Neste Oil reports healthy renewable diesel margins

By Susanne Retka Schill
Web exclusive posted August 1, 2008 at 10:55 a.m. CST

Neste Oil Corp. reported strong profits in its second quarter financial presentation July 31, partially due to what Neste Oil President and Chief Executive Officer Risto Rinne described as healthy margins in their renewables division.

With the first NExBTL unit brought online in summer of 2007, the oil company's second quarter results for renewables jumped from a negative €5 million ($7.8 million) in 2007 to profits of €13 million ($20 million) in 2008. Those results were dampened somewhat by project and development costs, although the renewable fuels division's rolling 12-month return on net assets at the end of June was 8.0 percent. The six-month comparable operating profit in renewable fuels was €15 million ($23.5 million).

Overall, the oil company's operating profit for the second quarter was €300 million ($469 million) on €4.4 billion ($6.9 billion) in sales. According to the company, a higher total refining margin and good sales margin on renewable fuels had a positive impact, whereas the weak U.S. dollar and lower margins in the specialty products division had a negative impact.

"The cornerstone of Neste Oil's growth strategy is the company's proprietary NExBTL technology," the Finnish company said in its quarterly report. The technology produces a premium-quality renewable diesel fuel from vegetable oil or animal fat that the company said outperforms methyl ester biodiesels and crude oil-based diesel products.

A second NExBTL plant is under construction at Porvoo, Finland, alongside the first 170,000 ton per year (51 MMgy) unit. The second unit, costing more than €100 million ($156 million) is scheduled to be commissioned in 2009. Construction of an 800,000 ton per year (240 MMgy) NExBTL renewable diesel plant in Singapore started in March. In June, Neste Oil announced it intends to build another 800,000 ton per year (240 MMgy) plant in Rotterdam, in The Netherlands. The estimated cost of the plant is €670 million ($1 billion), and is expected to come on line in 2011. Neste Oil will work with the same key partners in Rotterdam that it selected for its project in Singapore. Technip Italy SpA will act as the project's main contractor and Air Liquide Group will supply the hydrogen required by the process.

The company has set a goal to switch to non-food feedstocks, such as wood residue and new non-edible oils, by 2020. Neste also has a joint program with Finnish forest products company, Stora Enso, to develop wood residue gasification and gas purification technology for use with renewable diesel feedstocks.