Finnish Neste Oil in JV deal to produce biofuel from wood residue

Singapore (Platts)--16Mar2007

Finland's Neste Oil Friday said it had signed an agreement with Stora
Enso, an integrated paper, packaging, and forest products company, to jointly
develop technology for producing new-generation biofuels from wood residues.
The biofuels would help reduce consumption of fossil fuels and cut
greenhouse gases, the company noted.
The first step will be to design and build a demonstration plant at Stora
Enso's Varkaus Mill in Finland, Neste Oil said. The plant, owned on a 50:50
basis by the two companies, is expected to start up in 2008 and will produce
heat and electricity for use locally and crude biodiesel to be refined into
commercial fuel at Neste Oil's refinery in Porvoo. The demonstration plant is
expected to cost Eur14 million ($18.5 million).
The companies will utilize expertise from Neste Oil, Stora Enso, and
Finland's VTT Technical Research Centre to implement the development phase and
commercialize wood-based biofuel production.
Neste Oil and Stora Enso see the growing biofuel market in Europe as a
promising and sustainable business opportunity for meeting the increasing
demand for premium-quality products made from a wide variety of feedstocks,
the company said.
"The challenges related to generation of clean synthesis gas from wood
will need to be solved before wood-based biomass can be used in biofuel
production," Neste Oil said. The project will also focus on using
Fischer-Tropsch process to produce crude biodiesel from gas, it added.
The demonstration plant will be integrated into the energy
infrastructure of the Varkaus Mill, and the gas produced will equal the energy
needed to heat 4,300 homes and cut local carbon dioxide emissions
significantly, Neste Oil said.
Following the development phase and completion of the technical
solutions, and after the partners have gained sufficient experience from the
demonstration plant, the joint venture will build a full-scale commercial
production plant at one of Stora Enso's mills. This facility will also be
owned on a 50:50 basis by the JV partners.
Stora Enso will be responsible for supplying wood biomass and utilizing
the heat generated. Wood biomass will be supplied from forests according to
ecological preconditions, Neste Oil said, adding that its own responsibility
will be final refining and marketing of the biofuel.
The European Union has set a target of replacing 5.75% (18 million mt) of
the fossil fuels used in transportation with biofuels by 2010 and 10% by 2020,
This will mean replacing 30 million mt of fossil fuels and will require
significant increases in biofuel production, according to Neste Oil.
Developing wood-based biofuels underpinned Neste Oil's strategic goal of
producing high-quality traffic fuels from a broad base of feedstocks, the
company said. The company is currently commissioning its first plant to
produce 170,000 mt/year of renewable diesel from vegetable oil and animal fat
at its Porvoo refinery. The fuel provides high engine performance and low
tailpipe emissions, the company said. A second similar plant is under
construction at Porvoo.