What is unknown about the discovery of the “Zohr” gas field

The huge announcement of the discovery of the new Egyptian gas field, which was called “Zohr” in 2015, in cooperation with one of the largest international oil and gas companies, the Italian “Eni Company”, as a lifeline for the Egyptian oil and gas sector on the one hand. And a declaration to get out of the dangerous bottleneck in the industrial and electricity sectors, which depend increasingly on natural gas.

According to what has been published in the Egyptian newspapers and media affiliated with the regime and the government over the past two years, the most recent of which was Al-Ahram newspaper on 2/2/2018, the most important information and data published about this gas field are as follows: 1- The discovered field is 190 km northeast of Port Said. .

2- The proven reserves of the discovered gas are 30 trillion cubic feet of gas.

3- The investments made by the “Italian Eni” company and its contracting companies are about $8 billion until the end of 2017, and will reach $16 billion during the next three years, that is, until 2019.

4- Egyptian government sources say that the field will achieve a saving of $2.0 million/day from the gas import bill, equivalent to $600 million on average annually.

4- The field's production in December 2017 is 350 million cubic feet per day, and it continues until June 2018, then increases after that to one billion cubic feet per day during the following year (June 2018 until June 2019), and then increases to reach 2.7 billion cubic feet per day.

5- If we estimate the price of selling one million thermal units on average from this field at about 5.5 dollars, then we are in the process of revenues estimated at about 165 billion dollars over the life of the field, which reaches approximately 30 years, i.e. with an annual average of 5.5 billion dollars, and 176.4 billion dollars In the case of selling the produced gas at $5.88 per million BTUs, or $210 billion in the event of selling one million BTUs at $7 in the international market.

However, there are many thorny and sensitive issues that have not been presented to the Egyptian public opinion, as well as to economic experts from outside government work. However, understanding and dealing with them should begin with one understanding how to build oil and gas contracts, whether in the world or in Egypt. ?

The oil and gas contracts with foreign companies are based, according to the production-sharing system that is often used in Egypt, on several basic elements. A large part of the national interest, and depriving the public treasury of due resources, and among the most important pillars and essential elements in the contracts signed with foreign partners are the following elements:

In the midst of these new Egyptian economic, political and cultural conditions that passed through Egypt - state and people - regular mechanisms for contracting and relations arose between the leaders of the Egyptian oil and gas sector, and the major companies in the international market. For example, foreign companies continued to pressure the leaders of the Ministry of Petroleum and the Petroleum Authority. A new amendment was made to the agreements since 1987 and 1988, and according to these amendments, in the event of the emergence of natural gas, foreign companies recover the costs of research and exploration within the limits of 40%, in addition to 25% of their share of the extracted gas, and thus the foreign company gets more than 65% Of the discovered Egyptian gas, and only about 35% of this gas remains for Egypt. Since that date, Egypt has become committed to buying 75% of the foreign partner’s share of the gas, which relieves the foreign partner of the burdens of liquefying and exporting gas. These amendments also gave the foreign partner the right Reserving the gas for a period of seven years to search for a way to market it or export it abroad without a commitment to preserving a national reserve for Egypt (29).

Among the means and methods that may harm the Egyptian side is what is happening in the method of calculating the revenues of foreign oil and gas companies. There are two methods for calculating these revenues:

First: those that use the so-called Posted Price for a barrel of crude oil or natural gas, on which taxes due to the Egyptian state are calculated.

And the second: which uses the so-called Realized Price for a barrel of crude oil or gas and is often provided by foreign companies to the companies' shareholders and financiers.

The first method is usually used in Egypt with foreign companies under the slogan of attracting investments and not (disappearing investors), which always leads to wasting part of the resources that were supposed to enter the public treasury. All experts working in this field know perfectly well that foreign companies often manipulate declared prices, which consists of two parts,the first: the base posting priceand the second: the variable price, which represents a premium Temporary, granted on the price. During the Gaddafi era and some Latin American countries, Libya succeeded in adding this premium to the declared price and called it the inflation premium, shipping premium, or others.

