PARIS - Oil major BP may start construction next year of a cellulosic biofuel plant as part of a push toward commercial production of new types of biofuels from next year, the head of the group's biofuels division said.

BP is planning to develop commercial production of grass-based ethanol in the United States with partner Verenium, which already has a demonstration cellulosic ethanol facility, Philip New, Chief Executive of BP Biofuels, said on Tuesday.

BP is also planning to launch in 2012/13 commercial output of biobutanol at future biofuel plant in the UK, he said.

The oil company is building a wheat-based ethanol plant near Hull in eastern England in partnership with British Sugar and chemicals group Dupont that is due to come online next year, and plans subsequently to retrofit the facility to convert it to biobutanol output.

Biobutanol represented an attractive alternative to established ethanol as it allows higher blending levels without changing regulations, vehicle technology or distribution networks, New said.

Biobutanol can provide a door through the blend wall which I would argue is the key structural barrier to the growth of this industry over the next five to 10 years, he said in a presentation at the World Ethanol 2009 conference.

Through a $200 million joint research venture in the United States, BP and Dupont are developing a chemical process to produce biobutanol and will pilot the technology at a demonstration facility next year at the Hull plant, he said.

Biobutanol production at Hull would use wheat as feedstock and would also offer similar emissions and cost levels to ethanol, he said.

As part of its biofuel investments, BP is also involved in research in using algae as feedstock and is investing some $1 billion in sugarcane-based biofuel activities in Brazil.

To compete with fossil fuels in the future, biofuels would have to live without subsidies and keep costs within $1 a gallon on a volume basis, New said.

If you can't chin that bar you're not going to be able to compete in the long run, he said, stressing that sugarcane currently was the most cost-efficient.

(Reporting by Gus Trompiz; Editing by Keiron Henderson)

United kingdom Energy