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Are Hydrocarbons a Curse or Foundation for the Global Economy?

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Socrates, arguably the world's most known philosopher, was executed by poisoning - he drank a mixture containing poison hemlock. At that time death penalty alongside with ostracism, a procedure in which any citizen of ancient Athens could be expelled from the state, were among the most popular methods of punishment. If the majority voted in favour of the sentence, a person had no other choice but to leave or die. Quite often, people who ended up in exile or were sentenced to death were later acknowledged as the national pride. There is a chance something similar is happening with hydrocarbons today.

An online conference named 'Hydrocarbons. Look into the future', which was held within the Mining University in conjunction with the International Competence Centre for Mining-Engineering Education under the auspices of UNESCO, gathered over 900 mining experts. As a communication tool, the Cisco WebEx platform was chosen. Among the participants were noted representatives of the Presidential Administration of Russia, different ministries and government bodies, top managers of such major oil & gas companies as Shell, Novatek, Gazprom, students and researchers from engineering and mining universities. The meeting aimed to convey a professional community's position to the public.

So what are hydrocarbons for Russia and the rest of the world - bad karma or a God's gift that we do not know how to make proper use of? Will alternative energy sources become a replacement for the traditional ones in the near future? Vladimir Litvinenko, Rector of Saint-Petersburg Mining University, Doctor of Engineering Science, gave answers to these questions in a report he presented at the conference:

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1. Oil, gas, and coal currently make up 50% of the global trade.

2. Labour composition in countries with commodity-based economies is as follows: 1-2% of the working-age population is employed in geological exploration, mining extraction and processing, and 10-12% of the workforce provides servicing for mining enterprises. The outcome is two thirds of exported goods, 50% of the state budget, and 20-30% of the gross national product.

3. A petro-state cannot turn an extractive economy into a knowledge-intensive one if there are no efficient market-based mechanisms in force. The whole transformation takes several decades.

4. Mineral resources, similarly to other commodities, become depleted with time, but prices may fall abruptly if a cheaper alternative material with better consumer characteristics emerges.

5. New technologies will facilitate the adoption of renewable energy sources.

Plastic materials will be replaced with wooden ones since wood is a natural oxygen producer and carbon dioxide absorbent.

6. Global oil demand will be slowly decreasing but will never disappear completely.

7. Evolution of a raw paradigm inevitably changes the world.

8. Different resource types result in different knowledge systems.

9. Human society, on the whole, is not yet smart enough to self-organise and make required changes in advance.

10. History of civilisational development; agricultural and industrial revolutions; the progress of science and religion have always been connected to the evolution of a raw paradigm.

11. Hardware, software and networking technologies are not a novelty, but with each year they drift further apart from the third industrial revolution, yet becoming more sophisticated and integral. Digital technologies transform society and the global energy system.

"We need oil and gas to live no less than air or water. Moreover, currently there is no mechanism for replacing crude oil and raw materials on a global scale with a cleaner resource, neither it shows up any time soon. Of course, the use of renewable energy will be increased through the introduction of new technologies. This is what we call progress, and it is good news. However, global oil consumption will be decreasing very slowly and will never end. As for the gas, demand on it will continue rising for a long time to come," said Prof. Vladimir Litvinenko, D.Eng.Sc.

The Role of Hydrocarbons in the Global Energy Agenda: The Focus on Liquefied Natural Gas

Conference participants noted that the fuel and energy sector's impact on the global economy could not be overestimated. Energy is the foundation on which development of enterprises, industries and society as a whole rests. But alternative technologies are undoubtedly an integral element of technological progress in which humanity's future lies. Therefore vast financial, human and material resources must be allocated for acceptance and enhancement of such technologies.

Balanced social development strategies should be nonetheless based on satisfying current energy needs, which cannot be met once moving away from hydrocarbons altogether. New projects that may become viable several dozens of years later should be certainly considered. Still, none of the new energy sources, despite them being ecologically-friendly in theory, will replace fossil fuels soon. The critical shortcomings will prevent them from constituting a proper alternative to raw materials.

As such, wind generators and solar panels will remain outside competition during the next ten to twenty years because of poor efficiency of energy conversion and storage processes.

Nuclear and hydrogen energy will not stand competition with hydrocarbons in the next 30 years as well. There is an explanation: generation of atomic power is a high-risk activity, mainly because of the technogenic burden and environmental impact, eliminating which is virtually impossible at the moment. A large-scale introduction of hydrogen as an energy carrier would, in turn, require solving transportation and storage issues, increasing production efficiency and providing new infrastructure.

This way, sustainable development of the fuel-energy complex can be ensured only through enabling favourable conditions allowing for rational use of hydrocarbons. Development of alternative energy solutions in this environment will also be supported via investments of large oil & gas companies.

Experts noted that when considering the feasibility of adopting new energy technologies viability and growth of the energy basis - hydrocarbon resources - should be a matter of priority. Energy security, in particular of developing countries in Asia and Africa, can be guaranteed only if hydrocarbons substitution is carried out as a gradual process, running perhaps at different speeds but always within long-term planning horizons.

Participants also paid attention to the fact that hydrocarbon energy had been mostly criticised due to its contribution to global greenhouse gas emissions. But levels of fossil fuel emissions are literally incomparable to the ones coming from other sources - whether they be anthropogenic or natural emissions, even including fire or volcanic emissions.

On top of that, the conference participants took a look into the distant future. They made an estimate of what commodities could replace hydrocarbons in 30 to 50 years and named geothermal and nuclear energy as the most promising solutions.

In-depth market research and outlook studies on the development of the global energy industry are available in the following article:

Litvinenko, V.S. (2020) The Role of Hydrocarbons in the Global Energy Agenda: The Focus on Liquefied Natural Gas. Resources.

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