Finnish biofuel alliance

is to join forces with paper and forest products company

to develop technology for producing new-generation biofuels from wood residues.

The first step will be to design and build a demonstration plant at Stora Enso’s Varkaus Mill in Finland. The plant, owned on a 50/50 basis by the two companies, is expected to start up in 2008 and will produce heat and electricity for use locally, and crude biodiesel to be refined into commercial fuel at Neste Oil's refinery in Porvoo.

Experts from Neste Oil, Stora Enso, and VTT Technical Research Centre of Finland will help implement the development phase and market wood-based biofuel.

Neste Oil and Stora Enso see the growing biofuel market in Europe as a promising and sustainable business opportunity for meeting the increasing demand for premium-quality products made from a wide variety of feedstocks.

The challenges related to generation of clean synthesis gas from wood will need to be solved before wood-based biomass can be used in biofuel production. The project will also focus on using Fischer-Tropsch process to produce crude biodiesel from gas.

The €14m demonstration plant will be integrated into the energy infrastructure of the Varkaus Mill, and the gas produced will equal the energy needed to heat 4,300 homes and cut local carbon dioxide emissions significantly.

Following the development phase and completion of the technical solutions, and after the partners have gained sufficient experience from the demonstration plant, the joint venture will build a full-scale commercial production plant at one of Stora Enso’s mills. This facility will be owned on a 50/50 basis by the JV partners.

Stora Enso will be responsible for supplying wood biomass and using the heat generated. Wood biomass will be supplied from forests according to ecological preconditions. Neste Oil's responsibility will rest with refining and marketing of the biofuel.