Oil India buys 50% stake in Russian oil block for $85 million

Oil India Ltd, the nation's second-biggest state-run explorer, has bought a 50% stake in an oil block in Russia for $85 million.

OIL last month signed an agreement with Ireland- registered but Russia-focused firm PetroNeft Resources plc to take a 50% non-operating interest in License 61 in Tomsk Oblast in Russia, official sources said.

The deal includes a three-stage payout including $35 million in cash up-front, $45 million in exploration and development spending and a performance bonus of up to $5 million.

Tungolsky Licence 61 is located on the east side of the Ob River in the least explored oil bearing region of the Tomsk Oblast. The 4,991 square kilometer Licence contains 7 oil fields and over 25 identified prospects and leads.

Sources said according to independent expert Ryder Scott the block holds 117.68 million barrels of oil reserves. These reserve estimate do not include the new oil find of Sibkrayevskoye.

The block started production in 2010 and achieved a peak of 3,000 barrel of oil per day in 2011.

Sources said the transaction is subject to PetroNeft shareholder nod and regulatory approval. PetroNeft has called an Extraordinary General Meeting of shareholders on May 9 for a vote on the deal.

The London and Dublin-listed firm facing a shareholder campaign that wants to change the company's board and trajectory following disappointing drilling and production results at its core play in Western Siberia.

Natlata Partners, controlled by PetroNeft's largest shareholder Maxim Korobov, is seeking to replace the current board and has said it would review the OIL deal.

Sources said while PetroNeft will remain as operator of Licence 61, OIL will have the right to second certain technical experts.

OIL also has the right to become the operator of the Licence should there be a substantial change in the management team of PetroNeft within the first three years.

On completion of the deal, OIL will be able to book 50% of production and reserves from Licence 61.

The income from the farm-out will settle up Petroneft debts and the company is targeting resumption of drilling up to six wells starting in June.