By using this site, you agree to the Privacy Policy and Terms of Use.
Accept
DailynewsegyptDailynewsegypt
  • Home
  • Business
    BusinessShow More
    HDB targets 25% growth in profits, various activities by 2023-end: CEO
    HDB targets 25% growth in profits, various activities by 2023-end: CEO
    June 4, 2023
    Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
    Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
    June 4, 2023
    146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
    146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
    June 4, 2023
    Al Ahly Pharos tops brokerage ranking in May
    Al Ahly Pharos tops brokerage ranking in May
    June 4, 2023
    Beltone Leasing signs EGP 500m sale-and-leaseback agreement With Hassan Allam Properties
    Beltone Leasing signs EGP 500m sale-and-leaseback agreement With Hassan Allam Properties
    June 4, 2023
  • Politics
    PoliticsShow More
    Iranian, Saudi FMs meet on bilateral ties
    Iranian, Saudi FMs meet on bilateral ties
    June 4, 2023
    Egypt’s PM inspects service, development projects in Alexandria
    Egypt’s PM inspects service, development projects in Alexandria
    June 4, 2023
    FM Shoukry attends inauguration ceremony of Turkish President
    FM Shoukry attends inauguration ceremony of Turkish President
    June 3, 2023
    1 Egyptian security personnel, 3 Israeli soldiers were killed in border shooting
    1 Egyptian security personnel, 3 Israeli soldiers were killed in border shooting 
    June 3, 2023
    India train crash kills at least 207, injures hundreds 
    India train crash kills at least 207, injures hundreds 
    June 3, 2023
  • Interviews
    InterviewsShow More
    EFG Finance to launch unified platform gathering all its financing services: Alaa Al-Afifi
    EFG Finance to launch unified platform gathering all its financing services: Alaa Al-Afifi
    May 31, 2023
    I changed my artistic path to create ‘state of wonder’: Tarek Lotfi
    I changed my artistic path to create ‘state of wonder’: Tarek Lotfi
    May 25, 2023
    I adore Ramadan drama, ‘Telt Al-Talata’ series achieved great success: Ghada Abdel Razek
    I adore Ramadan drama, ‘Telt Al-Talata’ series achieved great success: Ghada Abdel Razek
    May 8, 2023
    We aim to establish Egypt as nearshore centre for Software AG for MET region: Rami Kichli
    We aim to establish Egypt as nearshore centre for Software AG for MET region: Rami Kichli
    April 29, 2023
    Egypt-Spain relations witness remarkable development in recent years: Spanish ambassador in Cairo
    Egypt-Spain relations witness remarkable development in recent years: Spanish ambassador in Cairo
    April 18, 2023
  • Culture
  • Opinion
  • Sports
  • Lifestyle
Reading: Petroleum giants level criticism at current contractual agreements model
Share
Notification
Latest News
HDB targets 25% growth in profits, various activities by 2023-end: CEO
HDB targets 25% growth in profits, various activities by 2023-end: CEO
Banking
Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
Banking
146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
Banking
Al Ahly Pharos tops brokerage ranking in May
Al Ahly Pharos tops brokerage ranking in May
Business
Beltone Leasing signs EGP 500m sale-and-leaseback agreement With Hassan Allam Properties
Beltone Leasing signs EGP 500m sale-and-leaseback agreement With Hassan Allam Properties
Business
Aa
Aa
DailynewsegyptDailynewsegypt
  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle
  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle
Have an existing account? Sign In
Follow US
  • Advertise
© 2023 DNE News. All Rights Reserved.
Dailynewsegypt > Blog > Business > Petroleum giants level criticism at current contractual agreements model
Business

Petroleum giants level criticism at current contractual agreements model

Mohamed El-Bahrawi
Last updated: 2013/01/16 at 9:29 PM
By Mohamed El-Bahrawi 5 Min Read
Share
SHARE

The Egyptian petroleum industry’s top players convened yesterday to deliberate the pros and cons of the current model of contractual agreements inked between government and investors, which regulate exploration and development operations within the country’s oil and gas industry.

Organised by Egypt Oil and Gas newspaper and moderated by former minister of petroleum Abdallah Ghorab the roundtable discussion amassed CEOs and senior executives of giant petroleum operators such as Royal Dutch Shell, British Petroleum, Total E&P, Sea Dragon Inc., Vegas Oil and Gas, Transglobe Energy. Present from the government’s side were the undersecretaries for agreements at the Ministry of Petroleum, the Egyptian General Petroleum Corporation (EGPC), the Egyptian Natural Gas Holding Company (EGAS), and Ganoub El Wadi Petroleum Holding Company (GANOPE).

