Rather than transporting the crude produced from the field 2,500 kilometres to the Kwinana refinery south of Perth, the process could converting it to diesel for sale in the north of Western Australia, the company claimed.

Aiming to transform its fortunes, TSX Venture Exchange-listed Golden Dynasty is currently finalising drilling plans for its Canning Basin blocks and is now moving to list on the ASX.

The blocks, which are being acquired from Kimberley Oil, lie along the northern edge of the Canning Basin, 130km east of Broome. They include five fields that pump about 70 barrels per day, and other targets that could potentially be hooked into existing production facilities.

The company said yesterday it had signed a heads of agreement with Nanokat GmbH of Germany to test the KDV500 Catalytic Depolymerisation process.

Nanokat’s technology passes crude through a low-temperature, low-pressure system. With the assistance of a catalyst in a closed liquid circulating system, gases are produced, which when passed through a distillation column, result in a diesel fuel condensate.

The equipment is self-contained and because the process is conducted at atmospheric pressure in a closed-circuit system there are no polluting emissions into the atmosphere, according to Golden Dynasty chairman Paul Ray.

“This is an exciting opportunity for the company - transportation costs are major to any producer in the Canning Basin," Ray said.

"The KDV500 process could make a major difference to the operating costs of the field, and ultimately to the company.”

The deal is subject to regulatory approval, but it brings a new and forward-looking dimension to Golden Dynasty’s oil exploration and development plans in the area, according to project director Bill Houston.

“This new partnership allows the company not only to be in oil exploration and development, but to become a downstream supplier of middle distillate fuels for local markets, adding value to the company,” he said.