Neste Oil's Nexbtl Renewable Diesel

NesteNeste Oil'sOil's NExBTLNExBTL RenewableRenewable DieselDiesel -- SustainabilitySustainability aspectsaspects

InternalInternal auditors,auditors, 1313 AprilApril 20112011 PekkaPekka TuovinenTuovinen NesteNeste OilOil CorporationCorporation Content

• Update on regulatory status • Challenges • How Neste Oil is ensuring compliance and continuous progress? • Traceability of feedstock • Certification Systems • Neste Oil Voluntary Scheme for sustainability verification • Conclusions

14.6.2011 Pekka Tuovinen 222 European legislation: Neste Oil’s compliance with the Renewable Energy Directive

Compliance method

Land use Change Proof that cropland existed prior to January 2008 9 Data obtained in Due Diligence process

Traceability Mass Balance method to trace feedstock to origin 9 System in place

Greenhouse Gas Basic data to enable Greenhouse Gas assessment Balance 9 System in place

Sustainability Sustainability compliance to be verified by Verification independent 3rd party 9 Voluntary Scheme filed with the Commission; ISCC (German system) also used

14.6.2011 Pekka Tuovinen 3 International Trade with Feedstocks and Biofuels – Europe is an Importer

(E) 2015: Big Suppliers in Latin America and Asia Pacific Europe is net importer of Feedstock and Biofuels

Source: HART Energy Consulting 12/2009

4 Challenge: availability of truly sustainable raw materials in Europe

14.6.2011 Pekka Tuovinen 5 Challenge: how to use land efficiently

Yield per hectare (t), End-product crude oil equivalent

oilseed rape (EU) NExBTL / (FAME) 0.9

soy NExBTL / (FAME) 0.54 (US)

oil palm NExBTL / (FAME) 4.2 (Malaysia)

wheat Ethanol 1.1 (EU) Ethanol barley (Finland) 0.6

corn Ethanol 1.2 (US)

sugar beet Ethanol 3.1 (EU)

sugarcane Ethanol 3 (Brazil) * Alternative, not in commercial production at the jatropha* NExBTL / (FAME) 1 - 1.5 moment

algae* NExBTL / (FAME) 30 Sources: multiple

14.6.2011 Pekka Tuovinen 6 Extensive R&D to expand feedstock base

Nonfood vegetable oils Algae

Harvesting waste and Microbes biomass gasification

7 14.6.2011 Pekka Tuovinen 7 Development of Neste Oil renewable diesel raw materials

Future raw materials • Waste oil from fish processing industry • Biowax produced from wood-based biomass • Soybean oil • Microbial oil • Micro-algae oil • Jatropha oil • Camelina oil

14.6.2011 Pekka Tuovinen 8 Neste Oil supply chain controls for renewable feedstock (palm oil)

Negotiations Contract signed Supplies start Continuous business

Full counterparty study by Risk Management (company profile) and RSPO Certification follow up Security (counterparty study) Neste Oil Voluntary Scheme operations as described in NOQD-260/EN Sustainability Due Diligence Reporting on traceabiity, principles of massbalance, internal audits etc by Corp. HSSE (separate slide on audit principles) 3rd party audits, as needed

Data on certification status/plans Neste Oil engagement and internal inspections

Agreement drafting: (Continuous effort by sustainability team and supply) Neste Oil Traceability planning Sustainability clause Communications Planning

• Pre Audit Simo Honkanen 9 Good governance and supply chain management are the corner stone of sustainability

Measuring and minimizing the undesirable impacts of the operations

Management systems: Policies, principles and instructions

Oil Renewable Companies feedstock

Feedstock Product Refining Sales Industry Logistics logistics Fossil Feedstock Consumers Households

Renewable Energy Directive: Sustainability, GHG

Fuel Quality Directive: Sustainability, GHG

14.6.2011 Pekka Tuovinen 10 Example: GHG emissions from palm oil based biofuel - Comparison between Neste Oil and EU calculations

