The United Kingdom's Development of Its North Sea Oil and Gas Reserves

ID-77-51: Published: Sep 23, 1977. Publicly Released: Sep 23, 1977.

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The United Kingdom's (UK) philosophy, approach, and control over development of its North Sea oil and gas reserves was examined in order to gain pertinent information that could be useful to the United States for managing resources of the Outer Continental Shelf.

The UK decision to adopt a policy of rapid exploration and development was facilitated by the basic resolution of mineral rights ownership, oil price increases, and the ability to develop needed technology. The policies were implemented primarily through a system of licensing, establishment of a national oil company, and a system of taxation and royalty. The licensing system encouraged rapid exploration because the cost of licenses was low, two-thirds of the licensed area must be surrendered after 7 years, and the Government stressed intensive work programs. The British National Oil Corporation, created on January 1, 1976, provides the Government with a secure source of oil and gas because it is a 51 percent partner in all licenses. The tax and royalty system encourages development by allowing companies to recover capital costs early in the production life of oil fields. Major features include a petroleum revenue tax, a corporation tax, and a 12.5 percent royalty.

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