As an internationally recognised business services centre with a stable and secure environment, Cyprus offers key advantages for global oil and gas companies with operations in the East Med, says Managing Director of Wymering Management Costas Georgiou.
The discovery of natural gas in Cyprus’ Exclusive Economic Zone and subsequent licencing of exploration blocks to international heavyweights was the beginning of a new sector in Cyprus. As the oil and gas sector develops, what are the potential benefits for the Cyprus economy?
Cyprus will be entitled to a share of the natural gas quantities, which can be used both for local consumption and to be sold to worldwide markets. This will significantly boost the state’s annual revenues and can relieve to a big extent the local power consumption cost, which is currently the most expensive within the European Union.
The discovery of natural gas is expected to create new job opportunities both directly and indirectly. More specifically, while the country’s workforce lacks expertise in the oil and gas sector, it is expected that vacancies for local staff will be created in the areas of administrative support. Also taking into consideration that Cyprus is an internationally recognised business services centre, the anticipated arrival of new and big companies will create demand for use of the local services sector – such as legal and financial services – thereby requiring more personnel to adequately fulfil the task.
These developments will assist in relieving the current unemployment rate of the country, which is currently at the highest-ever recorded rate of 33%. The increase of foreign presence in Cyprus will also contribute positively to the economy through local spending.
What advantages does Cyprus offer global oil and gas companies with activities and operations in the Eastern Mediterranean?
Prior to moving to any overseas locations, global oil and gas companies consider a lot of parameters with stability, safety and cost effectiveness being of fundamental importance. Contrary to other countries in the region, Cyprus is a member of the European Union and offers a politically stable and secure environment. The country is an internationally recognised business services centre, has low tax rates and maintains a highly educated workforce with extensive experience in dealing with foreign businesses. Lastly, the country has concluded a significant number of Double Taxation Treaties with other States, which reduces the potential overall tax burden of these companies.
What opportunities does Cyprus’ oil and gas sector offer your business?
Having worked in the oil and gas industry since 1994, Wymering is one of the oldest and more established companies in Cyprus involved in this sector. We have solid international experience working with public companies for the last 20 years and the expertise to handle efficient tax planning and corporate services for this industry. As the Cypriot oil and gas sector develops and expands, it will also give us more possibilities to work locally. The big energy and exploration companies usually set up offices in countries where they have operations and we can help by providing them with the necessary support with our knowledge of the industry. Even big firms in Cyprus do not have the level of knowledge we have, as they continue to rely on support from their international offices.
Can Cyprus develop into a regional hub for oil and gas companies?
Yes it can, but its extent will depend mainly on whether the currently-debated LNG plant will be built or not. The quantities of the gas reserves in Block 12 announced by Noble Energy Inc. are not enough to justify from an economic basis the construction of the plant. The Cyprus Government considers the construction of the plant to be of ultimate importance and is currently pursuing alliances with other neighbouring countries – mainly Israel – for utilising the potential Cyprus LNG plant for a portion of their natural gas production intended for export. In addition, there will be significant exploratory drilling activity during the current and following year in other offshore blocks within the Cyprus Exclusive Economic Zone by Eni and Total, whose results are also important for purposes of pursuing this important project.
Setting aside the economic burden of Cyprus' financial assistance programme, does it offer any long-term benefits for the country?
Definitely, the restructuring of the public sector and government services was long overdue and is absolutely crucial to make Cyprus more competitive. Also, the current overhaul of the banking sector is just as vital because it was not sustainable anymore. Although painful for some, the programme will help create a more efficient economy and better provision and management of our services and institutions. However, we are far from getting our reputation back and this will require much work from both the public and the private sector.