Russian Mineral Resources Characteristics
Prepared by Professor V.S. Litvinenko
Rector of St. Petersburg Mining Institute (technical university)
Fig.1. Role of oil operators (global financial investors) in the formation of a «price bubble» at the international oil market in 2007–2008.
Taking the opportunity provided to me by the International Organizing Committee of the World Mining Congress, I would like to share my opinion as regards the processes taking place in the mining industry and its perspectives for the future. It is important to define the role of social institutions influencing economic processes, including WMC ROC. Being an expert of the European Union in power energy, I have a clear idea of the processes and projects being currently implemented. In the short-term perspective the mining industry will change due to changes in perception of the mining industry. Let me give you an easy to understand example. We all want to live in better conditions. And from year to year will consume and use more energy resources ensuring a comfortable atmosphere for ourselves. It is stable energy- and water saving and all those services that are generated from primary resources. At the same time the approach of the community to resources is ambiguous. On the one hand, we need resources, and, on the other hand, we see real objections on the part of the community to those negative impacts that the mining industry has on the technogenic and living space of the whole world. According to fundamental research, using just petrol and other types of fuel in terms of transport, in Russia we burn approximately 110–120 mln. tons of fuel and at least 12–15 mln. tons of lubricants. Nearly 30 mln. tons of harmful substances is released into the atmosphere. These are combustion and processing products including 15 mln. tons of carbon monoxide, 12 mln. tons of nitrogen oxides, and approx. 1 mln. ton of sooth, these are negative consequences. On the one hand, resources give us a better life, but, on the other hand, they have a harmful impact on the human health.
Fig.2. Incremental costs of production of liquid hydrocarbons from traditional and alternative sources
What will we face in the near future? We understand that nowadays the process of raw material market globalization has completed. Such markets are controlled by this or that vertically integrated company. Redrawing of such influence may be accompanied by military conflicts that we have already witnessed several times. At the same time, we should realize that today the energy sector has turned into a global system that allows using private experience and separate possibilities for establishment of new steady integrated companies, i.e. there is a competition not of companies, not of money, but of strategies. And the winner will be the company the strategy of which takes all crises and risks into consideration as much as possible. Companies involved in the energy sector of the future have already realized that the world does not purely consume oil, gas and coal, mineral resources in their primary state, but also needs corresponding services generated in various industries as regards all fuels. The growing role of this tendency enhances the boom in general and first of all in consumption sector. Unavailability of a community controller coordinating raw materials market activities and development has created the environment for the current crisis. The world crisis was actually generated by large speculation deals not in mining, but of financial influence tools. Consumption has grown sharply, and mining enterprises invested practically no money in additional capacities required by the market. In this context it is obvious that the tendency towards global energy sector establishment means that raw materials possession does not guarantee stable income. During crisis we made sure that extracting companies have no idea who is the end user of their products.
There is regularity in the world economy: as a rule, countries rich in mineral resources grow at a medium rate and very often have poorly developed economy. Such an economy has usually no perspectives. On the on hand, high demand for resources increases their value, but makes the gross domestic product and income of the budgets of primary producing countries very non-transparent. Lack of normal business conditions accompanies the major part of mineral resources extraction. In Russia we face this problem. On the other hand, growth of income in the extracting industries results in processing sector stagnation. For instance, recent years have demonstrated a drastic increase in prices for primary energy resources, raw materials, when raw material prices grew by 20-30% annually. Companies put all their efforts to recovery, none of them very seriously concern themselves with processing. Thus, nowadays money and control in the processing sector are quite different things; though earlier we thought that these are interrelated processes. It is obvious that the main problem of resource-depending countries consists in underdevelopment of state institution control mechanisms, i.e. processes that should ensure clear and distinct relation between the sate and business. These are the processes that are able of providing both the market control mechanism, and activity control mechanisms promoting advance technologies and staff preparation for a new break-through and adaption of new technologies to the current requirements. Countries exporting raw materials are characterized by a high gross domestic product rates. Today Russia extracts raw materials to over 400 bln. USD annually (according to the previous year statistics), and the share of the deep processing is unfortunately is less than 10%. 20% is the value of primary processing for further treatment of raw materials in other countries.
According to 2007 results, we see that Russia exports huge amounts of oil, coal and other raw materials. Hydrocarbons serve as a basis for the chemical complex. Russia is the key exporter. Let’s compare incomes. In 2007 USA generated 630 bln. USD in the chemical complex; China — 2 times less (270 bln. USD); Germany that extracts practically no hydrocarbons generates 200 bln. USD. annually. France, the country that extracts nothing at all receives 140 bln. USD. annually. Russia is as last as the 41st. These are the figures that should not just alert us, but to push us towards the idea that we have to change something urgently. Practically all the income of those states that extract raw materials originates from sales, and the primary additional cost and internal consumption products are generated at the market where primary consumption products are packaged and manufactured.
