Producers: Oil refinery would help meet stricter sulfur requirements

A VKG mine in Ida-Viru County.
A VKG mine in Ida-Viru County. Source: (Postimees/Scanpix)

Estonian shale oil producers plan to build an oil pre-refining plant in Northeastern Estonia worth an estimated several hundred million euros with the help of the state, as increasingly strict sulfur content regulations may jeopardise the suitability of the oil produced in Estonia for sale on the global market in the future, daily Postimees reports.

Viru Keemia Grupp (VKG) CEO Ahti Asmann told BNS in early March that the plan was definitely worth considering, as it would allow for shale oil, which has specific characteristics, to be more standardised and better marketable. This would also significantly increase the product's value added as well.

State-owned energy group Eesti Energia spokesperson Priit Luts said that shale oil currently produced in Estonia, which is primarily used as a component of ship fuel, conains about 0.7% sulfur, which makes selling it more difficult in connection with the fact that beginning in 2020, sulfur content regulations will become stricter, and be set at 0.5% on all seas.

"The plant would allow for the sulfur content to be brought down to below 0.1%, and process shale oil into a component of motor fuel with a low environmental impact as well as ship fuel with a low sulfur content," Mr Luts said.

The plant could be completed in about five years, as an environmental impact assessment still needs to be carried out and financing arranged for the complex project.

According to Alexela Grupp CEO Andreas Laane, the most logical location for the plant would be at or around the Port of Sillamäe, as all relevant goods currently move through the Ida-Viru County port anyway. In addition, Sillamäe is located approximately equidistant from all of the oil producers.

New coalition to support study

It stands in the coalition agreement unveiled by the Centre Party, the Conservative People's Party of Estonia (EKRE) and Isamaa just over a week ago that in order to further develop the oil industry, a cost-benefit study aimed at establishing an oil pre-refining plant in Ida-Viru County will be initiated in such a way that it will include all Estonian oil producers.

The estimated smallest reasonable output capacity of such a plant would be approximately one million tonnes per year. In 2018, more than 1.1 million tonnes of shale oil was produced in Estonia. Currently, Eesti Energia is working on the preliminary designs for a new oil refinery to be built in Auvere that would increase the energy group's annual output from 411,000 tonnes in 2018 to about 700,000 tonnes. Last year, VKG produced a record 620,000 tonnes of shale oil products, and Alexela some 100,000 tonnes.

According to Mr Laane, it would make sense to establish a plant large enough to handle the entire output of the Estonian shale oil industry, plus a reserve.

The production of oil from oil shale is profitable if the price of oil on the global market is at least $50 per barrel.

Editor: Aili Vahtla

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