Neste's Singapore Refinery: A Catalyst for Scalable Sustainable Aviation Fuel in Asia-Pacific

The global push to decarbonize aviation is gaining momentum, and Neste, the Finnish renewable fuels giant, is positioning itself as a leader in this transition. At the heart of its strategy is the company's Singapore refinery—the world's largest producer of sustainable aviation fuel (SAF)—which has emerged as a linchpin for scaling SAF adoption across the Asia-Pacific region. With regulatory tailwinds like Singapore's 1% SAF mandate and partnerships with logistics giants like DHL, Neste is uniquely placed to capitalize on this $100+ billion market opportunity. Here's why investors should take note.

The Singapore Refinery: Scalability Meets Strategic Location

Neste's Singapore refinery currently produces 1 million metric tons of SAF annually, a capacity that has been critical to meeting regional demand. By 2027, Neste aims to boost global SAF output to 2.2 million tons annually, with the Singapore facility serving as its primary hub for Asia-Pacific. This expansion is underpinned by strategic investments: in April 2025, Neste's Rotterdam refinery began producing SAF, adding 500,000 tons to its global capacity. The Singapore refinery's role, however, remains irreplaceable due to its proximity to key aviation markets and its ability to supply CORSIA-eligible fuel—a critical requirement for airlines operating under the UN's Carbon Offsetting and Reduction Scheme.

The refinery's scalability is further bolstered by its use of 100% renewable waste and residue feedstocks, such as used cooking oil and animal fat. This ensures compliance with strict sustainability criteria while avoiding the land-use controversies associated with crop-based biofuels.

DHL's Commitment: A Blueprint for Corporate Adoption

In July 2025, Neste inked a landmark deal with DHL Express to supply 7,400 tons of SAF (9.5 million liters) to Singapore Changi Airport over a 12-month period. This partnership is significant for two reasons:
1. Volume and Visibility: The deal represents one of the largest SAF procurements in Asia's air cargo sector, directly supporting DHL's goal to reduce emissions by 50% by 2030.
2. CORSIA Alignment: The SAF supplied by Neste meets CORSIA standards, making it a model for other logistics firms seeking to comply with global carbon regulations.

The fuel is blended at a 35–40% ratio with conventional jet fuel for DHL's Boeing 777 freighters, reducing their carbon footprint by up to 80% compared to traditional fuel. This partnership underscores the growing demand for SAF among corporations, which are increasingly prioritizing ESG compliance to meet investor and regulatory expectations.

Regulatory Tailwinds: Singapore's 1% SAF Mandate

Singapore's 1% SAF mandate, effective from 2026, requires airlines operating in the country to blend at least 1% SAF into their fuel mix. This policy, aligned with CORSIA, is a critical catalyst for regional SAF adoption. Neste's Singapore refinery is already supplying SAF to local airlines like Singapore Airlines and樟宜机场, ensuring compliance for carriers serving this major aviation hub.

The mandate's ripple effect extends beyond Singapore. As neighboring countries like Malaysia and Indonesia explore similar policies, Neste's integrated supply chain—linking feedstock sourcing, production, and distribution—positions it to dominate the Asia-Pacific SAF market, which is projected to grow at a 25% CAGR through 2030.

Why Neste is a Compelling Investment

1. First-Mover Advantage: Neste's Singapore refinery is the largest SAF facility globally, giving it economies of scale and operational expertise others cannot match.
2. Regulatory Tailwinds: CORSIA compliance and mandates like Singapore's 1% rule create artificial scarcity for SAF, driving prices and demand.
3. Diversified Revenue Streams: Neste's SAF sales are complemented by its renewable diesel business, which generated €6.8 billion in revenue in 2024, providing a stable cash flow to fund SAF expansion.
4. Partnerships Drive Growth: Deals like the DHL agreement reduce execution risk and signal corporate demand for SAF at scale.

Neste's stock has underperformed Nordic equities in recent years, partly due to high feedstock costs and refining margin volatility. However, with SAF demand set to explode—analysts forecast SAF volumes could hit 20 million tons by 2030—this could be a buying opportunity.

Risks and Considerations

• Feedstock Supply: SAF production relies on waste-based raw materials, which are constrained. Neste's partnerships with waste suppliers (e.g., used cooking oil collectors) mitigate this risk but require ongoing investment.
• Competition: New entrants like TotalEnergies and Acciona are expanding SAF capacity, though Neste's early-mover advantage and scale remain formidable.
• Policy Uncertainty: While CORSIA is established, some governments may delay SAF mandates, though Asia-Pacific's decarbonization goals are increasingly firm.

Final Take: Neste is a Decarbonization Play with Legs

Neste's Singapore refinery and its partnerships with regional players like DHL position it to capture a disproportionate share of Asia-Pacific's SAF market. With regulatory tailwinds and corporate ESG commitments driving demand, Neste's ability to scale production while maintaining margins could make it a standout investment in the decarbonization theme. For investors, the stock's current valuation—trading at 10x 2025E EBITDA—offers a compelling entry point, provided they are willing to ride out short-term volatility tied to feedstock costs.

In a world racing to reduce aviation emissions, Neste isn't just keeping pace—it's leading the way.