Oil and gas
The discovery of hydrocarbons in Cyprus’ Exclusive Economic Zone (EEZ) has created new and exciting prospects for Cyprus to become an energy hub in the Eastern Mediterranean. Prospects in the energy sector are all the more promising thanks to the island’s geostrategic location, connecting Europe and the Black Sea with markets in the Middle East and Asia and its role as a pole of stability and security in the region of the Eastern Mediterranean.
Recent developments have attracted worldwide interest and significant investments from leading international energy giants, such as Noble Energy, Delek, Total, ENI and KOGAS, ExxonMobil as well as renowned international providers operating in the oil and gas auxiliary services sector. Comprehensive strategies are being developed to exploit the country’s wealth not only for local needs, but also for export purposes.
Exploration licenses have been granted for several offshore blocks within Cyprus’ EEZ. A consortium of Italy’s ENI and Korea’s KoGas are also exploring three offshore blocks while French oil major Total has exploration rights over one block in the Cyprus EEZ. US firm Noble Energy, operating block 12, the ‘Aphrodite’, and also developing Israeli Tamar and Leviathan gas fields, found an estimated 4.5 trillion cubic feet of natural gas, enough to meet Cyprus’ domestic gas demand for over 100 years. An initial development and production plan for ‘Aphrodite’ had been submitted in March 2015, while Cyprus is expected to make 70% of the profits from the liquefaction of natural gas. Investments of approximately €3 billion will be needed to build the exploitation structures of the field and the pipelines towards Egypt.
The 3rd licensing round was successfully completed with 6 offers from 8 companies for plots 6,8,10. Both existing and new companies such as ExxonMobil, Qatar Petroleum and Statoil, have placed their bids, showing the continuously increasing international interest for Cyprus’ new oil and gas realities.
Emphasis has also been given on fostering multilateral cooperation with neighboring countries in exploiting the reserves and building prospective regional pipelines. Regional cooperation has been successfully enhanced through agreements signed with Israel, Egypt and Lebanon, while Egypt and Cyprus have signed a deal for the transfer of natural gas via pipeline. The deal allows a direct subsea pipeline from Cyprus’s exclusive economic zone (EEZ) to either Egypt’s EEZ or onshore Egypt, for domestic consumption or re-export.
Moreover, Cyprus offers a secure and convenient base for operations for various auxiliary services to the oil and gas industry as well as for company headquarters to support activities in the EMEA region.
An important step in Cyprus’ ambitious plan to evolve as a regional energy hub is the operation of a €300 million oil storage terminal, which opened for business in November 2014, designed and constructed by VTTI Energy Partners LP. Its strategic location makes it the first terminal of its kind in the Eastern Mediterranean, connecting Europe and the Black Sea with markets in the Middle East and Asia. The asset currently comprises 28 tanks and capacity of 544,000m³, and offers access to a deep water marine jetty, as well as to road tanker loading facilities. A Phase 2 expansion is currently under evaluation and would create an additional 13 tanks and further capacity of 305,000m³, while the existing Larnaca oil storage facilities are relocated to Vasilikos as well.
The energy policy of Cyprus is harmonized with the European Union goal of promoting the use of energy from renewable sources, as a major step towards the reduction of global warming and climate change phenomena.
The EU RES Directive sets out specific national targets to be achieved by each individual Member State, regarding the share of RES generated in each Member State by the year 2020. For Cyprus, the national target states that the share of energy produced from RES must be at least 13% out of the gross national final consumption of energy in 2020.
In light of the above, the Cyprus Government has launched a number of financial measures in the form of governmental grants and/or subsidies, which aim at providing support and incentives for the promotion of RES-E utilization in Cyprus. The main types of RES technologies which are promoted under these measures for integration in the Cyprus power system are the following:
- Solar energy
- Wind energy
Cyprus ranks first in the world in solar energy use for water heating in households, and has achieved significant progress in the production of energy from Renewable Energy Sources (RES).
