From oil to renewable diesel — one company finds a ‘business opportunity’ in climate change 

Source: Niina Heikkinen, E&E reporter • Posted: Thursday, April 16, 2015

A Nordic oil company is making a big bet on biofuels’ future role in the global economy.

Since 2007, Finland’s Neste Oil Corp. has transitioned away from fossil fuels and is focusing a rapidly increasing part of its business on producing biodiesel from waste fats, plant oils and residues.

In just under a decade, the company has gone from a traditional fossil fuel-based oil company to become the world’s biggest producer of renewable diesel, with 62 percent of its raw inputs coming from feedstocks other than fossil fuels, said Simo Honkanen, senior vice president of sustainability and public affairs at the company.

“We believe that the world is constantly on the move, the need for people to move and use energy is constantly increasing. The question is, how much can the world take of these new demands? Our thinking is we add value to customers with cleaner renewable fuels,” said Honkanen to a small audience attending the Johns Hopkins SAIS Global Issues in Agriculture Speaker Series yesterday.

Across its refineries in Finland, Singapore and the Netherlands, the company has the capacity to produce 2 million tons of renewable diesel and is planning to increase production by more than half a million tons in the near future. The previous year, Neste Oil had €15 billion ($16 billion) in net sales and employed about 5,000 people, 20 percent of whom were focused solely on research and development.

In 2014, the international company produced close to 1.3 million tons of its proprietary NEXBTL renewable diesel from waste and residues. That’s enough fuel to run Finland’s 650,000 diesel passenger cars for two years, according to a press release.

While Neste Oil is not a widely known company in the United States, it has received recognition within the business community for its sustainability efforts. For seven consecutive years, Neste Oil has been listed on the Dow Jones Sustainability World Index, and has also been included in the Corporate Knight’s Global 100 list of the world’s most sustainable corporations.

Criticism about palm oil

Like other energy companies involved in biofuel production, one of the biggest challenges for the company is finding a consistent source of fuel.

“The feedstocks are the issue. Where can this type of industry find enough sustainably produced feedstocks? How can you manage the supply chain that is probably a global one? How do you ensure that [you’re] not causing greater harm?” asked Honkanen.

For Neste Oil, part of the answer has been to produce fuel based on a wide array of sources.

“Neste is the only energy company in biofuels that is running a truly global business model; we get feedstocks from all over the globe,” said Honkanen.

Some of its raw materials include animal and fish fat residues, as well as technical corn oil and vegetable oils. They are turned into a hydrocarbon fuel that is chemically identical to fossil fuel-based diesel. About 38 percent of vegetable oil comes from crude palm oil.

According to Honkanen, the company makes sure that all of its producers meet stringent sustainability requirements before they sign contracts with Neste Oil, and all palm oil producers are certified. Theoretically, all biodiesel can be sourced back to the individual smallholder who provided the feedstock.

“My message is, any company that builds a business on bio-based feedstocks, or using land, [sustainability] simply have to be taken into account. It’s not an option; it’s a must,” said Honkanen.

While the biofuel industry has faced criticism for using palm oil, energy producers account for just 5 percent of palm oil use, according to Honkanen.

“The fuel industry is the only industry that is regulated; the rest [of palm oil] is consumed by cosmetics and foods, but they aren’t regulated by how they are using it,” he said. “We think that fuel and energy industry has been doing a lot of good [in Southeast Asia] because the certification systems have had to be built for our industry.”

100% renewable by 2017?

Despite Neste Oil’s confidence in the sustainability of its crude palm oil, the company has cut back its use of the feedstock in recent years. In 2013, 47 percent of its vegetable oil came from palm oil, while in 2012, that figure was 65 percent, according to an earlier press release.

Currently, most of Neste Oil’s biodiesel is blended with fossil fuels, but that may soon change, according to Kaisa Hietala, executive vice president of Neste Oil’s Renewable Products business area.

“The production of fuels from waste-based feedstock is resource-efficient, and our aim is to have the capability to use 100% waste and residues by 2017. We are constantly searching for new waste-based raw materials of increasingly poorer quality, and use the majority of our €40 million R&D [research and development] expenditure for raw material research,” said Hietala in a press release.

Much of the biofuel the company is producing is used for passenger cars and heavy vehicles. The company is also in the process of diversifying into aviation fuels, biochemicals and other bio-based products.

As the company looks to increase its production, it is aiming to increase its use of lower-quality animal fats and has discussed the possibility of expanding into biomass and algae oil, though there is not enough of a market yet for either, according to Honkanen.

Climate change may also be a benefit to the company.

“We are offering ways to combat and work against climate change. This is a business opportunity for us, as long as we manage [the] waste stream properly,” he said.