Q and A with Enefit CEO Sandor Liive

1) Was Enefit drawn to the technology already being considered at the OSEC lease as opposed to sme of the in-situ technologies being tested in Colorado? Is the OSEC approach substantially similar to that employed in Estonia?

Enefit has developed and owns its own proprietary technology for shale oil production called the Enefit Technology. This basis of this technology is the same that has been proven in Estonia through industrial operations over the past 30 years and which we plan to use in Jordan. We are also currently building a new Enefit plant in Estonia, which will demonstrate the most efficient and environmentally advanced technology available. The construction is on schedule, with commissioning planned for the first half of 2012.

That being said, every oil shale deposit is different and there is no “off the shelf” solution. There will be modifications and adjustments needed for the Utah shale. One key difference between the technology used in the US and Estonia revolves around water. Estonia has abundant water and historically this has enabled use of industrial applications that do not significantly restrict water use. In Utah and Jordan however the technology would focus on minimizing water use.

The key difference between the Enefit technology and in situ technologies is that Enefit is a proven technology which targets shallower oil shale resources that can be mined and brought to the surface for processing. In situ technology targets much deeper deposits which could not be economically mined and brought to the surface. We do not see surface processing technologies such as the Enefit technology, and in situ technologies, such as those being tested in Colorado, as competing.

2) Does the company see a better business climate in Utah as opposed to Colorado? Was that a factor in the purchase?

As you know, Forbes magazine has awarded Utah as the number one state in the US for doing business and the positive business climate in Utah did certainly play a role in our decision.

3) Is there a timeline by which we can expect to see development on the Utah leases and private lands? Can you give us an idea how much the company is prepared to invest in U.S. oil shale? Does Enefit plan to market shale oil products in the U.S.?

Oil shale projects are fairly long lead time projects. We estimate the environmental permitting process will take at least 4 years before we can start construction. We anticipate first oil in 2019. We intend to produce high quality synthetic oil which would be acceptable to refineries, such as those in the Salt Lake City area, for example.

4) Does Enefit have any position on the way the U.S. sets oil shale rules? I’m particularly interested in the royalties the federal government is considering.

Enefit has closely followed the ongoing debates and recent actions which would impact the royalty rate to the federal government. We think important facts that the government needs to take into account are the significant upfront investment costs and the amount and cost of processing that is required to go from oil shale rock to a synthetic oil. The investment profile and size as well as the processing steps and associated costs needed to produce a refinery ready oil from oil shale are very different from conventional oil. The royalty rate needs to reflect these and other differences. One thing that is sure is the need for certainty regarding the regulatory framework and the costs. It is very difficult to ask the industry to make such significant investments without being willing to fix the requirements and costs.

5) Can you describe what Enefit does to meet European Union air-quality requirements and would the company use the same approach and technology in the United States?

Standard industrially proven control technologies that are used in other industries to meet emission limits can be used in the Enefit process as well. An example would be an ESP (electrostatic precipitators) or bag house which is used to capture particulate matter. The Enefit process has very low sulphur emissions due to a natural reaction that happens in the CFB boiler where the limestone (which naturally occurs with the shale) neutralizes the sulphur.

And then there is water. Can you tell me about water use by Enefit in its oil shale operations in Estonia and Jordan?

Jordan and Utah are both very similar in the fact that water is a very precious and limited resource. In both projects, reducing water use and maximizing water recycling and water reuse will be key. Water minimization will be a top priority in all of the engineering. One benefit of our process is that water is not needed for the oil production process itself. Some water is needed for mining, for cooling and for dust control, for example, but this is the case for all types of mining and industrial operations. There are many estimates in the public domain about the amount of water needed. A realistic guideline for surface processes (oil shale technologies that mine the oil shale and process it on the surface) is in the range of 1-3 barrels of water per barrel of oil produced. This is a number that generalizes across different locations, different shales and different surface technologies and is broadly applicable. We will strive to push down this range, but it is a bit early to give the exact figure.



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