Serica Energy PLC (SQZ.T) said Thursday that BP PLC (BP.LN) has agreed to earn a minority stake in its offshore Namibia exploration license by covering past costs and paying for an extensive three-dimensional seismic survey.

Serica currently holds an 85% stake in exploration license 0047 and has agreed to farm out 30% to BP. The National Petroleum Corporation of Namibia Ltd. holds a 10% stake and Indigenous Energy Ltd. holds the remaining 5%.

The deep water geological basins offshore Namibia, including the Luderitz Basin, are at the early frontier stage of exploration and having a major like BP on board, should reduce the financial and technical risk to the minnow.

Although the presence of very large structures have been shown to exist from seismic surveys, very few wells have been drilled in the deeper water Namibian basins to date and the full oil and gas potential of the area hasn't yet been fully tested. Water depths in Serica's Luderitz Basin blocks range from 300 to 3,000 meters. Drilling in these depths of water, while becoming more commonplace in the industry, requires sophisticated drilling techniques and equipment and is very costly, Serica noted.

As such, Serica has also granted BP an option to increase its interest in the license by meeting the full cost of drilling and testing an exploration well before the end of the first four-year exploration period.

In the event that this option is exercised, Serica's interest in the license will fall to 17.5%, with costs carried through the first well, which will have very considerable value if the exploration drilling is successful.

Serica will continue to be the operator of the license during the initial seismic period with BP taking over as operator if it exercises its option to drill and test a well.

Serica's chairman and interim chief executive Tony Walker said: "Serica's license interests in the emerging Atlantic margin basins offshore Ireland, Morocco and Namibia are attracting growing industry interest. In Namibia we recognize the benefits of having a partner who brings technical and development expertise to the group to complement Serica's early stage exploration capability."

Serica shares closed Wednesday at 29.25 pence.

-By Iain Packham, Dow Jones Newswires; 44-20-7842-9269; iain.packham@dowjones.com