4. OIL

to meet, particularly with respect to second-generation biofuels. There is no biofuel production in Estonia and the absence of an agreed standard for an HVO and the weather constraints on the use of FAME cause uncertainty about the availability of appropriate blending stock. Similarly, the preparation of local (national) technical standards for blending, uncoordinated with neighbouring Baltic countries, appears to create an unnecessary fragmentation of standards, blending practices and markets. The creation of such “boutique biofuels” adds to the cost of fuels in Estonia, which risks affecting the Estonian transport industry, and the freight industry in particular. Procedures for fuel blending and quality sampling can also add to the cost of fuels, which may be minimised by allowing industry some flexibility, such as allowing in-line or rack blending (at the loading of each tanker truck), to more cost effectively meet the biofuel mandate.

Oil security

The LFSA, amended in 2013 to align with IEA requirements (Estonia became the 29th member of the IEA in May 2014), regulates emergency response in the case of an oil crisis. The release of publicly held emergency oil stocks is the most prominent emergency response measure available to the Estonian government.

Emergency preparedness was also enhanced in 2018 with legislation regarding vital services, which mandates that by January 2022, all filling stations defined as providers of vital services be able to operate within 30 minutes of a blackout.

OSPA is responsible for managing Estonia’s emergency oil stocks. There is no stockholding obligation set on industry and OSPA’s stockholding fully covers Estonia’s stockholding commitments to both the IEA and the EU. Nearly half of OSPA’s stocks are held outside of Estonia, in either Finland or Sweden, under bilateral agreements. This includes just under half of OSPA stocks of gasoline and diesel, and all of the kerosene jet fuel stocks.

Recommendations

The Estonian government should:

Explore, together with industry, the opportunity of having refinery to process shale oil in the country, and facilitate such an installation if deemed economically feasible.

Monitor the availability of biofuel blending components for market suppliers for meeting the blending mandate, which is set to rise sharply, and facilitate access to the supply of appropriate blending components by quickly establishing, in coordination with neighbouring countries, technical standards for HVO.

Consider flexible mechanisms for fuel retailers in how they meet the blending mandate, such as allowing in-line or rack blending and streamlining quality verification procedures.

Investigate the need for lifting the biofuel blending requirement in a crisis, allowing fuel suppliers greater flexibility in meeting fuel demand in times of disruption.

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ENERGY SECURITY