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With regard to North Sea petroleum resources, the United
Kingdom generally used a discretionary licensing system under
which the United Kingdom selects oil companies to which licenses
are issued from a pool of companies that apply for the licenses.
This enabled the United Kingdom to further governmental
objectives such as rapid and appropriate exploitation of North
Sea petroleum resources. In contrast, under an auction licensing
system, licenses are issued to the highest bidders who are not
necessarily the most financially sound or competent companies to
develop petroleum resources associated with the licenses.
Further, at least in the 1960's and early 1970's, due to
uncertainties and risks associated with exploitation of North Sea
petroleum resources, it was generally expected that with regard
to the North Sea resources, the United Kingdom would not raise as
much revenue from an auction licensing system as from a
discretionary licensing system.
In June of 1971, as part of the fourth license round that
was generally conducted on a discretionary basis, the United
Kingdom experimented with an auction system and invited bids for
15 areas. The winning bid (by Exxon and Shell) for one of the
auctioned areas (involving a field adjacent to where Exxon and
Shell had already discovered oil) was for �21 million, but the
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Last modified: May 25, 2011