Situated at BP's existing chemicals site at Saltend in east Yorkshire, the plant will produce bioethanol from wheat and its capacity will stand at around 420 million litres per year. Production should begin in late 2009.
Although it is scheduled to produce only bioethanol at first, the companies say that they will look into the feasibility of producing biobutanol once the relevant technologies become available.
"This exciting project will make ABF the major producer of biofuel in the UK," George Weston, chief executive of Associated British Foods, said.
"Its announcement reflects our confidence in our sugar and agricultural businesses, in our partners BP and DuPont and in the government's commitment to biofuel production."
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