Virgin Atlantic said Tuesday it partnered New Zealand-based energy company LanzaTech to develop a low-carbon jet fuel in India for use in its passenger planes.

The partnership will use a technology "that will see waste gases from industrial steel production being captured, fermented and chemically converted using Swedish Biofuels technology for use as a jet fuel," Virgin Atlantic said.

The technology recycles waste gases that would otherwise be burnt into the atmosphere as carbon dioxide, it said.

Boeing Co. and Stockholm-based Swedish Biofuels AB are the other partners in the project and a demonstration flight using the fuel is planned in the next 12-18 months.

"With oil running out, it is important that new fuel solutions are sustainable, and with the steel industry alone able to deliver over 15 billion gallons of jet fuel annually, the potential is very exciting," said Virgin Atlantic President Richard Branson. He said the "new technology is scalable, sustainable and [the fuel] can be commercially produced at a cost comparable to conventional jet fuel."

Virgin Atlantic said India, being among the world's biggest steel producers, will be one of the first countries where LanzaTech will produce the jet fuel and the airline could operate flights from New Delhi to London using the fuel in three years.

A demonstration plan will be commissioned in China this year, with commercial operation scheduled to start by 2014. This will be followed by a facility in India in about six months and a wider roll-out later, including in the UK and the rest of the world.

"LanzaTech's estimates that its process can apply to 65% of the world's steel mills," Virgin Atlantic said. "The energy company believes that this process can also apply to metals processing and chemical industries, growing its potential considerably further."

Jennifer Holmgren, chief executive of LanzaTech, said the technology will enable airlines to "dramatically reduce their carbon footprint by reusing gases that would otherwise have been emitted directly into the atmosphere."