• Overview
• Structure of the petroleum industry in Egypt
• Investment Opportunities
• Statistical Indicators
• Reasons to Invest in OG
• Regulations

The first oilfield in Egypt was discovered in 1869 and it came into production in 1910. At this time, Anglo-Egyptian Oilfields (a joint venture between BP and Shell) was the major operator in the area and continued exploration and development until it was nationalized in 1964. In 1962, the Egyptian General Petroleum Corporation (EGPC) was formed and became the major operator in the form of joint ventures with foreign companies. In 2000, the Ministry of Petroleum, headed by H.E. Eng. Sameh Fahmy (Minister of Petroleum in Egypt) took promising measures to face-lift the petroleum sector in Egypt. This was marked by a complete restructuring of the industry and the separation between natural gas and petrochemicals activities and those of the Egyptian General Petroleum Corporation (EGPC). The reformation resulted in the establishment of EGAS, ECHEM and GANOPE, creating a new structure of the petroleum industry in Egypt. This restructuring releases EGPC from its gas and petrochemical activities and allows it to focus more on the oil sector.

At the beginning of 2007, the Shura Council’s Industrial and Energy Committee approved nine agreements for oil and natural gas prospecting in the areas of the Gulf of Suez and the Western and Eastern Deserts. The amount of investments for these agreements account for approximately $222.65 million, said Shamel Hamdy, the First Under-Secretary of the Ministry of Petroleum. One of the major contracts sealed during the first half of 2007 is the WTR- Gulf of Suez Petroleum Company (GUPCO) deal. Through this two-year contract, Aberdeen-based WTR is to provide the materials and the installation of cold repair for leak fixation in the areas of the Gulf of Suez, the Western Desert, Port Said, Dashour and Ras Bakr, where GUPCO owns production rights along with its partners BP and EGPC. In the framework of the ministry’s strategy to expand the usages of natural gas in all the Egyptian governorates, the Arab International Bank (AIB) sealed a loan agreement with the Egyptian Natural Gas Holding Company (EGAS) in order to finance the installation of two gas supply lines from Taba to Sharm El Sheikh and Shokair to Hurghada with a total value of LE 355 million and $90 million (LE 512 million). This loan agreement is provided by a consortium of eight banks which include the AIB; Societe Arabe Internationale de Banque, Egyptian Saudi Finance Bank, Piraeus Bank, United Bank of Egypt, National Bank for Development, the National Bank of Abu Dhabi, and the Audi Bank. The main target of this project is to supply six million housing units over the next six years with natural gas with LE 30 billion total investment. This is not the sole contribution of banks in projects related to the oil and gas sector.

The Ministry of Petroleum (MoP) exerted enduring efforts to bring into play the area of Upper Egypt and its attempt to benefit from its concealed reserves. Dana Gas is one of the leading corporations that have served the ministry’s strategy. Through a farm out agreement, the Middle East’s first regional private-sector natural gas company and Kuwait International Oil & Environment Company (KIOEC), a subsidiary of TAQA Holding and Gulf Oil Investments are to partner Dana’s Komombo Concession, situated in Upper Egypt, 800 km south of Cairo. Dana already conducted technical evaluation of the concession, including “the interpretation of geological and geophysical data and the acquisition of 516 Km’s of 2-D seismic,” announced the company in a statement. This technical evaluation led to the identification of drillable prospects and four addition leads. The new partners are to share the drilling works which were scheduled to begin in mid 2007.

The year 2007 also witnessed the revival of gold in the sector. “Egypt revives its Gold fortune…” was one of the key strategies and quotes adopted by the MoP, which is to resume the program of gold mining after a halt of more than 50 years. As a debut, Fahmy signed a memorandum of understanding with the International Finance Corporation (IFC), the private arm of the World Bank, to replace the old mining laws that contributed to the lack of local investments in general and foreign investments in particular.
 

EGPC was established by the Egyptian government in 1962 and is considered the first economic corporation established in the petroleum industry in Egypt. It is active in the upstream, downstream and petrochemical sectors, has full responsibility for all sectors of the Egyptian petroleum industry and holds the sole right to import and export crude oil and other petroleum products. As a controller of the industry, any foreign investments in Egypt are maintained through a joint venture with the EGPC and are supervised by the government. Among the major activities of the EGPC are petroleum agreements, exploration, production, transportation and refining.

