Nigeria’s oil and gas sector regulator in charge of the critical exploration and production segment of the industry, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has today launched a new oil licensing round for 2025, highlighting the ongoing efforts to boost Nigeria’s oil and gas sector. Gbenga Komolafe, the Commission’s Chief Executive, at the 2024 Licensing Round Commercial Bid Conference in Lagos, made known that the new round targets underexplored assets, fallow fields, and natural gas development.
The NUPRC chief has introduced a potential turning point for Nigeria’s oil industry with the announcement of a “drill or drop” policy. More specifically, this policy outlines the regulator’s intent to enforce clear terms for oil block allocations, asserting its right to reclaim blocks from owners or allottees if they are not developed, or remain underdeveloped.
The issue of idle blocks has long been a concern for industry observers. However, doubts persist about the feasibility of NUPRC’s plan to reclaim underdeveloped fields from allottees who fail to meet production targets, especially given the widespread belief that many of these companies are owned by Nigerians with significant political influence.
NUPRC’s Growing Role in Nigeria’s Oil Sector
The NUPRC plays a pivotal role in regulating and managing Nigeria’s upstream oil and gas sector. The Commission, established under the Petroleum Industry Act (PIA) of 2021, has been tasked with enforcing regulations, ensuring compliance, and optimizing the use of Nigeria’s hydrocarbon resources. With the recent launch of the 2025 oil licensing round, NUPRC is taking a proactive stance in addressing the issue of underdeveloped and idle oil fields, a problem that has plagued the sector for years.
As part of its new mandate, NUPRC has begun recovering idle oil blocks, aiming to address the inefficiencies in the country’s oil licensing system. This new initiative is focused on revitalizing underexplored fields and addressing the challenges that have historically impeded Nigeria’s oil production. The Commission’s actions signal that it may reclaim oil fields from operators who fail to develop them, as stipulated in the licensing agreements.
Challenges in Previous Licensing Rounds
NUPRC’s efforts come in the wake of previous licensing rounds, such as those in 2000, 2005, and 2010, which faced numerous challenges. Many of the marginal fields awarded in these rounds were either underdeveloped or stalled due to a lack of technical capacity or financial resources from the operators. In some cases, licensees failed to meet production milestones, which resulted in the wastage of valuable oil resources.
The 2022–2024 licensing round, which is still ongoing, was intended to address some of these issues by introducing more stringent regulations and expectations. However, concerns about the performance of some of the awarded operators persist, and NUPRC’s increasing oversight may be an attempt to address these concerns head-on. The Commission’s decision to reclaim idle fields could potentially streamline the sector and create opportunities for more capable operators to take on these resources.
Criticisms of Marginal Field Rounds in Nigeria
A key criticism of Nigeria’s oil licensing rounds has been the role of political influence and interference in the allocation process. Many industry observers have pointed out that the awards in earlier rounds, especially those in 2000 and 2005, were influenced by backdoor deals and political connections. This has led to the allocation of oil fields to operators who lacked the technical expertise or financial resources to develop them. As a result, many of these fields remained undeveloped, and Nigeria’s oil production stagnated.
The 2010 round, while aimed at being more transparent, still faced criticisms about the fairness of the allocation process. Despite improvements in the regulatory framework, political influence remained a significant concern. NUPRC’s mandate under the PIA aims to tackle these issues by enhancing transparency, accountability, and enforcement. The Commission’s new focus on reclaiming idle oil fields could be an attempt to mitigate the long-standing issue of influence peddling in the licensing process and to ensure that fields are developed in line with Nigeria’s economic and energy goals.
Will NUPRC Reclaim Oil Fields?
As part of its efforts to ensure that oil fields are developed and contribute to Nigeria’s economic growth, NUPRC may need to take more drastic steps, including reclaiming underdeveloped fields. The Commission’s ability to enforce compliance with licensing agreements is crucial in determining whether operators will be held accountable for failing to meet production targets. The PIA gives NUPRC the authority to impose penalties on operators who do not meet their obligations, including the possibility of license revocation.
The focus on reclaiming idle oil fields is particularly pertinent in light of Nigeria’s declining oil output. The country’s oil production has been facing challenges, and NUPRC’s efforts to optimize resource usage through the recovery of idle blocks could help increase the country’s production capacity. However, the process of reclaiming fields is complex and requires careful consideration of the economic implications. Revoking licenses or reallocating fields could send a strong signal to operators, but it also carries the risk of deterring future investment if not handled properly.
Lessons from Other African Countries
Nigeria is not the only African country to grapple with underdeveloped oil fields. Ghana, for example, has taken steps to cancel the licenses of oil blocks awarded in earlier rounds due to non-compliance with development timelines. In 2018, the Ghanaian government revoked the licenses of several operators who failed to meet their work program obligations. This move was seen as part of a broader effort to ensure that the country’s oil resources were being developed efficiently and responsibly.
Similarly, in the Democratic Republic of Congo (DRC), the government canceled a licensing round in 2024, citing environmental concerns and late submissions. These examples highlight the increasing trend in Africa of enforcing stricter compliance with licensing agreements and ensuring that resources are developed in a timely and responsible manner.
Will the NUPRC Join the African Trend?
Will the Commission be able to take decisive action to reclaim underdeveloped fields from operators who fail to meet their obligations? The answer hinges on NUPRC’s ability to navigate the complexities of the oil industry, strike a balance between regulatory enforcement and attracting investment, and ensure Nigeria’s oil resources are developed to their full potential, all while contending with the realities of Nigerian politics.
Should the NUPRC reclaim oil blocks from allottees, the move is certain to face intense scrutiny of the politics—particularly regarding the political dynamics. Will the NUPRC target oil blocks owned by companies without close ties to the current president or government, or will it remain impartial in its efforts?
With the ongoing 2025 licensing round and the recovery of idle oil blocks, NUPRC is taking significant steps toward reshaping Nigeria’s oil and gas landscape. Whether this will result in a more efficient, transparent, and productive sector remains to be seen, but the Commission seems to be signalling a push to optimize the country’s oil resources.
