Neste to restructure refining business, shutter Naantali refinery

Neste Corp. has approved its recently proposed plan to restructure its refining operations in Finland as part of the operator’s strategy to ensure long-term competitiveness of its oil products business under a program that will include permanently shuttering processing and production at its 58,000-b/d Naantali refinery (OGJ Online, Sept. 14, 2020).

Following negotiations with representatives of its employees that yielded no feasible solution for enabling continued and competitive refining operations in Naantali, Neste has decided to shut down the refinery by the end of March 2021, the operator said.

As part of the plan, Neste will transform the refinery—already home to Finland’s fifth-largest harbor in terms of traffic volume—exclusively into a harbor and distribution terminal, as well as upgrade its 206,000-b/d refinery in the Kilpilahti industrial area of Porvoo to co-processing renewable and circular raw materials.

The business transformation comes amid Neste’s determination that demand for fossil-based fuel products—which has been drastically reduced by the coronavirus (COVID-19) pandemic—will continue to decline, with no expectation of recovery to previous levels.

The company said this permanent decline in demand for petroleum-based products requires fundamental changes to secure competitiveness of Neste’s business, including increasing its share of renewable energy solutions in line with what will be continued growth for these energy sources moving forward.

Another core focus of the transformation will be to improve the productivity, resource efficiency, and adaptivity to market changes of Neste’s remaining oil products business, according to the operator.

“The changes will support the transformation of the Porvoo refinery into a leading sustainable, safe, and efficient refinery,” said Peter Vanacker, Neste’s president and chief executive officer.

While the transformation will not affect security of fuel distribution supply in Finland, shuttering of the Naantali refinery—following recent discussions with employee representatives—now will result in about 370 personnel redundancies, down from a previous estimate of 470, Neste said.

“[Some jobs] will cease to exist [under the transformed oil products operating model] but completely new jobs will also be created,” Vanacker said without disclosing additional details.

Neste said it expects proposed changes to its business under the planned transformation would result in annual fixed-cost savings of about €50 million.

Neste’s business transformation plan will be the company’s second major attempt to improve competitiveness of its overall refining operations after its €500-million program executed between 2014-17 to integrate the Naantali and Porvoo refineries into a single Finnish refining system (OGJ Online, Aug. 9, 2017; Mar. 23, 2015; Oct. 7, 2014).

Following its reconfiguration, the Naantali was revamped to produce diesel and specialty products, including solvents and bitumen, and maintain an important role in producing feedstocks, such as vacuum gas oil, for production lines in Porvoo. Gasoline components produced at Naantali were refined into finished products at Porvoo, with Naantali’s terminal capacity used for distributing Porvoo’s gasoline production.

Consolidation of the two Finnish refineries enabled Neste to increase diesel output alongside a simultaneous reduction in heavy fuel oil production from the integrated unit.