Egyptian Natural Gas Holding Company (EGAS)

Recognizing the increasing importance of natural gas, the Egyptian government created EGAS in August 2001. The purpose of existence of EGAS is to manage foreign investment in exploration and the use of LNG (Liquefied Natural Gas) tankers, production
and infrastructure. In addition to handling all the actions of natural gas industry in Egypt, EGAS has a mission of employing an active plan which encompasses the following:

• To prove additional gas reserves, EGAS plans to develop intensive exploration programs, based on the application of the most advanced exploration techniques and concepts.
• To maximize NGL (Natural Gas Liquids) recovery and enhance the petrochemical industry, EGAS plans to: (1) develop a complete framework for integration, and (2) upgrade the natural gas recovery facilities and transmission infrastructure.
• To expand gas export activities, EGAS plans to: (1) increasing gas export pipelines to link with the European Gas Pipeline system, and (2) implementing additional LNG (Liquefied Natural Gas) trains within the Ministry of Petroleum policy guidelines.
• To achieve sustainable development, EGAS plans to continue enhancement of gas utilization in the domestic market.

Egyptian Petrochemicals Holding Company (ECHEM)

ECHEM is a holding company assigned to manage and market Egypt’s emerging petrochemical industry. It is a major corporation in Egypt established in 2002, with a mission of developing a competitive petrochemicals industry based on the use advanced technology. ECHEM promotes investment, facilitates the development of new projects owns and is continuing to establish production plants. ECHEM has a 20-years plan to develop the petrochemical industry based on natural gas reserves of Egypt, which form the backbone of the petrochemical industry.

Ganoub El Wadi Petroleum Holding Company (GANOPE)

GANOPE, previously known as the South Valley Development Company (SVDC), was established in January 2003 to promote development activities specifically in Upper Egypt (Sohag, Aswan, Assyout, Qena, AL Wadi El-Gedied), which represent over half of Egypt’s total area. GANOPE is the chief corporation assigned by the Egyptian government for handling and assessing all petroleum activities in the south area of Egypt.

Foreign Companies and Egyptian Private Sector Companies

In addition to the holding companies (EGPC, EGAS, ECHEM and GANOPE), there are foreign companies and Egyptian private sector companies operating the Egyptian petroleum sector. These companies are granted concession areas for exploration purposes in accordance with the periodic bidding rounds administered by the relevant holding company. There are over 50 international companies that operate in the exploration, excavation and production of oil and gas in Egypt.

• Oil and gas exploration and production
• Asset acquisition
• New petrochemical master plan projects
• New world class third generation refinery
• New joint mega LNG projects
• Manufacturing of oil and gas equipment, materials and service activities
• Shares of existing companies in the stock market
• Upper Egypt
   
• Crude Oil projects proposed for investment in Egypt
• Natural Gas projects proposed for investment in Egypt
• Petrochemical projects proposed for investment in Egypt
• Mineral Resources proposed for investment in Egypt
   

• A booming petroleum sector
  The adoption of state-of-the-art technologies encouraged Egypt to explore all possible chances to sustain its credibility within all sectors of the hydrocarbon industry. Egyptian oil and gas experts enhanced the exploration of new deep water exploration and development adding up new reserves to the Egyptian oil and gas reserve, and resulting in a unique hydrocarbon reserves. In the western desert, new techniques and geological concepts have been introduced in the field giving rise to new opportunities for oil and gas reserves in Egypt. There has been an effective introduction of new technologies and theories in the natural gas sector and in addition to the presence of exploration acreage, instead of having one bid a year, the 3 organizations responsible for the oil and gas exploration (EGPC, EGAS and GANOPE) have 2-3 bid rounds every year, increasing the investment opportunities.
   
• Strategic location
  Due to Egypt’s geographical location, Egypt is located at cross roads with three continents (Africa, Asia and Europe) and thus transportation is facilitated between these continents. With proximity to important markets and having close ties with Europe, Egypt is a gateway of all East-West trade, making it a place for investment in both the upstream and downstream sectors. In addition to being on one of the vital marine traffic routes, Egypt controls the Sinai Peninsula, which is an area of great hope with regard to the petroleum industry.
   
• Expertise of the state energy company, EGPC
  Formed in 1962, the Egyptian General Petroleum Corporation (EGPC) became the major operator in the form of joint ventures with foreign companies. As the first economic corporation established in the petroleum industry in Egypt, EGPC has expertise with all sectors of the industry as it is active in the upstream, downstream and petrochemical sectors. It has full responsibility for all sectors of the Egyptian petroleum industry and holds the sole right to import and export crude oil and other petroleum products. As a controller of the industry, any foreign investments in Egypt are maintained through a joint venture with the EGPC and are supervised by the government.
   
