Egypt’s oil minister Tarek El-Molla said that the contract will provide investors with incentives to explore for fossil fuels in undeveloped areas.
Monday 11, February 2019
(Bloomberg) --Egypt is finalising details of a new type of oil and gas contract to attract even more foreign investment than the $10 billion already coming into its energy industry this year.
said in an interview. He did not provide details of the changes to the contract.
“We’re improving the cost-recovery process to be faster, less bureaucratic and more efficient,” El-Molla said. The Government will launch a new bid round in the Red Sea this quarter, he said.
The most populous Arab nation wants to become a gas re-exporting hub on the doorstep of Europe, and the contract overhaul is part of a broader plan to liberalise its energy industry.
Italian firm Eni SpA’s discovery of the giant offshore Zohr gas field in 2015 reignited waning investor interest in Egypt’s oil and gas industry, the country’s biggest single magnet for foreign direct investment.
Total Chief Executive Officer Patrick Pouyanne and BP’s Bob Dudley will be joining CEOs of other oil majors at an energy conference in Cairo
The new oil and gas contract will allow investors to control their share of production rather than sell to the government at preset prices. The officials, who asked not to be identified because the discussions were private, said terms could be tweaked depending on the investment.
Egypt’s existing production-sharing agreements give investors about a third of a project’s output to help cover exploration and production costs. The rest is split with the government, which has the right to buy the producer’s entire share at the preset price.
International oil companies have long complained about the contracts. Egypt struggled before Zohr’s discovery to attract major new energy investments. Its current investment model drew greater scrutiny after 2011, when the country began to experience fuel shortages and power blackouts.
The government halted gas exports at the time, diverting the fuel for local use and stopping payments to investors for their share of output. Arrears to international oil and gas companies mounted, peaking at $6.2 billion in 2012, and stood at $1.2 billion in July.