wood mackenzie energy markets service_oct13_pv

www.woodmac.com

Delivering commercial insight

Wood Mackenzie Energy Markets Service

October 2009

Julie BeattyPrincipal Economist

Chani SollezaAnalyst


www.woodmac.com

Agenda

Energy Markets Overview

Global Economic Outlook

Regional and Country Power Outlook4.0

Global Energy Outlook

2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

3

Macroeconomic Forecast Modelling Function Embedded in EMS Research Team

Integration and alignment with ICT and Coal Market Services

Alignment of FSU, ME and Africa EMS modules

Alignment of FSU, ME and Africa EMS modules

Alignment of Oil Price and GDP Assumptions –Global Recession Oct 2008

Calibration against EU, UN verified emissions for carbon emissions

Coverage in non-ETS countries of CER projects

Energy Markets ServiceWhat’s New?


www.woodmac.com

4

� Global energy supply and demand balance and forecast

� Key themes on market discontinuities and implications across stakeholders

Global Energy Balance

� Summaries highlight key energy market issues within the region

� Regional energy supply and demand balance and forecast download in Excel format

Middle East and Africa Regions Added

Country Analysis

� Economic, regulatory and infrastructure analysis

� Discussion on sectoral analysis and inter-fuel competition within sectors

� Full dataset download in Excel format

Country Brief

� Executive summary highlighting key energy market issues

� Full dataset download in Excel format

Country Service

� 95 % of total energy demand

� 96 % of global oil demand

� 99 % of global coal demand

� 99 % of global carbon emissions

� 100 % of global gas demand

� 100 % of global electricity demand

Global Coverage

� Custom extracts from the Energy Markets global energy data set

Data Tool

� In-depth analysis and discussion of key energy issues within a market or region

� Available to all clients regardless of subscription

Insights

Energy Markets Service covers 90 countries and ~ 100 percent of global energy market


www.woodmac.com

5

Energy Markets Service - Methodology

Cross-check assumptions with respective research teams for robustness

55

Finalise forecast and aggregate country views into a global balance

77

Global energy balance to 2025

Review supply and demand balances

44

Forecast using Energy Markets expertise

Upload Research Team Forecasts

22

Update Historic Data

11 33

IEA Statistics

Reconcile using proprietary data

Gas Demand • Gas & Power Services• Global Gas Model• LNG Service

Oil Demand• Macro Oils• Product Markets Service

Coal Demand• International Coal Trade

Model• Thermal/Metallurgical Coal

Market Report

Energy Supply• Upstream Research• Field, basin and mine

production profiles

On fuel-by-fuel basis

On sector-by-sector basis

Net trade on fuel –by –fuel basis

Demand• By sector • Energy intensity

Supply• Other solid fuels,

renewables, nuclear, carbon

Power• Modelled where not

covered in Gas & Power Service

Policy• Deregulation, demand

side management, climate change

66 Research revises forecast


www.woodmac.com

The Energy Markets Team

Americas

James Brick

[email protected]

+44 131 243 4571 Africa, Middle East, Southern Europe

Jennifer Evans

[email protected]

+44 131 243 4262

Western Europe, FSU

Renee Howarth

[email protected]

+44 131 243 4278

Eastern Europe

James Brick

[email protected]

+44 131 243 4571

North East Asia, India Sub-Continent

Michael Sinden

[email protected]

+44 131 243 4318

Southeast Asia

Chani Solleza

[email protected]

+65 6518 0879

Macroeconomics

Julie Beatty

[email protected]

+44 131 243 4493

Edmund Rawle

[email protected]

+44 131 243 4501


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

All roads to recovery lead to the US consumer beyond mid-2010

Q1 2010 Q2 2010 Q3 2010 Q4 2010 Q1 2011

5 October 09

Financial Sector De-leveraging: DONE

Q4 2009

Monetary Tightening

Tax Rebates

Fiscal Stimulus

Kitchen Sink Spending

Unemployment Rate Peaks

Slow Recovery in Real House Prices

Rise in Tax Receipts

Decline or Increase Current Account Deficit?

Rise in Real Disposable Income?

Narrowing Trade Imbalances

Private Investment Returns?


www.woodmac.com

Savings behaviour will determine the shape of recovery

US Personal Savings Rate (% of Disposable Personal Income)

0

2

4

6

8

10

12

14

Ja

n-8

1

Ja

n-8

3

Ja

n-8

5

Ja

n-8

7

Ja

n-8

9

Ja

n-9

1

Ja

n-9

3

Ja

n-9

5

Ja

n-9

7

Ja

n-9

9

Ja

n-0

1

Ja

n-0

3

Ja

n-0

5

Ja

n-0

7

Ja

n-0

9

%

1960 and 1980s Average

1970s Average

1990s Average

2000s Average

Source: Federal Reserve


www.woodmac.com

Fiscal stimulus will fade in 2010

FX Reserves USD bn

2009 Public Debt as % GDP

52

90

89

20

In-country number representsfiscal balance as a % of GDP, 2009

-2.4

-13.5

-4.0

-2.6

9.9

-14.4

-5.3

-8.2-4.6

-5.5

-8.0

-8.0

-4.2 -7.4-4.5

-2.6

-9.4-5.8

-8.0

-3.8

-0.9

9.8-0.3

-4.5

-10.6

206

260

21

2131992

158

47

16

4334

19

383

Brazil

India

China

Japan

Kuwait

Qatar

UAE

Russia

4362

200

UK

82

France

88

Germany

83

60

USA

120

Italy


www.woodmac.com

Winners and losers from the global crisis

Source: Wood Mackenzie

GDP Growth

-10%

-5%

0%

5%

10%

15%

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012

Ye

ar-

on

-Ye

ar

% G

row

th

China India

Brazil France

United States Japan

Russia United Kingdom

Germany


www.woodmac.com

Upside and Downside Risks to Growth

UK

USA

Early fiscal tightening

Africa

AustraliaChinaJapanIndia

ChinaKorea

MalaysiaJapanChinaAsia Pacific

Middle East

RussiaRussiaUkraineFSU

FranceGermanyUKEuro Area

UK

Europe

BrazilChile

BrazilBrazil S. America

CanadaUSAUSAUSAN. America

Regulatory reform

Export market

Business confidenceHousehold

confidence

Effective fiscal

stimulus

��

��


www.woodmac.com

Benign protectionism

Collapse of US Dollar

Significant shift away from USD as dominant global reserve currency

(by 2015)

Broad based social unrest and

revolt in advanced

economies

Money markets now normalised;

de-leveraging near completion


Fiscal spending and/or

tightening

Monetary tightening

Volatile exchange rates w/ potential for ‘safe haven’currency flight

recurrence

Continued lax regulatory reform

especially amongst afflicted economies

Household consumption

and confidence

Front of the mind Back of the mind


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Oil Demand – Current Long-Term Price Forecast


The risk to price is mostly upward because of continued strong OPEC production restraint

From 2010 to 2015, prices rise as the market comes back into balance. Supply and demand have been affected by the current economic crisis, with large downward revisions not just to demand but also to producers including Russia and Venezuela

