North Sea oil and gas exploitation has had a major impact on the UK economy. To maximize the potential national benefits appropriate licensing, taxation, depletion and pricing policies are required. Given the high degree of geological uncertainty in the early years some use of the discretionary licensing system to award acreage was appropriate, but greater use could have been made of auctions as the province matured. The taxation arrangements have certainty collected a high share of the economic rents to the state. The cost has been a very complex and frequently changed system. Depletion rates have been very fast and largely market-driven. Restrictive depletion policies would have imposed high costs. Emphasis should be placed on policies to ensure that appropriate investment of oil revenues takes place rather than restrict output. The monopsonist position of British Gas distorted the pattern of gas exploitation in the 1970s. While competition is still restricted within the current framework, the industrial market will become much freer.
- North Sea