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Sunday, October 21, 2018
Egypt is working on a new model for future oil and natural gas production contracts in undeveloped areas to spur exploration and help the country become self-sufficient in energy, oil ministry and company officials were cited as saying in a Bloomberg report.
According to the report, the new system has companies bearing the cost of exploration and production in return for a share of the output, and they would be free to sell to whomever they wish. The production shares would differ from concession to concession, depending on the investment.
Current PSAsentitle companies to roughly one-third of the project’s output to help cover exploration and production costs. The remaining output is split between the company and the government, which then has the right to buy the producer’s entire share at predetermined prices.
The new system could keep the government from struggling to pay for production diverted to the local market. The new contracts would enable investors to use their full share of production as they see fit, without having to sell it to the government at a preset price, so long as they pay all exploration and production costs.
Arrears to international oil and gas companies mounted as the country battled a financial crisis, peaking at $6.2 billion in 2012. The overdue payments stood at $1.2 billion in July, and the government has promised to repay them all.
This new investment system, if it becomes law, could be applied to future agreements in undeveloped frontier areas. According to the Bloomberg report, existing contracts will not be affected.
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