As for the market prices, they are the real prices that - unfortunately - are not dealt with on the basis of them in Egypt to calculate the revenues of foreign companies on the one hand, and therefore to calculate the taxes due on them to the Egyptian state.

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A reading of the change in oil contracts and gasEgyptian contracts with foreign partners

If we deal with the texts of some oil contracts signed by the Egyptian government with foreign companies, we can distinguish between three different stages:

First: decades before 1975.

Second: contracts for the period from 1976 to 2000.

The third: Contracts for the period in which Sameh Fahmy assumed responsibility for the Ministry of Petroleum and continued after his dismissal (2000-2015)

Due to the difficulty of presenting all the contracts concluded during the aforementioned periods, especially in the period from 1976 to 2010, whose number exceeded 471 agreements and contracts, and the entry of the Egyptian private sector into the exploitation of Egyptian petroleum and gas resources beginning in 1992, in 1994 the Signing the first agreement to encourage the investments of the Egyptian private sector to explore for oil and gas in Egypt, so our offer will be limited to a model contract in each of those contracts:

Let us consider the development - or the deterioration - that occurred in the drafting of Egyptian contracts with foreign partners during this period, and the interests that lie behind them, and the consequent waste of Egyptian financial resources and natural wealth.

2- Royalty: In the first agreement (155 of 1963), the royalty rate was 15% of the daily production quantity (M21), paid on the basis of the weighted price for exporting crude oil during the period for which the royalty is due, as the contract stipulated that the Egyptian government’s royalty include all Hydrocarbon material - other than crude oil - based on the market value at the well head or other facilities, but in the amendment that took place in 2003, the royalty rate was reduced to 10% only, and this percentage also applies to the renewal period, and the text was also dropped on all the aforementioned hydrocarbon materials. In the sixties, the market value was not taken into account, but rather they were taken under the pressure of foreign companies and their representatives (such as Mr. Tariq Hajji) at the announced price, which is less than the market value (the market value means the weighted average price obtained from buyers other than subsidiaries minus the costs and expenses incurred In the treatment of this article, and this differs from the declared price adopted by Egyptian contracts since the mid-eighties and nineties).

3- Abandoning Relinquishments: According to the 1963 agreement, it stipulates that in the event of the expiration of the third year from the date of entry into force of the agreement, or before its expiry, the contractor (the joint venture company between the Corporation and Philips) shall relinquish a number of research sectors equivalent to at least a quarter of the area of The total of the research sectors, and upon the expiration of 6 years after the entry into force of the agreement, they give up a quarter of the other sectors, and upon the expiration of 10 years they have the right to choose and keep a number of sectors that have been converted into development contracts, or request their conversion to that, and Philips has the right after the expiry of 3 Years of abandonment of any sector, provided that the Egyptian government is notified at least ninety days in advance, and in this case the Philips company is exempted from any obligations, and if its expenses are less than those committed to it, it pays the Egyptian government 50% of the difference, and the agreement went further by explicitly stating that If Phillips does not drill, within 24 months of the entry into force of the agreement, one exploration well in one of its areas, then it must relinquish to the Egyptian government one of those three areas covered by the contract, unless the Egyptian Minister agrees to exempt it from that, to the contrary in the amendment of the agreement in general 2003, where it stipulated new concessions for the foreign partner, including that in the event that commercial production of oil or gas is not achieved within 5 years from the date of entry into force of this agreement, the Authority can agree to the continuation of this development sector in the hands of the contractor, and here the amount of concession and sacrifice of national interests becomes clear. In comparison to what was going on before, and even what was going on in the neighboring country (Libya) since 1970 (40), and in the 2007 agreement, more concessions were made, as it stipulated that at the end of the fourth year after the entry into force of that agreement, the contractor relinquishes a quarter of the area The original ones that were not converted into development contracts (M5), and at the end of the sixth year, the contractor relinquishes to the Egyptian government an additional quarter of the original area from the date of entry into force of the agreement that was not converted into development contracts, so far this text seems good, but the rest of the provisions of the agreement are severe Damage as it came in this contract and the rest of the contracts of that period a new principle is (the unity and indivisibility of the concepts of commercial discovery and development contract), i.e. the development contract has become a legal extension of the contract of commitment to research and exploration without the need for a new government approval, and a new contract. The periods for announcing the results of research and exploration to the Egyptian side are very long, extending from 30 days to 12 months in the case of crude oil, and up to 24 months in the case of natural gas wells.

