Under the terms of the joint venture, Key would pay Pancontinental up to $A100,000 in reimbursement of past expenditure and would share certain future costs.

The partners believe the area holds significant oil exploration potential, and have been studying existing regional geological and seismic data for some time.

Pancontinental is also applying for its reconnaissance licence to be converted into a petroleum agreement and exploration licence. Key said it has agreed to be a 50% participant in any successful award.

Key managing director Ken Russel said the agreement maintains its focus on international petroleum ventures and provides the company with substantial new growth opportunities.

"Key Petroleum and Pancontinental are targeting oil plays off the Namibian coast and we believe that this area provides strong potential to discover hydrocarbon-bearing structures," he said.

"Only a small number of wells have been drilled in Namibia, mostly targeting gas plays.

"This agreement gives Key the opportunity to consolidate its presence in the offshore basins of Africa after its recent gas discovery in the Kiliwani North-1 well, in Tanzania on Africa's east coast."

Other companies operating offshore Namibia include BHP Billiton, Hunt and Tullow.