In a statement issued on 17 January 2024, Egypt's Cabinet approved a draft law authorising exploration and development in the Ras Qattara Development Area, a conventional oil field located in the Western Desert region of the Sahara.

According to the draft law, the State's Ministry of Petroleum and Mineral Resources will enter into a contract with the state-owned oil company, the Egyptian General Petroleum Corporation (EGPC), Apex International Energy and Croatian INA-Industrija Nafte D.D. for oil exploration and development in the designated area. In this article, we look at the legal and regulatory framework for licensing the conduct of petroleum operations in Egypt and the significance of new exploration and development rights being granted in the country's largest crude oil-producing area.

Legal framework for conducting petroleum activities in Egypt

The Egyptian Constitution regulates that all natural resources are owned and controlled by the state, represented by the Ministry of Petroleum and Mineral Resources. The rights to explore for and produce oil and gas in Egypt are granted pursuant to concession agreements. The enabling Egyptian petroleum legislation mandates that every concession must be instituted by a specific statute authorising the Ministry to enter into the concession agreement between the Arab Republic of Egypt, the Egyptian Natural Gas Holding Company (EGAS) and/or EGPC (both state-owned entities) and the international oil company contractor following successful bid rounds.

The concession agreement grants exclusive rights for the contractor to explore a specific concession area for an initial exploration period and establishes a schedule of minimum fiscal expenditure commitments. In the event of a commercial oil and/or gas discovery, the concession area capable of production is converted to a development lease, at which time a joint venture operating company is established to conduct the development operations.

Ras Qattara Development Area

Egypt is a mature oil and gas province and one of the largest producers in Africa. The Arab Republic is home to significant proven hydrocarbon reserves and is known globally for "super giant" gas fields like the offshore Zohr field, considered the largest discovery ever made in the Mediterranean Sea. In addition to the fiscal revenue generated from the development and production of hydrocarbons, Egypt assumes a critical role in international energy markets through the management of the Suez Canal, the 193km artificial waterway that connects the Red Sea to the Mediterranean Sea and the Suez Mediterranean Pipeline, a 42-inch pipeline that transports crude oil between the Gulf of Suez and the Mediterranean Sea.

While political unrest in Egypt in 2011 deterred investment and led to a fall in hydrocarbon production, the current Egyptian Government continues to promulgate new laws aimed at attracting international investment in the country's oil and gas sector, including most recently the draft law authorising exploration and development in the Ras Qattara Development Area. The Ras Qattara Development Area is situated in the Western Desert and is the country's largest crude oil producing area accounting for more than half of Egypt's total crude oil production. Over 65% of all drilling rigs in Egypt are located in the Western Desert Region which is speculated to host vast areas of undeveloped hydrocarbon reserves, making it a highly attractive region for international oil companies. This, combined with the country's strategic location and well developed infrastructure facilities supporting import and export of oil and gas, positions Egypt as an important energy transit and trading hub for its critical role in the global transportation of crude oil and natural gas connecting energy trading markets in Europe, Asia and Africa.

At Brodies Middle East LLP, our Abu Dhabi based partner led team are subject matter expert advisers on exploration and development of oil and gas projects in the Middle East and North Africa countries adopting the concession based licensing regime, having served in senior strategic roles for super-major oil and natural gas operators in countries like the United Arab Emirates, Egypt, Angola, Libya, Sierra Leone, Qatar, Kuwait and Iraq.

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Lucas Owhonda

Associate, Brodies LLP

Marc Penman

Senior Solicitor, Brodies LLP