4- Production and sharing production: According to the 1963 agreement, when a commercial discovery is made in any of the three research areas, the contractor shall bear 50% of all costs and expenses spent on development and production, and on continuing research and other operations within the area, with the exception of lands that are It has been converted into development contracts when the Philips company has spent the amounts it committed to, which is 10.0 million dollars, and in the event of commercial disclosure within a period not less than 60 days before the start of the calendar year (meaning the calendar year from which the company’s account begins on what it produces oil or gas), Philips may notify the Corporation of its desire to fulfill all or some of what may remain on it of the research obligations in the joint development contract. A new method for sharing production is based on the foreign partner obtaining 40% of the daily production amount in the form of cost recovery, and the remaining 60% is distributed equally between the authority and the contractor, in other words, the foreign partner gets at least 60% of the daily production amount, she added. The new agreement is a dangerous principle as it stipulates that if crude oil is discovered, the contractor and the foreign partner will not therefore be required to submit an application to sign a new contract, and he also has the right to a “optional extension” period of 5 years prior to the expiry date of the 20 years, and added to it the text on The approval of the Authority to continue this development sector in the hands of the contractor, if no commercial production of oil or gas was achieved within 5 years from the date of entry into force of the contract. As for the 2007 agreement, it stipulated that the distribution of shares should be on the basis of 37% in the form of cost recovery, and the remaining percentage would be distributed ( 63%) between the South Valley Holding Company and the foreign partner, according to the production quantities, which shows that the share of the foreign partner will, on average, exceed 64.5% of the daily production quantities.

5- Cost recovery: There has been an important development - or deterioration - in this field. According to the 1963 agreement, the calculation of the cost recovery item was very careful for the Egyptian national interest, as it was not more than 25%, and it states that the Philips company Every three months, a list of the costs incurred and the necessary documents are ready for examination at any time. The Egyptian negotiator in the 1963 agreement was keen to check and distinguish between the costs of drilling wells and the costs borne by the proposing party, and the non-proposed party for this drilling, in order to spare the Egyptian side the partner in this The partnership is unnecessary expenses that the foreign partner may make without necessity.

In the 2003 agreement, a different calculation was made for the cost recovery item, including costs and expenses for all research, exploration and development operations, and related operations - which is a rubber term that includes unnecessary elements - within the limits of 40% of all oil produced and retained from the development contract. Within the borders of the region, and added to that the indirect expenses that may include unnecessary equipment, cars, personal fuel and other items, and the experience of Libya, for example, indicates that they are narrow about the concept of unnecessary expenses due to the previous manipulation of foreign companies, especially the American, British and Italian ones (41). And it added to the Egyptian agreement of 2003 by distributing it so that the search expenses will be recovered at a rate of 25% annually, starting from the date of entry into force of the agreement, and not from the date of its enforcement, and in the tax year in which these expenses were charged and paid, in addition to another 25% for field development expenses that are also recovered. annually and in the same way, and finally the operating expenses that are recovered in the tax year are added to it. Rather, the Egyptian Petroleum Authority negotiator has gone too far in satisfying the foreign partner at the expense of Egyptian interests by stipulating that (when the value of all the oil allocated for cost recovery exceeds the actual costs and expenses that can be To recover and to be recovered in that quarter of the year, including what may be carried over in accordance with Article VII, the value of this surplus oil must be divided between EGPC and the contractor), i.e. simply making the foreign company share with us the value of oil in excess of the recovery oil instead of recovering This surplus is all in an unprecedented precedent in the history of Egyptian contracts until the mid-eighties.

