Oil giant Exxon Mobil (NYSE: XOM) has agreed to buy a 75 percent interest in exploration blocks off the coast of South Africa.
The blocks, owned by London-based Impact Oil & Gas Ltd, mark Exxon’s entry into the Tugela South Exploration Right region, which lies some 2.8 million acres off the east coast of South Africa
Exxon will control all operations. The deal also will allow Exxon to buy 75 percent stakes in three other Impact areas.
The deal comes at an opportune time for Exxon, which has been casting about for new oil reserves as its long-held reserves begin to show signs of petering out.
Natural depletion and political and economic uncertainties, particularly in Exxon’s Latin American and Middle Eastern theaters, have caused analysts to question Exxon’s near future.
Meanwhile, South Africa has quickly emerged as a high-interest spot, attracting attention from big-league players like Royal Dutch Shell (NYSE: RDS.A), Anadarko Petroleum Corp. (NYSE: APC).
“South Africa is one of the new areas offshore that there seems to be growing interest in,” Brian Youngberg, an analyst at Edward Jones in St. Louis, said in a telephone interview. “Thoughts have been that South Africa is probably an untapped market that could really see production grow in coming years.”
The primary area of exploration lies in water depths up to 6,500 feet, and the extra exploration rights increase Exxon’s reach to 16 million offshore acres in total.
In addition to the deals with Impact, Exxon also won a year-long permit from the South African government to explore possibilities to explore the 12.4 million acre stretch in the deep waters of the Durban Basin.
Exxon was down 0.5% on Monday morning to $89.11. The company has gained 5% in 2012.