Neste Oil plans integration of Finnish refining operations

Neste Oil Corp. plans to invest €500 million in a program designed to consolidate and optimize performance of its Finnish refineries as part of an effort to keep the company’s European operations competitive.

Neste Oil’s current plan is to closely integrate refinery operations at its 9.8-million tonne/year (tpy) Porvoo and 3-million tpy Naantali refineries to achieve better operational and cost efficiencies, the company said.

According to the current optimization and integration program, Neste Oil plans to manage the two refineries as one system, with four production lines at Porvoo and a fifth at Naantali.

The consolidation effort will result in the shutdown of some existing units at Naantali, as well as a reduction of about 250 employees from the company’s workforce, mostly from operations in Finland, Neste Oil said.

Naantali will continue to produce diesel and specialty products, including solvents, and maintain an important role in producing feedstocks, such as vacuum gas oil, for the Porvoo refinery, the company said.

Additionally, gasoline components produced at Naantali will be refined into finished products at Porvoo, with Naantali’s terminal capacity to be used for distributing Porvoo’s gasoline production, Neste Oil said.

“The investments that we’re planning, when completed, will help us reach our long-term profitability target,” said Matti Lievonen, Neste Oil president and chief executive officer.

“Given the substantial overcapacity that exists in the oil refining sector in Europe, we need to look at a broad range of solutions for improving our competitiveness and securing the foundation of our future operations and growth,” Lievonen said.

Investment program

The planned investment program covers a number of projects, the largest of which will be construction of a €200 million solvent deasphalt (SDA) feedstock pretreatment unit at Porvoo.

Designed to improve the refinery’s production structure and ability to optimize its crude slate, the SDA unit is scheduled to be completed in 2017, the company said.

Neste Oil also is investigating the future of the Porvoo refinery’s electricity distribution system. One of the options includes the sale of Porvoo’s distribution network to an outside investor in order to free up resources that could be used for investments in the company’s core businesses, Neste Oil said, adding that it intends to complete a study on this option by yearend.

A previously announced project to modernize energy generation at Porvoo refinery also has been modified to implement a €250 million power plant at the site through an off-balance sheet joint venture with Veolia and Borealis.

Neste Oil said it expects to make a final decision on the Porvoo power plant project during second-half 2015, with completion of the investment scheduled for 2017.

At Naantali, Neste Oil plans to invest about €60 million in various utility-related enhancements intended to simplify the refinery’s structure. While basic engineering on the projects at Naantali is due for completion in early 2015, the company will not make a final decision on individual project investments at the site until the completion of basic engineering on those projects, which is due in early 2015.

If approved, planned optimization projects at Naantali would be completed in early 2017, Neste Oil said.

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