YEARBOOK 2014 2 INTRODUCTORY WORD OF THE CHAIRMAN OF THE BOARD PRIIT ROHUMAA CHAIRMAN OF THE BOARD 3 The year 2014 was an anniversary year for Viru Keemia Grupp VKG has been one of the best partners for people during the concern. On 24th December 90 years since Shale Oil production process of Põlevkivi conversion. Our value chain, that starts has started in Kohtla-Järve were celebrated. with the newest and most up-to-date mines in Europe - Ojamaa Mine, also consists of three most up-to-date Petroter´s type oil Looking back to these ninety years we can say that Oil Shale factories, two power stations, district heating areas in two cities production has always been characterized by the excellent tech- and electricity distribution network. In addition, we produce fine nological development during different political times. Oil shale chemicals and resins from oil shale and also construction materi- products were produced for the first time in 1924, then during als from the wastes. Taking all this into account, we can confirm the period between 1950´s – 1960´s - oil shale gas was main- that our value chain adds a great deal of value and a high tax ly produced, which was sold to Tallinn as well as to Leningrad. contribution to the whole country. The analyses of PWC and EY Today, only a few people can still remember that Raua Street carried out by the consulting firms show that VKG provides 1% Sauna and Liviko Factory were the first buyers of oil shale gas for the Estonian GDP and covers about 1 % of the country´s tax- in Tallinn. After that, when the production of oil shale gas was ation. finished due to its uselessness, our enterprise went back to oil shale production. The constant development is the main feature of our enterprise and one of our three values. In addition to that, VKG is open to During such a long history of our enterprise both a number new knowledge, challenges and changes as well as development of rapid development stages and the biggest oil market crises of the region. The third value, which is also considered as a very took place. It is worth mentioning that the first 74 years of our important direction of our enterprise, includes dedication to our important past, the company was a State Enterprise, and only production, our employees and the region, where we work. for the last 16 years, after the privatisation process, it has been Unfortunately, the anniversary year has also brought some sad based on privately owned capital. events. The sudden drop of the world´s oil market resulted in closing down 2 Kiviter-type factories and reduction in the num- At the end of 1997 the state privatised the state enterprise RAS ber of our employees. Kiviter stating that the future investor would contribute to tech- nology, the growth of working places and would also solve im- We have been trying to explain to our state, that the oil shale portant environmental problems. Today, in our anniversary year sector is very sensitive to both the prices of the world´s oil mar- we can state, that VKG has been a good partner for our country. ket and to the relations of CO2 trade, which have been recently During the last 9 years our concern has created more than 1200 put into effect. We believe that the value chain of oil shale can well-paid working places in Ida-Virumaa. The concern employs still grow significantly, if by performing the same amount of dig- 2300 people. Within the whole period after the privatisation ging we can produce more expensive products and more con- VKG has invested about 8, 000 000 euro into the production struction materials from mineral wastes. Such a development modernisation, such as mining, new oil factories, energetics. In is, of course, connected with large investments, which VKG is addition, we have been successfully dealing with environmental able to carry out with the state´s stable resource and tax policy problems such as water treatment, waste discharge, emissions support. to the air, which were not solved before the privatisation of the state enterprises. VKG fast development was possible thanks to our workers, who are the best specialists in their sphere and who have definitely VKG fast development became a reality thanks to the effective deserved gratitude and recognition. Together with personal de- implementations of the open communication as well as the sus- velopment we have done very important things and put into ef- tainable development and the principles of social responsibility. fect big investment projects. By keeping our promises and hold- Our whole massive investment programm is financed by a syn- ing to the deadlines together with our technical professionalism dicate of three banks, which has been recently joined the forth we have deserved the respect from our investors. We are very one: the European Bank of Reconstruction and Development grateful to you for that! (EBRD). Over