Renewables to meet Asia oil demand growth: Neste

SINGAPORE (Reuters) - Neste Oil (NES1V.HE), the world's top biodiesel producer, expects renewable fuel demand to grow in Asia in the next 10 years, but Europe and North America will drive global consumption, its chief executive said Tuesday.

The Finnish company is in talks with Tokyo on biodiesel blending and may progress to other cities such as Hong Kong and Seoul, Matti Lievonen said at the Reuters Global Energy Summit in Singapore.

"If you take 10 years ahead, Asia will be very much into renewables," he said, adding that different resources will be needed to meet an expected 50 percent growth in the region's energy demand by 2030.

"China could surprise because they have a very fast mandate start," though it is not on Neste's horizon yet, Lievonen said.

He estimated that by 2020, renewable diesel consumption would be 35 million tonnes annually, of which some 20 million tonnes would be consumed in Europe.

Neste is building the world's largest biodiesel plant in Singapore. Costing 550 million euros, the 800,000 tonne-per-year (tpy) plant will start production in the fourth quarter, Lievonen said.

The company's biodiesel capacity will jump by five-fold to 2 million tpy in summer next year when another 800,000-tpy unit in Rotterdam is completed.

Neste uses palm oil, rapeseed and animal oil as feedstocks and is developing alternatives such as biomass, algae and microbes.

"At the end of this year, we're much wiser about the (biomass-to-liquids) technology and we need to look at the commercial viability," he said, adding that a commercial size unit would have a capacity of 200,000 to 300,000 tpy.

DIESEL DEMAND RECOVERS

Most of its biodiesel is consumed in Europe due to a mandate to use a 10 percent blend this year, Lievonen said.

Canada was another target market as it will expand a 5 percent biodiesel use throughout the country next year, he said.

"We will take a major share in the biodiesel market, especially the niche ones," he said, adding that its NexBTL diesel has a low cloud point, allowing it to be used in cold climate.

Neste's strategy of targeting niche markets has also enabled it to survive weak refining margins that hit European oil refiners last year, forcing a number to shut down capacities.

"We're happy now with the strategy because we have very good home market position in the Baltic sea area," Lievonen said, adding its refineries, especially the plant in Porvoo, Finland, is highly complex, allowing it to use the cheaper Russian Urals crude for 60 percent of its feedstock.

The refiner maintained full operating rates even though refining margins fell as low as $1 a barrel late last year, he said.

Refining margins rebounded in the first quarter on stronger gasoline demand and the company is seeing a pick-up in diesel consumption as European industrial production rose.

"We follow the West Coast container ports because it correlates immediately to diesel and there you can see the pick up has started," Lievonen said.

However, margins may come under pressure again toward the end of the year due to overcapacity, he said.

"It's a tough market still in refining," he said.

(Additional reporting by Nick Trevethan; Editing by Ramthan Hussain)