SAN NICOLAS, Argentina (Reuters) - An Argentine company opened on Friday the country's first factory to make biodiesel from algae, hoping to use pond scum as a replacement for soy in making biodiesel as part of a push for renewable energy. Argentina is the world's top exporter of soyoil, but using the edible oil to make fuel is controversial because it cuts into food supplies.

Oil extracted from algae is also seen as an attractive alternative to soyoil and other vegetable oils because it does not use land that could be used for food crops and can absorb carbon dioxide from power plants or factories. The oil-extraction process also produces a protein-rich paste, which is edible.

''We're not competing with the food supply but generating food, at a low cost and helping the environment because algae grow fast and trap carbon dioxide,'' said Jorge Kaloustian, president of Oilfox S.A., the company that owns the plant northeast of Buenos Aires.

The Oilfox plant's feedstock is currently 90 percent soyoil and 10 percent algae oil, but the company hopes to eventually depend entirely on algae, which can grow in seawater and even contaminated water.

The algae, which is grown in tanks inside greenhouses, produces a green oil in the photosynthesis process.

It grows fast and can duplicate its weight several times a day. ''Algae can get a much higher yield per acre than say soybeans,'' said John Williams, spokesman for the Algal BioMASS Association, a trade organization that groups companies involved with developing algae biofuels. ''It can produce more than 10 times more fuel per acre than soybeans.''

Some researchers say algaebased fuel would be too costly to produce commercially, but plants that use algae oil have sprouted everywhere, from Australia to China as companies bet on growing demand for renewable fuels.

Exxon Mobil Corp last year announced a $600 million investment over the next five years to develop biofuel from algae.