the last years these banks loaned VKG over 500 million euro. The financial support of EBRD is a kind of a preti- gious quality mark, which demonstrates that the activity of VKG in the oil shale industry of Estonia meets all the high standards of the European Union regarding the sustainable delevopment and enviromental protection. CONTENTs 2 INTRODUCTORY WORD OF THE CHAIRMAN OF THE BOARD 4 CONTENTs 6 OIl sHAlE IN THE WORlD 17 ECONOMIC INDICATORs 20 R&D ACTIVITIEs 23 ENVIRONMENTAl ACTIVITY 25 SOCIAl REsPONsIBIlITY 31 AREAs OF ACTIVITY 32 EXCAVATION OF OIl sHAlE 35 OIl sHAlE PROCEssING 37 OIl sHAlE CHEMIsTRY 39 OIl sHAlE ENERGY 41 PRODUCTION OF CONsTRUCTION MATERIAls 43 THE COMPANIEs sUPPORTING THE MAIN PRODUCTION AREAs OF VKG 49 CONTACTs 6 OIl sHAlE IN THE WORlD THE LARGEST OIL SHALE PROCESSING COUNTRIES IN THE WORLD BRAZIl EsTONIA CHINA 2.4 million tons 15 million tons 14.5 million tons per year per year per year The entire production is aimed at Approximately 11 mln tons for Very little is used for production of producing oil. production of energy, 4 mln tons energy, the majority is for production for production of oil. of oil. 7 THE LARGEST OIL SHALE PROCESSING COMPANIES IN ESTONIA Oil shale production in Estonia in 2014 770 000 tons of oil The share of vkg amounted to 433 000 tons of oil Or 57% 8 SUBSIDIARIES OF VKG PRODUCTION VKG Oil VKG Kaevandused VKG Energia oil shale processing extraction of oil shale production of heat and power VKG Plokk production of Roclite building blocks sERVICEs VKG Transport VKG Soojus VKG Elektrivõrgud railway and vehicle transport services heat network service electric power network service and sales VKG Elektriehitus Viru RMT construction and repair of electrical assembly, repair and maintenance of systems industrial equipment RECOGNITION >> Responsible Estonian Business >> On 23 February 2012, Nikolai >> Environmental Enterprise of 2010, 2011, 2012, 2013, 2014 Petrovitš, a member of the VKG the Year 2011 in environmental board and the head of the best management category >> Estonian Culture-Friendly enterprise in Estonia in 2009, VKG Business 2012, 2013, 2014 >> Enterprise of the Year in Ida- Oil, received an Order of White Virumaa >> In October 2012, Viru Keemia , IV class from the President Star 2010 Grupp was listed among the three of Estonia Toomas Hendrik Ilves, best companies in the category for supporting the development >> Best Estonian Enterprise of Sustainable Growth of the of the region. According to Nikolai 2009 VKG Oil AS Swedish Business Award Petrovitš, his order belongs to the entire VKG team. 9 GEOGRAPHICAL SALES DISTRIBUTION OF THE PRODUCTS AND SERVICES OF VKG >> Estonia >> Germany >> Latvia >> Malta >> Lithuania >> Austria >> Sweden >> France >> Finland >> Spain >> Norway >> Italy >> Denmark >> China >> Poland >> India >> Belarus >> New Zealand >> Ukraine >> Russia >> Romania >> United Arab Emirates >> United Kingdom >> Japan >> Netherlands >> South America >> Switzerland MAIN PRODUCTS AND SERVICES OF VKG >> Ship fuels >> Vehicle and railway transport services >> Heating oil for local heating boiler plants >> Steam and air conditioning for large-scale industrial companies >> Electrode coke for electrode manufacturers >> Production, transfer and sale of heat and energy to >> Oil shale fine chemical products for perfumery, households and companies cosmetics and textile industries >> Repair, assembly and rental services of machinery and >> Oil shale gas for production of heat and power equipment >> Consulting services in the field of oil shale processing technology NIKOLAI PETROVITš MEMBER OF THE VKG OIL BOARD, MEMBER OF THE VKG BOARD 11 MAIN INDICATORS IN 2014 Number of employees Profit 2179 10 people million euro Turnover Investments into environment and development 194,6 99 million euro million euro THE MAJOR ENVIRONMENTAL AND DEVELOPMENT PROJECTS IN 2014/2015 CONsTRUCTION OF THE PETROTER III COMPlETION OF THE CONsTRUCTION PlANT OF THE lIME PlANT at VKG ENERGIA In 2014 the investments into Petroter technology amounted to Construction of the lime plant was completed. As a raw mate- 66.6 million euro. At present, two shale oil plants are based on rial, the limestone remaining from the extraction of oil shale Petroter technology. The launching of the third plant is sched- at VKG Ojamaa mine is used, while for lime furnace, the gas uled for autumn 2015. The daily capacity of each plant is 3,000 generated in the course of shale oil production is used, and the tons of oil shale. The launching of the third plant (Petroter I was produce of the plant is used for trapping SO2 from flue gases at put into operation in June 2010, while Petroter II was launched VKG Energia power stations, in accordance with the current and in September 2014) will more than double the previous pro- future environmental requirements. Such a wise and efficient duction capacity of VKG.