Finland's Neste Oil heads for the top in biodiesel

Espoo, Finland's state-controlled Neste Oil is making good on its goal of becoming the world's leading producer of biodiesel.

The company announced plans today to build what it said would be the largest biodiesel plant in the world, with a capacity of 800,000 tonnes, or about 245 million gallons, per year.

The $810 million facility will be built in Singapore, near its palm oil feedstock. Construction is expected to start in the first half of 2008, with plant scheduled to be operational by the end of 2010.

"The main market is likely to be Europe, because Europe is requiring big volumes of high-quality biofuels in the future," said Jarmo Honkamaa, deputy CEO of Neste Oil and head of the company's biodiesel business, in a conference call.

"However, there has been lots of interest for this product also in the local market in Singapore, also in Korea and Japan," he said. "And California is also a potential market for this volume."

Today's announcement is just the latest, and biggest, move in the company's previously stated plan to invest several billion euros in biodiesel over the next 10 years.

Neste Oil's first facility using its proprietary NExBTL process was commissioned in Finland at the company's existing Porvoo refinery in the summer, with a second due to come on stream there in 2009. Annual production at each plant will be 170,000 tonnes.

Take a look at the Porvoo site here >>

The NExBTL technology can use any vegetable oil or animal fat as its input. The company said its process, which produces a non-oxygenated hydrocarbon biodiesel, offers larger reductions in both greenhouse gas emissions and pollution compared to traditionally produced fatty acid methyl ester biodiesel.

Des Plaines, Ill.-based UOP, a subsidiary of New Jersey's Honeywell International (NYSE: HON), is working on technology similar to Neste's.

"But they are only planning at this point," said Honkamaa. "We have a plant running that took us three years to complete. So we would say that they are at least three years behind us."

UOP said it expects its first commercial Green Diesel plant to go into operation in a European refinery in early 2009.

Neste Oil's Singapore plant, which will cover 47 acres, will be built in the Tuas industrial zone in the southwest of the island. The company said the facility will be integrated into the area's existing infrastructure, making use of local site utilities and port and storage services.

When its operational, Neste Oil said the plant will employ around 100 people.

The company said it is committed to using only palm oil certified by the Roundtable on Sustainable Palm Oil as soon as sufficient quantities are available.

The Roundtable, based out of Kuala Lumpur, was started in 2004 by founding members Aarhus United UK, Sweden's Karlshamns, the Malaysian Palm Oil Association, Switzerland's Migros, Netherlands-based Unilever, and the Worldwide Fund for Nature.

Groups like Greenpeace have protested Neste Oil's use of palm oil, claiming that forests and peatlands are destroyed to meet the growing demand for the feedstock.

Neste Oil said palm oil complying with the RSPO certification system, which was approved this month, will probably be available from the early part of 2008 onwards.

And the company will need that palm oil if it continues with its plans. "We believe that we will continue this program in other parts of the world," said Honkamaa

Earlier this year, the company had to dump plans for a biodiesel project at a Total refinery in France, saying it would have been too expensive at that location, but the company is continuing to make plans with Austria's OMV for a NExBTL facility near Vienna.

The proposed 200,000 tonne per year Austrian plant, which is undergoing an environmental assessment, is expected to start production by the end of 2008 at the earliest.

Honkamaa said the company is looking at investments similar to the size of the Singapore facility in the future, naming the Benelux area in Western Europe and the United States as potential locations.

"I think the logical locations for these types of plants are either where the raw material is or where the market is."