From 2015 to 2020, the gains in real prices are slower, with little change in OPEC spare capacity

From 2020 to 2030, there is a dramatic tightening in the s/d balance

There is a dramatic gain in oil prices beyond 2025 reaching $120 per barrel in real terms for WTI. This compares with the peak seen in 2008 of $99.96 in real terms for WTI

Oil Price – Brent 2009 US$

0

20

40

60

80

100

120

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030

US

$/b

bl


www.woodmac.com

Impact on outlook for global gas price inter-connectivity in medium term

Annual Global Gas Spot Prices (to 2020)

Source: Wood Mackenzie Global Gas Service

Europe prices set by US

US prices set by breakeven cost of

indigenous gas

Japan linked to Atlantic but priced at premium

Restraint by major Europe suppliers required to

disconnect NBP from US

Australian LNG growth softens Asia price

premium

USA Henry Hub NBP European Oil Indexed Contract Japan

0

2

4

6

8

10

12

20

07

20

08

20

09

20

10

20

11

20

12

20

13

20

14

20

15

20

16

US

$ /

mm

btu


www.woodmac.com

Coal Demand – Current Long-Term Price Forecast

-

20

40

60

80

100

120

140

2008 2010 2012 2014 2016 2018 2020 2022 2024 2026 2028 2030


Latest coal price settlement price is US$12/t above the marginal cost of international supply, a major transition point in thermal coal pricing.

The 44% settlement price fall will also place pressure on high cost thermal coal exporters in Russia, Canada and the United States, with leaner margins for Australian and Indonesian exporters.

Continued market weakness in the seaborne thermal coal market through the next four years, with recovery commencing in 2013 as the supply capacity overhang is taken up by growing demand.

CIF ARA 2008 US$ (6,000kcal/kg NAR)


www.woodmac.com

EU carbon emissions versus carbon price forecast


0

500

1,000

1,500

2,000

2,500

2005 2007 2009 2011 2013 2015 2017 2019

MtC

O2

0

10

20

30

40

50

60

70

80

US

$ / t

CO

2

Power Emissions Industrial Emissions Carbon Price Forecast Combined ETS Cap


www.woodmac.com

In a similar to story to global energy, the outlook for carbon emissions has also been affected by the recession

2009 carbon emissions are almost 5% lower than previously forecasted and it is not until 2016 that they recover to previously expected levels

There will be a permanent dampening of emissions in OECD countries due to structural shifts and carbon leakage

In contrast, revised expectations for non-OECD (esp. China, India, Vietnam, Indonesia) indicate higher emissions than previously expected, resulting in higher overall global carbon emissions and prompting heated debate ahead of the Copenhagen talks in December 2009

Global Carbon Emissions

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2000 2005 2010 2015 2020 2025C

O2 E

mis

sio

ns (

Mt)

Pow er Industry Res/Comm/Ag

Transport Emissions - Sept 2008


www.woodmac.com

Global Energy Demand – down but not out

The effects are stark – in 2011 our expected view for total energy has been reduced by the equivalent of 7.8 mboe/d, and 35.8 mboe/d over the 2009 – 2014 timeframe

Oil is the fuel strongest hit by the recession with global demand falling ~2% in 2009 will only a small increase (~0.5%) in 2010

The recovery is slow, but by 2015 energy demand recovers and surpasses our previous long-term expected view

Revised economic growth projections translate into stronger demand expectations for China, India, Vietnam and Indonesia beyond 2015


Global Energy Demand – 2009 vs. 2008

-

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

18,000

2000 2005 2010 2015 2020 2025

Mto

eCoal Oil Gas

Other Solid Fuels Nuclear Hydro

Other Renewables World - 2008


www.woodmac.com

Global Implications for Power Demand

The effects of the recession on power demand are stark – power demand is 3.5% lower in 2009 than previously expected, and 4.4% lower in 2010

2009 demand will grow just 0.7%, compared with historical growth of 3.6% since 2000

Oil-fired power will be hardest hit globally, falling 14.7%, while renewables will grow 14.4%

Similar to total energy, global power demand will resume its growth at a rate faster than previously expected, averaging 3.4% through 2025


Global Power Demand – 2009 vs. 2008

-

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

2000 2005 2010 2015 2020 2025

TW

h

Coal Gas Hydro

Nuclear Oil Other Solid Fuels

Other Renewables World - 2008


www.woodmac.com

Global Implications for Power Demand – Total Fuel Mix


0%

10%

20%

30%

40%

50%

2000 2005 2010 2015 2020 2025

Coal Hydro Gas Oil Nuclear Other Renewables Other Solid Fuels

Global Power Generation by Fuel (%)


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Power Demand – China

Coal dominates and increases its share of power output from 81% to 82% in 2025. Increase in thermal coal demand is met by imports in MT and by domestic production in the LT.

Gas increases its share of generation from 0.8% to 2.7% (16 bcm in 2008 to 61 bcm in 2025)

Mega hydro projects continue, but decreases in share as new nuclear capacity comes online –a total of 73 GW in 2010-2025 and 93 GW of hydro

China Power Demand – 2009 vs. 2008

-

2,000

4,000

6,000

8,000

10,000

12,000

2000 2005 2010 2015 2020 2025T

Wh

Coal Hydro Nuclear

Gas Oil Other Renewables

Other Solid Fuels China - 2008



www.woodmac.com

Near term will continue to be driven by industry, although in the longer term the

residential/commercial sectors will take the lead in demand growth

With govt intervention we believe there is power sector demand upside to our forecast

Upside would be expected to be met by further domestic coal production

Ability of the government to divert capital and resources from export-led manufacturing market

towards domestic-led investment and erection of social safety net (health care, property

rights/land reform) to ensure social stability and foster LT economic sustainability across all

provinces.

Lack of Ministry of Energy leaves market regulatory environment incomplete and subject to distinct regional variations

Government approach to energy imports versus domestic supply

Environmental policy does not suggest any structural shifts in regulations in near term

Power Sector Demand

Given the scale, location of reserves vs markets, and need for imports, meeting China’s future

gas demand will require enormous levels of capital, steel, labour etc

We view infrastructure delays and bottlenecks as a critical factor constraining demand

Supplies now modeled from Central Asia, Russia and Myanmar

Uncertainty around timing of net coal imports – depending on near term growth, could be as soon

as 2010, or else 2011. Thermal demand will continue to be dominated by domestic supply

Infrastructure Constraints

Economic

Regulation

Imports

China Uncertainties


www.woodmac.com

Power Demand – India

Power shortages expected to ease in 2009 with increased coal, gas production as well as improved uranium stocks

Recent trend of naphtha consumption in power caused by gas availability and reduction of tariff and oil price drop

11th Plan (2007-2011) targets not met in terms of hydro build (11 GW vs 16 GW) and coal build (17 GW vs 53 GW) but others are on track

Medium run new build dominated by coal, hydro and nuclear, with new gas based on mix of LNG and domestic supply

Overall the fuel mix will remain unchanged, except for a decrease in hydro in favour of nuclear


India Power Demand – 2009 vs. 2008

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2005 2010 2015 2020 2025T

Wh

Coal Hydro Nuclear


Other Solid Fuels India - 2008


www.woodmac.com

With govt intervention we believe there is power sector demand upside to our forecast

Upside would be expected to be met by further domestic coal production

The potential for lagged impact on Indian growth despite less exposure to export markets. The

nature and pace of investment (and regulatory policy) in addressing the infrastructure constraints

across the chokepoints in the energy, manufacturing and raw materials supply value chain.

