Royal Dutch Shell, Europe's biggest oil company, is working on a process to turn sugars into a synthetic petrol, rather than ethanol, with the aim of moving to a commercial demonstration plant in two years' time. The company yesterday announced a joint venture with Virent, a US biotech business based in Wisconsin, saying results from research over the past year had been better than expected in terms of costs and yields. The initiative is the latest of Shell's investments in a range of different technologies for "second generation", biofuels, which are more complex to produce but could avoid some of the problems of today's biofuels such as ethanol from corn. However, the environmental and social gains from the Virent technology will depend on the type of sugars used to produce the fuel. So far, none of Shell's investments has proceeded to commercial production. Graeme Sweeney, the vice- president for future fuels, said not all were likely to be successful, and the key decision for each venture would be at the end of the development phase, when the company would decide whether they could be commercially viable. Jeroen van der Veer, Shell's chief executive, has said he wants at least one viable alternative energy business by 2015. Virent's process is different from standard biofuel production, which takes sugars from corn or sugar cane or other sources and ferments them to make ethanol. It uses catalysts to convert sugars into hydrocarbons that are much closer to the standard petrol used in today's cars. The "biogasoline" fuel can be blended into conventional petrol up to a level of about 50 per cent without requiring any modification to engines, compared with a limit of about 10 per cent for ethanol. It has a higher energy content than ethanol, which delivers significantly fewer miles to the gallon than petrol, and would avoid some of the handling problems of ethanol, which needs a separate distribution infrastructure from petrol. Mr Sweeney said Shell believed the process "has the scope to be cost competitive" and would have "very good" total carbon dioxide emissions. However, he said the fuel's emissions performance would depend on source of the sugars used. Sugars from plant waste, such as the ones Shell hopes to produce from its other biofuels ventures researching enzymes, would lead to greater reductions in emissions than sugars made from corn in the US. Copyright The Financial Times Limited 2008