The Future of Biofuels: Achieving Targets and Remaining Competitive Jarmo Honkamaa Neste Oil Deputy CEO and Executive Vice President, Renewable Fuels European Refining Markets 27 September 2010, Brussels
Neste Oil - Three business areas Oil Refining Two refineries in Finland with an annual output of about 14 Mt/a of petroleum products Renewable Fuels Premium-quality Renewable Diesel based on Neste Oil s proprietary technology Oil Retail Market leader in Finland and a significant player in the St. Petersburg area in Russia, Estonia, Latvia, Lithuania, and Poland 2
Our goal is to be the world s leading producer of Renewable Diesel 3
The big picture in energy consumption
Megatrend - Increasing demand on energy and challenge with climate change Energy consumption increasing by 50% in next 25 years Majority of growth from transportation Urgent need for new energy sources Energy supply will have to be based on multiple energy forms and technologies New feedstocks are needed, e.g. bio mass, new biobased raw materials, waste etc etc Transportation Source: EIA 2007 ja IEA 2008 5
Market drivers for Renewable fuels Climate change need to reduce Greenhouse Gases Eg. The EU has a mandatory 10% energy content based target for biofuels for 2020 The desire to reduce our dependence on Crude Oil Price volatility The need to improve security of supply In practice, all industrialized countries have targeted increasing their use of biofuels 6
Further topics on biofuels Markets are and will be based on regulation Several sustainable biofuel sources needed due to limited feedstock options Product quality and local air quality impact should not be compromised due to biofuels Compatibility multiple infrastructures and/or engine types pose a challenge 7
How to remain competitive
Level field for competition globally Technology neutrality Aligned and unbiased targets and regulation Clarity and consistency in industry requirements Uncertainty is killing business to ensure that competitive solutions will be implemented 9
Feedstock Bottleneck at the moment Significant activities in the development of new feedstock Both short-term and long-term new feedstock solutions expected and needed Also local small-scale solutions are encouraged with a clear regulative framework 10
Feedstock development Algae, 11
Sustainability 12
Sustainability Environmental GHG emission savings Responsible land use Economic Job creation Social Economic growth in developing areas Pre-condition for the business 13
Strong commitment to highest standards of sustainability We participate in developing better sustainability standards e.g. through RSPO, RSB, and RTRS* We require highest sustainability standards from our Suppliers Close continuous monitoring and co-operation with suppliers Requirement of full compliance to sustainability criterias, laws and standards eg. Neste Oil s sustainability criterias Regional criterias like EU Renewable Fuels Directive RED Full traceable supply chain requirement We are highly active in new feedstock development *) RSPO=Roundtable on Sustainable Palm Oil, RSB= Roundtable on Sustainable Biofuels, RTRS=Roundtable on Responsible Soy) 14
Neste Oil approach today
Neste Oil's approach on sustainable biofuels Real GHG savings over the entire life cycle Sustainable feedstock and full traceability NExBTL renewable diesel Lower tailpipe emissions 16
NExBTL is the world s best and cleanest diesel GHG emissions 40-80% lower than those of fossil diesel Significantly lower levels of other tailpipe emissions Meets automotive manufacturers toughest specifications Can be used in all diesel engines as such or as a blend Compatible with existing distribution systems Flexibility in raw materials 17
NExBTL properties justify premium value NExBTL characteristics Fuel properties Biodiesel Sulfur-free diesel fuel 1) NExBTL CO 2 reduction Cleaner emissions Density at +15 C (kg/m 3 ) 885 835 775... 785 No implications for existing car pool Cetane number Cloud point ( C) 51-5 53-5 84... 99 2) - 5... - 50 No need to relax specifications to achieve high bio content Heating value (lower) (MJ/kg) Sulfur content (mg/kg) 38 < 10 43 < 10 44 0 Distribution within existing oil refinery logistics Product stability Unstable Stable Stable No need to compromise fuel quality 18
NExBTL has superior product quality NExBTL renewable diesel Hydrocarbon No blending restrictions All emissions reduced No "use by" -date Net calorific value 44 MJ/kg No implications for end-users No implications for vehicle technology FAME biodiesel Fatty acid methyl ester Maximum blend of 5% to 7 % NOx increase Limited storing possibilities Net caloric value 37-38 MJ/kg Problems with engine cleanliness Ash formation blocks exhaust after treatment filters 19
NExBTL - a proven technology already in use NExBTL renewable diesel has been tested extensively in normal truck and bus use with excellent results from all the tests Buses in Greater Helsinki Trucks operating in arctic conditions in Canada Trucks and buses in Germany In the capital area of Helsinki, 10 % NExBTL blend routinely sold to end-customers A proven solution for reducing CO2 emissions without having to replace or modify existing vehicles 20
