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UPDATE 1-Stora, Neste to cooperate on biofuels

Fri Mar 16, 2007 4:02am EDT

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(Adds details, quotes)

HELSINKI, March 16 (Reuters) - The world's biggest paper and board maker Stora Enso (STERV.HE) and oil refiner Neste Oil (NES1V.HE) said on Friday they have agreed to jointly develop technology for producing biofuels from wood residues.

The first step in their cooperation will be designing and building a demonstration plant at Stora Enso's Varkaus Mill in Finland, the companies said.

The 5 megawatt plant, to be owned 50-50 by Neste and Stora Enso, is expected to cost 14 million euros ($18.5 million) and start operations in 2008.

Stora Enso Chief Executive Jukka Harmala said an industrial plant, with 250 megawatt capacity, would cost 250 million to 300 million euros and six such plants could be built in Finland.

"We aim to decide on industrial production as soon as possible," Harmala told a news conference, but declined to specify a timetable.

((Reporting by Sami Torma and Tarmo Virki, editing by Rex Merrifield and Erica Billingham; Reuters Messaging: tarmo.virki.reuters.com@reuters.net; tel +358-9-680 50 235, news@reuters.fi))

($1=.7567 Euro) Keywords: NESTEOIL STORAENSO/BIOFUELS

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