Egypt Upstream (Oil and Gas) Fiscal and Regulatory Guide

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Egypt offers upstream acreage in the form of production sharing agreements (PSAs) and in some cases through service contracts. Several blocks have been awarded during the last few years due to a renewed investment interest after significant Mediterranean gas discoveries, improved gas pricing, and wider energy sector reforms. Supermajors such as BP, ENI, and Shell have strengthened their presence in the country while ExxonMobil and Chevron are few of the new entrants. Following the success of recent licensing rounds, EGPC and EGAS have launched a new bid round between March-August 2021, offering 24 blocks in the Mediterranean Sea, Gulf of Suez and Western Desert. Although, Egypt’s fiscal terms are generally more burdensome than those offered in neighboring Israeli, Cypriot and Greek waters, this is counterbalanced by the benefits of Egypt’s more developed sector, such as infrastructure availability and strong local gas demand. The fiscal terms remain more attractive than those offered in neighboring Libya and slightly better than in Sudan. The restart of Damietta’s LNG plant in 2021 after nine years will enhance further Egypt’s export LNG capacity and flexibility. Although, regional maritime border disputes in the East Mediterranean are ongoing, the deal between Egypt and Greece in 2020, the cancellation of Turkey-GNA Libya’s agreement in early 2021 and the political reproachment between Turkey and Greece can favour regional cooperation.

“Egypt Upstream (Oil and Gas) Fiscal and Regulatory Guide”, presents the essential information relating to the terms which govern investment into Egypt’s upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the state’s take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Egypt’s upstream oil and gas investment climate.

Scope

Overview of current fiscal terms governing upstream oil and gas operations in Egypt

Assessment of the current fiscal regime’s state take and attractiveness to investors

Charts illustrating the regime structure, and legal and institutional frameworks

Detail on legal framework and governing bodies administering the industry

Levels of upfront payments and taxation applicable to oil and gas production

Information on application of fiscal and regulatory terms to specific licenses

Outlook on future of fiscal and regulatory terms in Egypt

Reasons to Buy

Understand the complex regulations and contractual requirements applicable to Egypt’s upstream oil and gas sector

Evaluate factors determining profit levels in the industry

Identify potential regulatory issues facing investors in the country’s upstream sector

Utilize considered insight on future trends to inform decision-making

Table of Contents

Table of Contents

1. Executive Summary

1.1 Regime Overview – Production Sharing Agreements (PSAs)

1.2 Regime Overview – Service Contracts

1.3 Timeline

2. State Take Assessment

3. Key Fiscal Terms – Production Sharing Agreements

3.1 Royalties, Bonuses, and Fees

3.2 Cost Recovery

3.3 Profit Sharing

3.4 Direct Taxation

3.5 Domestic Market Obligations

3.6 Local Content

4. Key Fiscal Terms – Service Contracts

4.1 Royalties, Bonuses, and Fees

4.2 Baseline Service Fee

4.3 Renumeration

4.4 Direct Taxation

5. Regulation and Licensing

5.1 Legal Framework

5.2 Institutional Framework

5.3 Licensing Process

6. Appendix

6.1 References

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Table

List of Tables

Table 1: Regime Overview

Table 2: Egypt, Key Events Since Year 2000

Table 3: Egypt, Average Winning Signature Bonus (US$) For Bid Rounds

Table 4: Egypt, Production Bonus Thresholds (US$), EGPC

Table 5: Egypt, Production Bonus Thresholds (US$), EGAS

Table 6: Egypt, Production Bonus Thresholds (US$), GANOPE

Table 7: Egypt, Cost Recovery Limits (%), Various Concessions

Table 8: Egypt, Minimum NOC Share Of Excess Cost Recovery Rates (%), Bid Rounds 2015-2021

Table 9: Egypt, EGPC Profit Sharing (%), Bid Round Model 2021, 2018, and 2016

Table 10: Egypt, EGPC Profit Sharing (%), East Ras Qattara Concession, 2004

Table 11: Egypt, EGPC Profit Sharing (%), NW Gemsa Concession, 2002

Table 12: Egypt, EGAS Profit Sharing (%), Bid Round Model 2021, 2018 and 2015*

Table 13: Egypt, EGAS Profit Sharing (%), South Disouq Concession, 2014

Table 14: Egypt, EGAS Bid Round 2012, Profit Sharing (%), Shorouk Concession

Table 15: Egypt, EGAS Profit Sharing (%), North El Maghara Concession, 2007

Table 16: Egypt, GANOPE Profit Sharing (%), Bid Round Model 2019

Table 17: Egypt, GANOPE Profit Sharing (%), Bid Round Model 2016

Table 18: Egypt, GANOPE Profit Sharing (%), Bid Round Model 2014 and 2012

Table 19: Egypt, GANOPE Profit Sharing (%), Bid Round Model 2006

Table 20: Egypt, Tariff Fee, West Gharib Block H Service Contract

Table 21: Egypt, Licensee’s Remuneration (% of incremental production), Area A Service Contracts

Table 22: Egypt, Licensee Remuneration (% of incremental production), Issaran Service Contract

Table 23: References

Figures

List of Figures

Figure 1: Regime Flow Chart – Production Sharing Agreements

Figure 2: Regime Flow Chart – Service Contracts

Figure 3: Egypt, Indicative NPV10/boe, IRR and State Take Comparison, and Price and Cost Sensitivity Analysis

Figure 4: Egypt, Legal Framework

Figure 5: Egypt, Institutional Framework

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