OT30012 - Capital Gains

Seaward Licences.

There are two types of Seaward Licences:

Exploration Licences which are non-exclusive, permit the holder to conduct non-intrusive surveys, such as seismic or gravity and magnetic data acquisition, over any part of the UKCS that is not held under a Production Licence. Wells may be drilled under these licences but must not exceed 350 metres in depth without the approval of the Secretary of State.

These licences may be applied for at any time and are granted to applicants who have the technical and financial resources to undertake such work. Each licence is valid for three years, renewable at the Secretary of State’s discretion for one further term of three years. An application fee is charged together with an annual rental.

Exploration licence holders may be commercial geophysical survey contractors or licence Operators. A commercial contractor acquiring data over unlicensed acreage may market such data.

Production licences grant exclusive rights to holders to search and bore for, and get, petroleum in the area of the licence covering a specified block or blocks. They are usually issued in periodic Licensing Rounds, when the Secretary of State for Trade and Industry invites applications in respect of a number of specified blocks or other areas. An application fee is charged and successful applicants make an initial rental payment for the first term of the licence, followed by annual rentals, on an escalating scale.

Licences are issued generally for a 6 year initial period following which the licensee must surrender at least half of the area but can opt to continue activities in the remaining area for a secondary period (presently up to 40 years).

Many activities carried out under a Production Licence are subject to the consent of the Secretary of State and may require compliance with other legislative provisions and specific conditions attached to the consent.