BP has announced contracts to provide more than 200 million litres a year of biofuels to Australian customers by 2008.
BP will produce 110 million litres of tallow-based biodiesel at its Bulwer refinery in Queensland by 2007, which it will use to produce around two billion litres of 5 per cent blended fuel.
It will also purchase 80 million litres of ethanol a year from privately owned Primary Energy's plant in Kwinana, Western Australia, from 2008, as well as 23 million litres from Australia's biggest sugar miller CSR over the next two years.
Earlier this month Australia's leading car makers declared all locally made vehicles capable of running on petrol blended with 10 per cent ethanol, an alcohol most often made from grains and sugar cane and blended to reduce tailpipe emissions.
Gasoline stations selling biodiesels and ethanol blends are mushrooming across the country, while ethanol production rose 44 per cent year-on-year in the second half of 2005, after a government taskforce approved 10 percent ethanol-blended fuels.
A government capital grants scheme has also seen several new ethanol plants, focused in Australia's sugar-rich northeastern Queensland state, line up to begin production and supply expected demand from refiners.
BP's commitment to use both tallow and ethanol in blended fuels will reassure environmentalists concerned by the lack of deals since major refiners last year pledged their full support to the government's annual objective of 350 million litres by 2010 - a figure that represents about 2 per cent of overall oil demand.