Finnish refiner Neste defers net-zero targets

The world's leading biofuels producer, Neste, has scrapped plans to become carbon neutral within the next decade, citing that the investment is financially untenable.

Reaching ambitious net-zero deadlines requires "significant investments that are currently not realistic," the company said in a Dec. 15 statement, noting initial timeframes relied on plans to phase out crude oil at its Porvoo facility, which have since been delayed.

The Finnish refiner is now targeting a 2040 deadline to reduce its greenhouse gas emissions by 80% relative to 2019 levels, it said, replacing a previous goal to hit zero emissions by 2035. An interim target to halve emissions by 2030 has been delayed to 2035, according to the company.

Targets capture scope 1 and 2 emissions, relating to those produced directly by Neste's operations, as well as indirectly through processes such as the production of electricity.

The delay follows a series of rollbacks on Neste's green refining plans as part of a cost-cutting drive aimed at preserving its finances. Slumping biofuels margins led the company to post its first loss in a decade in 2024, triggering a critical assessment of all new investments.

The Finnish refiner has already delayed plans to phase out crude processing at its largest domestic refinery, Porvoo, shelved a green hydrogen project and pushed back timelines to double the renewables capacity at its Rotterdam facility.

At Porvoo, Neste had vowed to substitute 206,000 b/d of crude oil processing with renewables feedstocks, aiming to transform the complex into a pure "circular solutions hub" by 2035. However, it has since delayed the flagship renewables project and provided no revised timeline.

In its statement, the company said that planning and development work will continue at the complex, but timelines will remain subject to "actual fuel market demand" and relevant legislation. "For the time being, fossil fuels are needed, among other things, to ensure security of energy supply in Finland," it said.

The company pledged to focus on making decarbonization plans "ambitious but realistic," and emphasized its Rotterdam project as the cornerstone of its transformation.

"Neste's current financial position does not allow further major capital expenditure beyond the ongoing Eur2.5 billion investment in the expansion of our renewables refinery in Rotterdam," said CEO Heikki Malinen.

Market headwinds

The shifting timelines occur against a backdrop of challenging market conditions for European biofuels producers, which continue to grapple with policy uncertainty and competition from cheap SAF imports. In September, Shell abandoned plans to develop one of Europe's largest biofuels plants in Rotterdam, making it the latest producer to retreat from the developing market.

Meanwhile, Neste's recent financial challenges have been further compounded by technical difficulties across its renewables operations, following fire damage at both its Martinez joint venture in California and its Rotterdam plant in recent years.

In its latest quarterly earnings report, the company flagged expectations of oversupply in the global biofuels market, compounded by regulatory uncertainty in the US. In contrast, it has benefited from healthy prices in the fossil refining sector, which took its benchmark margin to $15.50/b in the third quarter, 46% higher than the previous year.