March 7, 2009

American, European Cars Could Run On Singapore-Made Biofuel

Finland's Neste Oil said on Friday that cars in Europe and North America might soon be powered on diesel made from palm oil, vegetable oil and animal fat in Singapore, the AFP reported.

The Finnish oil company has picked Singapore to build the world's biggest biodiesel plant at a cost of $776 million.

The company said it was also looking to market the fuel in Japan and South Korea.

Once it becomes operational next year, the plant will have an annual capacity of 800,000 tons and will produce Neste Oil's patented NExBTL renewable diesel, which the company claims is the cleanest diesel fuel in the world.

The company said that NExBTL can be used in all diesel engines and significantly reduces exhaust emissions, compared with regular diesel.

Neste Oil deputy chief executive Jarmo Honkamaa told reporters during a media visit that the plant was originally planned to target the European market.

"We know now already that part of the volume will go to North America... the west coast of Canada."

The move towards cleaner fuel worldwide in a bid to reduce global warming was likely to drive demand, company executives said.

Honkamaa said Neste Oil is also negotiating with companies in Japan and South Korea to buy the renewable diesel. He said that Singapore would also be a potential market.

"I don't see that the marketing of this product is very challenging. The main challenges will be on the raw material side," Honkamaa said.

The Singapore facility could even be upgraded to produce jet fuel from the same feedstocks if there was a need.

Neste Oil stated that renewable diesel would have a $200-$300 dollar premium per ton over regular diesel, adding that there was demand because of the benefits of using cleaner fuel.

Crude oil prices peaked at $147 in July 2008, but current levels are around $44.  Palm oil prices have also plummeted from $1,245 dollars per ton a year ago to about $526 dollars a ton.

Singapore"”which is close to Indonesia and Malaysia, the world's two leading crude palm oil producers"”was chosen as the plant's site partly because of its proximity to raw materials, according to Neste Oil chief executive Matti Lievonen.

Lievonen said Neste Oil is in a healthy financial state despite a global economic crisis, with a $2 billion credit facility with European banks.

Once the Singapore facility is up and operational, the company is also constructing a renewable diesel plant with similar capacity in Rotterdam, the Netherlands.


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