Egypt Agrees Tax Relief for Project to Import Cyprus Gas

SUBSCRIBE SEARCH ARTICLES NEWS The Chevron-led Aphrodite consortium and the Egyptian government have agreed on a special tax regime for a project that would enable the piped export of 100 percent of production from the field offshore Cyprus to the North African country. Image by Alexyz3d via iStock

The Chevron Corp-led Aphrodite consortium and the Egyptian government have agreed on a special tax regime for a project that would enable the piped export of 100 percent of production from the field offshore Cyprus to the North African country.

The Fiscal Regime Agreement (FRA) between the Aphrodite co-venturers, Aphrodite Midstream Co (AMC) and the Egyptian government exempts the companies from taxes on the sale of gas to state-owned Egyptian Natural Gas Holding Co (EGAS), except for income tax.

The agreement has yet to complete signatures and will need ratification by the Egyptian parliament, Aphrodite co-owner NewMed Energy LP said in a stock filing Monday.

NewMed Energy expects these procedures, along with the earlier initiated Host Government Agreement (HGA), to be completed in the "coming weeks".

Under the HGA, the Aphrodite owners and Egypt committed to building a pipeline to carry Aphrodite gas to EGAS. The HGA also provides for the formation of AMC, a special purpose company incorporated in Egypt, by the Aphrodite owners and an entity appointed by the government.

The FRA entitles the Aphrodite owners to terminate the HGA if Egyptian lawmakers do not approve the FRA within six months from the signing of the HGA.

"The FRA applies to the transportation activities from the Aphrodite reservoir, as defined in the FRA, including the sale of gas to the Egyptian Natural Gas Holding Co, and does not apply to gas from the Aphrodite reservoir that is delivered to the facilities of AMC", NewMed Energy said.

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The relief "does not apply to certain actions involving the realization or transfer of tangible assets of the Aphrodite reservoir in Egypt, or relating to assets acquired in Egypt, and that taxes applicable to employees or agents, as well as service, registration and administration fees, are not exempt from tax", it said.

"In addition, the direct supply of goods to the Aphrodite reservoir and of services relating to equipment or facilities, subject to certain conditions, is exempt from most VAT. The Egyptian Ministry of Finance pays the import duties and customs on approved items that are required exclusively for works in connection with the reservoir".

The FRA prevails over conflicting laws, NewMed Energy said.

Meanwhile, negotiations continue toward a binding agreement to sell Aphrodite gas to EGAS, NewMed Energy said.

The parties have already signed a term sheet for a contract of at least 15 years and up to 20 years. Export volumes would be increased to 700 million cubic feet per day after at least six years from when commercial supply began, according to a filing by NewMed Energy on April 9.

An assessment commissioned by NewMed Energy, published May, increased the best estimate of contingent gas resources on Cyprus' side of Aphrodite, located on the maritime border with Israel, by about four percent to 3.67 trillion cubic feet.

Last year Cyprus approved a $4 billion updated development plan, following failed talks on cost-saving changes to the original terms approved by the government November 2019, according to a filing by NewMed Energy February 15, 2025.

The new plan includes a floating production unit with a capacity of about 800 million cubic feet a day.

Recently Aphrodite co-owner Shell PLC agreed to exit the field by selling BG Cyprus Ltd to Hungary's MOL Group for $720 million.

"We believe Aphrodite remains an attractive development opportunity and will play an important role in supporting regional energy needs", Shell Integrated Gas president Cederic Cremers said in a statement July 31, 2026. "Our decision to exit is driven by disciplined capital allocation and portfolio choices, as we focus on opportunities that strengthen our integrated LNG value chain".

"Egypt remains an important country for Shell, where we continue to have a significant presence", Shell added.

Currently Shell is a majority owner with a 35 percent stake, the same as operator Chevron. NewMed Energy, part of Israel's Delek Group, holds the remaining 30 percent.

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