APA Corporation (APACHE) has announced it has reached an agreement in principle with Egypt’s Ministry of Petroleum and Mineral Resources (MOP) and the Egyptian General Petroleum Corporation (EGPC) in support of the MOP’s efforts to modernize the country’s petroleum sector.

The new Production Sharing Contract (PSC) will consolidate the majority of the concessions in the Western Desert of Egypt operated by APA Corporation subsidiary Apache Egypt (“Apache”) into a single new concession, which will account for more than 90% of the company’s gross production volumes in Egypt on a barrel of oil equivalent (BOE) basis. The changes simplify the contractual relationship with EGPC and include provisions to create a single cost recovery pool, adjust cost oil and gas and profit oil and gas participation, facilitate recovery of prior investment, update day-to-day operational governance, and refresh the term length of both exploration and development leases. The Apache entity that will become the sole contractor is owned two-thirds by Apache and one-third by Sinopec. The new PSC is subject to certain approvals within the Government of Egypt and ratification by Parliament.

“Egypt’s Minister of Petroleum and Mineral Resources, H.E. Tarek El Molla, has set important goals to modernize the country’s oil and gas sector and increase foreign investment. Today’s announcement follows nearly a year of discussions focused on those ends, and is great news for Egypt and Apache Egypt,” said John J. Christmann, APA Corporation CEO and president. “The new agreement in principle confirms Egypt’s commitment to economic development and public-private partnerships and will facilitate higher investment levels by Apache Egypt, resulting in more drilling, more production and more sustainability projects, while also enhancing talent development opportunities and delivering cost efficiencies through the introduction of new technology.”

“The agreement in principle with Apache Egypt is an important step as we modernize Egypt’s petroleum sector and position our country as a regional energy hub,” said H.E. Tarek El Molla, Minister of Petroleum and Mineral Resources, Arab Republic of Egypt. “It is a win-win for both parties and will help to drive increases in investment and production to the benefit of Egyptians.”