Egypt will adopt a new licensing policy for its future oil and gas exploration contracts signed with foreign companies that will allow the North African country to obtain a bigger share of the production, its oil minister Osama Kamal said.
"We have developed a new system that will be implemented in the next licensing round," Mr. Kamal said in a video interview posted on the Al Borsa newspaper website.
"The new system will allow Egypt to increase its share of the output when production rises. The more production rises, the more our share will rise," he said.
The new policy won't be implemented on the eight oil and gas exploration projects in the Mediterranean Sea that Egypt awarded earlier this month for an overall minimum investment of $1.2 billion, Mr. Kamal added.
The winning companies in the last bidding round, which include BP PLC, Italy's Eni SpA, Edison and IEOC, a subsidiary of Eni group, Canada's Sea Dragon Energy, will drill a minimum of 18 wells and will pay $73.2 million for the licenses.
Mr. Kamal has previously said that investments in oil and gas exploration are expected to reach $8.6 billion this year.
Egypt has seen its oil and gas exploration activities slowing over the past couple of years due the continuing political and social unrest since the ousting of former president Hosni Mubarak.
The country has been paying hefty premiums for its crude supplies due to the weaker Egyptian pound and difficulties in securing letters of credit for its transactions, while a shortage of state-subsided diesel has already paralyzed transportation in many parts of the country.
The civil unrest has also led to a risky economic mix of dwindling foreign-exchange reserves, declining tourism revenue and costly price subsidies, economists said. To prop up the Egyptian currency, the central bank has gone through nearly two-thirds of its foreign-currency reserves, pushing the country to the brink of a liquidity crisis.
The Egyptian government has been negotiating with the International Monetary Fund over a $4.8 billion loan, which analysts and investors say is critical for the country. IMF officials left Cairo earlier this month without agreeing on the terms of the loan.
The subsidies are delaying an agreement with the IMF, which is demanding Egypt makes progress on phasing them out.
The fund was on the verge of signing a bailout late last year, but the Egyptian government decided the measures were too controversial at the time. In a country already struggling with civil unrest, any cuts to fuel subsidies could enrage Egyptians who rely daily on cheap fuel, economists say.
Copyright (c) 2012 Dow Jones & Company, Inc.
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