Profile: Dr Fatih Birol

Profile: Dr Fatih Birol

International Energy Agency Chief Economist warns that given the current status quo of international climate policy and efforts, the “door to 2°C may be closing” soon, as it assumes vigorous implementation of emission reduction pledges to 2020 and much stronger action thereafter. Dr Fatih Birol said in Singapore that energy related CO2 emissions need to peak before 2020 and this is not happening. And all major emitters have to move, if not, the problem will not be solved.

IEA Chief Economist offers a look at our energy future

June 21, 2011 by Eugene Tay in Green Business Times  

Filed under Strategy and Leaders

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The era of cheap oil is over, and policies fall short of what is needed for a secure and sustainable energy future, says Dr Fatih Birol, Chief Economist of the International Energy Agency, in his lecture titled “A Glimpse into the Energy Fututre” at today’s EMA Distinguished Speaker Programme. This lecture is jointly organised by the Energy Market Authority and the Energy Studies Institute.

Era of cheap oil is over

Dr Birol shares that the era of cheap oil is over because of structural changes, and there is growing risk that the upturn in oil prices could undermine economic recovery.

On the demand side, strong growth from the transportation sector due to booming demand for mobility in emerging economies drives up oil use. The global car fleet continue to surge as more people in China and other emerging economies buy a car.

On the supply side, oil production becomes less crude. Global fossil fuel production reached 96 mb/d in 2035 on the back of rising output of natural gas liquids and unconventional oil, as crude oil production plateaus.

There is now more oil from fewer producers. The MENA region (Middle East and North Africa) would account for 90% of net global increase in oil production in 2020, and if current unrest defers investment, it could have implications for global energy security.

Oil prices is reaching a danger zone, and rising oil prices pose inflationary risks. High oil prices also represent significant redistribution of wealth from oil importers to oil exporters, and the impacts differ across OECD, emerging economies and less developed countries.

OECD spending on oil imports will be higher than 2008, if oil prices remain at current levels through 2011, and will present a serious risk to derail global economic recovery.

Stronger penetration of natural gas

Dr Birol shares that stronger penetration of natural gas could have profound implications for global energy markets. The majority of global natural gas production will continue to come from conventional sources but unconventional gas becomes increasingly important.

Natural gas can enhance the security of fuel supply. Global natural gas resources exceed 250 years of current production, while in each region, resources exceed 75 years of current consumption. Natural gas are also dispersed in many countries, unlike oil.

However, challenges remain in shale gas production due to environmental problems. The process need large volumes of water to fracture rocks, and uses chemicals that lead to the contamination of water.

The good news is that the challenges can be fixed with existing technologies, the government putting in the right regulations, and companies using the best technology.

The growing liquefied natural gas (LNG) production also enhances supply security and market flexibility. Australia is becoming the leading LNG supplier, followed by Qatar. Singapore could also become the regional hub for LNG.

Coal and renewable energy

Dr Birol explains that coal would remain the backbone of global electricity generation. The drop in coal-fired generation in OECD countries is offset by big increases elsewhere, especially in China, where 600 GW of new capacity exceeds the current capacity of US, EU and Japan.

Renewables would enter mainstream as the use of renewable energy triples between 2008 and 2035, but only if there is enough government support. Government support remains as the key driver, rising from $57 billion in 2009 to $205 billion in 2035, but higher fossil fuel prices and declining investment costs also spur the growth of renewable energy.


Dr Birol believes that China will be instrumental in shaping all energy markets. China would become the market leader in low-carbon technologies, given the sheer scale of China’s market. Its push to expand the role of low carbon technologies is poised to play a key role in driving down costs, to the benefit of all countries. If China becomes the low-carbon technology champion, this would have impacts on current champions in Europe and US.

Door to 2°C may be closing

Dr Birol warns that given the current status quo of international climate policy and efforts, the “door to 2°C may be closing” soon. The 2°C scenario assumes vigorous implementation of the Copenhagen Accord and Cancun Agreement pledges to 2020 and much stronger action thereafter. In this scenario, energy related CO2 emissions need to peak before 2020. This does not seem to be happening. In addition, all major emitters have to move, if not, the problem would not be solved.

Nuclear energy

Dr Birol shares that lower nuclear use would have implications for fuel mix, pushing up demand for coal, natural gas and renewables, and have a corresponding knock-on effect on energy prices. The implication for CO2 is that the growth in emissions from the power sector in 2008-2035 would be almost 30% higher in a lower nuclear case.