NExBTL renewable diesel in Finland Neste Green diesel, containing a minimum of 10% NExBTL renewable diesel, already available Neste Green 100 diesel, containing 100% NExBTL renewable diesel is currently in trial use The first time that a premium-quality 100% renewable diesel is being used in ordinary cars Neste Bio Heating Oil 3 contains 3% NExBTL renewable diesel 21
NExBTL projects are proceeding according to plan nameplate capacity t/a 2,000,000 1,750,000 1,500,000 1,250,000 1,000,000 750,000 500,000 250,000 0 2007 2009 2010 2011 Porvoo I Porvoo II Singapore Rotterdam Plant Capacity Investment Status Porvoo 1 190,000 t/a 100 million Onstream Porvoo 2 190,000 t/a > 100 million Onstream Singapore 800,000 t/a 550 million Start-up in Q4/2010 Rotterdam 800,000 t/a 670 million Start-up in the end of H1/2011 22
NExBTL advantages for the refineries NExBTL enables higher blend ratio up to 30 % within EN 590 (density) and up to 100 % within the US specification a flexible way to meet higher blending requirements beyond 5 / 7 % works also well in colder climate, cloud point can be adjusted to at least down to - 50 C NExBTL gives significant logistical advantages full pipeline fungibility no need for special logistics NExBTL gives flexibility into diesel blending gas oil streams can be upgraded into diesel streams in order to assess full NExBTL potential in a refinery it needs to be introduced in a refinery LP-model, where NExBTL can offer significant savings in refinery optimization, especially in smaller/less complex refineries 23
Thank you! refining the future
Appendix
Bio-jet NExBTL plants can produce renewable aviation fuel Commercial aviation consumes over 200 million tonnes of kerosene and produces roughly 680 million tonnes of CO 2 * And very few alternative modes of long-haul transport in sight Aviation is an interesting future market for high quality renewable fuels What is needed? 1. A biojet specification 2. Incentives or a mechanisms equal to those of renewable on-road fuels * Source: ATAG, 2008 data 26
Neste Oil s Biojet The Product Characteristics The Bio-component meets the ASTM specification D7566 for XTL jet components There are no aromatics The reason for lower density Less toxic Aromatics are needed for fuel system seal swell blend / add There is very little sulphur (< 5 ppm) Less emissions, less wear 27
Example on feedstock R&D: JV to develop fuels from forest residues A 50/50 Joint Venture between Neste Oil and Stora Enso Target to develop BTL-technology to convert wood residues to traffic fuels and commercialize it Demonstration plant at Stora Enso s Varkaus Mill in Finland started up in 2009, commercialization planning ongoing The project combines expertise from Neste Oil, Stora Enso, and VTT Heat Forest Biomass Drying Gasifier Gas purification to Ultra Clean Gas Fischer- Tropcsh Synthesis Crude FT product to refining, REFINING INTO TRAFFIC FUEL Illustrative Joint Venture 28
NExBTL testing, an example: Optibio Clean Air project, Finland NExBTL renewable diesel is being tested in about 300 buses in Greater Helsinki Joint project between Neste Oil, Helsinki Region Transport (HSL), Proventia and VTT Technical Research Centre of Finland Lower emissions from using 100% NExBTL: NOx approx. -10% Small particulates approx. -30% CO approx.. -35% HC approx. -40% Polyaromatics over -50% Source: VTT 29
NExBTL testing, an example: Alberta renewable diesel program, Canada Over 75 different size of trucks and buses took part in the trials, which lasted for 10 months Trials were primarily sponsored by the Canadian federal government, the Alberta provincial authorities, and Shell Canada Solid performance of NExBTL Possible to operate even at -44 C 30
NExBTL testing, an example: Heavy fleet testing in Stuttgart, Germany 14 Mercedes-Benz trucks and buses have used 100% NExBTL renewable diesel for around a year Trials include Daimler, public transport company Stuttgarter Strassenbahnen (SSB), Deutsche Post DHL, and the energy company OMV Test results have shown that the use of NExBTL reduces emissions significantly compared to fossil diesel 31
Sustainability Neste Oil has developed a system that enables it to track all the palm oil that it uses This system provides data on exactly where and how its palm oil is produced Neste Oil s palm oil supply chain has been audited by SGS PLANTATIONS SAPLINGS CULTIVATION HARVESTING PRESSING TRANSPORTATION REFINING 32
Extensive R&D to expand feedstock base Nonfood vegetable oil Algae Other microbes Harvesting waste and biomass gasification 33
NExBTL renewable diesel in Finland 36
Sustainability Neste Oil has been accepted, for the third year in a row, into the Dow Jones Sustainability World Index Economic dimension best in the industry Environmental dimension good Social dimension better than average within the industry 37
Thank you! refining the future