In just four years from now, a significant portion of Australia’s military hardware – its ships, jets, tanks and other vehicles – could run on fuels recycled from old tyres, human waste, noxious weeds and sugar cane residue.

That’s the vision of Tim Rose, the managing director of Australian refining company Southern Oil, which last week announced the first stage of a $650m investment to produce enough diesel from “advanced biofuels” to power Australia’s entire defence force.

We won’t have to import crude into refineries … This will do a hell of a lot for fuel security. Tim Rose, Southern Oil managing director

A $16m pilot plant is to be built in Gladstone in central Queensland, sourcing feedstock such as sugar cane bagasse (what’s left after the actual sugar is extracted) and prickly acacia (a noxious weed infesting vast swathes of land) to produce diesel fuels.

If successful, and Rose sees no reason why it wouldn’t be, the next stage will be a $150m investment in a new refining plant, and a dozen “feeder” plants around the state sourcing feedstock from weeds, wood waste, old tyres, plastics and wood from demolition sites, waste from humans and animals and just about anything that would otherwise be destined for landfill.

Rose says that by 2020, these refineries could produce around 200m litres of advanced biofuel diesel a year, about the same amount that is used by the Australian army, navy and air force each year.

“We could have a big green military force – powered by domestically produced fuel,” Rose says.

“We won’t have to import crude into refineries which are shutting everywhere in any case. This will do a hell of a lot for fuel security.”

Southern Oil says there is no official estimates of carbon dioxide savings from using advanced biofuels, but Rose says it will be “way less than fossil fuels” as the company will use waste products that typically would have rotted in landfills. So the greenhouse gas savings come from substituting biofuel for fossil fuels, which will not be burned.

If you are thinking that these are the sweet dreams of a green ideologue, think again.

Southern Oil has built a profitable but dirty business taking waste lubricating oil and putting it through a refinery to make it usable again – as lubricating oil.

The existing oil refinery in Gladstone recycles waste lube oil back into base oil. Photograph: Southern Oil

A few years ago, the company was approached by the defence attaché to the Queensland state government, who wanted to know how the Royal Australian navy could meet its commitments to the US plan for its great green fleet.”

The great green fleet is a commitment by the US department of defence to source half its fuel needs from fossil fuel alternatives by 2020 – a sign that it take climate change and energy security seriously, and in equal measure.

Australia’s close ties to the US has meant it has also jumped on board.

Green fuels have a particular interest for the Australian military beyond environmental concerns. They increase resilience and fuel security – and Australia is fast running out of refineries that can produce diesel fuel, and is increasingly reliant on imports.

Hence the solution proposed by Southern Oil.

Rose says there are three processing steps to make “advanced biofuels”.

The first is taking solid waste and turning it into crude oil. The second is taking that crude oil and turning it into distillate. The third is to finish the distillate to make a “drop-in” fuel that can be used in vehicles, planes or ships.

Southern Oil is already practised at the second, middle stage. The pilot plant will test the front and back ends. If successful, the company will spend $150m adding the “back end” to its main refinery, and then establish about a dozen “feeder plants” around the state that can accept different feedstocks. Each will cost $30m to $40m.

Rose says advanced biofuels are being produced in the US and other countries, although each refinery tends to specialise in one feedstock.

So what Southern Oil is trying to do, with such diverse sources, is unique in the world. It is an approach they are obliged to take – for the size of the market, the distance between varying feedstock supplies, and the need to tackle huge environmental problems such as prickly acacia.

“We can use algae, human waste, wood waste, weeds, sugar, anything that has an organic component to it and is recoverable,” Rose says. “As long as it has a carbon and a hydrogen atom, we can liquefy it.”

What could go wrong? Essentially, the economics. Right now, the feedstock would be zero-cost or near to it, because suppliers have to actually pay money to dispose of them. If these suppliers got greedy, then that might cause an issue.

“The defence people are cautious,” Rose adds, noting they will want to take a few years to get the necessary approvals. “We just have to get enough fuels to throw into ships, tanks and planes to make sure that the stuff works.”

But Rose says it’s a good time to be thinking of such projects. The collapse in the oil price, and the collapse of the refining business, means that there is a lot of near-new secondhand equipment out there.

The Queensland government describes the pilot plant as an “exciting step” towards building a significant new industry and Australia’s first commercial-scale advance biofuels production facility. Unlike other states, it has prepared a major biofuels roadmap.

“A fully-fledged biofuels industry has the potential to play a key role in our economic future, and this pilot plant is a giant step towards achieving that goal,” Queensland premier Annastacia Palaszczuk said at the launch of the pilot plant.

“This pilot plant is essentially the launch site for a Queensland biofuels industry. If we can develop this plant into a large-scale refinery, that’ll mean jobs here in Gladstone, but it could also kick off a new wave of investment and job creation across Queensland.”