British clean-fuel companies Oxford Catalysts Group Plc and PolyFuel Inc were awarded government grants in the United States as part of a move to promote alternative energy sources.

Oxford Catalysts, a catalyst innovator for clean fuels, said on Thursday its U.S. unit, Velocys Inc, had been awarded a $5 million commercialization grant for a period of two and a half years, sending its shares up 11 percent.

Synthetic fuels is core to Oxford Catalysts, both in short-term cash flow and long-term potential, and a rising oil price provides a more positive background for its exploitation, said brokerage KBC Peel Hunt, which has a buy rating on the stock.

Separately, fuel-cell technology company PolyFuel said it received an additional $2.5 million in funding for its portable fuel cell development program from the U.S. Department of Energy.

Earlier this month, the Obama administration proposed cutting billions of dollars in big tax breaks for oil and natural gas companies, while boosting government spending to promote alternative energy sources.

Oxford Catalysts said the grant would help in commercializing its microchannel technology for hydro-processing -- a step in the production of synthetic fuels used to maximize the yield of liquid fuels such as diesel.

The grant is part of the Ohio Department of Development's Third Frontier Project, a $1.6 billion 10-year initiative to expand the state's research capabilities.

Successful commercialization of the group's technology for hydro-processing will enable better economics for the production of clean fuels from renewable biomass and biowaste..., Oxford Catalysts said.

PolyFuel said it was actively seeking additional capital to complete its technology and product development, build out its manufacturing capability and introduce its products commercially.

Oxford Catalysts shares were up 11 percent at 52 pence at 0958 GMT (5:58 a.m. EDT) on the London Stock Exchange.

(Reporting by Tresa Sherin Morera in Bangalore; Editing by Anne Pallivathuckal)

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