Gas Utilization Policy – how much domestic gas will existing and new gas-fired power plants receive?

Power Sector Demand

General infrastructure build – UMPPs, ports, coal mining and nuclear – can these be achieved to

meet demand?

Will India’s expanding gas grid be able to keep up with a tripling of gas demand by 2015


Economic

Regulation

India Uncertainties

With new Dhirubhai supplies, LNG imports will remain above ToP levels until 2014, when

production growth slows while demand continues to grow

How much LNG above ToP levels will go to India in 2009-2014 time period?

Coal imports based on UMPP projects, but how fast can port infrastructure be built?

Imports


www.woodmac.com

Power Demand – Japan

New power demand will be met by lower emission gas and nuclear. Coal will see more additions, although on a much smaller scale

Increased gas will be at expense of oil generation (converted to gas)

Power outlook is contingent on the re-commissioning schedule of Kashiwazaki-Kariwa, which we assume will see one unit come online in 2009

Nuclear fleet LFs increase from 59% in 2008 to 75% in 2013 as more units are brought back online

Japan power supply will increasingly come from nuclear, keeping gas demand’s share of the fuel mix flat at 25%


R71D8O

Japan Power Demand – 2009 vs. 2008

-

200

400

600

800

1,000

1,200

1,400

2000 2005 2010 2015 2020 2025T

Wh

Coal Hydro Nuclear


Other Solid Fuels Japan - 2008


www.woodmac.com

Power Demand – South Korea

Similar story in South Korea, although with a much larger uptake of new gas capacity, with 20 GW of new capacity by 2025

With 16 GW of new nuclear capacity, gas and nuclear account for 60% of new capacity build, with coal taking the remainder but decreasing in share


South Korea Power Demand – 2009 vs. 2008

-

100

200

300

400

500

600

700

800

900

2000 2005 2010 2015 2020 2025T

Wh

Coal Hydro Nuclear


Other Solid Fuels South Korea - 2008


www.woodmac.com

Despite ongoing problems with nuclear fleet, will Japanese government be able to maintain its

commitment to nuclear power. Will South Korea be able to do the same?

What level of demand destruction will occur in the recession and what shape will the recovery

take

Stagnation in Japan LT growth inevitable w/ deflation era ‘déjà vu’ akin to 1990s and ‘age bulge’

& political (LDP) policy quagmire. Upside risk to S Korea MT growth dependent on China

recovery in 2010-13.

Power Sector

The quality and maintenance of Japan’s nuclear fleet remains under question as 8 GW of

capacity remains offline

Will there be large import pipelines projects from Russia in the long term


Economic

Japan and South Korea Uncertainties

Will Japan’s gas imports recover, or will the market remain flat through the forecast

To what degree will oil demand continue to fall in Japan and South Korea and will this be driven only by the transport sector, or also by gas switching in industry?

What role will demographics play in Japan’s energy market, and will South Korea follow a similar path?

Despite ongoing problems with nuclear fleet, will Japanese government be able to maintain its

commitment to nuclear power? Will South Korea be able to do the same?

What level of low carbon technology (wind, CCS, etc) will be developed and what threat for gas

Demand

Regulation


www.woodmac.com

Power Demand – Singapore


Slight reduction in gas-fired power output in 2009/2010 due to moratorium on gas supply from Malaysia (gas moratorium states that no new piped gas will enter SG)

Gas-into-power demand will pick up sharply in 2013 the LNG terminal starts operations

Singapore Power Demand – 2009 vs. 2008

-

10

20

30

40

50

60

70

80

90

2000 2005 2010 2015 2020 2025T

Wh

Gas Hydro Coal

Nuclear Oil Other Renewables

Other Solid Fuels Singapore - 2008


www.woodmac.com

Power Demand – Thailand


Spike in gas-fired power in 2014 due to delay of imported power from Lao PDR’sHong Sa coal power. When this starts operations in 2015, gas-into-power demand retreats to more stable growth. (Hong Sa coal is a Thailand-dedicated plant that will deliver about 11.4 TWh of power)

Even more power imports will be coming from Laos. From 2010 to 2020, 4.5 GW of dedicated hydro capacities will be built in Laos that will deliver 13.6 TWh

Thailand Power Demand – 2009 vs. 2008

-

50

100

150

200

250

300

350

2000 2005 2010 2015 2020 2025T

Wh

Gas Hydro Coal


Other Solid Fuels Thailand - 2008


www.woodmac.com

Flat growth for Singapore in 2009 despite recession – massive incremental power demand from

the 2 integrated resorts as they become operational by end-2009

Thailand to increasingly rely on power imports from Laos (hydro) and Vietnam (coal)

Both economies in deep recession in 2009 due to exposure to the export market

Thailand – political unrest to dampen investor confidence

Singapore – swift govt response to cushion the domestic economy via a fiscal stimulus package

Power Sector Demand

Thailand – would require new pipeline and compression facilities to accommodate new gas

supplies from Myanmar

Singapore continues to focus on security of supply, meaning ongoing capacity build and

maintenance of a considerable reserve margin


Economic

Each market to complete LNG terminal (both with a capacity of 3 mmtpa) by 2013 – is either

poised to become a regional LNG hub?

Singapore to begin importing coal by 2012; Thailand to require more gas – additional supplies

from Myanmar

Singapore’s moratorium on gas supply from Malaysia to prohibit additional piped gas into the

power sector – timing of lifting of moratorium to hinge on full capacity use of LNG terminal ~ 2016

Further liberalisation of Thailand’s gas market a likelihood?

Singapore & Thailand Uncertainties

Regulation

Imports


www.woodmac.com

Power Demand – Indonesia


Bullish outlook due to government commitment to support infrastructure development

Total power output to double in 10 years, with output from coal to almost triple

Input from other renewables – mostly geothermal – will increase by seven-fold

Gas into power to grow modestly – at about 7% p.a.

Bulk of demand from res/com sector

Indonesia Power Demand – 2009 vs. 2008

0

100

200

300

400

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024T

Wh

Coal Gas Hydro


Other Solid Fuels Indonesia - 2008


www.woodmac.com

Strong growth as gov’t diversifies towards lighter industry and service-based economy

Power fast-track program – heavy reliance on coal power output

One of the more resilient economies in SE Asia

Domestic economic robustness cushioned by (historical) fiscal prudence and private spending

Will continue with strong growth given more political stability and popularity of the Yudhoyono

administration

Power Sector Demand

Status of fast-track program by 2012 and beyond?

Connections amongst islands – will these be made by pipe and/or LNG


Economic

Increased crude imports due to declining domestic production

Will Bontang LNG be used domestically?