J 70 M

/ 2 O

C 60 g 5 3 35 % GHG savings requirement 50

50% GHG savings requirement 40 5 4 37 - 60% 30 5 3 20 25 29 g CO2eq/MJ 4 bonus factor if 10 cultivated on 15 15 degraded land 6 0 Neste Oil Study EU Default 1 EU Default 2 (Methane capture - best case) Palm oil cultivation Palm oil milling Transportation Biofuel production

Simo Honkanen 11 Developments: Creating a reliable, traceable supply chain for palm oil – term deals instead of spot market

14.6.2011 Pekka Tuovinen 12 Example of Traceability: Neste Oil’s Chain of Custody System for Palm Oil

AUTHORITY Supplier PALM OIL REFINERY

Neste Oil - Authority •Authority report

PFAD RBD stearin NESTE OIL’S PLANTATIONS MILLS HARBOUR REFINERY CUSTOMER

Crude Palm Oil (CPO)

Plantation - Mill Mill - (Refinery) - Harbour Supplier - Neste Oil Neste Oil - Customer •Approved mills •Summary of plantations of •B/L •Customer specific reports (Appendix of the agreement origin for each barge •Shoretanks measurement (+) •B/L including name of plantation, •Summary of discharging of barges •CoC report (++) •Shoretanks measurement (+) Previous land use, plantation history •History of shore tanks of harbour •Certificate of quantity (+) •CoC report (++) and establishment year) •Certification of quality (+) •Certificate of quantity (+) •Truck loading/discharging (FFB) •Certification of origin/T2L •Certification of quality (+) documents •RSPO certificates •Certification of origin/T2L •Ullage report (+) •RSPO certificates •Ullage report (+)

PFAD = Palm Fatty Acid Distillate 14.6.2011RBD stearin = RefinedPekka Bleached Tuovinen and Deodorized stearin 13 EU member states have three ways to verify sustainable production

• National approval, • EU-approved voluntary system and • Multilateral agreement with the EU

• Neste Oil has developed a voluntary scheme to show renewable energy and fuel quality directive compliance. • Will be verified by a third party • Covers the entire chain, from procurement through production to distribution • Keeps up Neste Oil’s high operational standards and adds the steps needed to verify regulatory compliance

14.6.2011 Pekka Tuovinen 14 Examples of two Verification Systems: ISCC - Germany and Voluntary (Company) Scheme

Scheme for Verification of Compliance with the Sustainability Criteria for Biofuels s >15 mission ha EU Com luation mes in eva ntary sche volu r 2011) phase (Ma

• National System: ISCC in Germany, NTA 8080 in the Netherlands • Voluntary Scheme, EU: Neste Oil scheme filed to the Commission and pending for approval. Based on meta standard principle: e.g. RSPO included in order to minimize double auditing.

14.6.2011 Pekka Tuovinen 15 Independent third party verification of sustainability

Third party verification procedures

Sustainability Supplier Greenhouse Criteria for Approval Chain of Gas Data Audits Continuous RED f Process f Custody f Handling f f Development Compliance

Waste & Residue Traceability Mass Balance GHG Calculation Definition Method Method Method

14.6.2011 Pekka Tuovinen 16 Recognitions received by Neste Oil

2007 - 2011

, 2008/2009, 2009/2010, 2010/2011

14.6.2011 Pekka Tuovinen 17 Conclusions and next steps

• Neste Oil’s HVO diesel (NExBTL) is superior quality renewable diesel • Fully compatible with modern diesel engines • Reduces exhaust emissions and greenhouse gas emissions • Equals with best fossil fuels in drivability, performance and comfort • Enables the development of engine technologies • Neste Oil is the sustainability leader in the industry • Active R & D, novel feedstocks • Committed to use 100% certified raw materials by 2015 – with full traceability • One of the biggest users of RSPO certified palm oil • Promotes better sustainability practises in the supply chain • Smallholder and greenhouse gas reduction projects under development

14.6.2011 Pekka Tuovinen 18