*3.3. Hydrogen Technologies*

Hydrogen fuel is a potential solution for several energy generation issues typical of both RES and HCR. On the one hand, the production of hydrogen will enable the conversion, accumulation and storage of energy generated from any primary source in the long run. This will enable the use of hydrogen as a mobile energy carrier [76]. On the other hand, hydrogen is recognized as an environmentally clean secondary energy resource due to the lack of any pollutant emissions during its use [77]. Additionally, its energy intensity in relation to weight units is much higher than of any HCR.

*Resources* **2020**, *9*, 59

Despite this, the hydrogen energy sector is in its primary stage of development and is not ready for large-scale implementation in the global energy system. There are several main factors hindering this process.


Price-specific advantages of hydrogen generation based on hydrocarbons can be seen in [80], as well, pursuant to which the generation based on natural gas varies from 1.34 \$/kg (without CO2 sequestration) to 2.27 \$/kg (with sequestration); and with coal: 1.34 \$/kg to 1.64 \$/kg; while the majority of other generation methods are 1.5–6 times more expensive. The generation of hydrogen based on methane pyrolysis is the most economically e fficient option, enabling a price of 1.22 \$/kg. The authors did not point out a single potentially leading production technology, but stated that the preference should be given to hybrid methods.

Equivalent results have also been obtained on the basis of a fuzzy logic method [81], proving that the highest technical and economic e fficiency, as well as level of readiness and level of reliability, was typical for technical chains based on hydrocarbon resources.

3. Transportation and storage processes are the foils of the hydrocarbon energy sector [82]. An increase in the e fficiency of the processes is related to the solution of two key issues: the transformation of hydrogen into a form with higher density (for example, liquefaction), and an increase in the safety of tanks and delivery systems. In addition, while the first problem already has some practical solutions, the issues of safe hydrogen handling have not ye<sup>t</sup> been studied. However, nearly 70 mln t are produced, presently, and as a rule is used during the processing of metals.

Therefore, despite the prospects for hydrogen in the long run, the current level of global economic readiness for the development of hydrogen infrastructure is less than that of the renewable energy sector, due to: a complete absence of market mechanisms; the lack of technologies and infrastructure enabling the e fficient generation, distribution and storage of hydrogen; huge problems with the safety of its use; and other [83] issues typical of technologies at the initial stages of development.

#### **4. Hydrocarbon Resources. Focus on LNG**

#### *4.1. The Role of Hydrocarbons in the Energy Sector*

HCR have played an important role in the global economy for centuries. They are real drivers for the development of both industry and society as a whole. Currently, the most influential HCRs for the economy are coal, oil and natural gas. Due to external reasons related to the "greening" of global economies (not only the reduction of greenhouse gases emission), multiple technological

transformations of industries will take place in the near future, mainly in the oil and coal industries, for the purpose of enhancing the raw material conversion ratio due to stronger vertical integration links with enterprises in the chemical industry. These transformations will lead to a change in the role of hydrocarbons in the global economy (Figure 4) and, most probably, to a partial substitution of some of them with alternative energy technologies.

**Figure 4.** Forecasted change in the global energy balance. Based on [84].

HCR released due to such substitutions may be redirected to chemical facilities, but these processes require the development of international norms and standards of coal use, in order to improve its purity as an energy and chemical resource.

The economical prerequisites of such processes can be clearly seen in the oil industry, as they are associated with some negative factors that hinder its further development:


To some extent, these negative effects can be compensated by manufacturing of scientific-intensive products with high added value. Even today, oil and gas giants such as ExxonMobil (7th place in the C&EN 2018 rating of chemical companies [86]) implement large-scale investment programs in the area of chemical enterprises development (Figure 5).


**Figure 5.** Increase in production of chemicals by ExxonMobil. Based on [88].

Unlike the oil and coal industries, the gas sector is on the rise and is demonstrating intensive expansion. This is due to both the cost performance of natural gas, which is slightly more expensive than oil, and environmental features. According to [92], CO2 intensity during the generation of 1 kWh of electricity from natural gas is nearly 450 g, which is almost a mean value between hydro power plants (10 g/kWh) and coal (1000 g/kWh). Therefore, natural gas is a somewhat "win–win" solution as it makes it possible to balance the interests of the "green" energy sector and hydrocarbon energy sector supporters.

