Estonia is latest to discover oil shale effort more difficult than expected
Shale oil in the Green River formation has once again proved to be more elusive in reality than it appears to be in theory. The latest investors to learn this fact are the Estonians. In a line stretching back to 1910, they are the latest to see their hope for a quick fortune in oil shale go up in smoke.
Estonians are the world’s leading experts on getting energy from shale. Shale is their only domestic source of fossil-fuel energy, and it has produced most of their energy since World War I. In Estonia, the shale is mined, crushed and burned to produce electricity.
Facing declining production of power, Estonia created Eesti Energia, a publicly owned power company and a world leader in producing energy from shale. Initially the company developed markets for burning shale, as was done in Estonia. More recently, it has been experimenting with proprietary new methods of retorting shale to extract kerogen.
Through its American subsidiary, Enefit American Oil, the Estonian giant bought a U.S. company that held large, privately-owned shale deposits in Uintah County near Vernal, Utah.
Lured by promises of 1,000 to 2,000 high-paying jobs, the Uinta County commissioners traipsed off to the Baltic to see first-hand the technology Estonia has developed. They returned convinced of the Estonian claim that their process would transform the future of shale oil.
“If we weren’t confident that they were going to do this and go forward,” Commissioner Mark Raymond told the Salt Lake City Tribune, “I don’t know that we’d go to all the trouble that we’re willing to at this point. We’re very satisfied.”
“All the trouble” included seeking local and state tax breaks and other inducements for opening a shale industry in Utah. Then reality set in.
A 600-ton sample of the Utah shale ore was sent to Germany for experimental retorting. The experiment found Utah shale was not releasing its kerogen as expected. It also reported that the American shale was “stronger and drier” than the Estonians were expecting.
“While the results were positive, more fine dust was generated than we expected. Oil shale in different parts of the world has different qualities and every process has to be modified to account for those differences,” Enefit American CEO Rikki Hrenko wrote in an e-mail to the Salt Lake Tribune.
In tones reminiscent of previous failures to extract commercial quantities of petroleum from shale, Hrenko concluded, “We’re reviewing decades of research on U.S. shale to help determine what changes will work best. This is not unexpected and we have a clear plan of action to move forward.”
But Ingo Valgma, director of the Department of Mining at Tallinn University of Technology, said on public television that oil shale from Utah is not a matter of five or six years, as Enefit predicts, but more a question of decades.
Meantime, back in Estonia, the prospect of a $100 million loss on an ill-advised investment in Utah oil shale is leading to tension in the government.
Following a report that the Utah investment could lose the millions the government invested in Eesti Energia to support the Utah project, Estonia media reports that opposition members of parliament are questioning the competence of the Economic Affairs minister.
Defending the Utah project, Estonia Prime Minister Andrus Ansip resorted to evasion: “At least as far as I know, it can’t be said that the project is currently unsuccessful. It is clear that oil shale quality and characteristics vary around the world and production technology must be adapted to different types of oil shale. And I don’t see anything unheard-of or anything that could have come as a major surprise to Eesti Energia.”
With unassailable logic, Ansip concluded, “I believe the project will be successful, otherwise the Eesti Energia management would not have undertaken it.”
To those with any knowledge of the boom-and-bust history of oil shale in the Green River Formation, the Estonians are just the latest boosters to discover that, if oil ever flows from shale, it won’t be soon, it won’t be easy and, most of all, it won’t be cheap.
Clearly not ready for prime time, Eesti Energia must decide whether to hold or fold. In either case, it likely to be years before commercial fuel is produced from Utah’s shale.
Bill Grant lives in Grand Junction. He can be reached at William.grant99gmail.com.