Cyprus is inviting offers to exploit billions of barrels of offshore oil.

The offshore-licensing tender begins on February 15 and industry giants such as BP, Exxon and Mobil have shown an interest, requesting seismological data prepared by Oslo-based Petroleum Geo-Services (PGS), an oil-prospecting company.

Offshore oil and gas resources surrounding Cyprus in the past have been reportedly estimated at six billion to eight billion barrels, worth about $400 billion at current market rates. But there are no reliable figures.

In Cyprus energy constitutes one of the most important sectors of the economy. The local energy sector is characterised by a high dependence on imported energy, a strong dominance of oil in the energy balance, a rapid growth in energy demand, the difficulties of interconnection with European networks due to Cyprus’ geographical location and the relatively low penetration and utilisation of Renewable Energy Sources (RES).

During the last few years, the Cyprus energy system has shown strong potential and is currently passing through a period of significant changes, with the liberalisation of the energy markets (electricity) as required by the applicable Guidelines, the decision for import and penetration of Natural Gas in the energy mix of the country, the promotion of renewable energy sources, modern cogeneration systems and energy saving, changes which require structural interventions to face the new challenges in the field of energy.

The Government of Cyprus, recognizing the positive contribution that the introduction and use of Natural Gas will have on the economy and the environment of Cyprus, assigned, by decision of its Council of Ministers (No.20/2001), a Committee of Ministers, to formulate terms of reference for the preparation of a study regarding the transfer and use of Natural Gas in Cyprus.

Following the launch of the relevant tender by the Ministry of Commerce, Industry and Tourism, a consulting firm was engaged. This consulting firm prepared and completed the aforesaid study in November 2002. The study showed that the most economic and secure way to supply and transport natural gas to Cyprus is by ships, in liquefied form. The study also indicated that the use of Natural Gas in Cyprus is limited, at least at this stage in the production of electricity, in view of the lack of other large industrial consumers.