), dsplacng
ccal, and ts prce vared n the range cf $i0-20/bbl befcre the crss cf the i70s. 1hen, the upper lmt cf cl
prces rcse ve-fcld, whle the average ccst cf cl ncreased three-fcld tc $50/bbl (Fgure 2.).
Figure 2.9 Dynamics of energy consumption and oil price
60
80
i00
i20
i40
6
8
i0
i2
i4
i6
i8
20
$200/bbl
mtce
Pistery Ferecast
0
20
40
0
2
4
6
8cenergy Ccal Ol Natural gas
Hydrc Nuclear Other renewables Shale breakthrcugh prces
Shale falure prces 8aselne scenarc prces
$15-20/bb|

Soorcc. FkI kAS
Many fcrecasts cf wcrld energy and cl market trends ccntan a wde range cf prcspectve cl prces. ln 20i2,
the lnternatcnal Lnergy Agency estmated an cl prce range cf $i00-i45/bbl (n 20ii prces) by 2035 |ii].
1he US Department cf Lnergy sees an even wder range cf 2035 prces: $50-200/bbl |i2]. 1he reccgnzed
wcrld experts predct ancther `trplng' cf cl prces n ther hgh-prce scenarcs - up tc $i50/bbl at current
prces. ln addtcn, lcw-prce scenarcs dc nct rule cut a pcssble ccllapse n prces - nuenced by demand
slcwdcwn, substtutcn cf cl by alternatve fuels, and rapd grcwth cf unccnventcnal cl prcductcn.
Outlcck-20i3 dces nct envsage ether prce `trplng' cr prce ccllapse. Advanced energy efcency technclcges
and the develcpment cf unccnventcnal scurces cf cl actually pulled dcwn prces, frcm the expected $i50
tc $i00-ii0 (200)/bbl, and mcved the prcspect cf prces `trplng' frcm ther i75-2005 level tc a tme
hcrzcn beycnd 2040. Hcwever, a senstvty analyss shcwed that even the appearance cf technclcgcal
breakthrcughs (unccnventcnal cl prcductcn, energy efcent technclcges, etc.) wculd nct be able tc return
wcrld cl market prces tc the levels they held at the prevcus stage, when they were $50/bbl (200 prces).
1he OPLC-ccntrclled market cf the i70s and i80s depended almcst
tctally cn the nterests cf the cartel's member ccuntres. Due tc the market's
nsttutcnal structure, t cculd nct fcrm a `market' prce (shcwng the actual
balance cf supply and demand) fcr cl. Only snce i86, wth the transtcn
tc prce fcrmatcn n hghly lqud nternatcnal cl exchanges, have cl prces
ccme clcser tc `deal' prces reectng the balance cf current supply and
demand, despte the nuence cf speculatve factcrs (Fgure 2.i0).
32
Figure 2.10. Correlation of balance and market oil prices
60
80
i00
i20
$20i0/bbl
0
20
40
i70 i75 i80 i85 i0 i5 2000 2005 20i0
8alance prce
8rent

Soorcc. FkI kAS
Speculative Factors in the Oil Market
After the establshment cf exchange tradng, the speculatve factcr played a sgncant rcle n shapng the
relatcnshp between equlbrum and market cl prces. Under ts nuence, the market cl prce cculd rse by
$20-40/bbl (20i0 prces) cver the balance prce and fall by $i0-i5/bbl (20i0) (Fgure 2.i0). Such a speculatve
ccmpcnent n the prce cf cl pcses extra rsks fcr cl prcducers and ccnsumers |i4], and the unpredctablty cf
the prce pcses rsks fcr cl eld develcpment prc|ects, mplementatcn cf whch takes decades. lt shculd be ncted
that the ccrrelatcn between market prce and equlbrum prce cnly became sgncant (ccrrelatcn ccefcent:
0.i8) n the phase cf cl prcng whch exsted frcm 2000 tc 20i0 n exchange tradng.
Equilibrium Oil Price
ln lcng-term prc|ectcns cf cl market develcpment, t s extremely dfcult
tc acccunt fcr the vclatle devatcn cf cl market prces frcm the balance
prce. ln ts fcrecasts, LPl PAS uses the èqulbrum prce cf cl' - the pcnt
at whch cl prcductcn n ccnventcnal and unccnventcnal elds, and the
ccmmercally vable cptcns cf cl substtutcn beng taken ntc ccnsderatcn,
wll satsfy demand durng the years cf the fcrecast percd (factually reectng
the dynamcs cf the supply and demand pcnts cf ntersectcn) |2].
As shcwn n Fgure 2.ii, the 8aselne Scenarc shcws a ibn tcn ncrease n
the cl supply by 2040; ths wll manly cccur due tc unccnventcnal supples
that wculd prevent any sgncant ncrease n prces at fcrecast levels cf
demand.
By 2040, the supply of oil will
increase by 1bn tons, mainly due
to unconventional resources.
J|ere Wi|| rct |e + sirirc+rt
growth in oil prices at forecasted
levels of demand.
33
Figure 2.11. Oil supply (cost of production) curve
i60
$20i0/bbl
i20
i40
i60
80
i00
i20
40
60
80
0
20
40
0
20
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
mtce
258
i
0
i
3
i
6
i
2
i
2
4
2
7
3
0
3
2
3
5
3
8
4
i
mtce
i40
i60
$20i0/bbl

Ccnventcnal cl
Ol sands
i00
i20
i40
Ccnventcnal cl
Ol sands
Shale and tght cl
Heavy cl
80
i00
i20
Heavy cl
20
40
60
80
0
20
40
0
7
4
4
7
2
i
6
6
4
3
i
7
2
6
5
3
8
i
3
8
8
6
i
3
4
0
8
8
3
5
7
3
0
0
4
0
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
4
3
8
3
4
6
5
7
4
3
0
5
2
0
4
mtce

Soorcc. FkI kAS
lnuenced by the grcwng prcductcn cf shale cl n the USA, there has been a
new trend cver the last three years - regcnalzatcn cf the wcrld cl market.
Fcllcwng the prcductcn cf grcwng vclumes cf supply n the USA, tradng
ccr prces n the Ncrth Amercan market have started tc fall, ccntradctng
Lurcpean market prce dynamcs. 1here has been prce dfferentatcn
between the twc man glcbal markers - w1l and 8rent (Fgure 2.i2).
ln the fcrecast percd, the change n the ratc cf supply and demand n regcnal
markets, as well as the redstrbutcn cf cl cws, wll create preccndtcns
fcr the fcrmatcn cf three cl markets: n Ncrth Amerca, wth ts man marker,
w1l; n Lurcpe, where the man marker wll be 8rent; and n the Asa-Pacc
regcn, where currently several cl markers ccmpete |i3].
34
Figure 2.12. Historical WTI and Brent price dynamics
i40
i60
$/bbl
8rent
w1l
i00
i20
i40
8rent
w1l
40
60
80
i00
i0
20
30
$/bbl 8rent-w1l dfference
0
20
40
-i0
0
i0
20
2
0
0
2
0
i
0
2
0
i
i
2
0
i
2
2
0
i
3
0
0i.2008 ii.2008 0.200 07.20i0 05.20ii 03.20i2 0i.20i3
-i0
2
0
0
2
0
i
0
2
0
i
i
2
0
i
2
2
0
i
3
Soorcc. uS 00F
1he pcssblty cf such a `regcnalzatcn' shculd nct be gncred when fcrmng
prc|ected balance prces fcr cl. ln the 8aselne Scenarc, equlbrum cl prces
wll reman wthn the prce range ccrrdcr, dened as the pcssble devatcn
cf lccal cl markers n Lurcpean, Ncrth Amercan, and Asan markets frcm
estmated equlbrum prces (n cther wcrds, average glcbal prces), takng ntc
acccunt the prce dynamcs cf dfferent markers n recent years (Fgure 2.i3).
Figure 2.13. Projected price range of equilibrium oil prices

60
80
i00
i20
i40
$20i0/bbl
0
20
40
i70 i75 i80 i85 i0 i5 2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Prcbable prce range
8alance prce
8rent
Soorcc. FkI kAS
The forecast shows the trend
for the gap between oil markers
Wicerir, relectir ccrtiraec
regionalization of the oil market.
35
Oil Processing
1cday, the wcrld faces an excess cf renng capacty, and durng the
fcrecast percd, gven the ccnstructcn cf reneres n varcus regcns, nc
capacty dect s tc be generally expected. New prc|ects are ready tc be
ccmmsscned n the Mddle Last, Afrca, and the Asa-Pacc regcn. 1hese
cculd pctentally almcst dcuble the prccessng vclumes n the Mddle
Last, creatng a sgncant amcunt cf cl prcducts, whch wll dsplace the
prcducts cf cther supplers frcm the Lurcpean and Ncrth Amercan markets,
and even thcse cf ther cwn prcducers. Hcwever, a number cf regcns (Scuth
Amerca and Asa-Pacc) wll nct be able tc meet ther petrcleum prcduct
demand frcm ther cwn capactes, whch wll thus requre expanscn after
2030 (Fgure 2.i4).
Figure 2.14. Oil processing by region, billion tons
Soorcc. FkI kAS
ln Ncrth Amerca, a hgh utlzatcn rate cf prccessng capactes s expected
up tc the end cf the fcrecast percd, due tc ncreasng cl prcductcn
frcm shale plays and Canadan tar sands. ln ccntrast, the ClS wll face an
underutlzatcn rate cf 20 per cent cf ts capactes durng the entre fcrecast
percd. 1hs wll cccur due tc a lack cf rescurces fcr Ukranan reneres, the
surplus cf renng capactes n Kazakhstan, and a declnng market nche fcr
the expcrt cf petrcleum prcducts.
International Trade
Lven n the 8aselne Scenarc, trade cws n the cl market wll change
fundamentally (Fgure 2.i5). 8y 2040, expcrt market nches wll narrcw by
275m tcns fcr key prcducers, n ccmparscn tc 20i0. Frst, the vclume cf
Lurcpe's cl mpcrts wll fall, n ccn|unctcn wth decreased utlzatcn levels
n Lurcpean reneres and stagnant demand n the develcped parts cf Lurcpe.
398
774
690
302,
2
398,
0039
4
890
916,
149
774
690
2010 2040
302,
2
4
2010 2040
612,
8347
8
CIS
890
149
2010 2040
2010 2040
325
612,
8347
8
2010 2040
1601
North America
Europe
CIS
2010 2040
2010 2040 1208
1601
North America
Europe
Middle East
404
218
247
2010 2040
Middle East
A i
258
404
2010 2040
218
247
2010 2040
2010 2040
Africa
Asia
South and
2010 2040
2010 2040
Africa
South and
Central
America America
36
Due tc the grcwth n cl prcductcn frcm US shale plays and Canadan tar
sands, by 2025 Ncrth Amerca wll have already beccme a net expcrter. 1he
mcst prcmsng market fcr crude cl s the Asa-Pacc regcn - the cnly
regcn where mpcrts wll ncrease ccmpared tc 20i0.
1he leadng pcstcn amcng cl expcrters, acccrdng tc the 8aselne Scenarc,
wll reman the Mddle Last: ts Asa-Pacc and Lurcpean expcrts wll grcw.
1he cther expcrtng regcns wll lcse ther pcstcns by 2040, partly due tc
ccmpresscn cf expcrt markets because cf stagnant demand (n Lurcpe), and
n part because cf Ncrth Amerca ccmng tc the markets as an expcrter. Hgh
ccsts cf cl prcductcn are the man prcblem fcr ncn-Mddle Last expcrtng
regcns; fcr ClS ccuntres ths s exacerbated by a hgh tax burden.
Figure 2.15. - Main directiens ef ei| ews, mi||ien tens
Soorcc. FkI kAS
Positions of the Key Market Players
1cday, the changed rcles cf players n the glcbal cl market s already evdent.
Durng the fcrecast percd, the nuence cf ma|cr nternatcnal ccmpanes s
expected tc decrease. ln the regcnal markets cf develcped ccuntres, small
ndependent ccmpanes wth effectve nncvatcn ccmpcnents - allcwng
them tc ccntrcl ccsts thrcughcut the whcle supply chan and tc develcp
unccnventcnal and dfcult-tc-reccver cl elds - wll gradually replace
the ma|crs. ln nternatcnal markets, the ma|crs wll start tc be replaced by
grcwng natcnal cl ccmpanes (NOCs), such as Saud Aramcc, the Natcnal
lranan Ol Ccmpany, Petrcbras, and Pcsneft. Mcrecver, natcnal ccmpanes
wll nct cnly take a large share n ther cwn dcmestc markets, but alsc begn
tc ccmpete n fcregn markets. 1hs s, n the rst place, characterstc cf
Chna's CNPC and PetrcChna, whcse assets already have a vast gecgraphy
- rangng frcm develcpment prc|ects n the Mddle Last tc partcpatcn n
prc|ects amed at the develcpment cf Canadan cl sands.
According to the Baseline
Scer+ric, tr+ce lcWs cl ci| Wi||
fundamentally change, forming
three oil markets: North America,
|arcpe, +rc Asi+-|+circ.
According to the Baseline
Scenario, it is expected
that the share of the world
market, dominated by national
companies will increase, while
the positions of the majors will
weaken, and small independent
companies in the North American
market will grow.
37
lt s alsc expected that the pcstcns cf ma|cr nternatcnal crganzatcns
(lke OPLC) and cf the largest ccuntres playng n the cl market wll change.
Certanly, the mcst sgncant change n the balance cf fcrces n the wcrld cl
market wll be attrbuted tc the glcbal grcwth cf US nuence. lt s estmated
that after 2030, cwng tc the develcpment cf shale cl, the USA wll be able
tc cease the mpcrt cf hydrccarbcns frcm all ccuntres except Canada and
Scuth Amerca (frcm the elds n the pcrtfclcs cf US ccmpanes).
lt s expected that by 20i5, US and Canadan reneres wll be utlzed almcst
tc ther full capactes. 8y 2020, Mexcan reneres wll be fully utlzed,
whch wll stablze the demand fcr crude cl and petrcleum prcducts and
make the regcn self-sufcent. Ncrth Amerca may beccme a net expcrter
cf cl after 2030 (Fgure 2.i6). Such an ncrease n US pcwer cn the wcrld cl
market, wth the achevement cf energy ndependence, cculd lead tc sercus
gecpcltcal shfts.
Figure 2.16. Crude oil balance in the North American market

1 000
mtoe
400
600
800
Exports
Imports from CIS
Imports from Africa
Imports from Middle East
-200
0
200
2010 2015 2020 2025 2030 2035 2040
Imports from South America
Indigenous production
Consumption
-400
Soorcc. FkI kAS
Chna, the cther ma|cr cl mpcrter, wll ncrease ts nuence n the market.
Hcwever, the reascns fcr the grcwth cf ts nuence wll be radcally dfferent
frcm the factcrs wcrkng fcr the USA. Chna, lke ncrth-east Asa as a whcle,
wll nct be able tc meet ts cwn demand fcr cl tself, and wll have tc ncrease
mpcrts, prmarly frcm the Mddle Last (Fgure 2.i7).
Chna partcpates n the cl market thrcugh lcng-term ccntracts ccncluded
at belcw-market prces, whch ensures the lcng-term securty cf ts cl
eccncmy. ln the fcrecast percd, t s expected that Chna's cl mpcrts frcm
the mcst pcltcally stable regcns (Ncrth Amerca, the ClS) wll ncrease,
as the mcst unstable supplers frcm Ncrth and Central Afrca are gradually
replaced. 1he securng cf cl mpcrts wll alsc be acheved by the expanscn
cf Chnese NOCs ntc cl develcpment and prccessng prc|ects n the Mddle
Last, the USA, Canada, and Scuth Amerca.
38
Figure 2.17. Crude oil balance in the north-east Asian market
400
500
600
700
800
900
1 000
mtoe
Imports from Africa
Imports from North America
Imports from CIS
Production in Japan
0
100
200
300
400
2010 2015 2020 2025 2030 2035 2040
Production in Japan
Production in South Korea
Production in China
Consumption

Soorcc. FkI kAS
Prccessng capactes n the ncrth-east Asan market wll ccntnue tc ncrease
thrcughcut the fcrecast percd, wth a pcstve mpact cn the supplers cf cl
tc the regcn, whch wll lead tc ncreased demand fcr crude cl up tc 2035,
fcllcwed by a gradual stablzatcn by 2040.
Durng the fcrecast percd, cnly the tradtcnal mpcrters cf cl - OLCD
members, whch are mcstly Lurcpean eccncmes - wll be unable tc
strengthen ther pcstcns. Due tc relatvely lcw cl prces and ther lcw pace
cf eccncmc grcwth, Lurcpean ccuntres wll prcbably have tc reccnsder ther
plans fcr the use cf renewable energy and gve up a number cf new hgh-ccst
cl prc|ects n the Ncrth Sea and the Ncrwegan sectcr cf the Arctc. Frcm the
very begnnng cf the percd, t s expected that the wcrkng lcad cf Lurcpean
renng capactes wll declne due tc the lcw return cn assets, wth a gradual
ncrease n renery thrcughput at the end cf the percd (Fgure 2.i8).
Figure 2.18. Crude oil balance in the European market
900
mtoe
500
600
700
800
Imports from North America
Imports from Africa
Imports from CIS
0
100
200
300
400
Consumption
0
2010 2015 2020 2025 2030 2035 2040

Soorcc. FkI kAS
1he antcpated reductcn n utlzatcn cf Lurcpean reneres wll be due
nct tc the sharp declne n demand fcr petrcleum prcducts n Lurcpe, but
tc the dsplacement cf Lurcpean-made prcducts by cheaper cnes frcm the
39
Mddle Last and the Asa-Pacc regcn. ln cther wcrds, n the mddle cf
the fcrecast percd, t wll be cheaper fcr Lurcpe tc mpcrt cl prcducts,
rather than crude cl tc be prccessed at ts cwn plants. 1cward the end cf
the fcrecast percd, when the Mddle Last and the Asa-Pacc regcn wll
ccnsume bgger vclumes cf ther cwn cl prcducts tc meet ther grcwng
dcmestc demand, capacty utlzatcn n Lurcpe wll stablze, but even by
the end cf the fcrecast percd, t wll nct reach the i0-2000 level. 1he
nuence cf Lurcpean ccuntres cn the cl market wll ccntnue tc declne, as
wll ther ablty tc meet ther cwn demands.
Stagnatcn cf Lurcpean demand fcr crude cl and ncreasngly strngent
ccmpettcn fcr the grcwng markets cf the Asa-Pacc regcn wll reduce the
pctental expcrt nche fcr Pussan prcducers. 1he stuatcn wll be aggravated
by ccsts and taxes that are hgh, ccmpared tc mcst cther expcrtng ccuntres,
and whch wll actually make Pussan cl unccmpettve, leadng tc a reductcn
cf expcrts, acccrdng tc the 8aselne Scenarc. 1hs wll have a negatve mpact
cn Pussa's budget revenues, especally n ccndtcns cf lcw wcrld prces.
1he pcstcns taken by the OPLC cl cartel cculd undergc scme surprsng
changes. On cne hand, gven relatvely lcw cl prces, scme OPLC members
(Lcuadcr, \enezuela, Algera, Lbya, and lran) wll prcbably nsst cn reducng
prcductcn quctas sc that shcrtage cf supply lfts the level cf wcrld cl
prces that are ctherwse relatvely lcw fcr them. On the cther hand, the
leadng prcducers cf the cartel (Saud Araba, Kuwat, and lraq) wll ccntnue
tc wcrk n a prce range sutable fcr them, whle they wculd see prcductcn
grcwth and the buld-up cf ther share n expcrt markets as apprcprate
steps tc be undertaken.
Fcrecast balance prces wll vary n a range sutable fcr the leadng OPLC
ccuntres - frcm $80 tc $ii5/bbl (20i0 prces) (Fgure 2.i). Due tc the
ccmmencement cf shale cl prcductcn n US plays, t s expected that prces
wll decrease durng the percd up tc 2020, wth a gradual return tc the
current level by 2040.
Figure 2.19. - reakeven price ranges ef preducing ceuntries' budgets: efcia| statements and expert
assessment
$2010/bbl $/bbl
80
100
120
140
160
80
100
120
140
160
$2010/bbl $/bbl
0
20
40
60
0
20
40
60
Nigeria Kuwait Saudi Arabia UAE Russia Iran Algeria Venezuela
Price range
Estimated price
Claimed price
Balance price (right axis)

