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What Triggered the U.S. Shale Gas Revolution?


The use of horizontal drilling in conjunction with hydraulic fracturing has greatly expanded
the ability of producers to profitably produce natural gas from low-permeability geologic
formations, particularly shale formations. Application of fracturing techniques to stimulate oil
and gas production began to grow rapidly in the 1950s, although experimentation dates back to
the 19th century.

Starting in the mid-1970s, a partnership of private operators, the U.S. Department of Energy and
the Gas Research Institute endeavored to develop technologies for the commercial production of
natural gas from the relatively shallow Devonian (Huron) shale in the Eastern United States. This
partnership helped foster technologies that eventually became crucial to producing natural gas
from shale rock, including horizontal wells, multi-stage fracturing, and slick-water fracturing. [1]

Horizontal Drilling Technology

Practical application of horizontal drilling to oil production began in the early 1980s, by which
time the advent of improved downhole drilling motors and the invention of other necessary
supporting equipment, materials, and technologies, particularly downhole telemetry equipment,
had brought some applications within the realm of commercial viability. [2]

Shale gas plays: Map of the major shale gas plays in the lower 48 states, including the sedimentary basins
which contain them. Enlarge map.
The Work of Mitchell Energy and Development
The advent of large-scale shale gas production did not occur until Mitchell Energy and
Development Corporation experimented during the 1980s and 1990s to make deep shale gas
production a commercial reality in the Barnett Shale in North-Central Texas. As the success of
Mitchell Energy and Development became apparent, other companies aggressively entered this
play so that by 2005, the Barnett Shale alone was producing almost half a trillion cubic feet per
year of natural gas. As natural gas producers gained confidence in the ability to profitably
produce natural gas in the Barnett Shale and confirmation of this ability was provided by the
results from the Fayetteville Shale in North Arkansas, they began pursuing other shale
formations, including the Haynesville, Marcellus, Woodford, Eagle Ford and other shales.

The Natural Gas "Game Changer"

The development of shale gas plays has become a "game changer" for the U.S. natural gas
market. The proliferation of activity into new shale plays has increased shale gas production in
the United States from 0.39 trillion cubic feet in 2000 to 4.87 trillion cubic feet in 2010, or 23
percent of U.S. dry gas production. Shale gas reserves have increased to about 60.6 trillion cubic
feet by year-end 2009, when they comprised about 21 percent of overall U.S. natural gas
reserves, now at the highest level since 1971. [3]

The growing importance of U.S. shale gas resources is also reflected in EIA's Annual Energy
Outlook 2011(AEO2011) energy projections, with technically recoverable U.S. shale gas
resources now estimated at 862 trillion cubic feet. Given a total natural gas resource base of
2,543 trillion cubic feet in the AEO2011 Reference case, shale gas resources constitute 34
percent of the domestic natural gas resource base represented in the AEO2011 projections and 50
percent of lower 48 onshore resources. As a result, shale gas is the largest contributor to the
projected growth in production, and by 2035 shale gas production accounts for 46 percent of
U.S. natural gas production.

Diffusion of Shale Gas Technologies

The successful investment of capital and diffusion of shale gas technologies has continued into
Canadian shales as well. In response, several other countries have expressed interest in
developing their own nascent shale gas resource base, which has lead to questions regarding the
broader implications of shale gas for international natural gas markets. The U.S. Energy
Information Administration (EIA) has received and responded to numerous requests over the
past three years for information and analysis regarding domestic and international shale gas.
EIA's previous work on the topic has begun to identify the importance of shale gas on the
outlook for natural gas. [4] It appears evident from the significant investments in preliminary
leasing activity in many parts of the world that there is significant international potential for
shale gas that could play an increasingly important role in global natural gas markets.

To gain a better understanding of the potential of international shale gas resources, EIA
commissioned an external consultant, Advanced Resources International, Inc. (ARI), to develop
an initial set of shale gas resource assessments. This paper briefly describes key results, the
report scope and methodology and discusses the key assumptions that underlie the results. The
full consultant report prepared for EIA is in Attachment A. EIA anticipates using this work to
inform other analysis and projections, and to provide a starting point for additional work on this
and related topics.

Shale Gas in Worldwide Basins

Recoverable Shale Gas
Resources by Country
Country Reserves
Algeria 231
Argentina 774
Australia 396
Bolivia 48
Brazil 226
Canada 388
Chile 64
China 1,275
Colombia 19
Denmark 23
France 180
Germany 8
India 63
Libya 290
Lithuania 4
Mexico 681
Morocco 11
Netherlands 17
Norway 83
Pakistan 51
Paraguay 62
Poland 187
South Africa 485
Sweden 41
Tunisia 18
Turkey 15
Ukraine 42
U.K. 20
United States 862
Uruguay 21
Venezuela 11
Western Sahara 7
Total (rounded) 6,622
Reserves are in trillions
of cubic feet.

In total, the report assessed 48 shale gas basins in 32 countries, containing almost 70 shale gas
formations. These assessments cover the most prospective shale gas resources in a select group
of countries that demonstrate some level of relatively near-term promise and for basins that have
a sufficient amount of geologic data for resource analysis. The map at the top of this page shows
the location of these basins and the regions analyzed. The map legend indicates four different
colors on the world map that correspond to the geographic scope of this initial assessment:

Red colored areas represent the location of assessed shale gas basins for which estimates of the
'risked' gas-in-place and technically recoverable resources were provided.

Yellow colored area represents the location of shale gas basins that were reviewed, but for which
estimates were not provided, mainly due to the lack of data necessary to conduct the assessment.

White colored countries are those for which at least one shale gas basin was considered for this

Gray colored countries are those for which no shale gas basins were considered for this report.

