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Nigeria Set to Revoke Dormant Oil Licenses

Revocation of Unused Oil Licenses: A New Strategy for Nigeria's Oil Sector

by Ikeoluwa Juliana Ogungbangbe

In a decisive move to optimize its oil sector, the Nigerian government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), plans to revoke unused oil exploration leases. This decision targets companies granted exploration rights but have failed to initiate activities.

NUPRC Chief Executive Gbenga Komolafe, in a discussion with Reuters, emphasized that the Federal Government’s approach aligns with the Petroleum Industry Act (PIA). The Act mandates a focus on national value delivery, ensuring only entities with technical and financial robustness retain their leases.

Komolafe highlighted the impending review of these leases. He noted that new lease awards would hinge on meeting specific terms and conditions, in line with the PIA’s stipulations.

Recent data from the NUPRC reveals a significant lapse in exploration activities. Since 2003, about 53 exploration leases have been issued. However, over 60% of these licenses, issued to both local and foreign oil firms, have expired. Out of these, 33 licenses have not been renewed, including four mired in contractual disputes. While these leases haven’t been automatically revoked, the regulator’s stance is clear: indefinite holding of leases without action is no longer acceptable.

The PIA, enacted in 2021, has given the regulator enhanced authority to scrutinize the capabilities of companies holding oil exploration leases. This move is part of broader efforts to reinvigorate the oil sector, which has seen a downturn in investments.

Challenges such as rising insecurity, sabotage of oil infrastructure, and legal disputes, particularly in the Niger Delta region, have led major oil companies to retreat from onshore and shallow water assets. This exodus, coupled with rampant pipeline vandalism and oil theft, has led to a noticeable decline in exploration activities and crude oil production, further hampering the sector’s growth.

This story is a vital development in Nigeria’s oil industry, signaling a shift towards more stringent regulation and oversight. The government’s plan to revoke unused oil licenses aims to streamline the sector, ensuring that only capable and committed companies are involved in exploration activities. This move is expected to revitalize the industry, attract more investments, and ultimately contribute to the country’s socio-economic development.

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