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Egyptian Oil and Gas Concessions   

Oil and gas concessions are granted in accordance with Egyptian Law No. 66 for 1953 concerning mines and quarries as amended by Law No. 86 for 1959 and its Executive Regulations. A law is promulgated by the People Assembly allowing the concerned Minister to conclude the required Concession Agreement for the exploration and exploitation of oil and gas between the Arab Republic of Egypt on one side and the Egyptian General Petroleum Corporation (EGPC) and the foreign Company (i.e. the Contractor) on the other side, in a specific area and according to the conditions that are attached to this Law, and the rules and procedures that are contained in those conditions that have the force of Law and prevail over other Egyptian Legislation including the above mentioned Law No. 66 for 1953 as amended.  Usually the Concession Agreement contains the definitions, the grant of rights, the government’s royalty during the development period, the initial exploration period and its extension, and the applicable rules in case of a commercial discovery. The general rule is that the Contractor is subject to the Egyptian income tax laws, and that the Contractor’s income is calculated in accordance to the rules contained in the Concession Agreement. Moreover, EGPC and the Contractor may form a private sector operating company in Egypt following the commercial discovery and this operating company is subject to the Laws and Regulations in force in Egypt to the extent that such Laws and Regulations are not inconsistent with the provisions of the Concession Agreement or the charter of the operating company. The Concession Agreement also provides for the rules concerning the Contractor’s recovery of his costs and expenses in respect of all exploration, development and related operations under the Concession Agreement, and the production sharing and valuation. The Concession Agreement also mentions the various bonuses that the Contractor has to pay to EGPC, the customs exemptions, the privileges of the governments representatives in relation to the supervision of the correct execution of the Concession Agreement, and in addition it contains a stabilization clause to protect the Contactor in case of changes in existing Legislation or Regulations which take place after the execution of the Concession Agreement and which significantly affect the economic interests of this Agreement to the detriment of the Contractor. The Concession Agreement provides for the right of the Egyptian Government to requisition all or part of the production in cases of national emergencies, and the applicable procedures and rules in such cases, as well as in cases of breach of the Concession Agreement. Finally, the Concession Agreement states that any dispute, controversy or claim arising out of or relating to the agreement or the breach, termination or invalidity thereof, between the Government and the parties shall be referred to the jurisdiction of the appropriate Egyptian Courts, and shall be finally settled by such Courts, and that any dispute, controversy or claim arising out of or relating to the Concession Agreement, or breach, termination or invalidity thereof between EGPC and the Contractor shall be settled by arbitration, and in this case Egyptian Law shall apply to the dispute except that in the event of any conflict between Egyptian Laws and the Concession Agreement the provisions of the Concession Agreement shall prevail.

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