The gas industry is one of the most rapidly developing parts of the energy sector, which is mainly related to the intensive growth of capacities for the production of liquified natural gas (LNG), which have doubled every 10 years since 1998 [93]. Existing forecasts of LNG industry development provide for the increase in both demand and supply, though there is a certain probability of product surplus amounting up to 100 mln t per year [94], provided that all planned production facilities are commissioned and demand remains constant. If only the most probable projects are implemented, then by 2025 LNG shortage will amount to nearly 30 mln t. Figure 6 demonstrates these trends. Data were taken from various reports and publications of VYGON Consulting Co. [94], International Gas Union, International Group of Liquefied Natural Gas Importers (GIIGNL), and other agencies.

**Figure 6.** Expected production and consumption of LNG (bottom) and capacity use of LNG-plants in 2000–2018 (top).

When planning production volumes, certain problems with capacity use should also be considered. Before the economic crisis of 2008, the average capacity use of plants amounted to nearly 91%. After 2008, increased interest in LNG industry development resulted in the redistribution of investments for the development of new projects. This caused the reduction of capacity use in existing plants. This trend may continue in the medium term, with fiercer competition and an ambition to displace the active players by creating new hi-tech production facilities.

In accordance with Shell forecasts, LNG consumption may reach 800–900 bln m<sup>3</sup> by 2040 (Figure 7); however, the main drivers of LNG demand growth are the necessity to compensate decreased domestic gas recovery and the need to diversify supplies. The reliability of the forecasts is confirmed by the fact that almost half of the prospective production capacity of LNG plants in 2035 has already been contracted (7%–9% of the contracts in Russia).

**Figure 7.** Expected growth in the consumption of natural gas by sources. Based on [95,96].

However, there is already a steady trend towards expanding the geography of LNG consumption (Figure 8), mainly due to Asia-Pacific Region (APR) countries (+220.6 bln m3), especially China (+73 bln m3).

**Figure 8.** Change in geography of LNG flows. Based on BP Energy Overviews.

Higher demand for LNG import in Asian countries (Figure 9) has mainly been driven by a rapid increase in energy consumption, but if the growth in China can be partially covered by domestic production (more than 160 bln m3) and pipeline supplies (nearly 110 bln m3), the countries of Southern and Southeastern Asia will mainly depend on external supplies (about 50% of expected consumption) in the near future.

**Figure 9.** Expected gas consumption in various regions. Based on Shell LNG Outlooks.

In addition, the growing interest of the European Union in increasing LNG import is evident. The main reasons for increased interest in LNG in Europe are, firstly, the increasing energy needs of its countries. Secondly, a rapid decrease in the volume of domestic gas production at the Groningen field (the Netherlands) due to complex seismic conditions. While 53.87 bln m<sup>3</sup> was produced in 2013, only 18.83 bln m<sup>3</sup> was produced in 2018. The Dutch Government is still under pressure from the local community to completely stop natural gas production, which could happen as early as in 2022 [97]. Thirdly, a less rapid but stable decline in gas production in the United Kingdom and Norway, in the short term.

To compensate for the fall in domestic production and diversification in supplies, Europe is implementing an extensive program for the development of LNG facilities. Almost every European country with access to the sea has its own regasification terminals (15 countries), which imported 69 mln t of LNG in 2018 (15%–20% of the global market), with an average capacity use below 60% [98]. Total capacity of regasification terminals in Europe including pre-FEED projects may exceed 200 mln t per year in the nearest future [99].

#### *4.2. The Role of Russia in the Development of the LNG Industry*

The situation in the European market creates favourable conditions for increasing the share of Russian gas in the region. However, following the implementation of the "Nord Stream-2" (+55 bln m<sup>3</sup> per year) and "Turkish stream" (+31.5 bln m<sup>3</sup> per year) projects, a further growth in Russian pipeline gas supply seems unlikely, thus opening extensive prospects for the development of LNG. This suggests that Russian pipeline gas and LNG are not competitors on European markets.

