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Eesti Energia Shale Oil Plant Delayed to Next Year, CEO Says

Nov. 28 (Bloomberg) -- Eesti Energia AS, Estonia’s largest utility, will delay the start of the world’s biggest shale oil plant to next year due to technological problems, Chief Executive Officer Sandor Liive said.

The Enefit280 plant in Auvere, northeastern Estonia, is about six months behind the initial plan of starting in September, Liive said in an interview today in the capital, Tallinn. The plant, due to process 280 tons of oil shale an hour, would exceed the capacity of peers in Brazil and China, the only other shale oil producers, and double Eesti Energia’s oil output to 10,000 barrels a day, Liive said.

“The launch is being delayed into next year,” Liive said. “We’ll have to wait for the 50,000 tons of oil we hoped to get from the new plant this year.”

Estonia, with the fastest-growing economy in the European Union last year, is the only country that depends on oil shale, a sedimentary rock from which petroleum-like oil can be extracted by heating, for most of its energy supply. It expects to reduce its reliance on oil shale in electricity generation to meet renewable energy goals, while expanding the use of the resource in more profitable production of liquid fuels to remain self-sufficient in energy and boost exports.

Bond Yields

The yield on Eesti Energia’s bond due in 2018 declined 4 basis points to 2.76 percent as of 2:02 p.m. in Tallinn. It dropped to a low of 2.74 percent on Nov. 15, according to Bloomberg data.

Privately owned Viru Keemia Grupp AS, now Estonia’s largest oil producer, and state-owned Eesti Energia have a combined shale oil output of about 500,000 tons a year, with total revenue of about $180 million in 2010 from oil operations.

Both aim to start refining their oil, now mainly used for heating and ship fuel, from 2016 to make diesel and gasoline. Their combined output may be as much as 40,000 barrels a day, according to plans published by both companies.

Eesti Energia’s new plant is the first to combine shale extraction and combusting oil shale in a boiler to produce electricity for added efficiency and less pollution at twice the capacity of the company’s existing units, Liive said.

Uintah County

In 2010, Eesti Energia paid 29 million euros (38 million) for Oil Shale Exploration Co., which holds the largest privately owned oil-shale resources in Utah, expecting to launch oil production of as much as 57,000 barrels per day in the U.S. state’s Uintah county and create as many as 2,000 jobs.

It also has a share of an oil concession in Jordan, where it sold a 30 percent stake to YTL Power International Bhd. in 2010. Eesti Energia and its partners in the $3.5 billion Jordanian venture expect to start producing shale oil in 2017, the head of the project said in September.

“It is hard to say today” whether there could be similar delays to timelines in the U.S. and Jordan, Liive said. The company has a so-called test bench device in Germany and is building a bigger one to test different shale to decide how its technology can be applied in different countries, Liive said.

“The Utah’ project is still in the first phase of assessing environmental impact,” Liive said. “By the middle of the next year, we have to prepare a technological setup to go forward with further environmental assessment.”

To contact the reporter on this story: Ott Ummelas in Tallinn at oummelas@bloomberg.net

To contact the editor responsible for this story: Balazs Penz at bpenz@bloomberg.net

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