Production Sharing Contract Terms
Cyprus uses Production Sharing Contracts (PSC) as the fiscal framework for offshore hydrocarbons. This page explains how revenues are shared between the state and contractors.
How the PSC Works
After royalty and cost recovery, remaining "profit oil/gas" is split between state and contractor based on the R-Factor (ratio of cumulative revenues to cumulative costs).
Profit Split by R-Factor
| R-Factor | State Share | Contractor Share |
|---|---|---|
| < 1.0 | 10% | 90% |
| 1.0 - 1.5 | 18% | 82% |
| 1.5 - 2.0 | 24% | 76% |
| 2.0 - 2.5 | 30% | 70% |
| > 2.5 | 36% | 64% |
Updated July 2026 · Sources: MECI, Model PSC
Other Fiscal Terms
Tax Regime
- Corporate Tax Rate
- 12.5%
- Withholding Tax
- 0% (EU treaties)
- Capital Allowances
- 100% immediate
- Loss Carry Forward
- 5 years
Contract Terms
- Exploration Period
- Up to 7 years
- Production License
- 25 years
- Extension Option
- +10 years
- Ring Fencing
- Yes
Domestic Market Obligation
Contractors may be required to supply a portion of production for domestic use at fair market prices.
NegotiableLocal Content
Contractors must maximize use of Cypriot goods, services, and personnel where commercially competitive.
Regional Comparison
| Country | Regime | Royalty | Gov't Take |
|---|---|---|---|
| Cyprus | PSC | 10% | ~50-60% |
| Israel | Concession | 12.5% | ~60% |
| Egypt | PSC | 10% | ~65-70% |
| Lebanon | EPA | 4% | ~55-65% |
Cyprus fiscal terms are competitive with regional peers, balancing government revenue with incentives for deepwater exploration investment.
Updated July 2026 · Sources: MECI, Industry fiscal-regime surveys