126
Abu Sennan...................................................................
17.9%
(1) Percentage applicable within the range is dependent on production volume in a given period. See “
Competent Person’s Report
” for
additional detail regarding specific volume and percentage levels.
Following deductions from gross oil production for cost recovery, the percentage of gas and condensate production
allocated to the JV partners is set out in the table below, with the balance allocated to EGPC:
PSC
Profit gas / condensate percentage or range
(1)
ERQ ..............................................................................
30%
Burg El Arab.................................................................
20%
Abu Sennan...................................................................
17.9%
(1) Percentage applicable within the range is dependent on production volume in a given period. See “
Competent Person’s Report
” for
additional detail regarding specific volume and percentage levels.
Under the PSCs, a royalty of 10% of gross production is payable to the Egyptian government and is borne by the EGPC
on behalf of the JV partners. The corporate tax in respect of the PSCs is also paid by EGPC on behalf of the JV partners.
The volume equivalent to this tax revenue is included in net entitlement reserves.
The JV partners are required under the PSCs in Egypt to pay annual training fees to EGPC in fixed amounts of between
$50,000 and $100,000 per PSC per annum during the exploration phases. The JV partners are also obliged to pay certain
bonuses to EGPC upon reaching various production milestones, with the amount of such bonuses under each PSC
ranging from $200,000 to $3,000,000. In Abu Sennan, the JV partners must also pay to EGPC a bonus of $500,000 upon
the approval of each development lease within the contract area; to date, three development leases have been approved in
Abu Sennan. Payment of these fees and bonuses is split amongst the JV partners on the basis of their cost interest
percentages.
Service contract in Egypt
Area A is governed by a service contract comprising (i) an exploration services agreement governing the non-producing
fields, and (ii) a production services agreement governing the six producing fields, namely, Kareem, Ayun, Um El-Yusr,
Kheir, Shukheir and Shukheir North West. Upon an agreed commercial discovery in an exploration area, that area
becomes a development area under the service contract, and is thereafter governed by the production services agreement.
The JV partners must perform certain minimum work obligations within both the exploration period (applicable to the
exploration areas) and the development period (applicable to the development areas). These minimum work
commitments are agreed with GPC. The Group’s current commitment for the exploration phase is to drill one exploration
well before September 2014. Meanwhile, the production services extension includes the drilling of six development
wells within three years and conduct of a Yusr Waterflood study. A Group company is the operator of GPC’s licence
under the service contract and performs those obligations on behalf of its JV partner.
Under the terms of the service contract, GPC holds the exclusive right, title and interest to any hydrocarbon produced by
the JV partners. In return, GPC pays the JV partners a service fee of $0.61 per barrel for maintaining the baseline
production in addition to and a share of any incremental production above the determined baseline. Liquid petroleum
production up to the determined baseline belongs to GPC. The percentage of the remaining incremental production for
each of the five producing fields in Area A other than the Shukheir North West field, where gross production reaches
above 500 bopd, allocated to the JV partners in any quarter is based on the average production rate for that quarter and
ranges from a 49.0% to 51.5% share.
Oil produced from the Shukheir North West field or from future commercial discoveries outside the Um El Yusr,
Kareem, Ayun, Shukheir and Kheir development leases above the baseline of 500 bopd for that field is allocated to the
JV partners in a percentage ranging from 49% to 57%. The remaining percentage is allocated to GPC. For production
below the baseline of 500 bopd, no production is allocated to the JV partners.
