The Baltic tiger of Estonia is the world’s first country to meet all its power needs from shale, with enough left over for neighbours and fuel exports for the shipping industry. “We are the most energy independent country in the European Union, and we will not compromise our energy security. We have a large neighbour,” said Juhan Parts, the economy minister.
It is the same story wherever you go across Eastern Europe: the fuel debate comes down to Vladimir Putin’s Russia, and Gazprom’s stranglehold on gas supplies. Global warming inevitably plays second fiddle. “Estonia is not rich enough to experiment with immature technologies,” said Mr Parts. “Even if we had to invest in new power plants today, shale would still be cheapest. Russian gas costs 1.8 times as much; onshore wind 2 times as much; and offshore wind 2.5 times as much.”
“I am a right-wing person and I am not a supporter of the war on fossils. We must look after the competitiveness of our industries. We must respect European environmental regulations of course but I am sceptical about these climate issues.” Oil shale is a combustible rock containing kerogen, and releases oil when heated. It is different from the shale oil and gas in America’s Marcellus or Barnett fields, or Britain’s Bowland Basin, obtained by hydraulic fracking deep underground. The word order is reversed, a source of confusion.
The industry at work is not a pretty sight. Collosal Soviet diggers imported from the Urals 40 years ago - each weighing 1500 tonnes and the size of a house - hack trenches 80 feet deep in the wooded flatlands near the Russian border. Swaths of Ida-Viru county have been gouged at a pace of 100 hectares a year, across a front twelve miles wide. It is as if the Weald of Kent were one great shifting quarry. Yet the land is mostly uninhabited, and is soon replanted.
“It is a moving process. We dig out and reclaim at the same time in a cycle of two years. The trenches are turned into artificial lakes. We don’t use water to extract oil shale so there is no contamination of the ground water,” said Hardi Aosaar, a geologist with the state power company Eesti Energia. The trauma leaves a strangely corrugated landscape, but trees grow again and wildlife returns. The residual ash is used to build roads. One mound has been turned into Estonia’s longest ski run.
Shale employs a quarter of the county one way or another, providing jobs for ethnic Russians in a blighted enclave. Nimbyism has not taken root in Narva. “We keeping the whole region afloat,” said Igor Kond, Eesti’s head of oil and gas operations. Oil shale is an overlooked fuel. The World Energy Council estimates global reserves at 4.8 trillion barrels, two thirds in the US. Eesti is building a plant in Jordan that will produce 38,000 bpd and third of the country’s needs, a bid to break Jordan’s total and costly dependence on imports. Morocco, Israel, and Ethiopia are next. Italy has big deposits in Sicily, if it ever falls on hard times.
“We know where the world’s oil shale reserves are, we know the quality of them and we know how to access them,” said Sandor Liive, Eesti’s chief executive. “That’s the great thing about rock, it doesn’t move and it changes very, very slowly. Oil shale doesn’t have the exploration risk of conventional oil and its reserves are at least four times larger than all crude oil reserves.”
There is nothing new about the industry. The Scots pioneered oil shale on an industrial scale in the 1850s near the River Forth, for use in London street lamps. The Paraffin Light Company near Edinburgh was the biggest oil works in the world in the 1860s. The West Lothian Council now runs the spoil heaps as a protected biosphere, home to rare plants and animals. The grasslands are dotted with the Orchis Mascula.
Estonia has been digging shale for a century. The methods have hardly changed, though Alstom filters have slashed sulphur pollution. Vast plants from the Soviet era still crunch shale rocks and burn them in 40 year-old cylinders near Narva. They used to supply Leningrad with electricity. They are now under Eesti’s control and serve the opposite purpose, keeping Russia at bay.
Eesti is about to open the world’s biggest oil shale plant, Enefit 280, to double output of kerogen oil to 22,000 bpd, shifting the focus from power to the more lucrative business of car diesel. “It is a good rock,” said geologist Hardi Aosaar, holding a chunk in his hand. “It works both ways. If you add oxygen it burns. If you don’t, it turns into oil.”
Not everybody agrees that it is a good rock. “The bloody stone doesn’t burn. You have to put as much energy in to get it out again,” said Valdur Lahtvee from the Stockholm Environment Institute in Tallinn. “I used to be the Eesti Energia’s environmental manager, and for four years I was the biggest polluter in Estonia. Shale has very low energy efficiency, and even with new technology it reaches only 36pc.”
“We inherited this infrastructure from the Soviet Union so there was some justification at first, but now it doesn’t make any sense. We are linked to electricity from Finland and we can offset wind intermittency with Nordic hydro-power. We should be switching everything to offshore wind and biomass,” he said. The government has sweeping ambitions beyond self-sufficiency, in keping with Estonia's Hanseatic trading tradition. We forget new, but it was once rich. Tallinn's church where the highest in the world for two centuries in the late Middle Ages.
Mr Parts wants Eesti to leverage its primacy in oil shale technology and go global, becoming a future sovereign wealth fund for the 1.3m strong nation. The company has bought a small chunk of Utah, claiming 2.6bn barrels of recoverable oil. It is a first step in cracking the prize of US oil shale, theoretically worth over $200 trillion at today’s spot price. “So long as oil it stays above $80 a barrel, this will be profitable,” said Mr Parts.
Estonia’s shale gamble at home assumes that carbon remains cheap under the EU emissions trading scheme. The price has crashed from €30 a tonne to €4 euros over the last five years, but the European Parliament is determined to push it back up. Some Euro-MPs are aiming for €50, deemed the minimum needed to shift the balance in favour of renewables. “We are highly sensitive to the EU carbon price. The situation is very uncertain in global climate policy, but we don't believe in extreme prognoses,” said Mr Parts.
Worse yet for Estonia, the EU’s forthcoming Fuel Quality Directive may impose an extra carbon tariff on oil shale, and possibly ban production. The minister is making a calculated bet on EU politics, with few illusions. “There are people who say it is very stupid thing to do to even think about oil shale right now. Maybe their view will prove correct,” he said.