oil and gas in in Egypt – Egypt is considered a significant oil and gas producer in North Africa. The Egyptian Ministry of Petroleum is the governmental authority responsible for the regulation and development of the oil and gas industry in Egypt. The Egyptian Ministry of Petroleum acts through two major entities in the oil and gas fields. The first is the Egyptian General Petroleum Corporation (EGPC) which is a public entity regulating the petroleum industry in Egypt.
The second is the Egyptian Natural Gas Holding Company (EGAS), which is a private entity owned by the EGPC responsible for regulating the gas industry in Egypt. The EGPC and EGAS focus on oil and gas activities, adapting an effective action plan to organize and manage the activities of oil and gas resources in Egypt. The EGPC and EGAS are engaged in a wide range of activities, including upstream (exploration and exploitation (drilling and production of oil and gas)) and downstream (processing, transmission, distribution of oil and gas in the domestic market and marketing thereof).
Under the Egyptian Constitution, all oil and gas resources are under the control of the state. Accordingly, only the state can grant rights for exploration and exploitation of oil and gas resources for interested investors. Rights of exploration and exploitation of the oil and gas resources are granted under the form of a concession agreement. The concession agreement is issued by virtue of a law. The law issuing the concession agreement authorizes the Minister of Petroleum to enter into the concession agreement between Egypt, the EGAS or EGPC (as the case may be) from one side, and the contractor company willing to undertake the exploration and the exploitation activities from the other side. All concession agreements are published in the Egyptian Official Gazette and follow a standard format, with slight deviation in each agreement.
In addition to the relevant concession agreement, oil and gas exploitation operations are governed by the fuel material Law No. 66 of 1953 (the Fuel Materials Law). In the absence of any legal rule under the relevant concession agreement, the exploration and exploitation operations will be subject to the rules of the Fuel Materials Law, its executive regulations, and related ministerial decrees, where applicable.
The Egyptian Ministry of Petroleum is the governmental authority responsible for the regulation and development of the oil and gas industry in Egypt. The Egyptian Ministry of Petroleum acts through the EGPC and EGAS.
And to support investments, Egypt has signed numerous landmark investment agreements. For example, Egypt is a party to the agreement to establish the Arab Company for Petroleum Investments and the agreement on the loan and guarantee to the natural gas investments between Egypt and International Bank for Reconstruction and Development (IBRD). In addition, Egypt has signed bilateral investment agreements with different states like Canada, Japan, South Korea, China, Italy, Sweden, Greece, Holland, Switzerland, France, the United Kingdom, Spain, and others.
The right to explore and exploit oil and gas is awarded by the government under the form of a concession agreement between the successful bidding contractor company (the contractor), the Egyptian state represented by the Ministry of Petroleum and EGAS/EGPC as the case may be. In this regard, the contractors must fulfil some financial and technical requirements to be granted the concession. The contractor does not need to be an Egyptian entity. Also, the EGAS or EGPC usually announces a bid round to all the companies interested in exercising the exploration and exploitation activities in the Egyptian territory.
Moreover, under the model concession agreement, the contractor is under an obligation to have an office in Egypt to or from which notices related to the concession should be made. In practice, foreign oil and gas companies establish a branch to operate its business or concessions in Egypt through the branch. Although establishing a branch is a straightforward process, it usually takes some time to be completed. A typical registration of a branch usually takes around six months from the date all the required documents are presented to the relevant regulator.
In general, the branch established for foreign entities in Egypt, other than branches of foreign entities operating in the oil and gas sector, may not employ foreign nationals in excess of 10% of its workforce (excluding foreign nationals employed as managers) or pay them more than 20% of the total payroll. However, there is a different regime for employment under the model concession agreement, which is applicable to branches of foreign companies operating in the oil and gas sector. This regime differs according to the required activities under the concession agreement, as follows:
25% of the total aggregate number of employees and contractors employed in the operations during the exploration phase (for example, drilling, deepening, engineering, construction and installation) shall be Egyptian nationals; provided, however, that the EGPC is entitled to second to the contractor (i.e., to temporarily transfer an official or worker to another position or employment)up to 15 per cent of its employees according to the contractor’s requirements.
75% of the total aggregate number of employees and contractors employed in the operations during the exploitation phase shall be Egyptian nationals; provided, however, that the EGPC is entitled to second to the contractor 15 % of the total aggregate number of employees and contractors employed in the operations during the production activities according to the contractor’s requirements.
Egypt has been successful in attracting foreign investment and arranging partnerships with major international oil and gas companies. The success of these partnerships has been due to the continuous support of the government and has been enhanced by many reasons that make Egypt’s energy industry a desirable location for investment. These include a developed petroleum sector, a strategic location and supportive legislation.
At ALZAYAT Law Firm we can help you in case you ever wanted to invest in Egypt at the Oil and Gas Sector. We shall advice you through the proceedings from the bid, the concession agreement negotiations, and the branch incorporation in Egypt requirements such as employing nationals or foreigners.
our specialist oil and gas lawyers have extensive experience in dealing with disputes of this nature and are ranked in The Legal 500 , hg.org and Global Law Expert as best experts in this field.
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