The UK-based Eco Positive and Eco-fuel Global LLC from the United States on Sunday agreed to invest $250 million in the growth of jatropha curcas, whose seeds yield oil.
"This investment will benefit Rwandans in terms of green development, preventing land erosion, create employment and more environmentally-friendly transport," Energy Minister Albert Butare said.
"It is a significant step forward in giving our nation greater energy security essential to our economic success."
The central African country fully relies on fuel imports through the Kenyan or Tanzanian ports, which often creates shortages.
Rwanda imports some 160 million litres of fuel annually and the biofuel project will produce about 13 percent of total fuel consumed, he said.
Butare sought to dispel fears that using 10,000 hectares for jatropha would be too much for the tiny, densely populated country and affect food security.
"This has been marginal land which is less or not productive at all for agriculture. They will first increase the quality of the land before they start growing the crop," he said. "It will have no direct impact on agriculture production since it was not being used at all."
Rwanda already has successfully implemented a pilot bio-diesel project by the Institute of Scientific Research and Technology currently producing 2,000 litres daily from Jatropha.