The Government now requires that biofuel blends make up 0.53% of all vehicle fuel sales from April 2008, rising to 3.4% by 2012.

But the major fuel retailers – BP, Mobil and Caltex – are still working on ways to implement the required biofuels sales levels.

The only company currently selling biofuels is Australian-owned Gull, which now offers its 98-octane Force 10 fuel, a blend of 10% bioethanol, at 11 of its 30 upper North Island service stations.

Produced by Anchor Ethanol, a subsidiary of dairy major Fonterra, the bioethanol comes from the company’s Reporoa factory in the Bay of Plenty, which can produce 30,000 litres of whey ethanol per day and 5 million litres in a dairy season. The fuel is then blended at Gull’s nearby Mount Manganui port terminal.

The New Zealand dairy industry produces sufficient whey ethanol to meet about 0.3% of the nation's petrol needs.

Meanwhile, Shell New Zealand has teamed up with Argent Energy to meet the new biofuels sales targets.

Argent is working on a feasibility study on establishing a biodiesel plant in New Zealand. It has already identified potential sites for a plant that could use up to 75,000 tonnes of tallow – waste animal fat product from the meat processing industry – to produce 85 million litres of biodiesel each year.

Another tallow-based diesel producer, Auckland-based Ecodiesel, has established a biodiesel production facility, aiming for initial production of 20 million litres per year by the end of 2008, increasing to 40 million litres by the end of 2009.

The country’s freezing works can supply enough tallow to produce up to 5% of the country’s diesel needs, about 3500 million litres per year.

State-owned coal company Solid Energy has also entered the biofuels market, with the acquisition last May of biodiesel producer Canterbury Biodiesel.

Solid Energy operates the business as Biodiesel New Zealand and plans to increase annual production to 70 million litres within three years, which will meet more than half the Government’s 2012 targets.

Biodiesel NZ currently produces about 1 million litres of biodiesel a year from its Christchurch plant by converting used cooking oil collected from restaurants and other food processing businesses. It is also investigating the potential for producing biodiesel from energy crops such as canola.

In addition, Solid Energy is assessing the use of biofuels in its own and contractors’ operations, saying biodiesel offers safety advantages over petroleum-based diesel in underground mining operations due to lower emissions.

Tallow, vegetable oils and whey are reasonably well established as biofuels sources. But one New Zealand company is breaking new ground.

Nelson-headquartered Aquaflow Bionomic Corporation has grabbed the attention of several aviation corporations with its world-first technology to chemically extract oils from algae.

United States aircraft manufacturer Boeing, the United Kingdom’s Rolls Royce group, and Air New Zealand are due to test a blend of biofuel and aviation fuel in the second half of 2008, with one of four Rolls Royce engines on an Air NZ Boeing 747-400 plane scheduled to trial the still-unspecified mix.

Sir Richard Branson’s Virgin Fuels has also been linked to the New Zealand biofuels start-up. Virgin Fuels said last April that it was working with Boeing on testing an algae-derived jet fuel blend in a 747-400.

Aquaflow director Vicki Buck told PetroleumNews.net her company hopes to have a pilot plant operating in early 2008 that would have the capacity to produce 1 million litres of biodiesel from Marlborough sewerage ponds over a year.

But Aquaflow did not intend to build commercial biodiesel plants.

“We want to develop the technology to such an extent that we can licence it and then sell those licence rights around the world,” Buck said.

She said Boeing had visited New Zealand five times over the past year, looking at Aquaflow’s biodiesel process.

Aquaflow last year successfully raised $NZ5 million ($A4.4 million) for further research and development of its wild algae-based fuel and, last July, secured a 19.9% cornerstone investment from Singapore-based Pure Power Asia.

Pure Power Global is also taking a 65.2% stake in Auckland-based BioJoule, which is working on ethanol production from shrubby willow plants.

But not all is rosy with the New Zealand biofuels sector.

LanzaFuels New Zealand has postponed plans for a maize-to-ethanol plant, saying it is cheaper to import ethanol than to manufacture it locally, because of low prices for Brazilian fuel ethanol and the strong New Zealand dollar.

LanzaFuels had been planning a production plant using locally grown maize.