Historically, the Eastern Mediterranean region has seen little evidence of energy resources; however, new technology and data gathering techniques have increased capabilities for discovering and developing deep-water deposits, thus providing new possibilities for energy exploration to Eastern Mediterranean countries.
Cyprus Energy Sector
The energy policy of Cyprus is fully harmonized with the energy policy of the EU, and the Cyprus energy system is currently passing through a period of significant changes, with the liberalization of the energy markets, the introduction of natural gas and renewable energy sources, modern cogeneration systems, and other energy saving changes.
Hydrocarbon Exploration in Cyprus
Cyprus conducted several seismic surveys within its Exclusive Economic Zone (“EEZ”) in 2006, 2007 and 2008-2009, which indicated potential hydrocarbon deposits. A first licensing round was held in 2007 offering 13 blocks offshore Cyprus, resulting in an exploration license being awarded for the are known as Block 12 in October 2008. Drilling in Block 12 began on 20 September 2011 and on 28 December 2011, deposits ranging between 5-8 trillion cubic feet of natural gas, was confirmed within Block 12.
On 11 February 2012, the Cyprus Government launched the second licensing round for the remaining 12 blocks offshore Cyprus. The round will be open for a total of 90 days.
As an emerging hydrocarbon producing country, the Republic of Cyprus is becoming increasingly attractive to multinational energy companies who are looking to participate in the present, and future, energy developments of the island. Under the current legal framework, Cyprus facilitates three types of licenses — Prospecting, Exploration, and Exploitation.
Prospecting is defined as the attempt to locate hydrocarbons, and/or to evaluate the hydrocarbon potential by any appropriate method other than drilling. Such a license can be granted for a limited period not exceeding 1 year.
Exploration is defined as the exploration for the discovery of hydrocarbon deposits by any appropriate method, including drilling. An Exploration license is granted for an initial period not exceeding 3 years, and can be renewed for up to two terms, each term not exceeding 2 years provided that the licensee has fulfilled all their obligations with respect to the current exploration term. Upon each renewal of the term of the exploration period, the licensee relinquishes at least 25% of the initial surface of the licensed area.
Exploitation is defined as the development and production of hydrocarbons, or any treatment in order to make them marketable, and the storage and the transportation of the hydrocarbons, and by-products to the loading installations for further disposal. The definition does not include refining. The term of the exploitation license is a maximum of 25 years, and it may be renewed for a maximum of 10 years, subject to the provisions of the contract. A Hydrocarbon Exploitation License, with respect to a commercial discovery during exploration, is granted after the approval of a Development and Production Plan.
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