Petroleum giant Shell could be getting into the algae biodiesel business. The company is joining with Hawaii-based HR Biopetroleum to test

This story in the Financial Times says the pair will start by building a small research plant with hopes to make it a full-scale commercial plant of 20,000 hectares, capable of producing 1.2 million tons of oil per year:

Shell has held back from production of first-generation biofuels such as ethanol and biodiesel from vegetable oil, focusing on second-generation fuels that can be produced from non-food plants or plant waste. It has argued that government support for biofuels ought to give greater incentives to second-generation products on the grounds they are likely to have much better environmental performance, particularly in cutting carbon dioxide emissions.

Graeme Sweeney, Shell’s head of future fuels, suggested that biodiesel from algae would need such support to be viable. He said: “The issue for us is that we are here investing in providing sustainable routes to biofuel with a low-carbon footprint.”

Shell officials admit there’s a lot of work to do to make the venture economically viable.