On the other hand, and in order to preserve the right of the foreign partner, the text stated that (the Authority has the right 90 days before the start of each calendar year to choose and notify the contractor in writing of a request to pay its share of this surplus at 100% in kind with crude oilprovided that it does not exceed The amount of crude oil that the Authority takes in kind in any quarter of the year is based on the value of the oil allocated to recover the costs actually taken, and which the contractor disposed of individually). *...!!

As for the 2007 agreement, it reduced the recovery rate to 37% of the daily production quantity, but it re-distributed production quotas so that the percentage of what the foreign partner gets reaches 62.5% of the production quantity, as we mentioned above. And it increased it by stipulating to satisfy investors and foreign companies that (if the costs and expenses in any tax year exceed the value of all the oil that must be recovered in that tax year, then the excess is carried forward to be recovered in the following tax year or years until it is fully recovered), in addition to that a loophole is added. Satan, which opened for some corruption practices, as Article ( ) of the 2003 amendment stipulates that (if the authority did not notify the contractor - and the foreign partner, of course - within three months of its objection to the statement, then this statement is considered approved), in other words, the negligence of a responsible person in the authority Petroleum or the South Valley Holding Company, which almost replaced the Petroleum Authority after 2004, or obtaining a bribe to overlook the response, which would cost Egypt several millions of dollars, is a matter left as such.

6- Purchasing oil: According to the 1963 agreement, Article (28) stipulates the right of the Egyptian government to purchase crude oil that does not exceed the needs of refineries in the country, and the government’s purchase of crude oil does not exceed 20% of the quantity it owns. The Philips Company or the Petroleum Corporation, according to previous time-graded notifications. As for the prices, the agreement set them at 10% less than the weighted average price obtained by the Egyptian Petroleum Corporation, or the overseas exporting Philips Company during the calendar month in which the delivery took place to the Egyptian government, and if the purchase was more From 20% of the oil of the Philips company or the Corporation, so that its price is the lowest price of both the price being used in calculating the royalties and the weighted average price for export.

As for the purchase of petroleum products by the Egyptian government, it is within the limits of 20% of the quantities extracted from the crude oil owned by the Corporation or the Philips Company. It stipulated that if the Egyptian Petroleum Authority wanted to purchase the contractor’s dues from the oil allocated for cost recovery or his share of the oil allocated for production sharing, then the price would be the market price less than 2.0% only..!! Comparing this text with what existed in Libya, we find that the Libyan government's acquisition of the foreign partner's share was at cost plus several cents or several dollars as a profit per barrel. As for the 2007 agreement, it stipulated that the purchase price is determined on the basis of the market price - not the announced price - provided that the Egyptian Petroleum Authority notifies the foreign partner 45 days before the start of the calendar half-year, of its desire to purchase for a specific quantity.

What is left unspoken about this Egyptian-Italian Dahr field?

First: The expected development of the field's production over the period of time from the beginning of production (December 2017), which amounts to 350 million cubic feet / day, until reaching the maximum production capacity of the field in 2019 (by 2.7 billion cubic feet / day), because this production schedule shows the technical age of the field on the one hand and the real development of the field’s revenues financially on the other hand, and thus the possibility of identifying the share of each of the parties to the contractual relationship, whether it is (the foreign partner or partners, as well as the Egyptian side ).

Second: The period of time that will be required for the so-called foreign partner or partners to recover the costs (i.e. to recover their investments and what they actually spent before the commercial discovery of gas), because in the light of this clause it is possible to accurately identify the distribution of part Significant revenues from the field between the foreign parties and the Egyptian party. If the recovery period extends for ten years, for example (an average of 1.6 billion dollars annually), this means that the foreign partner will obtain no less than 40% of the field’s production annually in one item, which is cost recovery, and if We added to it the foreign partner's share of the field's production (is it 25%, 30%, or 50% equally), and then we have to ask how much is left for the Egyptian side of the production of this field, then?

