New model proposed for Egypt upstream

01 March 2002

The 32-block exploration bid round for acreage the length and breadth of Egypt incorporates a new model concession agreement aimed at speeding up the process of awarding licences, Petroleum Minister Sameh Fahmy announced at the MEED Mediterranean Gas Congress in Cairo on 26 February.

Industry executives say the intention of speeding up the process is welcome, but some companies are understood to have reservations about financial aspects of the model. It is understood that the government is looking to secure more upfront benefits through increased signature bonuses, and has proposed a two-tier price structure for cost recovery and production sharing.

It is not clear how these new terms will affect the final outcome of the bid round. Fahmy also said that he aims to hold new bid rounds every three-six months, in an effort to keep up the momentum of exploration and production activity.

During his address to the congress, Fahmy made a point of clarifying the question of deferred payments for gas purchased by the government from gas field operators. The government suggested at the end of 2001 that the operators might be prepared to agree to payments being deferred by up to three years at 200 basis points over Libor. It is understood that some companies have agreed to do this, while others have not (MEED 18:1:02).

'Partners talk,' said Fahmy. 'We accepted changes in the past on issues such as gas pricing formulas and cost recovery, and we have also been talking on this question. These are negotiations between friends. If there is agreement, that is fine, if not, so be it.'

For a full conference report, see page 10

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