The International Shale Gas Resource Base

Although the shale gas resource estimates will likely change over time as additional information
becomes available, the report shows that the international shale gas resource base is vast. The
initial estimate of technically recoverable shale gas resources in the 32 countries examined is
5,760 trillion cubic feet, as shown in Table 1. Adding the U.S. estimate of the shale gas
technically recoverable resources of 862 trillion cubic feet results in a total shale resource base
estimate of 6,622 trillion cubic feet for the United States and the other 31 countries assessed.

To put this shale gas resource estimate in some perspective, world proven reserves [5] of natural
gas as of January 1, 2010 are about 6,609 trillion cubic feet, [6] and world technically
recoverable gas resources are roughly 16,000 trillion cubic feet, [7] largely excluding shale gas.
Thus, adding the identified shale gas resources to other gas resources increases total world
technically recoverable gas resources by over 40 percent to 22,600 trillion cubic feet.

References for World Shale Gas

[1] G.E. King, Apache Corporation, "Thirty Years of Gas Shale Fracturing: What Have We Learned?", prepared for the
SPE Annual Technical Conference and Exhibition (SPE 133456), Florence, Italy, (September 2010); and U.S. Department of
Energy, DOE's Early Investment in Shale Gas Technology Producing Results Today, (February 2011).

[2] See: U.S. Energy Information Administration, "Drilling Sideways: A Review of Horizontal Well Technology and Its
Domestic Application", DOE/EIA-TR-0565 (April 1993).

[3] U.S. Crude Oil, Natural Gas, and Natural Gas Liquids Proved Reserves, 2009: U.S. Energy Information

[4] Examples of EIA work that has spurred or resulted from interest in this topic includes: U.S. Energy Information
Administration, AEO2011 Early Release Overview (Dec 2010); R. Newell, U.S. Energy Information Administration, "Shale
Gas, A Game Changer for U.S. and Global Gas Markets?", presented at the Flame - European Gas Conference, Amsterdam,
Netherlands (March 2, 2010); H. Gruenspecht, U.S. Energy Information Administration, "International Energy Outlook 2010
With Projections to 2035", presented at Center for Strategic and International Studies, Washington, D.C. (May 25, 2010); and R.
Newell, U.S. Energy Information Administration, "The Long-term Outlook for Natural Gas", presented to the Saudi Arabia -
United States Energy Consultations, Washington, D.C. (February 2, 2011).

[5] Reserves refer to gas that is known to exist and is readily producible, which is a subset of the technically recoverable
resource base estimate for that source of supply. Those estimates encompass both reserves and that natural gas which is inferred
to exist, as well as undiscovered, and can technically be produced using existing technology. For example, EIA's estimate of all
forms of technically recoverable natural gas resources in the U.S. for the Annual Energy Outlook 2011 is 2,552 trillion cubic
feet, of which 827 trillion cubic feet consists of unproved shale gas resources and 245 trillion cubic feet are proved reserves
which consist of all forms of readily producible natural gas including 34 trillion cubic feet of shale gas.

[6] "Total reserves, production climb on mixed results," Oil and Gas Journal (December 6, 2010), pp. 46-49.

[7] Includes 6,609 trillion cubic feet of world proven gas reserves (Oil and Gas Journal 2010); 3,305 trillion cubic feet of world
mean estimates of inferred gas reserves, excluding the Unites States (USGS, World Petroleum Assessment 2000); 4,669 trillion
cubic feet of world mean estimates of undiscovered natural gas, excluding the United States (USGS, World Petroleum
Assessment 2000); and U.S. inferred reserves and undiscovered gas resources of 2,307 trillion cubic feet in the United States,
including 827 trillion cubic feet of unproved shale gas (EIA, AEO2011).

[8] The Department of State is the lead agency for the GSGI, and the other U.S. government agencies that also participate
include: the U.S. Agency for International Development (USAID); the Department of Interior's U.S. Geological Survey
(USGS); Department of Interior's Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE); the
Department of Commerce's Commercial Law Development Program (CLDP); the Environmental Protection Agency (EPA), and
the Department of Energy's Office of Fossil Energy (DOE/FE).

Conservative Basin Estimates

The estimates of technically recoverable shale gas resources for the 32 countries outside of the
United States represents a moderately conservative 'risked' resource for the basins reviewed.
These estimates are uncertain given the relatively sparse data that currently exist and the
approach the consultant has employed would likely result in a higher estimate once better
information is available. The methodology is outlined below and described in more detail within
the attached report, and is not directly comparable to more detailed resource assessments that
result in a probabilistic range of the technically recoverable resource. At the current time, there
are efforts underway to develop more detailed shale gas resource assessments by the countries
themselves, with many of these assessments being assisted by a number of U.S. federal agencies
under the auspices of the Global Shale Gas Initiative (GSGI) which was launched in April 2010.

Highly Dependent Countries

Delving deeper into the results at a country level, there are two country groupings that emerge
where shale gas development may appear most attractive. The first group consists of countries
that are currently highly dependent upon natural gas imports, have at least some gas production
infrastructure, and their estimated shale gas resources are substantial relative to their current gas
consumption. For these countries, shale gas development could significantly alter their future gas
balance, which may motivate development. Examples of countries in this group include France,
Poland, Turkey, Ukraine, South Africa, Morocco, and Chile. In addition, South Africa's shale gas
resource endowment is interesting as it may be attractive for use of that natural gas as a
feedstock to their existing gas-to-liquids (GTL) and coal-to-liquids (CTL) plants.

Countries with a Natural Gas Infrastructure

The second group consists of those countries where the shale gas resource estimate is large (e.g.,
above 200 trillion cubic feet) and there already exists a significant natural gas production
infrastructure for internal use or for export. In addition to the United States, notable examples of
this group include Canada, Mexico, China, Australia, Libya, Algeria, Argentina, and Brazil.
Existing infrastructure would aide in the timely conversion of the resource into production, but
could also lead to competition with other natural gas supply sources. For an individual country
the situation could be more complex.