CclcolctcJ pricc. Arclyticcl Ccrtrc oj thc kl 6ovcrrncrt
FstinctcJ priccs. by thc 6ovcrrncrt oj ScoJi Arcbic, 0ncr lircrcc Hiristcr 0crwish cl-8closhi, Fnirctcs N80, Arcb
Pctrolcon Irvcstncrts Corp., thc lorbcs ncczirc, kowciti lircrcc Hiristcr Hostcjc cl-Shcncli, CI8N, crJ IFA.
Soorcc. FkI kAS, Arclyticcl Ccrtrc oj thc kl 6ovcrrncrt
40
lt s natural that there s a ccnsderable dvergence n the estmates cf cl
prcducng ccuntres' budget breakeven prces; between thcse n cfcal
statements cn the cne hand and n experts' research cn the cther. 1he
cfcal prces are always pcltczed, and reect the speccs cf the budgetary
ccntrcl cf the ccuntry. 1he largest dfferences n the estmates are cbserved
n ccuntres that are nct mcnc expcrters, cr ccuntres wth an unstable
pcltcal stuatcn.
ln fact, twc `pcles' cf the requred prce level are fcrmed amcng ma|cr
expcrters n OPLC: cn the cne hand, there are ccuntres - lran, Algera,
\enezuela - that are extremely senstve tc prce reductcn and, cn the cther,
ccuntres whch are less senstve, ready tc cperate at relatvely lcw prce
ranges. lt s very mpcrtant tc ncte that, acccrdng tc the fcrecast, Saud
Araba wll |cn the seccnd grcup (Fgure 2.i).
Such dvergence cf nterests may lead tc ccncts wthn the crganzatcn and
lcss cf nuence n the wcrld market fcr a number cf ts members, cr fcr all
the OPLC ccuntres. Alsc, the leadng OPLC prcducers have recently launched
a number cf prccessng prc|ects, effectvely shftng them frcm beng cl-
prcducng ccuntres ntc `vertcally ntegrated supplers' (Fgure 2.20).
Figure 2.20 OPEC oil balance
255
194
2 500
mtoe
199
1 000
1 500
2 000
0
500
2010 2020 2040
OPEC production Spare crude oil production capacity
Oil exports Oil products exports
Domestic consumption

Soorcc. FkI kAS
Fcr OPLC members, the market wll expand, despte the nct-sc favcurable
prce stuatcn n the 8aselne Scenarc. On the cne hand, ths wll be due tc
grcwng demand n the Asa-Pacc regcn and ts cwn rsng demand. On
the cther, the cartel may partally ccmpensate fcr the lcss cf revenue due
tc the lack cf grcwth n cl prces by the ntrcductcn cf addtcnal renng
capactes and the sale cf prccessed cl prcducts n the expcrt market.
ln general, t can be stated that there wll be a redstrbutcn cf nuence
between grcups cf ccuntres and nternatcnal crganzatcns.
A sirirc+rt cillererce ir
prices which are suitable for
OPEC members might signal
potential instability and lack of
coordination of the activities of
the organizations members.
Over the forecast period, OPECs
potential impact on the average
annual oil price is estimated at
$29/bbl (2010 prices), with
prcisicr lcr sirirc+rt c|+res
in volumes of spare capacity.
41
Can OPEC Affect Oil Prices?
Any real pcssblty fcr OPLC members tc nuence the prce cf crude cl s dcubtful even ncw. OPLC has largely
cnly cne lever cf nuence - cl prcductcn quctas fcr ts members, cr `ccntrcl' cver free prcductcn capactes.
8ased cn the fcrecasted free prcductcn capactes (i0-250m tcns), the pctental mpact cf the cartel cn prces
can be estmated fcr the entre fcrecast percd as fcllcws:
1he cartel can have an upward mpact cn equlbrum prces cnly by fully cccrdnated actvtes and reducng
prcductcn quctas fcr the entre amcunt cf spare capactes frcm the `basc vclumes'. 1hs wll ncrease the cl
prce by $5-/bbl (20i0 prces).
1c have a dcwnward mpact cn equlbrum prces (an attempt tc ncrease ts expcrt nche and squeeze cut
cther players by prce dumpng), the cartel wculd have tc rase prcductcn quctas and reduce the use cf spare
prcductcn capactes. Assumng ccmplete cccrdnatcn cf actcn, the prces wll fall by nc mcre than $2-6/bbl
(20i0 prces) (Fgure 2.2i).
Figure 2.21. Changes
in the balance price
depending on OPEC policy,
Baseline Scenario
Soorcc. FkI kAS
ln fact, such a small senstvty cf fcrecast equlbrum prces tc OPLC's pctental actvtes cb|ectvely characterzes
that the cl cartel wll have lttle mpact cn wcrld prces.
Gas Market
Gas Demand
ln the 8aselne Scenarc, by 2040 fcrecast glcbal gas ccnsumptcn wll reach
5.3 tcm - ths s 60 per cent hgher than the vclumes ccnsumed n 20i0.
As n the case cf lqud fuels, the man ncrease n demand fcr gas (8i per
cent) wll be attrbuted tc develcpng ccuntres (Fgure 2.22). 1he man drver
cf ths rapd grcwth n demand fcr gas n all regcns wll prmarly be the
develcpment cf gas-red pcwer generatcn due tc ncreasng electrcatcn
and a ccrrespcndng ncrease n electrcty ccnsumptcn; develcpng
ccuntres are alsc expected tc ncrease ther ndustral gas demand rapdly.
1he envrcnmental advantages cf gas wll suppcrt (but nct determne) ts
rcle n ndvdual markets.
5
0
5
i0
20ii 2020 2030 2040
$20i0/bbl
-i5
-i0
-5
Prce ncrease by the amcunt cf fcrecasted spare crude cl
prcductcn capacty
Prce decrease by the amcunt cf fcrecasted spare crude cl
prcductcn capacty
42
Figure 2.22. Gas consumption by region, Baseline Scenario
3 000
4 000
5 000
6 000
bcm
Africa
Middle East
CIS
Developing Asia
0
1 000
2 000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Developing Asia
Developed Asia
Europe
North America

Soorcc. FkI kAS
Frst cf all, the prcspects fcr gas demand n the electrc pcwer sectcr are
determned by ts prce: n recent years, fuel ccmpettcn between natural
gas, ccal, and subsdzed renewable energy scurces has nct always been n
favcur cf gas. Fcr nstance, n 200-i3, lcw prces fcr ccal used n pcwer
generatcn (prcvcked by cheap shale gas, whch replaced ccal n the US
market) n Lurcpe made gas-red generatcn unattractve |i5] and have
already led tc the clcsure cf a number cf gas-red pcwer statcns and tc a
stagnation in demand for gas in the region
2
.
1he expected declne n eccncmc grcwth n the eurczcne and the ambguty
cf Lurcpean energy pclcy - amed prmarly at the decarbcnzatcn cf the
eccncmy and reductcn n the rcle cf fcssl fuels - has led tc a cautcus
assessment cf the prcspects cf gas ccnsumptcn n the regcn. Acccrdng tc
cur estmates, the average annual grcwth n Lurcpean demand fcr gas wll
nct exceed 0.5 per cent (the tctal grcwth wll be cnly i5 per cent frcm 20i0
tc 2040).
Amcng cther OLCD ccuntres, cnly Ncrth Amerca wll shcw relatvely hgh
grcwth rates - an average cf 0.8 per cent per year - due tc cversupply and
lcw gas prces. Cas demand n the regcn wll grcw n all sectcrs: electrc
pcwer, where ccal wll be dsplaced by gas; ndustry, where ts use wll
actvely develcp, ncludng ts use n the chemcal sectcr; and transpcrtatcn.
Cas ccnsumptcn wll ncrease mcre ntensvely n the develcpng wcrld: n
Asan ccuntres, t wll mcre than trple; t wll dcuble n Scuth and Central
Amerca; and t wll rse by 75-78 per cent n the Mddle Last and Afrca
(Fgure 2.23).
2 At the tme cf Outlcck-20i3, the US ccal prce s hgher than the prce cf gas, whle n Lurcpe, gven the reduced prce cf CO2 (3 eurcs per
tcn), electrc pcwer generatcn has swtched tc ccal.
lr t|e rrst p|+ce, cea+rc lcr
natural gas in the electric power
sector will be determined by
its price. In Europe, demand is
expected to stagnate; in North
America, there will be moderate
growth; in developing countries,
gas consumption will increase
rapidly.
43
Figure 2.23. The Balance of gas supply and demand in 2040, Baseline Scenario
bcm
5 500
6 000
bcm
2040 Level
4 500
5 000
5 500
2040 Level
3 500
4 000
4 500
3 000
3 500
4 000
2 000
2 500
3 000
0AAaa0
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Soorcc. FkI kAS
Production of Shale Gas in the USA
1he USA ccntnues tc ramp up the prcductcn cf shale gas. Despte the reductcn n prces and sgncant excess
supply n the market n 20i2, ts average annual prcductcn, acccrdng tc the Department cf Lnergy cf the USA,
amcunted tc abcut 260 bcm |i0]. Several years agc, the USA became the wcrld's largest natural gas prcducer,
hcwever, acccrdng tc baselne estmates, the ccuntry wll nct retan ts pcstcn tc the end cf the fcrecast percd.
ln the future, gas prcductcn n the USA, acccrdng tc the 8aselne Scenarc estmates, wll stablze, and even
undergc a small reductcn after 2020, fcllcwed by a slcw rse tc 870 bcm by 2040. 1hs grcwth wll be acheved
due tc shale gas prcductcn, whch wll reach 485 bcm by 2040 (Fgure 2.24).
Figure 2.24. US gas
production forecast,
Baseline Scenario

Soorcc. FkI kAS
00
i 000
bcm C8M
Shale gas
Ccnventcnal gas
500
600
700
800
i00
200
300
400
0
20i0 20i5 2020 2025 2030 2035 2040
44
Figure 2.25. World natural gas supply curve (cost of production) Baseline Scenario

2010
3
3,5
4 $20i0/mmbtu
2010
Demand
2
2,5
3
3,5
Ccnventcnal gas
Shale gas
Demand
i
i,5
2
2,5
Ccnventcnal gas
Shale gas
0
0,5
i
i,5
i2562256i478i2588i367
b
8 $20i0/mmbtu
2040
0
0,5
i
i
5
2
3
0
5
4
5
6
6
0
7
6
2
i
2
i

0
6
5
i

2
i
6
i

3
6
i

5
2
i
i

6
7
4
i

8
2
7
i

7
8
2

i
3
i
2

2
8
2
2

4
3
5
2

5
8
8
2

7
3
8
2

8
i
3

0
4
3
3

i
6
3

3
4
7
bcm
6
7
8 $20i0/mmbtu
2040
4
5
6
7
Crewth
2
3
4
5
Demand
0
i
2
3
0365825i47i70362628i5
0
i
4
0
3
i
3
5
8
6
8
5
i

i
3
5
i

4
0
8
i

6
8
2
i

5
5
2

2
3
i
2

5
0
4
2

7
7
7
3

0
5
i
3

3
2
7
3

6
0
0
3

8
7
3
4

i
4
6
4

4
2
2
4

6
6
4

5

2
4
2
5

5
i
8
5

7
i
6

0
6
5
bcm
Soorcc. FkI kAS
Gas Supply
Analyss cf elds and areas cf gas prcductcn shcws that there are avalable
pctental rescurces n the wcrld that can be prcduced at prces lcwer than
4 $/mmbtu by 2040 (Fgure 2.25).
ln the 8aselne Scenarc, all wcrld regcns (excludng Lurcpe) wll sgncantly
ncrease gas prcductcn (Fgure 2.26). 1he leaders n terms cf grcwth (n
addtcn tc the tradtcnal supplers - the ClS and the Mddle Last, whch by
2040 wll have grcwn by 5 per cent and 5 per cent respectvely), wll be
the develcpng ccuntres cf Asa (+202 per cent). Ncrth Amerca wll be next,
wth a prcductcn grcwth cf 3 per cent.
45
Figure 2.26. Gas production by region, Baseline Scenario

6 000
bcm
3 000
4 000
5 000
Africa
Middle East
CIS
0
1 000
2 000
Developing Asia
Developed Asia
Europe
North America
2000 2005 2010 2015 2020 2025 2030 2035 2040
Soorcc. FkI kAS
Ma|cr prcductcn gans wll be prcvded by new reserves cf ccnventcnal
gas and by further expanscn cf unccnventcnal gas, whch by the end cf the
fcrecast percd wll acccunt fcr i5 per cent cf wcrld gas prcductcn (shale gas:
ii per cent; ccal-bed methane: 3 per cent; and bcgas: i per cent) (Fgure 2.27).
Figure 2.27. Gas production by source, Baseline Scenario
6 000
bcm
3 000
4 000
5 000
Biogas
Coal-to-gas (China)
Offshore (USA)
Shale
1 000
2 000
CBM
Associated Gas
New fields
Operational fields
0
2010 2015 2020 2025 2030 2035 2040
Soorcc. FkI kAS
North America will achieve the largest increase in unconventional gas
prcductcn. Other wcrld regcns are cnly n the ntal stages cf geclcgcal
explcratcn, and ths entals great uncertanty regardng the pctental cf shale
gas prcductcn and, n certan regcns, regulatcry ccnstrants. lt s assumed
n the 8aselne Scenarc that asde frcm Ncrth Amerca, shale gas prcductcn
wll be carred cut cnly n Argentna, Chna, lnda, Scuth Afrca, Australa, and
Lurcpe, and wll nct exceed 70 bcm n tctal by 2040.
46
At the same tme, gas prcductcn frcm new tradtcnal elds wll beccme
mcre hgh-tech. 1here wll be the need fcr develcpment cf deepwater elds,
thcse wth mcre ccmplex geclcgcal structures, and elds lccated n harsh
clmatc ccndtcns.
Gas Price
Currently, the wcrld s wtnessng a transfcrmatcn cf the varcus regcnal
gas prcng systems, prmarly due tc the gradual expanscn cf trade based cn
`gas-tc-gas' ccmpettcn. Hcwever, mcre than 60 per cent cf gas n the wcrld
s stll scld at regulated prces, cr at prces related tc cl ndexes, cr by cther
mechansms (Fgure a).
Figure 2.28. Current world pricing of gas and its changes in 200510

Soorcc. FkI kAS, I6u 200-2012 1ricrrion work kcport, |orc 2012
Currently, the regcnalzatcn cf gas market prces s beccmng mcre
prcncunced, due nct cnly tc the mechansms cf regulatcn and prcng, but
alsc by prce levels:
Lcw prces have been establshed n recent years n the US spct market,
due tc cheap dcmestc prcductcn;
Medum prce levels have been establshed n the Lurcpean market, wth
hybrd prcng (arcund half the gas s suppled at spct-ndexed prces and
the cther half lnked tc the prces cf petrcleum prcducts), and due tc a
tempcrary excess supply cf gas;
1he hghest prces are cbserved n the Asan market, where tradng s
carred cut manly wth reference tc the prce cf crude cl;
1he gcvernments cf mcst ccuntres that are net expcrters cf gas, and alsc
many mpcrtng develcpng ccuntres, are eager tc keep dcmestc prces
belcw the wcrld level, tc suppcrt cther sectcrs cf the eccncmy and tc
reduce sccal tenscns.
47
Further changes n regcnal prcng mechansms wll be drven, apparently,
n the drectcn cf ncreasng the prcpcrtcn cf spct-ndexed supples n all
markets. 1he rapd develcpment cf the LNC market and ts glcbalzatcn
wll renfcrce ths prccess, nct cnly n Lurcpe but alsc n the Asa-Pacc
regcn, where ccnsumers, aganst the backgrcund cf hgh prces, lcck fcr any
cppcrtunty tc reduce ther blls. Mcst develcpng ccuntres wll cbvcusly
retan prcng based cn gcvernment regulatcn fcr sgncant vclumes cf gas
trade n ther dcmestc markets; there cculd be lmted ccmpettcn n the
clcsed dcmestc market, cr prces lnked tc thcse n the nternatcnal market
wth scme lcwerng ccefcents.
Calculatcns usng the mcdel have ccnrmed that, n the 8aselne Scenarc,
the sgncant dfferences between regcnal gas prces seen n 2006-8 wll
reman. 1he man reascn fcr ths s the hgh prce cf gas transpcrtatcn, whch
fcr nterccntnental shpments, adds mcre than 4 $/mmbtu tc the prce cf
gas. Acccrdngly, ths hgh ccst cf transpcrtatcn suppcrts the regcnalzatcn
cf gas markets and prevents the creatcn cf a sngle lqud market. ln ths
stuatcn, the lmted ablty tc redrect rcutes, the hgh mutual dependence cf
supplers and custcmers cn ppelne supply, and the ccntnung lmtatcns cf
LNC market exblty stll gve scme advantages tc the tradtcnal mechansm
cf lnkng tc alternatve fuels, whch wculd ncrease predctablty, reduce
nvestment rsks fcr prcducers, and smplfy the prccess cf prc|ect fundng.
lt s estmated that by the end cf the fcrecast percd, Lurcpe and the Asa-
Pacc regcn wll experence a nctceable prce ncrease (Fgure 2.2), due
tc the need tc develcp new and mcre expensve elds tc meet demand. ln
these crcumstances, the Ncrth Amercan market wll nd tself n a prce
range determned by ts cwn prcductcn; the USA, fcr the fcrecast percd,
wll retan the lcwest prces whch, hcwever, wll alsc ncrease by the end
cf the percd. ln 20i5-30, Lurcpe wll experence a declne n prces due tc
sluggsh demand and cversupply cf gas, whle there wll be rapd demand
grcwth n the Asa-Pacc regcn whch wll stmulate the develcpment cf
a large number cf new, qute expensve, gas supply prc|ects and, n ccntrast,
an addtcnal prce premum wll preval here untl 2020-25.
Figure 2.29. Forecast weighted average price* of gas by regional market,
Baseline Scenario
12
14 $2010/mmbtu
6
8
10
0
2
4
Europe (average weighted) China (average weighted)
Japan (average weighted) USA (Henry Hub)
0
2000 2005 2010 2015 2020 2025 2030 2035 2040

* Weighted average price between the prices of long-term contracts linked to alternative
fuels, and spot prices.
Soorcc. FkI kAS
For the period to 2040,
conditions will not be right for
the formation of a single global
+s a+r|et +rc + arirec +s
price.
48
International Trade
Fcr the next three decades, the man fccus cf the nternatcnal gas trade
wll be Asa whch, acccrdng tc estmates, wll ncrease ts net mpcrts by
nearly 500 bcm by 2040, whch mples, n n ts turn, the need fcr new huge
nfrastructure and supply rcutes.
1he develcpment cf shale gas prcductcn n the USA, even whle remanng
a regcnal phencmencn, has already had a sgncant ndrect mpact cn the
wcrld market, especally n terms cf redstrbutcn cf LNC cws. Such an
nuence wculd cnly ncrease wth the pcssble launch cf LNC expcrts frcm
the USA and Canada whch, startng frcm 20i6-i8, are lkely tc be delvered
tc premum markets cf the Pacc, Latn Amerca, and Lurcpe (Fgure 2.30).
Figure 2.30. Inter-regional gas trade in 2040, Baseline Scenario, bcm

Soorcc. FkI kAS
ln ths perspectve, the emergence cf ma|cr new players n the LNC market
(the USA and Canada; Australa, whch wll by 20i8 leave Qatar behnd n
terms cf lquefactcn facltes; and Last Afrca) wll sgncantly redrect the
rcutes cf tradtcnal prcducers, ncreasngly fccusng expcrts cn Asa.
Positions of the Major Market Participants
ln the fcrecast percd, acccrdng tc the 8aselne Scenarc, the USA and Chna
wll beccme the mcst nuental partcpants n the gas market, n addtcn
tc Pussa. 1he USA, beng behnd Pussa n terms cf gas prcductcn and
expcrt vclumes by 2040, wll, hcwever, sgncantly ncrease ts nuence
by enterng the LNC market. Ncrth Amerca wll beccme ccmpletely self-
sufcent, reducng ts dependence cn any external supplers, and able tc
add abcut i00 bcm cf gas tc the markets (Fgure 2.3i), respcndng exbly
tc market changes and prcmptly fcrwardng supples tc the mcst lucratve
markets.
49
Figure 2.31. Gas balance in North America
600
800
1 000
1 200
bcm
Exports
LNG from Africa and Middle
East
LNG from South and Central
America
LNG from Asia
-200
0
200
400
2010 2015 2020 2025 2030 2035 2040
Consumption

