MANILA, Philippines — Philippine state-owned PNOC-Alternative Fuels Corp. signed a $1.3 billion deal Wednesday with British company NRG Chemical Engineering Pte. to build a biodiesel refinery and two ethanol plants in the country.

Chris de Lavigne, corporate adviser of NRG Chemical, said the company decided to invest in the Philippines because of its location, climate and the government's pro-active efforts in promoting biofuels.

NRG Chemical will own a 70 percent stake in the joint venture and provide the bulk of the equity requirement in building a biodiesel refinery, two ethanol plants and a 2.4 million-acre jatropha plantation. PNOC-AFC will own 30 percent of the project.

The refinery, expected to be commercially operational by early 2008, will have an initial capacity of at least 350,000 metric tons a year, de Lavigne said. In three years, it would ramp up production to 3.5 million tons a year.

The refinery will initially use coconut and vegetable oil as feedstock until the planned jatropha plantation can start commercial production. The plantation will cost $600 million.

The project also will involve the construction of two ethanol plants at a cost of $200 million. The plants will process jatropha and sweet sorghum to produce 300,000 tons of ethanol needed by the biodiesel refinery.

PNOC-AFC, a unit of state-owned Philippine National Oil Co., was set up last year to take the lead in the country's push to develop biofuels. Its long-term goal for jatropha-based biodiesel is to produce a total of 1 million tons a year.