The United States were the first country to start commercial shale gas production.
Today, shale gas accounts for approximately 20% of the total gas production in the
United States. According to estimates, the share of shale gas in total gas production
will rise to approx. 50% by 2040.

There are several tens of prospective shale formations located in various US sedimentary basins, of which six account
for 88% of daily shale gas production. In decreasing productivity order, they are:

 Haynessville,
 Barnett,
 Marcellus,
 Fayettville,
 Eagle Ford, and
 Woodford.

The remaining formations account for 12% of the total shale gas production.

Fort Worth in Texas with its Barnett Formation is the best understood basin and the first one to produce shale gas.
The Barnett Formation is represented by Lower Carboniferous shales rocks that occur at relatively small depths of
1980 to 2600 m. Their average thickness is in the order of 90 m, but increases to 200 m in the northeastern section of
the basin. Organic matter content ranges from 3 to 12% TOC at an average thermal maturity of 1.6% Ro (vitrinite
reflectance scale). The geological characteristics of the Barnett Formation are considered as model ones and are often
used as benchmarks for other shale formations worldwide.
Recently, Upper Jurassic shales of the East Texas Basin's Haynesville Formation saw a rapid development of gas
production which has increased dramatically over the past six years. Located at depths ranging from 3200 to 4100 m,
this is one of the deepest US shale gas formations in the USA, but at the same time the most productive in the United
States. Its average thickness is approximately 80 m, while organic matter content and thermal maturity are similar to
those of Barnett Formation.

Middle Devonian Marcellus Formation of the Appalachian Basin is the third biggest shale play in the USA. At the
same time, it is one of the shallowest formations as its depth ranges from 1200 to approximately 2400 m in the eastern
part of the basin. Marcellus beds are on average about 45 m thick. The formation is rich in organic matter: average
TOC content is 4% and ranges from 2 to 13%, at thermal maturity in the order of 1.5 Ro.

Marcellus Formation in the Appalachian Basin is underlain by Utica, another prospective shale formation. The latter
is considered as the most similar to the Polish Ordovician/Silurian shale formation. Utica is today the only US shale
gas producing formation which, like its Polish counterparts, is of Lower Paleozoic age.

However, some Utica parameters diverge from those of Polish formations. Prospective dry gas-bearing complexes (on
average about 150 m thick) occur at depths ranging from 2500 to 3800 m. Like Polish shale formation, Utica shale
has a low content of organic matter: its average content is 1.3% TOC and thermal maturity does not exceed 1.6% Ro.

The Upper Cretaceous Eagle Ford Formation in South Texas is one of the youngest shale formations. The thickness
of shale packages which occur at depths ranging from 1200 to 3050 m is between 30 and approx. 90 m, with maximum
thicknesses reached in deeper central portions of the basin. Comparing to other “big six” plays, Eagle Ford has the
lowest content of organic matter (in the order of 2.7% TOC). Thermal maturity is approx. 1.2% Ro. Like in the case
of Poland's Lower Paleozoic shale formations, there is a transition with increasing depth from the oil generation
window to wet gas and finally to dry gas window.

Devonian Woodford Formation in the Arkoma Basin (Southeast Oklahoma) is the sixth most productive shale gas
play in the USA. Formation's depths range from 1820 to 3960 m and its average thickness is approx. 45 m. Its organic
matter content is the highest among all US plays (about 5% TOC on average) and thermal maturity is in the order
of 1.5% Ro.

Extensive exploration works with rapidly increasing production are underway in shale formations other than the “big
six” plays, for example in Bakken (shale oil), Antrim, Lewis and Utica. Low gas prices in the United States are an
incentive to the drilling operations and help make the country independent of gas imports. This is just the contrary of
Poland's current situation.

worldshalegas/ - contains data on shale
gas resources of 46 countries

Why Natural Gas Matters


With world demand for energy growing, natural gas is increasingly seen
as a more environmentally friendly option to coal, an alternative to oil and
nuclear, and a more mature technology than alternative energy sources
such as solar and wind. While coal is cheap and abundant, it is a major
pollutant, particularly of carbon dioxide. Low-emission nuclear power is
relatively cheap to operate, but it has become the subject of renewed
safety concerns in the wake of the 2011 nuclear accident at the Fukushima
plant in Japan. And oil prices and production remain volatile, placing
consuming countries reliant on it under considerable economic strain.

Longstanding issues such as control of transit pipelines, a lack of access to

pipeline routes, and the availability of cheap resources such as coal and oil
have constrained natural gas consumption in many parts of the world.
International trade of liquefied natural gas (LNG) allowed producers to
bypass pipelines, but LNG requires costly infrastructure for producers and
the importers, and, while growing, is unlikely to reach the levels of
shipments of dry gas. Some analysts see potential in shale gas and other
unconventional sources as a way to boost domestic resources of countries
once thought to have limited gas resources, lessening the potential for
import dependence. And whether U.S. success in shale gas can be
reproduced elsewhere is still under debate.
Natural Gas Production and Flows

The world produced and consumed more than 100 trillion cubic feet of
natural gas in 2009, representing more than 20 percent of global energy
production. About one-third of gas is exported and the rest consumed by
the producing countries themselves. North America, Europe, and Eurasia
comprise about two-thirds of all natural gas consumption. Current
projections suggest global consumption as a whole will rise to 156 trillion
cubic feet by 2035. Much of the increases in consumption come from
Asia, and increases in natural gas exports come from Middle East LNG.
Unlike oil, natural gas production is not dominated by the places with the
most natural gas reserves. Iran and Qatar have the second and third largest
reserves after Russia, but both provide only a small fraction of the world’s
total production. In 2009, both Qatar and Iran represented about 4 percent
of global production, according to the U.S. Energy Information
Administration (EIA). The United States is the world’s largest producer
but represents only a small fraction of global reserves.