Third: The Egyptian sources that celebrated the field and its discovery with great celebration, as well as the foreign sources, did not mention what percentage of the royalty is due to the Egyptian government, which is one of the basic rights in such contracts? Or has the Egyptian government waived the estimated royalty rate, which was in previous decades 10% to be avoided from the production of wells, then the shares are divided and the cost recovery item is calculated, noting that this percentage in Egypt twenty years ago was 15%, then the waiver was made and reduced to 12.5%, then To only 10%, allegedly to encourage investment and foreign investors?

Fourth: The Egyptian sources did not mention the method of recovering the assets or the ownership of the assets established and invested in by the “ENI” company and foreign companies, whose costs were recovered? Or has this issue been overlooked to encourage foreign partners? They are assets (equipment, machinery, cars, etc.) estimated at more than 16 billion dollars, which may decrease to 8 billion dollars at the end of the project due to the deterioration and depreciation of some of those capital assets.

As the contracts usually stipulate that the ownership of assets, such as equipment, machinery, land, and other movable assets (such as cars, etc.), the contractor and its foreign partner have previously been included in the item of cost recovery to the Egyptian Petroleum Authority, or the holding company (EGAS), which was established after 2002. – This process takes place after the end of the cost recovery period, or the expiry of the agreement, whichever is earlier, and here there may be manipulation and collusion between some leaders of the Egyptian oil sector and foreign companies, through methods of determining the value of those assets, whether by book values ​​or otherwise, as most contracts stipulate that the contractor Or the foreign partner to notify the Authority or the holding company before the end of the calendar quarter of the book value of these assets, and the report of the Central Auditing Organization in 2016 revealed that usually the General Petroleum Corporation is unable to recover its assets that foreign companies obtained their value according to the cost recovery item, which are assets Huge amounted on 30/6/2015 about 149.4 billion Egyptian pounds (pg. 175). The report indicates that this value could not be achieved in the authority’s books because there was no record of it that includes data and values ​​of items in dollars or Egyptian pounds.

Fifth: The Egyptian sources did not mention the sale or purchase price of the gas extracted from this field, whether in the international market, or in the event that the Egyptian side bought a part of the share of foreign partners. The conflicting information indicates that it ranges between 3. $25 per million BTU, to $5.5 per million BTU?

Sixth: And the big surprise is what the Russian company, ROSNIFT, announced on its website on Wednesday, February 21, 2018, that the Russian company has bought 30% of the expenses of research, exploration and development of the field, which means its participation For the Italian company Eni, ENI, to obtain a share of the gas under the item of cost recovery, and before it did the giant British company British Petroleum BP, and thus the distribution of gas shares from the item of cost recovery becomes as follows: 60% for the Italian company Eni, and 30% for the Russian company Rosneft, and 10% for the company Now, how do we calculate the revenues of the project from now until the field wells run out after less than thirty years?

First: The technical and productive age of the field

1- If the proven reserves of the field are equivalent to 30 trillion cubic feet of gas, this means that it will produce about 30 billion BTUs throughout its life (by calculating the BTU equivalent to one million thermal units = one thousand cubic feet of gas = 28.5 cubic meters).

2- If production will increase from 350 million cubic feet during the period from December 2017 to June 2018 (with an average of 150 working days), then this means that this is equivalent to 350 thousand BTUs, and this means the production and extraction of 52.5 billion cubic feet of Gas during the first period (December 2017 until June 2018, with an average of 150 days / production).

3- Then the extracted production will increase during the following year (from June 2018 to June 2019) to reach one billion cubic feet per day, and this approximates the extraction of 300 billion cubic feet during this period (June 2018 - June 2019).

4- By the second half of 2019, the field's production level will reach 2.7 billion cubic feet / day, which is the maximum estimated level of field production. Therefore, the estimated annual production is (2.7 billion cubic feet per day x 300 working days per year = 810 billion cubic feet of gas annually).

