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Neste Oil's Porvoo refinery. Image courtesy of Neste Oil.

Faced with overcapacity in Europe’s refining sector Finland-based Neste Oil is planning a major $400 million development plan to streamline production at its two Finland refineries and lower operational costs.

The company said it will closely integrate refinery operations at its Porvoo and Naantali plants.

The plants will be managed as one system with four production lines at Porvoo and one at Naantali.

Some units at Naantali will be closed down while other operations are expected to either be shut down or outsourced.

Naantali will continue producing diesel and specialty products such as solvents as well as feedstocks for use at Porvoo.

Gasoline components produced at Naantali will be refined into end-products at Porvoo, and terminal capacity at Naantali will be used for distributing gasoline from Porvoo.

The investment program includes a number of projects, the largest being the construction of an SDA feedstock pre-treatment unit at Porvoo that will cost about $158 million.

The unit is expected to be completed in 2017.

Neste is also planning to streamline the structure of its Nanntali refinery and invest about $47 million in various utility-related enhancements.

Basic engineering on these projects is expected to be completed by early 2015. The projects should be finished in early 2017.

Neste said the changes will reduce its labor force by about 250 employees, primarily in Finland. However, this number does not include possible outsourcings.

Staff reductions will mainly affect the company’s common functions and the oil products business area.

Neste is also considering the future of Porvoo’s electricity distribution system and is considering selling the plant’s distribution network to an outside investor.

“Given the substantial overcapacity that exists in the oil refining sector in Europe, we need to look at a broad range of solutions for improving our competitiveness and securing the foundation of our future operations and growth,” Neste Oil’s president and CEO Matti Lievonen said.