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World Energy Outlook 2014

The latest report (12 November 2014) of the International Energy Agency (IEA) "World Energy Outlook 2014" offers the following takeaways -

(a) Global economic re-structuring towards less energy-intensive development is likely to curb overall energy demand growth. Nevertheless, world primary demand is expected to be 37% higher by 2040. Asia, particularly China, accounts for 60% of the growth, at least until 2030. Oil demand is to increase from 90 mb/d in 2013 to 104 mb/d by 2040. But growth rate is expected to slow from 2% p.a. to 1% p.a.after 2025. 

(b) By 2040, world energy supply is to fall into four almost equal categories - (i) low carbon fuel (renewables and nuclear) (ii) oil (iii) natural gas and (iv) coal.

(c) Renewables (particulalry wind, hydro and solar, in that order) are to go from strength to strength, accounting for half of global increase in energy supply, a third of total energy mix, and overtaking the share of coal by 2040, driven by China and other emerging economies.

(d) Nuclear energy will grow only by one percentage point to account for 12% of total energy mix by 2040, with China contributing the lion's share of 40%.

(e) By 2040, while growth in oil demand is expected to slow to near halt, gas demand is likely to increase by over 50%, supported by LNG trade, with the United States becoming the lowest-cost producer. But US shale gas production is expected to level off by late 2030's while US tight oil output is likely to decline by early 2020's. 

(f) Coal demand is likely to remain 15% higher by 2040, supported by requirements in China, India, Indonesia and Australia, but the growth rate is expected to plateau in the 2020's and falling back in the 2030's except for India. 

(g) Owing to the above dynamics, global temperature is likely to rise above the target of not exceeding 2 degrees Celcius (3.6 degrees Fahrenheit) compared with pre-industrial times unless vigorous mitigation measures are implemented globally.

(h) Concentration of energy supply sources, rising costs of extraction, price disincentives, operating and political uncertainties are likely to continue to sustain countries' concerns of energy security, preventing abatement of global energy rivalries. 

An Executive Summary of the IEA report can be downloaded below. 

Download IEA World Energy Outlook November 2014

Southeast Asia at the Crossroads: Three paths to prosperity

A Mckinsey Global Institute report (November, 2014) points out that Southeast Asian countries are at the crossroads of a "Middle Income Trap".It suggests that they can address productivity challenges by capturing three global megatrends -

(a) capitalizing on ASEAN Economic Community integration and building a more competitive manufacturing sector as China's labour costs continue to rise;

(b) more than 90 million people will be moving to the cities in Southeast Asia by 2030, doubling the consumer class to 163 million households. Creating cities with a high quality of life will demand some $7 trillion in investment in infrastructure, housing, and commercial space; and

(c) five related technologies—the mobile Internet, big data, the Internet of Things, the automation of knowledge work, and cloud technology —are likely to drive major productivity gains.

Download MGI Report - Southeast Asia at the Crossroads - Three paths to prosperity - November 2014

Whether individual countries are able to embrace all or any of the above would depend on diverse imponderables. Some of the main imponderables are identified in an earlier strategic scenario simulation of Southeast Asia's trajectory to 2035 conducted by Wikistrat, a cloud-sourced global strategic consultancy of which I am a senior analyst. The resultant report dated October 2014, was written by me as the simulations's Lead Analyst. Edited by Wikistrat, the report is the outcome of synthesizing collaborative online efforts of 59 Wikistrat analysts across the globe. 

China to launch hack-proof quantum communication network in 2016

The world's first hack-proof quantum communications network is about to be launched by China, according to a report of 4 November, 2014 in the South China Morning Post.

Download China to launch hack-proof quantum communication network in 2016

This is China's response to the Edward Snowden revelations and the growing global influence of internet telecommunications in commerce and national defense. It may herald China's seizing the technological high ground for setting global standards and is likely to unleash a global race for mastery of this science-fiction-like hack-proof communications technology. 

China's happiness index near Germany and ahead of France

A survey of 43 countries published on October 30th by the Pew Research Centre of Washington, DC, shows that people in emerging markets are approaching nearly the same level of satisfaction as people in rich countries, according to a report in The Economist (1-7 November, 2014). 

In particular, on a scale from zero to ten, the percentage of people in China rating their life-satisfaction between 7 and 10 (i.e. as happy), is within is ahead of France, within a whisker of Germany, and not too far behind the United States. 

This punctures the constant wishful thinking that China will necessarily head towards collapse because it fails to embrace Western concepts of democracy. 

A reality check of the US "Shale Gas Revolution"

A report (October, 2014) by J David Hughes of the Post-Carbon Institute suggests that the US 's so-called Shale Gas Revolution may not be such an nirvana as it is portrayed to be.

The following extract is instructive. In particular, it should be observed that the EIA reference case forecast for the top seven shale gas plays overestimates cumulative production through 2040 in this report’s “Most Likely” scenario by 64%.

This would mean that gas production is likely to peak by 2016, instead of well beyond 2040 as claimed by IEA forecasts, leaving aside the question of uncertain impact on soil and water ecology as illustrated in my earlier blog Sobriety needed in Shale Gas Exuberance.  

"1.4 IMPLICATIONS

This report shows that the EIA’s optimistic forecasts for future U.S. tight oil and shale gas production are based on a set of false premises, namely that:

 High-quality shale plays are ubiquitous, and there will be always be new discoveries and production from emerging plays to fill the gap left by declining production from major existing plays.

 Technological advances can overcome steep decline rates and declining well quality as drilling moves from sweet spots to poorer quality rock, in order to maintain high production rates.

 Large estimated resources underground imply high and durable rates of extraction over decades. Actual production data from the past decade of shale gas and tight oil drilling clearly do not support these assumptions. Unfortunately, the EIA’s rosy forecasts have led policymakers and the American public to believe a number of false promises.

 That cheap and abundant natural gas supplies can create a domestic manufacturing resurgence and millions of new jobs over the long term.

 That abundant domestic oil and natural gas resources justify lifting the oil export ban (imposed 40 years ago after the Arab oil embargo) and fast-tracking approval of liquefied natural gas (LNG) export terminals.

 That the U.S. can use its newfound energy strength to shift geopolitical trends in our long-term favor.

 That we can easily limit carbon dioxide emissions from power plants as a result of natural gas replacing coal as the primary source of electricity production.

The promises associated with the expectation of robust and relatively cheap shale gas and high-cost but rising tight oil production have also led to a tempering of investments in renewable energy and nuclear power.

If, as this report shows, these premises and promises are indeed false, the implications are profound. It calls into question plans for LNG and crude oil exports and the benefits of the shale boom in light of the amount of drilling and capital investment that would be required, along with the environmental and health impacts associated with it.

Conventional wisdom holds that the shale boom will last for decades, leaving the U.S. woefully unprepared for a painful, costly, and unexpected shock when the shale boom winds down sooner than expected.

Rather than planning for a future where domestic oil and natural gas production is maintained at current or higher levels, we would be wise to harness this temporary fossil fuel bounty to quickly develop a truly sustainable energy policy—one that is based on conservation, efficiency, and a rapid transition to distributed renewable energy production."

Download Drilling Deeper - A reality check of the Shale Gas Revoultion - Executive Summary, 2014