"There are two parts to this business. There is what they have been doing so far, using and selling the product on pipelines and to improve oil recovery, and then there is a big space where there are huge undeveloped heavy oil accumulations we think could be a major focus for Indago," he said.

"There are a lot of these fields around the world, and in good countries where it is very easy to do business."

The technology, which is being used by Petronas in a heavy oil field offshore Malaysia and successfully used in India, is undergoing further testing is ongoing in the US and Canada with potential new clients.

Indago has signed a memorandum of understanding with HCD Holdings, the parent company of Hydrocarbon Dynamics, which could see the junior oiler become a major player in the heavy oil and oil storage space around the world.

Mitchell said the technology can be applied to improve oil flow rates by the re-liquification of oil deposition from oil wells and pipelines, and can also be used to recover oil from storage facilities.

Better still, the HCD Multiflow technology is much cleaner than toxic, carcinogenic BTEX [Benzene, Toluene and Xylene] or toxic chemical polymers that are already in use around the world.

HCD Multiflow is a small, specially engineered carbon-based organic molecule that can disaggregate the large, naturally occurring agglomerations of waxes and asphaltenes in heavy or paraffinic oil, Indago said in a statement to the Australian Securities Exchange this morning.

"Once disaggregated, these agglomerations are reabsorbed into the crude oil, reducing its pour point, viscosity and increasing API gravity, providing outstanding flow assurance and transfer system efficiency," the company explained.

"The HCD Multiflow molecule can also separate water and sediment from the crude oil and the product will have far-reaching applications in the productibility and transport of heavy/paraffinic crudes, as already evidenced by the product's use in a large offshore oil field and with many successful trials to its credit."

Potential markets include flow assurance in onshore/offshore pipeline and oil gathering lines that transport heavy or paraffinic crudes; flow assurance in the downhole and near well bore reservoir interface in reservoirs that produce heavy or paraffinic crudes; efficient clean‐up, oil recovery and water and sediment separation of tank bottom sludge in oil tank batteries offshore/onshore; clean-up and sediment separation at contaminated sites; and hydrocarbon recovery in tar sands.

The new tech is cheap and efficient, immune to the loss in the water phase of produced fluids, has a higher flash point than other chemicals, does not impede transportation, and can be fed into the refining process, Indago said.

Mitchell said Indago will use its technical, financial and commercial resources to expand the technology rapidly, and it will look to directly acquire existing oil accumulations where the technology will be used to increase or commence oil production.

It is still at an early stage of application in the industry with revenues of around $1.2 million, and the total purchase price is tied to future earnings.

The MOU requires due diligence, preparation of documentation, and shareholder approvals, and imagines an initial $1 million cash payment by Indago plus the issue of 50 million shares and 33.2 million options that will be exercisable at 25c for two years.

Assuming a set of pre-tax earnings hurdles are met a further 80 million shares will be issues in stages to April-May 2019.

Indago will also pay a royalty of 5% of net sales to inventor Nick Castellano until those payments total $US20 million ($A26.3 million), at a rate of at least $20,000 per month.

The junior has also agreed to outlay $400,000 worth of product for HCD immediately.

Castellano, HCD's managing director Allan Ritchie and one other unnamed representative will join the board.

"The merger with Indago gives our technology the best chance of rapid success by combining a proven product with seasoned energy industry professionals and strong financial resources," Castellano said.

Mitchell, who seized control of the former Pryme Energy earlier in the year, said the company had an opportunity to apply a proven and revolutionary oil technology across a global industry where demand was "immense" and worth millions.

He said the introduction to HCD came last year when he was asked to chair the company.

"I thought we could do more with it. We looked at around 20 deals, but in the end we decided to put it with Indago," he told Energy News.

The deal is expected to close late this year or early in 2017.

He said the company would also remain engaged in its low cost oil appraisal project in the US with Empire Energy Group.

Indago shares were last traded at $0.082, up more than 20%.