A commercial pilot project for carbon sequestration and large-scale algae biofuel manufacturing in Australia has been successfully completed, OriginOil announced today.

The company partnered with Australian energy company MBD Energy through a licensing agreement that has allowed both companies to share intellectual property on proprietary algae-to-fuel conversion processes.

The algae-to-fuel process in this case begins with an existing coal power plant.

CO2, given off as a byproduct of MBD Energy's coal-fired power plants, is captured by micro-algae. The micro-algae convert that captured CO2 and use it to reproduce, creating higher amounts of algae, which can then be used as algae biomass for fuel. That part of the process was developed by MBD Energy.

The algae biomass is then put through OriginOil's process. Its algae biomass is converted into oil that can be used for biofuel, while leaving behind concentrated algae biomass byproducts that can be used to make things like plastics.

OriginOil has developed a one-step process in which the oil, water, and algae biomass separate out over time, making it easier and more cost-effective to retrieve, according to OriginOil.

(Time-lapse video for OriginOil extraction process posted on Vimeo.)

As a result of the project's success, MBD Energy, known for its coal mining, will now begin adding algae production to three of its power plants in Australia.

"According to MBD Energy, each of its power station projects has the potential to grow to 80-hectare commercial plants, each capable of producing 11 million liters of oil for plastics and transport fuel. MBD Energy estimates that, subject to performance and joint approvals, the projects have potential at full scale to consume more than half of each power station's flue-gas emissions," OriginOil said in a statement.

OiriginOil says its ultimate goal is to transform algae "into a true competitor to petroleum."

While the idea is innovative, these are certainly not the first companies to try making lemonade out of lemons with regard to coal. Fellow Australian companies, Linc Energy and Bio Clean Coal announced in 2007 that they were building a bioreactor prototype for converting coal power plant emissions into algae biomass that could be used as fuel. In 2008, Inventure Chemical and Seambiotic announced a partnership to develop algae biofuels from a coal-fired power plant. And Cambridge, Mass.-based GreenFuel Technologies also has a process for growing algae from pollution.