Cairn India buys 60% in South African gas block

New Delhi: In its first deal since being acquired by Vedanta Resources, Cairn India has acquired a 60 per cent stake from PetroSA in an oil and gas exploration block on the west coast of South Africa. With this, Cairn India’s presence abroad would now be extended beyond Sri Lanka.

The block comprises an existing gas field, discovered in 1987. Cairn India would conduct seismic surveys and carry out initial exploration drilling. The time taken to begin production would depend on the nature and volume of hydrocarbons found.

“This is an important step for the company’s growth beyond the Indian sub-continent. We see an attractive opportunity to leverage our capabilities in a rapidly-emerging area and aspire to build a wider business in the region,” said P Elango, Cairn India director (strategy).

Elango is scheduled to take over as officiating chief executive from September 1. He would replace Rahul Dhir, who had resigned a week earlier.

Cairn India would be the operator in the block, while PetroSA, owned by the government of that country, would hold the remaining interest, said a company statement. The closure of the transaction is subject to regulatory approvals from the South African government.

Cairn India would hold the stake through a wholly-owned South African subsidiary. The company has made no payment for the deal. However, in the initial phase, it would carry PetroSA’s share of investment towards the work programme. The consideration for the stake acquired in the block would be through investment linked to the work programme for developing the asset. A company statement said it had signed a farm-in agreement for exploration in offshore Block 1. The block would be an anchor exploration asset in South Africa, and would augment Cairn India’s existing portfolio, the company said.

Block 1 covers 19,922 sq km and currently, initial stages of exploration are underway there. The block has an existing gas discovery, as well as identified oil and gas leads and prospects. It is located in the Orange Basin, along the north-western maritime border between South Africa and Namibia.