Egypt Upstream Fiscal and Regulatory Report – EGPC and EGAS Bid Rounds Opened for 2018

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Egypt has announced two new bid rounds for 2018, closing in October. After a significant drop in upstream investment following the 2011 revolution, recent reforms in Egypt have helped to boost investor confidence and reverse this trend. Although the government allowed some flexibility on fiscal terms, in the main the general PSA framework has remained stable and the improvement in investor confidence owes more to wider economic reforms and improved gas pricing. It is expected that this stability in fiscal terms will continue over the medium term, with the government focusing on licensing new exploration acreage.

“Egypt Upstream Fiscal and Regulatory Report – EGPC and EGAS Bid Rounds Opened for 2018”, 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

1. Table of Contents

1. Table of Contents 1

1.1. List of Tables 3

1.2. List of Figures 4

2. Regime Overview 5

3. State Take Assessment 8

4. Key Fiscal Terms- Production Sharing Agreements 9

4.1. Royalties, Bonuses and Fees 9

4.1.1. Signature Bonus 9

4.1.2. Production Bonus 9

4.1.3. Training Bonus 10

4.1.4. Assignment Bonus 10

4.1.5. Exploration Area Retention Bonus 10

4.1.6. Development Lease Bonus 11

4.1.7. Royalty (Paid out of NOC share) 11

4.2. Cost Recovery 12

4.2.1. Cost Recovery Limit 12

4.2.2. Recoverable Costs 12

4.2.3. Excess Cost Recovery 13

4.3. Profit Sharing 13

4.3.1. EGPC Agreements 13

4.3.2. EGAS Agreements 16

4.3.3. GANOPE Agreements 18

4.4. Direct Taxation 19

4.4.1. Income Tax 19

4.4.2. Deductions and Depreciation 19

4.5. Tax Exemptions 20

5. Key Fiscal Terms – Service Contracts 21

5.1. Royalties, Bonuses and Fees 21

5.1.1. Signature Bonus 21

5.1.2. Tariff Fee 21

5.2. Baseline Service Fee 21

5.3. Remuneration 22

5.4. Direct Taxation 23

5.4.1. Corporate Income Tax 23

6. Regulation and Licensing 24

6.1. Legal Framework 24

6.1.1. Governing Law 24

6.1.2. Contract Type 25

6.1.3. Title to Hydrocarbons 25

6.2. Institutional Framework 26

6.2.1. Licensing Authority 26

6.2.2. National Oil Company 26

6.2.3. Regulatory Agency 27

6.3. Licensing Process 27

6.3.1. Qualification 27

6.3.2. Bidding 27

6.4. License Terms 27

6.4.1. Duration and Relinquishment 27

6.4.2. Exploration Obligation 28

6.4.3. Management of Operations 28

6.5. Domestic Market Obligation 28

7. Outlook 29

8. Appendix 30

8.1. References 30

8.2. Contact Us 32

8.3. Disclaimer 32

Table

1.1. List of Tables

Table 1: Regime Overview 5

Table 2: Egypt, Production Bonus Thresholds in Model Contracts 9

Table 3: Egypt, Production Bonuses (US$ million), Various Concessions 10

Table 4: Egypt, Cost Recovery Limits (%), Various Concessions 12

Table 5: Egypt, Minimum NOC Share of Excess Cost Recovery Rates (%), Bid Rounds 2014 -2016 13

Table 6:Egypt, Oil and Condensate Profit Sharing Framework (% Contractor Share), EGPC 2018Round 14

Table 7:Egypt, Gas and LPG Profit Sharing Framework (% Contractor Share), EGPC 2018Round 14

Table 8: Egypt, Profit Sharing Framework, East Ras Qattara Concession (2004) 14

Table 9: Egypt, EGPC 2003 and 2004 Model Contract Profit Sharing Framework 15

Table 10: Egypt, Profit Sharing Framework, NW Gemsa Concession (2002) 15

Table 11: Egypt, Profit Sharing Framework, Burg El Arab Concession (1990) 15

Table 12: Egypt, Oil and Condensate Production Sharing Framework (% Contractor Share), EGAS 2018 Round 16

Table 13: Egypt, Gas and LPG Production Sharing Framework (% Contractor Share), EGAS 2018 Round 16

Table 14: Egypt, Profit Sharing Framework, South Disouq Concession (2014) 17

Table 15: Egypt, Oil and Condensate Profit Sharing Framework (% Contractor Share), Shorouk Concession (2014) 17

Table 16: Egypt, Gas Profit Sharing Framework, Shorouk Concession 17

Table 17: Egypt, Profit Sharing Framework, North El Maghara Concession, 2007 18

Table 18: Egypt, Oil and Condensate Production Sharing Framework (% Contractor Share), GANOPE 2016 Licensing Round 18

Table 19: Egypt, Gas and LPG Production Sharing Framework (% Contractor Share), GANOPE 2016 Licensing Round 18

Table 20: Egypt, Tariff Fee, West Gharib Block H Service Contract 21

Table 21: Egypt, Contractor Remuneration (% of incremental production), Area A Service Contract 22

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

Table 23: References 30

Figures

1.2. List of Figures

Figure 1: Egypt, Regime Flow Chart – Production Sharing Agreement 6

Figure 2: Egypt, Regime Flow Chart – Service Contract 7

Figure 3: Egypt, Indicative NPV10/boe, IRR and State Take Comparison,Regional 8

Figure 4: Egypt, Legal Framework 24

Figure 5: Egypt, Institutional Framework 26

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