3. Egypt, Introduction
A middle eastern country in northeast Africa
The Arab Republic of Egypt is at the center of the Arab world
The petroleum industry plays a key role in the Egyptian economy
Egyptian oil production comes from four main areas:
- Gulf of Suez - Western Desert
- Eastern Desert - Sinai Peninsula
4. Egypt, Upstream E&P Fiscal Regime
Egypt, Petroleum Fiscal Environment
Governing law
- The provisions of Law No. 86 of 1956
concerning mines and quarries
Licensing authority
- Arab Republic of Egypt
National Oil Company
- EGPC (Egyptian General Petroleum Corporation)
5. Egypt, License Terms
Concession agreement for petroleum exploration and exploitation
Exploration
- Initial exploration period of 3 years
- One extension to the exploration period, of 3 years
- Termination of agreement if no discovery after 6th year
Production
- Commercial oil discovery
- Area capable of production to be converted to a ‘development lease’
6. Egypt, Key Fiscal Terms
Type of contract
- PSA (Production Sharing Agreement)
Bonuses
- Signature bonus
- Bonus per development block
- Production bonus
Royalty
- EGPC shall bear the entitled royalty
Income Tax
- EGPC shall bear the entitled income tax
Deduction and depreciation
- Cost recovery
14. Egypt, Fiscal Regime - Sample Asset Valuation
Measures of Profitability
FNR $60,390,261.34
FMV $42,273,182.94
Net Present Value
Undiscounted $89,424,234.66
Discounted @15% $18,117,078.40
Pay Out Time
Undiscounted 3.39 years
Discounted @15% 4.88 years
Profit to Investment Ratio
Undiscounted 2.12
Discounted @15% 0.43
DCFROR
23%