Eyes On Enefit LogoThis blog is part of a series about Enefit, and Eesti Energia, covering the company’s financial outlook, background and status of its Utah project.

History has shown that for more for more than a century, oil shale is not a commercially viable energy source in the U.S. Oil shale is actually a rock that doesn’t contain oil at all (pdf). It’s kerogen, or fossilized algae, locked in shale rock. In order to turn oil shale into oil, the rock has to be superheated for months or even years, and then processed. That takes a lot of energy, money and potentially a lot of water

Yet, that hasn’t stopped industry executives and supporters, like ECCOS, from promoting oil shale as being on the verge of economic viability.

So it was surprising to read an interview (pdf) with the CEO of Eesti Energia (parent company to Enefit) which is regarded as the world leader in oil shale, admit that oil shale isn’t profitable.

“True, most of the investments are made under various subsidy schemes because even current free market prices are not high enough to make investments financially profitable.” – Sandor Liive, Esti Energia CEO, Eesti Paevaleht website via BBC Monitoring Europe, July 4, 2011

It’s great to see this type of candor and acknowledgement that Eesti Energia has been able to produce commercial oil shale in Estonia due to significant government subsidies. Now it looks like Eesti Energia is asking for more subsidies. But it turns out that not everyone thinks that’s a good idea, as some elected leaders in Estonia are raising questions about oil shale investments:

“The upcoming sharp increase in the power tariffs will almost double the prices of daily goods and services from January 2013, but this is not enough for Eesti Energia. While this year the company received 150 million euros in state subsidies, it is demanding another 200 million in 2013…Eesti Energia…pay[s] a few tens of millions of euros in oil-shale resource fee every year, but earn hundreds of millions of euros in net profit…benefitting from publicly owned oil-shale.” – Edgar Savisaar, Chairman of Estonian Centre Party, Text of report from Aripaev website via www.bbn.ee October 18, 2012

FYI, 200 million euros is the equivalent of approximately $264 million.

You can read previous installment of Checks and Balances Project’s Eyes on Enefit series here.