INNOVATING IN BIOFUELSWorkshop on environmental innovation and global marketsSeptember 20-21, 2007Harri TurpeinenVP Corporate Stakeholder Relationsharri.turpeinen@nesteoil.com

1

Neste Oil in Brief

• Oil refining & marketing company with focus on high quality refined petroleum products with reduced environmental impact

• Four businesses with complementary roles

• Listed in the Helsinki StockExchange under the symbolNES1V

• Approximately 4,600 employees• Market capitalization approximately

EUR 7 billion

2006 SALES EBITDA 1)

€ 12,734MM € 1,037 MM

Oil Refining€776 MM

Oil Retail€165 MM

Shipping €96 MM

1) Excludes “Oil Other” EBITDA of EUR -30 MM (including eliminations)

2

Four Business Divisions

• Oil Refining– Two complex refineries in Finland, with an annual output

of some 14 million t/a of petroleum products

• Biodiesel– High quality second generation renewable diesel from

variety of feedstocks

• Oil Retail– Market leader in Finland and a significant player

in the St. Petersburg area in Russia, Estonia, Latvia,Lithuania, and Poland

– Approx. 1,100 retail outlets

• Shipping– Operates around 30 modern crude and product tankers

3

Operational excellence

• One of the most flexible refineries in Europe

• Produce any required qualities of middle distillates and gasoline (e.g. Californian grade )

• Reaction speed and agility: ‘Just in time’ product dispatch

• Create innovative solutions quickly in cross-organizational efforts

• Combine business and technical expertise for a leading position in niche markets

• Cavern system enables contango plays

• Logistics flexibility allows reactivity to short-term market shifts

• Very large storage capacity and deep sea harbor allow loading of large vessels

4

Strong in technology

Early 1990s

Mid-1990s

Early 2000 2006

NExTAME Technology

Synthetic Base Oils (PAO)

NExETHERS Technology

Introduce Futura City Diesel

Next Generation BiodieselNExBTL

NExOctane Technology to replace MTBE

• Early adaptation of new technology• Sophisticated process modelling

• Extensive pilot scale testing

• Catalyst R&D

• Emerging know-how in processing heavy fractions

• In-house engineering capability

Neste Oil's key technologies

Areas of expertise

VHVI Technology

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Biodiesel

Strategy is based on two growth pillars

Refining

Complementary businesses( Base oils, Gasoline components )

Supporting businesses ( Retail & Shipping )

Refining the future

Excellent operational and financial performance

The leading provider of cleaner traffic fuels

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Leveraging refining

excellence

Increasing the range of

feedstocks

Delivering high-quality products for cleaner traffic

We reinforce the key elements of our strategy

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Strategy Implementation

NExBTL Renewable DieselStart-up of the first plant has proceededThe second plant is scheduled to be commissioned at the end of '08Planning work and Environmental Impact Assessmenton a jointly owned plant with OMV in Austria continuesCompany is progressing in planning phase with a number of other plant projectsAim to utilize a wider range of renewable raw materialsin the future

Global markets for renewable fuels

driversevolutionmarket regulation

9

Biofuels agenda is driven by three elements

Biofuels set to gain considerable share in transportation fuels

market

Climate change

Security of supply

Domestic agricultureand

EU is seeking for competitive technology

advantage

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Government policies will boost demand further -moving towards mandated use

Tax break Obligation No policy or no information

EU biofuel regimes 2006

Source: Neste Oil

EU biofuel regimes 2008

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Strong growth outlook in EU demand

2,0 3,2

12,120,0

55,0

0102030

405060

2004 2005 2010 2020 2030

Mt

Note: Assumes that both gasoline and diesel have 5.75% biocontent in 2010Sources: European Biodiesel Board, EU Commission

Key implications

• Need for high quality biomass derived diesel

• Need for a wide variety of different feedstocks to meet EU target and vision

• Need for products that are compatible with vehicle population in use and with the logistical system