5- Therefore, the weighted technical production life for this field = (30 trillion cubic feet ÷ (810 billion cubic feet extracted annually + 52 billion cubic feet during the first six months + 300 billion in the following year = 35 years exactly) losses are deducted from it Inevitably, the real life of this field, on average, is a little less than 30 years.

4- However, all experts in the field of oil and gas know that there is a rate of decline in the quantities of extracted production according to the law of diminishing returns, meaning the beginning of decreasing the quantities of extracted production after a period of time that may reach half the technical life of the field (15 years), unless development conditions are met. And the development of the field and wells, and the presence of new discoveries in the same seismic and geological scope of the field, or the development of the technology used, and this is another topic and another assumption. Therefore, it is more likely that 60% to 75% of the proven reserves of the field will be extracted, equivalent to only 18 to 22.5 trillion cubic feet of gas.

Second: Forms of contracting and stakes of different parties:

The Egyptian government was keen not to publish the details of the contract and the obligations of the Egyptian and Italian parties regarding this field, which raised many question marks about Egyptian rights, especially since the precedent of contracting with the giant British company BP in 2010 in the North Alexandria field, according to which the president’s government waived Mubarak for all Egyptian rights in return for obtaining its needs of produced gas at preferential prices less than the prevailing price in the international markets.

Some government sources recently revealed the following facts:

(3) According to this, and according to the estimated production volume from December 2017, through 2018, and up to the middle of 2019, when the field’s production reaches a maximum of 2.7 billion cubic feet per day, and according to the following equation:

(The amount of energy generated in btu units x unit price btu) x Egypt's share of field production (35%).

Egypt's share will be as follows:

Egypt's estimated financial share of Zohr field during the period from December 2017 to December 2035

If the annual operating rate of the field is 300 working and production days, the estimated income of the Egyptian government will be as follows:

First: In the first period (December 2017 to June 2018)

Second: In the second period (July 2018 to June 2019)

Third: In the third year (July 2019 to June 2020)

If production continues at this rate (2.7 billion cubic feet per day) until the end of the technical and productive life of the field (20 years), then the revenue achieved for the Egyptian government will be:

= 20277.8 million dollars = 20.3 billion dollars for a period of 22 years of production.

= 31.6 billion dollars for a period of 22 years of production.

As for the foreign partner, he will get:

However, the government and the Egyptian negotiator had waived his right to the royalty stipulated in all previous Egyptian and non-Egyptian contracts, whether in the field of gas or oil, with the exception of the unfair and suspicious contract with the British company in 2010 in the aforementioned North Alexandria field.

What would have been the result if the Egyptian government committed itself to his rights to a royalty of 10% of the total production of the field per day?

The second scenario:

In the event that we are committed to our right to the royalties, the distribution of shares will be as follows:

The deterioration of Egyptian contracts with foreign partners after 1985:

Let us consider the development - or the deterioration - that occurred in the drafting of Egyptian contracts with foreign partners during this period, and the interests that lie behind them, and the consequent waste of Egyptian financial resources and natural wealth.

A reading of the change in oil contracts and gasEgyptian contracts with foreign partners

We are now completing an in-depth legal and economic reading of Egyptian contracts with foreign partners from 1963 to 2007, which continued to concede to foreign partners day after day:

7- Investments: According to the 1963 agreement, the foreign partner is committed to 10.05 million dollars during the twelve years of research and excavation distributed as follows: three million dollars in the first three years, and one million dollars annually during the fourth, fifth and sixth years, and another million dollars annually during The seventh, eighth, ninth and tenth years, then $25,000 annually for the last two years for each research sector held, and so it appears that the contracts are accurate and clear with regard to the rights and duties of each party. During the three years from the date of entry into force of the agreement, and if these amounts are not spent during this period, the foreign partners shall pay the difference between 20 million dollars and what they have actually spent to the Petroleum Authority, and then they can recover it in the event that commercial production is discovered later.

