Oil report

Neste sets up Singapore distillates trading desk

LONDON, June 13 (Reuters) - Finnish refiner Neste Oil Corp NES1V.HE set up a distillates trading desk a firm in May in Asia's oil trading hub Singapore, a company source said on Friday.

Neste’s trading team in the city-state will initially comprise two to three dealers, said the source who declined to be named.

“It will focus on arbitrage flows,” he added.

The company is building an 800,000 tonne a year biodiesel plant in Singapore which will start operating in 2010.

Cross-regional fuel flows from Asia to Europe have been common this year, thanks to low freight rates charged for new vessels that need to make their maiden voyage, traders said.

“Arbitrage is common because there is harmony with low shipping costs and demand,” said one London-based trader.

Around 530,000 tonnes of Asian diesel shipments will head to Europe this month.

While oil refining remains Neste’s central business, the firm also aims to become the world’s leading producer of renewable diesel fuel.

Neste will build a biodiesel plant -- its fourth such plant investment so far -- in the Dutch city of Rotterdam to meet growing demand for biofuels.

The plant will cost about 670 million euros ($1 billion) and will have an annual capacity of 800,000 tonnes. Construction will begin immediately and is due for completion in 2011.

Neste already has one 170,000 tonnes per year plant producing its proprietary biodiesel NExBTL operating in Porvoo, southern Finland, and it is building a second similar one next to it, due to be ready next year.

Reporting by Felicia Loo