Uncertainty on the implementation of the DMO policy

Pricing reforms to lessen subsidy exposure

Energy Ministry and National Energy Commission reorganization

Indonesia Uncertainties

Regulation

Imports


www.woodmac.com

Power Demand – Vietnam


Economic slowdown to lower demand by 41 TWh by 2025

Demand to increase by more than six-fold, fuelled mostly by domestic coal

Light industry drives power demand, making Vietnam one of fastest growing power markets in the world

Share of coal-fired output to rise from 17% in 2009 to 55% in 2025; coal power to be largest output by 2017 among all fuels

Increased gas into power to be constrained by insufficient pipeline network as well as lack of indigenous resource

High CO2 intensity relative to SE Asia neighbours

Vietnam Power Demand – 2009 vs. 2008

0

100

200

300

400

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024T

Wh

Coal Gas Hydro


Other Solid Fuels Vietnam - 2008


www.woodmac.com

Coal market – Vietnam


Industrial demand to increase in the medium term, but forecast to be flat through to the forecast period

Increasing production through to the medium term but leveling off over the long term

Power sector is the main growth driver for coal demand

Declining self-sufficiency over the forecast period suggests domestic production is increasingly unable to meet domestic demand

Shift to net coal importer around 2020 with implications on the seaborne coal market

Production vs Sectoral Demand

0.0

10.0

20.0

30.0

40.0

50.0

2000 2002 2004 2006 2008 2010 2012 2014 2016 2018 2020 2022 2024

Mto

e

Elec Industry Losses and Gains

RCA Transport Production


www.woodmac.com

Gas market – Vietnam


Demand largely from the power sector –gas-fired output to increase from 36 TWh in 2009 to 67 TWh in 2025

Small but growing demand for gas in industry, particularly in the fertiliser sector

WM does not forecast new pipelines or LNG imports to be realised in the forecast

Production vs Sectoral Demand

0.0

4.0

8.0

12.0

16.0

20.0

2000 2005 2010 2015 2020 2025

Mto

e

Elec Industry Losses and Gains

RCA Transport Production


www.woodmac.com

Forecast increased demand from res/com

Restructuring plans in power sector will progress more quickly than the gas sector

Increased reliance on power imports from Laos and Cambodia

Also one of the more buoyant markets in SE Asia

Progressive economic expansion with continued market liberalisation

Economy driven by light manufacturing and services sectors

Power Sector Demand

Lack of interconnectivity between north and south fragment the market, especially to bring gas

from north to south

Power connections between the two halves are underdeveloped


Economic

Vietnam to become a net coal importer by around 2020 due to massive increase in power

demand

Will become a net oil importer by 2016

Gas imports not a reality in the forecast despite discussion of LNG

Lack of an independent regulator; oil and gas sectors remain under central government’s remit

Slow progress in privatisation of PetroVietnam subsidiaries

Vietnam Uncertainties

Regulation

Imports


www.woodmac.com

Power Demand – Malaysia


Demand to contract by 3.1% due to the severe economic downturn – reduction of 34 TWh by 2025 from WM’s 2008 forecast

Gas to be pushed out in the medium term due to temporary re-allocation into industry – result in re-powering of fuel oil capacity

Assumed phased commissioning of Bakunhydro by 2016

Malaysia Power Demand – 2009 vs. 2008

0

50

100

150

200

250

2000 2005 2010 2015 2020 2025T

Wh

Coal Gas Hydro Nuclear

Oil Other Renewables Other Solid Fuels Malaysia - 2008


www.woodmac.com

Path to recovery is uncertain as Malaysia is forecast to be one of the worst-performing

economies in the region

New policy direction by new government include deeper diplomatic ties with China and India

Massive Bakun hydro power to become a reality?

Will port handling capacity be able to keep up with power requirements?


Economic

Availability of gas puts industrial users in competition with power producers for supply

Weighted average cost of gas to power players set to rise with the import of LNG

Large anticipated shift from gas-dominated power market to coal-fired power

Likelihood of economic pricing for end users in the power sector

How long will gas be subsidized to TNB

Incentivising the power sector to switch from gas to coal by raising domestic prices

Malaysia Uncertainties

Regulation

Role of LNG imports in meeting domestic demand and raising introduce price reforms

In diversifying the power sector away from gas, the need to import coal will increase

Power Sector Demand

Imports


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Russia Oil and Gas Markets

Russia Gas Demand – 2009 vs. 2008Russia Oil Demand – 2009 vs. 2008

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2005 2010 2015 2020 2025

kb

oe/d

Russia - 2009 Russia - 2008

300

350

400

450

500

550

600

2000 2005 2010 2015 2020 2025b

cm

20%

25%

30%

35%

40%

45%

50%

Russia 2009 Russia 2008 Gas % of Power

Source: Wood MackenzieSource: Wood Mackenzie


www.woodmac.com

Power Demand – Russia


Growth in gas and hydro over entire forecast

Nuclear decommissioning over short to medium term reduces nuclear output but net additions from 2015 increases nuclear fuel share

New coal-fired build will continue

Net exports will grow to 26 TWh by 2025

Infrastructure improvements lagging in the short term so losses likely to remain high

Electricity demand growth to average 2.5% per annum post-recession period

Efficiency improvements likely to be evident after 2015

Russia Power Demand – 2009 vs. 2008

-

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2000 2005 2010 2015 2020 2025

TW

h

Coal Hydro Nuclear


Other Solid Fuels Russia - 2008


www.woodmac.com

Postponement of new power capacity and implications for extended delays in nuclear

decommissioning

Nature and pace of recovery in the power sector

Whether rising hydrocarbon revenue with expected real oil price increase will foster investment in

infrastructure in conjunction with a resumption of FDI flows

Whether industry recovers on the back of price and cost competitiveness across steel and other

heavy industry sectors

Power Sector Demand

Economic

Timing and gas supply sourcing for Nabucco and Russian gas market development

Extent to which gas tariff rises cause fuel-switching away from gas to increase gas exports

On-going disputes with Ukraine

Russian government push for European netback gas pricing by 2013

The nature and timing of gas and electricity market liberalisation

Former Soviet Union Uncertainties

Regulation

Impact of low Gazprom capital expenditure on current infrastructure investment program

Impact of lower profits on new build power generation

Exports



www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Middle East

The Middle East is one of the world’s key energy suppliers, holding 40% and 60% of proven global gas and oil reserves respectively

67% of regional oil and gas production is exported

Regional oil production growth is expected to slow in the short-term due to a combination of OPEC quotas and decline in short-term global oil demand

Key demand markets are Iran and Saudi Arabia, accounting for 70% of regional TPES

Gas and oil accounts for 89% of regional fuel demand, driven by the power, industry and transport sectors

Fuel switching in power from oil to gas in all countries, except Saudi Arabia

Key issue for region is gas demand-supply constraint, due to gas commitments in oil field re-injection and LNG exports

Shortfall in gas has led to some governments establishing a nuclear program for power supply


Middle East Energy Demand-Supply Forecast

0

500,000

1,000,000

1,500,000

2,000,000

2,500,000

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

KT

OE

Fuel Inputs to Electricity Industry and Non-Energy Use

Losses and Gains Residential, Commercial and Agricultural

Transport Production


www.woodmac.com

In Middle East, the strong rise in gas demand vs gas supply is having a significant impact on self sufficiency

Source: History - IEA; Forecast - Wood Mackenzie

Middle East Self Sufficiency 2000 to 2025Middle East Net Fuel Imports

-1,400,000

-1,200,000

-1,000,000

-800,000

-600,000

-400,000

-200,000

0

2000 2005 2010 2015 2020 2025

KT

OE

Gas Oil

0

200,000

400,000

600,000

800,000

1,000,000

1,200,000

1,400,000

1,600,000

1,800,000

0 100,000 200,000 300,000 400,000 500,000 600,000

Demand (ktoe)

Su

pp

ly (

kto

e)

Gas Oil

Self Sufficient



www.woodmac.com

Power Sector


Economic

Middle East Uncertainties

Regulation

Exports

• Will infrastructure be sufficient across the Middle East to support increasing energy demand and supply?

