InterviewNeste targets 15% return on biodiesel

15 January 2008 10:42  [Source: ICIS news]

By Florence Tan

 

SINGAPORE (ICIS news)--Finnish refiner Neste Oil has targeted a 15% after-tax return on capital employed for its €550m ($820.9m) Singapore biodiesel project at a time when many southeast Asian plants are forced to idle or operate their plants at low rates on record-high crude palm oil (CPO) feedstock prices.

 

“The secret here is to use a wide range of feedstocks then you will be competitive. If you’re dependent on only one, you will be hurt in some stages,” Risto Rinne, president and CEO of Neste, said in an interview.

 

Neste was confident that its 800,000 tonne/year project on Jurong island, the world’s largest biodiesel unit, would meet its profit target as it could use a wide range of vegetable oil and animal fat feedstocks and its customers were willing to pay a premium for its quality, he added.

 

Rising concern for climate change would also push for more renewables, he said.

 

Neste has put the current global demand at 15m tonnes, mostly from Europe, and it would double in 2010. The current production stands at 6m-8m tonnes.

 

“We believe that there will also be markets for biodiesel here in Asia and probably in Singapore,” Rinne said.

 

In Europe, a mandate for a 5.75% bio-content in gasoline and diesel will be enforced in 2010, said Neste deputy CEO Jarmo Honkamaa said.

 

“We are a fairly small player [and] our own commitment is very easy to fulfill, but the big oil companies really have a big challenge. We will be part of the solution,” he said, adding that customers liked the product which could be used to improve the quality of diesel.

 

“If palm oil is produced in sustainable way, it will cut down CO2 production [from Neste’s biodiesel] by 40-60%,” said Rinne.

 

Malaysia’s IOI is supplying most of the CPO required at Neste’s first 170,000 tonne/year plant at Porvoo, Finland.

 

 The Singapore project would require 1m tonnes/year of vegetable oil or animal fat feedstock, with up to 80% CPO supplied from Malaysia and Indonesia depending on price and availability, Rinne said.

 

Even as high CPO costs and sustainability issues cast doubt on the project, the company said there was no technology to use other feedstocks.

 

“There is another alternative also, let’s do nothing and wait 10 years for the new technologies and we chose not to do that, Rinne said, adding that it decided to build plants while developing new feedstocks at the same time.

 

“Algae oil is so promising that we can use them in the second part of the next decade,” Rinne said.

 

The company was also building a pilot plant using biomass feedstock which will start up next year, Rinne said, adding that a commercial unit could come on stream in 2013.

 

Increasing palm oil production in ways that will not destroy nature or livelihood would be another solution, but it was challenging, he said. Neste buys only from producers which are certified by the Roundtable on Sustainable Palm Oil (RSPO).

 

Industry sources have questioned the effectiveness of the non-profit organisation.

 

“We have to set or change the rules so that unsustainable production of palm oil is bad business,” Rinne said, hoping that other companies will follow too.

 

($1 = €0.67)

 

Bookmark Simon Robinson’s Big Biofuels Blog for some independent thinking on biofuels

By: Florence Tan
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