Neste to build 550m biofuelsplant in S'pore

HELSINKI: Finland's Neste Oil said yesterday it would spend 550 million ( 1 = RM4.95) to build the
world's largest biodiesel plant in Singapore to meet the growing but controversial demand for biofuels.
Neste, which in 2006 supplied about 14 million tonnes of conventional fuel products, said the plant would
have a design capacity of 800,000 tonnes a year, and use mostly palm oil as its raw material, though it can use
also soyaoil or animal fats.
"The investment forms part of Neste Oil's strategic goal of becoming the world's leading renewable diesel
producer," the firm said.
The use of biofuels made from crops such as maize, sugarcane and vegetable oils is expected to rise rapidly in
developed economies and is seen by many as a way to cut emissions of greenhouse gases and provide an
alternative fuel source to crude oil, which has been pushing US$100 (RM336) a barrel this year.
Some environmentalists, however, dispute the greenhouse gas emissions benefits of biofuels and are alarmed
by deforestation to increase palm oil output and the effect on food prices of the additional demand.
On Sunday, environmental group Greenpeace tried to prevent a tanker bringing palm oil to Neste's first
biodiesel plant, which started earlier this year and is running at full capacity of 170,000 tonnes, in Porvoo,
Finland. Neste's second biodiesel unit is due to start operations in 2009.
Construction of the plant in Singapore, which is close to major palm oil producers Malaysia and Indonesia
and is the world's third-largest oil refining centre, will begin in the first half of 2008, with completion due by
the end of 2010.
The announcement is expected to boost prices of palm oil, which have more than doubled since January 2006,
a Malaysian industry analyst said yesterday.
"We are already facing supply constraints and not even able to meet the demand from the food sector," said
M.R. Chandran, an independent consultant and former head of Malaysian Palm Oil Council. "It is very good
news for the market."
Soaring feedstock prices have squeezed the margins of biodiesel producers in Asia and only large producers
like Neste Oil will survive, he said.
"Obviously now it is the volumes game, it is like the refinery sector. Margins are so small that you have to
have the volumes in order to be economically viable," Chandran said.

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The news about the biodiesel plant came on a day when the world's largest palm planter Sime Darby relisted
on the Malaysian stock exchange at a 36 per cent premium to its indicative price, after merging with two other
palm-oil groups.
Neste said it was planning "similar-sized investments" for the future, and committed itself to only using palm
oil certified by the Roundtable on Sustainable Palm Oil as soon as sufficient quantities were available. Reuters
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