Australia could become a major oil exporter like the Middle East if it starts farming native algae, researchers say.

University of Queensland experts say Australian algae species hold great promise in the race for cheap, efficient biofuels that can compete with fossil fuels.

UQ's Dr Evan Stephens says microscopic algae from Australia's fresh and saltwater environments have proven to be hardy and fast-growing.

The most promising are now being trialled at a pilot processing plant in Brisbane.

"If we devoted just 1 per cent of our land mass to algae farming, we could theoretically produce five times more oil than we currently consume," he said.