BIOFUELS producer D1 Oils is to close its Teesside refinery with the loss of 40 jobs.

It has blamed spiralling production costs and pressure from cheap imports of biodiesel - US imports are selling for as little as 11p a litre.

D1, which announced an annual loss of £46.1m, also plans to close its refinery on Merseyside.

It wants to re-focus on plant science and growing jatropha crops used in the production of biofuel.

It agreed a 50-50 fuel planting partnership with fuel company BP last year, which has led to the expansion of its jatropha crop plantations in India, Africa and South-East Asia.

D1 wants to grow a million hectares by 2012 and plans to raise another £16m through a share placing to finance its planting and research venture.

Elliott Mannis, D1 chief executive, said its refining and trading operations had struggled in the face of cheap imported fuel, but refocusing on planting would take the business to the next level.

He said: "Refining food-grade vegetable oils into biodiesel in Europe has developed into a highly-competitive market, in which only very large-scale operations are viable.

"We, therefore, intend to withdraw from this business and propose to close our UK refining sites."

Ian Williams, director of business and industry at regional development agency One North- East, said the closure announcement was "very disappointing news for the region".

John Seymour, rural affairs spokesman for the North-East Biofuels Consortium, said: "European producers of biofuel are taking a hammering on price at the minute.

"I doubt D1 Oils will be the only one to withdraw from production.

This is very disappointing."