Neste Jacobs Secures EPC Contract for Shale Oil Condensation Facility in Estonia

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Researched by Industrial Info Resources (Sugar Land, Texas)--Estonian state-owned energy utility Eesti Energia AS (Tallinn, Estonia) has awarded Neste Jacobs (Porvoo, Finland) an engineering, procurement and construction (EPC) contract to build a shale oil condensation facility. As part of the agreement, which was signed in April, Neste Jacobs will work as the engineering and technology partner for the project. Sources have said that Neste Jacobs was selected based on its extensive oil shale project management expertise in the region.

Neste Jacobs, a leading engineering services provider in the region, works with companies in the oil, gas and chemicals sectors. The company is jointly owned by Jacobs Engineering Group Incorporated (NYSE:JEC) (Pasadena, California) and Neste Oil Corporation (OMX:NES1V) (Espoo, Finland). Jacobs holds a 40% stake in the venture, while Neste has the remaining 60%. Neste Jacobs, which employs about 700 people, has successfully executed projects in the Middle East, North America and Europe. In 2009, the company's net sales were about 100 million euros ($127 million).

The condensation facility, which will be part of the Enefit-280 project, will purify and fractionalize shale oil vapor gas. The project is scheduled to be completed by 2012. The investment for the condensation facility is considered to be one of the largest made by Eesti Energia AS in the clean-energy sector. The project is being developed in association with Eesti Energia Technology Industries (Tallinn, Estonia), a subsidiary of Eesti Energia AS. Eesti Energia Technology Industries manufactures and supplies industrial equipment to the mining, energy, wind, oil and gas sectors under the brand "Enefit." Construction of the project, which will be part of the existing oil shale plant at Auvere, near Narva in northeastern region of Estonia, has commenced.

Eestie Energia AS is Estonia's primary energy enterprise. The company is involved in the production of fuel, and heat and electricity generation. Eestie Energia's operations span Lithuania, Latvia, Jordan and Finland. In a related development, the Jordanian government approved an agreement to allow Eestie Energia AS access to large oil shale reserves, located in the southern region of Jordan. The oil shale extraction project in Attart Um El-Ghudran, is expected to produce 36,000 barrels per day and reach full capacity in the next 10 years. About $6 billion is likely to be invested over this period. Eestie Energia AS will hold a 76% stake in the project, which will also include a power generating facility with a generating capacity of between 600 megawatts (MW) and 900 MW. The $1.5 billion power plant will produce electricity from oil shale combustion. The power generating facility is expected to begin operations in 2015.

In the background of slumping petroleum supplies, rising demand and spiraling oil prices, shale oil is emerging as a popular fuel alternative. Oil shale, which is a sedimentary rock, is found extensively in the United States, Estonia, Israel, China, Russia, Brazil and Germany. The extraction process converts the organic substances found in rocks into synthetic gas and oil. The oil produced by this method can be upgraded or used directly.

According to the "Global Oil Shale Market" report recently published by Markets and Markets (Dallas, Texas), by 2015 the global oil shale market will reach $12.01 billion. The report states that in the next 40 years, global crude oil reserves will be exhausted. Presently, global oil shale reserves can supply nearly 2.8 trillion barrels of fuel. However, the cost of producing fuel from oil shale is considerably higher than producing fuel from crude oil. There are several research and development projects under way to study and develop techniques to bring down the cost of producing fuel from oil shale. Royal Dutch Shell plc (NYSE:RDS.A) (The Hague, Netherlands) is working on a technology that is expected to reduce production costs to less than $25 per barrel.

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