LONDON: British oil giant BP said Tuesday that it has signed a deal with US group Martek Biosciences to further develop biofuel production using sugar.

"BP and Martek Biosciences Corporation today announced the signing of a joint development agreement to work on the production of microbial oils for biofuels applications," the pair said in a statement.

Under the multi-year agreement, the two groups will seek to "advance the development of... technology for the conversion of sugars into biodiesel."

Sugar is already used to make ethanol, a cheaper alternative to gasoline used to power road vehicles.

"BP is very pleased to be entering this important partnership with Martek," added Philip New, CEO of BP Biofuels.

"As an alternative to conventional vegetable oils, we believe sugar-to-diesel technology has the potential to deliver economic, sustainable and scaleable biodiesel supplies."

The price of sugar reached a 28-year high in New York trading last week after jumping 25 percent in three weeks in London trading.