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Development Cooperation Co. (Nosodeco), following a production
sharing format. The Nosodeco agreement provided:
Income tax of NOSODECO in the [A.R.E.] to the
Government shall be borne and paid by EGPC. EGPC shall
present to NOSODECO the document evidencing such
payment of tax. Income taxation outside [A.R.E.] shall
not be borne by EGPC.
There was no provision dealing with the calculation of
EGPC's taxes.
Since 1970, all new Egyptian concession agreements,
including those to which Amoco Egypt is a party, have used the
production sharing format, rather than the 50/50 income-sharing
format.
Under a typical Egyptian production sharing agreement, EGPC
holds the concession to explore for and produce petroleum. A
foreign oil company, as contractor, bears the cost of all
exploration, development, and production activities in return for
a negotiated share of production. Some percentage of the oil
produced in any year is allotted to the contractor for the
recovery of costs. The remaining oil production is shared by
EGPC and the contractor in agreed percentages.
In contrast to the 50/50 agreements, under the production
sharing format, EGPC bears the entire royalty obligation and pays
the royalty out of its share of production. Under the production
sharing format, the foreign entity remains subject to Egyptian
income tax, but EGPC assumes the obligation to pay the tax.
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Last modified: May 25, 2011