• Facilitated legislation
  There have been new petroleum-related legislation introduced which makes Egypt an attractive investment destination. Since the 1990s, the Egyptian government started passing new laws with the aim of attracting local, regional and multi-national investments through reducing & simplifying the procedures & regulations that hinder investment. For more information on the Egyptian legal framework created by the government that facilitates and ensures for the investor the sustainability of their installations, visit our regulations section.
   
• Economic stability
  With the installation of the 2004 Egyptian parliament, the Government of Egypt began a new reform movement, following a stalled economic reform program begun in 1991, but moribund since the mid-1990s. In the past year, the cabinet economic team has simplified and reduced tariffs and taxes, improved the transparency of the national budget, revived stalled privatizations of public enterprises and implemented economic legislation designed to foster private sector-driven economic growth and improve Egypt’s competitiveness.
   
• Political stability
  Today, Egypt lives a new phase of political and democratic development aiming at more deepening of democratic practice, enhancing freedoms and laying down the state of law, institutions and respect of human rights. To bolster stability and moderation in the region, Egypt has provided military assistance and training to a number of African and Arab states. Egypt remains a strong military and strategic partner of the United States. Egypt is enjoying political stability amidst a high tensioned region.

   

A law substituting the law 230 of 1989:
Giving authority for an entity to be responsible for the investor incentives and guarantees. It allows total ownership of projects and assures the right to remit income earned in Egypt and to repatriate capital.

Law 8 of Investment:
Guarantees against deduction, sequestration and nationalization. It grants the following:

• The right to own land
• The right to maintain foreign currency bank accounts
• The freedom from administrative attachment
• The right to repatriate capital and profits
• Free hiring of Egyptian staff
• Absence of price control or restrictions
• Equal treatment regardless of nationality

Oil & gas concessions laws and regulations:

• Allows approval on any investment among 16 different fields, one of which is the oil and gas investments in Egypt.
• Oil and gas concessions are approved based on agreements set between the government of Egypt and the Egyptian General Petroleum Corporation (EGPC), and a foreign oil company, usually known as the contractor.
• A special law is specified for each concession agreement, where the contractor is responsible for all the exploration risks.
• The agreement between the contractor and the government specifies a certain period of time of 4 years for exploration.
• The time specified could be extended based on the contractor’s desire for maximum 2 years.
• This agreement automatically ends if no exploration has been achieved by the contractor, with 6 months extension enabling the contractor to complete drilling of a previously explored well during the permitted phase.
• The agreement specifies the number of wells to be explored at each phase. A certain amount of work is specified for each phase with the completion of exploring at least one well.

Oil & gas concessions financial regulations:

• Contractor provides all the necessary financing within the exploration stage in freely convertible currency.
• A minimum amount of spending is specified for the contractor to be spent during the allowed exploration period.
• If the contractor failed to spend the amount previously mentioned it should pay for the Egyptian General Petroleum Corporation (EGPC) the fall back amount of money.
• The money transactions are handled by a bank specified by EGPC for guarantee, which is reduced according to the amount of money spent by the contractor.
• The money spent by the contractor is recoverable in the case of a commercial discovery, the cost recovery crude oil.
• In case no money was spent the contractor cannot maintain any amounts of money spent by EGPC.

Other advantages granted to petroleum projects are:

• There are no restrictions on the nationality and the volume of the capital. Egyptian, Arab or foreign capitals can hold alone, or share with any percentage in the investments of the free zone projects.
• Projects may be wholly owned by foreigners.
• There are guarantees against nationalization and expropriation of projects.
• There is no limit on the volume of the capital, as the law gives the owners of the project the freedom to determine the volume of the capital in the light of the nature, size & the estimated production capacity of the project.
• There is freedom of choice with regard to the legal form of the project.
• There is freedom of transferring the profits & the invested money and re-exporting it.
• There is freedom in giving operations to others in order to utilize their excess capabilities.
• There is freedom of determining the prices of products as well as the percentage of profits.
• Foreign investors are given facilities in residence, and the foreign workers are given residence licenses upon the project request.
• There is no limit on the volume of the capital, as the law gives the owners of the project the freedom to determine the volume of the capital in the light of the nature, size & the estimated production capacity of the project.

Article is copied from www.egyptoil-gas.com