The Finnish company is investing about €100 million ($A159.8 million) in the new biodiesel facility, expected to produce up to 170,000 tonnes of biodiesel per annum when it begins operating in mid-2007.
Based on Neste Oil’s proprietary biodiesel technology, the fuel will be produced from 100% renewable raw materials, in the form of vegetable oils and animal fats.
"Our new biodiesel facility is an excellent example of how we are continuing to work to turn Neste Oil's clean fuel strategy into reality – using a variety of raw material inputs and further developing our advanced refining expertise," said Neste Oil president and chief executive Risto Rinne.
"In less than two years from now, we will be producing the world's best and purest diesel fuel at this unit, using pioneering technology that we have developed ourselves to make optimum use of renewable raw materials," Rinne said.
Neste Oil said the new biodiesel facility had the potential to meet Finland’s commitment to the European Union’s biofuel goals as soon as the plant began production, three years in advance of the 2010 target.
Kimmo Rahkamo, executive vice president of Neste Oil's components division, said that ensuring biofuels could come on to the market would call for measures from government, for example tax breaks.
Rahkamo quoted a study indicating 84% of Finns supported the idea of tax breaks for bio-based traffic fuels.
Neste Oil said it had made considerable efforts to implement environmentally friendly processes at the Porvoo refinery over its 40 years of operation, pioneering the adoption of low-sulfur fuels and in more recent years, sulfur-free fuels.
A new reforming unit made unleaded gasoline possible in 1986, while a new sulfur recovery facility halved the refinery's emissions in 1991.
The company said the biodiesel plant further strengthened its commitment to sulfur-free fuels, as would a new €600 million refinery using heavy fuel oil to produce 1 million tonnes per annum of high-quality diesel, due to be commissioned in late 2006.