More on:

Fossil Fuels

Pipelines are the dominant transportation method for natural gas, but they
are becoming more expensive to build as commodity and labor prices rise.
A proposed pipeline between the United States and Canada is expected
to cost between $20 billion and $41 billion. Estimates for a pipeline
proposed to run from Caspian gas producers to the EU range from over
$11billion to as much as $20 billion (IHT).
Pipelines can also be affected by geographic and political issues. There is
almost no inter-country natural gas trade in Asia via pipeline, in part
because several of Asia’s most prosperous and populous countries are
islands, including Japan, Indonesia, and Malaysia, and because of access
to other resources such as coal. Social or political unrest, or pricing
disputes, can disrupt supply. Russia, for example, must rely on some
pipelines through the Ukraine, once a Soviet-state and now a sovereign
country, which has led to a tense relationship over transit fees.

Looking to LNG

LNG currently accounts for about 30 percent of all natural gas trade
(PDF). LNG capacity is expected to more than double between now and
2035 to about nineteen trillion cubic feet per year, up from nearly nine
trillion cubic feet in 2009. But while LNG--shipped via large ocean
tankers--provides countries with trade flexibility and helps avoid some of
the geopolitical and geographic issues associated with pipelines, LNG has
its own limitations. The technology has been around for decades, but until
recently it was not price-competitive against pipelines. LNG requires a
port to accommodate tankers and processing plants. On the export side,
the process requires a liquefaction facility, which can cost several billion
dollars, and large tankers, each of which can cost between $200 and $400
million (Bloomberg). A facility to gasify LNG on delivery is also required
on the importers side costing in the hundreds of millions into the billions.

Despite tremendous global growth in LNG, an EIA 2010 global energy

assessment found that pipelines, not LNG shipping, will remain the
dominant mode of gas transportation for the next two decades. Currently,
because natural gas is mostly traded by pipelines--in some cases with
years-long contracts--prices are often regional. "In time, this LNG trade
will lead to a global market for natural gas similar to that for oil," writes
energy expert John Deutch in Foreign Affairs. "If trade is freely permitted,
a difference between $4 per thousand cubic feet in New York and $10 per
thousand cubic feet in Tokyo, for example, simply cannot survive."

Shale Gas Growth

Two techniques--horizontal drilling and hydraulic fracturing, also called

"fracking" (injecting liquid into rock formations to push out trapped gas)--
have the potential to access large swaths of shale gas, tight gas, and coal-
bed methane once thought too expensive to extract. In the United States,
shale gas has already jumped from less than 1 percent of U.S. production a
decade ago to 23 percent in 2010. After assessing gas reserves in thirty-
two countries, a 2011 EIA report estimates that shale gas could increase
recoverable gas globally by as much as 40 percent.

Some analysts believe shale gas will be a game changer in the global gas
market. Energy analysts, including Amy Jaffe of the James Baker Institute
for Public Policy, note that shale will make a natural gas cartel
(WSJ) similar to OPEC impossible and could break the stranglehold on
gas trade for some big players such as Russia. The EIA report shows shale
gas could reduce dependence on imports for countries like China and
South Africa and provide export opportunities for other countries. But
other analysts suggest estimates on the amount of shale that can be
produced economically might be overblown (FP). Still others are
concerned about the potential environmental effects of fracking, which
some environmental advocates argue fouls water supplies.

Natural Gas Market Regions

Current regions for natural gas production and consumption can be broken
down as follows:

 Russia/Eurasia/Europe -- The region represents about 38 percent of the

world’s gas consumption in 2009 and two-thirds of the world’s pipeline
trade. The region has a massive network of pipelines primarily running
from Russia into Western Europe. Overall, the region represents about 48
percent of global natural gas exports, but nearly all of it is exported
between countries in the region. Russiarepresented 20 percent of global
exports in 2009--the highest of any country. Norway is the world’s second
largest gas exporter. The Netherlands and Uzbekistan are also high net
exporters in the region.

The region is largely characterized by tensions between Russia and its

natural gas clients. The EU, which gets about 40 percent of its gas from
Russia, has increasingly looked for ways to diversify access to natural gas,
such as the long-delayed Nabucco pipeline project, which would route
natural gas from Caspian states to Europe, bypassing Russia’s pipeline
network. In 2009, with natural gas demand dropping in Europe and shale
gas production increasing in the United States, Russia fell to the world’s
second largest producer. However, as EU countries, particularly Germany,
pull away from nuclear power, some analysts say the temporary glut in the
European market is likely to disappear and put Russian gas back in play
(NYT). EU governments are also investing in LNG (PDF) and represented
about 29 percent of global LNG imports in 2009. The EU is also looking
at shale gas, but the degree to which it can replicate U.S. success is
 North America -- The region, which comprises about 26 percent of global
gas consumption as 2009, also has an extensive pipeline system. Canada is
the world’s third largest exporter of natural gas, all of it going to the
United States. Mexico also ships natural gas to the United States, but
overall the country is a net importer and domestic demand is rising. The
United States dominates world production and is the globe’s largest gas
consumer. U.S. producers have increasingly looked to unconventional gas
sources, with shale gas boosting the country’s output considerably. The
United States is the only major LNG exporter in North America, almost all
of it going to Japan.

