Petroleum licensing

Petroleum licensing or exploration license is the act of giving licenses (geographical areas at land or sea) to a company or a joint venture allowing them to search for commercially feasible deposits for the extraction of petroleum.

Each sovereign country distributes licenses in what is typically called a licensing round. The procedure for such, can greatly vary from country to country. The largest change is usually if it is a bid system or a grant system. In the bid system, each company or joint venture will offer a bid to gain the rights for the petroleum exploration at the license for a limited period of time. The highest bid, will obtain the rights. In the grant system, the license will be granted to the company or joint venture that shows the highest interest and ability for the exploration of the license. This can be shown by the company experience, projected plan for the exploration (by high investment) and or longest presence on the country as a petroleum exploration company.

Countries Licensing Rounds

Oil and gas rights in the offshore US are divided between the state and federal governments (see Offshore oil and gas in the United States). Rights to explore on US federal offshore areas are obtained through competitive sealed bids. Individual tracts are generally 9 square miles (23 km2). Current leases being offered in the Gulf of Mexico have 5-year terms for tracts in water depths of less than 400 m, and 8 years for tracts in water greater than 400 m. Royalty rates are 18.75%.[5]


When a petroleum license is granted, the company or join venture is given a limited time for the exploration of the license. If after the limited time, the company has not discovered or performed its minimal obligations (usually agreed with the government as a minimum number of exploration wells and investment on seismic ) the license will be relinquished. Relinquished licenses can be re-attributed in next licensing rounds, or even kept as relinquished if the government believes there is little interest on that area for the petroleum exploration.

See also


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