• Will political uncertainty continue to be a deterrent to foreign investment?

• Will energy subsidization remain ongoing, or will efforts be made to improve energy efficiency?

• Will policy efforts be made to ease demand-supply constraints?

• Will oil and gas exports continue to drive GDP growth?

• OPEC cuts and demand-supply constraints may limit exports, and hence affect revenue.

• Will political instability continue to hinder economic and energy development?

• Will power capacity be developed by state-owned operators or foreign investment?

• Will there be sufficient fuel supply to feed new capacity?

• Will the Gulf Cooperation Council’s regional power network ease the requirement for new capacity?

• To what extent will the OPEC quotas impact upon oil exports?

• To what extent will price liberalization and the global economic crisis impact upon exports?


www.woodmac.com

Iran


Iran’s gas production has grown by over 150% in the past five years

Despite holding the second largest gas reserves in the world, it has been unable to meet growing domestic demand

A number of delays to gas projects will result in an ongoing gas constraint until 2015

Domestic gas production is expected to double by 2015, due to commissioning of South Pars Phase 9 and 10

Over 90% of gas produced in Iran will be consumed in the domestic market to 2025

Key driver of demand is the res/com and power sector

Gas supply constraint has prompted government to establish a nuclear campaign

First nuclear power station is due for commissioning by 2010 (Bushehr I)

Iran Gas Supply-Demand Forecast

0

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100

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300

2000

2002

2004

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2008

2010

2012

2014

2016

2018

2020

2022

2024

bcm



TransportProduction


www.woodmac.com

Who will finance future capacity commissioning?

Will Iran be able to maintain a secure supply of uranium to power the nuclear industry?

To what extent will the gas constraint affect the development of gas-fired capacity?

Will the commissioning of a nuclear industry exacerbate foreign boycotting of Iran’s exports?

Will future oil export revenues sustain the current level of contribution to the government’s budget?

Power Sector


Economic

Will domestic demand be favored over gas exports?

Will Iran be able to meet its gas export ambitions to Turkey, Bahrain, India, Kuwait, Oman and

elsewhere, whilst meeting growing domestic demand?

How and when will domestic energy subsidies be removed?

Will the Iranian policy of state ownership of assets be relaxed to support FDI and development?

Iran Uncertainties

Regulation

Gas

Will ongoing political interference continue to hamper development of infrastructure?

Will infrastructure development be sufficient to avoid further delays to projects in Iran?

Will there be sufficient infrastructure to supply rising domestic demand?


www.woodmac.com

Power Demand – Saudi Arabia

Electricity is heavily subsidised by the government

Large youthful, unemployed population causes concerns about social unrest

Politically less risky to build new capacity than raise power prices

Government is keen to diversify away from hydrocarbons and is developing power intensive aluminium industry

Large amounts of electricity is used in desalination

Gas used in generation is constrained by supply

Fuel Inputs to Electricity – Saudi Arabia

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

180,000

2000 2005 2010 2015 2020 2025 2030

KT

OE

Gas Oil



www.woodmac.com

Easier to build new capacity rather than raise prices and risk social unrest

Efficiency gains if electrical operating areas are connected

Uncertain if Saudi will be connected to neighbours

Sovereign Wealth Fund (SWF) is helping to weather recession

Reliant on oil

Trying to diversify away from hydrocarbons and developing significant aluminium smelting

capacity

Saudization’ aims to replace foreign labour with unemployed Saudi labour.

Energy subsidies will become increasingly costly as they diminish oil export capacity


Power Sector Demand

Historically it has been easier to transport hydrocarbons across the country than electricity

Electricity grid not fully connected

If spare gas capacity and infrastructure is available Saudi Arabia could import gas


Economic

Regulation

Imports

Saudi Arabia Uncertainties


www.woodmac.com

United Arab Emirates


UAE is the 9th largest oil producer in the world

Oil revenue accounts for 35% of GDP, and has supported rapid economic development

OPEC quotas, a decline in oil prices and the global economic recession have resulted in a decline in oil production

Peak oil production by 2020 at 3.8 mboe/d

Government policy is to diversify domestic energy demand away from oil, toward gas

Gas accounts for 64% of domestic energy demand

Gas demand is expected to grow at 3% per year to 2015, driven by the power sector

Short-fall in domestic gas supply has resulted in UAE importing gas from Qatar

Gas supply constraint will result in the commissioning of a nuclear power plant by 2020

UAE Self-Sufficiency 2000-2025

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

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0 5,000 10,000 15,000 20,000 25,000 30,000 35,000 40,000 45,000 50,000

Demand (ktoe)

Su

pp

ly (

kto

e)

Gas Oil Self Sufficient


www.woodmac.com

Is the commissioning of a nuclear facility in the UAE necessary and realistic?

Where will secure uranium supplies be sourced and how will this affect regional stability?

Can renewable targets be met as per government’s plans?

Will the UAE successfully make the transition to a diversified economy?

Will the country’s high level of debt and crippled property market reduce the pace of expansion?

Power

Which gas/electricity transmission routes will be built?Infrastructure Constraints

Economic

What new initiatives will the government deploy to alleviate energy supply constraints?

What measures will be taken to improve energy efficiency?

Will gas supply continue to be constrained and will regional supply continue to be available?

Will domestic gas supply by sufficient to meet rising demand, or will further fuel diversification be

needed?

Will gas pricing help control the level of demand?

United Arab Emirates Uncertainties

Gas

Regulation


www.woodmac.com

Qatar


Large exporting country due to abundance of natural resources and small population

World’s largest non-associated gas deposit

Gas production has risen tenfold in the last 15 years

Over 75% of gas produced in Qatar will be exported to 2025

Global economic crisis has had little impact on Qatar – gas supply tied up in long-term contracts

Forecast gas production is contingent on the North Field Reservoir study

Qatar has imposed a moratorium on new gas projects until 2013

Gas accounts for 76% of domestic energy demand

Gas demand is driven by the LNG industry and power sector

Qatar Energy Self-Sufficiency 2000-2025

0

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0 5,000 10,000 15,000 20,000 25,000 30,000 35,000

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Su

pp

ly (

kto

e)



www.woodmac.com

Will the Gulf Cooperation Grid be developed, and what role will Qatar play?