 South East Asia/Oceania -- Though this is the world’s most populous

region, it represents only 17 percent of global natural gas consumption.
The greatest growth production and demand in the region is expected to
come from China, which gets just 3 percent of its energy from natural gas,
and India, which gets about 7 percent of its energy from gas, according to
the EIA. While both countries import some LNG, much of the
consumption comes from domestic production. China has the region’s
second largest natural gas reserves and hopes to increase domestic
production, which could decrease coal use and lower the country’s
greenhouse gas emissions. Some analysts also expect domestic shale gas
and coal-bed methane production to begin competing with LNG imports in
In 2009, Indonesia and Malaysia are the region’s biggest net exporters and
among the world’s top-ten exporters, almost entirely LNG. Australia is
also a large LNG exporter. With limited domestic gas resources, Japan and
South Korea account for nearly 60 percent of LNG global imports, and
experts say these two countries will remain the dominant consumers of
LNG in the near future. And following the 2011 Fukushima nuclear crisis,
LNG is expected to be an increasing portion of Japanese energy
 Middle East and Africa -- The Middle East claims almost half of the
world’s conventional natural gas reserves. With exporters Algeria, Oman,
United Arab Emirates, Qatar, Egypt, and Libya, the area represents about
40 percent of the global LNG trade--and LNG is expected to dominate
future natural gas exports from the region. Algeria is the region’s largest
exporter, shipping via both pipeline and LNG. With the world’s third
largest reserves, Qatar is the region’s largest producer and has had the
strongest growth in production and exports--almost all LNG. The Middle
East/North Africa region also has a developed network (PDF) of pipelines,
primarily leading into southern Europe. But very little infrastructure exists
currently on the African continent to facilitate intraregional natural gas,
according to the EIA.And generally, pipelines from the region are not a
viable option for the region’s main customers in Asia.

Exports from Iran, the region’s third largest producer, were minuscule.
Iran will likely stay a pipeline country rather than a major LNG exporter
because of costs and international sanctions limiting certain
technologies. Saudi Arabia, with the world’s fourth largest natural gas
reserves, has modest production levels, but produces none for export.
Nigeria has significant natural gas, especially as a byproduct of oil
production. The country continues to burn off much of this gas, though oil
producers are beginning to look at ways to harness associated gas for
domestic energy.
 Latin America/Caribbean -- The region is the world’s smallest consumer
of natural gas, at less than 5 percent. Trinidad and Tobago is the region’s
number one gas exporter and its only major LNG exporter. Venezuela and
Brazil are the region’s largest natural gas producers, Brazil being a net
importer and Venezuela producing all of its gas for domestic use. Several
countries are investing in LNG import capacity, including Brazil,
Argentina, and Chile.

Global shifts in the energy system


Four large-scale shifts in the global energy system set the scene for the World Energy
Outlook 2017: the rapid deployment and falling costs of clean energy technologies,
the growing electrification of energy, the shift to a more services-oriented economy
and a cleaner energy mix in China, and the resilience of shale gas and tight oil in the
United States.

These shifts come at a time when traditional distinctions between energy producers
and consumers are being blurred and a new group of major developing countries, led
by India, moves towards centre stage.

How these developments play out and interact is the story of this year’s Outlook.

Growing energy demand

In the New Policies Scenario, global energy needs rise more slowly than in the past
but still expand by 30% between today and 2040. This is the equivalent of adding
another China and India to today’s global demand.
A global economy growing at an average rate of 3.4% per year, a population that
expands from 7.4 billion today to more than 9 billion in 2040, and a process of
urbanisation that adds a city the size of Shanghai to the world’s urban population
every four months are key forces that underpin our projections.

The largest contribution to demand growth – almost 30% – comes from India, whose
share of global energy use rises to 11% by 2040 (still well below its 18% share in the
anticipated global population).

Southeast Asia is another rising heavyweight in global energy, with demand growing
at twice the pace of China. Overall, developing countries in Asia account for two-
thirds of global energy growth, with the rest coming mainly from the Middle East,
Africa and Latin America.

Renewables step up, coal strikes out

Compared with the past twenty-five years, the way that the world meets its growing
energy needs changes dramatically in the New Policies Scenario, with the lead now
taken by natural gas, by the rapid rise of renewables and by energy efficiency.

Coal (Mtce)Oil (mb/d)Gas (bcm)Low-carbon fuels (Mtoe)Change in world primary

energy demand by fuelChinaOther countries1990-20162016-20401990-20162016-
20401990-20162016-20401990-20162016-2040World Energy Outlook 2017, IEA
Improvements in efficiency play a huge role in taking the strain off the supply side:
without them, the projected rise in final energy use would more than double.
Renewable sources of energy meet 40% of the increase in primary demand and their
explosive growth in the power sector marks the end of the boom years for coal.

Since 2000, coal-fired power generation capacity has grown by nearly 900 gigawatts
(GW), but net additions from today to 2040 are only 400 GW and many of these are
plants already under construction. In India, the share of coal in the power mix drops
from three-quarters in 2016 to less than half in 2040. In the absence of large-scale
carbon capture and storage, global coal consumption flatlines.

Oil demand continues to grow to 2040, albeit at a steadily decreasing pace. Natural
gas use rises by 45% to 2040; with more limited room to expand in the power sector,
industrial demand becomes the largest area for growth. The outlook for nuclear power
has dimmed since last year’s Outlook, but China continues to lead a gradual rise in
output, overtaking the United States by 2030 to become the largest producer of
nuclear-based electricity.
Bright future for renewables
Renewables capture two-thirds of global investment in power plants to 2040 as they
become, for many countries, the least-cost source of new generation.

GWGlobal average annual net capacity additions by typeCoalGasNuclearSolar

2040020406080100120140160World Energy Outlook 2017, IEA
Rapid deployment of solar photovoltaics (PV), led by China and India, helps solar
become the largest source of low-carbon capacity by 2040, by which time the share of
all renewables in total power generation reaches 40%.

