VANCOUVER, British Columbia - A Royal Dutch Shell Plc gas station in Canada became the first in the world on Wednesday to fill tanks with gasoline containing biofuel made from wheat straw, Shell said.

For a trial period, regular gasoline bought at a Shell service station in Ottawa will contain 10 percent cellulosic ethanol, a biofuel that is made locally from nonfood raw material and promises to produce up to 90 percent less carbon dioxide emissions over its life cycle than gasoline.

Shell's trial of cellulosic ethanol, which can be made from wood, grasses or the nonedible parts of plants, will run for one month at the Ottawa gas station. The price of the fuel and the pumps used to dispense it are the same as for regular gasoline.

Ethanol-blended gasoline is already widely proven. There are trillions of miles of vehicle experience with it, said Brian Foody, chief executive of Iogen Corp, a small Ottawa-based cellulosic ethanol maker and Shell's partner in the cellulosic venture.

What we are doing is not changing the basic chemistry or performance of the gasoline at all. We are delivering ethanol that is made in a new way that is better for the environment and has the potential to deliver very large volumes, he told Reuters.

Globally, big oil companies are moving slowly into both corn ethanol and next-generation cellulosic ethanol amid concerns about greenhouse gas emissions and rising mandates for biofuels in the United States, the world's top energy consumer.

Overall cellulosic output has been slow due to high costs and technological challenges. The United States may be hard pressed to meet its first mandate on blending the next generation into gasoline. The mandate calls for the blending of 100 million gallons of the fuel into the gasoline pool in 2010.

Shell and Iogen, which together operate a demonstration plant in Ottawa that produces just 40,000 liters of the biofuel a month, are working to develop the first large-scale commercial project, Foody said.

Although no investment decisions have been made, the partners are eyeing a site for a plant in Prince Albert, Saskatchewan, and have more than 100 people working on the detailed design of the project.

While it will be some time before general customers can buy this product at local service stations, we are working with governments to make large-scale production economic, Shell Executive Vice President Future Fuels and CO2 Graeme Sweeney said in a statement. (Reporting by Nicole Mordant; Additional reporting by Timothy Gardner in New York; editing by Peter Galloway)

Energy Canada