Nordic refiner

perspectice

Matti Lehmus, EVP Oil Products, Neste Oyj

29.9.2016

Neste in brief

9/16/2016

Revenue

€ 11 billion

Comparable

operating profit

€ 925 million

Four Business

Areas

• Oil Products

• Renewable

Products

• Oil Retail

• Emerging

businesses

Largest owner

the Finnish State

(50.1%)

~ 5,000

employees

in 15 countries

The European refining industry needs to

address a number of macrotrends

9/16/2016

Demand trends

affecting product

balances

Decarbonization

of traffic

4

769791808869

20202010 2015 2025

-0,8%

-66 -63

-96

20

33

1110

32

38

-53

-4

2020

Gasoline

Middle

distillates

Fuel oil

-23

2010 2015

Surplus

Deficit

European long-term demand trends affect product balances

9/16/2016

Greater Europe total demand

forecast for oil products

Mt/a

Source: Wood Mackenzie, Greater Europe

product markets long term outlook, 1H 2016

Greater Europe all supply

balances outlook

Mt/a

Source: Wood Mackenzie, Greater Europe

product markets long term outlook, 1H 2016

Pressure on European utilization rates

expected to continue

9/16/2016

%

Source: Wood Mackenzie Balancing the World, 1H 2016

Refinery utilization rate forecast including known

capacity changes

60

65

70

75

80

85

90

2004 2006 2008 2010 2012 2014 2016 2018 2020 2022

Greater

Europe

North

America

Russia and

Caspian

Asia Pacific

Decarbonization of traffic is a key business

environment driver for the coming decades

9/16/2016

Traffic will

become the largest

source of CO2

emissions in

Europe

Source: European Commission

9/16/2016

Improving

energy efficiency

and smart traffic

Alternative

powertrainsAlternative fuels

Complementary means for decarbonizing

traffic will be needed

Assessing alternative solutions should

consider well-to-wheel emissions

9/16/2016

Well-to-wheels gCO2eq/km

Source: JEC: Well-to-Wheels analysis of future automotive fuels and powertrains

in the European context./January 2014

0 50 100 150

Fossil gasoline

Fossil diesel

Diesel hybrid

Natural gas

Electricity (EU mix)

Waste-based HVO

Waste-based advanced biofuels are a

cost-efficient way to reduce emissions

9/16/2016

Estimated cost to society (in EUR) to reduce 1 ton of CO2

emissions in heavy duty and passenger cars

Source: Roland Berger,

Integrated Fuels and

Vehicles Roadmap to 2030,

2016

Data refers to situation in

2030. EU average projected

power mix (IEA). Oil price

range of 70-113 USD/bbl.

Expected 2030 cost for

alternative powertrains.

Includes required investments

in infrastructure.

EU level commitment to greenhouse gas

reductions driving biofuels regulation

109/16/2016

Longer term

outlook

EU committed to

40% GHG reduction

and 27% renewable

energy target by

2030

EU Regulation up

to 2020

10% overall target

firmly in place -

current biofuel

blending level

estimated to be 6%

Several Nordic countries have a high

ambition for decarbonisation

9/16/2016

FINLAND

• Roadmap towards a

carbon-neutral

society in 2050

• 40% renewable fuels

share by 2030

SWEDEN

• Ambition to be one

of the first fossil-free

developed econo-

mies in the world

• A fossil-free vehicle

fleet by 2030

NORWAY

• 40% reduction in

GHG by 2040, carbon

neutral by 2050

• Significant incentives

for electric vehicles

9/16/2016 12

41 41

10 9

0

10

20

30

40

50

60+/-0%

50

Mton

2021

50

2016

Middle distillatesGasoline

0

1

2

3

4

5

>4

2016

>2

>10%/a

2021

Biofuels

Baltic Sea market outlook reflects high

ambition for decarbonisation

Baltic Sea biofuel demand

forecast 2016−2021

Baltic Sea demand forecast for

gasoline and distillates (incl.

biofuels) in 2016−2021

Baltic Sea demand estimate includes: Finland, Sweden, Denmark, Norway, Poland, Estonia, Latvia and Lithuania.

Mton

Case Neste –

Focusing on two strategic objectives

9/16/2016

• Differentiated customer offering

• Operational performance improvement

• Asset development

Baltic Sea

champion

Global

renewables

growth

• Waste and residue feedstock focus

• Expanding to new markets and

applications

• Renewables capacity growth

Neste’s One Refinery asset development program

positions our refining system for the future

9/16/2016

One Refinery program 2015−2017

• Construction of residual

hydrocracker feed pretreatment

unit to Porvoo

• Naantali conversion change

• Optimization as one refinery

system

Targets

• Increased fuel oil to distillates

conversion

• Improved feedstock flexibility

• Naantali production cost reduction

Naantali

reconfiguration

Porvoo feed

pretreatment

(SDA)

Porvoo

Production

Line 4

VGO +400 kt/a

VGO import

-350 kt/a

Middle distillate

+100 kt/a

Heavy fuel oil

-300 kt/a

9/16/2016 15

New configuration enables increased feedstock

flexibility and improved product mix

65 %75 %

27 % 23 %

8 %2 %

0%

20%

40%

60%

80%

100%

Before After

VGO

Others

Urals

8 % 5 %

50 % 53%

31 % 31 %

11 % 11%

0%

20%

40%

60%

80%

100%

Before After

Others

Gasoline

Middledistillates

Fuel oil

Feedstock flexibility improvement Product mix improvement

Renewables growth − Neste has grown into a

giant of the circular economy

9/16/2016

2Million tonsWaste and residues

2Million cars

Annual consumption

2Billion litresRenewable Diesel

More than 75 % of our renewable feedstocks are wastes and residues

Expanding into new markets and

applications

9/16/2016

Renewable fuels

for road traffic

and expanding

the feedstock

range

Renewable

solvents and

biobased

chemicals

Renewable

aviation fuels

Neste’s renewable diesel expanding

into new markets

189/16/2016

“By 2020, all plastic material

used in our home furnishing

products will be 100%

renewable and/or recycled.”

Thank you.

Matti Lehmus,

EVP Oil Products Business Area,

Neste