South Africa’s state-owned oil company PetroSA and Cairn India group have signed a farm-in agreement for crude oil and natural gas exploration in the Orange Basin, off the west coast of South Africa.

Under the agreement, Cairn India, through its wholly-owned South African subsidiary, will hold a 60% interest in offshore block one, while the remaining 40% stake will be retained by PetroSA.

Block one, which the company claims is on trend with the discovered Kudu and Ibhubesi gas fields, covers an area of 19,922km2 within the Orange Basin and is located along the northwestern maritime border of South Africa and Namibia.

According to company, the block is in its initial stages of exploration but has existing gas discovery and identified oil and gas leads and prospects.

PetroSA New Ventures vice president Everton September said that the company is set to realise the full potential of block one.

"We are delighted to join hands with one of Asia’s most successful exploration companies. Cairn India brings with it extensive geo-technical and operating capabilities that will combine very well with our experience and understanding of the region," September said.

Cairn India strategy director P Elango said this was 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," Elango said.

The Orange Basin is a large cretaceous deltaic basin with multiple proven source rocks and the potential for material oil and gas discoveries.

It is an emerging hydrocarbon province, which Cairn India believes has not been explored to its full potential.

After taking over 60% stake, Cairn India will become the operator of the block one.