The California investment was paved for years. The company bought raw material sourcing companies and considered building its own refinery, but ended up with a large American refinery company.
Fuel refiner Neste is taking on a big role in the U.S. renewable fuels market. The company is investing nearly a billion euros in the production of renewable diesel in California, along with American oil refiner Marathon Petroleum. At the same time, Neste is already considering the next steps, such as setting up its own refinery in the United States.
The company said late Tuesday it would form a joint venture with Marathon to focus on the production of renewable diesel. Marathon is one of the largest oil refiners in the United States.
Through the joint venture, Neste will join Marathon’s ongoing project to convert the company’s old oil refinery in Martinez, California to renewable diesel production. The refinery is becoming huge. Its annual production capacity is 2.1 million tonnes, of which Neste receives half. By comparison, Neste’s Singapore refinery will have a capacity of 1.3 million tonnes after the expansion.
The liquid managing director Peter Vanacker describes the investment as very significant. Neste is now the only company to have renewable fuel production facilities on three continents, Rotterdam, Singapore and California.
“This makes Neste a truly global company,” he says.
Neste’s CEO Peter Vanacker
Vanacker describes the U.S. market as very important, and in climate regulation, California is at the forefront. The state supports the use of renewable fuels with significant subsidies.
Neste has already sold its products in the United States, but manufactured them in Singapore. For years, however, the company has seen that it needs a manufacturing facility in the United States.
“As a global leader in the industry, we need to have a local presence there,” Vanacker says.
According to him, with the investment, Neste is perceived in the United States as a local player that is also ready to invest locally. In addition, there will be benefits related to logistics.
“It is extremely important that we have a local supply chain.”
Head opening The U.S. has been preparing for a long time, Vanacker says. The company has built its raw material supply chain by acquiring two major brokers of animal and vegetable fats in the United States, Mahoney and Agri Trading. Neste already has more than 500 employees in the United States.
Neste was also considering building its own refinery in the United States, but said working with Marathon was a better option. According to the companies, their strengths complement each other.
“Marathon has experience in remodeling large renewable diesel plants, implementing capital-intensive projects, and operating the plant in the California market. Neste has expertise in the sustainable sourcing of raw materials and the production of renewable fuels, ”Marathon explains in the stock exchange release.
Vanacker says the arrangement will also swallow less capital than building a new refinery.
Under the agreement, Marathon will be responsible for operating the refinery, but the companies will be jointly responsible for sourcing the raw material. Production is split in half, and its companies sell to their customers under their own brands.
Liquid is already preparing for the next big steps in the United States.
According to Vanacker, Neste may have its own refinery in the United States that could produce renewable aviation fuel. It is equally possible to look for a local partner for this as well.
Neste does not give any timetable for the next possible steps. Refinery investments are billions of projects that will take a long time to prepare.
“We’re tracking market demand,” Vanacker says.
With liquid There are now many major investments underway or in the pipeline.
The expansion of the Singapore refinery is scheduled for completion next year. The expansion will cost 1.5 billion euros.
When Singapore and Martinez are fully operational by the end of next year, Neste’s annual production capacity will increase from the current 3.3 million tonnes to 5.5 million tonnes.
In addition, the company is preparing to build a new refinery in Rotterdam. No final investment decision has been made, but the company says it will be made in the coming months. The company has said the investment is the same size as in Singapore.
If Rotterdam also materializes, Neste will make a roughly estimated investment of EUR 4 billion in production within a few years.
According to Vanacker, this will not destabilize Neste’s finances. He emphasizes that the company is very solvent and profitable.
The market welcomed the investment news. After 1 p.m., the company’s stock was up 15 percent.
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