Investing 1.5 billion euros ($1.64 billion) in NExBTL refining capacity, importing waste-based and virgin feedstock from around the world, and exporting renewable diesel to many of those same overseas markets are capital-intense endeavors&mdash;but they&rsquo;re also highly profitable. Last year, Neste Oil&rsquo;s operating profit for its renewable diesel division was 238 million euros, says Kaisa Hietala, executive vice president of renewable products for Neste Oil Corp. &ldquo;That&rsquo;s around 40 percent of Neste Oil Group&rsquo;s total profit,&rdquo; she tells Biomass Magazine. The company produced 2.1 million metric tons (more than 680 million gallons) of renewable diesel last year from its two NExBTL refineries in Singapore and Rotterdam, each of which has a nameplate capacity of 800,000 tons per year, and its Porvoo oil refinery in Finland, where two 190,000-ton-per-year NExBTL units were commissioned in 2007 and 2009. The Singapore and Rotterdam NExBTL refineries came online in 2010 and 2011, respectively. All three sites can produce biojet fuel and renewable diesel. In 2014, Neste Oil&rsquo;s average run rate for NExBTL was an impressive 98 percent. While 2014 was a very profitable year for the company&rsquo;s renewable diesel business, it couldn&rsquo;t match the record year of 2013 from which the division&rsquo;s comparable operating profit was 273 million euros. Feedstock Procurement As the world&rsquo;s largest producer of renewable diesel, Neste Oil&rsquo;s reach for adequate volumes of feedstock must be truly global, particularly as the company positions itself to rely more heavily on waste- and residue-based inputs as a result of political directives in destination markets to reduce greenhouse gas emissions and indirect land use change. In 2014, Africa and Antarctica were the only two of the world&rsquo;s seven continents from which Neste Oil did not secure renewable feedstock. &ldquo;We have successfully searched for waste and residue volumes for our production, and last year their share was already over 60 percent,&rdquo; Hietala says. Of the 2.1 million tons of renewable diesel produced last year, 1.3 million tons were from waste- and residue-based materials, or roughly 62 percent of its feedstock consumption. That&rsquo;s up from 52 percent in 2013, and 35 percent in 2012. In 2014, the company sourced its waste and residues such as animal fat, waste fish fat, palm and other vegetable oil fatty acid distillates, distillers corn oil, spent bleaching earth oil and other waste-based materials from Australasia, South America, Europe, Southeast Asia and North America. Used cooking oil became a part of the company&rsquo;s feedstock base for the first time last year. &ldquo;This is work that needs to be done on several fronts, as new feedstock must be validated for our pretreatment and production process, and relevant volumes must be found,&rdquo; Hietala says. Neste Oil&rsquo;s pretreatment process is based on a bleaching unit to reduce impurities that would otherwise foul the catalyst in the hydrotreatment unit. The bleaching process begins with the addition of an acid to form a salt, and then removal of that salt by precipitation. The feedstock is subsequently fed through silica or bleaching earth, which act as adsorbents for further reduction of impurities. &ldquo;Then there are vendor audits and traceability,&rdquo; she says. &ldquo;As an example, in the case of waste animal fat, we source on five continents and are clearly the largest buyer in the world. Our aim is to be able to use only wastes and residues by the end on 2017 if we so choose.&rdquo; Historically, Neste Oil has relied on crude palm to make its renewable diesel, but as its use of waste feedstocks increases, its reliance on palm oil has waned considerably. In 2012, 65 percent of Neste Oil&rsquo;s feedstock was palm. That dropped to 47 percent in 2013 and 38 percent last year. In 2014, the company sourced its palm oil from 212 plantations in Malaysia and Indonesia. Palm oil is one of the most contentious feedstocks for biofuel, particularly in less developed countries where there are concerns of deforestation to establish palm plantations that provide much-needed economic relief where there would otherwise be little. Simo Honkanen, senior vice president of sustainability and public affairs for Neste Oil, says the fuel industry is the most regulated of all using palm oil. &ldquo;Regulations are setting strict requirements on traceability, environmental