Mumbai: Reliance Industries, India's largest private sector enterprise with businesses in the energy and materials value chain, today signed an agreement to acquire a 90 per cent stake in an oil block in Peru.

Reliance bought the stake in block 141 in the high plateau of Peru from Pan Andean Resources PLC, company CEO and president (oil & gas) PMS Prasad said.

Pan Andean will dilute its interest in Block 141 to 10 per cent, in return for which Reliance Industries will incur all exploration costs through commercial discovery.

Following a commercial discovery of an agreed size, Pan Andean will reimburse Reliance for its share of the exploration costs.

In addition, based on a formula established in the farm-out agreement, Pan Andean has the right, though not the obligation, to increase its stake to a maximum of 30 per cent. In such a situation Pan Andean will reimburse Reliance Industries for that proportion of its exploration expense on Block 141 which Pan Andean will then own, it said.

Block 141 is situated in 1.2 million acres (0.5 million hectares) of Andean mountain plateau.

The agreement is subject to the regulatory approval of the Peruvian authorities. Once such approval is obtained, Reliance Industries will assume operations.

Pan Andean plans to reduce financial exposure while accelerating drilling plans in potentially high value blocks, the Peruvian company said.
 
"We believe that Block 141 contains highly prospective and potentially valuable structures. This is based on the belief that the kitchen that charges the world-class Camisea gas and condensate field to the north may also charge structures in our Block 141 to the south,'' David Horgan, managing director of Pan Andean Resources, commented.

Reliance believes that the block contains highly prospective and potentially valuable structures. ''We plan to conduct geological & geophysical work. If the seismic shows adequate structures we anticipate drilling and a total work programme that may exceed $40 million,'' Prasad said, adding, Reliance was looking at oil blocks in Latin America particularly in the heavy oil belt.