Oil shale producer VKG closes Kiviter plant

VKG Kiviter plant.
VKG Kiviter plant. Source: Rene Kundla/ERR

Shale oil producer Viru Keemia Grupp (VKG) announced on Friday that it is to close one of its oil shale producing plants due to high raw material prices and the slump in world oil prices.

"We're closing the factory because the oil shale purchased is significantly more expensive than our own produced raw material, which makes shale oil production at that particular production unit economically uncompetitive in the given market situation," Ahti Asmann, VKG board chair, said on Friday.

The closure of the plant, the so-called Kiviter plant named after a process of oil shale extraction first developed in Estonia nearly 100 years ago during the period of the first Estonian republic, affects 11 employees.

Other production units, whose raw material is supplied by the VKG-owned Ojamaa mine, will continue to operate at normal volumes.

The world market has seen a sharp fall in oil prices since late February, exacerbated by the coronavirus pandemic and the aftermath of the dissolution of a pricing agreement between the Russian Federation and Saudi Arabia, with the latter's Aramco producer increasing crude oil production, pushing down prices.

Oil prices fell nearly a third on Monday, the largest drop since 1991, ERR's online news in Estonian reports.

Finance minister Martin Helme (EKRE) said on Tuesday that while the oil shale sector in Estonia, which used to provide virtually all of Estonia's electricity generation as well as various by products from the oil refined from shale mined in Estonia's easternmost county, Ida-Viru County, is being hit hard by the oil price crash, the Estonian government would not let the sector down.

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Editor: Andrew Whyte

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