Neste to shut down oil refinery operations in Naantali, Finland
Neste announced that it has decided to shut down its oil refinery operations in Naantali, Finland, by the end of March 2021, following the conclusion of co-operation negotiations. In September, Neste announced that it was planning to restructure its refinery operations in Porvoo and Naantali, Finland, to ensure the competitiveness of its Oil Products business.
Neste will focus the Naantali site on the terminal and harbor operations, as well as renew its Oil Products operating model. In the second phase of the transformation, the Porvoo refinery will be developed towards co-processing renewable and circular raw materials. These measures are expected to result in annual fixed cost savings of approximately EUR50 million (USD59 million).
Neste said it believes that the demand for fossil oil products will continue to decline, and that the share of renewable energy solutions will continue to grow in the coming years. The Covid-19 pandemic has substantially accelerated the decline in demand for oil products, which is not expected to recover to previous levels, Neste said.
“Fundamental changes are therefore required to secure the competitiveness of Neste’s Oil Products business. With these measures, Neste aims to improve its productivity, resource efficiency and adaptiveness to market changes,” the company said in a statement. It added that the shutdown of the Naantali refining operations does not affect the security of the fuel distribution supply in Finland.
“We want to improve our competitiveness and maintain refining operations and related strategic capabilities in Finland. The changes will support the transformation of the Porvoo refinery into a leading sustainable, safe, and efficient refinery, enabled by our highly innovative and efficient Neste people. Neste’s story began in Naantali, so I understand that this news might be difficult to receive. Over the years, our Naantali people have shown tremendous cooperation and innovation skills in many difficult situations, and we can be proud of that. But now we are in a situation where we do not have any other options. We will support our people in adapting to this change in several ways,” says Neste’s President and CEO Peter Vanacker.
“I want to thank our employee representatives for the co-operation negotiations that were open and thorough. Together we looked at different solutions which improve competitiveness and examined the effects of the future transformation of the oil industry. However, during the negotiations, we did not find a solution which would have enabled continued and competitive refining operations in Naantali. As part of our transformation, we will also renew the Oil Products operating model. As a consequence, some of the jobs will cease to exist but completely new jobs will also be created. In the co-operation negotiations, we agreed on comprehensive change support measures which will help our personnel in adapting to the change,” says Hannele Jakosuo-Jansson, senior vice president, Human Resources, HSSEQ and Procurement at Neste.
The company estimated in its earlier announcement that the plans, if implemented, would mean up to 470 redundancies, including possible outsourcing. Together with the employee representatives, a solution was found that reduced the total number of redundancies from what was previously presented. The shutdown of the Naantali refining operations and the renewal of the Oil Products operating model will lead to approximately 370 redundancies.
In this transformation, Neste will primarily offer its personnel new jobs and related training as well as compensation for moving to a new location. For those whose employment will end, Neste will offer retirement agreements and specific support packages, including startup grants to support education or entrepreneurship. In addition, a change support program will be implemented with different measures which support finding new employment.
Operations in the terminal and harbor in Naantali will continue. To support the future economical activities of the area, Neste is cooperating with the authorities of the Ministry of Economic Affairs and Employment of Finland, City of Naantali as well as regional environmental agencies.