3. Oil shale

3. OIL SHALE

is mined in solid form, and has slightly higher energy density than lignite (EE, 2019). In addition to oil shale, Estonia also uses small shares of coal, coal products and peat, which account for around 1% of TPES.

Figure 3.1 Share of oil shale in Estonia’s energy system, 1990-2018

IEA 2019. All rights reserved.

Oil shale is the dominant energy source in Estonia, although its shares in domestic energy production and electricity generation have decreased in the last decade.

Note: Supply data for 2018 are provisional.

Source: IEA (2019), World Energy Balances 2019, www.iea.org/statistics.

Estonia’s oil shale production varies slightly from year to year, but in general total domestic supply has been around 4 Mtoe since 2010. This is an increase from around 3 Mtoe in the early 2000s. Stocks are used to balance supply and demand between years, as was the case for instance in 2016 (Figure 3.2). Although domestic oil shale production has increased, its share in domestic energy production has declined due to a rapid increase in bioenergy production.

Figure 3.2 Oil shale supply by source, Estonia, 1990-2018

IEA 2019. All rights reserved.

Estonia’s oil shale production has been around 4 Mtoe per year since 2010, covering around 70% of TPES.

Notes: Mt = million tonnes. Supply data for 2018 are provisional.

Source: IEA (2019), World Energy Balances 2019, www.iea.org/statistics.

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3. OIL SHALE

The plan includes financial means for the years 2016-19 and is accompanied by an action plan for implementing the strategic aims and measures.

The need for an oil shale development plan follows from the “Earth’s Crust Act” (Riigi Teataja, 2017), which states that no oil shale mining permit will be granted in the absence of a national development plan for mining and all usages of oil shale. The latest revision of the act entered into force in 2017 to ensure the sustainable and economical use of natural resources, including oil shale, while reducing adverse effects for the environment. The Ministry of Environment1, based on the Earth’s Crust Act, regulates oil shale mining. The oil shale resources belong to the state and the Ministry of Environment, through the Environmental Board, issues exploration and mining permits. The revised act requires all companies applying for mining permits to provide an ex ante analysis of the socio-economic impact of its activities related to oil shale.

The Earth Crust Act sets the total annual maximum mining limit at 20 million tonnes (Mt). Oil shale reserves are around 5 000 Mt, and the economic proven reserve is estimated to be 1 000 Mt. With an annual production of roughly 15-20 Mt, the proven reserves would suffice for approximately 50 years at the current mining rate (MoE, 2016). The purpose of the annual mining limit is to ensure the sustainable use of the reserves, and to eventually reduce the annual use of oil shale due to the negative environmental and social impacts of oil shale mining and use (MoE, 2016).

The earlier oil shale development plan ran from 2008 to 2015. The National Audit Office’s 2014 evaluation of the implementation of that plan found that two of the plan’s primary goals were not met: reducing the environmental impact of oil shale mining and the use of oil shale; and increasing the efficiency of mining and use. The audit further found that the existing environmental charges were ineffective in influencing behaviour in the shale industry (Riigicontrol, 2014).

The oil shale development plan has close linkages with other strategic documents, including the National Development Plan of the Energy Sector 2030 (NDPES 2030) (MEAC, 2017). The NDPES 2030 discusses the oil shale industry as a part of the country’s overall energy policy and focuses on issues related to the production of energy from oil shale within the larger security of supply context. The focus of the oil shale development plan is on identifying new technologies to improve the sustainability of oil shale extraction, and on the environmental impact of extracting and processing oil shale.

The government aims to find a balance between energy security, environmental concerns and state revenues when setting the level of fees charged for the exploitation of oil shale resources. It is increasingly aware of the need to better reflect the external costs associated with the mining and use of oil shale when setting environmental fees and taxes.

The oil shale industry is subject to the Environmental Charges Act. Until 2016, each tonne of shale oil produced from oil shale was taxed at EUR 1.58, the so-called resource or mining tax. In 2016, the government reduced the tax to EUR 0.275 per tonne to maintain the competitiveness of the Estonian liquid shale oil industry in light of low world crude prices. The level of the resource tax is further linked to the average crude oil price in the

1 Annex A provides detailed information about institutions and organisations with responsibilities related to the energy sector.

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