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    Estonia: Support for EU Exploration is Essential to Secure Energy Independence

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Summary

Reesi-Reenaa Runnel, advisor at Energy Department of the Estonian Ministry of Economic Affairs and Communications, discusses achievements of which Estonia is proud, specifically advancements in oil shales, along with some concerns it faces.

by: Linas Jegelevicius

Posted in:

Natural Gas & LNG News, News By Country, , Estonia, Oil Shales

Estonia: Support for EU Exploration is Essential to Secure Energy Independence

Estonia, the smallest, though often most standout country amongst the closely intertwined Baltic States of Latvia and Lithuania, has enjoyed one of the fastest-growing economies in the European Union and the OECD. Estonia's buoyant economy is actively seeking to reduce the intensity of its energy system and, along with its Baltic neighbours, decrease reliance on Gazprom.

Reesi-Reenaa Runnel, advisor at Energy Department of the Estonian Ministry of Economic Affairs and Communications, kindly agreed to share with Natural Gas Europe some of the achievements of which Estonia is proud, along with some challenges it faces.

How peculiar is Estonia’s power sector?

Well, first of all, we are extremely determined to work out an energy system that is really the best for our country.

Pursuing it, developing rationally oil shale, the fuel which the country has been using for almost a century and which production has been ramped up over the last years so that now it meets 70% of our energy demand, is perhaps one of the most key endeavors.

Although oil shale provides a large degree of energy security, on the other hand, it is a highly carbon-intensive affair.

Therefore, the Estonian government seeks to buffer the negative environmental impact by shutting down old power facilities and developing new technologies aimed to significantly reduce CO2 emissions, regardless of the sources of generation.

Without question, Estonia has a solid track record of modernizing its overall energy system. Since restoring its independence in 1991, Estonia has fully liberalized its electricity and gas markets and attained most national energy policy targets and commitments for 2020.

It has also started preparing its energy strategy to 2030, with an outlook to 2050. Estonia is also promoting energy market integration with neighboring EU member states.

The strengthening of the Baltic electricity market and its timely integration with the Nordic market, as well as the establishment of a regional gas market, are therefore key priorities for Estonia.

Following its accession to the Organization for Economic Co-operation and Development (OECD) in 2010, Estonia applied for International Energy Agency (IEA) membership in 2011.

This review of Estonia’s energy policies is part of the IEA accession process. It analyses the energy policy challenges and opportunities facing Estonia, and provides critiques and recommendations for future policy improvements. It is intended to guide the country towards a more secure and sustainable energy future.

What is Estonia’s energy source make-up?

The total primary energy supply in 2012 was 5.7 million tonne oil-equivalent (Mtoe). Of that 70% came from oil shale, 13.9%- from bio-fuels and waste, 9.5%- from natural gas, 8.6%- from oil, 0.7%- from other renewables and 0.6%- from peat.

What are the main issues the Baltic country is dealing with?

The Estonian energy system is undergoing significant restructuring, aimed at replacing ageing energy infrastructure, deploying higher energy-efficient technologies for fossil fuel combustion, enhancing grid integration of renewable energy resources and developing interconnections with regional markets.

In the gas market we plan to build an LNG terminal in the region and a Baltic-connector pipeline with Finland.  

How far has Estonia advanced with the LNG terminal? What kinds of works are slated for 2014? How will it affect local energy market?

The LNG projects in Estonia are developed by private investors. 

The one aiming to be part of the regional gas infrastructure, and thus competing for the EU (Connecting Europe Facility) grant, is Alexela’s Paldiski terminal project.

The Finnish and the Estonian governments are following the negotiations between Finnish and Estonian developers of terminal and Balticconnector (EE-FI submarine pipeline) projects. 

The Estonian state would like to see the projects make the first Connecting Europe Facility call allowing the earliest possible start for projects’ implementation. 

The projects’ developers are due to propose their plans by the very end of May.

Why the EU’s interference was needed in Estonia’s dispute with Finland over site of Alexela’s Paldiski terminal project?

The regional LNG terminal has a ‘project of common interest’ status and close co-operation with the EU Commission has been inherent to the process.  The regional terminal can only be realized with support from the Connecting Europe Facility and the Commission will eventually make the decisions on allocations.

How much has Estonia used oil shale resources by now?

Estonian oil shale reserves are estimated to be 4.4 billion tonnes. The mining of oil shale is capped at 20 million tonne per year.

The estimation is that 1,8 billion tonnes of oil shale has been used since the start of its use in 1918.

What is the dynamics of oil shale production over the last three years?

Shale oil production has been steadily increasing since 2000. In 2012, production stood at 11 kb/d and volumes are expected to continue to increase. (Estonia IDR report)

How much of the oil shale production does Estonia export? What are export markets?

The majority of the shale oil is exported to neighboring countries and used as bunker fuel or refinery feedstocks. In, 2011, 8 kb/d of shale oil was exported: Europe imported 6kb/d (5 kb/d going to the Netherlands), the remainder was exported to Lithuania and Russia. (Estonia IDR report)

What hampers a speedier and more effective oil shale extraction in the country?

Industrial processes sometimes take time as capital intensive investments are needed. Such a shift from electricity production is capital-intensive and, definitely, takes time.

How is Estonia addressing the environmental issues leading the activity?

Oil shale R&D activities are targeted to address the environmental issues in relation to this activity.

 What is the message Estonia has for Lithuania that eyes a repeated shale gas mining tender?

 Estonia has no experience with fracturing technologies (because oil shale is not a porous rock) and thus cannot advise on shale gas explorations.

 In plain English, Estonian oil shale is excavated and then heated to produce (shale) oil. 

Similar to shale gas, oil produced via fracturing regular shale is (light) tight oil – again, we have no experience with that.

 However, as a general principle we strongly support exploring EU’s indigenous resources to become more energy independent.  EU’s stringent environmental and other regulations obviously need to be respected in any such activity – does not matter whether it is related to fossil or renewable energy, conventional or unconventional sources.

What are the country’s other short and long-term energy challenges? How are they being addressed?

The key challenges that will be addressed in the new Energy Development Plan 2030+ include (in elaboration, due to be launched by the end of 2014): delivering a secure energy supply, reducing the carbon intensity of the power sector, setting clear direction for oil shale mining and shale oil production, promoting development of the electricity and natural gas markets and increasing the share of renewable energy supply.

 One of the main energy challenges is to make our energy-mix more environmental friendly in long-term. We work on enhancing the technologies to make the use of oil shale more environmentally friendly.  

How much is the country relying on Russia?

Estonia is fully dependent on gas imported directly from Russia by pipelines or pumped from storage facilities in Latvia. Share of natural gas is 9.5% of total primary energy supply (TPES) and 1% of electricity generation.

How big is Estonia’s power import?

Estonia is a net exporter of electricity, with net exports of 3.6 TWh in 2013, or 31% of total generation. Regional trade has expanded thanks to the interconnectors with Finland and more open electricity markets among neighboring countries.

In 2013, Estonia had three main trading partners: Latvia, Finland and Lithuania.

However, oil shale is the main source of electricity in Estonia, accounting for 85.3% of total generation in 2012.

The majority of installed generating capacity, approximately 2 000 MW is oil shale-fired capacity followed with 247 MW from wind power.

 The use of oil shale has provided Estonia with a relatively high degree of energy security and energy independence. Around 85% of its mined oil shale is used for electricity and heat generation and it provided for 85% of Estonia’s electricity in 2012. The remaining 15% is used for the production of shale oil and other valuable chemicals.