As part of the trials, biodiesel will be used in power generators operated by NT Parks and Wildlife and in five buses that run daily from Darwin to the Batchelor Institute of Indigenous Tertiary Education.

"Environmentally friendly fuels are the way of the future, and the construction of a $77 million biodiesel facility by Natural Fuels at East Arm has the Territory well placed to maximise on this emerging industry," said NT Business Minister Paul Henderson.

The plant, an equal joint venture between Natural Fuels Limited and Babcock & Brown Environmental Investments, will be the largest biodiesel plant in Australia, said to have three times the production capacity of its competitors.

The plant will use imported palm oil as its feedstock, and is expected to start production in September 2006.

The NT Government said the location of the plant positioned NFA to meet the needs of both the Australian and Asian markets for "green fuels".