A start-up company based in Menlo Park, California, plans to make diesel fuel from natural gas using microorganisms, potentially at half the cost as conventional diesel, reports the MIT Technology Review.

Calysta Energy uses microorganisms that naturally feed on natural gas. It has demonstrated its process at small scale, and projects that the cost of using ‘bugs’ to digest the gas will be cheaper than existing thermochemical proceses to make liquid fuels from natural gas.

The abundant supplies of natural gas resulting from the use of hydraulic fracturing have led several high-tech firms to move away from methods based on producing liquid fuels (such as ethanol) from wood chips and other cellulose-based biomass sources.

Natural gas is already being converted to liquid fuels, but the process requires large, costly plants; Shell is building a $20 billion gas-to-liquids facility in Qatar. Conversion plans that use microorganisms could be far smaller and cheaper.

Alan Shaw, the CEO of Calysta, previously ran, Codexis, Inc., a Redwood City, California-based company that aims to make biofuels and other products from cellulosic sources.  Codexis received about $400 million in funding from Shell, which has since halted its support of such research.

“Biomass doesn’t cut it,” Shaw told the MIT Review. “Carbohydrates are not a substitute for oil. I was wrong in that, and I admit it. That will never replace oil because the economics don’t work. You can’t take carbohydrates and convert them into hydrocarbons economically.”

Although commercially promising, the conversion of natural gas to liquid fuel has the potential for creating more greenhouse gases than producing it from oil.