Soorcc. FkI kAS
As a result, t s lkely that US spct prces (plus the ccsts cf gas lquefactcn
and transpcrtatcn) wll fcrm a knd cf `celng' fcr prces n the markets cf
the Pacc and Atlantc basns, whch means that when prces rse abcve ths
level, US LNC plants wculd fcrward sgncant amcunts cf gas tc the market,
fcrcng prces dcwn tc the desred level. 1herefcre, the USA wll be able tc
nuence the prce stuatcn n ma|cr gas markets, and the US spct ndex
mght beccme a prce reference fcr the cther markets.
1he Lurcpean market wll shcw lcw rates cf grcwth, but aganst the
backgrcund cf weak dcmestc prcductcn ts need fcr gas mpcrts wll
nevtably grcw (Fgure 2.32). Scme cf these needs wll be ccvered by
ppelne gas, but a grcwng share n gas demand (3i per cent cf Lurcpean
ccnsumptcn by 2040) wll be ccvered by LNC supply.
Figure 2.32. Gas balance in Europe
800
bcm
400
500
600
700
800
Pipeline gas from CIS
LNG from CIS
LNG from North America
LNG from South and Central America
LNG from Africa
0
100
200
300
2010 2015 2020 2025 2030 2035 2040
LNG from Middle East
Pipeline gas from Middle East
Pipeline gas from Africa
Consumption
2010 2015 2020 2025 2030 2035 2040
p
Soorcc. FkI kAS
50
1he gas market cf ncrth-east Asa (Fgure 2.33) wll grcw the fastest. lt wll
hcld seccnd place n the wcrld by vclume, partally due tc the rapd grcwth
cf demand n Chna.
Chna's cwn large reserves cf unccnventcnal gas and ts desre tc actvely
develcp them, ts successful pclces cf mpcrt dverscatcn, ts accelerated
develcpment cf nfrastructure, and prcng refcrm n ts dcmestc market - all
make Chna the mcst dfcult ccuntry tc fcrecast, but yet t s an ncreasngly
mpcrtant player n the glcbal market. Meanwhle, Chna strengthens ts
pcstcn n cther regcns thrcugh the partcpatcn cf ts natcnal ccmpanes
n the develcpment cf gas rescurces, securng ts supples wth lcng-term
ccntracts at reduced prces.
Figure 2.33. Gas balance in north-east Asia
400
500
600
700
800
900
1000
bcm
LNG from developed Asia
LNG from North America
LNG from Africa
Pipeline gas from CIS
LNG from CIS
LNG from developing Asia
0
100
200
300
400
2010 2015 2020 2025 2030 2035 2040
LNG from developing Asia
LNG from Middle East
Pipeline gas from Burma
Consumption

Soorcc. FkI kAS
OPLC members wll clearly lcse ther pcstcns n the gas market due tc the
emergence cf pcwerful new players (the USA, Australa), and because cf the
explcsve grcwth n dcmestc demand fcr gas and the need tc satsfy t tc
avcd sccal prcblems, even at the expense cf gas expcrts.
ln ths scenarc, Pussa wll reman an mpcrtant partcpant n the gas
market, whle mantanng leadershp n prcductcn and expcrt (althcugh ts
expcrt perfcrmance wll be scmewhat lcwer than the gures used n cfcal
fcrecasts). Hcwever, Pussa's barganng pcstcn wll be weakened, due tc
ts nvestment n expensve prc|ects, gas frcm whch wll be margnal n all
expcrt markets. 1hs wll make the ccuntry susceptble tc even relatvely
small uctuatcns n market ccndtcns: n such stuatcns, Pussan gas wll
be pushed cut cf the market by cheaper supplers.
51
Solid Fuel Market
Untl i60, scld fuels (manly ccal) prcvded the bulk cf energy ccnsumed n
the wcrld, due tc ther eccncmc and technclcgcal accessblty; frcm i60
tc i80, the share cf scld fuels n glcbal energy ccnsumptcn fell. Hcwever,
durng the last 30 years, scld fuels have stablzed at arcund 25 per cent cf
prmary energy ccnsumptcn, and durng 2000-i0 scld fuels shcwed the
hghest absclute levels cf grcwth (almcst half cf tctal energy ccnsumptcn
grcwth), ncreasng ther share tc 28 per cent.
Acccrdng tc cur estmates, durng the next three decades, scld fuels wll
mantan ther sgncance n the energy sectcr and wll satsfy abcut a
quarter cf glcbal energy demand. ln ths sectcr, ccal wll ccntnue tc play
the key rcle.
Coal
Durng the fcrecast percd up tc 2040, the man ncrease n wcrld ccal
ccnsumptcn wll be attrbuted tc the develcpng Asa-Pacc ccuntres
(especally Chna and lnda) (Fgure 2.34). 1he OLCD ccuntres, manly Lurcpe
and the USA, wll reduce ther demand fcr ccal.
Figure 2.34. Coal consumption by region, Baseline Scenario
7 000
8 000
mt
5 000
6 000
7 000
Africa
Middle East
2 000
3 000
4 000
CIS
Developing Asia
Developed Asia
Europe
0
1 000
2 000
Europe
North America
2000 2005 2010 2015 2020 2025 2030 2035 2040
Soorcc. FkI kAS
1he pcwer sectcr n the develcpng ccuntres cf Asa wll prcvde the man
grcwth n ccal ccnsumptcn. Currently, the leaders n ccal-red generatcn
capacty are Chna, the USA, Pussa, and lnda; the planned new generatcn
facltes n Chna and lnda (cver 500 Cw per ccuntry) wll make them
absclute leaders (Fgure 2.35) wth an aggregate share cf 77 per cent cf the
wcrld's tctal ccal-red generatng capacty.
52
Figure 2.35. - Insta||ed and p|anned cea|-red capacity
400
600
800
i 000
i 200
i 400
i 600
i 800
Cwh
Planned capacty ccmmsscnng
lnstalled capacty
0
200

Soorcc. FkI kAS
8y 2040, develcpng ccuntres n Asa wll have strengthened ther leadershp
nct cnly n ccal ccnsumptcn but alsc n ccal prcductcn (Fgure 2.36). Ccal
prcductcn n Lurcpe wll drcp by half, whch, despte the declnng demand
fcr ccal n Lurcpean ccuntres, wll lead tc addtcnal mpcrts cf ccal beng
needed.
Figure 2.36. Coal production by region, Baseline Scenario
3 000
4 000
5 000
6 000
7 000
8 000
mt
Africa
Middle East
CIS
Developing Asia
D l d A i
0
1 000
2 000
2000 2005 2010 2015 2020 2025 2030 2035 2040
Developed Asia
Europe
North America

Soorcc. FkI kAS
Under the 8aselne Scenarc, nternatcnal steam ccal trade wll reach i.4bn
tcns by 2040. 1he equlbrum prce cf traded ccal, calculated n acccrdance
wth the balance cf supply and demand (Fgure 2.37), wll be at least $i20/
tcn (20i0 prces).
Non-OECD Asia will retain its
leadership in coal consumption;
its share by 2040 will amount to
75 per cent.
53
Figure 2.37. Global steam coal supply for the international trade, Baseline Scenario, 2040*
160
$2010/t
South Africa
140
160
$2010/t
South Africa
Indonesia
Russia Steam coal
l
120
140
Indonesia
Russia
Columbia
Australia
Other
Steam coal
volume
100
120
Australia
Other
80
100
60
80
20
40
60
0
20
0
0 150 300 450 600 750 900 1050 1200 1350 1500 0 150 300 450 600 750 900 1050 1200 1350 1500

* f.o.b. prices are shown both for maritime trade and at the border for land transportation.
Soorcc. FkI kAS
Coal Pricing in International Trade
Spct prces fcr ccal are fcrmed regcnally, but generally are nterrelated. 1here are several man tradng platfcrms.
Fcr expcrters: prces are fcrmed cn f.c.b. terms; the man pcrts at whch ths s dcne are Pchards 8ay (Scuth Afrca),
8clvar (Cclcmba), and Newcastle (Australa). Fcr mpcrters: prces are fcrmed cn c..f terms; at APA (Amsterdam,
Pctterdam, and Antwerp) and cther pcrts. 1hese pcrt prces are determned by supply and demand.
Durng 2008-i2, the market prce fcr ccal experenced turbulence due tc the glcbal nancal crss, the ccds n
Australa, the nuclear plant dsaster n lapan, ncreased supply frcm the USA, and cther factcrs (Fgure 2.38). ln
the percd up tc 2040, we expect a relatvely mcderate ncrease n equlbrum prces fcr traded ccal, as a result cf
ncreasng demand and grcwng prcductcn ccsts.
.
8y 2040, the exstng tradng platfcrms wll stll play a key rcle, but there
wll be scme scrt cf redstrbutcn cf the shares n wcrld trade. ln Lurcpe,
trade n the APA trangle wll be reduced, whle n Asa new trade centres wll
pcssbly emerge. Our perspectve assumes that the structure cf the market
wll largely rely cn lcng-term xed prce ccntracts (Fgure 2.38), that prces
wll be based cn the prces at certan pcrts, and that these ccntracts wll
ccver 80 per cent cf the market leavng spct ccntracts wth 20 per cent.
Figure 2.38. Weighted average import prices for steam coal, Baseline
Scenario
40
60
80
i00
i20
i40 $20i0/t
0
20
2000 2005 20i0 20i5 2020 2025 2030 2035 2040

Soorcc. FkI kAS
Moderate growth in equilibrium
prices for traded coal, ranging
from $120 to $125/ton (2010
prices) is expected during the
forecast period.
54
8y 2040, under the 8aselne Scenarc, the glcbal ccal market wll mantan ts
bpclar structure: the Atlantc and Asa-Pacc markets wll reman (Fgure
2.3). 1he Asa-Pacc market wll cccupy the leadng pcstcn; ts share cf
the wcrld's steam ccal trade wll exceed 70 per cent.
Figure 2.39. Key Steam Coal Trade Flows by 2040

Soorcc. FkI kAS
1he largest expcrters (Australa, Scuth Afrca, lndcnesa, Pussa, and
Cclcmba) and mpcrters (Lurcpe, develcped and develcpng Asan ccuntres)
wll dcmnate the glcbal ccal market. 8y 2040, lnda wll beccme the largest
mpcrter cf ccal. 1he USA wll reman a ccal expcrter, but ths rcle wll be
largely determned by the stuatcn n ts dcmestc market, and the ccmpettcn
between ccal and gas. Lnvrcnmental requrements and emsscn charges
wll strcngly nuence the market. 1he 8aselne Scenarc dces nct envsage
a sgncant ncrease n payments fcr CO2 emsscns, cr the extenscn cf
ths practce wcrldwde. Cven the ncreased ccmpettcn between ccal and
gas n the future, we dc nct expect a wdespread ntrcductcn cf clean ccal
technclcges.
Despte the adequate rescurce base, the ntrcductcn cf new prcductcn
capactes s lmted by the hgh captal ntensty cf ccal prc|ects. Hcwever, f
there s an ncrease n ccal prces and demand, exstng rescurces wll be able
tc ncrease ccal prcductcn sgncantly. Cven a favcurable market stuatcn,
Pussa wll be cne cf the best-placed ccuntres n terms cf an antcpated
ncrease n ccal prcductcn.
J|e Asi+-|+circ reicr Wi|| |c|c
the dominant position in global
steam coal trade, accounting for
more than 70 per cent.
Despite the adequate resource
base of coal, development
of new coal mining capacity
is limited by the high capital
costs of a number of projects.
Nevertheless, if the demand
for coal, and its price, increase,
existing coal resources will allow
+ sirirc+rt ircre+se ir cc+|
production.
55
Solid Biomass
1he term `scld bcmass' refers tc wccd and wccd prcducts (pellets,
brquettes), dry and dehydrated plants, etc. 1cday, tradtcnal bcmass
remans the mcst affcrdable energy rescurce fcr pccr ccuntres.
Hcwever, prccessed bcmass (fcrmed ntc pellets, brquettes, etc.), s
beccmng ncreasngly pcpular n develcped ccuntres. Fcr example, ts
prcductcn n the LU had ncreased tc 80 mtce by 20ii (Fgure 2.40).
Figure 2.40. Solid biomass production in the European Union
60
0
mtce
0
30
2000 200i 2002 2003 2004 2005 2006 2007 2008 200 20i0 20ii
Soorcc. For0bscrv'Fk
ln certan markets, bcmass and scld hcusehcld waste are qute ccmpettve
wth ccnventcnal energy scurces |i6] (Fgure 2.4i).
Figure 2.41. 2012 The levelized cost of electricity ranges
Large hydrc
waste
Onshcre wnd
8cmass ncneratcn
0 50 i00 i50 200 250
CCC1
Ccal
Nuclear
$/Mwh

Soorcc. worlJ Sorvcy oj Frcry 1cchroloics, 8loonbcr Ncw Frcry lircrcc 2012
56
Wood Pellets
Amcng the dfferent types cf scld bcmass, the use cf wccd pellets has beccme
wdespread. ln 20i0, wcrld prcductcn cf wccd pellets reached scme i5.7m
tcns, abcut 60 per cent cf whch was prcduced n the LU. 1he LU s alsc a ma|cr
ccnsumer cf ths fuel - n 20i0 ts share amcunted tc 85 per cent cf glcbal demand.
Calculated n terms cf energy equvalence, the prce cf pellets s apprcxmately
twce that cf gas.
8y 2040, glcbal ccnsumptcn cf pellets, acccrdng tc the fcrecast, wll reach 2m
tcns; ths wll be manly used n the LU, Ncrth Amerca and east Asa (1able 2.i).
Nuclear Energy
Durng the fcrecast percd, nuclear energy wll cbvcusly begn a new stage
cf develcpment after nearly 60 years cf cperatcn. ln addtcn, the servce
lfe cf many nuclear reactcrs currently n cperatcn wll be prclcnged fcr up
tc 60 years. Despte ths prclcngatcn, a number cf nuclear facltes wll be
deccmmsscned, and ths wll nct be balanced by the ntrcductcn cf new
nuclear capacty n all regcns (Fgure 2.42).
Figure 2.42. Cumulative dynamics of NPP commissioning and decommissioning by region
500
GW
100
120
WorId nucIear pIants capacity growth, GW
400
500
GW
20
40
60
80
100
120
WorId nucIear pIants capacity growth, GW
300
400
-20
0
20
40
60
200
300
Capacity commissioning
0
100
200
Capacity commissioning
0
100
2013 2018 2023 2028 2033 2038
-100
0
2013 2018 2023 2028 2033 2038
Capacity conclusion
-200
-300
200
North America Europe CIS Developed Asia China India Other countries
-300
North America Europe CIS Developed Asia China India Other countries

Soorcc. FkI kAS
Table 2.1. Demand for
wood pellets by region
until 2040, million tons
2020 2040
EU 32 49
North
America
6 14
East Asia 8 20
Soorcc. FkI kAS
57
1he mcst senstve stuatcn wll be n OLCD ccuntres, whch dc nct always
ntend tc replace retred capactes wth new cnes (Fgures 2.43 and 2.44).
lnstances cf abrupt shcrt- and medum-term grcwth n demand fcr alternatve
capactes and energy mpcrts may therefcre be expected. 1he nstalled
capacty cf deccmmsscned nuclear facltes n OLCD ccuntres wll be fcur
tmes hgher than that n ncn-OLCD ccuntres, whch have reactcrs that were
bult mcre recently.
After 2020, the wcrld wll be lkely tc return tc the level cf nuclear capacty
addtcns that t reached n the i80s and i0s, whch wll be mcstly due tc
develcpng ccuntres. 8y the end cf the fcrecast percd, the aggregate amcunt
cf nuclear capacty n ncn-OLCD ccuntres wll exceed that cf the OLCD.
Figure 2.43. The dynamics of nuclear capacities
i50
Cw
300
400
GW
Change in capacities from 2010 to 2040
OECD
50
i00
i50
Cw
0
100
200
300
400
2010 2015 2020 2025 2030 2035 2040
GW
Change in capacities from 2010 to 2040
OECD
non-OECD
0
50
0
100
2010 2015 2020 2025 2030 2035 2040
-50
0
-i00
-50
Capacty ccncluscn ncn-OLCD Capacty ccncluscn OLCD
Capacty ccmmsscnng ncn-OLCD Capacty ccmmsscnng OLCD
-i50
i00
p y p y
Capacty ccmmsscnng ncn-OLCD Capacty ccmmsscnng OLCD
Soorcc. FkI kAS
Figure 2.44. Nuclear plants installed capacity by country groups
0
20
40
60
80
100
120
140
160
OECD Europe USA OECD Asia India CIS China
GW
2010
2040

0
OECD Europe USA OECD Asia India CIS China
Soorcc. FkI kAS
58
8y 2030, t s expected there wll be a reascnably stable grcwth cf electrcty
generated n nuclear plants, and that durng 2030-35, nuclear electrcty
prcductcn wll stablze, due tc the deccmmsscnng cf large numbers cf cld
nuclear pcwer plant unts. Hcwever, the grcwth cf nuclear capacty wll be
restcred n the fcllcwng ve year percd (2035-40). 1he develcpng ccuntres
cf Asa wll dcmnate the glcbal nuclear pcwer ndustry (Fgure 2.45).
Figure 2.45. Nuclear electricity generation by region
2 000
2 500
3 000
3 500
4 000
4 500
5 000
GWh
Africa
Middle East
CIS
Developing Asia
Developed Asia
Europe
North America
0
500
1 000
1 500

Soorcc. FkI kAS
1he 8aselne Scenarc dces nct ccnsder technclcgcal breakthrcughs n the
eld cf nuclear energy, but t s expected that there wll be ncreases n the
efcency cf exstng nuclear pcwer plants and mprcvement n the qualty cf
new cnes. ln partcular, the ndustral use cf fcurth-generatcn reactcrs wll
begn. Hcwever, ths wll nct have a sgncant effect cn the energy balance,
as the share cf such unts wll be relatvely small. 1he lcng lfespan cf nuclear
plants makes the tme taken fcr equpment upgrades rather prctracted.
Outlcck-i3 s based cn the premse that durng the percd up tc 2040, the wcrld
wll nct experence accdents at levels 6 cr 7, as set fcrth by the lnternatcnal
Nuclear Lvent Scale (lNLS). Otherwse, there wll be new mcratcrums cn
nuclear pcwer plants, pcstpcnements and cancellatcns cf new prc|ects, as
well as nstances cf refusal tc renew cperatcn cf exstng unts.
Renewable Energy
Penewable energy scurces (PLS) are very dverse n nature and are used n
varcus fuel markets: bcgas ccmpetes n the gas fuels market; bcethancl
and bcdesel dc the same n the lqud fuels market; and wccd and wccd
pellets n the scld fuel market. ln cur descrptcn cf fuel markets, we fccused
cn certan types cf renewable energy; here, renewable energy scurces wll be
ccnsdered n general, wth an emphass cn renewables used fcr electrcty
and heat prcductcn (n cther wcrds, technclcges based cn the ccnverscn
cf sclar, wnd, tdal, gecthermal scurces, etc.).
wcrld ccnsumptcn cf renewable energy wll apprcach 3000 mtce by 2040;
cf ths, 2700 mtce wll be used n the prcductcn cf electrcty and heat,
ncludng 500 mtce cf hydrcpcwer.
59
Develcped ccuntres wll lcse ther leadng pcstcn n renewable energy
ccnsumptcn, n ccmparscn tc 20i0, ther share cf ccnsumptcn wll declne
frcm 57 per cent tc 44 per cent (Fgure 2.46). Develcpng Asa wll represent
35 per cent cf the grcwth n renewable energy scurces, whle Chna's share
wll amcunt tc i per cent.
Figure 2.46. Renewable energy consumption and growth by region, Baseline Scenario
3 500
mtoe Crewth by reg|on, 20102040
3 000
3 500
mtoe
12,5%
0,4%
11,2%
17,6%
Crewth by reg|on, 20102040
2 500
3 000
Africa
Middle East
12,5%
0,4%
11,2%
3,3%
34,6%
4,2%
16,2%
17,6%
1668
2 000
2 500
Africa
Middle East
CIS
34,6%
4,2%
1 500
2 000
CIS
Developing Asia
Developed Asia
Europe
1 000
1 500
Developed Asia
Europe
North America
0
500
1 000
North America
0
2000 2005 2010 2015 2020 2025 2030 2035 2040

Soorcc. FkI kAS
1he use cf renewable energy fcr electrcty generatcn and heat wll develcp
rapdly; t wll grcw by 77 per cent by 2040 (Fgure 2.47).
Figure 2.47. Consumption of renewable energy by type, Baseline Scenario
i 500
2 000
2 500
3 000
3 500
mtce
Scld bcfuels and waste
Lqud bcfuels
Other renewables
Hydrc
0
500
i 000
20i0 20i5 2020 2025 2030 2035 2040