In the European Union, renewables account for 80% of new capacity and wind power
becomes the leading source of electricity soon after 2030, due to strong growth both
onshore and offshore. Policies continue to support renewable electricity worldwide,
increasingly through competitive auctions rather than feed-in tariffs, and the
transformation of the power sector is amplified by millions of households,
communities and businesses investing directly in distributed solar PV.

Growth in renewables is not confined to the power sector. The direct use of
renewables to provide heat and mobility worldwide also doubles, albeit from a low
base. In Brazil, the share of direct and indirect renewable use in final energy
consumption rises from 39% today to 45% in 2040, compared with a global
progression from 9% to 16% over the same period.

The future is electrifying

Electricity is the rising force among worldwide end-uses of energy, making up 40% of
the rise in final consumption to 2040 – the same share of growth that oil took for the
last twenty-five years.

TWhElectricity demand by selected region2016Growth to 2040ChinaUnited

StatesIndiaEuropean UnionSoutheast AsiaMiddle
EastAfrica010002000300040005000600070008000900010,000World Energy
Outlook 2017, IEA
Industrial electric motor systems account for one-third of the increase in power
demand in the New Policies Scenario. Rising incomes mean that many millions of
households add electrical appliances (with an increasing share of “smart” connected
devices) and install cooling systems.
Electricity makes inroads in supplying heat and mobility, alongside growth in its
traditional domains, allowing its share of final consumption to rise to nearly a quarter.
A strengthening tide of industry initiatives and policy support pushes our projection
for the global electric car fleet up to 280 million by 2040, from 2 million today.

The scale of future electricity needs and the challenge of decarbonising power supply
help to explain why global investment in electricity overtook that of oil and gas for
the first time in 2016 and why electricity security is moving firmly up the policy

The increasing use of digital technologies across the economy improves efficiency
and facilitates the flexible operation of power systems, but also creates potential new
vulnerabilities that need to be addressed.

When China changes, everything changes

China is entering a new phase in its development. The president’s call for an “energy
revolution”, the “fight against pollution” and the transition towards a more services-
based economic model is moving the energy sector in a new direction - with the
emphasis in energy policy now firmly on electricity, natural gas and cleaner, high-
efficiency and digital technologies.

MtoePrimary energy demand by fuel in ChinaOther

renewablesBiomassHydroNuclearGasOilCoalAnnual growth (right
%20%World Energy Outlook 2017, IEA
Demand growth slowed markedly from an average of 8% per year from 2000 to 2012
to less than 2% per year since 2012, and in the New Policies Scenario it slows further
to an average of 1% per year to 2040. Energy efficiency regulation explains a large
part of this slowdown. Without new efficiency measures, end-use consumption in
2040 would be 40% higher. Nonetheless, by 2040 per-capita energy consumption in
China exceeds that of the European Union.

China’s choices will play a huge role in determining global trends, and could spark a
faster clean energy transition. The scale of China’s clean energy deployment,
technology exports and outward investment makes it a key determinant of momentum
behind the low-carbon transition: one-third of the world’s new wind power and solar
PV is installed in China in the New Policies Scenario, and China also accounts for
more than 40% of global investment in electric vehicles (EVs).
GWInstalled capacity by technology in China in the NPSOther renewablesSolar
1000200030004000World Energy Outlook 2017, IEA
China provides a quarter of the projected rise in global gas demand and its projected
imports of 280 billion cubic metres (bcm) in 2040 are second only to those of the
European Union, making China a linchpin of global gas trade.

China overtakes the United States as the largest oil consumer around 2030, and its net
imports reach 13 million barrels per day (mb/d) in 2040. But stringent fuel-efficiency
measures for cars and trucks, and a shift which sees one-in-four cars being electric by
2040, means that China is no longer the main driving force behind global oil use –
demand growth is larger in India post-2025.

China remains a towering presence in coal markets, but our projections suggest that
coal use peaked in 2013 and is set to decline by almost 15% over the period to 2040.

The US shale revolution turns to exports

A remarkable ability to unlock new resources cost-effectively pushes combined
United States oil and gas output to a level 50% higher than any other country has ever
managed; already a net exporter of gas, the US becomes a net exporter of oil in the
late 2020s.

mboe/dOil and gas production in the United StatesNew Policies Scenario, 1980 -
2040Shale oilShale gasOther unconventionalsConventional oil and
World Energy Outlook 2017, IEA
In our projections, the 8 mb/d rise in US tight oil output from 2010 to 2025 would
match the highest sustained period of oil output growth by a single country in the
history of oil markets. A 630 bcm increase in US shale gas production over the 15
years from 2008 would comfortably exceed the previous record for gas.

Expansion on this scale is having wide-ranging impacts within North America,

fuelling major investments in petrochemicals and other energy-intensive industries. It
is also reordering international trade flows and challenging incumbent suppliers and
business models.

By the mid-2020s, the United States become the world’s largest liquefied natural gas
(LNG) exporter and a few years later a net exporter of oil – still a major importer of
heavier crudes that suit the configuration of its refineries, but a larger exporter of light
crude and refined products.
The era of oil is not yet over
With the United States accounting for 80% of the increase in global oil supply to 2025
and maintaining near-term downward pressure on prices, the world’s consumers are
not yet ready to say goodbye to the era of oil.

Up until the mid-2020s demand growth remains robust in the New Policies Scenario,
but slows markedly thereafter as greater efficiency and fuel switching bring down oil
use for passenger vehicles (even though the global car fleet doubles from today to
reach 2 billion by 2040).

