4Fields of activity
Our goal and one of the most important principles is adding the value to the oil shale processing value chain and its extension. The existing value chain at VKG is the longest in Estonia and one of the longest in the world.
In order to add maximum value to oil shale as the main input in oil production, we also operate in the following areas in addition to our core activity:
Excavation of oil shale
The excavation of oil shale at VKG takes place at the Ojamaa mine, which is the most recent in Europe and the first new mine in Estonia that was built after regaining independence. Since the layer of oil shale is deposited in the bed that is more than 30 metres deep, underground extraction is used at Ojamaa.
Every day about 150 units of wheeled machines are working underground, and 27 km of conveyors are used on a regular basis. Mining provides employment to about 540 people. By a good tradition, the friendly team of the mine selects the best of the best each year, who are awarded an honourable 'Honorary Miner' title. The best workers are also acknowledged on the last Sunday of August, i.e. on the Miners’ Day. So far, 63 workers of the Ojamaa mine, whose work has been acknowledged by their co-workers and the management of VKG, have been awarded this title.
The total surface area of the Ojamaa mine is 23,7 km2
The excavated area since the opening of the mine has been 10,3 km2
The annual production capacity is 4,5 million tons of oil shale
In 2020, VKG Kaevandused reduced the volume of commercial shale production to 4.14 million tons (4.37 million tons in 2019), as due to the crisis we aimed at cutting costs and using more shale from our stocks. In connection with the recovery of the market, we are planning to again produce the maximum allowed quantity of commercial shale, i.e. 4.35 million tons at the Ojamaa Mine in 2021.
Availability of oil shale resource
VKG assesses the availability of the oil resource in the short-term perspective, i.e. current supply, and in the long-term perspective, i.e. future supply.
Current supply
VKG assesses the availability of the oil shale resource both in the short-term and long-term perspective.
Considering all the oil production capacities, VKG’s need for oil shale is a total of 4.1 tons of the geological resource a year, i.e. 5.1 million tons of commercial shale. The mining permits issued to VKG allow the extraction of 2.77 million tons of the geological resource at the Ojamaa Mine, (3.5 million tons of commercial oil shale) and if other market participants do not extract their allowed volume in the full extent, the extraction volumes at the Ojamaa Mine can be increased to 3.5 million tons (4.35 million tons of commercial shale) through the retrospective extraction mechanism. This means that in order to purchase the missing 750,000 tons (15%) of commercial shale, VKG has to reach agreements with other market participants.
VKG currently cooperates with Kiviõli Keemiatööstus in purchasing oil shale. Although the oil shale need of the state enterprise Eesti Energia that holds a dominant position in the oil shale production market has decreased by nearly 60% in the past two years, disagreements with regard to the price of the sold raw material do not allow us to reach an agreement on mutually beneficial terms.
Future supply
Considering VKG’s extraction volumes and the various restrictions and extensions of the Ojamaa Mine, the existing extraction will cover VKG’s resource needs approximately until the end of 2030. Upon adding the agreement reached with Eesti Energia in 2019 with regard to sharing the Uus-Kiviõli mining field, the majority of the Group’s oil shale needs are covered at least until 2040. From the viewpoint of environmental sustainability, issuing the Uus-Kiviõli mining permit to VKG was the only right solution, as the said mining field is logistically at the best possible location in terms of VKG’s oil shale processing units in Kohtla-Järve and allows the maximum use of the existing infrastructure. The oil shale enrichment plant at the Ojamaa Mine will be able to ensure the processing of the production from the new mining field and there is no need to perform additional aboveground construction works and disturb the nature.
Shale oil
The main product of VKG is shale oil, which is obtained as a result of processing oil shale.
We have been dealing with shale oil production since 1924. We have been processing oil shale using the Kiviter technology for over 90 years, and since 2005, we have been developing the Petroter technology, too: Petroter I (2009), Petroter II (2014) and Petroter III (2015). The aggregate processing capacity of six production units is 5 million tons of oil shale a year, of which the Petroter plants make up 70%.