Soorcc. FkI kAS
1668
mtoe
60
1he prcspects fcr grcwth n demand fcr certan types cf renewable energy
vary wdely by regcn. 1hus, durng the fcrecast percd tc 2040, the hghest
ncrease n demand fcr renewable energy scurces used fcr electrcty and
heat generatcn wll be expected n Chna (4.4 tmes), whch wll alsc beccme
the wcrld's leadng ccnsumer cf these rescurces. A dfferent stuatcn wll be
fcund n the bcenergy sectcr, whch ncludes `lqud bcfuels' and `bcmass
and waste' sub-sectcrs. ln Chna, ccnsumptcn cf bcenergy wll grcw at a
mcderate pace (5 per cent ncrease durng the fcrecast percd), and althcugh
mcst cf the ncrease wll cccur n lqud bcfuels ccnsumptcn (74 per cent),
the mcst sgncant share cf tctal bcmass ccnsumptcn wll ccntnue tc be
bcmass and waste (6 per cent by 2040).
ln the USA, a dfferent dynamc s expected. Lqud bcfuels wll ccmprse 4
per cent cf the grcwth n bcenergy ccnsumptcn; they wll alsc ccnsttute a
large part (67 per cent by 2040) cf tctal bcenergy ccnsumptcn. 8esdes ths,
by 2040, the USA wll cvertake Chna n terms cf the tctal ccnsumptcn cf all
types cf bcenergy (Fgure 2.48).
Figure 2.48. Dynamics of bioenergy consumption in selected countries,
Baseline Scenario
100
150
200
250
mtoe
Brazil
China
India
0
50
2000 2005 2010 2015 2020 2025 2030 2035 2040
Germany
USA

Soorcc. FkI kAS
A hgh degree cf dependence cn gcvernment suppcrt makes PLS vulnerable
n tmes cf eccncmc slcwdcwn, when the eccncmy wll nct prcvde the
requred level cf suppcrt. Despte technclcgcal mprcvements, whch enable
ccsts tc be reduced and help the develcpment cf renewable energy use,
many renewable energy technclcges wll requre gcvernment suppcrt fcr
the next decades.
1he ccmpettve level cf renewable energy scurces n the electrc pcwer
sectcr may be determned f they are ccmpared tc ccnventcnal technclcges
n terms cf the levelzed ccsts cf electrcty (LCOL). 1hs takes ntc acccunt
captal ccsts, xed and varable cperatng ccsts, tax rates, and the avalablty
and effectveness cf the technclcgy |i6]. ln develcped markets, the mcst
ccmpettve renewable energy technclcges are large and small hydrc plants
(abcut $30 per megawatt-hcur), wth a LCOL, n scme cases, even lcwer than
that fcr nuclear, ccal, and gas pcwer plants (Fgure 2.47). Scme gecthermal
plants may be eccncmcally clcse tc hydrc plants, but ther use s lmted
tc regcns where these (gecthermal) rescurces are avalable. Amcng the
bctechnclcges, the mcst attractve cne, n terms cf ths ndcatcr, s muncpal
scld waste and landll gas (frcm $45 per Mwh). Onshcre wnd turbnes, beng
already a well-develcped and wdespread technclcgy, `t' practcally ntc a
LCOL range fcr tradtcnal energy rescurces ($50-i30 per Mwh).
The developing countries in
Asia will increase their use of
bioenergy at a restrained pace,
unlike the USA and some other
developed countries.
61
Figure 2.49. Global levelized cost of electricity ranges for developed markets
i04
78
Cecthermal bnary plant
8cmass gasfcatcn - bcgas
8cmass anaercbc dgestcn
P\
Sclar thermal tcwer and helcstat
Sclar thermal parabclc thrcugh
Offshcre wnd
Marne tdal
Marne wave
Natural gas CCC1
Ccal fred
Nuclear
Large hydrc
Small hydrc
Cecthermal flash plant
Muncpal scld waste
Landfll gas
Onshcre wnd
8cmass ncneratcn
Cecthermal bnary plant
$/Mwh
0 i00 200 300 400 500
Natural gas CCC1
Ccal fred
$/Mwh

Soorcc. worlJ Sorvcy oj Frcry 1cchroloics, 8loonbcr Ncw Frcry lircrcc 2012
Over the fcrecast percd, glcbal nvestments n new electrcal pcwer plants
and nfrastructure are estmated at $i-20 trllcn (20i0 prces). Of ths, 32
per cent (abcut $6 trllcn) cf the tctal nvestment wll be spent cn renewable
energy develcpment, i4 per cent cf whch wll be nvested n the USA and 22
per cent n Chna (Fgure 2.50).
Figure 2.50. Regional structure of investments in the construction of new
power plants utilizing renewable and other energy sources
50%
75%
100%
China
USA
0%
25%
Renewables Other energy
sources
USA
OECD, excl. USA

Soorcc. FkI kAS
62
1he lmpact cf 1echnclcgcal
8reakthrcughs cn Lnergy Markets
63
3. THE IMPACT OF TECHNOLOGICAL BREAKTHROUGHS
ON ENERGY MARKETS
The Role of Technology in the Development of the Energy Sector
1he rcle cf energy nncvatcn s crucal nct cnly fcr the develcpment cf
wcrld energy, but alsc, tc a large extent, fcr the whcle cf cvlzatcn (Fgure
3.i). lt s the develcpment cf new fcrms cf energy and energy technclcges
that has fcrmed the bass cf all ndustral revclutcns. Understandng the
mpact cf these technclcgcal advances cn the current crcumstances n the
fuel market s an mpcrtant task cf Outlcck-20i3.
Figure 3.1. History of technological revolutions and breakthroughs*
mtoe
Electric cars
12
14
mtoe
Energy consumption
Electric cars
Commercial shale oil and
gas production
10
12
Energy consumption
3D & 4D seismic
Commercial shale oil and
gas production
Alternative liquid and gaseous fuels
8
10
3D & 4D seismic
Other renewables growth
Alternative liquid and gaseous fuels
6
8
Other renewables growth
Unconventional sources of oil and gas
4
6
Steam engine Electric motor Deepwater and ultradeepwater drilling
Unconventional sources of oil and gas
2
4
Weed Mechanizatien Steam engine
Interna| cembustien engine,
|ectricity
Wind and water mills
LNG
Commercial oil and gas production
Steam engine
Steam turbine
Nuclear energy
Electric motor
Coal production
Deepwater and ultradeepwater drilling
0
400000 before A.D. 500 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
Weed Mechanizatien Steam engine
Interna| cembustien engine,
|ectricity
Commercial oil and gas production
Nuclear energy
400000 before A.D. 500 1860 1870 1880 1890 1900 1910 1920 1930 1940 1950 1960 1970 1980 1990 2000 2010
* Technological revolutions are shown in red, breakthroughs in black.
Soorcc. FkI kAS
ln the hstcry cf the develcpment cf energy technclcges, we dfferentate
`technclcgcal revclutcns' and `technclcgcal breakthrcughs'.
Technological revolution means the realzatcn cf at least three ccmpcnents:
A set cf new technclcges, whch enables the develcpment cf a new, usually
mcre ccncentrated, fcrm cf prmary energy wth a multple expanscn cf
the energy rescurce base;
Lnergy fcr nal ccnsumptcn cf sgncantly ncreased value |i7, i8], whch
radcally mprcves prcductcn prccesses and lvng ccndtcns, acccmpaned
by a steep ncrease n the efcency cf labcur;
Creatcn cf new energy and assccated markets
1echnclcgcal breakthrcughs, n ccntrast tc technclcgcal revclutcns,
ccntrbute tc a sgncant expanscn cf the eccncmcally attractve rescurce
base, cr tc ncreased efcency cf the technclcges used, resultng n a
substantal change n market ccndtcns fcr exstng energy scurces. Hcwever,
they result cnly n an nccmplete set cf the abcve ccmpcnents and, as a rule,
have much smaller sccal ccnsequences.
64
Technological Revolutions and Breakthroughs in the 20th Century
Fcr a percd cf abcut 30 years arcund the turn cf the ith century, twc truly revclutcnary technclcges were
created whch are ncw at the heart cf the wcrld's need fcr energy - the nternal ccmbustcn engne (lCL) and the
electrcal pcwer ndustry. 1he nventcn cf the lCL marked the sunset cf the ccal and steam century, and gave
bcth a pcwerful mpetus tc the era cf cl and a thcusand-fcld ncrease n decentralzed (ncludng ndvdual)
mcble energy. Large-scale generatcn cf electrcty by thermal and hydrc pcwer plants, lcng-dstance pcwer
transmsscn, and electrcatcn cf all spheres cf lfe created the energy fundamentals nct cnly fcr ndustral
but alsc fcr pcst-ndustral sccety. Llectrc machnes and alternatng current transfcrmers revclutcnzed the
structure cf statcnary energy prcductcn: pcwerful centralzed energy systems, usng every sngle type cf prmary
energy rescurce, were created.
Later cn, up tc the end cf the 20th century, energy technclcges ccntnued tc mprcve, cn the bass cf a seres
cf technclcgcal breakthrcughs. Cas turbnes, |ets, and rccket engnes appeared n addtcn tc the lCL. 1he
electrcal pcwer ndustry ncreased n sze many tmes mcre than the parameters and capactes cf facltes
and netwcrks, and made pcssble the creatcn cf transccntnental systems. 1here was an explcsve grcwth cf
electrcal technclcges - rangng frcm electrclyss, ccmputng technclcgy, teleccmmuncatcns, and ccntrcl
systems tc efcent lghtng. Cas turbnes gave new mpetus tc the develcpment cf avatcn and fcrmed
the demand fcr |et fuel. ln many nstances, due tc the gas turbne, mcdern gas transpcrtatcn systems were
created, tcgether wth the gas ndustry as such. 1he develcpment cf hgh-pcwer gas turbnes, and ther use
n statcnary pcwer facltes, enabled a swtch frcm the steam cycle tc the mcre efcent gas-steam cycle.
1he efcency cf the best types cf ccmbned-cycle gas turbnes reached 60 per cent, whch s clcse tc the
maxmum values fcr the heat engne.
lt became pcssble tc ncrease the hydrccarbcn rescurce base, cn acccunt cf techncal advances n explcratcn and
prcductcn cf lqud and gasecus hydrccarbcns and ccals: 3D and 4D geclcgcal surveys and numercal mcdellng
by superccmputers; methcds cf mpactng, physcally and chemcally, cn surrcundng rccks and extracted ud,
whch change ther structure and prcpertes; techncal means cf hydrccarbcn extractcn n extreme ccndtcns
(deep sea, deep water shelf, drft ce, etc.); rcbctc systems wth remcte ccntrcl fcr undergrcund mnng frcm thn
ccal layers; and cther technques.
ln the seccnd half cf the 20th century, the wcrld wated fcr ancther revclutcn n the develcpment cf nuclear
energy, whch became a `by prcduct' cf nuclear defence prc|ects. 1he energy ntensty cf nuclear fuel s three
tmes hgher than that cf any crganc fuel, but t s stll used very neffectvely - n the steam turbne cycle wth
lcw steam parameters, efcency levels cf cnly 32-33 per cent are attaned. 1hus, nuclear pcwer has faled tc
full the seccnd crtercn cf a technclcgcal revclutcn. Mcrecver, the techncal dfculty cf prcvdng guaranteed
nuclear safety, unresclved prcblems wth dspcsal cf radcactve waste, and the nccmplete nature cf the nuclear
fuel cycle have made t mpcssble fcr nuclear generatcn tc cccupy a dcmnant pcstcn n the energy sectcr, as
was predcted n the i70s.
ln the next 30 years we dc nct expect a new technclcgcal revclutcn n
the energy sectcr (fcr example, the develcpment cf cheap nuclear fuscn,
cr cf harnessng energy frcm gravty), but there may be ma|cr technclcgcal
breakthrcughs. 1hey are already evdent n the develcpment cf unccnventcnal
cl and gas rescurces and the emergence cf new types cf mctcr fuel, whch
are capable cf satsfyng grcwng demand and cf substantally curbng the
grcwth cf hydrccarbcns prces. Such an expanscn cf the rescurce base and
mprcvement cf cl and gas prcductcn wll lead tc radcal changes n the
stuatcn n fuel markets.
New electrcal technclcges, whch are less certan but pctentally mcre
sgncant, are beccmng mcre wdespread: stcrage unts (accumulatcr
batteres and super capactcrs) and fuel cells (whch utlze the drect
ccnverscn cf chemcal energy n hydrcgen ccmpcunds tc electrcal energy).
1hey wll gve an mpetus tc the mass usage cf electrc pcwer n mcble
applcatcns, and substantally mprcve the crcumstances fcr usng renewable
energy rescurces. 1hs wll shft the bcundares between centralzed and
decentralzed energy supply: ndvdual vehcles wll be refuelled frcm the
65
centralzed electrcal system, and the latter wll face strcng ccmpettcn
frcm wdely dstrbuted (ncludng ndvdual) pcwer generatcn based cn
renewable energy scurces and natural gas. 1hs technclcgcal breakthrcugh
wll brcaden the rescurce base thrcugh the develcpment cf ccmmercally
vable renewable energy scurces and ncreased efcency cf fuel generatcn.
lt brngs the prcspect cf changng nct cnly the systems cf electrc pcwer
supply, but the entre nfrastructure, tcgether wth human settlement.
Shale Breakthrough
Lven tcday, t can be sad that the `shale breakthrcugh' s a fat acccmpl: cl
prcductcn frcm shale plays
3
has increased from 8m tons in 2007 to 100m
tcns prcduced n 20i2; shale gas prcductcn, frcm abcut 40 tc 250 bcm
fcr the same percd. A detaled analyss cf ths phencmencn, and cf the
ccndtcn, and prcspects fcr develcpment, cf shale cl and gas prcductcn
technclcges, s presented n LPl PAS studes |i, 20]. 1hese shcw that there
are a number cf factcrs lmtng the further rapd expanscn cf cl and gas
prcductcn frcm shale plays:
Pelatvely hgh ccsts fcr prcductcn frcm shale plays lccated cutsde
Ncrth Amerca: $80-i40/bbl fcr cl and $3,5-ii,5 $/mmbtu fcr gas
prcductcn;
Hgh rate cf water ccnsumptcn (t takes abcut 7 bbl cf water tc prcduce
i bbl cf cl frcm lcw-permeablty fcrmatcns);
Lnvrcnmental rsks related tc the ccntamnatcn cf grcund water, scl,
and ar;
Untested technclcges fcr n stu cl shale retcrtng.
lt s mcst lkely, that the technclcges capable cf cverccmng these lmtatcns
|i, 20], wll be based cn a lcw-ccst waterless frackng methcd and mcdern
technques cf n stu retcrtng. lf these can be emplcyed cn an ndustral scale,
the rescurce base cf the wcrld's cl and gas ndustry wll expand sgncantly;
the prcductcn cf shale cl wll beccme pcssble n ccuntres where cl has
never been prcduced, and shale plays lccated n areas wth lmted amcunts
cf fresh water wll be ùnpacked', whch wll prcvde a sgncant ncrease n
prcductcn (Fgures 3.2 and 3.3).
3 Ol fcund n shale plays ncludes all types cf cl extracted frcm cl shale depcsts - whch manly ccnsst cf ne-graned sedmentary
rcck rch n kercgen (clay, marl cr carbcnates). ln partcular there cculd be: tght cl (cl prcduced frcm lcw-permeablty plays cr cther
depcsts by drllng hcrzcntal wells, fcllcwed by multstage hydrcfracturng); and shale cl (thermally prcduced cl frcm shale rch n
kercgen).
66
Figure 3.2. Shale oil production in 2040, Baseline and Shale Breakthrough Scenarios
2
6
2
66
0
2,4
_0_
18,3 2,4
3,3
_0_
18,3
3,3
437
10
437
360
10
63
0
437
360
1,1
20
10
63
_0_
8
360
1,1
20
_0_
8
20
8
_3_
12
0
_3_
12
_0_
20
_3_
12
_0_
16
_0_
20
_0_
16
_0_
16
_0_
16
_0_
7,6
_0_
7
7,6
_0_
7
_ _
7
Production in Baseline Scenario
2 4 mtoe Baseline Scenario 2040
2,4
3,3
mtoe, Baseline Scenario, 2040
mtoe, 'Shale Breakthrough', 2040
Production starts in 'Shale Breakthrough'
2,4
3,3
Production starts in 'Shale Breakthrough'
Scenario
2,4
3,3
Production starts in Shale Breakthrough
Scenario

Soorcc. FkI kAS
Figure 3.3. Shale gas production in 2040, Baseline and Shale Breakthrough Scenarios

Soorcc. FkI kAS
67
1hus, the `Shale 8reakthrcugh' Scenarc suggests the further develcpment
cf a technclcgcal mpulse that already begun n the prcductcn cf
unccnventcnal hydrccarbcns. lt s based cn the fcllcwng assumptcns:
8y 2020, the new waterless technclcgy fcr the prcductcn cf cl and gas
frcm lcw-permeablty fcrmatcns wll be fully develcped. As a result,
cl and gas elds lccated n Chna, lcrdan, lsrael, Mcngcla, and cther
ccuntres wll enter ntc cperatcn;
Lnvrcnmental restrctcns cn cl and gas prcductcn frcm shale plays
wculd be lfted;
Clcbal shale cl prcductcn ccsts wculd equal the levels cf US prcductcn
ccsts (less than $80/bbl cf cl and 4 $/mmbtu fcr gas);
Actve develcpment nct cnly cf lcw-permeablty cl reservcrs, but alsc
cf cl shale plays (kercgen), wll start.
ln acccrdance wth the `Shale 8reakthrcugh' Scenarc, prcductcn cf
unccnventcnal cl n the wcrld by 2040 wll ncrease by ii7m tcns, and gas
by 222 bcm, n ccmparscn wth the 8aselne Scenarc. 1hs cculd shft cl and
gas prces dcwn (Fgures 3.4 and 3.5). After 2020, hcwever, n ccntrast tc scme
wdely dscussed estmates, cur calculatcns shcw that ths scenarc wll nct
lead tc a sgncant drcp n cl prces (n relatcn tc the 8aselne Scenarc).
Figure 3.4. Equilibrium oil prices in the Baseline and the Shale Breakthrough
Scenarios
80
85
0
5
i00
i05
ii0
ii5
$20i0/bbl
'Shale 8reakthrcugh'
8aselne Scenarc
20i0 20i5 2020 2025 2030 2035 2040
Soorcc. FkI kAS
Figure 3.5. Equilibrium gas prices by region in the Baseline and the Shale
Breakthrough Scenarios
0
2
4
6
8
10
12
14
2000 2005 2010 2015 2020 2025 2030 2035 2040
$2010/mmbtu
'Shale Breakthrough' Baseline Scenario
Europe (average weighted) China (average weighted)
Japan (average weighted) USA (Henry Hub)
Soorcc. FkI kAS
The Shale Breakthrough
Scenario does not forecast a
sirirc+rt crcp ir t|e price
of oil and gas as compared to
the Baseline Scenario (mean
reduction is about $5/bbl for oil
and 1,4-1,7 $/mmbtu.
68
Such a prce respcnse s explaned by the fact that qute sgncant vclumes
cf cl and gas prcductcn frcm shale plays have already been ncluded n the
8aselne Scenarc, and wthcut them, the prces cf these energy rescurces
wculd be much hgher (see the next sectcn). 1he bcttcm lne s that, n
acccrdance wth the `Shale 8reakthrcugh' Scenarc, the cl and gas supply
curves are ccnsderably expanded and beccme atter, whch mples an
ncrease n the supply cf cl and gas n the md-prce range (addtcnal lcnger
`steps' appear n the central part cf the curve). 1hs makes a sharp declne n
equlbrum prces mpcssble (Fgures 3.6 and 3.7).
Figure 3.6. Oil supply curve (production costs), the Shale Breakthrough Scenario
$20i0/bbl
i60
$20i0/bbl
2011
i40
i60
$20i0/bbl
2011
i20
i40
i60
Demand
2011
i20
i40
Demand
i00
i20
C l l
80
i00
i20
Ccnventcnal cl
Ol sands
80
00
Ccnventcnal cl
Ol sands
Shale and tght cl
60
80
Ol sands
Shale and tght cl
H l
40
60
Shale and tght cl
Heavy cl
40
Heavy cl
0
20
40
0
20
047i63725838i48
0
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
mtce
0
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
mtce
$20i0/bbl
C th
iiii22233334
i60
$20i0/bbl
Crewth
2040
i40
i60
$20i0/bbl
Crewth
2040
i40
Demand
i20
i40
Demand
i00
i20
Demand
i00
60
80
i00
60
80
40
60
20
40
60
20
40
0
20
0
20
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
4
3
8
3
4
6
5
7
4
3
0
5
2
0
4
5
4
7
mtce
0
0
2
7
4
5
4
7
8
2
i
i
0
6
i
3
6
i
6
4
3
i
i
7
2
i
2
2
4
6
5
2
7
3
8
3
0
i
3
3
2
8
8
3
5
6
i
3
8
3
4
4
i
0
8
4
3
8
3
4
6
5
7
4
3
0
5
2
0
4
5
4
7
mtce
2
7
5
4
8
2
i
0
i
3
6
i
6
4
i
i
2
i
2
4
6
2
7
3
3
0
i
3
2
8
3
5
6
3
8
3
4
i
0
4
3
8
4
6
5
4
3
5
2
0
5
4
7mtce
Soorcc. FkI kAS
69
Figure 3.7. Gas supply curve (production costs), the Shale Breakthrough Scenario

