Cyprus is heavily dependent on oil imports which account for 92% of total primary energy supply (TPES). The Ministry of Commerce, Industry and Tourism (MCI&T) is the state authority that monitors the oil products market. Nevertheless, the Council of Ministers may grant authorisations for the prospecting exploration and exploitation of hydrocarbons, following a tender or auction. The aforementioned law does not explicit differentiate between foreign and Cypriot investors. Two multinational companies (BP-Mobil and Esso) and a consortium of Cypriot companies (Petrolina, Lina and Lefkarities Oil) import crude oil as well as finished products, whilst the Electricity Authority of Cyprus (EAC), which generates and delivers electricity throughout the island, imports heavy fuel oil. 

Cyprus Oil Refinery Ltd.(CPRL), the only refinery in Cyprus, has been in operation since 1972, following ratification of Law 42/1969 - an Agreement between the Republic of Cyprus and certain oil companies to establish a refinery in Cyprus. The refinery is a share-holding company whose stakes are allocated as follows; Government (65%), Mobil Oil Cyprus Ltd. (25%) and Petrolina Ltd (15%). According to the said Law, the refinery has to treat all oil marketing companies operating in Cyprus equally, whether or not they participate in the aforementioned Agreement. The refinery accepts crude oil from oil companies and delivers finished products back to them in return for a processing fee. Oil products, produced at the local refinery, may be exported in case of surplus only. Oil companies are free to import crude oil at any time for further processing at the refinery. With the exception of heavy fuel oil for the Electricity Authority of Cyprus, the marketing companies distribute all oil products.

The Cyprus refinery applies hydroskimming technology and its maximum capacity is 1.2 millions of MT of crude oil per year. CPRL satisfies about 55% of total refined products demand in Cyprus. The MCI&T examines all import applications for petroleum products in order to ensure that the local refinery is fully utilised. Oil products are imported by the oil marketing companies (75% of total imports), the Electricity Authority of Cyprus (23%) and the two cement plants (2%). The implementation of environmental protection measures and the production of gas oil with a low sulfur content require considerable investment (US$ 39 million). In 1998, CPRL began producing unleaded petrol. Strategic reserves of crude oil and finished products are not maintained in Cyprus.
 The prices of petroleum products are tightly regulated by the state. According to the Petroleum Law 23/86, the maximum retail prices for petroleum products are controlled by the House of Representatives through regulations which are prepared by the Government. Prices are set at a level which is considered adequate to meet the operating cost of oil companies plus a mark-up of 12%. Prices are reviewed every six months and if they are found to be too high, additional taxes are imposed on gasoline. With this marginal tax revenue the government can finance a rebate to all electricity consumers. Excise taxes and other levies are imposed on all gasoline products, but there are no “green” taxes on petroleum products.