LanzaTech NZ Ltd., a closely held developer of transport fuels and chemicals from waste gases, plans to start raising $60 million to $80 million from venture capital and strategic investors this year to develop technology for waste gas-to-biofuel.

The company is developing projects with Baosteel Group Corp. and Shougang Group in China to use emissions from their steel mills to make ethanol for vehicles, said Jennifer Holmgren, chief executive officer of the Auckland, New Zealand-based company. Holmgren will consider an initial share sale once a plant is running, probably in 2015, she said.

“We started our business development in China because it has 60 percent of the world’s steel industry,” Holmgren said by phone. “We have relationships with steel mills in India and Korea but in terms of moving those to commercial projects I would say they’re at least six to 12 months behind.” The plants are funded by Baosteel and Shougang.

Governments are pushing fuel suppliers to increase the amount of biofuel in their mix as they strive to cut pollution. Europe has a 10 percent target for biofuels in transport by 2020. The U.S. requires gasoline and diesel producers to blend 36 billion gallons (136 billion liters) of biofuel a year into their products by 2022.

A 30 million gallon-a-year plant to convert gases from steel mills into ethanol costs about $80 million, Holmgren said. The commercial plant it’s building for Baosteel will produce 10 to 12 million gallons a year and for Shougang, about 25 million gallons a year.

Jet Fuel

LanzaTech’s fuel so far has not been sold, having instead been used to test and demonstrate that it’s identical to corn-based ethanol that is already used in cars, said Holmgren. LanzaTech also has converted some of the ethanol into clean jet fuel and tests have found it to meet all the properties of petroleum-based fuel, she said.

ASTM International, the U.S. technical standards body that in 2011 gave approval for airlines to start flying passenger planes using fuel made from organic matter, is certifying alcohol-based jet fuel. It’s expected to grant approval by the end of 2014. That’s when LanzaTech will be able to start selling its clean jet fuel commercially, Holmgren said.

Virgin Atlantic Airways Ltd. probably will be the first user of LanzaTech’s biofuel following an agreement they signed in October 2011. Virgin in 2008 became the first airline to fly a plane using biofuel from babassu nuts and coconut oil blended with kerosene.

LanzaTech raised about $60 million in January 2012 from Petroliam Nasional Bhd., the Malaysian state oil company known as Petronas.

To contact the reporter on this story: Louise Downing in London at ldowning4@bloomberg.net

To contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net