$20i0/mmbtu
2010
3 5
4
$20i0/mmbtu
2010
2
2,5
3
3,5
4
Ccnventcnal gas
Shale gas
Demand
i
i,5
2
2,5
Shale gas
0
0,5
i
i,5
0
0,5
i
i
5
2
3
0
5
4
5
6
6
0
7
6
2
i
2
i

0
6
5
i

2
i
6
i

3
6
i

5
2
i
i

6
7
4
i

8
2
7
i

7
8
2

i
3
i
2

2
8
2
2

4
3
5
2

5
8
8
2

7
3
8
2

8
i
3

0
4
3
3

i
6
3

3
4
7
bcm
7
8
$20i0/mmbtu 2040
i
5
3
0
4
5
6
0
7
6
i
i

0
6
i

2
i
i

3
6
i

5
2
i

6
7
i

8
2
i

7
2

i
3
2

2
8
2

4
3
2

5
8
2

7
3
2

8
3

0
4
3

i
3

3
4
5
6
7
8
Crewth
3
4
5
6
Crewth
0
i
2
3
258270483642548i5037
Demand
0
i
2
2
7
5
5
4
8
8
2
2
i

0
7
i

3
7
0
i

6
4
4
i

i
8
2

i
3
2

4
6
6
2

7
3
3

0
i
4
3

2
8
3

5
6
2
3

8
3
5
4

i
0
4

3
8
4
4

6
5
8
4

3
i
5

2
0
5
5

4
8
0
5

7
5
3
6

0
2
7
bcm
i

i

i

i

2

2

4
2

3

3

3

3

4

4

4

4

5

5

4
5

6

bcm
Soorcc. FkI kAS
Hcwever, the absence cf a sharp fall n prces dces nct mean that ths
scenarc s `safe' fcr the prcducers. 1he analyss shcws that, whle the cl and
gas markets are well-balanced, there are sgncant changes tc the balance
cf pcwer between the leadng partcpants n these markets n ths scenarc.
Scme glcbal players wll have addtcnal cppcrtuntes fcr nuence, whle
fcr cthers a lcss cf pcstcn s mpled. Cenerally, n terms cf pcstcns cf the
man players n the cl and gas markets, the scenarc actually results n a
strengthenng cf the trends dened n the 8aselne Scenarc.
1he benecares cf the `Shale 8reakthrcugh' Scenarc are:
1he USA - due tc the dcmestc prcductcn cf cl (70m tcns mcre than n
the 8aselne Scenarc) and gas (a lttle less than dened n the 8aselne
Scenarc due tc lcwer expcrts, as the vclume cf the glcbal gas trade
wll declne n general, mcstly due tc the ncrease n Chna's dcmestc
prcductcn) - wll beccme the largest prcducer cf hydrccarbcns n the
wcrld. 1hs fact, gven the cverall gecpcltcal sgncance cf the USA, wll
actually turn t ntc the mcst nuental player n the glcbal hydrccarbcn
market;
Chna - wll reduce the vclume cf mpcrts relatve tc the 8aselne Scenarc,
due tc the develcpment cf ts cwn shale depcsts after 2020.
70
The losers in this scenario are:
1he develcped Lurcpean ccuntres - at lcwer levels cf cl prces
(ccmpared tc the 8aselne Scenarc) even greater vclumes cf Lurcpean
cl wll be dsplaced frcm the market; Ncrth Sea shelf prc|ects wll nct
be put ntc cperatcn; the attractveness cf renewable energy wll be
reduced n relatcn tc hydrccarbcn fuels; and energy dependence cn
supplers wll grcw;
OPLC ccuntres wll almcst nevtably face a declne n prcductcn and
a reductcn cf ther market share n 2025-35. 1he `shale breakthrcugh'
wll apparently fcrce the cartel tc tghten ccntrcl cver prcductcn
ccsts, reduce the tax burden cn the ndustry (whch may destablze the
eccncmc and pcltcal stuatcn n scme ccuntres), and create a shcrtage
cf supply by ntrcducng quctas. Hcwever, even n the `Lxtreme' Scenarc,
ccherence cf actcns by OPLC members can hardly be expected, because
cf the dfference n cl prce levels whch these ccuntres need, and the
pctental destablzatcn cf a number cf `cl-dependent' eccncmes. 1hs
means that the `shale breakthrcugh' s lkely tc weaken OPLC further.
8y the end cf the fcrecast percd, OPLC's market nche wll stablze
scmewhat, but f the `Shale 8reakthrcugh' Scenarc s realzed, t wculd
practcally deprve the cartel cf any pcssblty cf nuencng the wcrld
prce cf cl n the mddle cf the fcrecast percd;
1he ClS ccuntres and Pussa - the ClS wculd be fcrced tc cut a
substantal part cf ts cl expcrts n ths scenarc. Pussa's prcductcn
by 2020 wculd be 50m tcns lcwer than n the 8aselne Scenarc, and ts
expcrts wculd declne by the same amcunt, due tc ts narrcwed nche n
the Asan market (Fgure 3.8). Pussan gas expcrts n ths scenarc wculd
be 70 bcm lcwer than n the 8aselne Scenarc (Fgure 3.). Pesults shcw
that durng the fcrecast percd the ClS wculd be mcre senstve than any
cther ccuntry tc ths scenarc.
Figure 3.8. Changes of oil net export and import volumes in 2040 relative to 2010, Baseline and Shale
100
150
mtoe
xperts
Baseline Scenario
400
mtoe Imperts
Baseline Scenario
'Shale Breakthrough'
0
50
100
S th d CIS Middl E t N th A i
200
300
-150
-100
-50
South and
Central
America
CIS Middle East North America
0
100
-250
-200
150
-100
Europe Asia

Soorcc. FkI kAS
The Shale Breakthrough
Scer+ric sirirc+rt|] +|ters t|e
power balance of key players in
the global hydrocarbon market,
and the CIS turns out to be the
most vulnerable.
71
Figure 3.9. Changes of gas net export and import volumes in 2040 relative to 2010, Baseline and Shale
350
bcm
xperts
Baseline Scenario
600
bcm
Imperts
250
300
350
bcm
xperts
Baseline Scenario
500
600
bcm
Imperts
Baseline Scenario
150
200
250
300
300
400
500
Baseline Scenario
50
100
150
100
200
300
0
50
100
CIS South and
C t l A i
Africa Middle East
100
0
100
North America Europe Asia
0
CIS South and
Central America
Africa Middle East
-200
-100
0

Soorcc. FkI kAS
Shale Failure
Fcr a balanced vew cf the shale perspectve, t shculd be ncted that
develcpment cf cl and gas prcductcn frcm shale plays s assccated wth
large uncertainties:
Lstmates fcr ccmmercally reccverable reserves vary sgncantly. As cf
tcday, the best explcred lcw-permeablty fcrmatcn, where cl s already
actvely prcduced, s the 8akken cl shale play n the USA. ln many cther
elds, a detaled estmate cf reserves has nct yet been made. 1he prcblem
cf determnng an exact gure fcr prcven reserves s aggravated by ssues
related tc estmatng cl reserves extracted frcm `dry shale' by retcrtng.
Current lcw prcductcn ccsts are assccated nct cnly wth the techncal
mprcvement cf prcductcn methcds, but alsc wth lcw barrers tc market
entry. lt s wcrth nctng that n all Ncrth Amercan states (except Calfcrna)
where shale play rescurces are lccated, there are nc current envrcnmental
prchbtcns cr restrctcns cn the prcductcn cf ths cl. Cven the abcve,
the actual mpact cn the envrcnment durng shale cl prcductcn has nct
yet been evaluated;
1he man reascn fcr dcubt relates tc the speccs cf hydrccarbcn
extractcn frcm shale plays, wth ts maxmum rst year prcductcn
rate and sharp drcp n prcductvty the fcllcwng year that necesstates
ccnstant drllng cf new wells tc mantan prcductcn levels. At the
mcment, drllng s perfcrmed cnly n the mcst attractve areas n
terms cf prcductcn (`sweet spcts') - thcse wth hgh rates cf estmated
ultmate cl and gas reccvery (LUP) and estmated shale reccvery. wth
the depletcn cf hghly prcductve plays, prcductcn frcm less prcductve
areas may beccme less attractve, leadng tc a declne n prcductcn
vclumes. 1herefcre, there s reascn tc beleve that the ma|crty cf shale
depcsts, due tc the speccs cf ther cccurrence and prcductcn, can
The prospects for development
of oil and gas shale plays are
associated with considerable
uncertainties relating to the
exact assessment of proven
reserves, estimates of real
environmental impacts, and
most importantly, an adequate
assessment of the cost of a
complete cycle of well operation,
given rapidly declining well
productivity.
72
suppcrt hgh prcductcn rates n the ntal stages cf develcpment, but
can sustan these cnly fcr a shcrt percd cf tme as ccmpared tc the lfe
cycle cf tradtcnal elds.
1he `Shale Falure' Scenarc ccntans a set cf assumptcns whch mply
reduced prcductcn vclumes cf cl and gas frcm shale plays:
Sgncant ccst ncrease fcr new prcductcn prc|ects;
Nc ccnrmatcn cf large rescurce base;
lntrcductcn cf strct envrcnmental ccnstrants;
New waterless and heat extractcn technclcges fcr shale cl and gas
prcductcn are napprcprate, fcr eccncmc and/cr envrcnmental reascns;
Startng frcm 2020, shale cl and gas prcductcn n the USA begns tc
declne rapdly, and practcally stcps by 2025;
Prcductcn cf shale cl and gas ccntnues cnly n ccuntres where t has
already ccmmenced and rapdly reduces tc zerc.
Acccrdng tc estmates fcr ths scenarc, the equlbrum cl prce level s
much hgher than n ether the 8aselne Scenarc cr, n partcular, the `Shale
8reakthrcugh' Scenarc - by 2040, t wll reach $i30/bbl (20i0 prces) (Fgure
3.i0). Smlarly, average gas prces are hgher by i,25 $/mmbtu: amcuntng tc
i0,5 $/mmbtu n Lurcpe; i2,5 $/mmbtu n lapan; and i3,5 $/mmbtu n Chna.
1he spct prce cf gas n the USA wll reach i2,0 $/mmbtu (Fgure 3.ii).
Figure 3.10. Equilibrium oil prices in the three scenarios
ii0
i20
i30
i40
$20i0/bbl
'Shale Falure'
'Shale 8reakthrcugh'
8aselne Scenarc
80
0
i00
20i0 20i5 2020 2025 2030 2035 2040

Soorcc. FkI kAS
In the Shale Failure Scenario,
the equilibrium price of oil by
2040 will reach $130/bbl (2010
prices). Similarly, the weighted
+er+e price cl +s Wi|| |e ++
1,25 $/mmbtu m3 higher than
that in the Baseline Scenario.
73
Figure 3.11. Equilibrium gas prices in the three scenarios
14
$2010/mmbtu
ase|ine Scenarie
14
$2010/mmbtu
'Sha|e reakthreugh' Scenarie
10
12
14
$2010/mmbtu
ase|ine Scenarie
10
12
14
$2010/mmbtu
'Sha|e reakthreugh' Scenarie
4
6
8
10
12
4
6
8
10
12
0
2
4
6
0
2
4
6
0
2
2000 2005 2010 2015 2020 2025 2030 2035 2040
0
2
2000 2005 2010 2015 2020 2025 2030 2035 2040
14
$2010/mmbtu
'Sha|e Fai|ure' Scenarie
10
12
14
$2010/mmbtu
'Sha|e Fai|ure' Scenarie
4
6
8
10
12
Europe (average weighted)
China (average weighted)
Japan (average weighted)
USA (H H b)
0
2
4
6
China (average weighted)
Japan (average weighted)
USA (Henry Hub)
0
2
2000 2005 2010 2015 2020 2025 2030 2035 2040
Soorcc. FkI kAS
ln the `Shale Falure' Scenarc, nct cnly s the current balance cf pcwer n
the glcbal cl and gas market sustaned, but the pcstcns cf the ccuntres,
whch appear tc be unsuccessful n the 8aselne and `Shale 8reakthrcugh'
Scenarcs, wll be sgncantly strengthened:
Cven hgher wcrld prces, Pussa may sgncantly ncrease ts cl and
gas prcductcn (up tc 535m tcns and 80 bcm, respectvely, by 2040) and
reman the largest hydrccarbcn prcducer n the wcrld. Hgh cl prces wll
enable t tc develcp ccstly elds n Lastern Sbera and the Arctc shelf.
1he expcrt nche fcr Pussan cl wll alsc brcaden - ths wll be acheved
by lcadng Lurcpean renng capactes, and by the lack cf Ncrth Amercan
expcrts tc the Asa-Pacc regcn (Fgure 3.i2). 1he expcrt cf Pussan
gas will also increase owing to the growth of North American natural gas
mpcrts (Fgure 3.i3);
1he USA, a ma|cr player n the cl market, wll lcse sgncantly frcm
`shale falure'. 1he ccuntry's cl and gas prcductcn n ths scenarc wll fall
sharply after 2020 aganst the backgrcund cf the lcw grcwth rate cf crude
cl mpcrts, due tc the fact that wthcut ts cwn rescurce base, US renng
beccmes neffectve. 1he largest energy prcducer (acccrdng tc the cther
twc scenarcs) s ccnverted ntc an energy-dependent regcn whch can
affect hydrccarbcn markets cnly by ncn-market mechansms. 1he USA wll
have tc ncrease LNC mpcrts agan, whch prcvdes an addtcnal mpetus
tc the develcpment cf ths segment cf the gas busness n the wcrld (Fgure
74
3.i4). 1he return cf the USA tc the pccl cf ccuntres mpcrtng natural gas
wll radcally alter glcbal trade cws. 1hus, Ncrth Amercan LNC mpcrt
demand wll reach i70 bcm, whle the prce cf gas n the USA wll be
i2 $/mmbtu, whch wll be arcund the md-pcnt cf the prce range set
n Lurcpe and the Asa-Pacc regcn. 1he grcwth cf prces n the USA
wll alsc lead tc scme reductcn n net mpcrts tc Lurcpe and the Asa-
Pacc regcn, relatve tc the 8aselne Scenarc; part cf the gas frcm the
tghtenng glcbal gas market wll be drected tc Ncrth Amerca; all the
wcrld's gas prcducers and expcrters wll wcrk at peak capacty;
lf cl prces rse, Lurcpe may ncrease the use cf renewable energy scurces
and the vclumes cf ndgencus prcductcn. lt s alsc sgncant that,
acccrdng tc ths scenarc, the reduced dcmestc rescurce base cf US
reneres wll ncrease cppcrtuntes n the glcbal market fcr cl prcducts,
whch wll ncrease cl renng n Lurcpe and ts demand fcr bcth mpcrted
and ts cwn crude cl.
OPLC wll expcrt an addtcnal 220m tcns, ccmpared tc the 8aselne
Scenarc, n the event cf hgh cl prces and the expanscn cf market nches.
OPLC wll sgncantly (by $20-30/bbl) nuence the prce cf cl, wth less
spare capacty than n the 8aselne Scenarc;
Hgh cl prces wll enable the grcwth cf prcductcn n the Asa-Pacc
regcn, where ccmmercally vable ccndtcns fcr deepwater cffshcre
prc|ects may develcp;
Chna's pclcy cn the supply cf ts cwn market wth cl and gas frcm the
expanscn cf ts natcnal ccmpanes abrcad wll prcbably be strengthened.
1hs wll gve Chna the cppcrtunty tc retan ts pcstcn cn the wcrld
stage, even wthcut the use cf ts cwn shale rescurces.
Figure 3.12. Change of crude oil net import and export volumes in 2040 relative to 2010, in Baseline and
Shale Failure Scenarios
200
250
mtoe xperts
Baseline Scenario
300
350
mtoe
Imperts
50
100
150
200
250
p
Baseline Scenario
'Shale Failure' Scenario
150
200
250
300
350
p
-50
0
50
100
CIS Africa South and Middle East
50
100
150
200
-150
-100
-50
0
CIS Africa South and
Central
America
Middle East
50
0
50
100
Europe North America Asia
-250
-200
-150
-100
America
-100
-50
0
Europe North America Asia
-250
-200
-100

Soorcc. FkI kAS
The Shale Failure Scenario will
have a positive effect on the
production of conventional oil
+rc +s lrca |i|ccst re|cs,
the position of the CIS countries
and OPEC, and on the producers
of alternative liquid fuels, while
kassi+ |eccaes t|e |+rest
hydrocarbon producer in the
world.
75
Figure 3.13. Change of natural gas net import and export volumes in 2040 relative to 2010, in Baseline
and Shale Failure Scenarios
400
bcm
xperts
Baseline Scenario
600
bcm
Imperts
300
400
bcm
xperts
Baseline Scenario
'Shale Failure' Scenario
400
500
600
bcm
Imperts
200
300
200
300
400
100
200
100
200
300
0
100
CIS South and Latin
America
Africa Middle East
-100
0
100
0
CIS South and Latin
America
Africa Middle East
-200
-100
0

Soorcc. FkI kAS
Figure 3.14. Volumes of natural gas in inter-regional trade in 2040 in the
three scenarios
57%
58%
5%
60%
6i%
600
800
i 000
i 200
i 400
bcm
LNC
Ppelne gas
54%
55%
56%
57%
0
200
400
600
Share cf LNC

Soorcc. FkI kAS
when ccmpared tc the 8aselne Scenarc, the `Shale Falure' Scenarc fcrecasts
a sgncant change n the nature cf the lqud fuels market. Demand wll stll
be largely met by ùnccnventcnal' scurces - nct |ust by Canadan tar sands
and heavy cls, but alsc by ncn-cl fuels. ln the case cf hgh cl prces, the
latter wll beccme eccncmcally attractve and wll take i0 per cent cf the cl
market by 2040 (Fgure 3.i5).
76
Figure 3.15. Consumption growth of oil fuel substitutes, the Shale Failure Scenario
300
400
500
600
mtce
C1L
Llectrcty
C1L
Cas fuel
0
i00
200
20i0 20i5 2020 2025 2030 2035 2040
Cas fuel
8cfuels

Soorcc. FkI kAS
ln addtcn tc the technclcgy related tc the develcpment cf shale plays,
cther technclcges n the lqud fuels market may affect the balance cf supply
and demand. 1hese are lsted belcw n the crder cf ther mpcrtance n the
market fcr lqud fuels, and by the lkelhccd cf a fundamental breakthrcugh:
Use cf natural gas as mctcr fuel;
Develcpment and mplementatcn cf cther bctechnclcges;
Develcpment cf electrc transpcrt.
Gas Use in Transportation
1he use cf gas fcr transpcrtatcn n 20i0 amcunted tc 2 bcm |2i], whch s
less than i per cent cf tctal transpcrt energy ccnsumptcn. Of ths amcunt,
mcre than 0 per cent was used by passenger cars runnng cn ccmpressed
natural gas (CNC).
We can distinguish two categories of countries that are of the most interest
tc gas transpcrt:
Ccuntres whch have sgncant reserves cf natural gas and/cr are net
mpcrters cf cl and cl prcducts (lran, Kcrea, lnda, etc.);
Ccuntres whch are dversfyng fuels fcr transpcrt (the USA, 8razl, and
ltaly).
Practcally, tcday there s nc cppcrtunty fcr ccmpettcn, cn the same bass,
between cl and gas n the transpcrtatcn sectcr. Ccmpressed natural gas
requres ccnverscn cf vehcles and a netwcrk cf specal gas llng statcns
(CFS), whch are nct yet ccmmcn n the wcrld. 1hus, despte the eccncmc
attractveness cf natural gas fcr a number cf ccuntres (Fgure 3.i6), the man
lmtng factcr s the avalablty cf nfrastructure.
77
Figure 3.16. - Margina| gas prices ensuring gas meter fue| efciency fer private transpert, ei| price at
$110/ bbl.*
12
$2010/mmbtu

8
10
12
$2010/mmbtu

4
6
8
10
2
4
6
0
2
Russia Europe North
America
China India Japan Russia Europe North
America
China India Japan
Gas price needed to switch to gas fuel
Natural gas price in 2010
Gas price needed to switch to gas fuel without refitting of cars
N t l i i 2040
Gas price needed to switch to gas fuel without refitting of cars

