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average bid price with respect to the remaining 14 areas that
were available under the auction was less than �1.2 million.2
At the time, in the 1960's and early 1970's, the United
Kingdom concluded that the financial terms of the discretionary
North Sea licenses that it issued to Exxon and to other oil and
gas companies were appropriate for the particular circumstances
of the United Kingdom, which at the time had virtually no
indigenous oil and gas production and which was in competition
with other countries for resources that the oil industry would
allocate to the North Sea.
After the fourth license round in 1971 in which the United
Kingdom had experimented with an auction licensing system, the
United Kingdom has continued to use, with limited exceptions, a
discretionary licensing system. The United Kingdom and most
major oil-producing countries other than the United States rely
primarily on discretionary licensing systems with regard to the
recovery of petroleum resources.
Generally, under the discretionary licenses issued by the
United Kingdom for exploitation of North Sea petroleum resources,
terms of the licenses required licensees to pay to the United
Kingdom up-front fees based on the size of the areas subject to
2 In these cases, the parties generally refer to U.K. pounds,
without providing U.S. dollar equivalents. We, therefore, in
this opinion also use U.K. pounds, and we leave for the Rule 155
computation questions relating to proper exchange rates between
U.K. pounds and U.S. dollars.
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