They will work with British Sugar, a subsidiary of Associated British Foods plc, to convert its ethanol fermentation facility in Wissington, eastern England, using sugar beet to produce 30,000 tonnes of biobutanol annually.

The companies said a second phase of development work will be rolled out in 2010 on a wider scale.

Biobutanol can be made from a range of common crops, such as sugar cane or sugar beet, corn, wheat, or cassava, and has the potential to be blended into gasoline at higher concentrations than existing biofuels without the need to retrofit vehicles. It can be used in existing fuel distribution pipelines, offers lower emissions and would give consumers more miles per gallon, DuPont officials said.

"It is important that governments and other agencies understand this alternative. We think it has clear advantages," said DuPont chairman and chief executive Charles O. Holliday, Jr.

The companies said advanced biofuels today account for less than 2 percent of global transportation fuels, but projections show that biofuels could account for up to 30 percent of the fuel mix in key markets.

Thomas Connelly, DuPont's chief innovation officer, said the companies projected that its new biofuel would be competitive without subsidies with oil in the range of US$30 to $40 per barrel.

The announcement comes seven months after oil major BP formed BP Alternative Energy, a dedicated alternative energy business, and as it launches a new biofuels business unit with plans to invest US$500 million over the next decade in a new Energy Bioscience Institute to fund long-term biofuels research.

Chemicals company DuPont formed a business unit in April specifically aimed at development of biofuels and said it had a bio-based product pipeline valued at US$3 billion.

Environmental Defense President Fred Krupp issued a statement Tuesday applauding the partnership and calling for further actions to address not only problems associated with oil dependency but also global warming concerns.