Africa Oil has agreed to acquire an additional stake in oil Block 3B/4B in the Orange Basin, offshore South Africa.

The Canadian oil and gas business has a binding letter of intent in place to purchase 6.25% of the block from Eco (Atlantic) Oil & Gas subsidiary Azinam.

Africa Oil, which owns a 15.02% stake in Eco, has agreed to pay $10.5m (R194m) in cash for the additional stake.

Block 3B/4B, which spans an area of 17,581km², is on trend with several oil discoveries including Venus and Graff offshore Namibia.

The overall unrisked gross P50 potential resources for Block 3B/4B were estimated to be around four billion barrels of oil equivalent, according to an independent review, said Africa Oil.

Over the 24 selected prospects, the probability of success ranges from 11% to 39%, it added.

Upon completion of the transaction, which is subject to approval from the government, Africa Oil will hold an operated working interest (WI) of 26.25% in the block.

Azinam will hold a 20% WI and Ricocure (Proprietary) Limited will control the remaining 53.75% interest.

Africa Oil and its partners in the oil block are moving ahead with their plans to drill two wells.

They are also in talks with a number of prospective partners to farm out up to a 55% gross working interest in Block 3B/4B.

In a separate statement, Eco Atlantic co-founder and CEO Gil Holzman said: "Since Africa Oil is already established as JV [joint venture] partner and Operator on the Block, receipt of the requisite regulatory approval for the transfer is expected to be straightforward.

"The initial cash to be received from Africa Oil will enable Eco Atlantic to fund its growth opportunities elsewhere and with no shareholders dilution, while maintaining a strategic and considerable 20% working interest in this highly prospective Block (pre-farm out to a third party)."