The oil shale development plan about to make it from environment ministry to government within weeks may prove useless being founded on totally unrealistic energy price prediction and leaving what's most vital – mining volumes bearable for Estonia – to be dictated by policy.
Regarding a document decisive concerning a key industry for peace in Estonia, its economy and energy security, one would expect any ignoramus reading it to not stumble over childishness. Regrettably, such undesirable experiences are indeed on offer.
Namely, the document is built on the premise that in 2016–2030 global oil prices fill fluctuate from $90 to $110 per barrel.
Meanwhile, institutions like World Bank in its prediction this year suggests oil to average at $61.2 in 2016, $71.9 in 2020, and $88.3 in 2015.
«At the moment the analysis was being compiled, these assumptions about oil price were totally normal. At that moment, a substantially lower assumption would have seemed extremely unrealistic,» said environment ministry’s vice chancellor Ado Lõhmus, to explain the weirdish figures.
Actual fluctuation large
One can but shrug at the reply by vice chancellor defending the incompetent price prediction as, according to World Bank data, in January 2001 oil stood at the average of $25 a barrel while four times higher in January 2014 – $102.
«In a fifteen year perspective, I’d suggest the realistic oil price fluctuation to be $20–$200 as during the past half century the oil price has not stayed within the narrow bracket proposed by environmental ministry,» said Tõnis Oja of Postimees writing on finances.
Incompetence of environment ministry in regulating oil shale industry was already a year ago underlined by National Audit Office while oil shale business was fighting the state over environmental fees. «Environmental fees do not fulfil their intended purpose and the alterations/dimensions of said fees are not based essential analysis,» the office said in its memo, advising that the ratification of the development plan be postponed.
On state assessment of energy prices hangs natural resources taxation policy, on which in turn hang investment decisions of industrialists. Should the state lean on the development plan and its way-above-reality oil price while setting the taxes, industrialists will earn below expectations and will not get bank loans to build new plans.
Just some years ago, the grand plan of Estonian oil shale plants was to begin production of quality diesel fuel in volumes more than twice the domestic consumption of Estonia. In 2012, VKG’s (Viru Keemia Grupp) preparations were in a stage where initial diesel would have been produced the next year.
In 2013, however, both Eesti Energia and VKG mothballed their vehicle fuel plant projects.
Adding production capacity is directly linked to mining volume allowed by the state. Pursuant to the current development plan the limit is 20 million tonnes of oil shale mined per year and no more. During the past four years, our four oil shale processers have managed to process a total of 15 million tonnes.
The new development plan, however, grants the government powers to reassess the allowable mining volume every five years. The volume may be cut if the estimated environmental damage proves too big. The volume may be boosted if oil shale technology allows for estimated reduction of the damage.
In the development plan, oil shale mining is compared with yearly volumes of 15, 20 and 25 million tonnes. Meanwhile, a «scenarios» chapter introduces the option of nearing 30 million tonnes in the absence of yearly mining limit.
West-Viru County targeted
By mining volumes, common people can predict the time the Caterpillars come to plough up their back yard. With oil shale mining thus far limited to East-Viru County (Ida-Virumaa), the decision-making granted to government by the development plan will create a situation where changes may come before twenty years go by – no matter that till that time the existing mining licences will do.
In West-Viru County, oil shale is currently mined by Kunda Nordic Cement alone, using the resource to heat cement chimneys and pouring the ash created into cement content.
Estonia’s westernmost minable oil shale reserves are in the very West-Viru County. The Haljala research area spans along Narva Highway till Loobu, encompassing lands of Haljala, Kadrina, Sõmeru and Rakvere Parish.
East of Haljala, underneath the Kohala and Kabala research areas, there lies the phosphate rock which in the 1980ies triggered the mighty mine-it-not! protest movement in Estonia.
In case the oil shale industries continue at current volumes of 15 million tonnes a year, the large oil shale mines will only reach near Rakvere in 80 years. But should the industrialists succeed in convincing the government that their technology is good enough and the volumes rise to 30 million tonnes a year, cut 30 years from that.
While other oil shale industries were eager to comment the oil shale development plan to Postimees, the largest oil shale group Eesti Energia limited itself to telling us they were aware of the development plan being compiled.