Since 2006, the government of the Lao PDR has strongly promoted biofuel development, on the basis of national energy security concerns, and interests for rural development. As a result, many farmers were encouraged to cultivate jatropha as a biofuel feedstock through government campaigns and private sector investment. For most, the return on their investment has been woefully low; a domestic biofuel sector has failed to materialise, largely due to (i) negligible feedstock supply and poor yields, (ii) inadequate market development, and (iii) a lack of investment in biofuel processing capacity. Despite these limitations, the Lao government has set an ambitious target of offsetting 10% of petroleum fuel consumption with biofuel by the year 2020. In order to address the likelihood and requirements of reaching such a goal, this paper presents a baseline assessment of the embryonic biofuel sector in the Lao PDR, and formulates a comparison between national expectations and targets with the current scale of investment by public and private sectors. A simple analysis of market chains for domestic biofuel production and consumption in the Lao PDR is established as a basis to evaluate the merits of biofuel for the Lao PDR, in the context of national development goals.