Oil shale is an energy-rich sedimentary rock which contains organic matter in the form of kerogen, a waxy hydrocarbon-rich material regarded as a precursor of petroleum. In IEA statistics, oil shale is aggregated with coal when measuring primary energy supply. In solid form, it contains more inert matter than coal, making it less energy-dense. Once extracted from the ground through mining, oil shale can be used directly in a power plant or processed to produce shale oil, also known as kerogen oil or oil-shale oil. Shale oil should not be confused with light tight oil which issometimes also referred to as shale oil that is produced from shale formations, often together with shale gas in hydraulic fracturing (fracking). Fracking and tight oil production is not done in Estonia. 


Producing electricity and heat. Both are produced by directly burning oil shale in shale powered electricity plants, where the efficiency is around 40%. With high carbon intensity of the fuel and low efficiency, Estonia had the most carbon intensive economy in the OECD countries in 2014. In 2017 the shale sector contributed about 70% of Estonian emissions. In fact, compared to the 1990 emissions baseline, the key driver for the fall in emissions was the collapse of the Soviet Union and transition from a planned economy to a market economy (National Inventory of Greenhouse Gas Emissions in Estonia, 1990-2017) which resulted in -50% emissions reductions. The emissions have been quite stable since 1993 until 2018. However, during 2019 the direct burning has dropped significantly due to high carbon prices which have lead to further emissions reductions up to 40% in energy sector

Producing shale oil and electricity. Due to converting the oil shale into oil, CO2 emissions during productions fall about ⅔ compared to direct burning of shale. However, according to environmental organisations’ own calculations, converting one ton of oil shale into oil and burning that oil after export will result in only 6% lower emissions than using one ton of oil shale for electricity production. And this does not reflect the oversea transport emissions, as most production is exported. However, without this complete life cycle assessment, shale oil production can be shown as almost a 60% drop in CO2 emissions in national statistics. 

Other chemistry products. Shale can also provide other “non-fuel” chemistry products, but these are mostly by-products (phenols, diluents, additives) which would be uneconomical to produce without the main production of shale oil.  

Financial QUESTIONS 

Shale oil profitability

In 2019, a  PhD thesis (in English) was defended finding that even when the oil plant produces both oil and electricity from the by-product retort gas, it is economically very risky due to other cheaper/cleaner alternatives already on the market. According to the Estonian Chemistry Industry Union (in Estonian), the price of the oil barrel has to stay within $55-$60 (not too low, not too high) for the industry to be sustainable in a business sense. For the first Enefit oil production plant in 2010 , the price limit was 70-80 USD, for the new planned Enefit plant planned to be finisehd in 2024 it is said to be 45 USD. At the same time, the recently completed economic analysis for the latter one is not public. 

Oil shale resource tax

Between 2010-2015 there was a small but steady rise in resource tax. Each tonne of mined oil shale was taxed by as a minimum of  1.10 euros in 2010 reaching 1.53 euros in 2015. According to critics, this was not high enough to make up for external costs. In fact, the Estonian Energy Development Plan until 2030 clearly states that it is still unclear if and how much the country profits from the shale industry resource tax when environmental costs are also accounted for. In 2016, the government reduced the tax to 0.275 EUR per tonne as a minimum to maintain the competitiveness of the Estonian liquid shale oil industry in light of low world crude prices (IEA 2019). Since 2016 resource tax is dependent on global fuel oil price, staying relatively low.

While clearly an indirect subsidy to the industry, the state and the industry ignore the fact. In March 2020, the subsidy logic was changed (in Estonian) further, so that when the oil price is low, the resource price rapidly drops accordingly without a lag (which was the case before).

Financial support from the government

The national energy company Eesti Energia is proposing to build up to 4 new shale oil plants and 1 oil pre-refinery. In the end of March 2020, the government green-lighted one of the oil plants with an investment of 125m euros. For the refinery (€ 600m), it looks like the government tends to participate actively with public money. “In addition, the government committee continued the discussion of Eesti Energia’s plan to build a new Enefit shale oil plant and the plan to build an oil shale pre-refinery by Eesti Energia and Viru Keemia Grupp. The committee instructed the Ministry of Finance and the Ministry of Economic Affairs and Communications to analyse various options for co-financing the shale oil pre-refinery. The state budget strategy 2021–2024 process will include the discussion of whether and how the state plans to support the pre-refinery investment.” (press release of Estonian Government). These discussions do not involve civil society partners. With the added production capacity, the added yearly emissions from this industry (including emissions from burning the fuel after export) would be about 2.6 m tons of CO2. For comparison, the total emissions of Estonia was 18.6 m tons of CO2 equivalent in 2018. 

In 2012, the National Audit Office estimated that Estonia had subsidised the sector 148 million yearly during the period 2008–2012. 

Jobs and national security

Regarding just transition, the direct job count in the sector is around 6000, indirectly up to 13 000,calculated based on 2018 stats and lay-offs in 2019. The idea for planning a gradual transition has been proposed by environmental organizations for decades, but the government has so far avoided the topic. Some of the reasons for avoidance are national energy security and possible social instability in the region when phasing out oil shale.  

The real danger to world climate ambitions

Untapped shale deposits are widespread around the world. The unique technology developed in Estonia has been already tested in the  USA and Jordan. USA’s project has seen large resistance from local NGOs, Jordan’s project is said to be completed in 2020. Both projects have been objected to on the grounds of heavy water usage and huge CO2 emissions. In April 2020, Estonian energy company Eesti Energia sold its rights to build an oil shale plant in Israel to an Israeli company.

Updated 15.04.2020