If so, will this impact on the extent of power capacity development required?

Will Qatar be incentivised to diversify their power supply?

Will Qatar diversify its economy structure, to reduce dependence on exports, thereby avoiding

exogenous shocks?

Power Sector

Will Qatar 3,4 and RL3 be developed?

Will Dolphin 2 be developed?


Economic

Will rising domestic demand be constrained due to commitment of gas to LNG?

Will domestic gas prices support rising demand?

Will the moratorium be sustained so as to preserve the lifespan of the North Field?

Will low production costs be sustained?

Will there be any policy drive for the development of other fuels such as renewables?

Will domestic gas prices support rising demand, or will economically rational pricing be

introduced?

Qatar Uncertainties

Regulation

Gas


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

North Africa


North Africa gas and oil production has almost doubled in the last 20 years

Key producers of oil and gas are Libya and Algeria

Peak production of oil in Libya is currently expected to be reached in 2014

North Africa is a key supplier of gas to Europe, will continue to be over the forecast period although at declining levels

46% of energy produced is consumed domestically

Key energy demand countries are Egypt and Algeria, accounting for 72% of regional demand

Gas and oil are the primary fuels supplying the region, driven by power, res/com and industry

North Africa Energy Demand-Supply Balance

0

50,000

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300,000

350,000

400,000

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2000

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2020

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2024

KT

OE



Transport Production


www.woodmac.com

In North Africa, the strong rise in gas exports & steady gas self sufficiency reflects healthy reserves growth despite rising domestic demand

Source: History - IEA; Forecast - Wood Mackenzie

North Africa Self Sufficiency 2000 to 2025North Africa Net Fuel Imports

-300,000

-250,000

-200,000

-150,000

-100,000

-50,000

02000 2005 2010 2015 2020 2025

KT

OE

Gas Oil


0

50,000

100,000

150,000

200,000

250,000

300,000

-10,000 10,000 30,000 50,000 70,000 90,000 110,000 130,000 150,000

Demand (ktoe)

Su

pp

ly (

kto

e)



www.woodmac.com

Will there be sufficient gas supply to meet expected power capacity development?

Will nuclear energy be an option for power supply in North Africa?

Will increased interconnectivity within North Africa ease requirement for new capacity

development?

To what extent will the decline in oil production, and oil exports affect the regional economy?

Will the development of heavy industry in Egypt shift North Africa’s economic structure?

Power Sector

Will there be sufficient infrastructure to deliver increased supply to meet rising demand?

Will further interconnectivity within North Africa occur?

If so, will this ease pressure to increase domestic supply in some countries?


Economic

Will North Africa continue to be a major supplier of gas to Europe?

Is there any potential for new discoveries or revival of mature oil fields to maintain oil exports?

Will North Africa emerge as a transit country for West African gas?

Will there be effective regulation to promote increased energy efficiency?

Will there be a further push for the development of renewables?

To what degree will Libya open up its upstream sector to further exploration?

North Africa Uncertainties

Regulation

Exports


www.woodmac.com

Algeria


Hydrocarbon sector accounts for 40% of Algeria’s GDP

Strong government intervention in energy continues, despite attempted liberalization in 2005

Algeria is the world’s 4th largest exporter of LNG

Algeria is the third largest oil producer in Africa, behind Libya and Nigeria

Peak oil production was reached in 2006

Only 25% of energy production is consumed domestically

Energy demand is expected to increase by 4.5% per year to 2025, driven by gas

Gas demand is expected to more than double by 2025

Algeria will remain a key exporter of oil and gas to Europe over the forecast period, although at a decreasing rate

Algerian Net Imports

-160,000

-140,000

-120,000

-100,000

-80,000

-60,000

-40,000

-20,000

02000 2005 2010 2015 2020 2025

KT

OE

Gas Oil


www.woodmac.com

Will gas supply be sufficient to meet rising demand and export commitments?

Will gas continue to be the dominant fuel – will development of renewables reduce reliance on

gas?

Will oil and gas exports continue to underlie Algeria’s GDP or will the government diversify?

To what extent will structural reform in Algeria result in growth in energy demand?

Gas

Will Algeria sustain (and expand) electricity trade with Tunisia and Morocco?

Will expansion of infrastructure be sufficient to meet rising demand?


Economic

Will export commitments affect the supply available to meet domestic demand?

Will oil and gas prices favour increased exports?

Will effective energy liberalization be achieved in Algeria?

Will efforts be made to encourage foreign investment and participation in the market?

Will diversification of the energy sector into alternative fuels (such as solar) become a reality?

Algeria Uncertainties

Regulation

Exports


www.woodmac.com

Egypt


Egypt is a major transit route for energy fuels between the Middle East and Europe

Receipts from trade have declined in response to global economic recession

Egypt is expected to remain a net importer of oil to 2025

Phase out of price subsidies on gas and electricity over the next 2 years

Resulting increase in prices is expected to attract foreign investment to the upstream sector

Egypt has the largest refining sector in Africa

Master Petrochemicals Plan spurred oil demand, involving development of 24 petchem projects by 2022

Gas supply constraints, price liberalization and global recession have resulted in delays to Phase II of MPP

Energy demand growth is forecast at 3.3% per year to 2025, driven by oil and gas

Egypt Energy Demand-Supply Balance

0

20,000

40,000

60,000

80,000

100,000

120,000

140,000

160,000

2000

2002

2004

2006

2008

2010

2012

2014

2016

2018

2020

2022

2024

KT

OE


Losses and Gains Residential, Commercial and AgriculturalTransportProduction


www.woodmac.com

Will Phase II of the MPP be completed on track?

Will all 24 of the planned petrochemical and fertilizer projects will constructed?

Can Egypt sustain its current level of FDI and remain an attractive industrial hub?

Will trade across the Suez return to pre-global recession levels?

Will heavy industry be phased out by growth in the services sector?

Industry

Will interconnections with Egypt etc be constructed?

Will Egypt remain a net exporter of power?

Will gas infrastructure be sufficient to meet rising demand?

Can upstream investments sustain domestic demand and export commitments?


Economic

Will Egypt remain reliant on oil imports over the forecast period or can it diversify away?

To what extent will gas be available to the domestic market?

Will removal of price subsidies be effectively implemented to reduce expense and demand?

Will rational prices be sufficient to ensure attraction of foreign investment?

Egypt Uncertainties

Regulation

Imports


www.woodmac.com

South Africa

Between November 2007 and January 2008 South Africa experienced 23 power cuts.