* The areas in the oval are the countries, where, due to the mass production of cars powered by gas, a potential and effective
competition between oil and natural gas motor fuels is feasible.
Soorcc. FkI kAS
Synthetic Liquid Fuels Obtained from Gas
Drect ccmpettcn between natural gas and cl n transpcrt s pcssble wth the use cf `gas tc lqud' technclcgy
(C1L), whch prcduces gasclne and desel fuel, smlar n qualty tc the fuels made frcm cl. 1cday, hcwever, the
ccst cf prcductcn cf synthetc fuels frcm gas amcunts tc $ii0-i40/bbl, assumng a gas prce nct hgher than
2,i $/mmbtu, mplyng that the prc|ected prce cf cl and gas makes these prc|ects uneccncmc.
Prcspects fcr the use cf gas n the transpcrt sectcr wll depend drectly cn:
1he envrcnmental pclces cf ccuntres (fcr example, the use cf LNC fcr
fuellng wll depend cn tghtenng the regulatcns cn sulphur ccntent n fuel);
Develcpment cf nfrastructure fcr CNC;
Peducng the ccsts cf synthetc fuels prcduced frcm gas.
ln the fcrecast percd, at relatvely lcw cl prces, the ccmpettveness cf gas
transpcrt s lcw. Hcwever, f ccnsumers dc nct have tc re-equp ther cars
wth gas equpment, and ths s dcne by the car ndustry, the market fcr gas
fuel cculd greatly expand. ln the 8aselne Scenarc, gas ccnsumptcn n the
transpcrt sectcr wll reach 80-85 bcm by 2040, and f the abcve measures
are mplemented, t wll ncrease tc ii0 bcm (Fgure 3.i7).
Gas use in transportation is a
promising prospect for some
regions, but it requires the
support of government and
business interested in it.
78
Figure 3.17. Forecasted consumption of natural gas in transport and its stimulated growth, Baseline
Scenario
120
bcm
Growth potential
60
80
100
G owt pote t al
Africa
Middle East
20
40
CIS
Asia
Europe
0
2010 2015 2020 2025 2030 2035 2040
p
North America

Soorcc. FkI kAS
Liquid Biofuels
Figure 3.18. Raw materials used for the production of different types of biofuel
BIOGAS
Advanced
Test stage production, high technology level, high costs
Algae
BIODIESEL
JET FUEL
OILGAE
BIOETHANOL
First generation
Mass production, low technology level
BIODIESEL
PLANT OIL
Jatropha
Sunflower
Palm
Cotton
Rapeseed
Soybean
Coconut
Castor
ndustrial biodegradable
waste
Manure
Residential organic
waste
Maize
Wheat
Sugar beet
Sugarcane
Potato
Cassava
Sorghum
BIOETHANOL
Animal fats
HTU
Near-commercial production, high technology level
Waste
liquor
HVO
Any Biodiesel
feedstocks
F-T
BIODIESEL
BIOMETHANOL
Advanced
L
L
BIODME
BIOHYDROGEN
Sludge
Potato peelings
Sugarcane
bagasse
Beet pulp
Wood chips
Maize stover
Wheat stalks
Miscanthus
BIOETHANOL
DMF
Soorcc. uNFP, Asscssir biojocls, 200,
uN-Frcry, Sostcircblc 8iocrcry.
lrcncwork jor 0ccisior Hckcrs, 2007,
FPA, kcrcwcblc locls StcrJcrJ Prorcn
kcolctory Inpcct Arclysis, 2010, kcjocl.
co, 8iojocl Hcczirc prcss rcvicw, SAF
Irtcrrctiorcl yJrotrcctcJ \cctcblc 0il
{\0} cs c kcrcwcblc 0icscl locl, 2008
79
lt s wdely beleved that bcfuels can play a sgncant rcle n meetng the
demand fcr fuel - reducng pcllutcn and greenhcuse gas emsscns. Fgure
3.i8 llustrates varcus raw materals that can be ccnverted ntc bcfuels fcr
transpcrtatcn, and technclcges used fcr ths.
Acccrdng tc cur estmates, lqud bcfuels cculd cnly, realstcally, meet less
than i0 per cent cf the grcwng demand n the transpcrt sectcr, and they
reman a ccmplex and ccntrcversal ssue. ln recent years, debates abcut the
mpact cf bcfuels cn the fccd market, and ther pctental fcr adverse effects
cn envrcnmental bcdversty, scl, and water have ntensed.
1cday, ndustral-scale prcductcn s cnly pcssble fcr rst-generatcn bcfuels
frcm agrcultural crcps, but the avalablty cf cultvated land and ncreasng
ccmpettcn frcm fccd manufacturers drectly lmt ther prcductcn.
Mcrecver, bcfuels have twce been partly respcnsble fcr fccd crses.
1he Lurcpean Uncn has set a target tc ncrease the share cf bcfuels n the
transpcrt sectcr tc i0 per cent by 2020, but a bll s pendng, based cn studes
made n 20i2, whch lmts the use cf bcfuels extracted frcm crcps tc 5 per
cent. As an alternatve, the Lurcpean Ccmmsscn s tryng tc accelerate the
spread cf electrc vehcles by passng regulatcns cn the mandatcry number
cf avalable specalzed chargng statcns.
Fcr ncw, bcfuels are ccmpettve cnly n regcns wth trcpcal and subtrcpcal
clmates (where crcps are harvested several tmes each year) at cl prces cf
$i00-ii0/bbl. ln cther regcns, ther ccst rses tc $i20-i40/bbl whch, gven
cl prces n the 8aselne Scenarc (whch wll nct exceed $ii0/bbl by the end
cf the percd), wculd requre a specal ncentve fcr bcethancl and bcdesel
prcducers.
Electric vehicles
1he technclcgcal breakthrcugh that cculd change energy use n the
transpcrtatcn sectcr, and thus the energy balance, s a large-scale
penetratcn cf electrc vehcles.
1cday, OLCD ccuntres are actvely develcpng electrc mcblty technclcges.
ln electrc vehcles, lthum cn batteres are manly used wth i00-200
wh/kg pcwer capacty, capable cf i000-3000 charge-dscharge cycles -
ccnsderably hgher than that cf ccnventcnal lead-acd and alkal accumulatcr
batteres. Such fully charged batteres prcvde an average range cf i20-i60
km; full chargng requres 4-8 hcurs cr mcre. 1he ccst cf batteres (tcgether
wth perpheral equpment and a ccntrcl system) s $600-00/kwh (20i0
prces), dependng cn ther characterstcs. 1her ccst thus acccunts fcr 65 per
cent cf the tctal ccst cf the electrc vehcle. 1he perfcrmance cf affcrdable
batteres lmts ther usablty, n ccnsumers' terms, meanng that electrc
vehcles cannct yet ccmpete wth ccnventcnal cars.
Llectrc transpcrt has twc develcpment paths - the use cf accumulatcr
batteres and fuel cells. Hcwever, nether cf these technclcges has, sc far,
been able tc ccmpete wth the ccnventcnal nternal ccmbustcn engne and
bcth requre sgncant mcdernzatcn n certan areas (Fgure 3.i).
The growth potential for liquid
biofuels is strictly limited by the
food market and the availability
of arable land.
80
Figure 3.19. Technological changes necessary to ensure competitiveness of electric vehicles relative to ICE
Electric drive and
battery weight
Electric drive and
battery weight
decrease 3 times
Battery cost
battery weight
decrease 3 times
Increase of power
t 300
Battery cost
decrease by 50%
decrease 3 times
Increase of power
reserve up to 300
k
Battery cost
decrease by 50%
Increase of power
reserve up to 300
km
y
decrease by 50%
reserve up to 300
km
Reduce the time of
Lithium ion and Sodium
Reduce the time of
charge from usual
grid 6-8 times
Provision of electric
charging
Lithium-ion and Sodium
Ni k l Chl id b tt
charge from usual
grid 6-8 times
Provision of electric
charging
infrastructure
Nickel-Chloride battery
d l t
grid 6-8 times
charging
infrastructure
Nickel-Chloride battery
development
g
g g
infrastructure
development
Centralized generation Centralized generation Centralized generation
Distributed generation Distributed generation Distributed generation
Fuel cells development Fuel cells development Fuel cells development Fuel cells development
Fuel cells cost
decrease 6.5 times
Weight decrease 7-
10 times
Fuel cells cost
decrease 6.5 times
Weight decrease 7-
10 times decrease 6.5 times
g
10 times
E i th Ensuring the
safety of the
The use of
Ensuring the
safety of the
hydrogen transport
The use of
hydrogen as a fuel
safety of the
hydrogen transport
The use of
hydrogen as a fuel
hydrogen transport
hydrogen as a fuel
Soorcc. FkI kAS
ln the meantme, the lthum cn and scdum nckel chlcrde batteres manly
used n advanced electrc cars are nfercr tc tradtcnal nternal ccmbustcn
engnes n ther ccst, mleage, and weght, but have sgncant pctental fcr
mprcvement.
81
Prospects for the Development of Electrochemical Batteries
Pesults cf ntensve glcbal research and develcpment suggest that the pcwer capacty cf accumulatcr batteres
wll multply, and that by 2020 ther ccst wll drcp tc $400/kwh, and by 2030 tc $200/kwh. ln the lcnger
perspectve, t may be pcssble tc reduce battery ccst tc $i00/kwh. lt shculd be ncted that the US Department
cf Lnergy (DOL) has set a target that by 2025 the ccst cf batteres shculd decrease tc $250/kwh, and chargng
tme shculd be reduced tc 6-i0 mnutes, makng t ccmparable wth the tme cf fuellng a ccnventcnal
vehcle. lf these requrements are met, electrc cars wll beccme ccst-ccmpettve wth vehcles equpped wth
nternal ccmbustcn engnes.
Lthum cn batteres have mprcved mcre rapdly than any cthers. 1he search fcr substances tc be used
fcr electrcdes and electrclyte, and fcr new technclcges used n ther manufacture, s under way. 1he mcst
prcmsng apprcach s ccnsdered tc be the use cf nancstructured hgh-pcrcsty ccmpcste materals: n
partcular nancccmpcstes based cn lthum and rcn phcsphate cr lthum sulphte and carbcn used fcr the
manufacture cf cathcdes; and nancstructured slccn nstead cf graphte fcr ancdes, etc. 1hs shculd ncrease
battery pcwer several tmes, expand the per charge mleage up tc 600-800 km, reduce chargng tme tc i0
mnutes cr less, and extend battery servce lfe tc 8-i0 years.
Prcmsng prcspects can be expected frcm the develcpment cf lthum ar batteres. 1her thecretcal energy
cutput s 8-i0 tmes hgher than that cf lthum cn cnes. 1he crusng range cf electrc vehcles cn a sngle
charge cculd reach 800-i000 km. 1hese batteres are beng develcped by many crganzatcns, cne cf whch
s the ccnscrtum cf ccmpanes whch ncludes Amerca's l8M and lapan's Asah Kase and Central Class
ccmpanes, suppcrted scentcally by a number cf US natcnal labcratcres (prmarly by the Argcnne Natcnal
Labcratcry) n the ambtcus 8attery 500 Prc|ect. 1hs battery wculd meet all future DOL requrements, and ts
pcwer cutput s expected tc reach i700 wh/kg. lt s lkely tc appear cn the market n 8-i0 years.
Actve research fcr the creatcn cf even mcre efcent batteres s n prcgress. Fcr nstance, at Stanfcrd
Unversty scentsts are ccnsderng pctassum cns as charge carrers nstead cf lthum and make electrcdes
frcm nancmaterals based cn rcn and ccpper, whch wculd ncrease the number cf battery `charge-dscharge'
cycles tc 40 000. At the Unversty cf Massachusetts, an ar vanadum bcrde element (vanadum bcrde ar
cell) has been develcped whch wll be able tc surpass the energy ntensty cf gasclne and desel fuel. 1he
thecretcal energy capacty cf ths element s 27 kwh/kg. Hcwever, researchers estmated a practcable
achevable energy capacty cf 5 kwh/kg, whle the energy capacty cf gasclne s i2.i kwh/kg and desel fuel
s ii.8 kwh/kg. 1akng ntc acccunt mctcr efcency (30-40 per cent), these values amcunt tc 3.6-4.7 kwh/
kg. One cf the ma|cr prcblems related tc ths accumulatcr, hcwever, s severe ccrrcscn cf the element leadng
tc the rapd lcss cf ts capacty and release cf hydrcgen, whch makes the battery explcsve. 1he research team
hcpes tc resclve ths ssue quckly, by stablzng the vanadum bcrde ancde by ccatng t wth a thn layer cf
zrccnum dcxde.
Scentsts frcm the unverstes cf Mam, 1ckyc, and 1chcku have dsccvered the phencmencn cf generatcn
cf an electrcmctve fcrce (LMF) n a statc magnetc eld. LMF has a spn crgn, whch s created by the
spn-dependent effects n a specally prepared nancstructure ccnsstng cf quantum nancmagnets cf specc
ccmpcstcn. 1he techncal mplementatcn cf ths phencmencn may cpen the way fcr the creatcn cf sc-
called spn batteres - accumulatcrs wth fantastc energy capacty and pcwer, whch wculd stcre `quanta cf
energy'. Hcwever, the mplementatcn cf `spn' batteres by 2040 s nct expected.
1he mprcvement cf ccntrcl systems can brng abcut further upgrades cf accumulatcr batteres. 1hs s
acheved by new methcds and techncal tccls fcr mcntcrng the ccndtcn cf electrcchemcal cells, and
efcent algcrthms tc cptmse chargng strateges and subsequent battery usage, dependng cn the physcal
ccndtcn cf the cells. 1he mplementatcn cf ths prc|ect by the Unversty cf Calfcrna, n ccn|unctcn wth
the ccmpanes 8csch and Ccbasys, suppcrted by the Advanced Pesearch Prc|ects Agency-Lnergy (APPA-L) cf
the USA wth a .6m dcllar grant, s expected tc reduce the ccst cf lthum cn batteres by 25 per cent and
halve the tme cf chargng.
ln parallel wth the develcpment cf accumulatcr batteres, the mprcvement cf electrcal equpment n the
electrc car, whch wculd reduce ts pcwer ccnsumptcn per km, s alsc n prcgress. Fcr example, Yasa Mctcrs
has unveled an ultra-lght and pcwerful electrc mctcr - the DD500 develcped at the Unversty cf Oxfcrd.
1he mctcr sze s 50 per cent smaller than ccnventcnal tractcn mctcrs, ts specc peak tcrque s twce as
large (30 Nm/kg), and Yasa Mctcrs ntends tc ncrease t tc 40 Nm/kg.
82
1he prcspects fcr fuel cell vehcles based cn hydrcgen cr hydrcgen-
ccntanng fuel - natural gas, ammcna, methancl, cr gasclne, are stll vague.
All tested verscns cf fuel cell vehcles run cn hydrcgen; scme prctctypes
use methancl, but ths technclcgy has nct yet been apprcved. 1he man
prcblem cf exstng hydrcgen cars s the hgh level cf re and explcscn
hazard (hydrcgen mclecules can penetrate the car's metal bcdy cr fuel tank
and leak cutsde the vehcle, whch can lead tc detcnatcn). 1herefcre, n
scenarcs fcr energy change n transpcrt, the mcst prcmsng perspectve fcr
the percd tc 2040 s expected tc be n battery mprcvement; the use cf fuel
cells s lkely tc be pcstpcned tc a mcre dstant future.
The objectives of individual countries for promotion of electric vehicles and methods for their stimulation
Already tcday, many ccuntres have gcvernment suppcrt n place fcr the develcpment cf electrc vehcles; ther
cwners are drectly subsdzed cr get tax benets. Fcr example, n the UK and the USA, buyers cf electrc cars
are ccmpensated frcm the state budget fcr 25-50 per cent cf the car's value, wth a tcp lmt cf US$7500. lapan,
8elgum, ltaly, Chna, and Canada have develcped a system cf tax credts and deductcns, wth cther benets (free
regstratcn plates n Chna, nfrastructure nancng, subsdes fcr prcducers), savng the custcmer up tc a thrd cf
the electrc vehcle's ccst.
1he Chnese gcvernment plans tc ncrease the prcductcn cf electrc and hybrd cars tc 2 mllcn per year by 2020.
1he USA wants tc ncrease the number cf electrc vehcles tc cne mllcn by 20i5.
1he share taken by electrc vehcles n tctal energy ccnsumptcn n the rcad
transpcrt sectcr may reach 5 per cent by 2030 (the equvalent cf 23m tcns
cf mctcr fuel); by 2040, t cculd reach i0 per cent (600m tcns), prcvded:
i) OLCD ccuntres and Chna ccntnue tc suppcrt `green transpcrt' and
subsdze electrc vehcles up tc 2025;
2) lmprcvement cf battery technclcgy wll prcvde:
up tc 300 km crusng range cn cne charge,
reductcn n battery ccst by 50 per cent (frcm 20 tc i0 thcusand dcllars
n 20i0 prces),
battery lfe cf at least 7 years,
threefcld reductcn n weght (tci00 kg),
reductcn cf tme (tc 30-40 mnutes) fcr full battery charge frcm 220\
supply;
3) Ccvernments, energy ccmpanes, and autcmakers wll nance the
develcpment cf nfrastructure, whch wll make electrc cars avalable
tc all.
lf ths electrc transpcrtatcn breakthrcugh s mplemented by the end cf the
fcrecast percd, the sze cf the cl market wll fall by up tc 600m tcns cf cl,
and the prce cf cl wll drcp tc $i02/bbl. 1hs wll reduce prcductcn and
expcrt cf cl n a number cf regcns wth hgh ccsts cf prcductcn, partcularly
n Lurcpe and the ClS ccuntres (Fgure 3.20).
Implementation of the Electric
Vehicles Scenario requires full
state support, or electric cars
will not be able to compete with
conventional vehicles.
83
Figure 3.20. Oil and gas export and import volume in 2040 relative to 2010 in Baseline and Electric
Vehicles Scenarios
100
mtoe
xperts
Baseline Scenario
Prospective electric cars
0
50
100
mtoe
xperts
Baseline Scenario
Prospective electric cars
-100
-50
0
50
CIS Africa South and
Central
America
Middle East
mtoe Imperts
-150
-100
-50 Central
America
0
200
400
mtoe Imperts
-250
-200
-150
400
-200
0
200
Asia Europe North
America
-250
200
-400
-200
Asia Europe North
America

Soorcc. FkI kAS
1he develcpment cf electrc transpcrt wll ncrease electrc pcwer generatcn
by 4 per cent ccmpared tc the 8aselne Scenarc (whch s a challengng
task); n OLCD ccuntres a dcublng cf electrcal pcwer prcductcn wll be
requred (Fgure 3.2i).
Figure 3.21. Electricity production increment 201040 in Baseline and
Electric Vehicles Scenarios
i5 000
20 000
25 000
30 000
1wh
8aselne Scenarc
Prcspectve electrc cars
0
5 000
i0 000
OLCD ncn-OLCD
p

Soorcc. FkI kAS
Analysis of the generation structure required in this scenario shows that the
demand fcr gas, ccmpared tc the 8aselne Scenarc, wll ncrease by 80-0
bcm, and ccal by i20-i30m tcns. At the same tme, prces n the gas market
wll ncrease sgncantly, ccntrbutng tc a swtch tc alternatve fuels,
ncludng nuclear and renewable energy (Fgures 3.22 and 3.23). Hcwever,
aganst the backdrcp cf rsng prces fcr the electrc pcwer sectcr and fallng
cl prces (due tc lcwer demand), the ccmpettveness cf the tradtcnal
nternal ccmbustcn engne wll ncrease.
84
Figure 3.22. Impact of the additional demand for gas on energy prices in Baseline and Electric Vehicles
Scenario
bcm
Meeting natura| gas demand in 2040 by scenarie
5350
5400
5450
bcm
Meeting natura| gas demand in 2040 by scenarie
5200
5250
5300
5350
5400
5450
5050
5100
5150
5200
5250
5000
5050
5100
5150
Base scenario Prospective electric cars
5000
$/mmbtu
Natura| gas prices in 2040 by scenarie
12
14
$/mmbtu
Natura| gas prices in 2040 by scenarie
6
8
10
12
14
2
4
6
8
0
2
4
0

Soorcc. FkI kAS
Figure 3.23. Required electricity generation in Baseline and Electric Vehicles Scenarios
i 000
i 500
2 000
2 500
3 000
3 500
4 000
mtce
20i0
8aselne Scenarc
Prcspectve electrc cars
0
500
i 000
Ccal Natural gas Nuclear Other renewables 8cenergy Hydrc Ol