Thus, it seems clear that foreign companies in the field of oil do not actually abide by the figures presented to the Egyptian government regarding their investment in the country, and instead of signing fines or penalties as was the practice in the sixties, they opened a back door for them to recover these amounts by various means, and you will find Foreign companies, in the event of rampant corruption in Egypt and in the oil sector, do not provide them with such services.

As for the 2007 agreement, it stipulated that the foreign partner spend 45 million dollars during the initial research period (4 years) and drill two wells with a seismic survey of specific areas in 4 years, and the foreign partner is committed to spending 50 million dollars in the first extension period (two years) and drill Two additional wells, and the contractor is obligated to spend another 50 million dollars during the second extension period (two additional years), i.e. a total of 145 million dollars over eight years. The strange thing is that these severe conditions, which were imposed on medium-sized Indian and Spanish companies, we have never found similar. In the contracts signed with the American companies and not the British company, as well as the Shell company, whose interests were managed by Tariq Hajji, who had close ties to the men of governance and security in Egypt.

8- Bonus grants: There was no mention in the 1963 agreement on the grants provided by the foreign partner in the event of contracting or production grants, etc. As for the 2003 agreement, Article (9) provided for a grant provided by the foreign partner in the amount of one million dollars upon signing the agreement. The Authority is also granted another million dollars as a production grant when production from the region reaches 10,000 barrels per day for the first time over 30 consecutive days, then other grants are paid when production reaches other quantities, all of which do not exceed $5.5 million. As for the 2007 agreement, it It stipulated grants and commitments represented in 1.5 million dollars as a signature grant, and 500 thousand dollars as a grant upon approval of the contractor entering the extension period, in addition to 125 thousand dollars annually as a non-refundable cost for the purpose of training. As for the grants related to the production quantities, they were related to the production quantities extracted from the field.

9- Taxes on income Taxes: Taxes have two aspects. We will deal with one of them now and postpone the second related to the accounting principles used by foreign companies in calculating their revenues and expenses, and according to all laws and contracts signed with foreign companies and even national companies, the companies’ exports of oil were exempt from taxes. And customs duties, with the exception of taxes on income imposed on foreign companies (contractors), which amount to 50% of the income or profits realized. In Libya, it was up to 62% of the profits achieved before NATO’s intervention in Libya in 2011. The 1963 agreement stipulates that this tax should not be less than the amount received by the Egyptian government in any tax year for the value of the royalty. additional to income.

The annual taxable income is calculated as follows = (total revenues - (costs and expenses + the value of the Authority’s share of the surplus oil allocated to recover costs repaid to the Authority in cash or in kind, if any) + an amount equal to the income taxes due on the Contractor)

When the 2003 agreement was signed, the income tax rate was only 32%. Therefore, neither this agreement nor the 2007 agreement contained any text related to the income tax rate. It was left to the Egyptian tax laws that reduced the tax rate from 32% to 20% only in Income Tax Law No. (91) of 2005. Thus, an additional advantage was achieved for project owners in general and oil companies in particular.

Treatment of oil companies and refineries with the system of private free zones also leads to granting them undue tax exemptions for their work. In May 2008, the government issued Law No. (114) for the year 2008, which was called Decisions 5/5/2008, according to which it was Oil companies and refineries (37 companies and factories) were removed from the private free zones system to the internal investment system subject to Law No. (8) of 1997, which resulted in the imposition of taxes on their income and an increase in tax revenues, as only three companies paid about one billion Egyptian pounds ( 43).

10- Ownership of assets: In the 1963 agreement when the joint venture company was established between the Petroleum Corporation (representing the Egyptian government) and the American company Phelps under the name (WEPCO) as a contractor doing business, it never stipulated that this company is a private law person, and therefore the Owning the assets after the end of the business of this company, whether by the end of the contract and concession period, or by voluntary or compulsory abandonment of the company, or after the end of the cost recovery period, or in any way that was transferred directly to the Petroleum Corporation and added to its balance of production assets. However, this The pattern has changed under the pressure of powerful interest groups that arose within the oil sector and in alliance with Egyptian and Arab businessmen and businessmen. The new texts after 1992 provided for the establishment of a company (the contractor) to be a private sector company..!! Here, the question is how to be a private company or a person of private law and there is a governmental shareholding in it, at least equally, and where will the ownership of these assets revert after the end of the recovery period or the end of the contract, whichever is closer? Why not be a joint venture company between the governmental and foreign or private sides?

