Belsif Session 17: Investing in biofuelsGeneral Introduction

Sustainability challenges

Belsif Session 17: Investing in biofuelsGeneral Introduction

Sustainability challenges

30.5.2011 Tiina Tuominen

(Manager, Sustainability)

30.5.2011 Tiina Tuominen

(Manager, Sustainability)

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Content

• Neste Oil in brief

• Why biofuels? Legislative framework

• The way forward

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Neste Oil in brief

• A refinery and marketing company concentrating on delivering fuels for cleaner traffic

• Refining of 15 million tons of oil products per year• Listing on the NASDAQ OMX Helsinki exchange (stock symbol NES1V)• Turnover of 11.9 billion euros in 2010• Operations in 15 countries• Personnel 5,000• State of Finland as primary owner (50.1% holding)• Neste Oil’s Business Areas

• Oil Products and Renewables• Oil Retail

See more information: www.nesteoil.com

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Neste Oil strategy: cleaner, high quality traffic fuels

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NExBTL – the highest quality diesel in the world commercially available today

• Measured by product quality, easily outperforms both conventional biodiesel (FAME) and fossil diesel

• Suitable for passenger cars, heavy transportation vehicles, ships, and airplanes • Fully compatible with fossil diesel

• Compatible with all modern diesel engines without any modifications • Meets automotive manufacturers’ toughest quality specifications• Can be used in diesel engines as such (100%) or blended with fossil diesel (as in Neste Green

diesel)

• Can be transported and stored like fossil diesel• Compatible with existing logistical and distribution systems

• Excellent cold properties • Can result in over 50% lower GHG emissions than fossil diesel measured over the product’s

entire life cycle.

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NExBTL improves urban air quality

• Based on extensive research NExBTL diesel contributes to a significant reduction in exhaust emissions compared to fossil diesel: • Nitrogen oxide (NOx) 10% lower

• Particulates (PM) 28% lower

• Carbon monoxide (CO) 28% lower

• Hydrocarbons (HC) 50% lower

Emissions reduction figures are averages based on numerous field and laboratory tests.Emissions reduction figures are averages based on numerous field and laboratory tests.

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Growth projects progressing as planned – 2 million metric tons in 2012

Location Capacity Investment Status

Porvoo 1 190 000 t/a €100 million Started up in 2007

Porvoo 2 190 000 t/a Over €100 million Started up in 2009

Singapore 800 000 t/a €550 million, one of the largest investments in 2010 by Finnish state-owned companies

Started up in Nov 2010, production ramped up to full capacity on a phased basis

Rotterdam 800 000 t/a €670 million Start up in mid- 2011

Singapore site

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Neste Oil’s sustainability ratings

, and 2008/2009, 2009/2010, 2010/2011

Why biofuels?Why biofuels?

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Change in the energy industry• Population growth, especially in the developing countries.• Fossil crude oil reserves are being depleted.

• The output at existing fields is estimated to drop by almost two-thirds by 2030.

• Traffic volumes and emissions are increasing, especially in the developing countries.• Traffic volumes are expected to triple by 2050.

• By 2030, the global CO2 emissions will be more than 50% higher than today (Source: IEA).

• Energy consumption is growing strongly, driven by China and India.• Security of energy supply has become a key economic and political issue.• Concern about climate change and the state of nature.

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How to meet the increasing demand for energy in an economic and environmentally sound manner?

• Climate change – one of the most pressing reasons for seeking alternative sources of energy and fuel

• The EU's goal is to reduce greenhouse gas (CO2) emissions by 80% by 2050.

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Biofuel legislation in Europe

•

Renewable Energy Directive

(RED)

Fuel Quality Directive

(FQD)

Identicalsustainability

criteria

• Renewable energy directive that came into force in 2010 requires member states to increase the energy content of transport fuels from renewable raw materials to 10% by 2020.

• The use of biofuels should result in a clear reduction of GHG emissions (compared to fossil fuel)

• 35 % savings from 2011 on• 50 % savings from 2017 until 2020• 60 % savings from 2018 (on within those installations that

started production after Jan 1st, 2017)

• Technical specifications for fuel properties andbinding targets to reduce fuels’ greenhouse gas emissions

• The GHG emissions of gasoline, diesel and other fuels should be reduced by 6% by 2020

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Key points in the EU RED Compliance

Land use Change

Traceability

Green House GasBalance

Sustainability Verification

Way forwardWay forward

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Sustainability plays a key role in the production of biofuels

Economical aspects

Social aspects

Environmental aspects

Sustainability

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Sustainability over the whole supply chains

• Land use Focus and investment on agriculture and promoting of best

practises

• Social impact Poverty in producing countries and role of smallholders

• Future feedstock Research and investments on next generation technologies and

feedstock options

Thank you!

www.nesteoil.com

Thank you!

www.nesteoil.com

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The oil palm is clearly the best crop at the moment

End-productYield per hectare (t), crude oil equivalent

oilseed rape (EU) NExBTL / (FAME) 0.9

soy

(US)NExBTL / (FAME) 0.54

oil palm (Malaysia)

NExBTL / (FAME) 4.2

wheat

(EU)Ethanol 1.1

barley (Finland)Ethanol

0.6

corn

(US)

Ethanol1.2

sugar beet

(EU)

Ethanol3.1

sugarcane (Brazil)

Ethanol3

jatropha* NExBTL / (FAME) 1 - 1.5

algae* NExBTL / (FAME) 30

* Alternative, not in commercial production at the moment

Sources: multiple

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Palm oil contributes to increasing welfare in the producing countries

• Palm oil production has strong traditions in South East Asia. The first plantations were established in 1848. Currently Malaysia and Indonesia are the biggest palm oil producing countries in the world.

• The cultivation of oil palm is a significant source of income and a contributor against poverty in South East Asia, where 23 % of the population lives without clean drinking water and 15 % is living under the poverty line.

• The size of 40 % of palm oil plantations is 2-4 ha and they are managed by families. The volume produced by the smallholders is increasing in the near future.

• Palm oil production employs over 7 million people and it has a significant role in exports of Malaysia and Indonesia.

Multiple sources: ie. Statistics dept, Malaysia and Statistics Bureau Indonesia, 2008, MPOB (2009), IPOB (2008)