Powerful impetus from other sectors is enough to keep oil demand on a rising
trajectory to 105 mb/d by 2040: oil use to produce petrochemicals is the largest source
of growth, closely followed by rising consumption for trucks (fuel-efficiency policies
cover 80% of global car sales today, but only 50% of global truck sales), for aviation
and for shipping.

mb/dChange in global oil demand by sector2010-2040, New Policies

ScenarioOtherPower generationBuildingsPetrochemicalsIndustryAviation,
shippingRoad freightPassenger vehiclesTotal2010-20152015-20202020-20252025-
20302030-20352035-2040-20246World Energy Outlook 2017, IEA
Once US tight oil plateaus in the late 2020s and non-OPEC production as a whole
falls back, the market becomes increasingly reliant on the Middle East to balance the
market. There is a continued large-scale need for investment to develop a total of 670
billion barrels of new resources to 2040, mostly to make up for declines at existing
fields rather than to meet the increase in demand.

Even greater upside for US tight oil and a more rapid switch to electric cars would
keep oil prices lower for longer. We explore this possibility in a Low Oil Price Case,
in which a doubling of the estimate for tight oil resources, to more than 200 billion
barrels, boosts US supply and more widespread application of digital technologies
helps to keep a lid on upstream costs around the globe.

Extra policy and infrastructure support pushes a much more rapid expansion in the
global electric car fleet, which approaches 900 million cars by 2040. Along with a
favourable assumption about the ability of the main oil-producing regions to weather
the storm of lower hydrocarbon revenues, this is enough to keep prices within a $50-
70/barrel range to 2040. However, it is not sufficient to trigger a major turnaround in
global oil use.
Even with a rapid transformation of the passenger car fleet, reaching a peak in global
demand would require stronger policy action in other sectors. Otherwise, in a lower
oil price world, consumers have few economic incentives to make the switch away
from oil or to use it more efficiently.

Meanwhile, with projected demand growth appearing robust, at least for the near
term, a third straight year in 2017 of low investment in new conventional projects
remains a worrying indicator for the future market balance, creating a substantial risk
of a shortfall of new supply in the 2020s.

A new order for global gas markets

Natural gas grows to account for a quarter of global energy demand in the New
Policies Scenario by 2040, becoming the second-largest fuel in the global mix after

In resource-rich regions, such as the Middle East, the case for expanding gas use is
relatively straightforward, especially when it can substitute for oil. In the United
States, plentiful supplies maintain a strong share of gas-fired power in electricity
generation through to 2040, even without national policies limiting the use of coal.

But 80% of the projected growth in gas demand takes place in developing economies,
led by China, India and other countries in Asia, where much of the gas needs to be
imported (and so transportation costs are significant) and infrastructure is often not yet
in place. This reflects the fact that gas looks a good fit for policy priorities in this
region, generating heat, power and mobility with fewer carbon-dioxide (CO2) and
pollutant emissions than other fossil fuels, helping to address widespread concerns
over air quality.

bcmGas demand in selected regions in the New Policies Scenario20162040United

StatesMiddle EastChinaRussiaEuropean UnionOther Developing AsiaLatin
AmericaAfricaIndia0100200300400500600700800900World Energy Outlook 2017,
But the competitive landscape is formidable, not just due to coal but also to
renewables, which in some countries become a cheaper form of new power generation
than gas by the mid-2020s, pushing gas-fired plants towards a balancing rather than a
baseload role. Efficiency policies also play a part in constraining gas use: while the
electricity generated from gas grows by more than half to 2040, related gas use rises
by only one-third, due to more reliance on highly efficient plants.
A new gas order is emerging, with US LNG helping to accelerate a shift towards a
more flexible, liquid, global market. Ensuring that gas remains affordable and secure,
beyond the current period of ample supply and lower prices, is critical for its long-
term prospects. LNG accounts for almost 90% of the projected growth in long-
distance gas trade to 2040: with few exceptions, most notably the route that opens up
between Russia and China, major new pipelines struggle in a world that prizes the
optionality of LNG.

bcmChange in gas imports by selected region and mode in the New Policies Scenario,
2016-2040LNGPipelineJapan and KoreaEuropean UnionIndiaSoutheast AsiaOther
AsiaChina-50050100150200250World Energy Outlook 2017, IEA
Gas supply also becomes more diverse: the amount of liquefaction sites worldwide
doubles to 2040, with the main additions coming from the United States and
Australia, followed by Russia, Qatar, Mozambique and Canada. Price formation is
based increasingly on competition between various sources of gas, rather than
indexation to oil. With destination flexibility, hub-based pricing and spot availability,
US LNG acts as a catalyst for many of the anticipated changes in the wider gas

The new gas order can bring dividends for gas security, although there is the risk of a
hard landing for gas markets in the 2020s if uncertainty over the pace or direction of
change deters new investments.

Over the longer term, a larger and more liquid LNG market can compensate for
reduced flexibility elsewhere in the energy system (for example, lower fuel-switching
capacity in some countries as coal-fired generation is retired). We estimate that, in
2040, it would take around ten days for major importing regions to raise their import
levels by 10%, a week less than it might take today in Europe, Japan and Korea.

Falling short on access, air pollution and GHGs

Access to electricity and clean cooking
Universal access to electricity remains elusive, and scaling up access to clean cooking
facilities is even more challenging.

