Eesti Energia's competitor closes two refineries, says distribution of oil shale pie is unfair

A shale oil dig for the Viru Keemia Grupp (VKG). (Postimees/Scanpix)
12/2/2014 11:50 AM
Category: Economy

Viru Keemia Grupp (VKG), the main rival as well as a dependent of the state-owned energy company Eesti Energia, has decided to close two shale oil plants, citing low crude oil prices and the high price of oil shale charged by Eesti Energia.

The move, which comes with Brent crude oil prices in free fall and down to $67 per barrel on Monday, could result in the loss of 200 jobs, although VKG said it will try to transfer as many workers as possible to other units.

The two plants use the Kiviter process, one of two main shale oil extraction technologies used in the country. Although the processes are more efficient than in the past and cycle heat back into the system, it is still only profitable to produce shale oil when petroleum prices are above a certain level - around $55 per barrel in the case of Estonia.

VKG has an action pending with the Competition Authority in which it is asking whether state-owned Eesti Energia (EE) is behaving fairly in asking 35 euros per ton from VKG while EE's own refineries are charged 13 euros, ERR reported.

The Ministry of the Environment says that the buying-in price for oil shale is something that should be decided between companies, but that it isn't realistic to allocate more mining rights to VKG.

Estonia mines 20 million tons of oil shale each year, of which VKG can independently mine 2.7 million tons. Two other companies also share in the pie, Kunda and Kiviõli, but their needs are said to be covered.

Increasing the quantity mined requires a Parliament decision.


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