Soorcc. FkI kAS
1c ensure the ccmpettveness cf electrc vehcles thrcughcut the fcrecast
percd, the prce cf electrcty shculd nct exceed 45 cents per kwh, prcvded
all cf the prerequstes mentcned abcve are met. Hcwever, gven the
nevtable rse n the prce cf fuel fcr electrcty generatcn, ths task s qute
challengng wthcut substantal gcvernment suppcrt.
Gas Hydrates
One cf the mcst prcmsng energy scurces s gas hydrates - gas mclecules
enclcsed wthn a shell cf water mclecules. Cas hydrate rescurces are
ccncentrated n marne sedments and n permafrcst regcns. Acccrdng tc
prelmnary estmates, gas hydrate reserves rcughly amcunt tc 52-54 per
cent cf all gas reserves cn the planet.
85
lapan s engaged n the mcst actve research ntc the develcpment cf gas
hydrate depcsts, and the ccuntry has already started plct prcductcn.
Pussa launched ths research n the Scvet era, and t s ncw alsc carred cut
by the USA, Canada, Chna, Ncrway, Cermany, France, lnda, and Scuth Kcrea.
Cas mpcrters have hcpes that develcpment cf these methane reserves wll
release them frcm energy dependence. Hcwever, hydrates are stable cnly
at depth, under hgh pressure. Durng drllng, methane separates frcm the
hydrate ccmplex and escapes ntc the atmcsphere. Ncnetheless, safe and
effectve extractcn cf gas hydrates wll be a new technclcgcal breakthrcugh
n the glcbal energy ndustry.
Durng the fcrecast percd up tc 2040, t had nct been expected that ccst-
effectve ndustral prcductcn technclcgy fcr gas hydrates wculd emerge.
8ut, snce lapan Ol, Cas and Metals Natcnal Ccrpcratcn (lcgmec) declared
n 20i3 that t had started plct develcpment cf an underwater gas hydrate
depcst, amng at extractng gas frcm t, and that t planned tc cbtan
technclcgy sutable fcr ndustral use by 20i8, we have assumed t wculd be
useful tc evaluate a range cf ccst-effectveness cf ths technclcgy.
1he estmated ccst cf methane prcductcn frcm gas hydrates, declared by
the develcpers, amcunts tc 50/m3 (abcut i5 $/mmbtu). Acccrdng tc cur
estmates, ths technclcgy wculd cnly be eccncmcally ccmpettve f the
ccst cf prcductcn dd nct exceed ii $/mmbtu.
Biogas
8cgas s prcduced frcm bcmass usng a bclcgcal deccmpcstcn prccess,
n whch crganc matter s ccnverted tc methane and carbcn dcxde by
beng ccmpcsted n an cxygen-free envrcnment. 8y ccmpcstcn (methane:
50-70 per cent; carbcn dcxde: 50-30 per cent), bcgas s clcse tc natural
gas and s used fcr the same purpcses; f pured, t beccmes a `green' gas,
cr bcmethane, whch can be n|ected ntc the natural gas transpcrtatcn
system. lt s qute ccmmcnly used n the Netherlands, Sweden, and Cermany.
1here are fcur man ways cf utlzng bcgas n the energy sectcr (Fgure 3.24).
Figure 3.24. Biogas utilization
BIOGAS
Heat and steam
generation
Power
generatcn/
cogeneration
Fuel
cells
Fuel for the
transpcrt
sector

Mcst ccmmcnly, bcgas s used fcr the generatcn cf heat and electrcal
pcwer frcm gas turbnes havng a capacty rangng frcm 800 kw tc tens
cf Mw. lt has alsc been used successfully tc fuel mcrc-turbnes (25 tc i00
kw). 1hs technclcgy s partcularly sutable fcr rural areas, agrc-ndustres,
and fcr specc purpcses n urban and metrcpcltan areas. 8ut abcve all, t
86
s effectve n agrculture, because t can be mplemented ntc a ccmplete
ecclcgcal cycle.
ln develcped markets, levelzed ccsts fcr electrcty generated n bcgas
plants currently vary frcm $85 tc $2i0 per Mwh (Fgure 3.25).
Figure 3.25 Levelized costs of electricity by energy type
N l
Large hydrc
Landfll gas
Onshcre wnd
0 i00 200 300
CCC1
Ccal
Nuclear
$/Mwh
Soorcc. otnt worlJ Sorvcy oj Frcry 1cchroloics, 8loonbcr Ncw Frcry lircrcc 2012
ln scme cases (dependng cn the ccuntry and lccatcn cf ts use) bcgas
electrc pcwer generatcn s qute ccmpettve wth electrcty prcduced frcm
natural gas, ccal, cr nuclear energy.
1cday, the vclume cf bcgas prcductcn n the Lurcpean market exceeds i0
bcm per year. Chna s cne cf the wcrld's leadng prcducers - t prcduces
abcut i5 bcm cf bcfuel annually.
The main factors contributing
to development of biogas usage
are: subsidies for renewable
energy, relatively short
payback period, environmental
friendliness, suitability for use as
power supply in remote areas.
87

1he lmpact cf Clcbal Lnergy Markets
cn Pussa's Lccncmy and Lnergy Sectcr
88
4. THE IMPACT OF GLOBAL ENERGY MARKETS ON RUSSIAS
ECONOMY AND ENERGY SECTOR
The Initial Scenario for the Development of the Russian Economy and Energy Sector
The Outlcck-20i3 lntal Scenarc fcr Pussa (and the nput parameters fcr
the cptmzatcn mcdels cf the wcrld's energy markets) uses develcpment
ndcatcrs whch, fcr the percd up tc 2030, are ccnsstent wth the lnncvatcn
Scenarc cf the lcng-term fcrecast cf the Mnstry cf Lccncmc Develcpment
cf the Pussan Federatcn, ssued n early 20i3. Outlcck-20i3 then retans
the abcve trends fcr the whcle percd cf the fcrecast.
Acccrdng tc ths cfcal scenarc, the ccuntry's pcpulatcn wll rse slghtly,
tc i44m pecple by 2020, after whch there wll be an accelerated declne,
tc i38m pecple by 2040. Pussa's CDP wll ncrease 3.2 tmes by 2040 (an
average cf 3.4 per cent per year) and per capta nccme wll ncrease by 3.3
tmes. Up tc 2030, Pussa wll hcld sxth place n CDP ratngs amcng the
ccuntres cf the wcrld and, by 2040, t wll cvertake lapan and rse tc fth
place n the wcrld, whch wculd strengthen Pussa's gecpcltcal pcstcn.
Fgure 4.i shcws the dynamcs and ccmpcnents cf CDP fcr ths lntal
Scenarc cf Pussa's eccncmc and energy develcpment (bars labelled ì').
Such dynamcs, when appled tc the pcpulatcn and eccncmy, ccrrespcnd
tc a 3 per cent grcwth n dcmestc energy demand by 2040, 40 per cent cf
whch s prcduced by electrc pcwer statcns. Half cf ths demand s ccvered
by natural gas (Fgure 4.2, bars labelled ì').
1hs scenarc assumes that the energy ntensty cf Pussa's CDP wll declne
by 57 per cent by 2040 - a faster rate than the wcrld average. Hcwever,
despte the hgh rate cf ths declne, the energy ntensty cf the Pussan
eccncmy wll stll reman 75 per cent hgher than the wcrld average (n 20i0,
t exceeded the wcrld average by 0 per cent).
1he lntal Scenarc predcts a slght ncrease n energy expcrts by 2020,
fcllcwed by stagnatcn and declne n tctal expcrt vclumes. 1he vclume cf cl
and petrcleum prcduct expcrts wll fall, whle gas expcrts (especally LNC)
wll rse, (Fgure 4.3, bars labelled ì'). Mcrecver, acccrdng tc ths scenarc,
even n 30 years' tme, Pussa wll be nct cnly the wcrld's largest expcrter cf
cl and gas, but alsc the largest prcducer.
Such a pcstcn cf nternal and external demand ccrrespcnds tc an ncrease
n the prcductcn cf prmary energy by 20 per cent; ths s manly represented
by gas, renewables, and nuclear energy prcductcn, whle the share cf cl wll
fall and the share cf ccal wll stay unchanged (Fgure 4.4, bars labelled ì').
Cas prcductcn, acccrdng tc the lntal Scenarc, wll exceed 00 bcm per
year, whch s ccmparable cnly wth US prcductcn. 8y 2030, cl prcductcn
wll stablze at clcse tc current vclumes - 500m tcns per year - ccmparable
wth Saud Araba and the USA.
1he parameters cf the lntal Scenarc namely: the dynamcs cf ccnsumptcn
and energy rescurce prcductcn n Pussa; the ccsts cf prcductcn, prccessng,
and transpcrt cf cl and gas; the exstng current expcrt dutes; and the
taxatcn system n these ndustres - were extrapclated usng cptmzatcn
mcdels cf wcrld energy markets. 1hs was dcne fcr:
(a) a feasblty analyss cf these lntal Scenarc parameters under severe
restrctcns cn the demand sde, and ccmpetng supplers n glcbal energy
markets;
(b) the dentcatcn cf pcssble ccnsequences (whch cculd have an mpact
cn Pussa) cf dfferent cutccmes cf wcrld energy develcpment.
89
Russian resources in world energy markets: external constraints
1hs mcdellng shcwed a sgncant decrease n Pussan hydrccarbcn
expcrt vclumes tc external markets, n ccmparscn wth lntal Scenarc
ndcatcrs.
ln the 8aselne Scenarc fcrecast cf vclumes and prces n wcrld markets,
Pussan cl was valued acccrdng tc the ccsts cf eld and transpcrt
develcpment (acccrdng tc Ccldman Sachs and cl ccmpanes' estmates),
and wth applcable taxes taken ntc acccunt. Acccrdng tc the results cf the
smulatcn, Pussa turned cut tc be amcng the mcst expensve supplers n
the wcrld market, beng left wth underutlzed pctental prcductcn (Fgure
2.ii). As a result, and takng ntc acccunt the external market stuatcn,
Pussan expcrts cf cl and petrcleum prcducts wll declne by 25-30 per
cent after 20i5 acccrdng tc the 8aselne Scenarc, ccmpared tc the lntal
Scenarc, wth a lcss cf $i00-i50bn cf CDP per year (Fgure 4.5, bars
labelled `2').
lf cl expcrt dutes were tc be lcwered by 35 per cent (tc $255/t), then
the prcductcn and expcrt cf Pussan cl wculd almcst ccrrespcnd tc that
n the lntal Scenarc. Hcwever, the ccntrbutcn cf the cl sectcr tc CDP
wculd be reduced even further than f t cperated tax free (Fgure 4.5, bars
labelled `3'). 1hus, the preservatcn cf the vclume cf Pussan cl expcrts
wculd nct ccmpensate fcr the lcss n CDP caused by the necessary
reductcn n the expcrt duty.
1he ccuntry wll lcse ancther $20-25bn cf CDP each year frcm decreased
cl prces n the `Shale 8reakthrcugh' Scenarc (Fgure 4.5, bars labelled `4').
ln 8aselne Scenarc gures fcr vclumes and prces cn wcrld markets, Pussan
gas was valued acccrdng tc ccrpcrate publcatcns cn the ccst cf ma|cr
nvestment prc|ects, wth applcable taxes taken ntc acccunt. Acccrdng tc
the results cf glcbal gas market mcdellng, Pussa was amcng the supplers
that were laggng the furthest, and facng underutlzatcn cf pctental
prcductcn, n Lurcpean and Asan regcnal markets (Fgure 2.25). 1akng ntc
acccunt the dfcult stuatcn n external markets, tcgether wth ncreased
ccmpettcn frcm cther gas supplers, after 20i5 Pussan gas expcrts wll
declne by i5-20 per cent mcre than estmated n the lntal varant cf the
8aselne Scenarc. 1hs mples a lcss cf $40-50bn cf CDP per year (Fgure
4.5, bars labelled `2').
lf Pussa abclshes the current expcrt duty fcr ppelne gas (30 per cent),
the prcductcn and expcrt cf Pussan gas wll ncrease, but wculd nct reach
the levels seen n the lntal Scenarc. ln ths case, as seen abcve n the case
fcr cl, the gas sectcr's ccntrbutcn tc CDP wculd be reduced by even mcre
than f expcrts were tax free (Fgure 4.5, bars labelled `3'), that s, the results
cf a scal stmulus cf Pussan gas expcrts wculd nct ccmpensate fcr the
abclshment cf the expcrt duty.
CDP wll be reduced by ancther $20-25bn per year as a result cf lcwer gas
prces n the `Shale 8reakthrcugh' Scenarc (Fgure 4.5, bars labelled `4').
lt s nterestng tc ncte that - even takng ntc acccunt ts pcssble new
mpetus - the negatve ccnsequences cf the `shale revclutcn' wll have
ther greatest mpact cn Pussa durng the next i0-i5 years, and they wll
gradually weaken by 2040.
Estimates of conditions in external
markets show a decrease of 2530
per cent in forecast volumes
cl kassi+r expcrts cl ci| +rc
petroleum products after 2015,
relative to the Initial Scenario,
resulting in a loss of $100150bn
of GDP per year.
90
Figure 4.1. Dynamics of Russian GDP
4 500
5 000
$20i0 bln
2 1
3 000
3 500
4 000
4 500
5 000
$
Servces
lnfrastructure
2
2
2
2
1
1
1
1
i 500
2 000
2 500
3 000
3 500
lnfrastructure
Prccessng
Paw, excl. energy
sectcr
1
2
2
2
1
1
1 - Initial Scenario
0
500
i 000
i 500
sectcr
2 - Baseline Scenario
0
500
20i0 20i5 2020 2025 2030 2035 2040
Soorcc. FkI kAS bcscJ or thc kl HF0 Irrovctior Sccrcrio crJ owr cstinctcs
Figure 4.2. Primary energy consumption in Russia by fuel type
i 400
i 600
mtce
2 1
2
1
2
1
800
i 000
i 200
i 400
Others
Hydrc
Nuclear
S ld f l
1 2
2 1
2
1
2
1
2 1
2
1
400
600
800
i 000
Hydrc
Nuclear
Scld fuels
Casecus fuels
Lquds
0
200
400
20i0 20i5 2020 2025 2030 2035 2040
0
20i0 20i5 2020 2025 2030 2035 2040
Soorcc. FkI kAS
Figure 4.3. Energy Resources Exported from Russia by Fuel Type
00
i000
mtce
1 2
2 1
2
1
2
1
2 1
2
1
600
700
800
00
i000
mtce
Ccal, electrcty
LNC
1 2
2 1
2
1
2
1
2 1
2
1
300
400
500
600
700
Ccal, electrcty
LNC
Ppelne gas
Ol prcducts
Ol
0
i00
200
300
Ol
0
i00
20i0 20i5 2020 2025 2030 2035 2040
Soorcc. FkI kAS
91
Figure 4.4. Primary Energy Production in Russia by Fuel Type
2 500
mtce
2 1
2
1
2
1
2 1
i 500
2 000
2 500
Others
Hydrc
Nuclear
1 2
2 1
2
1
2
1
2 1
2
1
i 000
i 500
Hydrc
Nuclear
Ccal
Natural gas
Ol
0
500
Ol
0
20i0 20i5 2020 2025 2030 2035 2040

Soorcc. FkI kAS
Figure 4.5. Energy Export Volumes (Top) and Decrease of Its Contribution to Russias GDP (bottom) in the
Different Scenarios of Outlook-2013
-400
-300
-200
-i00
0
i00
200
300
400
500
-800
-600
-400
-200
0
200
400
600
800
i 000
20i5 2020 2025 2030 2035 2040
$20i0 bln
mtce
Ol, cl prcducts Natural gas
1 2 3 4
left axis
right axis
1 2 3 4
1 2 3 4
1 2 3 4
1 2 3 4
1 2 3 4
-400 -800
$20i0 bln Ol, cl prcducts Natural gas

Soorcc. FkI kAS
Figure 4.6. Investments in the Russian Fuel and Energy Complex
700
800
$20i0 bln
Lnergy savngs
Heat supply
2 1
2
1
2
1
400
500
600
700
Lnergy savngs
Heat supply
Other renewables
Hydrc
Nuclear
1 2
2
2
1
2
1
2 1
2
1
200
300
400
500
Hydrc
Nuclear
1hermal pcwer plants
and netwcrks
2 B li S i
0
i00
200
2006-20i020ii-20i5 20i6-2020 202i-2025 2026-2030 203i-2035 2036-2040
0
2006-20i020ii-20i5 20i6-2020 202i-2025 2026-2030 203i-2035 2036-2040
Soorcc. FkI kAS
1 lnlLlal Scenarlo 3 8asellne Scenarlo wlLh no exporL duLy
2 8asellne Scenarlo 4 'Shale 8reakLhrough' wlLh no exporL duLy
92
The Forecast Scenario of Russias Economy and Energy Sector Development
Outlcck-20i3 has revealed sercus pctental threats tc the Pussan eccncmy
and ts energy sectcr, resultng frcm the prcfcund transfcrmatcn cf glcbal
energy markets that s expected. 1he 8aselne Scenarc cbtaned by mcdellng
falls shcrt cf the cfcal lntal Scenarc, n terms cf all the ma|cr ndcatcrs:
ln the 8aselne Scenarc, cver the next i0-i5 years, Pussan expcrts cf cl
and gas wll fall by 20 per cent cr even mcre, and wll then stablze (Fgure
4.3, bars labelled `2'), althcugh Pussa wll reman the wcrld's largest
suppler cf fuel tc wcrld markets.
1he decrease n revenues frcm gas expcrts - and even mcre, thcse
frcm cl expcrts - wll reduce the ccntrbutcn cf hydrccarbcn expcrts
tc CDP by a thrd. Strcng multpler effects pecular tc these ndustres,
and a decrease n the cw cf fcregn captal, wll sgncantly enhance the
mpact cf ths decrease n expcrt earnngs, and reduce the develcpment
cf the eccncmy by cne per cent per year (Fgure 4.i and 1able 4.i.). ln ths
case the dynamcs cf Pussa's CDP, nstead cf beng slghtly hgher than the
glcbal average fcr CDP grcwth (as descrbed n the lntal Scenarc) wll lag
behnd t, and Pussa's CDP wll nct rse abcve ts current sxth place n the
wcrld. 1hs cf ccurse wll, tc scme extent, weaken the gecpcltcal pcstcn
cf the ccuntry.
1he slcwdcwn n CDP grcwth wll lead tc a detercratcn cf the man
parameters cf the Pussan energy sectcr - the vclume cf nvestments
(ncludng nvestments n energy savng), energy ccnsumptcn, and energy
prcductcn. wth a mcderate reductcn n dcmestc demand (Fgure 4.2,
bars labelled `2'), tctal energy prcductcn (Fgure 4.4, bars labelled `2') wll
decrease by mcre than the ccuntry's expcrts, althcugh Pussa wll retan ts
current pcstcn as the thrd largest prcducer n the wcrld.
Table 4.1. Role of the fuel and energy complex in Russias economy, %

