Managers at a thriving eco-fuels company believe they are set to be leaders in an “exploding” market following their takeover of an American firm.

Roy Lipski, chief executive of Oxford Catalysts, based at Milton Park, near Didcot, predicted a bright future after the £56m deal for Velocys was announced. The deal will go ahead subject to shareholder approval.

Velocys specialises in the production of liquid synthetic fuels made from waste materials or from gases such as methane. Mr Lipski said: “This is a transformational deal for Oxford Catalysts. It accelerates the time we will take to get to the market, reduces the risks of commercialising the technology, and allows us to achieve a critical mass as a combined organisation with more than 90 staff.”

Velocys is a spin-off of the Battelle Memorial Institute, a not-for-profit scientific research centre, while Oxford Catalysts was founded in 2004 and is a product of Oxford University’s chemistry laboratory.

Mr Lipski believes the deal, which caused Oxford Catalysts’ shares to be suspended from October 29 until last Monday, will also speed up the development of small-scale synthetic production plants which will ultimately see alternative fuels on garage forecourts.

Demonstrations of the technology will begin next year and by the end of 2009, Mr Lipski is confident the company will be able to take orders.

Unlike first-generation biofuels that are blended with conventional petrol or diesel and also impact on food production, Oxford Catalysts’ product will be able to go straight into the tank.

The company is also working on harnessing waste gases which are burned off during the oil refining process.

Mr Lipski added: “I believe the synthetic fuels market is going to be exploding and we are positioning ourselves to be the market leader.”

Oxford Catalysts employs 23 people and won the Innovation category at this year’s Oxfordshire Business Awards.