Cyprus is offering blocks 6, 8 and 10 in its third offshore licensing round, which it hopes to attract more investments even as exploration budgets have been greatly slashed, according to a report from GlobalData.

Entitled Cyprus Faces Strong Competition for Eastern Mediterranean Investment, the article details how Cyprus’s prospects are greatly reduced by the absence of any commercial discovery in the country and the uncertainty regarding commercialisation of gas.

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The country is up against neighbouring Egypt and Israel, which have a proven track record in deepwater gasfields in the Eastern Mediterranean, while just one offshore discovery has been made in Cyprus to date.

"The country currently has no gas market or export facilities to support development of a discovery."

The existing fiscal regime in the country is less attractive for investors when compared with terms offered by others countries in the region. Almost all nations operating in the Eastern Mediterranean waters stand to earn a higher internal rate of return (IRR) than Cyprus in a deepwater gas development.

Another challenge the country faces is asset commercialisation, which renders the Cypriot blocks unattractive even if fiscal terms are relaxed. The country currently has no gas market or export facilities to support the development of a gas discovery.

A proposed LNG project has been halted due to insufficient gas resources, while the country’s lone discovery has yet to witness any development.

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GlobalData insight states that the Zohr discovery last year attracted interest in Cyprus’s hydrocarbon potential and prompted the latest licensing round. However, the country faces competition with both Egypt and Israel having head- starts in field development.

The two countries are also planning new Mediterranean licensing rounds later this year. New entrants such as Lebanon also pose competition for Cyprus, upping the stakes for a successful licensing round.