127
JV partners
Cost recovery is not applicable under the Area A service contract. A corporate tax of up to 30% is payable by the JV
partners such that each JV partner’s production allocation is net after tax profit.
Tax regime
In July 2014, the Egyptian government announced a 10% withholding tax payable on dividends and other cash
distributions to shareholders. At present, the Group’s only Egyptian subsidiary, Kuwait Energy (Eastern Desert)
Petroleum Services SAE, which holds the Group’s interest in Area A in Egypt, distributes cash to the Issuer as
repayment of intercompany loan arrangements, which are not treated as dividends and therefore will not be subject to
10% withholding. Once the intercompany loan balances have been repaid, however, any further distributions from
Kuwait Energy (Eastern Desert) Petroleum Services SAE to the Issuer will be characterised as dividends and subject to
this 10% withholding tax. The Egyptian government also announced a temporary 5% income tax effective for the next
three years on any profits above one million Egyptian pounds, in addition to the already existing income tax regime,
applied at progressive rates up to 25%. Kuwait Energy (Eastern Desert) Petroleum Services SAE will be subject to this
additional 5% income tax. Either or both of these changes in Egyptian tax law could have an effect on our financial
results in Egypt, which could render our Area A operations unprofitable and otherwise have a material adverse effect on
our business, prospects, financial condition and results of operations. See
“Risk factors—Risks relating to the
jurisdictions in which the Group operates—The Group’s operations in Egypt may be disrupted by political and economic
developments
.”
Iraq
Summary
The Group’s assets in Iraq are close to existing infrastructure and represent 96.5% of its contingent resources as at 31
May 2014. In 2011 the Group was awarded a 20-year gas development and production sharing licence in Iraq for each of
the Siba and Mansuriya gas fields. The Group expects first production of gas from Siba in July 2015, and is aiming to
have full production of gas on stream by the end of 2015. In 2012 the Group was also granted an exploration and
development licence for up to 30 years over Block 9 near Basra. The Group’s licences in Iraq are governed by service
contracts.
The map below presents an overview of the Group’s assets in Iraq.
