Major challenges of the modern world: energy security, oil price, resources depletion and climate change, have prompted significant advances in research and development of biomass-derived energy and fuels. Algal biofuels are seen as one of the most promising solutions of global energy crisis and climate change for the years to come. Major advantages of algae are potentially high yield and no competition with food crops for arable land and fresh water resource. This review summarises recent advances in algal biofuel production and focuses on synthesis of transportation fuel rather than characterising algal feedstocks or their well-documented potential as bioenergy resource. The available literature covering production of bioethanol, biodiesel and other potential liquid fuels are evaluated. Overall finding from this study suggests that to date the most effective methods of producing biofuels from algal feedstocks are: fermentation of microalgae to bioethanol and production of biodiesel via in situ transesterification of microalgal biomass. The real breakthrough however is expected from metabolic engineering of photosynthetic organisms to produce and secrete biofuels that promises significant simplification of down-stream processing. (c) 2012 Elsevier Ltd. All rights reserved.