Estonia's VKG chooses builders of diesel plant

Photo: Toomas Huik

The Estonian privately held chemical company Viru Keemia Grupp (VKG) has chosen a consortium made up of the Italian company KT - Kinetics Technology and the Spanish company OHL Industrial as the winner of a tender to build a diesel refinery for VKG.

The tender was for a turnkey contract and the size of the winning offer has not been disclosed. The price tag of the entire refining complex together with a facility for making hydrogen from natural gas has been put at approximately 400 million euros, the daily Postimees reported earlier this month.

In addition to the winning consortium three other companies -- Korea's Samsung, the Spainish company Tecnicas Reunidas and Technip of Italy -- took part in the tender.

«It was a very strong contest, all the offerors did a lot of work. The ones that worked particularly hard were the Koreans. Kudos to them! They had done really a lot of engineering work at home, but their price was the highest,» VKG board member Jaanus Purga told the newspaper. «It came as a cold shower. But, fortunately, the Korean offer was the most expensive and the more envelopes were opened the better things got.»

Under plans, the refinery would be able to process about 750,000 tons of shale oil per year, turning less than half of it into diesel and the other half into low-sulphur ship fuel, plus 7-8 percent into stabilized gasoline.

Purga said VKG was not rushing the investment decision. «There's plenty of time to make the investment decision, we're in no hurry. Recently we learned about many surprising things,» Purga said referring to the decision of the state-owned Eesti Energia to abandon the plan to build a refinery of its own and to start negotiations with local shale oil producers on setting up a common diesel plant.

«Maybe it makes sense to build a single refinery in Estonia,» Purga said. The management at VKG is weighing that option now. At the same time, negotiations with the owners of Eesti Energia and Kivioli Keemiatoostus have not started yet.

Since VKG has a turnkey offer on the table it can now think on whether to embark on the project alone or to build a larger facility with the help of other oil producers. Cooperation with rivals is inevitable because VKG would not be able to supply the required amount of oil even after completing its own shale oil producing assets. Cooperation with others would mean either participation in the investment or an agreement on the supply of oil.