Outlook for Producer Economies 2018 What do changing energy dynamics mean for major oil and gas exporters? World Energy Outlook Special Report INTERNATIONAL ENERGY AGENCY The IEA examines the full spectrum of energy issues including oil, gas and coal supply and demand, renewable energy technologies, electricity markets, energy efficiency, access to energy, demand side management and much more. Through its work, the IEA advocates policies that will enhance the reliability, affordability and sustainability of energy in its 30 member countries, 7 association countries and beyond. The four main areas of IEA focus are: n Energy Security: Promoting diversity, efficiency, flexibility and reliability for all fuels and energy sources; n Economic Development: Supporting free markets to foster economic growth and eliminate energy poverty; n Environmental Awareness: Analysing policy options to offset the impact of energy production and use on the environment, especially for tackling climate change and air pollution; and n Engagement Worldwide: Working closely with association and partner countries, especially major emerging economies, to find solutions to shared IEA member countries: energy and environmental Australia concerns. Austria Belgium Canada Czech Republic Denmark Estonia Finland France Germany Greece Secure Hungary Sustainable Ireland Together Italy Japan Korea Luxembourg Mexico Netherlands New Zealand Norway Poland Portugal © OECD/IEA, 2018 Slovak Republic International Energy Agency Spain Website: www.iea.org Sweden Switzerland Turkey United Kingdom Please note that this publication United States is subject to specific restrictions that limit its use and distribution. The European Commission The terms and conditions are also participates in available online at www.iea.org/t&c/ the work of the IEA. Foreword A career in energy means, on occasion, returning with fresh eyes to some familiar themes. For many years, I have been following the efforts made by countries that rely heavily on revenues from oil and gas to diversify their economies. This is a longstanding ambition for many producers, and progress has been made. But changes in today’s energy sector – from the shale revolution to the renewable energy revolution – are giving these efforts new momentum and urgency. This report in the World Energy Outlook series is very timely. It highlights the strategic importance of these ambitious reform programmes for economic and social development. It underscores the risks that can arise from excessive reliance on volatile hydrocarbon income, as the current situation in Venezuela amply demonstrates. What comes through clearly is that energy is at the heart of the reform process, even if the ultimate aim of reform is to diminish reliance on hydrocarbons. Energy provides the means to reform and can also provide an enduring source of comparative advantage. The report also highlights a shared interest in a positive outcome: this is an issue with wide- ranging implications for energy security, for the global economy and for the pathways to reach sustainable development goals. The findings in this report are those of the IEA alone, but the process of producing it has been a collaborative one in which Tim Gould, Ali Al-Saffar and others in the World Energy Outlook team have worked closely with counterparts in many of the countries on which we focus. I would like to extend my sincere appreciation to all those that have provided their support. Fatih Birol Executive Director International Energy Agency Foreword 3 Acknowledgements This study was prepared by the World Energy Outlook (WEO) team in the Directorate of Sustainability, Technology and Outlooks (STO) in co-operation with other directorates and offices of the International Energy Agency (IEA). It was designed and directed by Tim Gould, Head of the WEO Energy Supply and Investment Outlook Division. Ali Al-Saffar co-ordinated and led the work across the chapters. Other principal authors were: Tae-Yoon Kim, Christophe McGlade, Paweł Olejarnik, Tristan Stanley, Emily Stromquist, Molly A. Walton and Toshiyuki Shirai. The study relied on support from across the entire WEO team, in particular from Yousef Al-Abdullah (seconded to the IEA from the Kuwait Institute for Scientific Research), Zakia Adam, Stephanie Bouckaert, Wataru Matsumura, Diana Alejandra Rodriguez, Glenn Sondak and Brent Wanner, as well as valuable guidance from Laura Cozzi, Chief Energy Modeller. Jean Chateau from the OECD contributed the macroeconomic modelling. Teresa Coon and Eleni Tsoukala provided essential support. Edmund Hosker carried editorial responsibility. Debra Justus was the copy-editor. Valuable comments and feedback were provided by the senior management and other colleagues within the IEA. In