New shale oil refinery to be located in Sillamäe or Auvere

Prime Minister Jüri Ratas (Centre) and Tiit Vähi at the Port of Sillamäe.
Prime Minister Jüri Ratas (Centre) and Tiit Vähi at the Port of Sillamäe. Source: Rene Kundla/ERR

The Northeastern Estonian coastal city of Sillamäe would be a suitable location for the planned shale oil pre-refinery, although building the refinery in Auvere, to the southeast of Sillamäe, would also have its benefits, Hando Sutter, CEO of the Estonian state-owned energy group Eesti Energia, said on Tuesday.

Sutter said that Eesti Energia is expecting co-financing from the state's modernization fund, noting that public aid would cover 20 percent to one third of the total cost of the refinery.

Currently underway is an analysis aimed at providing a detailed overview of the technological aspects of the project as well as the investment required.

According to Sutter, input for the refinery would be provided by oil producers, while its output would target the global market. The refinery should ensure relatively stable revenue and guaranteed cash flow.

"I wouldn't rule out the possibility that, in addition to oil producers, funds and financial investors may invest as well; this would be a solid investment and a sound project in terms of size as well," he added.

The project's team also includes shale oil producer Viru Keemia Grupp (VKG). Alexela Grupp is also involved in the project, however not as a member of the team, as the group's production volumes are smaller.

Late last month, the Estonian government endorsed in principle the construction of a shale oil refinery in Northeastern Estonia. Construction is estimated to cost €600 million and be completed by 2024 at the earliest.

New plant would help meet sulfur norms

With the help of the state, Estonian shale oil producers intend to establish an oil pre-refining plant in the country's northeast for an estimated several hundred million euros, as increasingly struct sulfur content norms may jeopardize the suitability of oil produced in Estonia for sale on the global market in the future.

The plant would allow for the sulfur content of the oil below 0.1 percent and process shale oil into a component of motor fuel with a low environmental impact and marine fuel with a low sulfur content.

The estimated smallest reasonable output capacity of such a plant is approximately 1 million tons per year. In 2018, more than 1.1 million tons of shale oil was produced in Estonia.

Eesti Energia is currently working on the preliminary designs for a new oil refinery to be built in Auvere that would raise the energy group's annual output from 411,000 tons in 2018 to approximately 700,000. Sutter noted that the investment decision regarding the new Enefit 280 oil plant will hopefully be made in the fourth quarter of this year.

In 2018, VKG produced a record 620,000 tons of shale oil products; Alexela produced another approximately 100,000 tons.


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Editor: Aili Vahtla

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