New form of gas exploration agreements in Red Sea: Petroleum Ministry

Mohamed Adel
3 Min Read

The Ministry of Petroleum has finalised the form of the new petroleum agreements, to be included in the first tender for natural gas exploration in the Red Sea.

The tender is scheduled to be launched at the end of 2018.

The new agreement form includes incentive clauses for the foreign investor, most notably the increase of the partner’s share in production, to recover financial expenses in less time.

A source in the oil and gas sector told Daily News Egypt that the new agreements would include increasing the partner’s share, and reduce the expense recovery period to encourage foreign companies to increase investments in Egypt’s oil and gas sector.

He explained further, that the exploration agreements will also include the abolition of mandatory abandonment of part of the concession area every two years.

The source pointed out that instead of forcing the investor to abandon parts of the exploration concession area every two years, the new agreements will allow them to submit an exploration plan for this part, and they will be given a new period to implement the plan.

He added that seismic studies carried out in the Red Sea area pointed out to the possibility of natural gas presence, in large quantities.

Furthermore, the source said that the amendments were praised by foreign partners. Moreover, some incentives have been added, such as a share in the production surplus, and setting the gas price after the commercial discovery, according to the size of the investments required for development, with the possibility of reviewing this price periodically.

Egypt pays $2.65 to foreign partners for every million BTU, in most of its agreements, except for some areas of deep water in the Mediterranean.

The source added that gas pricing should be suitable to achieve a return on investment rate consistent with the size of the risks in the oil and gas exploration.

Egypt aims to increase the total natural gas output to about 6.75bn cubic feet per day by the end of this year, compared with the current 6.2bn cubic feet of gas.

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