Dr Birol concludes that existing and announced policies can make a difference, but fall well short of what is needed for a secure and sustainable energy future. Energy and geopolitics will also be more and more interwoven.


Dr Fatih Birol, Chief Economist at the International  Energy Agency (IEA), today addressed a 350-strong audience of energy players at the second instalment of the EMA’s Distinguished Speaker Programme (DSP).  The first DSP took place on 29 April, with Tenaga Nasional Bhd Chairman, Tan Sri Leo Moggie,speaking on “The Dynamics of the Electricity Industry”.

Speaking on the theme, “A Glimpse into the Energy Future”, Dr Birol began by highlightingthe major structural shift in energy demand from OECD countries such as the US, Japan, Korea and Australia, to non-OECD countries particularly China, India and the Middle East. In fact, the Chief Economist quipped that today’s global energy demand is being driven by five countries and/or region, namely China, China, China, and then India and the Middle East. This, he said, could have substantial energy implications for global energy mix and security.

Announcing that the era of cheap oil is over, Dr Birol revealed how there has been structural changes in oil markets. For example, he shared how the vast majority of demand for oil is being driven by transportation, as opposed to power generation. Unlike power generation, cars, planes and automobiles can run on only oil and this results in rigid demand, said the Chief Economist.  He continued by saying that demand for oil-dependent vehicles is only going to increase, putting pressure on depleting oil resources and the need to find alternative fuel choices for vehicles.  He added that oil resources also lie in areas of increasing geo-political uncertainty, which can impact the security of oil supply.

On the other hand, Dr Birol said the picture for gas is much more positive in terms of both the amount of resources available and security of supply.  IEA, which had recently published the report “Are We Entering A Golden Age of Gas”, projected that  global resources of natural gas will exceed 250 years of current production. In each region, resources will exceed 75 years of current consumption.   Dr Birol also highlighted that the other major advantage of gas lies in its dispersion, which means gas is not confined to or concentrated in any one region.  

Later, Dr Birol would tell audiences during the Q&A session that the Golden Age of Gas must be met by golden standards. For countries to clear the hurdles to gas, particularly to shale gas where its production has caused environmental concerns, governments would need to put the right regulations in place, while companies would have to use the right technology.  Dr Birol also commented that with the upcoming LNG terminal due to come online in 2013, Singapore is well-placed to be an LNG hub for the region.

Turning to coal, Dr Birol reminded all that the fossil fuel is currently the backbone of the global electricity generation industry. He shared that half the world’s electricity generation comes from coal, while the other half is made up of oil, gas and renewables combined.  With electricity generation increasingly fuelled by gas, which is the cleanest fossil fuel, he highlighted that this would have a positive impact on climate change and carbon emissions.  Nevertheless, this by itself is insufficient to limit the average global temperature rise to no more than 2 degrees Celsius.

In fact, this is a topic close to his heart, and Dr Birol shared his disappointment that an agreement was not reached in Copenhagen.  While the Cancun Agreement does commit countries to reducing emissions, he put this into perspective by highlighting the current debate regarding cutting European emissions to either 20 or 30 percent, which really works out to roughly two weeks of Chinese emissions.

Given the current status quo of the international climate policy and efforts, Dr Birol feared that the “door to 2 degrees Celsius may be closing” soon.

The good news is that every government Dr Birol has encountered is pushing forward a strong renewables programme.  He explained that government support is essential as the cost of renewables can be prohibitive. Again, he sees China emerging as the main driving force behind renewables and low carbon technology, in particular solar, wind, nuclear and electric cars.  The Chief Economist said China’s dominance of the market will positively impact clean technologies by providing the necessary scale to lower costs, but added the caveat that this could also have a converse impact on current cleantech companies.

The Fukushima tragedy has also had an impact on the global energy landscape, with nuclear’s generation share expected to drop to 10 percent in 2035, from 14 percent today. This, he said, will leave a gap that must be filled by coal, gas or renewables, which in turn will result in almost 30 percent greater higher emissions from 2008-2035.

In summing up, Dr Birol felt that energy and geopolitics will become increasingly interwoven, with an impact on supply security.  While existing and upcoming policies can make a difference, they fall well short of what is needed for a secure and sustainable energy future.  The volatility and upturn in oil prices in particular, could undermine global economic recovery.  Against this bleak backdrop, Dr Birol said a stronger penetration of natural gas could have profound and potentially positive implications for global energy markets, with China continuing to be instrumental in shaping our energy future.


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