London: The fiscal and regulatory terms governing Egypt’s oil and gas industry may require amending after decades of stability, following new discoveries of gas prospects in the country’s deepwater areas; however, numerous challenges may well outweigh the need for more incentives to boost exploration and production in the region, says a new report from research and consulting firm GlobalData.
The company’s latest report states that despite years of rigid Egyptian fiscal terms, a brief signal of flexibility came from an amendment signed by BP and RWE in 2010 for their North Alexandria and West Nile Delta concessions. Since then, however, recent bidding rounds have retained the Production-Sharing Agreement (PSA) framework.
Now, following recent discoveries in the previously unexplored areas of the offshore Nile Delta and Egypt’s wider Mediterranean waters, new investment incentives may be necessary to improve the attractiveness of exploration and production activity in the country.
Rabie Khellafi, GlobalData’s Lead Analyst covering Upstream Oil & Gas in the Middle East and North Africa (MENA) region, said: “Many of the fields boast considerable size and come with significant costs, and with domestic gas prices being low compared to world and even regional averages, along with increasing domestic consumption and the decreasing exports share of the total production, profitability for license holders is significantly reduced.
“However, the decision to remove the production-sharing mechanism from the concession agreements in 2010 illustrates that improvements to Egypt’s fiscal terms could also make discoveries in this area commercially viable.” [14/11/13]