As recently reported, Finland's third largest company, Neste Oil, has attracted attention from China, which wants to know more about the company's refinery-based biodeisel technology. Unfortunately for Neste, which wants to be to biodiesel what Nokia is to mobile phones, the proprietary process has also attracted attention from a formidable foe, the mere mention of which can cause large companies to tremble with fear—Greenpeace.
The international environmental organization strongly objects to Neste's use of palm oil, which stems from Southeast Asian rainforests.
Greenpeace is asking people "not to fill their tanks with rainforest."
Neste, which generally gets high marks for ethical standards and policies—and aims to phase in jatropha oil and other more environmentally friendly feedstocks—is on the Greenpeace international hit list.
The organization has a case. Vast areas of rain forest are cleared to make way for palm harvests, causing carbon-dioxide to be released into the atmosphere. In Malaysia and Indonesia, which are both leading palm oil producers, the production is likely to lead to further rainforest destruction ... in the name of producing a renewable fuel.
Just last month, Neste opened its first big biodiesel plant—a 60 million-gallon-per-year (MMGY) facility located inside the company's Porvoo oil refinery. The plant cost an estimated $125 million to build, much more than a typical biodiesel plant. A second, identical, 60 MMGY plant is under construction and is expected to open next year. It, too, is located in the Porvoo refinery. The company's third 60 MMGY plant, identical to the first two plants, is scheduled for completion at another Neste refinery site in Finland in 2009.
And Neste is working with Austrian oil refiner OMV Aktiengesellschaft on a 65 MMGY biodiesel plant that will be built on a site near Vienna.
There is a reason for the 60-plus MMGY figure. Neste aims to enter and eventually dominate the US biodeisel market, and has therefore designed its plants and business models accordingly—that is, to take advantage of the US federal government's $1 per-gallon subsidy for producers or users of both biodiesel and so-called renewable diesel, which is made by mixing refinery petroleum with vegetable oils or animals fats to produce a cleaner-burning petro-diesel substitute. The renewable diesel subsidy—in the form of a tax credit or direct cash payment from the government—expires in 2008 but is widely expected to be renewed by the U.S. Congress for at least another two years.
The law limits the subsidy to 60 MMGY—per facility. In principle, then, a company like Neste can own and operate several 60 MMGY plants and collect a dollar on every gallon of renewable diesel it sells. Alternatively, it can pass the subsidy along to its customers.
Although Neste calls its alternative fuel biodiesel because it is (for the time being, at least) made only from vegetable oils, the product is technically not biodiesel because it is not made by the classic (century-old) transesterification method, which mixes vegetable oils or animal fats with methanol and a chemical agent to produce pure biodiesel, known as B100.
The Neste technology is similar to renewable diesel processes developed by Italy's ENI, Brazil's Petrobras, the UK's BP, and ConocoPhillips. All these companies are seeking to leverage their petroleum reserves, along with their refining, distribution and transportation capabilities, to exploit demand for green fuels.
Copyright Andre Pachter. Published with permission. Andre
Pachter's blog China Confidential may be read at: http://chinaconfidential.blogspot.com/