The agreement gives BP control of Verenium's research and development facilities in San Diego and a pilot plant and demonstration-scale facility in Jennings, La. Cambridge, Mass.-based Verenium will retain control of its commercial enzyme operations as well as select research and development capabilities.

Cellulosic biofuels are usually made from grass, wood chips or agricultural waste and are seen as an alternative to more prevalent alternative fuels made from corn and other food crops.

"This acquisition demonstrates BP's intent to be a leader in the cellulosic biofuels industry in the U.S. and positions us as one of the few global companies with an integrated end-to-end capability, from R&D through commercialization to distribution and blending," said Philip New, chief executive of BP Biofuels in a statement.

"We believe that BP is the right company to make the investment needed to carry this forward and expedite the commercialization of the technology," said Carlos A. Riva, president and chief executive of Verenium, in a statement.

"As a result of this transaction, Verenium will have the resources to grow our commercial enzyme business while maintaining strategic access to the emerging cellulosic ethanol market in a manner that better fits our resources," said Riva.

In light of the Gulf oil spill, "it should be pretty obvious that BP can't afford to stay addicted to oil, but this small investment is not going to move them beyond petroleum," said Jeremy Martin, a senior scientist with the Union of Concerned Scientists, the Los Angeles Times reports.

"BP should be building new facilities and making investments measured in billions," he said.

Other oil giants are also stepping into the biofuel sector. In June, Wisconsin-based Virent Energy Systems Inc. said Shell was among the investors from which it had received $46.4 million in funding. The two companies also partnered in a demonstration plant in Madison, Wis., that can produce up to 10,000 gallons of biofuel each year.

Last year Exxon Mobil invested $300 million in La Jolla, Calif.-based biofuel firm Synthetic Genomics. This week the two companies announced the opening of greenhouse facility dedicated to researching algae-based biofuels.

"The reality is that the big oil companies have invested trillions of dollars in their infrastructure over the past hundred years, and we're going to need that infrastructure for biofuels," Joel Kurtzman, a senior fellow focusing on energy for the Milken Institute in Santa Monica, told the Times.

"And we will also need alternate sources of energy as supplies shrink and oil becomes more expensive."

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