Oil Exploration Tenders Received

The first applications from foreign companies for licences to search for oil and gas in the Cypriot sector of the southern Eastern Mediterranean were received by the Government on 16 August. The inaugural licensing round had been launched in February for 11 of the 13 blocks in the 70,000 sq km southern offshore sector, where initial research indicates that important hydrocarbon reserves are located.

In welcoming the applications, the Government condemned Turkey for challenging its right to offer the licences, as recognized under international law by the EU, the USA and many others. Regarded as particularly provocative was Turkey’s claim that its offshore rights in the Mediterranean extended to parts of the blocks offered for exploration licences by the Cyprus Government.

At the deadline for submissions on 16 August, the Ministry of Commerce, Industry and Tourism announced that tenders had been received from a US oil company for one block and from a consortium of Norwegian, United Arab Emirates (UAE) and UK companies for two blocks. The Ministry explained that the bids would be evaluated by an advisory committee, which would report to the Council of Ministers by the end of the year for decisions to be made on the issuing of licences.

Although not officially disclosed because of confidentiality requirements, the applicant companies were identified by the media as Texas-based Noble Energy, DNO of Norway, Larson Oil & Gas of the UAE and Increased Oil Recovery of the UK. There was some public disappointment that more applications had not been received, especially from US and European majors and China. However, the Government expressed broad satisfaction with the outcome and stressed that the eight blocks not bid for would be included in the second licensing round in 2008, together with the other two blocks in the Cypriot sector.

Sabre-rattling by Turkey included over- flying of Paphos by Turkish warplanes as the tenders were announced, amidst reports that a Turkish survey vessel had set sail from Alexandretta and was heading for Cyprus’ exclusive economic zone (EEZ). The Turkish Government also wrote to UN Secretary General Ban Ki Moon repeating its contention that the “Greek Cypriot Government” was acting illegally in offering offshore exploration licences. Taking a relaxed approach to such machinations, the Cyprus Government continued to point out that it was acting in full conformity with the 1982 UN Convention on the Law of the Sea and that its sovereign rights under the Convention were recognized by virtually the entire international community. On 10 August Foreign Minister Erato Kozakou-Markoulli issued a warning that Turkey’s threats over Cypriot oil and gas exploration would have serious repercussions for its EU accession aspirations.


Upturn in Tourist Arrivals and Revenue

Arrivals of tourists in Cyprus showed a welcome upturn in June-July compared with the same months in 2006, boosting industry hopes that 2007 as a whole will not be as disappointing as had been feared in the early months of the year. In addition, revenue receipts were strong in May, confirming that efforts to diversify into higher-value tourism are bearing fruit.

Tourist arrivals were up by 0.8 per cent in June and by 3.2 per cent in July, to 282,465 and 352,423 respectively. Arrivals from Britain fell by 4.6 per cent in July, but still accounted for 52.6 per cent of the total, whilst arrivals from Russia and Greece increased sharply. Total arrivals in the seven months to July were 1,316,521, only 1.7 per cent down on the same period in 2006.

Revenue from tourism amounted to C£119.9 million in May, an increase of 7.1 per cent over the same month in 2006. Receipts in the five-month period to May totaled C£274.6 million compared with C£269.6 million in the same period in 2006.

The Cyprus Tourism Organization (CTO) announced on 17 August that it would spend C£12 million promoting the island in 2008 - C£1 million more than in 2007. The effort will be concentrated in Britain, Germany and Russia, although smaller markets such as Scandinavia will also be covered.


Euro-Laboratories Monitor Transition to Euro

Confidence that the “euro-laboratories” opened by the Government in the main towns to monitor Cyprus’ switch to the euro single currency on 1 January 2008 will help to prevent any unfair price increases was expressed by Finance Minister Michalis Sarris on 9 August after a visit to the one established in Paphos. Dual pricing of goods and a fair pricing code would assist the process, said Mr Sarris, as Cyprus neared “the finishing line to achieve a smooth transition”.