Iseteenindus

Eesti Energia received the green light for the construction of a new oil plant

27.03.2020

The Government decided to authorize the Minister of Finance Martin Helme to increase the equity capital of Eesti Energia by a monetary contribution of EUR 125 million. This enables Eesti Energia to construct a new Enefit280 oil plant. The construction of the new oil plant is based on the owner's expectation and on Eesti Energia's strategic plan to increase the production of liquid fuels.

“The construction of the new oil plant is a long term and strategic investment that enables us to valorize the most important mineral resource of Estonia, create new jobs and reduce the impact to our environment,” said Prime Minister Jüri Ratas. “Creating additional jobs reduces the social risks of the ongoing transformation of the energy sector and supports Ida-Virumaa as a region.”

During the construction of the new oil plant, nearly 1,000 employees from construction and technology companies will be employed, including up to 700 local people. Additionally, indirect jobs will be created in service sector during construction period. According to experts, up to half of the investment cost may stay in Estonia. After reaching full capacity, the oil plant will generate a total of around 500 direct and indirect jobs.


Martin Helme, Minister of Finance emphasized, that the owner continues to expect Eesti Energia to develop a more efficient and cleaner use for oil shale, and oil production is a good example of this. “The construction of the new oil plant is in line with national strategy documents such as the Energy Development Plan, the Oil Shale Development Plan, and the basic principles of climate policy. The mentioned strategic plans foresee a reduction in direct incineration of oil shale and an increase in the production of oil shale oil,” Helme said. “In the current economic situation it is important to make large infrastructure investments, keeping in mind, that it is fair to expect construction costs to reduce in the near future.”

“With the construction of the new oil plant, the CO2 emissions and oil shale use of the Estonian oil shale industry will not increase, but will decrease. This is due to the fact that in parallel with the construction of the new oil plant, Eesti Energia will permanently close several older power units used for electricity production. In addition, the CO2 intensity of electricity production from oil shale is many times higher than that of oil production,” Helme said.

Helme also mentioned that the oil shale sector is a very important source of revenue for the state, with more than EUR 100 million a year in recent years moving to the state treasury, and the oil shale industry helps to keep high-paying jobs in Ida-Virumaa. According to Helme, the capital contribution by the owner is necessary to launch the investments in the construction of Enefit's new oil plant, and to maintain the optimal capital structure and investment grade credit rating of Eesti Energia.

The new oil plant will be completed in 2024 and is expected to reach full capacity a year later. The investment cost is estimated at EUR 286 million. The plant is designed to produce 268,000 tonnes of liquid fuels per year. The new oil plant will use the unique Enefit technology developed by Estonian engineers, and its construction work is scheduled to begin this year. Enefit technology is known to be the most efficient and industrially proven oil shale valorisation technology in the world with the lowest environmental impact.

Hando Sutter, Chairman of the Management Board of Eesti Energia, said that the European Union is in a deep energy deficit and that there is a particularly large shortage of liquid fuels in Europe, 90% of which are imported. “Estonia is one of the few countries in Europe that has the capacity to produce liquid fuels on its own, and I think that it is a great asset. We use technology that is of global interest and we have recently exported this knowledge, too. Oil shale oil is a very important export article for Estonia, almost all of it is exported outside of Estonia and is currently mainly sold as marine fuel. With the support of the new plant, Eesti Energia's annual oil output will increase to over 700,000 tonnes - taking into account the average selling price of liquid fuels in 2019, such volume will amount to nearly EUR 250 million in sales revenue,” Hando Sutter explained. He added that Enefit technology enables the recycling of waste tyres and potentially waste plastics as well during oil shale oil production, thus enabling environmental issues to be addressed in the circular economy.

As global demand for oil products is growing with great probability, oil production from oil shale will remain competitive for the next couple of decades, and it makes sense to produce high-quality and low sulphur-content liquid fuels, for which there is local expertise in Estonia. At the same time, earning money from oil production enables to increase investments in renewable energy development, as the Kingdom of Norway has done with its oil money for example.

Eesti Energia's Strategic Action Plan foresees that the direct combustion of oil shale into electricity will decrease, the production of renewable energy will increase, and the production of liquid fuels, which is the most efficient and environmentally friendly way of valorising oil shale, will increase as well. Eesti Energia's strategic developments, including the construction of a new oil plant, are in line with climate goals. Eesti Energia has reduced its CO2 emissions by 50% in 2019, compared to 2018. The CO2 emissions will be further reduced due to the closure of older production units and increase in CO2 prices.

Necessary financial instruments are forseen in the 2020 State Budget Act.