The 2003 agreement stipulates that (Apache Umm Baraka) Company shall be committed to transferring all its ownership to the Authority, represented by 50% of all fixed and movable assets that currently exist and are used in the operations of the Umm Baraka Development Contract.

As for the 2007 agreement, it came with completely new and dangerous provisions and principles at the same time, as Article 8 of that agreement stipulated that the South Valley Holding Company - which here replaced the Petroleum Authority in the contract within the framework of a restructuring process carried out by Minister Sameh Fahmy in 2007 2002 - owner of all the assets that the contractor obtained and owned and forced them to recover the costs, but he added to them in the second paragraph of the article a very cunning and cunning condition by saying (however, the full ownership of the fixed and movable assets will automatically transfer from the contractor to South when the contractor has recovered the cost of these assets in full according to the provisions of Article VII, or upon the expiry of the agreement, whichever of the two dates is earlier).

This legal manipulation has led to an additional advantage for the foreign partner at the expense of Egyptian national interests.

11- Disputes and Problem Solving: The weakness of the Egyptian position in dealing with foreign partners, and this was evident in the texts of the contracts signed since the mid-seventies as follows:

First, importing equipment: Where Article (18) of the 1963 agreement stipulates that the foreign company obtains its supplies and equipment from the local market whenever necessary, even if the local price is 10% higher than the imported one, and thus restricts the foreign partner’s import of equipment, machinery, and others. The 2003 agreement came to stipulate the right of the contractor (and the foreign partner) to freely import equipment and machinery from abroad, as well as the text in the 2007 agreement

Secondly, reviewing records and invoices: While the text of the 1963 agreement came decisive and unequivocal, as it came in Article VII (Philips provides every quarterly a list of the costs it has incurred and the necessary supporting documents ready for examination at any time), as well as the text on That (financial data and purchases are presented as detailed as is reasonable), while in the 2003 agreement we found a different language in which there is a lot of prostration in front of foreign partners or partners from the Egyptian and Arab private sectors, as the text came to restrict the inherent right of government representatives to inspect records using expressions such as “submit Information within reasonable limits and “at appropriate times” and other expressions, and the method of resolving disputes and disputes is added to it.

Third, the method of settling disputes and arbitration: There was no provision in the 1963 agreement to refer disputes and disputes - such as a dispute over pricing, implementation of obligations, or other issues - to an international arbitration committee or others. 2003, as well as in the 2007 agreement, we find a regression that amounts to neglecting Egyptian rights and Egyptian sovereignty. First, it stipulates consultation between the two parties and an attempt to reach a satisfactory settlement for both, without any provision for imposing penalties or fines in the event that the foreign partner violates the contract in any of its provisions. And his obligations, then after the consultation process that did not reach a satisfactory solution for the two parties, it resorts to arbitration, whether by choosing one arbitrator (M24) to determine the agreed price and according to specifications that may never apply except to offices and persons located in Western countries and the United States, and they are very limited in number * *

Also, Article (13) of the 2003 agreement stipulates that the contractor’s budget shall be approved by an accredited Egyptian accounting office. Then, Article (16) of the same agreement added restrictions on the freedom of movement of government representatives and inspectors by stipulating two conditions: the first: not to impede safety or efficiency Operations, and the second: to maintain the confidentiality of the information they obtain, and to do so, as we indicated before, at appropriate times and in a reasonable manner. As for Article (24) of that agreement, it completely relinquished Egyptian judicial sovereignty by providing for resorting to arbitration at the Permanent Court of Arbitration in (The Hague) in the Netherlands.

Part one