Kiviter oil plants are operating on the basis of lump oil shale, and oil is manufactured in vertical retorts, where gas is used as a heat carrier. The plants that are operating on the basis of Petroter technology use fine oil shale, and the manufacturing process takes place in horizontal retorts, while ash is used as a heat carrier
In 2020, the Group’s oil plants processed 4.75 million tons of oil shale in a year (–5.4%), producing 629,000 tons of shale oil products (–4.5%).
Of the goods produced, the production of coke suffered the proportionally largest drop (–36%), as both the demand and the price decreased. At the same time, we saw a positive surprise in the phenol products and fine chemistry market where the high demand increased our production by 55%. We estimate that the 2021 production volumes will probably remain on the same level as in the previous year.
Shale oil is used due to its small viscosity, low chilling point, and insignificant sulphur content mainly in order to improve the properties of heavy fuel oils, including as an additive to marine fuels, as a raw material in the chemical industry, and as fuel for boilers and industrial furnaces. Although the majority of the production is exported, shale oil is also used locally in driers, asphalt factories, and industrial and small boilers
The group's shale oil production, 2018 - 2020
TonnesGlobal demand for shale oil continues to grow in the coming decades
Unlike electricity production, shale oil has a clear potential and high added value as ship fuel. According to OECD’s forecast, maritime transport volumes will grow by nearly three and a half times in the coming 30 years. The multiplication of cargo transport volumes naturally also means a growing demand for ship fuels. The global ship fuel market will grow and there are currently no alternative carbon-neutral solutions for ocean ships.
Eighty percent of the fuel consumption of the shipping sector comes from international trade which has undergone a notable improvement in energy efficiency – the GHG emission per shipped ton is 32% lower than in 2000. There are currently more than 120,000 ships with a capacity of over 100 tons. Of these, 90% are cargo ships with an average useful life of 21 years. Which in turn means that any technological innovations will take time
Volume and growth forecast of international maritime trade
Manufacturing heat, steam, and electricity
A hundred years of experience in refining oil shale has taught us to get much more than just oil out of oil shale. Refining oil shale in VKG means the combined production of oil, heat and power, which is the most eco-friendly and economically efficient way to use this resource.
The shale oil production process generates oil shale gases that do not condense into oils and are transferred to VKG Energia where they are used for manufacturing heat, steam, and electricity. Heat energy is forwarded to the local central heating system, steam is sold to production companies located in the neighbourhood, and most of the electricity is consumed by the companies of the Group. In addition to that, we also use oil shale gases at the limestone plant, whose produce is consumed by our own sulphur-trapping devices that purify exhaust gases. This production chain guarantees the ultimately efficient and environmentally-friendly use of energy contained in oil shale.
VKG Energia’s electricity production formed 10% of all the electricity produced and 6% of all the electricity consumed in Estonia in 2020. VKG thus continues to be the second largest electricity producer in Estonia
In 2020, VKG Energia generated 436 GWh of heat energy, which is 3% less than in the previous year. This was caused by a decreased demand due to an extraordinarily warm year. Electricity production decreased by 6%, to 446 GWh, due to a decrease in the production of shale oils
In April 2020, VKG Energia rose to be Estonia’s largest controlled-capacity thermal power plant within one month, producing 40,782 MWh of electricity, which made up 15.5% of the 262,496 MWh produced in Estonia (previously 4.5%). In total, 41% of Estonia’s domestic electricity consumption was produced in the preceding month, the rest was imported.
The company rising to be the largest controlled-capacity thermal power plant at the capacity of 65MW was possible thanks to VKG’s unique vertically integrated value chain which allows us to participate in the electricity market without the state electricity production subsidy enjoyed by the rest of the local producers. The current production more of VKG Energia directly depends on the output of VKG Oil and, if necessary, we could also produce electricity from natural gas, if the market price of electricity allowed it.
