Energy giant Chevron this week announced it is to team up with US Department of Energy's National Renewable (NREL) to work on a new research project to develop an approach for turning algae into transportation fuel.

The company said the initiative, which joins an existing Chevron-NREL research project on turning decomposing food into biofuel, will investigate various algae strains and assess their suitability for being transformed into transport fuels, including green fuel for jet engines.

NREL director Dan Arvizu said he was confident the project would lead to a rapid increase in the yield and productivity of key algae strains.

"NREL operated the Aquatic Species Program for the Department of Energy for nearly 20 years, giving us unique insights into the research required to produce cost-effective fuels from algal oils or lipids," he added.

Experts regard algae-based biofuels as a highly promising alternative to controversial biofuels made from food crops as algae is abundant, can be grown quickly in industrial environments, and delivers high volumes of oil.

Don Paul, Chevron's vice president and chief technology officer, said the technology was likely to play a central part in the energy giant's future.

"Chevron believes that non-food feedstock sources such as algae and cellulose hold the greatest promise to grow the biofuels industry to large scale," he said.

The news came a week after Dutch biofuel company AlgaeLink unveiled a new photobioreactor technology, which it claims will lead to increased yields and dramatically reduce installation costs. Hans van de Ven, president of AlgaeLink, said the new approach to creating algae-based biofuels would bring down costs sufficiently to make the fuel commercially viable.

Meanwhile, Oxfam this week became the latest group to raise concerns about the environmental and humanitarian effects of European policies which have stimulated demand for first-generation biofuels.

A report from the charity entitled Biofuelling Poverty concluded that the EU target of gaining 10 per cent of transport fuels from biofuels by 2020 was leading to the rapid expansion of biofuel plantations in developing countries that threaten to "force poor people from their land, destroy their livelihoods, lead to the exploitation of workers and hurt the availability and affordability of food".

Oxfam's Robert Bailey said that urgent action was required to prevent such results.

"The EU must include safeguards to ensure that the rights and livelihoods of people in producing countries are protected," he said. "Without these, the 10 per cent target should be scrapped and the EU should go back to the drawing board."