Hydrocarbon Activities in Cyprus – Licensing
Below is the prescribed procedure for obtaining licensing for Hydrocarbon activities:
- Prospection License
The Hydrocarbon Prospection License, is the authorization for prospection using various geophysical techniques (no drilling) and evaluating the offshore Cyprus hydrocarbon potential by identifying geological structures. This license is issued for a maximum of one year,
- Exploration License
This license offers the licensee authority upon each renewal of the term of exploration period, to relinquish at least 25% of the initial surface of the licensed area. The Hydrocarbon Exploration License is granted for an initial period of three (3) years and may be renewed for up to two (2) terms, each term not exceeding two (2) years, provided that the licensee has fulfilled all their obligations with respect to a current exploration term.
An extension of six months may be granted in the case of an appraisal program not being completed of an oil discovery at the end of the second renewal period. Furthermore, an extension of 24 months or more could be granted for a viable gas market to be established if an appraisal program of a natural gas discovery at the end of the second renewal period is not completed. If a discovery is made, the licensee has the right to be granted an exploitation license for that discovery.
- Exploitation License
A Hydrocarbon Exploitation License shall be granted with respect to a commercial discovery during exploration, after the approval of a Development and Production Plan. It can be granted for a period not exceeding twenty-five (25) years and may be renewed for a maximum of ten (10) years.
Application Guidelines and Criteria
A selected applicant for an Exploration Block engages in a Production Sharing Contract (PSC) with the Republic of Cyprus, after a successful application for each Exploration Block has been submitted to the Minister of Commerce, Industry and Tourism. The Council of Ministers is the competent authority that grants the Hydrocarbon Exploration and Hydrocarbon Exploitation License.
• Content of applications:
The application shall contain the following:
- The Application Letter
- Technical, Financial and Legal Capacity documentation
- Technical and Financial Proposal for the block
- Evaluation Criteria:
- National security and public interest;
- Technical, legal and financial ability of the applicants;
- Ways in which the applicant intends to carry out the license activities;
- Financial consideration that the applicant is offering in order to obtain the license;
- Previous track record;
- Environmental, biological and mineral resources and national treasures considerations;
- Safety of workers and installations and transport security.
Production Sharing Contract (Model):
A model Production Sharing Contract has been issued as concluded between the licensee and the Republic. The main terms include:
- Minimum exploration work program (2D/3D seismic surveys, number
- of exploration well, depth etc.
- Cost Oil / Gas Recovery (up to a maximum %).
- Profit Oil / Gas Sharing % (for oil according to production tiers and
- Price; for natural gas according to production tiers).
- Signature and Production Bonus.
- Minimum annual training budget.
- Annual Surface Fees.
- Performance Guarantee.