The biofuel capacity from the Australian forestry is estimated and its impact on the pulp and paper industry analysed. Two technologies are considered: Pyrolysis and Biochemical conversion. Biofuels are examined as petroleum substitute in terms of consumption and refinery capacity. Under the best process conditions, conversion of all the wood resources into biofuels could replace about 13% of Australia's petroleum consumption. Wood residues could produce 2.9 Mtonne/year of bio-oil, which would replace 11% of the Australian automotive gasoline consumption in 2006. The current petroleum refinery capacity is sufficient to refine all biofuels, should technology be compatible. The ideal Australian biorefinery location lies between Victoria and New South Wales, close to the sea for accessing Tasmania's bioresource supply.