Answer

Introduction

            The UK’s fiscal regime for its key production area –the UKCS (United Kingdom Continental Shelf)- represents an example of a regime developing with both the production as well as the global market. In fact, the UK’s political as well as legal environment come across as complex and negotiating a contract to exploit such resources as oil is not an easy process. More so, a contract in the UK to exploit oil resources sees the government seek to exercise its supremacy and reign over the company. In fact, the government adds a regulatory dimension to the licensing that virtually prevails its contractual character.

            The elements associated with contracts between the UK government and the oil firm are based upon the 1934 Act vested in the Crown, proprietary rights in petroleum. In fact, the contract regime no longer was based upon the requirement to forbid unlicensed exploration or exploitation of oil resource but the transfer of crown proprietary rights. the contract, by far and large, is driven by such factors as environmental considerations as well as deteriorating crude oil quality (Berends 2007, p 4262), as clauses in a contract provide the exclusive as well as liberty to search and bore for and get petroleum.  Indeed, North Sea production has been found not only to be mature but also on the decline even as UK remains the only nation in the EU with significant energy exports. For instance, since 1999 oil production in the UKCS fell by up to 50 percent (Inkpen and Moffett 2011, p 249). This is granted in consideration for royalties as well as payments to be gotten out of a contract. Nonetheless, the language making up a contract between the government and the oil firm is not necessarily of adequate evidence and a license may in fact not be enforceable contract. In some cases, it may be understood as a mere intention statement.         

            In addition, a contract regime between the UK government and an oil firm ought to be primarily about the transfer of valuable rights in return for financial remuneration. In fact, a contract between the two parties is distinctive for it many provisions seeking to bestow great control powers on one party –usually the government representative in the form of a minister – over the other, which often is the oil company. It can be said that the contract is largely built upon competitiveness in which the government increasingly seeks to obtain the maximum gains (Dongkun and Na 2010, p 758). This sees the government and the oil firm negotiate the contract for implementation at some stage during development (Berends 2007, 4265). Often, this comes in the form of government freedom of action meaning that it has the inherent power to override its contractual obligations through unilateral action in the name of public interest. in fact, this freedom of action by the government ends up defeating the purpose of making the differentiation between the contract and regulations applicable to that particular contract.     

Conclusion

            The area of contract with respect to oil production in the UK is quite complex as evidenced in this paper. More so, the government is quite of its interests and perhaps those held by the community in general. In addition, a contract between the UK government and the oil firm is rather one-sided as the government is bestowed with great control via such acts as the Petroleum Act of 1934.

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