Bio-fuels pioneer Lanzatech New Zealand is accelerating its path into the aviation fuel market by partnering with a Swedish company to convert ethanol to aviation bio-fuel for use by global airline Virgin Atlantic and plane manufacturer Boeing.

Both Lanzatech and Swedish Biofuels hold research contracts with the US Department of Defence Advanced Research Projects Agency, which is spearheading American research into alternatives to fossil fuels for aircraft.

Lanzatech's patented bio-engineering process converts carbon monoxide-rich gas streams from steel mills into ethanol, creating a feedstock for production of an aviation bio-fuel. Swedish Biofuels has used its USDARPA funding to produce "fully synthetic 100 per cent biological aviation fuel from a wide variety of non-food biological feedstocks including lignocellulosic biomass."

Virgin Atlantic's plan is to start using bio-fuel made from ethanol produced using Lanzatech technology in China and India by 2013 for flights from Shanghai and Delhi to London. Demonstration plants using Lanzatech's process are under way in both countries, with the first commercial production facility anticipated in China by the end of 2013.

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With potential for Lanzatech's process to be applied in 65 per cent of the world's steel mills, Virgin is also anticipating being able to extend its use of bio-fuels throughout its global operations, and Lanzatech says it is in discussions with possible customers throughout Europe.

"While there is still work to be done and logistical hurdles to cross, we have excellent partners in Virgin Atlantic, Swedish Biofuels and Boeing," said Lanzatech's US-based chief executive Jennifer Holmgren said. "We are confident that we will have a facility with the capacity to produce fuel for commercial use by the end of 2013."

While the process does not avoid greenhouse gas emissions from aviation, it recycles waste gases that would otherwise be burnt into the atmosphere.

"Sustainable aviation biofuel based upon conversion of alcohol to jet fuel is the next type of biofuel which will be under consideration for approval for use in commercial aviation. Boeing will be playing a key role in supporting the approval process," said Bill Glover, Boeing vice-president of environmental strategy and aviation policy in a statement from the four partners in the venture.

Virgin Atlantic president Sir Richard Branson said the move continued the airline's leadership in bio-fuels for commercial aviation.

"This partnership is a major step towards reducing our carbon footprint," said Sir Richard, who was in New Zealand recently during the early stages of the Rugby World Cup.

"It is important that these new fuel solutions are sustainable, and with over with 15 billion gallons of jet fuel potentially generated from the billion tonnes of steel produced annually, this exciting new technology is scalable, sustainable and can be commercially produced at a cost comparable to conventional jet fuel."

Before commercial roll-out can occur, the partners will require technical approvals, with the first demonstration flight planned within the next 12 to 18 months.

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The Roundtable for Sustainable Biofuels (RSB), a leading international body on sustainable biofuels production, will advise the team to ensure the fuel produced meets key environmental, social and economic criteria.