At the same time, it is a mistake to believe that Russian gas supplies to Europe are completely protected from competition with the USA. In March 2020, the price of natural gas in the USA (Henry Hub) was 1.79 \$/MBTU, and in the European market about 2.72 \$/MBTU. When a spread of 2 or more \$/MBTU is reached, LNG supplies from the USA could be profitable, and this situation has already been observed in 2017–2019. Given that gas consumption in Europe will grow at an accelerated pace in the coming years, it is likely that prices will rise, and competition risks will increase. This indicates the need to take urgen<sup>t</sup> measures to increase the competitiveness of Russian natural gas export.

It is remarkable that even today a significant share of the increased LNG import to Europe is accounted for by Russia (with a more than 18% increase in 2018–2019), which has exclusively been regarded as pipeline gas supplier. The current situation demonstrates the inadequacy of this preconception, despite Russia's share in the global export of LNG, which is still relatively low (Figure 10).

**Figure 10.** Russia's share in the global LNG market (on the left) and total LNG capacity of global plants in 2019 (on the right). Based on [100].

Similar prospects are also seen in Asian markets, the entry to which for a long time was only associated with the "Power of Siberia" (38 bln m<sup>3</sup> for export) project development. However, as shown in Figure 9, the share of the project is just a small part of the potential growth of China's gas consumption. Additionally, the markets of Southern and Southeastern Asia will be 50% supplied by imported LNG, which may be a favourable factor for Russia, since the efficiency of LNG production at Russian plants is among the highest in the world. This can be seen when comparing the cost of final products with delivery to APR (Figure 11).

As a whole, Russia is implementing an extensive program to develop production capacities and to realize the potential of the LNG industry on global markets. By 2025, the total annual capacity of plants will amount to 61 mln t, excluding low-tonnage facilities, and by 2035, about 140 mln t [101–105]. In total, there are three key centres of the growing gas industry in Russia (Figure 12): the Baltic region (with a focus on Europe), the Far East (with a focus on Asian market), and Arctic regions (with a focus on both Europe and Asia).

**Figure 11.** Comparison of LNG production costs with the delivery to APR. Based on [106,107].

**Figure 12.** Prospective centres of the growing gas industry in Russia and options for gas resource commercialization.

A basic factor for the development of these growth centres is to define efficient methods for monetization of gas industry products (Figure 13). Based on the current level of technological development, it can be concluded that LNG production is very promising and can be diversified due to gas chemical enterprises, which currently have a capacity use level below 65% [108]. This is due to a lack of export infrastructure and limited demand in the domestic market [109]. On the other hand, the forecast for the development of the methanol production industry alone is indicative of potential market growth by 50% before 2025 [110].

**Figure 13.** Conceptual scheme for commercialization of gas industry products.

To ensure the stability of gas monetization schemes, it is necessary to ensure the stability of the raw materials base for such projects for at least 25–30 years, both through their implementation at the most promising existing fields and through the search for new sources of raw materials, which is normally associated with the Arctic regions being quite an ambiguous factor.

On the one hand, the potential resources of natural gas in the Arctic amount to nearly 30% of the global volume [111]. However, a major portion of the resources is concentrated in the Western part of the Russian Arctic zone [112], which will enable the supply of plants with volumes of raw materials su fficient to produce around 150 mln t LNG per year. This will theoretically ensure nearly 30% market growth. The location is also favourable, as it will allow entry into both European and Asian markets, as well as contribute to the development of the Northern Sea Route, which is important for the social and economic development of all Arctic regions.

On the other hand, implementation of projects in the Arctic is a very labour- and capital-intensive process due to the influence of natural, climatic and infrastructural factors, the mitigation of which requires state support. Moreover, the unit costs for Arctic hydrocarbon production projects may be 2–10 times higher than that in Southern regions, especially at o ffshore deposits [113]. The development of practical solutions to reduce the cost for the development of such fields [114] will be one of the main drivers for the development of the Arctic hydrocarbons.