Cyprus has already exceeded its intermediate 2020 targets, with RES comprising of about 8.7% of its total electricity generation, compared to the 7.45% threshold for 2015- 2016. In addition, Cyprus holds the EU-28 record according to the “European Solar Thermal Industry Federation” for use of solar water heating systems per capita. Currently, more than 93% of households and 52% of hotels in Cyprus heat water through solar power heating systems.
Cyprus is on track in achieving its Renewable Energy Sources (RES) target, i.e. to supply 13% of the island’s energy by 2020.
The most important projects relating to power generation from RES concern wind parks and photovoltaic (PV) parks, concentrated solar thermal plants and biomass and biogas utilisation plants. 6 wind parks are currently in operation, while as regards solar energy, 4 PV parks have been connected to the national grid so far, generating 1,000,000 kWh.
Renewable energy is definitely rising and is expected to experience considerable growth in coming years, while the Cyprus government is also welcoming companies with expertise in renewables to bring their operations, know-how and advanced technology to the country.
Banking, Financial Services & Investment Funds
The Cyprus financial services sector is diverse, comprising domestic banks, International Banking Units (IBUs), insurance companies, and other companies that offer financial intermediation services. Many foreign banks from the Middle East, Europe and Asia operate subsidiaries, branches or representative offices in Cyprus.
Cyprus banking & financial services sector legislation is in line with international best practices and has a simplified, effective and transparent tax system, which is fully EU, OECD, FATF and FSF compliant. Commercial banking arrangements and practices follow the British model, all banks maintain correspondent networks around the world and are able to carry out both traditional and specialised financial transactions.
Banks located in Cyprus offer an array of services ranging from asset management, private banking, international, corporate and investment banking, retail banking, syndicated loans, custodian services and more.
Cyprus is a renowned International Shipping Centre and home to some of the world’s leading names in the global shipping industry, such as the Italian MSC Mediterranean Shipping Company, the German-owned Bernhard Schulte Shipmanagement and the Russian Unicom Management Services.
The maritime sector has historically been one of Cyprus’ most successful industries. Capitalising on its strategic location at the crossroads of busy sea trade routes and offering attractive legislative and operational shipping infrastructure, a solid and efficient tax framework and an excellent communications network, Cyprus has successfully built a diversified and robust maritime industry that accounts for over 7% of the country’s GDP (including auxiliary services). Currently more than 1,022 registered vessels with a 21 million gross tonnage are registered under the Cyprus flag making Cyprus the:
- 10th largest merchant fleet in the world
- 3rd largest merchant fleet in the EU
- Top 3 Ship Management Centre globally
- Largest third party Ship Management Centre within the EU
Cyprus has an EU-approved “Open Registry” regime, one of the only two ‘Open Registries’ in the EU, with a very wide and legally endorsed Tonnage Tax System (TTS), which was introduced with the Merchant Shipping Law in 2010 and covers the three main “maritime transport” activities, namely ship-owning, ship-management (crew and technical management) and chartering. The simplified Cyprus Tonnage Tax System represents a compelling competitive advantage and contributes significantly to the already strong position of the country in the global shipping world.
Owners of Cyprus flag ships fall automatically under the tonnage tax regime, whereas ship owners of foreign flag ships, charterers and ship managers may opt to be taxed under the tonnage tax system (TTS) under certain conditions.Over 150 ship-owning, ship-management, chartering and shipping related companies control a merchant fleet of 2,300 vessels with a 50 million gross tonnage, while employing approximately 4,500 employees and 55,000 seafarers.
Cyprus maintains a wide range of competitive advantages through a high quality maritime cluster, offering efficient and quality services, including:
- The latest EU-approved Tonnage Tax System (TTS) with no direct link to corporate tax
- Competitive ship registration costs and fees
- No crew/officer nationality restrictions
- 28 Merchant Shipping Bilateral Agreements
- Signatory to all international maritime conventions on safety, security and pollution prevention
- Full protection for financiers and mortgagees
- White List of Paris and Tokyo MoUs