Neste eyes biojet expansion in clean fuels drive

Neste wants to expand its biojet, or sustainable aviation fuel, capacity by 450,000 mt/year as part of its existing Rotterdam refinery by 2023, with the Finnish refiner looking to capitalize on the push for cleaner fuels.

"The concept of these investments is based upon the current versatile Singapore investment. The aim is to continue to grow the business in renewable road transportation, aviation as well as polymers and chemicals," Neste told S&P Global Platts.

Neste is developing its Singapore refinery which will increase its renewable fuel capacity by 1.3 million-2.3 million mt/year and raise its global output to 4.5 million mt/year by mid-2022.

The refiner said the new production line will also include the option to produce up to 1 million mt/year of SAF at the facility.

"Engineering studies on the next worldscale capacity expansion steps are ongoing for several sites globally, including current and selected new locations," a Neste spokesperson said.

"We are targeting investment decision capability on the next worldscale production capacity by the end of 2021 and production start-up in 2025," the spokesperson added, without elaborating.

Neste acknowledged there is a growing sector committed to reducing fossil oil dependency and related emissions beyond minimum regulatory targets and sees renewable fuels as "being one of the readily available, efficient solutions to doing that."

The renewable diesel refiner estimates global renewable diesel demand will grow from 5 million mt/year in 2019 to more than 20 million mt/year in the coming decade.

"This long-term view has not changed in spite of the short-term market movements due to the current special situation," as the coronavirus wipes out transport fuel demand at least in the near term. Platts Analytics sees oil demand falling 4.5 million b/d in 2020, led by a collapse in jet and gasoline demand.

BIOJET FOR THE LONG HAUL

Neste sees the volumes of renewable jet fuel needed only going up, even though it says airlines are also using other methods to maintain 2020 targets, such as through the use of carbon offsets and more efficient planes.

The International Air Transport Association has self-imposed targets for sustainable growth from 2020. The global jet fuel market consumes around 300 million mt/year and despite the latest hit most analysts believe it is likely to return to its growth path at some point.

"Regulatory changes are evolving in Europe and North America creating demand for sustainable aviation fuel. Neste's SAF current production capacity of 100 000 mt/year is planned to exceed 1 million mt/year in 2022," Neste said.

SAF is gradually becoming more cost competitive due to its rising supply as more airlines adopt the cleaner fuel which is being supported by better technology. SAF is now around three or four times more expensive than jet fuel, compared with four years ago when it was 17 times more expensive, according to Platts data.

In Europe, the more ambitious targets in the reduction of greenhouse gas emissions are bound to boost demand for biofuels. Globally, a shift to lower sulfur road fuels is seeing more and more countries adopt the European specifications for diesel and gasoline. This is on top of an industry transformation toward cleaner bunker fuels set to impact the balance of refined products across the world.

Neste started commercial sales of SAF in 2019.