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Box 4.1 Biofuels in Estonia’s transport sector
Based on the target set for the transport sector in the EU Renewable Energy Directive (2009/28/EC), Estonia will have to ensure that 10% of energy used in the transport sector comes from renewable sources by 2020. The target is to be met primarily by imposing an obligation on oil product suppliers to blend biofuel components into the transport fuels supplied to the Estonian market. Initially intended to be effective in 2017, implementation was delayed a year due to the difficulty for fuel suppliers in meeting the blending level.
Revised legislation requires the total share of biofuels blended into diesel and gasoline sold as transport fuels to be at least 3.1% (in energy content) as of May 2018, 6.4% from April 2019 and 10% from January 2020.
Suppliers are responsible for meeting the blending level at the warehouse terminal exits; however, industry standards will need to be developed regarding the specifications of bio component blending stocks to be used, as well as logistical aspects such as whether blending can be done with each tanker truck (i.e. rack blending) or if stocks of blended fuels are to be maintained (i.e. in-tank blending), and at what point sampling or quality testing is to be conducted. In the case of diesel, given Estonia’s colder climate, hydro vegetable oil (HVO) is likely to be the more appropriate blending stock; however, no technical specifications or testing standards yet exist for HVO use in Estonia. In addition to setting a biofuel blending requirement on oil product suppliers, Estonia is also promoting the use of biomethane in vehicles (see Chapters 6, 7 and 8).
As of November 2018, the share of renewable energy in the Estonian transport sector was 4.85%, of which 3.1% is the first generation of biofuels, 1.35% second-generation biofuels or domestic biomethane and 0.4% electric mobility.
Source: Government of Estonia (2018), Estonian National Energy and Climate Plan (NECP 2030), https://ec.europa.eu/energy/sites/ener/files/documents/ec_courtesy_translation_ee_necp.pdf.
Market structure
The Estonian oil market is regulated by the Liquid Fuel Act (LFA), which determines the basis and procedures for ensuring fuel quality. All companies that import, export, sell or store fuels in Estonia must be registered with the Ministry of Economic Affairs and Communications (MEAC)4.
There are three companies in Estonia that produce shale oil: Viru Keemia Grupp (VKG Oil), Kiviõli Keemiatööstus (KKT Oil) and Eesti Energia. VKG Oil is the largest producer of shale oil, accounting from some 52% of total production in 2017, followed by the state-owned company Eesti Energia (39%) and the privately owned KKT Oil (9%) (EE et al., 2018).
4Annex A provides more detailed information about institutions and organisations with responsibilities related to the energy sector.
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4. OIL
The downstream wholesale oil market in Estonia is dominated by three main importers: Orlen Eesti (part of the Polish PKN Orlen group), which accounts for roughly 70% of product imports (primarily from its refinery in Lithuania), followed by Neste Eesti with 22% (from its refinery in Finland), with Equinor (formerly Statoil) importing the bulk of the remaining volumes.
The retail market is largely dominated by four companies: Olerex (27%), Circle K (previously Statoil) (26%), Neste (18%) and Alexela (18%). There has been a reshuffling of the retail market since the last In-depth Review in 2013, with Olerex becoming the dominant player, up from fourth place, with 14% of market share; and the shares of Circle K, Neste and Alexela decreasing slightly. In addition to these four main companies, there are a number of companies with smaller volumes of retail sales, together representing 18% of the market in 2017, an increase from 12% in 2013. There were 500 filling stations operating in Estonia in 2017, a significant number compared to the country’s market size. Of all transport fuel consumption, 77% was consumed by retail customers and the rest was wholesale purchases by companies with vehicle fleets.
Prices and taxes
With the oil market fully liberalised, there is no regulation on either wholesale or retail prices. In the first quarter of 2019 (Q1 2019), the price of diesel was 1.47 USD/L. The tax rate has increased from 35% to 55% over the last five years. Estonia used to have the cheapest price among European IEA countries and the fourth-lowest in total IEA countries, but is now located at the median in IEA comparison (Figure 4.8).
In Q1 2019, the price of gasoline was 1.44 USD/L. The tax rate has increased from 48% to 61% over the last five years. Similar to diesel, the price of Estonian gasoline has moved up from being the fifth-lowest to being slightly lower than the IEA median in 2019. In Estonia, the level of tax applied on gasoline is by far the highest among all taxes on energy use, followed by the one on diesel.
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Figure 4.8 Oil fuel prices in IEA member countries, Q1 2019
Automotive diesel fuel
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Premium unleaded gasoline (95 Research Octane Number (RON))
3.0 |
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Tax component |
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2.5 |
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2.0 |
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IEA 2019. All rights reserved.
Estonia has progressively raised the rate of its fuel excise duties since 2016.
Notes: Premium unleaded gasoline data are not available for Japan; light fuel oil data are not available for Australia, Hungary, Mexico, New Zealand, the Slovak Republic and Sweden.
Source: IEA (2019c), Energy Prices and Taxes: First Quarter 2019, www.iea.org/statistics.
Upstream – Oil shale liquefaction
There are ten oil shale liquefaction units in Estonia. Three of these have been commissioned since 2013, reflecting the growth in shale oil production over the past decade as a greater share of total oil shale production is used for liquefaction (see Chapter 3).
According to the National Development Plan of the Energy Sector 2030 (NDPES 2030), growth in shale oil production is expected to continue, with additional liquefaction plants under development by Estonia’s largest miner of oil shale, Eesti Energia, and further anticipated investment decisions in 2019 by shale oil producers regarding new facilities. Based on shale oil producers’ investment plans, liquefaction capacity is expected to reach a level where, by 2035, the total amount of permissibly extracted oil shale each year could be used for shale oil production. This would equate to total domestic shale oil production reaching nearly 48 kb/d, more than twice the 2018 production level (MEAC, 2017).
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