Member of Management Board of VKG Energia
The company rising to be the largest controlled-capacity thermal power plant at the capacity of 65MW was possible thanks to VKG’s unique vertically integrated value chain which allows us to participate in the electricity market without the state electricity production subsidy enjoyed by the rest of the local producers. The current production more of VKG Energia directly depends on the output of VKG Oil and, if necessary, we could also produce electricity from natural gas, if the market price of electricity allowed it.
Member of Management Board of VKG Energia
Heat, electricity, and steam production in the Group
MWh- Electricity
- Heat
- Steam
Energy for over 30,000 clients in Narva, Narva-Jõesuu and Sillamäe
The sale of electrical power and network services is handled by VKG’s north-east Estonian subsidiary VKG Elektrivõrgud. The company’s service area includes Narva, Narva-Jõesuu and Sillamäe.
In 2020, 240.4 GWh of electricity was distributed. The volume of clients’ network services decreased by 4.2% compared to 2019. Above all, the consumption volumes of low-voltage corporate clients dropped, mainly due to the spread of the corona virus and the deterioration of the economic environment. During the emergency situation, hotels, spas, schools, cultural establishments and, in the spring, shopping centres were closed.
Subsidiary VKG Elektrivõrgud sells electricity in the free market on the basis of price packages developed by VKG Elektrivõrgud or in the form of general services to clients who consume electricity without an electricity contract. In 2020, the electricity sales volume decreased by 1.4% compared to 2019. Exchange and fixed supply prices have dropped during the year and the electricity sales volume is therefore lower than in the previous year. In 2020, electricity sales amounted to 102.5 GWh.
Every year, VKG Elektrivõrgud invests considerable amounts into the maintenance of power lines, substations and other equipment, thus increasing network reliability and reducing network losses. In 2020, VKG Elektrivõrgud commissioned new installations and reconstructed existing installations for 1.2 million euros. The enterprise pays great attention to electrical safety and constantly holds further training courses of its employees.
The enterprise completed the implementation of the IFS asset management programme and the new ArcGIS geo-information system started in 2019. The said solutions allow us to more efficiently manage assets and improve the planning of maintenance works and investments.
Oil shale chemicals
In addition to electricity, heat, and oil, different chemical products are also manufactured from oil shale. VKG still remains the only company in Estonia that manages to obtain valuable chemicals from phenol-water that is separated in the course of oil production at Kiviter plants. Our fine chemicals have a high purification level, i.e. over 99%.
Oil shale chemistry can be divided into two groups: oil shale chemicals (alkyl resorcinol fractions) and fine chemicals. The first group is widely used in rubber and plywood industry, the production of moulded forms, etc. The second group includes products with a high level of purity, which are used in cosmetics, perfume manufacture, and electronics. The main field of application of fine chemicals is the synthesis of medications and the manufacture of hair dyes. For example, fine chemicals produced in Estonia can be found in the products of such companies as Keune, Estel, and Schwarzkopf. Besides, they are used in the process of production of liquid crystals for LCD monitors.
Oil shale phenol fractions are used in the form of resin adhesives in the tyre, plywood, and oil industries and in the process of manufacture of tyres with high durability level (Goodyear, Pirelli and Bridgestone) as well as in the manufacture of Lexus and Toyota spare parts.
In 2020, we produced 2,288 tons of fine chemistry and phenol products, which were sold by the company both to Estonian and foreign customers. The chemicals produced at VKG were mainly sold to the markets in Great Britain, India, Italy, Belgium, and the USA. Now we are dealing actively with the expansion of our customer database for marketing standardized fine chemicals.
The production of fine chemicals contributes to the development of the national economy and oil shale industry since they are manufactured from the by-products of oil shale processing. Extensive research and development expenses as well as marketing expenses still remain a challenge in the oil shale chemical industry. The obligation to register chemical substances in accordance with the European Union REACH Regulation also entails significant expenses.
