Eesti Energia defends purchase

  • 2011-03-16
  • From wire reports

TALLINN - Just after Estonian energy utility Eesti Energia’s announcement of its purchase of a U.S.-based oil shale company, in which it intends to develop an oil extraction facility in the U.S. state of Utah, scientists in Estonia have raised questions about the project’s viability, reports ERR. Eesti Energia on March 9 announced that it was going to buy all the shares of U.S. company Oil Shale Exploration Company (OSEC), which owns the largest privately owned compact oil shale resources in Utah, in order to start producing shale oil. Utah has the biggest oil shale deposits in the world.
By concluding the transaction, Eesti Energia gets oil shale supplies that are estimated to reach 3.1 billion tons and to contain oil reaching 2.1 billion barrels.

However, Juri Soone, the former head of the Tallinn University of Technology’s Shale Institute, said that the difference between Estonian and American shale may cause problems for the company. According to Soone, it was possible for Eesti Energia to use its extraction technology on other types of shale; however, the high percentage of nitrous compounds in the U.S. shale would limit oil production.

Academician Anto Raukas echoed Soone’s view about the shale composition and its potential effect on the extraction process. “It’s too early to say whether this project will succeed or fail,” said Raukas. As a negative example, Raukas cited Eesti Energia’s project in Jordan, where the company has spent years developing oil shale deposits. He said that the low quality with high sulfur content of the Jordanian shale made production there pointless.
Sources within Eesti Energia said that the Utah project was very risky on the technology side. Eesti Energia board member Meelis Atonen agreed that the project carries certain risks, but said he wouldn’t discuss details because he didn’t know whether the information was confidential.

Meanwhile, Eesti Energia spokeswoman Marina Bachmann denied that there were any risks and said that Eesti Energia had done all the necessary tests on the Utah shale before buying the U.S. company: “If the production of oil shale in the U.S. wouldn’t be profitable, we wouldn’t have bought the Oil Shale Exploration Company.”
In purchasing the U.S. company, Eesti Energia is to develop an industry with capacity of up to 57,000 barrels of shale oil a day on the basis of the reserves in Utah. The development of the project till the start of construction should take 4 years and construction then another 3-4 years.

“Our economic benefit comes from increasing the value of the project in the development stage and selling our unique oil shale processing technology to America,” said Eesti Energia board member Sandor Liive at the time of the purchase.
“It is a unique opportunity for Estonia to be able to provide one of the largest countries in the world with something they need - technology which enables them to utilize their domestic oil shale resource and therefore increase the country’s energy independence,” Liive added.

Estonia covers more than 90 percent of its power needs via its shale reserves, which are the country’s only mineral resource.