After the huge drop, 2021 is expected to bring the decade’s fastest growth of 4.0% a year, but that still leaves the global gross product more than 5% short of the 2020 forecast.

The Estonian economy also fell in 2020, but somewhat less compared to the rest of the world. According to Statistics Estonia, Estonia’s gross domestic product decreased by 2.9%. Despite the economic decline, Estonia’s average gross monthly salary continued to grow. Although the 2020 salary increase was the smallest of the past decade, i.e. 2.9% (7.4% in 2019), the difference between the salary increase and economic growth was the greatest of the decade, i.e. 5.8%. As labour productivity per employed person did not change, we can conclude that the entire weight of the crisis was left for enterprises to bear in Estonia. The largest Estonian commercial banks expect an economic growth of about 3% in 2021.

VKG’s financial results are most of all influenced by developments in the global oil market which also suffered historically negative effects in 2020. Although the beginning of the year was highly promising, the spread of the corona virus from China took the oil prices into a decline in January. The ensuing price war between Saudi Arabia and Russia poured more oil into the fire and on 21 April the most closely monitored Brent crude oil closed at 19.33 $/bbl, while the WTI future dropped into minus for the first time in history. With support from the US, OPEC and Russian soon reached new agreements, as a result of which Brent stabilised at 43 $/bbl by the beginning of June. Only the news about the vaccine that came in November gave a boost to a new rise. The year’s average Brent remained at 43 $/bbl, which is 33% lower than in 2019 and one dollar lower than in the 2016 crisis.

VKG sells most of the produced oils on the basis of the price of fuel oil with 1% sulphur content. Compared to the Brent crude oil, the 1% fuel oil market is less liquid and the price of fuel oil may move differently from Brent, depending on the ratio between supply and demand. As VKG’s expenses are denominated in euros, the company’s results are also influence by the US dollar rate. Thus, the Group’s results are best characterised by the following fuel oil price curve.

Due to the pressure arising from the European Green Deal, the Group reviewed its investment strategies at the end of 2019 and decided to cut its 2020 investments to 20 million euros (30.2 million euros in 2019). The oil market crisis caused by the COVID-19 pandemic forced the Group to cut its investment plans by a further 6 million during the year, with the remaining 14.2 million euros divided as follows between different areas:

The expected investment volume of 2021 has been raised to 29 million euros which includes investments postponed in 2020 as well as preparations for a one-time major investment into the renovation of Petroter I in 2022, as the plant has been operating for more than 10 years by today.