Fig.3. Long-term offer curve (accrued for 937 oil-and-gas provinces) for the traditional oil and alternative liquid hydrocarbons sources (heavy oil, bitumen sandstone, combustible shale)
The key problem nowadays consists in dependence of countries on raw resources. In this context those programs that are implemented in the countries with developed economy are as a rule efficient, and those that are tried to be implemented in countries with raw-material economy not only bring no positive impact, but generate the opposite reaction. Gradual fund generation stimulates complex processing industries development; countries having no raw resources use them for invention of high-technology devices, machines, equipment, as the share of intellectual labour resources in such countries grows from year to year, and the volume of raw materials consumed reduces. In fact, we have to state that raw materials market globalization envisages not only expansion of integration relation of the countries producing and consuming raw materials, but also expansion of integration of financial and investment resources and new technologies, revolutionary attitude towards raw materials. The biosphere state, social and economic living conditions and the advance of the civilization are very dependant on production development and organization level in the mineral and raw resources sector in first of all in consumption. In the environment where resource extraction rates grow drastically the international community is interested not only in competition of extracting technologies, but in stable growth of raw material volume. From year to year we have to and will increase the volume of raw materials consumed. Raw materials markets and relations concerning use of mineral and raw resources will take a leading position in the globalization system; mineral materials will be a strategic component. It will be a link to the competitive abilities of companies and countries.
Fig. 4. Share of idle wells in the performance stock, thousands of wells/%
Fig. 5. Average operating well flow rates, t/day
Efficiency of raw materials use in the complete processing chain starting from surveys to generation of products and direct-consumption services during globalization is determined primarily by the efficiency of use of accumulated intellectual and scientific-and-engineering potential of all the countries, availability of investment globalization and scientific-and-technical co-operation for all consumers. The other question is: what are the prognoses for coal?
Fig. 6. Model for formation of new knowledge in geomechanical processes of nature-and-engineering systems saving (based on geology and geophysics data)
Coal is a primary sphere of interests of the majority of WMC participants. Coal was, is and in the future will attain even greater significance. First, we have to clearly understand that there is no any serious alternative to hydrocarbons for the coming 10-20 years. Hydrocarbons in the form of gas and oil are limited. Coal is a most commonly spread resource that is why it is obvious that the place of coal in the international fuel balance will be unique. It is apparent that coal transportation is a complicated and costly; this is why probably pipe and hydro transportation will enjoy active development, where coal-water slurries or other formulations will have a singular value. Transport development will be connected with new technologies that are quite well-developed in China, Australia and other countries. These are performing, a new method for transportation to long distances where environmental impact is minimal. Another direction is power engineering. In our country coal burning efficiency is very low, and the closest perspective is new burning technologies using plasmatron ion sources. But the basis for energy production and supply is the technology using no steam generation, i.e. direct coal-water slurry burning like gas burning. There are already positive results of direct coal burning using special water-based mixes where water is delivered to the turbine bucket and due to direct exposure energy is generated ensuring an increase in the coal use efficiency at the rate of up to 80%.
When using coal as a fuel, furnaces and boilers are outdated equipment, the future belongs to coal synthesis, synthetic liquid fuels generation, gas generation and so on. Such projects are already implemented in three countries.
The method that provides for a possibility to find a serious field for coal application consists in synthetic fuels, special technologies for generation of economically feasible liquefied gas, special resins and a wide range of chemical components. Nowadays such a project requires investment of approximately 4 bln. USD for generation of components from 20 mln. tons of coal. In terms of prices it is comparable to the technology of natural gas liquefaction; nowadays such a plant costs approximately 3.5 bln. USD. Taking into consideration transportation of gas to consumers in difficult-to-approach regions the cost reaches 200 USD per 1000 m³ of liquid product. It is 30% more profitable than today but unfortunately there are still no large-scale projects. Some technologies exist, and one module already operates in Harbin.
WMC ROC is an organization that may change its attitude towards the processing taking place in the mining industry. The WMC has the right to take a unique place in the modern international relations system; it can help countries to expeditiously find coordinated solution to a wide range of issues in the mining sector without use of any efforts, without sophisticated diplomacy, on the integration level. The geopolitical pressure tool is hydrocarbons, coal, gas and other raw materials. The WMC is a body that works in a constant mode. In this context it is obvious that there should be systematic work among large mining congresses. Such work should be aimed towards integration, towards solution of problems, primarily not purely engineering, but engineering-and-organizational ones, that would allow generating staff potential, international scientific co-operation and integration tools, establishing global multiple access centres on the basis of unique apparatuses. The key aspect is to be normal, descent and pure lobbyists on all levels including such tools as impact on the UNO and European Union systems and other bodies that co-operate, unite and work for interstate co-operation.
