Reopening two refineries only trims VKG’s losses, says CEO
Bringing two of their shale oil refineries back online would only reduce the losses of Viru Keemia Grupp (VKG), the price of crude oil would have to rise further for the company to make a profit, the company’s CEO, Ahti Asmann, said.
Because of the low oil price, reactivating the two plants would not cover all operational and fixed costs, Asmann told BNS. "No oil shale energy business can earn a profit at such a price," he said.
"We are able to cover the expenses, we're able to meet our financial obligations, we're able to make the necessary minimum investments to keep the plants running. With some luck, we'll be able to invest a little in development, but at today’s price that isn’t possible," Asmann said.
Asmann said that the government's decision to lower resource charges positively influenced their decision to reopen the plants. The company said earlier that it would reactivate the plants as soon as the world market price of oil remained above $55 per barrel. In June the price reached around $50 per barrel.
In addition to the decision to lower resource charges, the government's attitude to maintaining a dialogue with oil shale businesses and taking a constructive approach to solving problems was important, Asmann said.
Asmann said he believed that a large part of former employees would be eager to return to VKG, but added that it would become clear in three to four weeks' time whether staff could be found at short notice.
VKG announced on Thursday that it was going to reopen two of its shale oil plants and rehire 350 workers. The decision was prompted by a modest rise in global oil prices as well as the government's decision to create a flexible tax system for the oil shale sector that would take into account the changing global oil price.