Madison, Wis.-based Virent Energy Systems announced its second collaboration with oil giant Royal Dutch Shell (NYSE: RDS.A) today, saying the two plan to work on developing a biogasoline that could be used in regular cars and take advantage of the existing gasoline infrastructure.

Virent said its BioForming technology, based on research started at the University of Wisconsin-Madison, uses a solid-state catalyst to convert plant sugars into hydrocarbon molecules like those produced at a petroleum refinery.

And the company said the technology can take in a broad menu of feedstocks.

"We think the biggest benefit of the process is that we can use whatever the cheapest, most available sugar stream is in that area," Eric Apfelbach, president and CEO of Virent, told Cleantech.com.

"So anything that's a carbohydrate that can be made soluble in water is a candidate feedstock."

Virent said the sugars for its biogasoline can be sourced from non-food sources like corn stover, switch grass, wheat straw and sugarcane pulp, in addition to conventional biofuel feedstock like wheat, corn and sugarcane.

The company said its biogasoline molecules have a higher energy content than ethanol or butanol and deliver better fuel efficiency, and unlike ethanol, the biogasoline could potentially be transported using the same pipelines as regular gasoline.

Apfelbach said the collaboration with Shell is primarily a funding relationship, but did not disclose the terms of the deal.

"There's a also a very good partnership on the things that are required to commercialize a new fuel like this."

Shell has considerable experience in the field as one of the largest oil and gas companies in the world, as well as owner of more than 45,000 gas stations.

Last May, Virent announced its first partnership with Shell, signing a five year joint development agreement to work on and commercialize Virent's platform for hydrogen production from biomass (see Shell and Virent Energy Systems pursuing hydrogen from biomass).

Most hydrogen produced today is made from fossil fuels, including natural gas and coal, but Virent's technology, which has it's roots in hydrogen research, is looking to expand that.

"The initial work was to make hydrogen out of sugars. That was kind of the initial excitement. As we worked more with it, we found that we had a really effective way to make a gasoline-like liquid fuel," said Apfelbach.

Take a look at one of Virent's liquid fuel laboratories here >>

Randy Cortright, the company's chief technology officer, co-founded the company in 2002 after working on the technology at the University of Wisconsin-Madison, where he earned a doctorate in chemical engineering.

Apfelbach is another UW-Madison alumni. He holds a bachelor's degree in chemical engineering from the university.

Under the new biogasoline project with Shell, which Virent said has already been ongoing for a year, the companies plan to focus on further improving Virent's BioForming technology and scaling it up for commercial production.

Emeryville, Calif.-based Amyris Biotechnologies, another company based on university research, is also working on a biogasoline process (see Amyris pulls in $70M for unique biofuel).

"We're a very different technology pathway," said Apfelbach.

Spun out from the University of California, Berkeley, in 2003, Amyris uses synthetic biology to reprogram microbes, or "bugs," to function as living factories for the environmentally-friendly production of high-value chemicals.

The end result is a hydrocarbon that Amyris said is designed to closely resemble components in current gasoline, diesel, and jet fuel.

"We're making something that looks just like gasoline with a catalyst," said Apfelbach.

"A catalyst has a very wide process window to use many different types of mixed sugars and carbohydrates. And a bug generally will only eat one monosaccharide."

Virent, which has 68 employees at its biorefining development facility in Madison, has pulled in $28.5 million in two rounds of financing to date, counting venture capitalists and industry leaders among its backers.

Cargill Ventures, an arm of Wayzata, Minn.-based Cargill, one of the leading grain producers in the U.S., is an investor in Virent, along with the strategic venture unit of Tokyo's Honda Motor (NYSE: HMC).

Also backing Virent are Venture Investors, Stark Investments, Advantage Capital and several angel investors.

Virent has also received a little over $10 million in government grants for its research.

Apfelbach said the company's pilot plants can produce about a gallon of fuel a day, and they would likely have a commercial demonstration size in the 10,000 liters range within a few years.

Shell and Virent haven't set a target for how much of the fuel they eventually want to make, but Apfelbach predicts there will be a high demand.

"The benefit of the fuels markets is they're huge," he said. "You look at this year, 160 billion gallons of gasoline will be consumed here in the U.S. alone."

"Really, the challenge for us will be, 'How fast can you build capacity?'"