The proposed refinery would produce up to 100 million litres of diesel a year - or about 10% of the state's total diesel consumption per annum, according to Stuart.

It would treat crude produced from Stuart’s existing and future field developments in the Cooper Basin, it said.

After producing 832,000 barrels of oil last financial year, Stuart expects to soon start producing up to 3,000 barrels of oil a day from its seven South Australian fields.

The decision to proceed with the $900,000 FEED study, which is expected to take 16 weeks, follows the completion of a feasibility study to establish the economics and viability of a diesel refinery in the state.

“Our initial feasibility study demonstrated the robust economics for a South Australian refinery,” managing director Tino Guglielmo said.

"But further work is required, particularly relating to process technology, statutory approvals, quality of crude feed, diesel distribution and detailed plant design.

“The entire project could be built and commissioned within 15 months of the green light from Stuart Petroleum’s board of directors at the completion of the FEED study.”

In its feasibility work, Stuart had sought assistance from the Scott Group of Companies - a logistics provider and fuel distributor - to consider the marketing and logistics elements of the project.

“Stuart is confident, subject to the outcome of the FEED, that the project will deliver a high quality product from crude oil produced in South Australia to regional South Australian customers,” Guglielmo said.

Meanwhile, Stuart also reported that its Hiraji-1 well in Cooper Basin permit PEL 113 reached a total depth of 1707m without encountering any hydrocarbons, following the evaluation of wireline logs. The well, in which Stuart has a 100% interest, will now be plugged and abandoned.

In the Cooper/Eromanga Basin, the company reports that Harry-1 in PEL 90 was drilling ahead at 2870 metres at 6am (CST) this morning, after stabilising the hole. Harry-1 has a planned total depth of 3100 metres. Stuart also holds a 100% interest in this well.