2010
2015 2020 2025 2030 2035 2040
1 2 1 2 1 2 1 2 1 2 1 2
GDP growth rates 4,3 4,5 4 4,3 3,3 4,2 3,2 3,8 2,8 3,7 2,7 3,5 2,5
The share of the energy sector
in the GDP
28,5 25,6 25,5 22, 23,i 20,0 20,4 i8,4 i8,8 i7,0 i7,3 i5,6 i5,
Investments in the energy
sector as a share of GDP
4,6 5,2 6,4 4,3 3, 3, 3,8 3,5 3,5 3,2 3,2 2,8 2,8
The share of the energy sector
investments in the total
investments
22,6 23,8 23,5 i7,4 i5,i i5,0 i2,3 i3,4 i3,4 i2,5 i2,5 ii,2 ii,2
Ìr thc 3-yccr cvcrcc Source: ERI RAS
1 - Iriticl Sccrcrio 2 - 8csclirc Sccrcrio
At rst sght, n crder tc ccunteract these threats, t wculd appear useful tc
reduce cr even elmnate the dutes cn expcrts cf hydrccarbcns, especally
snce cther ma|cr market players dc nct use them and they are nct apprcved
by the w1O. waver cf dutes, cf ccurse, wculd ncrease the nternatcnal
ccmpettveness cf Pussan hydrccarbcns and ncrease the vclume cf expcrts,
but t has twc negatve aspects. Frst, as mentcned abcve, the ccntrbutcn
cf expcrts tc CDP wll be reduced - because the rate cf expcrt grcwth
Outlook-2013 has revealed
sericas ris|s lcr t|e kassi+r
economy and energy
sector resulting from the
transformation of global energy
markets: declining oil and gas
exports and export revenues,
relative to planned performance
indicators; slowing GDP growth;
deterioration of all the main
p+r+aeters cl t|e kassi+r erer]
sector.
There are two main options for
improving the competitiveness
cl kassi+r |]crcc+r|cr expcrts
in global markets: reduction of
state seizures and a reduction of
companies costs throughout the
chain of supply.
93
wculd be less than the lcss ncurred due tc the decrease cf dutes mpcsed
cn the entre expcrt vclume. Seccnd, t wculd lead tc an ncrease n dcmestc
prces fcr gas and cl prcducts, whch wculd curb eccncmc develcpment and
reduce the added value cf mcst types cf eccncmc actvtes, whch n turn
wculd further slcw dcwn the ccuntry's eccncmy.
A truly effectve means cf ccunterng external challenges wculd be a dramatc
ncrease n bcth the nvestment efcency cf the Pussan energy sectcr and
n the energy efcency cf the eccncmy as a whcle. Pussa has a number
cf unque pctentaltes n respect cf bcth these ccurses cf actcn. lndeed,
the Pussan energy sectcr has already undertaken huge captal nvestments
and t wll grcw, n acccrdance wth apprcved plans fcr the develcpment cf
energy ndustres, tc reach an unprecedented 6-7 per cent cf CDP (1able 4.i)
(the glcbal average s abcut i.3-i.5 per cent cf CDP).
Hcwever, Pussa's natcnal eccncmy has cne cf the wcrld's lcwest ndcatcrs
cf CDP prcductcn per unt cf ccnsumed energy (three tmes less than the
glcbal average), and by 2040, acccrdng tc ths Outlcck, ths gap wll hardly
have been reduced.
1he elmnatcn cf such wastage wculd requre twc ccncerted grcups cf
measures - nncvatve-technclcgcal and eccncmc-crganzatcnal. 1he rst
cne s strategc and requres lcng-term, ccntnucus applcatcn. 1he seccnd
grcup cf measures cculd prcduce qute rapd and efcent results - whch
are requred fcr the expected glcbal turbulence.
1he rst gcal cf the Pussan energy ndustry's eccncmc and crganzatcnal
measures shculd be a radcal reductcn n the ccst cf nvestment prc|ects,
tcgether wth a thcrcugh evaluatcn cf ther ccst-effectveness and pctental
rsks. lt s advsable tc rank nvestment prc|ects - ncludng thcse amed at
the dverscatcn cf rcutes, prcducts, and markets - and re|ect cr pcstpcne
the mplementatcn cf nefcent cnes. 1hs s ccnrmed by the results
cf wcrk dcne by fcregn and Pussan experts, whc analysed the ccst cf
dcmestc energy prc|ects, shcwng that they were typcally several tmes
mcre expensve ccmpared tc exstng analcgcus prc|ects fcund elsewhere
4
,
whle thcse prc|ects that were ccmpleted were underutlzed fcr years
5
.
1he seccnd necessary, but nct sufcent, prerequste fcr mprcvng the
efcency and reducng the rsks cf nvestment prc|ects s extensve study cf
the prcspects fcr fcregn and dcmestc energy markets. 1he new publcatcn
cf ths research demcnstrates pcssble apprcaches, enhanced nstruments,
and new results, but t s stll nsufcent tc fully assess the eccncmc and,
especally, ccmmercal vablty cf certan prc|ects. Pussa certanly needs
a mechansm fcr ccntnucus mcntcrng and algnment cf expcrt pclces
(fcllcwed by precse tactcal actcns), and the creatcn cf a Pussan system
fcr fcrecastng the prcspects cf energy market develcpments, armed wth
the ablty tc analyse ther senstvty tc a varety cf factcrs, ncludng the
behavcur cf the man market players, wculd be a great step fcrward.
Nevertheless, the man ccndtcn fcr ncreasng the ccmpettveness cf the
Pussan fuel and energy ccmplex s a radcal mprcvement n the qualty
cf publc, and especally ccrpcrate, gcvernance. 1he latter can play an
mpcrtant rcle n attractng fcregn partners ntc the ccnscrta engaged
4 Fcr nstance, the ccsts cf Pussan gas nvestment prc|ects used n cur estmates (taken frcm ccrpcrate publcatcns), exceed twcfcld ther
nternatcnal assessment smulated by the NLXAN1 gas mcdel.
5 Fcr nstance, the `8lue Stream' gas ppelne, ntended fcr the supply cf natural gas acrcss the 8lack Sea tc 1urkey, has cperated at less
than 50 per cent cf ts thrcughput capacty fcr i0 years.
The main goal should be a
radical reduction in the cost
of investment projects it is
advisable to rank investment
projects, declining or postponing
t|e iap|eaert+ticr cl irelrciert
plans.
94
n rescurce develcpment (ths refers especally tc the eastern part cf the
ccuntry, the ccastal shelf, and depcsts cf unccnventcnal hydrccarbcns). lf
prcperly managed, t wculd enable the ccuntry tc:
attract fcregn nvestment and apply advanced technclcgy;
develcp types cf busness actvtes wth pctental, under new ccndtcns;
ensure tght ccntrcl cver ccsts and cther busness results;
cbtan addtcnal assurances fcr prcduct sales; and
facltate access tc lcgstcs and adapt tc the rules cf nternatcnal markets.
Prelmnary estmates shcw that f such measures are taken n a tmely manner,
t wll be pcssble tc ccmpensate fcr the negatve effects cf the fcrthccmng
transfcrmatcns cf glcbal energy markets, and return the Pussan eccncmy
and energy sectcr tc the ambtcus ndcatcrs cf the lntal Scenarc.
95
Appendxes
96
APPENDIXES
Appendix 1. Methodology
1he wcrld energy mcdel nccrpcrated n the SCANLP mcdellng and
nfcrmatcn ccmplex ccnssts cf a grcup cf nterccnnected mcdules that
enable the perfcrmance cf a ccnsstent ccmputatcn cf ndcatcrs cn the
bass cf cptmzatcn, eccncmetrc analyss, and balance apprcach.
1he calculatcn base s very detaled: t ccntans i2 ClS ccuntres, 37 Lurcpean
ccuntres - n tctal i2 ncdes. 1he wcrld fcrecast s lnked wth a detaled
prcgncss fcr the Pussan fuel and energy ccmplex, whch makes t pcssble
tc assess the rsks and prcspects fcr the functcnng cf the Pussan energy
sectcr n the glcbal ccntext.
1he bass cf the retrcspectve nfcrmatcn cn the ma|crty cf energy ndcatcrs
s lnternatcnal Lnergy Agency (lLA) data.
1he demand fcr prmary energy, electrcty, and lqud fuels (cl prcducts, etc.)
s calculated based cn the fcrecasted ndcatcrs cf eccncmc develcpment
(CDP) and demcgraphy (Fgure Pi). 1he resultng demand fcr electrcal pcwer
s transferred tc the electrc pcwer generatcn mcdule, where t s ccmbned
wth apprcprate fuel types, and wth a factcr relatng tc energy efcency.
1he results are drected then tc the balance mcdule, whcse task s tc nd a
ratcnal cptcn fcr supplyng exstng energy demand.
Lnergy pclcy has a sgncant mpact cn the future develcpment cf renewable
energy (fcr generatcn) and the use cf nuclear energy. 1herefcre, these
ndcatcrs are calculated n separate mcdules. 1hese nclude the structure
cf exstng, under ccnstructcn, and planned capactes, and assumptcns fcr
eccncmc efcency and energy pclces cf ndvdual ccuntres.
1he man cb|ectve cf all the rescurce mcdules s tc nd sclutcns tc the
cptmzatcn cb|ectve cf mnmzng the tctal ccsts cf meetng energy
demand, takng ntc acccunt the eccncmc feasblty cf fuel substtutcns.
1he vclumes and eccncmc parameters cf the pctental substtutcn cf
lqud and gasecus fuels are set cut n threshcld vclumes fcr each ncde. 1he
ccmpettve pctental cf natural gas s estmated n relatcn tc ccal, nuclear
energy, and renewable energy n electrcty prcductcn; the ccmpettveness
cf cl fuels s ccmpared wth bcfuels, natural gas, and ccal (C1L, CNC, C1L),
and wth electrcty (transtcn tc electrc vehcles).
1he mcdel cf the lqud fuels market, based cn the results cf the cptmzatcn,
determnes: demand fcr cl and cther alternatve fuels by ncde; the vclume cf
capactes nvclved n prcductcn, transpcrtatcn, and prccessng; and the tctal
specc ccsts requred fcr meetng the demand (balance prces). Ol prcductcn
s dsplayed n acccrdance wth the type cf cl (ccnventcnal, shale, etc.); cl
prcducts are dvded ntc sx types. 1he mcdel ccntans mcre than 2000 rcutes
cf ppelne, ral, and sea transpcrtatcn, as well as data cn 872 reneres.
1he gas mcdel enccmpasses the market fcr all gas fuels. 1he mcdel, based
cn the results cf cptmzatcn, determnes: hcw much gas and cther fuels, n
acccrdance wth the ncdes, wll be n demand; gas prcductcn vclumes; the
rate cf utlzatcn cf transpcrt capactes and prces (spct, and assccated wth
lcng-term cl-lnked ccntracts). 1he mcdel ccntans 33 gas transpcrtatcn
ccrrdcrs ccnnectng the ncdes n all regcns cf the wcrld, and ii6 rcutes
cf LNC delvered by tankers.
1he ccal mcdel ccvers the entre market cf scld fuels. 1he mcdel determnes
the requred amcunts cf fuel prcductcn n acccrdance wth the ncdes, ther
prces, and supply rcutes.
Fcr large ccuntres, the rescurce mcdules ntegrate several ncdes.
After determnng the ccnsumptcn amcunts fcr each type cf fuel, CO
2

emsscns are estmated.
Calculation is conducted for
each country (node). The
resource modules are more
detailed.
97

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Appendix 2. Regional Balances
Figure P2. Structure and dynamics of primary energy consumption in the world
20000
mtce
0,9%
10,0%
i6000
i8000
20000
mtce
32,2% 5,6%
2,3%
0,9%
10,0%

8000
i0000
i2000
i4000
i6000
i8000
32,2%
21,4%
27,6%
5,6%

3,9%
9,9%
2000
4000
6000
8000
i0000
26,6%
6,6%
2,9%
3,9%
9,9%

0
2000
4000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
24,6%
25,6%
6,6%

0
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Ol Natural gas Ccal Nuclear Hydrc Other renewables 8cenergy
24,6%
25,6%
Figure P3. Structure and dynamics of primary energy consumption in OECD countries
mtce
2,1%
4,7%
6000
7000
mtce
38,3%
10,7%
2,1%
4,7%

3000
4000
5000
6000
7000
38,3%
23,6%
19,5%
10,7%

i000
2000
3000
4000 23,6%
30,2%
10,3%
2,6%
5,3%
8,9%

0
i000
2000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
30,2%
28,4%
14,3%
10,3%
2,6%
,

0
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
28,4%
14,3%
99
Figure P4. Structure and dynamics of primary energy consumption in non-OECD countries
i2000
i4000
mtce
27,4%
1,7%
2,5%
14,1%
8000
i0000
i2000
i4000
mtce
27,4%
19,7%
33,8%
1,7%
2,5%
14,1%

4000
6000
8000
19,7%
33,8%
24,9%
4,8%
3,0%
3,2%
10,3%
0
2000
4000
6000
24,9%
22,7% 31,0%
4,8%
3,0%
3,2%
10,3%

0
2000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
22,7% 31,0%

Figure P5. Structure and dynamics of primary energy consumption in North America
4,1%
3000
3500
mtce
38,6%
9,0%
2,1%
4,1%
2000
2500
3000
3500
mtce
38,6%
25,5%
19,8%
9,0%

i000
i500
2000
2500
25,5%
31,8%
8 8%
2,5%
4,5%
8,7%
0
500
i000
i500
31,8%
14,5%
8,8%
2,5%
4,5%
8,7%

0
500
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
29,2%
14,5%

100
Figure P6. Structure and dynamics of primary energy consumption in South and Central America
i200
mtce
18,9%
i000
i200
mtce
45,9%
4 0%
9,4%
18,9%

400
600
800
i000
45,9%
20,4%
4,0%
9,4%

18,7%
200
400
600
35,9%
10,5%
2,4%
18,7%

0
200
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
35,9%
25,7%
4,5%
2,2%
10,5%
,

2000 2005 20i0 20i5 2020 2025 2030 2035 2040
25,7%
4,5%
Figure P7. Structure and dynamics of primary energy consumption in Europe
2500
mtce
2,7%
7,0%
2000
2500
mtce
36,3%
16,3%
12,2%
2,7%
7,0%

i000
i500
2000
24,1%
16,3%

27 4%
5,8%
11,9%
500
i000
27,4%
11,5%
3,2%
5,8%
11,9%

0
500
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
28,7%
11,4%
11,5%

2000 2005 20i0 20i5 2020 2025 2030 2035 2040
28,7%
101
Figure P8. Structure and dynamics of primary energy consumption in the CIS
i600
mtce
19,4%
6,6%
2,0%
1,0%
i200
i400
i600
mtce
19,4%
18,2%
6,6%
2,0%
,

600
800
i000
i200
i400
52,7%

19,4%
11,6%
2,2%
2,7%
200
400
600
800
19,4%
11,1%
11,6%
2,2%
2,7%

0
200
00
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
Ol N t l C l N l H d Oth bl 8
51,8%
11,1%

2000 2005 20i0 20i5 2020 2025 2030 2035 2040
51,8%
Figure P9. Structure and dynamics of primary energy consumption in OECD Asia
i000
mtce
12,4%
1,2%
1,9%
700
800
00
i000
mtce
40,6%
26,3%
12,4%
1,2%
,

300
400
500
600
700
800
00
40,6%
16,9%
26,3%

29 7%
1,4%
6,5%
3,4%
i00
200
300
400
500
29,7%
14,1%
1,4%
6,5%
3,4%

0
i00
200
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
24,1%
20,8%

2000 2005 20i0 20i5 2020 2025 2030 2035 2040
24,1%
102
Figure P10. Structure and dynamics of primary energy consumption in non-OECD Asia
8000
mtce
23,8%
2,1%
13,5%
6000
7000
8000
mtce
23,8%
7,9%
2,1%
13,5%

3000
4000
5000
6000
7000
7,9%
50,9%

22,3%
2,7%
4,3%
8,2%
i000
2000
3000
4000
22,3%
14,6%
4,9%
2,7%
4,3%
8,2%

0
i000
000
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
14,6%
43,1%

2000 2005 20i0 20i5 2020 2025 2030 2035 2040
43,1%
Figure P11. Structure and dynamics of primary energy consumption in the Middle East
mtce
i000
i200
mtce
50,4%
47,6%
600
800
i000
50,4%
47,6%
2,3%
1,3%
200
400
600
42,9%
2,3%
1,3%

0
200
400
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
42,9%
52,7%

0
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
103
Figure P12. Structure and dynamics of primary energy consumption in Africa
mtce
i200
i400
mtce
22,5%
47,4%

600
800
i000
i200
,
12,5%
15,7%
47,4%

200
400
600
800
15,7%
23,4%
34,2%

0
200
400
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
23,4%
12,9%
24,1%
2,0%
2,4%
34,2%

0
2000 2005 20i0 20i5 2020 2025 2030 2035 2040
24,1%
2,0%
2,4%

104
Appendix 3. Comparison with Other Forecasts
Figure P13. Comparison with other forecasts for primary energy consumption by region in 2030,
2035, and 2040
Africa
Middle East
Developing Asia
Developed Asia
CIS
Europe
North America
2 000
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
mtoe
0
2 000
E
R
I
R
A
S
-
A
C
P

2
0
1
3
I
E
A

2
0
1
2

N
P
I
E
A

2
0
1
2

C
P

2
0
1
3
E
I
A

D
O
E

2
0
1
1
E
R
I
R
A
S
-
A
C
P

2
0
1
3
I
E
A

2
0
1
2

N
P
I
E
A

2
0
1
2

C
P
E
I
A

D
O
E

2
0
1
1
E
R
I
R
A
S
-
A
C
P

2
0
1
3
E
x
x
o
n
M
o
b
i
l

2
0
1
3
2010 2030 2035 2040
Zcno+uor. Z3Z PA
Figure P14. Comparison with other forecasts for energy consumption by fuel type in 2030, 2035,
and 2040
4 000
6 000
8 000
10 000
12 000
14 000
16 000
18 000
20 000
mtoe
Renewables
Nuclear
Coal
Natural gas
Oil
0
2 000
E
R
I
R
A
S
-
A
C
P

2
0
1
3
I
E
A

2
0
1
2

N
P
I
E
A

2
0
1
2

C
P

2
0
1
3
E
I
A

D
O
E

2
0
1
1
E
R
I
R
A
S
-
A
C
P

2
0
1
3
I
E
A

2
0
1
2

N
P
I
E
A

2
0
1
2

C
P
E
I
A

D
O
E

2
0
1
1
E
R
I
R
A
S
-
A
C
P

2
0
1
3
E
x
x
o
n
M
o
b
i
l

2
0
1
3
2010 2030 2035 2040
Oil
105
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107
Energy Research Institute of the Russian Academy of Sciences (ERI RAS) is
Pussa's leadng ndependent research centre n the eld cf ntegrated energy
research.
1he nsttute was establshed n i85 fcr the prcvscn cf fundamental
research wthn the framewcrk cf the develcpment and mplementatcn
cf the ccuntry's energy pclcy. 1he lnsttute ccmbnes the advantages cf
academc scence - n-depth study cf tasks and rgcrcus methcdclcgcal
apparatus - wth a dynamc and custcmer-crented apprcach.
Durng mcre than 25 years cf cperatcn, the lnsttute has cbtaned extensve
practcal experence, develcped pcwerful mathematcal tccls, and has
accumulated unque databases cn wcrld energy, the energy ndustres cf the
wcrld, ClS ccuntres, Pussa, and ts regcns.
1he man scentc cb|ectve cf the lnsttute s the develcpment cf the thecry
and methcdclcgy cf systems research and energy develcpment fcrecastng.
1he man cb|ectves cf appled research are: the fuel and energy ndustres
cf the wcrld, ccuntres and regcns; Pussa's Uned Cas Supply System and
pcwer grd (ncludng the nuclear sectcr); the ccuntry's cl and ccal ndustres;
scentc and techncal prcgress cf ts energy sectcr; and the energy ndustry
n ClS ccuntres.
Analytical Centre of the Government of the Russian Federation (AC) is
a multfunctcnal expert and analytcal agency wcrkng n the eld cf
cperatcnal analytcs and advanced research, crganzng tranng usng
management by cb|ectves (M8O).
1he Centre was establshed n acccrdance wth a Pesclutcn cf the
Ccvernment cf the Pussan Federatcn as cf 20 December 2005. 1he purpcse
cf ts actvty s tc prcvde relable and tmely nfcrmatcn that prcvdes
antcpatcry warnngs tc the Ccvernment cf the Pussan Federatcn relatng
tc materal crcumstances that help cr hnder the achevement cf nal results
- dented as beng the prmary fccus cf gcvernment prcgrams under
develcpment cr mplementatcn, and prc|ects fcr the ccuntry's sccal and
eccncmc develcpment.
1he task cf the Analytcal Centre s the mprcvement cf data qualty used fcr
analyss and fcrecastng cf sccceccncmc phencmena and prccesses, the
management cf gcvernment prc|ects and prcgrams, as well as the expanscn
and deepenng cf cccperatcn wth thnk tanks, expert grcups, and ndvduals
fcr the develcpment cf an external expertse base. Specal attentcn s
gven tc cccperatcn wth Pussan regcns, nternatcnal crganzatcns, and
research centres, wth the gcal cf achevng best practce n cperatcnal and
strategc mcntcrng cf sccceccncmc develcpment.
1he ccpyrght fcr all materal publshed n ths fcrecast, except where ncted, belcngs tc
LPl PAS and the AC. lllegal ccpyng and dstrbutcn cf nfcrmatcn prctected by ccpyrght
wll be prcsecuted. All materal presented n ths dccument s fcr nfcrmatcnal purpcses
cnly and s sclely the prvate |udgment cf the authcrs; t s nct ntended as the cffer cr
reccmmendatcn fcr the ccmmsscn cf any actcn. LPl PAS and the AC are nct respcnsble
fcr any lcss, damage, cr cther adverse effects that may result frcm the use cf nfcrmatcn
ccntaned n ths publcatcn, fcr any drect cr ccnsequental lcss arsng frcm the use cf ths
nfcrmatcn, cr fcr the accuracy cf nfcrmatcn cbtaned frcm external scurces. Any use cf
the materal s permtted cnly wth prcper reference tc the publcatcn.
@ LPl PAS, AC, 20i3. All rghts reserved.
IsBN 978-5-91458-012-7

Global and Russian Energy Outlook

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The Energy Research Institute of the Russian Academy of Sciences

Analytical Centre of the Government of the Russian Federation

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