Starting from the year 2000 Egypt has gone into a series of reforms
related to it is economy and foreign strategy. These reforms are aimed
at giving opportunities for foreign investors to enter the Egyptian
market. Due to the importance of the petroleum sector for the Egyptian
economy, a number of reforms were made to ensure its efficiency.
Reforms in the sector include implementation of new laws, a reduction
in price controls and an opening of the distribution sector to private
investment. Among the laws and regulations related to the petroleum
sector in Egypt are:
A law substituting the law 230 of 1989:
Giving
authority for an entity to be responsible for the investor incentives
and guarantees. It allows total ownership of projects and assures the
right to remit income earned in Egypt and to repatriate capital.
Law 8 of Investment:
Guarantees against deduction, sequestration and nationalization. It grants the following:
The right to own land
The right to maintain foreign currency bank accounts
The freedom from administrative attachment
The right to repatriate capital and profits
Free hiring of Egyptian staff
Absence of price control or restrictions
Equal treatment regardless of nationality
Oil & gas concessions laws and regulations:
Allows approval on any investment among 16 different fields, one of which is the oil and gas investments in Egypt.
Oil
and gas concessions are approved based on agreements set between the
government of Egypt and the Egyptian General Petroleum Corporation
(EGPC), and a foreign oil company, usually known as the contractor.
A special law is specified for each concession agreement, where the contractor is responsible for all the exploration risks.
The agreement between the contractor and the government specifies a certain period of time of 4 years for exploration.
The time specified could be extended based on the contractor's desire for maximum 2 years.
This
agreement automatically ends if no exploration has been achieved by the
contractor, with 6 months extension enabling the contractor to complete
drilling of a previously explored well during the permitted phase.
The
agreement specifies the number of wells to be explored at each phase. A
certain amount of work is specified for each phase with the completion
of exploring at least one well.
Oil & gas concessions financial regulations:
Contractor provides all the necessary financing within the exploration stage in freely convertible currency.
A minimum amount of spending is specified for the contractor to be spent during the allowed exploration period.
If
the contractor failed to spend the amount previously mentioned it
should pay for the Egyptian General Petroleum Corporation (EGPC) the
fall back amount of money.
The
money transactions are handled by a bank specified by EGPC for
guarantee, which is reduced according to the amount of money spent by
the contractor.
The money spent by the contractor is recoverable in the case of a commercial discovery, the cost recovery crude oil.
In case no money was spent the contractor cannot maintain any amounts of money spent by EGPC.
Other advantages granted to petroleum projects are:
There
are no restrictions on the nationality and the volume of the capital.
Egyptian, Arab or foreign capitals can hold alone, or share with any
percentage in the investments of the free zone projects.
Projects may be wholly owned by foreigners.
There are guarantees against nationalization and expropriation of projects.
There
is no limit on the volume of the capital, as the law gives the owners
of the project the freedom to determine the volume of the capital in
the light of the nature, size & the estimated production capacity
of the project.
There is freedom of choice with regard to the legal form of the project.
There is freedom of transferring the profits & the invested money and re-exporting it.
There is freedom in giving operations to others in order to utilize their excess capabilities.
There is freedom of determining the prices of products as well as the percentage of profits.
Foreign
investors are given facilities in residence, and the foreign workers
are given residence licenses upon the project request.
There
is no limit on the volume of the capital, as the law gives the owners
of the project the freedom to determine the volume of the capital in
the light of the nature, size & the estimated production capacity
of the project.
