4. Global energy security will become a higher international priority over the next decade because of: + significant projected increases in both global demand for energy and international trade in oil and gas; + a greater dependency on oil and gas supplies from countries with uncertain political prospects; and + the threat of terrorist attacks against oil and gas facilities. ‘Suppliers Will Fulfil the Growth in Demand 2. Energy forecasters anticipate that the growth in global demand for oil and gas will be strong in the next ten years, in large measure because of increases in Chinese energy use. In 2015, the world's consumption of oil will likely be closing in on 100 million barrels per day (mb/d), roughly 22% higher than the current level—which is a relatively high average annual growth for the oil industry. The percentage increase in natural gas use over the same period will be even greater, around 30%. 3. Satisfying this demand will require, according to the International Energy Agency, over one trilfion dollars of investment in exploration, production, transportation and refining over the next 10 years. This is not beyond the financial or technical capacity of the industry. Sufficient reserves of conventional oil and gas exist. Oil and gas companies (private and state-owned) are, with a few exceptions, in good shape. Generally high prices over the past four years have produced a steady and large cash flow, as well as profits, for the oil producers. From the perspective of the industry, there should be no -3- s.18(1) s.16(1) s.16(2) 8.21(1)(b) CONFIDENTIAL problem in supplying adequate quantities of oi} and gas. But Dependence on the Middle East and North Africa Will Grow 4. Despite efforts by importing countries to diversify suppliers, and notwithstanding more oil being produced and exported by Russia, the Caucasus, Central Asia and West Africa over the next dacade, itis the Middle East and North Africa (MENA) that will account for an even greater share of the world's production. The U.S. Energy Information Administration projects that MENA countries will have 40% of the world’s petroleum production capacity in 2015, in comparison to the current 30%. Saudi Arabia alone will nave 15%. The region's share of global crude oil exports will be even higher, possibly in the range of 70-75%. 5. Although most attention is given to oil exports, global trade in natural gas is forecasted to expand dramatically. Much of this trade is within regional markets because of the transportation constraints. But as more liquefied natural gas (LNG) processing plants and ships are built, worldwide trade in natural gas will expand. MENA countries will figure prominently in this growth. From a relatively ‘small share at present, the International Energy Agency projects that countries in the Middle East will steadily increase their share of the world’s inter-regional gas trade, reaching 31% by 2030. Africa's share will be 25%, much of which will come from North Africa. 1A or CIB ##/2003CONFIDENTIELDate-1 000497