Historical and targeted EU biomass based diesel production

1 M t pa increase in production required to achieve EU

target

2,5 M tpa increase in

production required to achieve EU

vision

14 September, 200712

BTL

Vegetable oils

Esterification

FAME

In

Out

Mineral Oil

Gasoline

Jet

Diesel

CnH2n+2

CnH2

AromaticsPolyaromatics

MARPOL Annex I MARPOL Annex II** MARPOL Annex ?Goal

MARPOL Annex I* MARPOL Annex I* (Oil ;mineral oil based)

MARPOL Annex II**(Chemicals)

BTL GTL

Biomass

GasificationFischer-Tropsch

CnH2n+2

Vegetable oils

Animal fats

Hydrotreating

NExBTL

CnH2n+2

Natural gas

GasreformingFischer-Tropsch

CnH2n+2

Refinig

Sugar

Corn

Fermentation

EthanolGasoline

Jet

Diesel

C2H5OH

Gasoline

Jet

Diesel

Gasoline

Jet

Diesel

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Next Steps - Get out from the food chain!

• Food should not be used as fuel, but– that is all we have currently– all feedstock should have equal treatment

• Long-term solutions include– use of non-edible vegetable oils (Jatropha, Castor etc.)– new feedstock as algae and bacteria– 3rd generation solutions (wood gasification FT etc.)

• Extensive R&D needed

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Large units provide economies of scale –Globalisation offers opportunities

• We have a global ambition to move to large scale plants– Significant scale-up from Porvoo

NExBTL plant– Plants can be constructed in Europe,

Asia and North America

• We enjoy economies of scale whereas first generation plants have limited economies of scale– Limited feedstock availability– Logistics constraints

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Considerable growth potential exists in biofuels

US: 4.6 %by 2012

US: 4.6 %by 2012

EU: 5.75 % by 201010 % by 2020

EU: 5.75 % by 201010 % by 2020

China: Decided to opt for 2nd

generation solutions

China: Decided to opt for 2nd

generation solutions

India:

20% of diesel by

2012

India:

20% of diesel by

2012

Notes:1) EU target: 5.75% (energy content) biocomponent penetration in road fuels by 2010, 10% alternative fuels in road transport by 20202) US target: 4.6% of 2012 gasoline demand to come from renewable fuel components (i.e. 7.5 billion gallons)3) India target: 20% of diesel pool from biocomponents by 2012, 10% ethanol in gasoline by 2010

Sources: European Biodiesel Board; Federal Renewable Fuel Standard (Energy Bill); EU commission

Brazil: 2 % by 2012, 5 % >2013

Brazil: 2 % by 2012, 5 % >2013

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Biodiesel Generations - Market Share Evolvement

0

2

4

6

8

10

12

2006 2010 2015 2020

% o

f die

sel p

ool

3rd Generation2nd Generation1st Generation

illustrative

2% 5.75% 8% 10%

FAME = 1st generationBio hydrocarbons from bio oils = 2nd generationBio hydrocarbons from biomass = 3rd generation

2020: Equal to 25 Mton

Rapid development of ALGAE and/or other non-food

feedstock

2% 5.75% 8% 10%

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Neste Oil expectations from policymakers on biofuels

Technology Neutrality– legislation not to choose technology winners

Performance Driven– legislation to set standards for outcome

Sustainable Feedstock– criteria for feedstock sustainability– based on sound sciece, not to be used as trade barriers

Cost-Efficiency And Energy-Efficiency– industrial scale solutions– "well-to-wheel" energy-efficiency

Maintain Fuel Quality– no backsliding in performance standards or emissions

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Neste Oil’s view on the role of governments and the financial sector

• Predictability and consistency of policies

• Sustainability based performance criteria by regulator

• Challenging and realistic target setting in the complexcontext

• Public financial tools to support R&D&D of new solutions

• The financial sector to provide acid testing of the sustainability of the business concept

• The financial sector to provide capital

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Thank You!

The leading provider of cleaner traffic fuelswww.nesteoil.com

harri.turpeinen@nesteoil.com