performance, land use, greenhouse gas emissions and reporting,&rdquo; he says. &ldquo;Our palm oil supply chain is fully certified and it is audited on a regular basis by external auditors. All our suppliers have to pass a sustainability due-diligence assessment before they sign a supply contract with Neste Oil. We review their land use history, production procedures and certification status, as well as their policies concerning deforestation. We only buy from old estates. Neste Oil believes in continuous improvements. Therefore, we have a dedicated team only focused on palm oil sustainability work with our producers. This work is much easier for us because we know the supplying estates in detail.&rdquo;&nbsp;&nbsp; Honkanen says Neste Oil&rsquo;s sustainability system is based on careful vendor selection, traceable supply chains, third-party auditing, legal requirements and continuous development. &ldquo;We comply with U.S. EPA requirements as well as EU biofuels sustainability requirements,&rdquo; he says. &ldquo;We are actively promoting sustainability in the Roundtable on Sustainable Palm Oil and contributing to developing legislation on sustainability issues.&rdquo;&nbsp; The company&rsquo;s three renewable diesel production facilities in Singapore, Rotterdam and Finland use different feedstocks at different times, Hietala says, and the suppliers and countries from which those plants import feedstock varies. &ldquo;We optimize our feedstock according to price and markets,&rdquo; she says. &ldquo;Our NExBTL technology is very flexible and we can use a dozen different feeds. On top of product quality, this is our key competitive edge.&rdquo; Export Markets Europe and North America are Neste Oil&rsquo;s key markets, &ldquo;but we are actively looking into other markets too,&rdquo; Hietala says. Europe receives the lion&rsquo;s share of NExBTL, followed by North America and Asia-Pacific. &ldquo;Our sales volume increased by 9 percent from the previous year,&rdquo; says Neste Oil&rsquo;s President and CEO Matti Lievonen. &ldquo;A significantly higher share, 73 percent of the volume, was allocated to the European market in 2014. The volume allocation reflected the margin situation and continued regulatory uncertainty in the U.S. The decision to reintroduce the U.S. Blender&rsquo;s Tax Credit for 2014 was confirmed in late December. It had almost a 90 million euros positive impact on the segment&rsquo;s comparable operating profit.&rdquo; Of the nearly half a billion gallons of NExBTL entering Europe last year, Hietala wouldn&rsquo;t disclose which EU countries were the largest recipients. &ldquo;Neste Oil is an active player in many markets in EU,&rdquo; she says. &ldquo;We have estimated that NExBTL-blended in fossil diesel is being used by several million customers EU-wide.&rdquo; Hietala says about one-fifth of Neste Oil&rsquo;s NExBTL production quantities for 2014 was shipped to North America. This equates to roughly 136 million gallons. &ldquo;Both the U.S. and Canada are our markets,&rdquo; she says, not disclosing how much product goes to Canada versus the U.S. The incentive for Neste Oil to send its fuel to the U.S. is strong, given the added economic incentive of generating renewable identification numbers (RINs) under the federal renewable fuel standard (RFS). Moreover, for NExBTL product entering the U.S., the California market specifically is an even stronger lure due to the added incentive of low carbon fuel standard credit generation. Again, Heitala would not say how much product sent to North America is destined for the California market. &ldquo;We do not disclose these figures, but as a leading state decarbonizing its transport, California is very important also to us,&rdquo; she says. Palm-based renewable diesel does not qualify for D4 biomass-based diesel RIN generation in the U.S. because EPA has not determined that it meets the 50 percent GHG reduction threshold required to satisfy qualification as a biomass-based diesel. Palm-based diesel does, however, qualify for D6 renewable fuel generation as it satisfies the 20 percent GHG reduction threshold for that category. Neste Oil is registered to produce &ldquo;non-ester renewable diesel&rdquo; with a RIN equivalence of 1.7 for both D4 and D6 RINs, depending on the feedstock. When asked how much of its NExBTL entering the U.S. qualified for D4 RINs versus D6 RINs, Hietala would only say, &ldquo;Our primary market in the U.S. has been and is the D4 market.