Oil and Natural Gas Sector in Egypt

Throughout history, Egypt has had significant energy resources, both in traditional fossil fuels and in renewable energy, due to the abundance of underutilized land and year round sunshine within the country.

Exemplifying this is Egypt’s proven hydrocarbon reserves which stood at 3.3 billion barrels of oil and 62.8 trillion cubic feet of natural gas by the end of 2017. Aware of the potential which lies within this sector, the Egyptian government encourages international oil companies to participate in the oil and gas sector, and as a result of their implementations more than fifty international oil companies are currently operational in Egypt.

The existence of the Suez Canal which was recently reopened, along with the Suez-Mediterranean (SUMED) pipeline, has solidified Egypt’s position as a player within the international energy markets . The Suez Canal in particular is a strong asset for the sector as it provides an important transit route for oil and liquefied natural gas (LNG) shipments traveling southbound from North Africa, and along the Mediterranean Sea to Asia. Additionally, fees collected from the operation of these two transit points generate significant revenue for the Egyptian government.

Oil and gas is also a substantial sub-sector of the Egyptian economy, with hydrocarbon production alone constituting the largest single industrial activity, representing approximately 16% of Egypt’s total GDP. Additionally, the petrochemical sector represents about 12% of industrial production and generates revenues totaling USD 7 billion yearly, equivalent to nearly 3% of the total GDP.

Within the region of Africa, Egypt has the largest refinery capacity producing a minimum of 840,000 barrels per day. To aid in the development of the sector, the government plans to invest an additional USD 14.5 million into the development of petrochemical production over the next five years, focusing primarily on updating existing refineries, and encouraging new private-sector refineries to enter the market.

Essential to the development plan of any sector are laws and regulations which facilitate international, regional and domestic investments. Since the 1990’s the Egyptian government has focused on enacting such laws, whilst simultaneously addressing the regulations and procedures that hindered
production and facilitated investment resolutions.


1 | Strategic location

Geographically, Egypt is ideal for people from all corners of the world, and travel is facilitated through direct flights from Europe, Africa and the Middle East. A number of ‘Passage Projects’ have created various naval passages which connect European countries with Egyptian cities such as Alexandria and Port Said. Additional ports are found along the Red Sea (Ras Shukhair, Al Adabia and El Sokhna Ports), two of which, (El Sokhna and Eastern Tafreea) constitute two of the five naval axes which link the European Union to its neighbors.

The accessibility of the country has also allowed it to retain a larger share of international petroleum products and to be a key player within natural gas trade. This is particularly important when we consider neighboring countries in the Gulf, West Africa and the Caspian Sea, all of which are primary crude oil and natural gas production areas.

2 | Mature Petroleum Industry

The petroleum industry in Egypt is considered one of the oldest in the world, starting with the dawn of the twentieth century. Today, the sector has matured, employing a multitude of technical experts in searching, exploration and production as well as transporting and refining activities.

3 | Supporting Infrastructure

Over the last few decades the Egyptian government has invested tens of billions of pounds in constructing national pipe grids to transport crude oil, natural gas and petroleum products to and from the seven refinery labs which are present within the country. As the sector grows, the government will continue injecting money to create additional supporting infrastructure which will keep Egypt at the forefront of these developments.

4 | Governmental Support

The government of Egypt has focused a considerable amount of effort into the development of the oil and natural gas sector, by primarily restructuring its governing system’s. This has included amending the entire body of legal provisions regulating the oil and gas sector to preserve Egypt’s mineral wealth and to encourage additional direct foreign investment.

To keep up with urgent local demand, the government has also put in place a plan of action which includes:
– Development of Egyptian refineries that lack technology.
– Increasing petroleum product trade.
– Restructuring the financial support system for petroleum products to take into account energy prices.
– Allowing private sector companies to import natural gas to meet current local demand.
– Ensuring the delivery of natural gas to residential areas as well as industrial establishments.
– Increasing the number of distribution and supply stations within the country.

Rights Granted

Private companies are capable of exploring and exploiting oil and gas through concession agreements with the government.

