August 23, 2018 / 7:06 AM / 3 months ago

Neste keeps faith with renewable jet fuel business despite setback

HELSINKI (Reuters) - Biofuel producer and oil refiner Neste (NESTE.HE) sees good opportunities for its renewable jet fuel despite a cancelled pilot project in Switzerland, a company executive said.

FILE PHOTO: An American Airlines Boeing 767-300ER aircraft takes off from Zurich Airport, Switzerland January 9, 2018. REUTERS/Arnd Wiegmann/File Photo

The Finnish company is hoping to get a boost for its biofuels business in the coming years from proposed reductions of CO2 emissions in aviation.

The pilot project was due to replace at least 1 percent of jet fuel used at Geneva airport with Neste’s biofuel, until Swiss authorities earlier this week told Neste they had decided not to back the scheme.

Neste had considered the Geneva project as an important step in ramping up its aviation business, but the head of its renewable products Kaisa Hietala told Reuters the cancellation would not affect Neste’s plans.

“It was surprising, a disappointment ... but we have other partners to proceed with, and there are more coming in the pipeline,” she said.

Neste has recently announced similar projects with Dallas airport in the United States as well as American Airlines (AAL.O), and the product has already been tested by Boeing (BA.N) and Lufthansa (LHAG.DE).

“At the moment, what holds back this market is high price and availability. But when the market is created, there will be more interest,” Hietala said.

She added Neste’s plan to expand its biofuel production in Singapore would enable it to provide sufficient volumes for the aviation market. Production at the new line is due to begin in 2022.

The International Civil Aviation Organization is targeting carbon-neutral growth in aviation from 2020, Hietala noted.

“Aviation is a global business that grows at a fast pace. Reliability of delivery for the fuel will be an important question.”

Alongside Neste, at least one other company, U.S. AltAir Fuels, has tested biofuel for aircraft with pilot projects.

Neste has stepped up usage of low-quality feedstock in its biofuels: waste and residue inputs, such as animal fats, make up more than 80 percent of its raw materials.

In the first half of 2018, biofuels for road traffic made 70 percent of Neste’s core profit of 679 million euros (603.39 million pounds).

“Aviation might become a significant source of income for us in the future,” Hietala said.

Reporting by Jussi Rosendahl; Editing by Mark Potter

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