Millions of hours of engineering expertiseNeste Oil is best known for its refining and its R&D, but what about its engineering? That is the responsibility of Finland’s second-largest engineering consultants, Neste Jacobs. The latter also serves a number of other customers as well.
May was something of a special month for Tom Främling, who took over as CEO at Neste Jacobs earlier his year, as it saw the announcement of a long-term framework agreement between Neste Jacobs and Abu Dhabi-based chemical giant, ChemaWEyaat.
Although the agreement will not guarantee any concrete contracts, it does underline Neste Jacobs’ excellent reputation in the engineering world – and could bring extensive work on a USD 20-billion project to create one of the world’s largest chemical facilities.
“The Middle East is becoming one of the world’s toughest markets in terms of new contracts, as it’s the only region where there’s so much money,” says Främling.
Neste Jacobs’s broad-based expertise proved the ace up the company’s sleeve in securing a role in the ChemaWEyaat project.
Largely unknown outside the industry
Although Neste Jacobs is largely unknown outside the industry, it is Finland’s second-largest engineering consultancy company, with annual net sales of €110 million and 800 personnel. In a normal year, the company carries out a million hours of engineering work and buys in hundreds of thousands of hours of engineering design from its subcontractors.
What marks Neste Jacobs off from others in the industry is that its majority shareholder is an oil refiner. Close to a half of its time is spent on projects for outside customers, however, primarily chemical companies.
With oil industry investments slow at the moment, engineering on other projects has become more important, which is why the Abu Dhabi deal is so important.
Neste Oil is something of an unusual oil company in its own right, because of its involvement in engineering through Neste Jacobs and because of the scale of its R&D for a company of its size. Some 250 people work in R&D at Neste Oil, and the company is involved in extensive collaborative projects worldwide.
A decisive link
Close to one in five people at Neste Oil work for Neste Jacobs or the company’s R&D organization. The close cooperation between these teams in developing new technology has made Neste Oil a force to be reckoned with internationally, despite its small size compared to the majors.
“It would be impossible to be the type of technological pioneer we are without strong R&D and engineering resources. The links between our organizations in these areas give us a decisive competitive advantage,” says Lars Peter Lindfors, who has been Neste Oil’s Senior Vice President, Technology & Strategy since the company’s reorganization this spring.
Large companies generally buy in the engineering services they need from specialist engineering providers. Neste Oil, in contrast, has chosen to research, design, and implement its major capital projects and enhance the third-party technology it uses in-house.
A good example of the improvements that Neste Oil has made to technology it originally acquired from other suppliers is the heavy gas oil-based gasoline line at Porvoo. Neste Oil has succeeded in doubling the unit’s output over the last couple of decades, while a Central European-based competitor that acquired a similar unit has preferred to focus just on reliability and similar issues, with the result that output from their unit is virtually the same as its nameplate capacity.
“Our engineers are encouraged to experiment, innovate, and improve our product palette, which is very positive, but it also means that we need to keep a close eye on our risk profile to ensure that it stays where we want it to be,” says Jorma Haavisto, Vice President, Risk Management.
A symbiosis that really delivers
The close cooperation between Neste Oil’s researchers and Neste Jacobs’ engineers has saved a lot of money and time in developing new technologies.
The most recent example of this is NExBTL renewable diesel, which has gone from the laboratory to world-scale implementation in a remarkably short time, less than a decade.
“When our research people began testing the chemistry in earnest, we launched a parallel engineering project to evaluate how the concept would need to be developed to make it an efficient full-scale process,” says Vice President Harri Turpeinen. He was closely involved in the work, which halved the time normally needed to develop such an innovative technology.
Automotive manufacturers have used a similar approach to reduce their product development cycles, but it is very much the exception in the oil industry, where the convention is to do the research first, then contract out the engineering, and then start the first plant project.
“A number of our competitors began work on developing comparable products to NExBTL around the same time we did, but they still haven’t come up with something commercial,” says Turpeinen.
Neste Oil commissioned its first NExBTL plant at Porvoo in summer 2007.
Virtual plants
The speed at which Neste Oil succeeded in developing NExBTL renewable diesel has also been helped by the use of advanced computer-based modeling and the elimination of many stages of traditional process design.
“Neste Jacobs is at the front of the field internationally when it comes to computer-based modeling,” says Haavisto.
Neste Oil decided back in the 1990s to abandon pilot plants wherever possible. Prototype units are expensive and slow to build, and it is much more cost-effective to carry out testing in the laboratory and in virtual units.
Virtual plants combine theory with field-based experience to create an environment that can effectively model processes in great detail.
