4. OIL

In the case of a government decision to release emergency oil stocks, OSPA would offer to sell the stocks at prevailing market price to eligible oil companies, on a pro rata basis based on companies’ sales data from the four preceding quarters. In the case of gasoline and diesel, this pertains to registered fuel wholesalers; offers for jet kerosene sales are made to aviation fuel suppliers and fuel oil offers to heat producers.

The stocks are to be sold at the market price at the time of delivery. The time estimated for delivery from overseas is estimated to be no more than 27 days. The transportation of the stocks to Estonia would be arranged by OSPA. In the case of ticket agreements, the stocks are to be sold to the market players in the same way as the stocks owned by OSPA. The only difference is that in the case of tickets, OSPA would buy the stocks from the ticket seller then sell these stocks to market players. If the market player is the ticket seller, then it has the right to use the volume of stocks indicated in the sales offer.

Assessment

Oil markets

Estonia’s production of unconventional crude oil is derived from the liquefaction of oil shale which is accounted for in TPES, as “coal and oil shale”. Thus, while Estonia’s primary energy balance seemingly indicates a small role for oil, demand for oil products, principally in the transport sector, is an important component of Estonia’s final energy consumption at over one third of TFC.

Estonia’s substantial and growing production and export of shale oil result in it being only a marginal net oil importer. However, with no domestic refinery, Estonia is fully reliant on imports of refined products to meet its oil needs. Until now, the economic case for building a refinery in Estonia to convert its shale oil into oil products has not been strong enough, but as less and less oil shale is needed for power and heat generation, more quantities become available for processing into shale oil. If the entire mining quota were to be used for shale oil production, the shale oil production could increase to some 48,000 barrels per day. Although such a transformation is not likely to happen overnight, one should note that such a quantity of shale oil could justify the operation of a refinery in Estonia and thereby enlarge the value chain and increase security of supply. Of note: domestic petroleum product consumption in Estonia (diesel, gasoline, kerosene) is some 25 kb/d. Estonia could thus become a relatively large exporter of refined products.

Moreover, the new IMO standards for bunker fuels starting in 2020 will likely change the role of shale oil for bunker fuels, making it no longer possible to use directly for fuelling ships, thus adding further incentive to build capacity for refining shale oil into higher value oil products.

The relatively high level of storage capacity at Estonia’s oil terminals, totalling over 20 mb compared to oil demand of around 10 mb per year, reflects the role it played in previous decades as a transit country for Russian oil exports. The ample storage capacity in Estonia, primarily for gasoline and transport diesel, has no doubt facilitated the growing practice since 2012 of (re-)exporting refined products.

The biofuel blending requirement set on oil product suppliers as of May 2018, of 3.1% into transport fuels, appears to have been successfully met. However, the steep ramp-up in the mandate, to 6.4% in April 2019 and 10% by 2020, will be challenging for industry

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