A TEESSIDE company has established a fuel business in oil-rich Saudi Arabia.

D1 Oils, of Stockton, has formed a joint venture with Saudi-based Jazeera For Modern Technology, to create D1 Oils Arabia.

If a pilot project is successful, refineries for renewable, cleaner engine fuel will be set up in the middle of some of the world's largest oil fields.

Karl Watkin, chairman of D1 Oils, said: "This venture creates a great step change in the recognition of the D1 brand on the global stage.

"Helping to deliver a renewable energy solution to the world's most recognised petroleum-based economy is a huge achievement for our business."

D1 produces a biodiesel fuel by extracting vegetable oil from the seeds of the jatropha, a non-edible tree with a 30-year lifespan.

The company has about 90,000 hectares in production, spread across Ghana, Africa and India, with an option on at least a further four million hectares - an area twice the size of Wales.

It floated on the Alternative Investment Market (AIM) last October, when it was valued at £34.4m.

It hopes to follow the Saudi deal with an even bigger contract in China.

In setting up a Middle East base, D1 had to negotiate for two precious natural resources - arable land and water.

Because the jatropha is not eaten, the company can use treated sewage water to irrigate its plantations, which will be established in the desert. This will eventually create agricultural land and help to reverse the spread of the desert.

Jazeera is contributing 5,000 hectares for the pilot project, with a further 100,000 if it is successful. The Saudi group is also providing working capital of about £5m and access to credit.

The commissioning of the first refinery in Saudi Arabia is expected as soon as the plantations begin producing seeds, which is expected to be in the second half of next year.

Philip Wood, D1 chief executive, said: "This joint venture with a well-experienced partner in Saudi Arabia represents a strong endorsement of our technology and of jatropha as our feedstock of choice.

"The structure significantly reduces our capital requirement for entering this market and enables us to accelerate our plan to make D1 the solid and trusted brand for biodiesel."