The production of biofuel using thermostable bacterial lipase from hot spring bacteria out of low-cost agricultural residue olive oil cake is reported in the present paper. Using a lipase enzyme from Bacillus licheniformis, a 66.5% yield of methyl esters was obtained. Optimum parameters were determined, with maximum production of lipase at a pH of 8.2, temperature 50.8°C, moisture content of 55.7%, and biosurfactant content of 1.693 mg. The contour plots and 3D surface responses depict the significant interaction of pH and moisture content with biosurfactant during lipase production. Chromatographic analysis of the lipase transesterification product was methyl esters, from kitchen waste oil under optimized conditions, generated methyl palmitate, methyl stearate, methyl oleate, and methyl linoleate.