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Significant uncertainties, risks, and investment commitments
for Exxon were associated with Exxon’s North Sea licenses --
risks that insufficient oil deposits would be discovered, that
oil resources that might be discovered would not be commercially
exploitable, and that the large capital and operating costs
associated with exploring for and developing oil and gas
resources in the North Sea would be lost.
The licenses between the United Kingdom and Exxon regarding
North Sea petroleum resources were entered into in good faith.
They were negotiated at arm’s length. They constituted
enforceable contracts under U.K. law.
License fees and royalties that have been collected by the
United Kingdom from oil and gas companies with regard to North
Sea petroleum resources have constituted a substantial source of
income to the United Kingdom.
Through 1992, Exxon has paid to the United Kingdom more than
�16 billion in royalties in connection with the North Sea
licenses it received. Under the licenses Exxon received and
taking into account risks and costs associated therewith at the
time the licenses were issued, the fees and royalties Exxon paid
to the United Kingdom for the licenses to exploit North Sea
petroleum resources constituted reasonable and substantial
compensation therefor.
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Last modified: May 25, 2011