More information about fine chemicals is available here
www.finechem.eu
After a registration process that took nearly five years, we gained the right to sell our unique oil shale chemistry product Honeyol™ in the US market starting from July. Honeyol™ is used, for instance, in the tyre and leather industries. While in the European Union we are allowed to produce and distribute over 40 different chemicals made of oil shale, we are entirely new to the US market. The production of high added value fine chemicals is a part of a circular economy and extends the value chain of oil production.
Honeyol™ is one of the best alternatives for resorcinol which is a very commonly used chemical in the US market and therefore the potential of Honeyol™ is very high there.
Fine chemistry is a logical extension of our core production and we have systematically developed it since the beginning of the 2000s. We develop oil shale chemistry as a separate branch, because we see its distinct potential and believe in its future sustainability. This year, the demand for oil shale chemistry and phenol products for the first time exceeds the production volume, mainly due to the opening of new sales areas and directions. The opening of the US market is a natural extension of that development.
Technical Director, Vice-Chairman of the Board
Fine chemistry is a logical extension of our core production and we have systematically developed it since the beginning of the 2000s. We develop oil shale chemistry as a separate branch, because we see its distinct potential and believe in its future sustainability. This year, the demand for oil shale chemistry and phenol products for the first time exceeds the production volume, mainly due to the opening of new sales areas and directions. The opening of the US market is a natural extension of that development.
Technical Director, Vice-Chairman of the Board
Limestone production
VKG’s lime factory operates since summer 2014. The factory uses limestone from Karinu quarry, which is used to produce lime necessary for the operation of the desulphurization device.
Semi-coke and generator gases deriving from the production processes of shale oil are used to get energy for decarbonisation. Both the purified char gas and the mixture of semi-coke and generator gases can be used in the operating process. To mix and dose gases, a modern mixing unit has been built. It was developed by Viru Keemia Grupp and is a unique solution developed in Estonia for limestone production.
In 2020, the lime factory beat all the records in all the indicators. In a year, the factory produced more than 27,800 tons of slaked lime, which was used to the full extent in the flue gases in the SO2 capture process. At the same time, the increased quality and volume of the produced lime reduced the consumption of lime in the sulphur purification equipment. The production record was established in March – 2,610 tons. The equipment was accessible for about 8,300 hours. The average content of quicklime in the finished product was 74.6% a year, rising to 79.3% in December. The OEE indicator introduced in 2018 was 71.3% (previously not above 69%).
The lime factory’s production capacity fully covers all the current and future needs of VKG and also provides an opportunity to sell a certain amount of limestone to consumers outside of the Group.
Some of the products of desulphurization found use in agriculture. The product complies with the quality requirements set for lime fertilizers in the Fertilizers Act, which is also proven by a certificate issued to the company.
Special projects
The Group’s subsidiary Viru RMT is an engineering and project management centre with diverse know-how operating in the international market. The company has several decades of experience and offers repair and assembly services as well as the production, installation and maintenance of metal structures and metal components
Areas of activity of Viru RMT:
- electrical works from the lamps in the ceiling to transforming substations
- design, production and installation of technical equipment
- automatic management systems design, software development and installation
- installation and repair of control and measuring instruments
- maintenance and repair of lifting equipment, and lifting works;
- project management for the performance of integral technical solutions.
Main projects launched and implemented in 2020:
- automation of gas-nitrogen mixture disposal equipment for VKG Oil
- automation of new synthesis equipment cooling towers for VKG Oil
- construction of technical utility networks in VKG’s production territory
- installation and commissioning of a 6kV cable in VKG Energia’s phenol water pumping station
- renovation of the Martna 110 kV substation of Elering AS into a compact substation
- installation of earth fault current compensating equipment in the Järveküla 110/20 kV and Harku 330/110/20 kV substations of Elektrilevi OÜ.