Force majeure was declared on 24 January 2008

Mines told to reduce power usage to survival levels

Recession, price increases and return-to-service of mothballed power capacity has ended power cuts

Insufficient generation capacity is being added to advert future power cuts

South Africa will become a net importer of power in 2014 with the commissioning of Mmamabula coal fired power plant in Botswana

Future power situation could impact global supply of platinum group metals (PGMs), manganese and chromite

South African Generation Shortfall

0

20,000

40,000

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2006 2009 2012 2015 2018 2021 2024 2027 2030C

ap

acit

y (

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)0

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Dem

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d (

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Domestic Generation (RHS) Imported Generation (RHS)SA Capacity (LHS) Foreign Capacity for SA (LHS)DME Demand (RHS)

Generation

Shortfall



www.woodmac.com

Mandatory 10% reduction of power used by the mining industry

Massive power price increases will decrease demand

Increased electrification will increase residential usage

Demand will be constrained by supply

Inadequate power supply could hinder long term growth

Potential problems addressing very high income inequality

Frequent labour disputes and skilled labour shortages are reducing productivity

Heavy regulation in the power sector sowed the seeds for current power crisis

Impact of Black Economic Empowerment (BEE) unknown

Free Base Electricity (FBE) and other populist regulation may prove untenable


Power Sector Demand

High copper prices caused theft electrical infrastructure

Poor rail infrastructure has reduced ability to transport coal for export or to domestic power

stations

Effectiveness of electrification scheme is an unknown

Frequent derailments are restricting coal exports

Will become a net importer of power in 2014


Economic

Regulation

Imports

South Africa Uncertainties


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Power Demand – Brazil & Chile


Chile Power Demand – 2009 vs. 2008Brazil Power Demand – 2009 vs. 2008


-

100

200

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500

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2000 2005 2010 2015 2020 2025

TW

h

Hydro Coal Nuclear

Oil Other Renewables Other Solid Fuels

Gas Brazil - 2008

-

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80

90

100

2000 2005 2010 2015 2020 2025T

Wh

Hydro Coal Nuclear

Oil Other Renewables Other Solid Fuels

Gas Chile - 2008


www.woodmac.com

Less winter-summer variation in total demand than in northern hemisphere countries

Extreme thermal load variations due to seasonal hydro availability and occasional drought years

Rising self-supply generation due to high system losses and subsidies for low usage customers

Region (exc Venezuela) will benefit from relative lack of exposure to economic issues in North

America & Europe, and it will see rising dmd for metals and coal from industrial recovery

Argentina and Venezuela will be exceptions – their participation may be hampered by lack of

investment and by government policies that discourage industrial and commercial expansion

Power Sector Demand

Transmission infrastructure may delay addition of remote large hydro

Transmission constraints may affect integration of wind and other non baseload generation

Chile & Brazil major industrial clients willing to pay for uninterrupted predictable cost generation,

even if they have to build their own


Economic

Limited regional international power exchange except for shared large hydro stations (like Itaipu

and Yacyreta)

Future development of foreign hydro by Brazil to supply Brazil (not grid integration), favoring

areas with different rainfall seasonality

Power generation and dispatch in most countries is economics-driven, but countries must provide

incentives for new non-hydro generation to assure sufficient reserve

Policy, equipment, and regulatory differences have limited international system interconnection

CDM projects (esp wind and seasonal OSF capacity) may complicate transmission coordination

Brazil & Chile Uncertainties

Regulation

Imports


www.woodmac.com

Power Demand – Colombia & Peru


Peru Power Demand – 2009 vs. 2008Colombia Power Demand – 2009 vs. 2008

0

10

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80

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2000 2005 2010 2015 2020 2025

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h

Coal Nuclear Oil

Other Renewables Other Solid Fuels Hydro

Gas Colombia - 2008


0

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Coal Nuclear Oil


Gas Peru - 2008


www.woodmac.com

Will Colombia’s domestic gas production be sufficient for its own needs – i.e. within four years –

given ongoing exports to Venezuala (currently 2x contracted levels)

In Peru, will gas pricing discourage economic power pricing, and how will this affect demand in

the short and long term?

Commodity export-led growth in Peru will ensure economic growth of over 5% through 2015, and

strong growth (4%+) through 2025

Colombia’s net hydrocarbon position (particularly gas) will affect the country’s economy insofar

as the investment required to build new thermal and hydro capacity

Power Sector Demand

Dispersion of population will make gas grid development difficult in Peru, potentially saving more

gas for LNG export (est. 2010 commissioning)

Level of hydro development in eastern Peru, and how much will be dedicated to Brazil


Economic

Level to which Colombia exports hydro to Ecuador in the future, given Ecuador’ own hydro

potential

Will Venezuela reverse some of the gas imports from Colombia, or will Colombia be forced to

import LNG or convert power planto coal-fired?

How will the Colombian government incentivise thermal power generation in order to avoid power

shortages?

Gas pricing in Peru has encouraged huge development, but efficiency has suffered and hydro

investment has been deferred

Colombia & Peru Uncertainties

Regulation

Imports


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Power Demand – Western Europe

Total power demand growth is 0.3% in 2009, rebounding to 2.4% in 2012 then decline to 0.9% in 2020

Gas output to grow at 2.8% through 2025 while coal will shrink 0.6% p.a.

Gas output grows from 25% to 30% of all power generated

Renewables (dominated by wind) will grow by 6.3% p.a. through 2025, doubling its share to 8% and hydro increases to 13% of total power outputs


Western Europe Power Demand – 2009 vs. 2008

-

500

1,000

1,500

2,000

2,500

3,000

3,500

4,000

2000 2005 2010 2015 2020 2025

TW

hCoal Nuclear

Oil Other Renewables

Other Solid Fuels Hydro

Gas Western Europe - 2008


www.woodmac.com

All-Europe Gas demand – by Sector


100

200

300

400

500

600

700

800

900

2000 2005 2010 2015 2020 2025

bc

m

Residential/Commercial/Agriculture Fuel Inputs to Electricity Industry and Non-Energy Use

Other Losses and Gains Transport Europe - 2008


www.woodmac.com

Fuel mix heavily contingent on carbon policy, security of supply and demand destruction in

current environment

Level to which governments facilitate new nuclear developments

Patchwork, uneven fiscal policy hampers LT growth across region w/ UK facing prolonged effects

and weaker pound sterling. The propensity to ‘muddle through’ rather than spur cohesive

remedies may threaten EU and new entrants. E European economies are no longer new

‘economic tigers.’

Power Sector Demand

Rate of development of new storage capacity

Questions around industry’s capacity to keep up with wind turbine demand and approval process

Development of CCS technology


Economic

Rising import dependence brings alternatives and conservation to fore

Numerous pipeline development options – with Russia, Middle East, Norway, North Africa, etc

Development of power interconnections with non-ETS Europe – new form of carbon leakage?

Unknown specifics around Phase III, Kyoto II and renewable targets (20% by 2020)

Rate of liberalisation of markets, given current climate of nationalism

Auto fuel efficiency standards

Western Europe Uncertainties

Regulation

Imports


www.woodmac.com

Power Demand – Eastern Europe


Additional gas supplies will be consumed in western Europe as NIMBYism forces controversial coal and nuclear generation east.

Increasing efficiencies and EU ETS relaxation for eastern Europe will flatten coal demand relative to western Europe.