Generally speaking, the government requires contractors to acquire a certain amount of any oil or gas discovered in accordance with a production sharing scheme. The contractor can then sell and export his share

according to the price valuation set out under the concession agreement. These agreements include specific provisions to encourage foreign investors to enter into a bidding process announced by the Minister of Petroleum.

Concession Agreements


The Egyptian General Petroleum Authority (EGPA) is responsible for the governance of the conditions pertaining to the exploration and exploitation of oil and gas set out under Law No. 66 of 1953 and Law No. 86 of 1956 (Law No. 167 of 1958)

A concession agreement is the only mechanism and document that grants the contractor the right to carry out oil and gas exploitation activities.

The term of these agreements must then be approved by Parliament, signed by the Egyptian Minister of Petroleum and the contractor. In general, the terms for exploration range from seven to nine years, and are divided into three terms – the initial term and two extensions. However, if there is a commercial oil and gas discovery, the agreement may be granted for 25 years to be extended to 35 years.

The contractor’s rights can then be assigned by a deed of assignment to a third party in accordance with the terms of the concession agreement, after the approval of the Government.

Granting of Licenses

Oil and gas concession agreements are awarded to contractors through a bidding process. Generally, the Egyptian General Petroleum Company (EGPC) and the Egyptian Natural Gas Holding Company (EGAS) announce specific tenders to solicit the best and most appropriate contractor.

The tender documents are usually offered in accordance with the provisions of the Egyptian Tender and Bids Law No. 89 of 1998 and its executive regulations.


Generally, the contractor’s financial liabilities are determined by virtue of the provisions of the concession agreement, and there are no set fees associated with acquiring the right to practice exploration and exploitation activities.


The contractor is considered a party to the concession agreement, meaning that he is bound by certain contractual liabilities under terms of the concession agreement.
These rights and obligations can only be altered or amended through written approval from both parties


Profits attained as a result of the exploration and/or exploitation activities will be subject to a 40.55% tax as per Egyptian Income Tax Law No. 91 of 2005.
Additionally, contractors who work under a concession agreement will be subject to Egyptian income tax law and must comply with the requirements to file returns, assess tax, keep and show books and records on the stipulated dates.
The Egyptian General Petroleum Company (EGPC) pays income tax on behalf of the contractor out of EGPC’s share of the petroleum saved under the terms of the concession agreement.

Ongoing Projects 

1 | Zohr Natural Gas Field

In August 2015, one of the world’s largest natural gas discoveries was made in Egypt’s Mediterranean Sea, namely, the Zohr Field. The field was found by Italian company Eni, however minority stakes in the Shorouk concession where the field is located have been sold to BP (30%) and
Rosneft (10%).

Zohr has the potential to produce 850 billion cubic meters of gas, and could therefore double Egypt’s natural gas production in the near future. More specifically, experts have stated that the discovery of this well will potentially allow Egypt to be self-sufficient for natural gas by 2019.

As it stands, over 80% of the development is completed, and the field is set to start producing in December of this year. It is expected that imports will decrease significantly once production commences.

2 | Mediterranean Sea Gas Projects

Egypt’s Ministry of Petroleum has recently announced the commencement of new natural gas projects near the Mediterranean Sea, which are due to double the production of natural gas by 2020. The first stage will increase natural gas production by 50 percent by the end of 2018, and eventually 100 percent in 2020. These new projects will account for approximately $8.3 billion of investment within the sector.

It is believed that these projects, coupled with the rapid developments of the Zohr field will make Egypt a hotspot for trading oil and gas by 2021..

3 | Western Desert Exploration Projects

Minister of Petroleum and Mineral Resources signed three new agreements for oil and gas exploration in the Western Desert of Egypt worth approximately $79 million.

The first and second agreements were signed with American company Apache, enabling them to explore within the concession areas of the Western Desert with using $73 million of investments, while the third agreement with Merlon Company was made to enable exploration within the Fayoum region, with approximately $6 million of investments.

These developments are part of much larger expansion plan wherein 79 new agreements for oil and gas exploration were signed, with predicted investment amounts reaching a minimum of $15.3 billion.