GREEN fuels firm D1 Oils said it will begin using the more cost-effective jatropha crop in production at its two UK plants from next year, as it looks for ways to recover from annual losses of £12.6m.

The North-East plc has been growing the crop at various sites around the world since last year, and said yesterday it hopes the first supplies of jatropha oil would be used in production sometime next year.

Despite the losses announced by the firm earlier this year, yesterday it said it remained confident it was making strong progress despite "challenging market conditions".

D1 - which delivered its fifth refinery unit to its biodiesel plant, on Teesside, earlier this month, allowing production in the region to increase to 42,000 tonnes - said the company continued to be boosted by the £48.7m it raised in a share placing in December.

On the back of yesterday's upbeat statement, shares in the company rose 2.27 per cent to close at 169p last night.

In a statement, D1's chairman Lord Oxburgh of Liverpool said: "Over the year, and in the months since, we believe we have built the foundations of a business that will deliver supplies of sustainable, inedible oils for biodiesel production."

Jatropha is a non-edible tree that can produce oil-bearing seeds over a 20-year life span. D1 has identified jatropha as its preferred crop and has plantations in Africa, India and south-east Asia.

It is seen as a more long-term and lower-priced alternative to wheat or soya in the production of biofuels. Lord Oxburgh said D1 hoped that by using the crop, it would continue to progress in the biofuel market.