San Francisco-based Solazyme has teamed up with the No. 2 U.S. oil producer to work on getting biodiesel from algae.

The startup signed a biodiesel feedstock development and testing agreement with Chevron Technology Ventures, a division of San Ramon, Calif.'s Chevron (NYSE: CVX).

"Building a relationship with Chevron Technology Ventures is an important step toward commercialization of Solazyme's technology which fits cleanly into Chevron's existing refining and fuels distribution infrastructure," said Jonathan Wolfson, CEO of Solazyme.

Financial terms of the agreement were not disclosed.

This isn't Chevron's first brush with algae. Last year, the company announced an agreement to work with the U.S. Department of Energy's National Renewable Energy Laboratory to produce transportation fuels using algae (see Chevron, NREL team up on algae biofuel).

Solazyme, which said it has developed an industrial scale fermentation process capable of producing thousands of gallons of algal oil using standard industrial equipment, signed a deal in June to supply oil to Seattle, Wash.-based biodiesel maker Imperium Renewables (see Solazyme to supply algae oil to Imperium).

Solazyme uses synthetic biology for the renewable bioproduction of fuels, industrial oleochemicals, and health and wellness ingredients from marine microbes.

The company said it plans to expand production in 2008.