ABSTRACT

In the field of licensing tracts for oil and natural gas exploration and production there is a wide gap between the way academic experts believe is advisable and what governments choose to do. Many academic experts seem to favour an auction mechanism for allocating tracts. In contrast, most countries can be observed to follow policies embodying a very significant element of discretion in allocation of tracts. This paper examines the two approaches and the arguments used to support them. While empirical evidence to support the auction approach is significantly favourable given the circumstances under which the auctions were used, no similar empirical evidence exists for discretionary approaches.