Eastern Europe is positioning itself to increase its net exports to 62 TWh by 2025

The Balkan region is starting to see massive infrastructure investment aiding exports to western Europe, particularly Italy

Non EU-ETS countries will see an additional 8 GW of coal fired capacity built for the export market

Eastern Europe Power Demand – 2009 vs. 2008

-

200

400

600

800

1,000

1,200

2000 2005 2010 2015 2020 2025T

Wh

Coal Nuclear Oil


Gas Eastern Europe - 2008


www.woodmac.com

Power Demand – Poland


Coal is king and will continue on the back of relaxation of carbon legislation

New EU ETS rules for the 3rd round will give most E EU 80% of carbon credits for generation for free decreasing by 2020 to no free credits. This is delaying coal’s relative decline

Major diversification will start post 2025 with additional nuclear

Commissioning of two additional reactors at Hungary’s Paks Nuclear complex will increase in nuclear power supply by almost 60% between 2020-2025

Poland Power Demand – 2009 vs. 2008

-

50

100

150

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250

2000 2005 2010 2015 2020 2025T

Wh

Coal Gas Hydro


Other Solid Fuels Poland - 2008


www.woodmac.com

Power Demand – Hungary


Nuclear’s increased role is from the commissioning of Paks (x2 reactors each at 1000MW, 2000MW in total) by 2025

Coal is taking biggest hit in the demand correction in 2009 due to falling base load

Eastern Europe has more options for power generation (i.e. nuclear, wind and coal) than Western Europe, hence higher levels of alternates to gas

Conditions of IMF loan to Hungary will deregulate power prices by 2010

HUF dropped by ~25% against CHF and ~20% Euro since July 08

Credit default spreads increased from 50 bpto 600 bp from 08-09

Hungary Power Demand – 2009 vs. 2008

-

10

20

30

40

50

60

2000 2005 2010 2015 2020 2025T

Wh

Coal Gas Hydro


Other Solid Fuels Hungary - 2008


www.woodmac.com

Power Demand – Romania


Major site for offshore wind (Black Sea), 1512MW new wind added by 2025

Nuclear energy set to increase with 2x 700 MW reactors (1400MW total) in 2015, likely to be Candu reactor and current CernavodaNPP. Another 700MW reactor will be added 2025

Like Bulgaria, Romania is gearing itself to become major regional net exporter. Lots of transmission being built to western Europe, (easier in the East)

Romania Power Demand – 2009 vs. 2008

0

10

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70

80

90

100

2000 2005 2010 2015 2020 2025T

Wh

Coal Nuclear Oil


Gas Romania - 2008


www.woodmac.com

Power Demand – Slovakia


Will see 1000MW added but mainly small (440 MW) reactors at Mochevce and Bohunice

Adoption of Euro is likely to help FDI

Slovakia Power Demand – 2009

0

10

20

30

40

50

60

2000 2005 2010 2015 2020 2025T

Wh

Coal Nuclear Oil


Gas


www.woodmac.com

Relationship between latent demand and recession.

Securing funding for new power plants.

Level to which governments facilitate new nuclear developments

Each country is being impacted by the recession differently.

IMF has learned from past mistakes and adopted new precautionary approach.

For certain countries questionable economic data.

Power Sector Demand

Which gas/electricity transmission routes will be built, more planned than needed.

District heating is going to be encouraged as a means to reduce carbon emissions. But

distribution infrastructure will not be expanded, only improved.


Economic

Refocus on domestically sourced fuels in the face of improved diversity of supply.

The fate of Nabucco is incredibly uncertain but likely to be canceled.

Development of power interconnections linking east and west.

Impact of EU ETS decision to allocate 80% of generation credits for free to certain eastern

European countries casts doubt over capricious carbon legislations.

Recession is forcing some to liberalise prices faster, for some countries it could delay.

Russia/Ukraine gas dispute changed regulation for certain countries to guarantee energy security

Eastern Europe Uncertainties

Regulation

Imports


www.woodmac.com

Agenda





2.0

Asia Pacific

South America

Europe

North America

3.0

Middle East

Africa

Former Soviet Union

1.0


www.woodmac.com

Power Demand – United States

Concerted efforts in Canada to reduce coal will make some difference, while expected US carbon legislation post-2010 has deterred many new coal projects and demand will stagnate.

In the short term however, we expect approximately 12 GW of new efficient coal-fired power in the US

Post-recession (2012), gas will benefit from this shift and will increase its share of power output from 17% to 22% in 2025. New capacity will increase by 6 GW p.a., increasing to 10 GW p.a. post 2015. Gas will increase its share of power generation from 21% to 32% by 2025

New nuclear capacity build is expected to resume post-2015 with 3 GW of new build by 2020 and a further 5 GW by 2025

Renewables (dominated by wind) will increase its share of the power mix from 1.2% to 1.9% in 2025. Approximately 5 GW of new capacity will be built each year through 2025


US Power Demand – 2009 vs. 2008

-

1,000

2,000

3,000

4,000

5,000

6,000

7,000

2000 2005 2010 2015 2020 2025T

Wh

Coal Gas Nuclear

Hydro Oil Other Renewables

Other Solid Fuels US - 2008


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To what extent will new domestic gas supplies flow to power generation, pushing out other fuels

(coal, oil)

Will there be sufficient industrial capacity to meet plans for increased wind generation

Will carbon capture emerge as commercially viable in the forecast

Nature and pace of LT growth depends on maximising allocation of capital towards infrastructure

rather than social programs. Real rate of growth of the deficit needs to be blunted successfully by

boosting investment and income rapidly. Unclear whether this can be done w/ current policy.

Timing and shape of carbon legislation developed under the Obama administration

As one of the “five pillars” of the economic recovery, which bills will pass in the pursuit of energy independence, technology and efficiency

What level of incentives will be provided in Canada and the US to resume nuclear build

Power Sector

Capacity to bring Haynesville and other unconventionals to market

What infrastructure level is required to support hybrid vehicle development, if it is viable

To what extent will the oil sands development be constrained by infrastructure


Economic

Regulation

North America Uncertainties

Can auto efficiency legislation help reduce US oil imports

Will the US be a market of last resort for spot LNG cargosImports


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Contact the Team

+44 131 243 [email protected]: Renee Howarth

+44 131 243 [email protected]: James Brick

+44 131 243 [email protected]: Renee Howarth

+65 6518 [email protected] Pacific: Chani Solleza Regional Analysts

+44 131 243 [email protected] Africa: Jennifer Evans

+44 131 243 [email protected] Middle East: Jennifer Evans

All team members

Mike Sinden – Product Manager

Julie Beatty – Principal Economist

Energy Markets Contact

+44 131 243 4318

+44 131 243 4493

Telephone

[email protected]

[email protected]

Email

Methodology

Product Sales

Area


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Wood Mackenzie Disclaimer

Strictly Private & Confidential

This report has been prepared for PetroVietnam by Wood Mackenzie Limited. The report is intended solely for the benefit of PetroVietnam and its contents and conclusions are confidential and may not be disclosed to any other persons or companies without Wood Mackenzie’s prior written permission.

The information upon which this report comes from our own experience, knowledge and databases. The opinions expressed in this report are those of Wood Mackenzie. They have been arrived at following careful consideration and enquiry but we do not guarantee their fairness, completeness or accuracy. The opinions, as of this date, are subject to change. We do not accept any liability for your reliance upon them.


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