Oil extracted from algae is also seen as an attractive alternative to soyoil and other vegetable oils because it does not use land that could be used for food crops and can absorb carbon dioxide from power plants or factories.

"We're not competing with the food supply but generating food, at a low cost and helping the environment because algae grow fast and trap carbon dioxide, said Jorge Kaloustian, president of Oilfox S.A., the company that owns the plant northeast of Buenos Aires.

The Oilfox plant's feedstock is currently 90 percent soyoil and 10 percent algae oil, but the company hopes to eventually depend entirely on algae, which can grow in seawater and even contaminated water.

Through a deal with a JP Morgan-owned company, the carbon dioxide emissions that are pumped into the algae greenhouses from a nearby power plant will eventually be sold as bonds in the carbon market, Kaloustian said.

Oilfox has also signed an agreement with YPF ?the country's biggest energy firm, to produce 50,000 tonnes of biodiesel per year. Under Argentine law, energy companies will have to blend diesel with 10 percent biodiesel by year's end.?

"There's great enthusiasm for producing renewable energy in Argentina because we have the material needed to make the blend which is soyoil," Kaloustian said. "We made a bet on using soyoil with a bit of algae, but one day, it will all be algae." (Writing by Luis Andres Henao; Editing by Helen Popper and Eric Beech)