EGAS INTERNATIONAL BID ROUND 2008
MAIN CONTRACT TERMS AND CONDITIONS
The Egyptian Production Sharing Model

The contract shall be a Production Sharing Model. Contractor undertakes all risk to explore and develop both gas and crude oil.

The parties to the contract shall be The Government of Arab Republic of Egypt, The Egyptian Natural Gas Holding Company (EGAS) and Contractor.

Individual petroleum exploration company or group of companies are free to submit a separate offer for each block (if they bid for more than one block).

EGAS shall bear and pay out of its share, on behalf of the Contractor:
a. Royalty.
b. The applicable Egyptian Income Tax.

The duration of the Exploration period shall be specified in the offer and subdivided into two phases. Total Exploration period should not exceed (6) years, except for Blocks No. 6 and 7, the Total Exploration period should not exceed eight (8) years. The duration of any development lease shall be twenty (20) years from the date of the commercial oil discovery (in case of oil development lease) or from first delivery of gas (in case of gas development lease).
This period may be extended up to 5 years “Five Years Extension” upon Contractor’s request and his submission of a complementary development or production plan to EGAS and subject to the Government’s approval.
If Gas is discovered in commercial quantities and Contractor failed to put such gas on production in accordance to the submitted development plan or within six (6) years period from the date on which the Contractor notifies EGAS of the existence of a commercial gas discovery, (whichever is earlier); Contractor shall surrender such gas reserves and the relevant development lease to EGAS, except in case of Blocks No. 6 and 7, the production should start in accordance to the submitted development plan or within eight (8) years period from the date on which the Contractor notifies EGAS of the existence of a commercial gas discovery, (whichever is earlier); Contractor shall surrender such gas reserves and the relevant development lease to EGAS.

At the end of the first Exploration phase, the Contractor shall relinquish a minimum of ----% (not less than 40%) of the original area in a single unit or a configuration accepted by EGAS. At the end of the last Exploration phase, the Contractor shall relinquish the remaining area except those parts that have been converted into development lease(s).
In any development lease, the Contractor shall relinquish development blocks not producing or contributing to production at the end of 4 years from the date of commercial oil discovery or 4 years from the date of first gas deliveries; as the case may be. Following to that there will be a periodical revision every 3 years during the development lease period, in order to relinquish any development block(s) not producing or contributing to production in the same development lease.

For each phase, companies shall bid the minimum exploration program (seismic and exploratory wells) and its expected relevant financial commitments. Seismic acquisition accompanied by potential evaluation could be accepted during the first exploration phase in some blocks.
Any technical obligation and financial expenditure in excess of the minimum obligations during the first Exploration phase shall be carried forward to the second Exploration phase and offset against the minimum technical and financial commitment for the second phase.
A letter of Guarantee for the minimum financial commitment of the first exploration phase should be submitted to EGAS by the Contractor within certain period before final signature date of the contract and upon EGAS’ notification.

A similar letter of Guarantee is required if Contractor elects to enter the subsequent phase.

Contractor recovers its cost out of … percent (…% ) of the total production. Exploration and Development expenditures shall be recovered within a minimum of (…) years (competitive, not less than five (5) years).

Excess cost recovery (if any) belongs to EGAS.

The remaining percentage of the Petroleum after deducting cost recovery percentage shall be divided between EGAS and Contractor based on Brent value and according to the following shares, considering that EGAS’ share shall increase with Brent Price increasing.:

N.B. : Bidder(s) shall abide to fill the above blank EGAS’ share.

N.B.: Bidder(s) shall abide to fill the above blank EGAS’ share, regardless the type of the gas whether dry or wet.

Shall be competitive, and transferred to EGAS account before the final signature date of the Concession Agreement.

Shall be competitive and due upon approval of each development lease.

Shall be competitive and due to at the following production rates:

Five year extension bonus shall be competitive and due upon the approval of EGAS and The Government on Contractor’s request.

During any exploration phase, a training budget of the sum of US$ ……… (Competitive but not less than US$ 100,000) at the beginning of any financial year to cover the training of EGAS’ employees.

The following Assignment Bonus shall be paid by Contractor to EGAS on the Government’s approval date to each assignment and upon EGAS’ notification to the Contractor:

Neither Contractor nor Contractor member(s) may assign to a person, firm, corporation or affiliated company in whole or in part, any of its rights, privileges, duties and obligations under the contract without the written approval of the Government. Priority shall be given to EGAS to obtain Contractor’s share intended to be assigned except in case of assignment to an affiliated company of the same Contractor member. The assignor must submit reasonable documents that evidence the assignee's financial and technical competence which will be subject to EGAS’ and Government’s approval.

• Priority shall be given to satisfy the Local Market needs for both gas & crude oil. EGAS shall have the right to buy Contractor’s share of both gas and crude oil.
• In case quantity of gas and / or crude oil isn't required for the local market, the Contractor may have the right to dispose its remaining production share the way it prefers after having the A.R.E. competent authorities’ approval.
• In case a part or the total Contractor’s production share of gas is disposed of for export, the quantities of gas to be exported will be subject to the A.R.E. competent authorities’ approval.
• In case gas is disposed of for export by EGAS and Contractor, the quantities of gas to be exported, the gas price, as well as the relevant gas sales agreement will be subject to the A.R.E competent authorities’ approval.

During the exploration period an Exploration Advisory Committee consisting of equal number of representatives from Contractor and EGAS, shall discuss and recommend proposed annual work program and budget to EGAS for approval.
During the development of any discovery, EGAS and Contractor shall meet and agree on the Joint Venture Company that will take place to conduct the operations. Such Joint Venture Company will be approved by The Minister of Petroleum.

The Contractor shall give preference to the use of Egyptian Goods and Services (design, construction, engineering…etc.) subject to quality, availability and competitive pricing.

Contractor shall give preference to the employment of qualified Egyptian nationals, whom shall undertake appropriate training programs.

The Egyptian laws shall be the applied law in enforcing the terms of the Agreement. Arbitration procedure shall be governed by the Arbitration rules of the Cairo Regional Center for International Commercial Arbitration.