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Cyberattacks, extreme weather—the energy market faces some big threats

Severe weather, slowing population growth and the threat of cyberattacks on utility companies and energy infrastructure are among the top dangers facing the energy market, the secretary-general of the World Energy Council told CNBC.

Christoph Frei said the frequency of extreme weather events had risen by fourfold in the last 30 years — and would likely do so again in the next three decades.

"Why would this trend suddenly stop? … Yesterday's unlikely is tomorrow's reality," Frei told CNBC on Friday.

Don Klumpp | Getty Images

He highlighted Hurricane Sandy, which hit New York in 2012, and the cyclone that struck the Philippines in 2013 as examples of severe weather events that could become more frequent.

In addition, increasingly frequent droughts in countries ranging from Ethiopia in Africa to Colombia in Latin America would place higher competition on water supplies over the next 40 years, he said. That includes both water used for irrigation and drinking and water used for energy generation in hydro plants and thermal power stations.

"Droughts can impact electricity. … If it's a question of energy security versus water security, water trumps," Frei said.

More attacks on power supplies?

Attacks on major utility companies and power networks are an increasing concern for governments and corporations.

Hundreds of thousands of homes in Ukraine were left without electricity in December after an alleged malware attack on the power system. The assault was the first widely known example of hackers bringing down a major power network.

In February, there were media reports that ISIS terrorists may have been planning an attack on a Belgian nuclear power plant.

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"Cyber is among the top issues keeping energy (players) awake at night," Frei told CNBC.

"Why should it be limited to Ukraine? We have seen other cyberattcks on banks ... why should this be different in infrastructure?" he added separately.

Population growth

World demand for energy is closely tied to economic growth. Expansion was driven in the latter half of the 20th century by a very sharp rise in the global population, which now tops 7 billion.

However, rapid population growth is now slowing, due to decelerating birth rates around the world.

"The 'new normal' for China may be the new normal for the world ... economic growth was previously boosted by a huge growth in population," Frei told CNBC.

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"If energy demand growth is not to come from people, it has to come from productivity," he later said.

Energy Futures Chart

The secretary-general said it "seems plausible" for oil prices to remain between $40 and $60 per barrel for the next three to five years.

A "black swan event " such as a massive expansion in a battery's ability to store energy could see crude prices fall below $40, Frei said, adding that this level was a "killer threshold" for a number of marginal oil players.

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