particular, Paul Simons, Keisuke Sadamori, Rebecca Gaghen, Amos Bromhead, Laszlo Varro, Neil Atkinson, Peter Fraser, Aad Van Bohemen, Aya Yoshida, Alessandro Blasi, Yoko Nobuoka, Peg Mackey, Kate Dourian and Sacha Scheffer. The Energy Data Centre provided support and assistance throughout the preparation of the report. Thanks go to the IEA’s Communication and Information Office for their help in producing the final report, particularly Astrid Dumond for production and Bertrand Sadin for graphics. A high-level workshop organised by the IEA was held on 26 April 2018 in Paris to gather essential input to this study. The participants contributed valuable insights, data and feedback for this analysis. Further details of the workshop are at www.iea.org/weo/events/. Many international experts provided input, commented on the underlying analytical work or reviewed early drafts of this report. Their comments and suggestions were of great value. They include: Khaled Abu-Ismail United Nations Economic and Social Commission for Western Asia Tony Addison UN World Institute for Development Economics Research Ali Aissaoui Independent consultant Luay Al-Khatteeb Iraq Energy Institute Majid Al-Moneef Supreme Economic Council of Saudi Arabia Hatem Al-Shanfari Sultan Qaboos University, Oman Yahya Anouti Strategy& Mustafa Ansari Arab Petroleum Investments Corporation (APICORP) Sami Attallah Lebanese Center for Policy Studies Igor Bashmakov Center for Energy Efficiency (CENEf) Edward Bell Emirates National Bank of Dubai Kamel Ben Naceur Abu Dhabi National Oil Company (ADNOC) Acknowledgements 5 Jason Bordoff Center on Global Energy Policy, Columbia University Nick Butler Independent consultant Tim Callen International Monetary Fund Dunia Chalabi Total Antonio Ciavolella Department for Business, Energy and Industrial Strategy, UK Jennifer Coolidge CMX Caspian and Gulf Consultants Joel Couse Total Helima Croft RBC Capital Markets Anita Csiki Ministry of National Development, Hungary Spencer Dale BP Ziad Daoud Bloomberg Economics Andrea di Chiara Eni Amir Emamgholi International Monetary Fund Vladimir Feigin Institute for Energy and Finance (FIEF) Jean-Francois Gagne Natural Resources Canada Francesco Gattei Eni Ivetta Gerasimchuk International Institute for Sustainable Development Kuzushige Gobe Japan Bank for International Cooperation Adel Hamaizia Oxford Gulf and Arabian Peninsula Studies Forum Awwad Harthi Ministry of Energy, Industry and Mineral Resources, Saudi Arabia Laury Haytayan Natural Resource Governance Institute Allison Holland International Monetary Fund Ágnes Horvath MOL Group Takuma Inamura Ministry of Foreign Affairs, Japan Alisher Khamidov Independent Consultant Pawel Konzal Chevron Ken Koyama Institute of Energy Economics, Japan Jim Krane Baker Institute, Rice University Glada Lahn Chatham House Alessandro Lanza Centro Euro-Mediterraneo sui Cambiamenti Climatici Marcus Lippold Saudi Aramco Giacomo Luciani Sciences Po Ali Mawlawi Bayan Center for Planning and Studies, Iraq Tatiana Mitrova Skolkovo Business School Fareed Mohamedi SIA International Paul Mollet King Abdullah Petroleum Studies and Research Center (KAPSARC) Francisco Monaldi Baker Institute, Rice University Isabel Murray Natural Resources Canada Carole Nakhle Crystol Energy Petter Nore Nord University Jessica Obeid Chatham House 6 World Energy Outlook 2018 | Special Report Bright Okogu African Development Bank Tarek Osman European Bank for Reconstruction and Development Meghan O'Sullivan Harvard Kennedy School Yongduk Pak Korea Energy Economics Institute Gulmira Rzayeva Oxford Institute for Energy Studies Aisha Sarihi London School of Economics, Kuwait Centre Tariq Shafiq Independent consultant Adnan Shihab-Eldin Kuwait Foundation for the Advancement of Sciences Bruce Smith Abu Dhabi Water and Electricity Company Christopher Snary Department for Business, Energy and Industrial Strategy, UK Kazushige Tanaka Ministry of Economy, Trade and Industry, Japan Wim Thomas Shell Bill Tompson Organisation for Economic Co-operation and Development Sara Vakhshouri SVB Energy International Chris Weafer Macro Advisory Richard Westerdale Department of State, United States Sun Xiansheng International Energy Forum Javad Yarjani Independent consultant Fareed Yasseen Government of Iraq William Zimmern BP The individuals and organisations that contributed to this study are not responsible for any opinions or judgements contained in this study. All errors and omissions are solely the responsibility of the IEA. Comments and questions are welcome and should be addressed to: Tim Gould Head of World Energy Outlook, Energy Supply and Investment Division Directorate of Sustainability, Technology and Outlooks International Energy Agency 31-35, rue de la Fédération 75739 Paris Cedex 15 France