The agreement model in question, implemented by the government in the majority of deals, the Production Sharing Contract (PSC), has recently come under strong criticism by industry players for its structural inefficiencies and the thick bureaucracy attached to its implementation.

In simple terms, the PSC model entitles the investor to a percentage of the hydrocarbon production to cover the cost exploration (cost recovery), which the investor initially assumes and is only eligible for if a discovery made, then the remainder of the production and profit is shared between the government and the investor.

While its true that the Egyptian petroleum industry has endured the past two years of consistent political turmoil better than most industries in Egypt, and has been somewhat successful in sidestepping many of the economic impediments brought about by the lack of stability and security, it is by no means impervious to the structural disarray and the flimsiness of the current government.

The discussion’s shared sentiment was that despite Egypt’s copious hydrocarbon resources, the era of “easy” exploration and production is at its culmination. Meaning that the extraction and and development of these massive resources, which are situated at great depths, high pressures and high temperatures, necessitates significantly larger investments and the assumption of higher risks by investors, a step they’re currently reluctant to take for several reasons, most prominently is the rigidity of the PSC model.

Production from Egypt’s known basins using the conventional methods can only go so far, a “recovery factor of about 1/3” according to Ghorab. The remainder requires the aid of more sophisticated techniques known as Enhanced Oil Recovery, which increase the mobility of crude in the well to facilitate its extraction. Such techniques present higher risks and require larger investments, which are not economically viable under the PSC model due to slow turnaround of cost recovery, a curbing limitation that tends to repel investors.

Egypt’s untapped resources lay at higher depths, onshore as well as in the Mediterranean, horizons that also require massive investments and the utilisation of cutting-edge technologies. The process of exploration requires the government’s approval for each dollar spent by the investor, since the government is required to settle in case of discovery, which restrains investors when it comes to the use of costly technology. That, coupled with the painfully slow cost recovery process, means the PSC has become an obstacle to the development of Egypt’s potential virgin resources.

“Proposing regulations in challenging fields is problematic,” stated Schlumberger’s vice president and general manager, Amr El Essawi. The PSC has countless limitations and “one size doesn’t fit all” added El Essawi.

Former head of Dana Gas Egypt, Hani El Sharkawi, stressed the importance of “putting together a formal committee made up of investors and government officials to look after agreements.“

Government representatives listened openly to the criticism levelled by investors, yet maintained that the PSC is still viable and that some clauses could be amended to suit the needs of investors.

Investors also spoke of honouring the agreements and meeting payment deadlines in order to restore confidence investor.

“Egypt needs a comprehensive energy master plan, and incentives has to be made to encourage venturing into riskier projects,” said Chairman of Shell Egypt, Jeroen Regtien.

Ghorab stressed the need to increase public awareness and engage in an open dialogue with the forthcoming parliament to introduce the problems clearly, maintaining that clarity is essential for guaranteeing a smoother process.

You Might Also Like

HDB targets 25% growth in profits, various activities by 2023-end: CEO

Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank

146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023

Al Ahly Pharos tops brokerage ranking in May

Beltone Leasing signs EGP 500m sale-and-leaseback agreement With Hassan Allam Properties

TAGGED: Business, Daily News Egypt, DNE, Egypt
Share this Article
Facebook Twitter Email Print
Previous Article The Future of Al-Wasat Party
Next Article Shura Council forms committee to investigate train crash
Leave a comment

Leave a Reply Cancel reply

Your email address will not be published. Required fields are marked *

Ad image
Ad image

Stay Connected

Facebook Like
Twitter Follow
Instagram Follow
Youtube Subscribe

Latest News

HDB targets 25% growth in profits, various activities by 2023-end: CEO
HDB targets 25% growth in profits, various activities by 2023-end: CEO
Banking
Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
Bank ABC Egypt sees 158% profit growth in 1Q 2023, after merging with BLOM Bank
Banking
146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
146% growth in net profit of Attijariwafa bank Egypt reaching EGP 434.5m in 1Q 2023
Banking
Al Ahly Pharos tops brokerage ranking in May
Al Ahly Pharos tops brokerage ranking in May
Business
//
Egypt’s only independent daily newspaper in English. Discuss the country’s latest with the paper’s reporters, editors, and other readers.

Quick Link

  • Home
  • Business
  • Politics
  • Interviews
  • Culture
  • Opinion
  • Sports
  • Lifestyle

Sign Up for Our Newsletter

Subscribe to our newsletter to get our newest articles instantly!

© 2023 DNE News. All Rights Reserved.

Join Us!

Subscribe to our newsletter and never miss our latest news, podcasts etc..

Zero spam, Unsubscribe at any time.

Removed from reading list

Undo
Welcome Back!

Sign in to your account

Lost your password?