A unit of China Petrochemical Corp (Sinopec Group), China's largest oil producer by sales revenue, is seeking to produce aviation fuel from used cooking oil, The Economic Observer reported Saturday, citing a company official inside the unit.

The Zhejiang-based Sinopec Zhenhai Refining & Chemical Co has a capacity of producing 20,000 tons of aviation biofuel from used cooking oil each year, according to the report.

The unit, which is the largest refinery of Sinopec, has completed production trials and is expected to be ready for reviews by China's aviation authorities in January, which will be an important step before the biofuel can be used in commercial flights.

"The cost of extracting biofuel from waste cooking oil and whether the fuel can be produced at a massive scale are two key factors that could hinder the market penetration of such fuel," Zou Jianjun, a professor at the Civil Aviation Management Institute of China, told the Global Times on Sunday.

However, the cost to refine waste cooking oil is still 1.5-2 times higher than the cost of regular jet fuel, and an annual production capacity of 20,000 tons is still very small considering the total demand, according to experts.

Experts noted that biofuel-powered airlines to and from Europe will be exempted or partly exempted from the European Union's carbon tax for airlines, a practice that may encourage carriers to use more biofuel in their flights.

"But if the use of biofuel derived from gutter oil involves higher costs than the carbon tax, airlines will be reluctant to use the biofuel to power their flights," Zou noted.

Lin Boqiang, director of the Center for Energy Economics Research at Xiamen University, told the Global Times that selling gutter oil to restaurants generates much higher profit in China, though it is illegal.

"Competition from small restaurants can push up the cost to refine used cooking oil for energy companies, while the supply is also not guaranteed," said Lin.

The Economic Observer report said that currently the Sinopec unit is talking with restaurant chains such as McDonald's for the supply of used cooking oil.

A growing number of airlines are now trying to tap biofuel in a bid to cut emissions. UK-based Thomson Airways and KLM Royal Dutch airlines have both successfully launched flights that use aviation fuel derived from cooking oil.

"But in China, a bigger issue is how to stop gutter oil from being used again in restaurants," said Lin.

Lin further noted that the market alone can not guarantee a healthy recycling process for used cooking oil and stronger government supervision is also crucial.