Abstract: The invention provides a system for obtaining biofuel from an algae composition comprising algae and water. The system comprises a pump for pressurizing the algae composition to a predefined pressure and a heater for heating the algae composition to a predefined temperature. Lipids in the algae are extracted and/or hydrolyzed to form fatty acids at a set of predefined temperature and pressure. The water may be in a subcritical or supercritical state at the predefined pressure and predefined temperature. The system further comprises a separator for partitioning the treated algae composition into an organic phase which includes the lipids and/or fatty acids, an aqueous phase, and a solid phase with biomass residue, and for collecting the organic phase. The organic phase can be upgraded to biofuel.