OT30011 - Capital Gains

Landward Licences.

The Landward regime applies in Great Britain to all territory above low water mark and within "bay closing lines" as defined in regulations; a separate regime is operated in Northern Ireland. The Petroleum (Production) (Landward Areas) Regulations 1995 introduced a single licence, the Petroleum Exploration and Development Licence (PEDL), as the principal Landward Licence to replace the previous three licence system that covered the various stages of the full development cycle - exploration, appraisal and production.

There are two other Landward Licences: Supplementary Seismic Survey Licences(SSSLs) which allow seismic acquisition to extend slightly beyond the licensed area andMethane Drainage Licences (MDLs) which allow mine operators to extract gas from workings for safety reasons. Other Coalbed Methane projects require full PEDLs. Five older types of licence are also currently valid but not now issued:

• Mining Licences (MLs), issued during or before 1967;
• Production Licences (PLs), issued between 1968 and 1984;

and three types of licence introduced in 1984 to cover the identifiable stages of activity:

• Exploration Licences (EXLs);
• Appraisal Licences (ALs); and
• Development Licences (DLs).

Before Licensees can carry out any site activity they must obtain approval from the DTI to shoot seismic (notification only), drill wells and develop fields, plus any necessary planning permission from local Government authorities and access rights from the landowner(s). Licensees wishing to enter or drill through coal seams must seek the permission of the Coal Authority.

The terms and relinquishment requirements on Landward Licences vary according to the type of licence in question. The oldest MLs were originally granted for a term of 50 years with the last due to expire in 2017. In contrast the terms of PLs vary according to the regulations governing them. The last of these is also due to expire in 2017. The outstanding EXLs are valid for an initial term of 6 years, as are the current PEDLs, with further extensions of 5 and 20 years being granted at the discretion of the Secretary of State (at least 50% of the area must be relinquished at the end of the initial 6-year term).
Although there have been some significant discoveries, in general the oil reserves found have been small by comparison with offshore fields. Recently there has been increased interest in the possibility of commercially significant coal bed methane production in the UK.