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In January 2007, Serica was awarded its first exploration licences in Norway, having first pre-qualified as a participant in the 2006 Awards in Predefined Areas ('APA') Licence Round. Serica was awarded a 20% interest in two adjacent offshore licences, 407 and 406 in the Egersund Basin, about 120 kilometres southwest of the port of Stavanger, Norway’s fourth largest city.

Three oil discoveries had been made in these licence areas in the early 1970s but were not believed to be commercial at that time. The area was thereafter not made available for licensing for over 30 years, until the 2006 APA Licence Round. One discovery in particular, the Bream oil field in Licence 407, is now believed to have commercial potential, given the advances in drilling and production technology since the discovery was made and the currently prevailing oil price. Licence 406 contains exploration prospects analogous to the Bream field and identified on modern 3D seismic data that was not available when the original discovery wells were drilled.

Norway recently introduced a new fiscal regime for the oil industry, under which the costs of seismic surveys and exploration and appraisal wells are subsidised by the state to the extent of 78%. This effectively puts independent exploration companies such as Serica, with no Norwegian production, in the same position as established Norwegian producers as far as the net costs of exploration activities are concerned.

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