There are some positive signs: over 100 million people per year have gained access to
electricity since 2012 compared with around 60 million per year from 2000 to 2012.
Progress in India and Indonesia has been particularly impressive, and in sub-Saharan
Africa electrification efforts outpaced population growth for the first time in 2014.
People without access to electricityPeople without clean cooking accessBillion
peoplePeople without access to electricity and clean cooking facilitiesSub-Saharan
AfricaIndiaSoutheast AsiaOther Developing AsiaChinaOther developing
economies200020042008201220162000201500.511.522.53World Energy Outlook
2017, IEA
But, despite this momentum, in the New Policies Scenario around 675 million people
– 90% of them in sub-Saharan Africa – remain without access to electricity in 2030
(down from 1.1 billion today), and 2.3 billion continue to rely on biomass, coal or
kerosene for cooking (from 2.8 billion today). Household air pollution from these
sources is currently linked to 2.8 million premature deaths per year, and several
billion hours are spent collecting firewood for cooking, mostly by women, that could
be put to more productive uses.

Air quality
Policy attention to air quality is rising and global emissions of all the major pollutants
fall in our projections, but their health impacts remain severe.

Ageing populations in many industrialised societies become more vulnerable to the

effects of air pollution and urbanisation can also increase exposure to pollutants from
traffic. Premature deaths worldwide from outdoor air pollution rise from 3 million
today to more than 4 million in 2040 in the New Policies Scenario, even though
pollution control technologies are applied more widely and other emissions are
avoided because energy services are provided more efficiently or (as with wind and
solar) without fuel combustion.

Change in air pollutant emissions by regionNew Policies Scenario, 2015-

2040European UnionChinaIndiaSoutheast AsiaRest of World-60%-
30%0%30%60%World Energy Outlook 2017, IEA

GHG emissions
Despite their recent flattening, global energy-related CO2 emissions increase slightly
to 2040 in the New Policies Scenario. This outcome is far from enough to avoid
severe impacts of climate change, but there are a few positive signs. Projected 2040
emissions in the New Policies Scenario are lower by 600 million tonnes than in last
year’s Outlook (35.7 gigatonnes [Gt] versus 36.3 Gt). In China, CO2emissions are
projected to plateau at 9.2 Gt (only slightly above current levels) by 2030 before
starting to fall back.
Index (2000 = 100%)Three speeds of CO2 emissions in the New Policies
ScenarioChinaRest of the worldAdvanced
%300%World Energy Outlook 2017, IEA
Worldwide emissions from the power sector are limited to a 5% increase between
now and 2040, even though electricity demand grows by 60% and global GDP by
125%. However, the speed of change in the power sector is not matched
elsewhere: CO2 emissions from oil use in transport almost catch up with those from
coal-fired power plants (which are flat) by 2040, and there is also a 20% rise in
emissions from industry.

The Sustainable Development Scenario

The Sustainable Development Scenario offers an integrated way to achieve a range of
energy-related goals crucial for sustainable economic development: climate
stabilisation, cleaner air and universal access to modern energy, while also reducing
energy security risks.

This scenario starts from a set of desired outcomes and considers what would be
necessary to deliver them. Central to these outcomes is the achievement of an early
peak in CO2 emissions and a subsequent rapid decline, consistent with the Paris
A key finding is that universal access to electricity and clean cooking can be reached
without making this task any more challenging. We also investigate, in a Faster
Transition Scenario, how policies could push an even more rapid and steeper decline
in CO2 emissions and limit climate risks further.

In the Sustainable Development Scenario, low-carbon sources double their share in

the energy mix to 40% in 2040, all avenues to improve efficiency are pursued, coal
demand goes into an immediate decline and oil consumption peaks soon thereafter.
Power generation is all but decarbonised, relying by 2040 on generation from
renewables (over 60%), nuclear power (15%) as well as a contribution from carbon
capture and storage (6%) – a technology that plays an equally significant role in
cutting emissions from the industry sector. Electric cars move into the mainstream
quickly, but decarbonising the transport sector also requires much more stringent
efficiency measures across the board, notably for road freight.

The sustainable development scenarioRelative to other recent decarbonisation

scenarios20402100Emissions from scenarios projecting global temperature rise of
around 1.7-1.8°C:20002010202020302040205020602070208020902100-30-20-
10010203040World Energy Outlook 2017, IEA
Gt CO2
The 2030 targets for renewables and efficiency that are defined in the Sustainable
Development agenda are met or exceeded in this scenario; renewables and efficiency
are the key mechanisms to drive forward the low-carbon transition and reduce
pollutant emissions. Considering the inter-linkages between them and aligning policy
and market frameworks – notably in the residential sector – is essential to ensure
cost-efficient outcomes. The provision of highly efficient appliances, combined with
decentralised renewables, also play a major role in extending full access to electricity
and clean cooking, especially in rural communities and isolated settlements that are
hard to reach with the grid.

Natural gas and the clean energy transitions

As oil and coal fall back and renewables ramp up strongly, natural gas becomes the
largest single fuel in the global mix in the Sustainable Development Scenario.
Securing clear climate benefits from gas use depends on credible action to minimise
leaks of methane – a potent greenhouse gas – to the atmosphere.

Consumption of natural gas rises by nearly 20% to 2030 in the Sustainable

Development Scenario and remains broadly at this level to 2040. The contribution of
gas varies widely across regions, between sectors and over time in this scenario. In
energy systems heavily reliant on coal (as in China and India), where renewable
alternatives are less readily available (notably in some industrial sectors), or where
seasonal flexibility is required to integrate high shares of variable renewables, gas
plays an important role.

Stepping up action to tackle methane leaks along the oil and gas value chain is
essential to bolster the environmental case for gas: these emissions are not the only
anthropogenic emissions of methane, but they are likely to be among the cheapest to
abate. We present the first global analysis of the costs of abating the estimated 76
million tonnes of methane emitted worldwide each year in oil and gas operations,
which suggest that 40-50% of these emissions can be mitigated at no net cost, because
the value of the captured methane could cover the abatement measures.

Implementing these measures in the New Policies Scenario would have the same
impact on reducing the average global surface temperature rise in 2100 as shutting all
existing coal-fired power plants in China.