Federal Government Considers Cancelling Inactive Oil Field Licenses Amidst Industry Reforms

The Federal Government is considering the cancellation of numerous licenses issued to marginal oil field operators that have remained inactive. Gbenga Komolafe, CEO of the Nigerian Upstream Petroleum Regulatory Commission, revealed plans to Reuters on December 4, emphasizing that only companies with strong technical and financial capabilities would retain their leases. Komolafe stated that the commission, in line with the Petroleum Industry Act (PIA), aims to deliver value to the nation, and reviews of existing leases will be conducted, with new lease awards subject to specific terms and conditions.

As per the latest data from the NUPRC, more than 60% of prospecting licenses issued to local and foreign oil firms, out of the 53 exploration leases issued from 2003 to the present, have expired. 

Of the 53 licenses, 33 have lapsed and not been renewed, including four entangled in contract disputes. Although the leases haven't been automatically revoked, the regulator is no longer willing to allow indefinite holding by these companies.

Enacted in 2021, the PIA grants the regulator authority to assess the technical and financial capabilities of companies holding oil exploration leases. In Nigeria, limited investments in oil exploration have occurred as major oil companies exit onshore and shallow water assets due to increasing insecurity, sabotage of oil infrastructure, and legal disputes with communities in the Niger Delta.