The Finnish oil refining company invests S$1.2 billion in the Republic to produce the world's cleanest renewable diesel.

As efforts to discover clean and sustainable energy become a global agenda, one company has emerged as a forerunner in the development of traffic fuels with reduced environmental impact. Neste Oil is a Finnish refining and marketing company focused on advanced, clean traffic fuels. And it looks like its strategy of becoming one of the world's leading premium-quality renewable diesel producers has paid off.

The company recently capped off a strategic milestone in its global development plan by committing S$1.2 billion (US$800 million) to build a plant in Singapore to produce NExBTL, the world's cleanest renewable diesel. The plant has the distinction of being the largest facility to produce diesel fuel from renewable feedstock anywhere. The use of biofuels such as NExBTL is slated to increase rapidly in developed economies over the next few years.


Neste's new proprietary technology

The Singapore plant will be based on Neste Oil's proprietary NExBTL technology, which is the first commercial new generation renewable diesel production process, and can use any vegetable oil or animal fat as its input. The end-product, NExBTL Renewable Diesel, is a premium-quality fuel that outperforms conventional fossil diesel fuel and can be used in existing vehicles and distributed in existing logistics systems.

In environmental terms, NExBTL Renewable Diesel is a good performer. When produced from sustainably sourced raw materials, its total lifecycle greenhouse gas emissions are 40-60 per cent lesser than those of conventional diesel fuel. In addition, NExBTL has lower tailpipe emissions, contributing to better air quality.

The main raw material planned for the Singapore plant will be palm oil. Neste Oil has already committed itself to only using palm oil certified by the Roundtable on Sustainable Palm Oil, as soon as sufficient quantities become available.

Leveraging background to become a major player

Looking back at its history, it comes as little surprise that Neste Oil is one of the leading players. Neste Oil's roots are deep in the Finnish oil and energy businesses. Its predecessor company, Neste, was established in 1948 to secure Finland's oil supply. During the years since, it has been known as Neste, Fortum Oil, and now Neste Oil Corporation.

In the years that followed, Neste's refining capacity steadily grew, as did the range of the company’s business interests. Natural gas, exploration and production and chemicals joined its core refining and shipping activities. Neste also established itself as a retail service station brand. Today, Neste Oil's business portfolio consists of oil refining, biodiesel, specialty products (base oils and gasoline components), oil retail and shipping divisions.

Although oil refining is still Neste Oil's core business, it has decided in recent years to leverage its unique refining know-how to produce high-quality fuels for cleaner traffic from a variety of lower-cost raw materials. This new strategy highlights the importance of biodiesel and oil refining for generating growth for the company. Production of high-quality base oils and gasoline components adds to Neste Oil's cleaner traffic offering.

Singapore on track for next-generation biofuels technologies

In November 2007, the Singapore government released a National Energy Policy Report to tackle the global energy challenges and leverage opportunities to sustain the Republic's long-term growth. The Report also recommended growing the clean energy sector as one of the key strategies, as the global demand for clean energy technologies is expected to explode in the next decade. With experience and capabilities in the semiconductor, industrial equipment and chemicals sectors, Singapore is in the perfect position to capture opportunities in the solar, fuel cells and biofuels markets. Creating a conducive environment for technological innovation and R&D is also essential for the growth of this sector.

Since Shell established the first oil refinery here in 1961, the oil industry has been a key player in Singapore's economy. Through the years, the oil industry has been a catalyst for the development of the chemical industry. Today, Singapore is a leading oil hub in Asia and is one of the world's top ten petrochemicals hubs. Capitalising on Singapore's strengths in oil, the biofuels industry already has a head start.


There are four aspects to Singapore's competitive advantage in biofuels. Firstly, the Republic's strong foundation in oil lends the biofuels industry not only ready infrastructure and synergies with downstream chemical projects, but also infrastructure for biofuels trading activities. Secondly, Singapore's logistics connectivity to both raw materials suppliers and markets provides biofuels players a ready network of partners. Thirdly, its access to markets is enhanced not only by its physical connectivity, such as well-connected seaports, but also through its existing free trade agreements with key markets like the US. Lastly, a strong science and R&D culture allows Singapore-based companies to undertake R&D and integrate research with manufacturing to accelerate the development of next-generation biofuels and higher value renewable products.

Over the past three years, the focus in Singapore has been to kick-start biodiesel production. It is already harnessing technology that is beyond the first generation - which is biodiesel made from the trans-esterification of vegetable oils - and aims to produce higher quality biofuels and use alternative feedstock that is sustainable.


A centre for Asian biofuels industry

Thus, Neste Oil's investment in Singapore represents not just a huge impetus for the biofuels industry, but also a validation of its competitive advantages. The Republic is not only a signatory to the Kyoto Protocol, committing itself to reducing greenhouse gas emissions, but has also invested S$75 million (US$51.7 million) to accelerate R&D initiatives and manpower capability development in clean energy.

As one of the world's top three largest oil refining centres, Singapore is centrally located in terms of product and feedstock flow and logistics. This provides the city-state with excellent potential to develop into a centre for Asian biofuel production.

Aw Kah Peng, Assistant Managing Director, Industry Development, Singapore Economic Development Board (EDB), says, "Neste Oil's NExBTL plant here clearly puts Singapore's biofuels industry on track to capture and maximise value from next generation biofuels technologies, adding further momentum to our efforts in promoting clean energy. Continued research and development will be key, and Singapore will step up discussions with industry, universities and public research institutes to build up the necessary technologies expertise and capabilities for future generations of biofuels."

Construction of the Singapore plant will begin in the first half of 2008 with completion by the end of 2010. The plant has an annual capacity of 800,000 metric tons and will employ around 100 people.

With the support infrastructure of Tuas industrial zone, where its new plant is situated, Neste Oil can readily leverage the services and utilities in the value chain of its industry. As it is, Neste Oil and Technip have signed an agreement whereby the latter will provide engineering, procurement and project construction management services to Neste Oil.


Expanding the value chain

As part of the clean energy movement, Neste Oil is also committed to supporting the growth of other green businesses around its plant in Singapore. It has already agreed with SOXAL to establish a bio-based carbon dioxide recovery process at the plant, with the captured bio-based carbon sold to the local market, including the food industry, the medical sector and dry ice producers.

Keeping its operations as clean as possible is yet another priority for the producer of the world's cleanest fuel. Neste Oil pledges to recycle waste and make its Singapore facility a completely waste-free refinery.

Currently, it is also part of the "Gardens By The Bay" park project, which is currently using NExBTL on trial basis, to apply sustainable energy and water solutions in the design and development of the gardens.

Such developments can only mean one thing: Singapore is geared to play a pivotal role in R&D for developing a second-generation sustainable biofuels industry.