The Ministry of Petroleum has formed a joint committee to re-draft the petroleum agreements and to add incentive terms for foreign investors in the petroleum sector. The new committee consists of the Egyptian General Petroleum Corporation (EGPC), the Egyptian Natural Gas Holding Company (EGAS), the Ganoub El Wadi Petroleum Holding Company, and a global consultant.
A source in the petroleum sector told Daily News Egypt that the committee has been mandated to review the similar petroleum agreements in other countries and develop new formats by the end of 2018.
He said that the amendments will include changing the partners’ production shares and decrease the reimbursement periods to stimulate foreign investment in the Egyptian petroleum sector.
The source added that the committee held meetings with the officials of foreign companies operating in Egypt to discuss their suggestions for amending the petroleum agreements. The committee will consider these suggestions when reformulating the current agreements to achieve the maximum benefit for both the foreign investors and the country.
According to the sources, the EGPC has added some terms to a number of recently signed petroleum agreements. The amendments included the abolition of mandatory abandonment of part of the concession area every two years and the increase of the partner’s production share to 40% allocated to recover expenses.
The mandatory abandonment of a part of the exploration area term was amended to allow the partner to present a new exploration plan for those areas, so that the EGPC could grant a new period for the implementation of that plan in the targeted area.
The partner’s oil and gas production share has been increased to 40% rather 35% to allow the foreign partner to recover his expenses. The rest of production will be shared between the EGPC and the partner.
The source pointed out that the new form of petroleum agreements has been implemented in the recent tender posed by the EGPC. The amendments were reviewed by the foreign partners in the petroleum sector, who welcomed the changes to stimulate investment in oil exploration.
The source added that some incentive terms have been added to the new petroleum contracting forms, such as sharing production surplus and identifying the gas price after commercial discovery and before converting it into a development contract in accordance with the required investments for development as well as the petroleum reserves. These prices will be reviewed regularly.
According to most Egyptian petroleum agreements, Egypt pays $2.65 to foreign partners for each 1 million BTU, with the exception of some areas in the Mediterranean.
The source added that the gas pricing with foreign partners should achieve suitable return in line with the size of risks and investments in the research and exploration sector.
He noted that the negotiation over gas pricing with partners will continue with the aim to accelerate development plans in concession areas.
