1. Belsif Session 17: Investing in biofuels General Introduction Sustainability challenges 30.5.2011 Tiina Tuominen (Manager, Sustainability) 30.5.2011 Tiina Tuominen (Manager, Sustainability)

2. 2 Content Neste Oil in brief Why biofuels? Legislative framework The way forward

3. 3 Neste Oil in brief A refinery and marketing company concentrating on delivering fuels for cleaner traffic Refining of 15 million tons of oil products per year Listing on the NASDAQ OMX Helsinki exchange (stock symbol NES1V) Turnover of 11.9 billion euros in 2010 Operations in 15 countries Personnel 5,000 State of Finland as primary owner (50.1% holding) Neste Oil’s Business Areas Oil Products and Renewables Oil Retail See more information: www.nesteoil.com

4. 4 Neste Oil strategy: cleaner, high quality traffic fuels

5. 5 NExBTL – the highest quality diesel in the world commercially available today Measured by product quality, easily outperforms both conventional biodiesel (FAME) and fossil diesel Suitable for passenger cars, heavy transportation vehicles, ships, and airplanes Fully compatible with fossil diesel Compatible with all modern diesel engines without any modifications Meets automotive manufacturers’ toughest quality specifications Can be used in diesel engines as such (100%) or blended with fossil diesel (as in Neste Green diesel) Can be transported and stored like fossil diesel Compatible with existing logistical and distribution systems Excellent cold properties Can result in over 50% lower GHG emissions than fossil diesel measured over the product’s entire life cycle.

6. 6 NExBTL improves urban air quality Based on extensive research NExBTL diesel contributes to a significant reduction in exhaust emissions compared to fossil diesel: Nitrogen oxide (NOx) 10% lower Particulates (PM) 28% lower Carbon monoxide (CO) 28% lower Hydrocarbons (HC) 50% lower Emissions reduction figures are averages based on numerous field and laboratory tests.

7. 77 Growth projects progressing as planned – 2 million metric tons in 2012 LocationCapacityInvestmentStatus Porvoo 1190 000 t/a€100 millionStarted up in 2007 Porvoo 2190 000 t/aOver €100 millionStarted up in 2009 Singapore800 000 t/a€550 million, one of the largest investments in 2010 by Finnish state- owned companies Started up in Nov 2010, production ramped up to full capacity on a phased basis Rotterdam800 000 t/a€670 millionStart up in mid- 2011 Singapore site

8. 8 Neste Oil’s sustainability ratings, and 2008/2009, 2009/2010, 2010/2011

9. Why biofuels?

10. 10 Change in the energy industry Population growth, especially in the developing countries. Fossil crude oil reserves are being depleted. The output at existing fields is estimated to drop by almost two-thirds by 2030. Traffic volumes and emissions are increasing, especially in the developing countries. Traffic volumes are expected to triple by 2050. By 2030, the global CO 2 emissions will be more than 50% higher than today (Source: IEA). Energy consumption is growing strongly, driven by China and India. Security of energy supply has become a key economic and political issue. Concern about climate change and the state of nature.

11. 11 How to meet the increasing demand for energy in an economic and environmentally sound manner? Climate change – one of the most pressing reasons for seeking alternative sources of energy and fuel The EU's goal is to reduce greenhouse gas (CO 2 ) emissions by 80% by 2050.

12. 12 Biofuel legislation in Europe Renewable Energy Directive (RED) Fuel Quality Directive (FQD) Identical sustainability criteria Renewable energy directive that came into force in 2010 requires member states to increase the energy content of transport fuels from renewable raw materials to 10% by 2020. The use of biofuels should result in a clear reduction of GHG emissions (compared to fossil fuel) 35 % savings from 2011 on 50 % savings from 2017 until 2020 60 % savings from 2018 (on within those installations that started production after Jan 1st, 2017) Technical specifications for fuel properties and binding targets to reduce fuels’ greenhouse gas emissions The GHG emissions of gasoline, diesel and other fuels should be reduced by 6% by 2020

13. 13 Key points in the EU RED Compliance Land use Change Traceability Green House Gas Balance Sustainability Verification

14. Way forward

15. 15 Sustainability plays a key role in the production of biofuels Economical aspects Social aspects Environmental aspects Sustainability

16. 16 Sustainability over the whole supply chains Land use  Focus and investment on agriculture and promoting of best practises Social impact  Poverty in producing countries and role of smallholders Future feedstock  Research and investments on next generation technologies and feedstock options

17. Thank you! www.nesteoil.com

18. 18 The oil palm is clearly the best crop at the moment End-product Yield per hectare (t), crude oil equivalent oilseed rape (EU)NExBTL / (FAME)0.9 soy (US) NExBTL / (FAME)0.54 oil palm (Malaysia) NExBTL / (FAME)4.2 wheat (EU) Ethanol1.1 barley (Finland) Ethanol 0.6 corn (US) Ethanol 1.2 sugar beet (EU) Ethanol 3.1 sugarcane (Brazil) Ethanol 3 jatropha*NExBTL / (FAME)1 - 1.5 algae*NExBTL / (FAME)30 * Alternative, not in commercial production at the moment Sources: multiple

19. 19 Palm oil contributes to increasing welfare in the producing countries Palm oil production has strong traditions in South East Asia. The first plantations were established in 1848. Currently Malaysia and Indonesia are the biggest palm oil producing countries in the world. The cultivation of oil palm is a significant source of income and a contributor against poverty in South East Asia, where 23 % of the population lives without clean drinking water and 15 % is living under the poverty line. The size of 40 % of palm oil plantations is 2-4 ha and they are managed by families. The volume produced by the smallholders is increasing in the near future. Palm oil production employs over 7 million people and it has a significant role in exports of Malaysia and Indonesia. Multiple sources: ie. Statistics dept, Malaysia and Statistics Bureau Indonesia, 2008, MPOB (2009), IPOB (2008)