Wellington, Sept 17 NZPA - Biofuel entrepreneur LanzaTech says its pilot plant at the New Zealand Steel works has successfully used microbes to convert waste gas into high-octane ethanol.

The biofuel company said the trials have been successful, yielding ethanol produced at a low cost, the businessgreen.com website reported.

LanzaTech eventually aims to license its technology to firms in the industrial bio-commodities market, and a co-founder of the company, Sean Simpson, said its waste gas-to-ethanol process had gained attention from companies in China and the USA.

He estimated that the world's steel mills generated enough carbon monoxide emissions to produce 227 billion litres of ethanol a year, and the process captured emissions equivalent to half a tonne of carbon dioxide for each tonne of steel produced.

LanzaTech was last month named Green Technology Innovator of the Year at the Frost and Sullivan Asia Pacific Industrial Technologies Awards, the UK-based website reported.

LanzaTech has financial backing from Silicon Valley firm, Khosla Ventures, which in 2007 led its first-round funding of $US3.5 million ($NZ4.97m).

Its process captures steel mill waste gases and removes particulates, nitrogen and oxygen before sending the resulting gasses to a bioreactor. The carbon component of the gas is then fermented by the company's proprietary microbes to produce ethanol.

The fermentation process is fuelled by a synthetic gas that can be produced from a wide range of biomass resources, including municipal rubbish, waste wood and organic industrial waste such as tyres. Gasification is used to break down the chemical bonds in the biomass, making up to 80 percent of the energy available for fermentation.

In Marlborough, another biofuel start-up, Aquaflow Bionomics, has started a fund-raising programme in Australia for the first of up to 16 pilot plants to demonstrate what it describes as its unique algae fuel technology. Oil giants Exxon Mobil and BP and other global energy companies are similarly investing heavily in developing algae-based fuels, with almost all focusing on extracting lipids from algae grown in controlled environments, such bio-reactors.

But Aquaflow has developed technology to harvest "wild algae" found in municipal sewage ponds, farm outflows and polluted waterways and either convert it into "green crude" or refine it into other biofuels and chemicals.

According to director Nick Gerritson, Aquaflow's approach avoids the large, upfront capital costs of other algae-based fuel technologies which require the development of monocultures and bioreactors.

The company has been running a pilot plant of its algae harvester at the Blenheim sewage ponds, where it has stockpiled 40 tonnes of algae, some of which has already been used to produce jet fuel.

Aquaflow is in discussions with more than 16 possible projects over three continents, Mr Gerritson said. It was talking with both municipal authorities and corporates about the potential to clean up water, and it could potentially charge technology transfer fees, royalties, and for the algae feedstock, green crude and other products that result from the process.

Aquaflow's investor presentation includes forecast revenue of $A5.3m ($NZ6.57m) in 2010/11, rising to $A94.4m in 2014/15, with pre-tax profits forecast to jump from $A110,000 to $A33.2m over the same period.

These forecasts include only the sale of its equipment and remediated water sales, but not any revenue from the sale of green crude or from the generation of carbon credits.

The fund-raising of $A2.5m in funding has been proposed as the last before a possible IPO in the next 12 months. The company's largest shareholder is the Singapore renewable energy investor Pure Power with 19.9 percent.