Using this approach and bypassing a traditional pilot unit, Neste Oil was able to scale up its NExBTL technology directly from the laboratory to a full-scale plant capable of producing 170,000 tonnes of product a year.
Doing this ‘just’ using computer-based modeling is likely to set most people’s head spinning, and it also generated some tense moments for the engineers involved as well.
“It certainly was a relief to see that the technology really did work at plant scale as we thought, and knew, it would,” admits Tom Främling.
The next step in NExBTL technology, from the 170,000 t/a output of the two plants at Porvoo to the 800,000 t/a of the plants now under construction in Singapore and Rotterdam, was a much smaller one than going from the laboratory to the first Porvoo plant.
Neste Oil followed a similar model in developing its plant in Canada, which supplies the North American market with iso-octane, an advanced gasoline additive.
The demonstration plant for producing biofuel from forestry industry residues commissioned at Varkaus as a joint project with Stora Enso this summer has been an exception to the rule. Diesel produced from wood-based biomass is such a new area that neither Neste Oil nor anyone else had enough basic data to use the virtual plant approach, which made a pilot plant a necessity.
Leveraging in-house knowledge
Technology development at Neste Oil involves sales personnel, in addition to R&D, Neste Jacobs, and production. Input from sales teams on drivers’ needs and expectations has been particularly valuable in developing the base oils used in lubricants, for example, says Jorma Haavisto.
Openness and mutual respect are essential for different functions across Neste Oil to work effectively together on development projects like this. Keeping things in-house also reduces the risk of strategic information falling into the wrong hands.
Neste Jacobs sells the fruit of internal development work at Neste Oil onward to third parties in the form of technology licenses, but not everything is available for license. Nobody is likely to be granted a license to produce NExBTL renewable diesel, for example, however much they offer, and there is no doubt that there would be many takers.
A number of technologies can be licensed without harming Neste Oil’s core business, however, such as the company’s iso-octane technology.
Being part of an oil refining organization has meant that Neste Jacobs has not often gone after contracts from other oil refiners. Outside customers tend to be concentrated in parallel fields, particularly chemicals.
“With 800 people on the payroll, we can’t depend just on work from Neste Oil itself,” says Främling. “A lot of our expertise has application in other areas that call for cutting-edge process engineering, and that’s why we’re actively marketing our know-how these days.
“Processes used in oil refining to recover sulfur, for example, can also be applied to CO2 recovery, for example, which enables us to draw on the expertise and theoretical knowledge we’ve built up here.”
Neste Jacobs has also been able to leverage its Finnish roots in the Middle East.
“Finland and Neste Jacobs both have a very neutral profile internationally, and we could probably make more of this,” says Lars Peter Lindfors.
A giant for a partner
Neste Jacobs also has the opportunity to call on the massive resources of the company’s minority shareholder, US-based Jacobs, for major projects. The Jacobs Engineering Group is the world’s fifth-largest engineering services provider, with 56,000 people on its payroll.
With such a large workforce, Jacobs can handle much more detailed engineering work than Neste Jacobs, which typically buys in things like pipework design from outside contractors.
Despite having its own in-house engineering resource, Neste Oil also buys in major services from other providers. Technip, for example, is acting as the principal engineering contractor for the new NExBTL plants in Singapore and Rotterdam, as Neste Jacobs did not have sufficient resources available when the projects were launched. Personnel from Neste Jacobs are acting as owner’s engineers as part of the Neste Oil teams dedicated to the projects.
Once the plants have been commissioned, Technip’s job will be done and the responsibility for further developing them will be Neste Jacob’s. The latter is responsible for ensuring the smooth running of technology at all of Neste Oil’s facilities, and almost half of the company’s personnel are dedicated to the Porvoo and Naantali refineries.
A new world
The acquisition of Rintekno last year added over 200 people to Neste Jacobs’ payroll, and extended the company’s know-how in renewables, such as tall oil. New raw materials for renewable diesel are one of the most important areas of development for Neste Oil and Neste Jacobs.
“We very much hope that wood-based fuels will take off and result in some major capital projects,” says Tom Främling.
Researching and developing raw materials for renewable fuels is taking Neste Oil into completely new areas. While some of the processes needed are similar to those used in conventional oil refining, biomass and other organic inputs place tough demands on systems and call for a number of new technologies.
Anyone who would have predicted 15 years ago that Neste Oil’s engineers and researchers would be working on how to produce algae on an industrial scale today would have been labeled crazy. But that is what they are doing, as well as working on other methods for using new types of raw materials.
A refiner working with biofuels needs to see the wood for the trees in very much the same way as when working with conventional hydrocarbons, and be able to stay ahead of the competition in the same way as well. Focusing on the essential is what counts, just as much as elsewhere.
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