Neste to consider war's impact on costs of Rotterdam refinery

By Anne Kauranen

HELSINKI (Reuters) -Finnish energy company Neste on Friday said it was not yet ready to decide on a major new renewable fuel refinery in the Dutch port of Rotterdam given the geopolitical situation and possible implications for costs.

After delivering first-quarter earnings that beat forecasts, Neste's outgoing Chief Executive Peter Vanacker said the company was not delaying its final investment decision for the new plant but it needs to analyse the impact first.

"You can't go to the board (for a final investment decision) when we haven't fully analysed the implication of the war in terms of inflation, inflation of material and goods costs, (and whether) the procurement strategy is still valid," he told Reuters.

The Finnish refiner and biofuel producer announced the investment in March last year, saying the refinery would be about the same size as the 1.5 billion euro ($1.58 billion) refinery expansion it is working on to produce sustainable aviation fuel (SAF) in Singapore.

Neste has bet heavily on renewable fuels but is competing in an increasingly crowded space as fossil fuel majors enter the green fuel market, pushing up costs for used cooking oil and discarded animal fat.

Prices for vegetable oil crops have also gone up due to the war in Ukraine but Vanacker said Neste had been able to mitigate the rise because of its global sourcing of waste and residue materials.

"We have been able to reduce the share of vegetable oils to 5% in our renewable raw materials input. We see it gradually going down," he said, adding the figure was 8% in 2021.

Neste said the logic and demand for the Rotterdam facility remained unchanged, despite the joint venture it formed in March with U.S.-based oil company Marathon Petroleum Corp to produce renewable fuels in California.

"All things that we can do to prepare the site (Rotterdam) we continue to do," Vanacker said.

A decision was originally expected on the plant early this year and on Friday, Neste said the final investment decision would be made "during the next months".

The company's operating profit rose to 762 million euros ($803 million) from 458 million last year, beating the 413 million euro mean estimate of eight analysts polled by Refinitiv.

Vanacker said the company had almost finished cutting ties to Russian crude oil.

"We have already mostly replaced Russian crude oil with other crudes, and the remaining supply contracts for Russian crude oil will end in July," Vanacker said.

The company has appointed Matti Lehmus, executive vice president in charge of renewables, as its new chief executive officer to replace Vanacker from the beginning of May.

Shares in the company were 8.5% lower in afternoon trade.

($1 = 0.9490 euros)

(Reporting by Anne KauranenEditing by David Goodman and Elaine Hardcastle)