Neste to restructure Finnish refining operations

Neste Corp. plans 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 would involve permanently shuttering processing and production at its 58,000-b/d Naantali refinery.

Under the proposed restructuring, Neste is exploring transforming the Naantali refinery—already home to Finland’s fifth-largest harbor in terms of traffic volume—exclusively into a harbor and distribution terminal, as well as upgrading its 206,000-b/d refinery in the Kilpilahti industrial area of Porvoo to co-processing renewable and circular raw materials, the operator said on Sept. 14.

The proposed 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, requiring fundamental changes to secure competitiveness of the company’s business.

“The energy transition is proceeding faster than expected, [and previously planned] forthcoming operating and maintenance investments in the Naantali refinery are not viable nor sustainable in a situation where there is large overcapacity for oil refining globally,” said Peter Vanacker, Neste’s president and chief executive officer.

“Although the time is not optimal, and this news is unfortunate for many of us, the planned actions to develop our refinery operations are urgently needed to maintain operations and strategic capabilities in refining in Finland and to secure [our oil products business’] competitiveness,” Vanacker added.

With the planned restructuring measures, Neste said it aims to improve productivity, resource efficiency, and adaptiveness to market changes.

While the proposed transformation will not affect security of fuel distribution supply in Finland, the program, if implemented, would mean up to 470 personnel redundancies, Neste said.

To initiate the transformation, Neste plans to start cooperation negotiations in its oil products business unit and supporting functions in Finland. Decisions on the measures and impacts on the various functions, personnel groups, and locations will be made after the negotiations have been concluded, according to the operator.

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

The announcement follows Neste’s decision earlier this year as a result of the COVID-19 outbreak to delay 11 weeks of routine planned maintenance previously scheduled for second-quarter 2020 into a phased turnaround event for which a new schedule was to be determined by the end of third-quarter 2020 (OGJ Online, Mar. 23, 2020).

Second refining transformation

Neste’s newly announced 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.