&rdquo; EPA&rsquo;s 2014 EMTS data shows that nearly 320 million gallons of non-ester renewable diesel qualified to generate D4 RINs in 2014, and more than 151 million gallons of non-ester renewable diesel qualified to generate D6 RINs. Some of the D4 non-ester RINs were generated domestically by Diamond Green Diesel (130 MMgy capacity) in Norco, Louisiana, and Renewable Energy Group at its Geismar, Louisiana, biorefinery (75 MMgy capacity). The rest was from Neste Oil and other importers. Some sources have suggested to Biomass Magazine that most, if not all, of the non-ester renewable diesel generating D6 RINs came from Neste Oil&rsquo;s palm-based NExBTL but the numbers don&rsquo;t quite add up, and there is no way for this to be determined with certainty. Neste Oil&rsquo;s first shipment of its NExBTL renewable diesel to the U.S. landed in 2012. According to a corporate press release issued April 26, 2012, the fuel qualified as an advanced biofuel and was produced at its Porvoo refinery in Finland from waste fats. &ldquo;We are very pleased to see that legislation on renewable fuels and our ability to meet the import regulations for these types of fuels are progressing in various markets,&rdquo; said Matti Lehmus, Neste Oil&rsquo;s executive vice president of oil products and renewables, in 2012. &ldquo;This enables us to participate and contribute to the greenhouse gas reduction efforts around the world.&rdquo; &ldquo;It is a demanding and time-consuming process to get these certifications for feedstock, supply chain and refineries,&rdquo; Hietala says. &ldquo;We started the work early and have been cleared for them for over two years now. The registration process is different for EU and the U.S., and therefore a global player like Neste Oil is required to meet specific requirements for each cargo we sell. Differences occur in areas like the approval process, documentation, reporting, certification systems and more.&rdquo; She says renewable fuels programs &ldquo;create the market, so they are important,&rdquo; and help determine into which markets the company sells its renewable product. &ldquo;Countries and regions have them in order to fight climate change, and high-quality renewable fuels such as our NExBTL renewable diesel are readily available for this cause.&rdquo; As far as how important tax incentives are in playing a role in determining export markets, she says, &ldquo;We do not speculate on tax incentives&mdash;they either exist or they don&rsquo;t.&rdquo; Neste Oil plans to increase its renewable diesel production capacity to 2.6 million tons by 2017. &ldquo;This is mainly debottlenecking some parts of our process and learning to operate the refineries better,&rdquo; Hietala says. &ldquo;No major investments are needed.&rdquo; She adds that the company is constantly looking for new markets, and it is a strong possibility that new applications, such as low-level blends of biojet fuel or biobased chemicals, will increase the demand of NExBTL &ldquo;considerably.&rdquo; Author: Ron Kotrba Senior Editor, Biomass Magazine 218-746-8347 <a href="mailto: rkotrba@bbiinternational.com">rkotrba@bbiinternational.com</a>

Neste Oil shipped its first cargo of NExBTL renewable diesel to the U.S. in 2012 where it qualified as an advanced biofuel and D4 RIN generation under the federal renewable fuel standard.

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Neste Oil is leveraging waste- and residue-based feedstocks more and more to comply with increasingly stringent political directives in its destination markets. Last year, 62 percent of its renewable diesel was produced from waste-based materials.  

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Neste Oilâ€™s Rotterdam NExBTL production facility has a nameplate capacity of 800,000 tons per year and came on line in 2011 as its newest renewable diesel facility. 

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Simo Honkanen, Neste Oilâ€™s senior vice president of sustainability and public affairs, says of all the industries that use palm oil, the fuel industry is the most heavily regulated. He says all its palm suppliers must pass a sustainability due dili

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Neste Oil imports feedstock from five continents to process renewable diesel in Singapore, Rotterdam and Finland, then ships its fuel to destination markets in the EU, North America and Asia-Pacific. 

Feedstock Importer, Renewable Diesel Exporter

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