Because of the record low oil prices, VKG conserves Kiviter plantsNews
15. January 2016
On 15 January, the management board of Viru Keemia Grupp decided to conserve the oil plants using Kiviter technology because of an outstanding decrease in oil prices. Production of shale oil will continue at three oil shale processing plants using Petroter technology for which oil shale is mined at VKG's own Ojamaa mine.
Ahti Asmann, the Chairman of the management board of VKG: „The success of production of oil shale depends on oil prices at the global market as well as on national taxes and payments. The drastic decrease in oil prices has significantly diminished the competitiveness of VKG as a non-conventional oil manufacturer, which has finally led to the conservation of Kiviter plants. We are operating at the oil market, of which high volatility is very typical, and where large-scale structural changes are taking place, which means that we have to adapt to the new reality. Considering the level of oil prices at present, oil production using Kiviter technology is not at all cost-effective any more. In order to minimize the risks, we have already taken a number of measures, but in spite of that, we are forced to reduce our production costs significantly, and it is high time we did that. The decisions we are making at the moment are very painful, but are urgent indeed, since they will help to provide the long-term sustainability of the company and the continuation of its activities. The reorganization of production that is going to take place in the result of conservation of Kiviter plants will affect about 500 employees. In spite of the measures aimed at cost optimization that we have already taken, the economic environment we are witnessing at present and extremely low oil prices do not leave us any other possibilities for preserving the sustainability of the company“.
Next week the companies of the Group will start consultations with the Trade Union of Chemists and the Unemployment Insurance Fund concerning the alleviation of consequences of withdrawal from employment contracts. Because of the conservation of plants, the number of workplaces at VKG Oil as well as in other companies included in the Group, such as VKG Kaevandused, VKG Energia, VKG Transport, Viru RMT and the parent company, will be reduced.
VKG is one of the largest oil shale manufacturing and processing companies in Estonia, and it is the second largest oil shale manufacturer in the world. The annual contribution of the Group into the national GDP is about 1%. The company owns a mine, the plants that process oil shale, a power station, and electricity and heat distribution companies.
Head of the Public Relations Department at VKG
Phone: 334 2702
GSM 523 2700