This Small Business Technology Transfer (STTR) Phase I project is to develop a reactor for the processing of vegetable oils or their resulting fatty acids to sugar esters. The membrane reactor system is envisioned to be permeable to small molecules, hydrogen and water. The esterification of fatty acids and sugars will occur in a non-aqueous environment and the water level in the reactor will be controlled by membrane properties and transmembrane pressure. It is expected that high conversion to sugar esters can be obtained at low enzyme concentrations. Moreover, continuous operation of the reactor can result in high productivity.