Business and economic activity
Work safety and operational reliability continued to be priorities in production.
VKG’s core activities are divided into three major stages in the process chain: the extraction of oil shale, the production of shale oil products, and the production of energy. The Group also includes two service companies which provide logistics and repair services mainly to other Group companies.
The production of 669,000 tonnes of oil products by VKG in 2023 was the best result so far for the Group
In addition to the ongoing structural reorganisation of the Group, VKG’s main priorities as a manufacturing company in 2023 were to improve the energy efficiency of production and ensure the reliability of equipment and the occupational safety of employees.
The production of 669,000 tonnes of oil products by VKG in 2023 was the best result so far for the Group, so in terms of reliability the result is satisfactory. However, we continue to see room for improvement, as there were a number of emergency shutdowns throughout the year, caused either by subcontractors’ mistakes, carelessness from our own employees or miscalculations regarding equipment durability. We are pleased with the progress made in improving the energy efficiency of the production process. In 2023, the energy consumption (i.e. the amount of electricity and natural gas) per tonne of oil products was 12% lower than in 2022 and 13% lower than in 2021. There is still room for improvement in this area as well, particularly in terms of energy production efficiency. However, the occupational safety results for 2023 were not positive. Although the target was set to reduce the number of accidents at work leading to incapacity for work, the actual number of accidents at work turned out to be almost 25% higher than in the previous year. There were certainly some improvements in the area of occupational safety in 2023 (see the chapter ‘Working environment and occupational safety’ for more details), but the overall result was not satisfactory and work will continue in 2024 to improve safety in production.
When comparing production figures for 2023 with the previous year, it should be noted that 2022 was only half a production year. In addition, VKG no longer holds non-current assets related to production, but rents these from Kirde Varad AS under a long-term contract. Pursuant to the requirements of IFRS 16, VKG still reports long-term lease obligations as non-current assets. While as at 31 December 2022 VKG continued to own the assets related to oil shale extraction, as at 31 December 2023 those assets have also been transferred to Kirde Varad and VKG will purchase the oil shale required for oil production from Kirde Varad’s subsidiary VKG Kaevandused OÜ on the basis of a long-term contract. This is the reason for the drop in both the balance sheet volume and equity compared with the previous year. Although market conditions were worse in 2023 than in 2022, both profit and net profit margin have improved. This is due to the fact that Petroter I was idle for a large part of the second half of 2022 due to major repairs, resulting in lower than normal production and sales in 2022.