By Ese Ufuoma
Nigeria’s upstream regulator is demanding answers from oil companies that have failed to meet their development commitments. As the deadline approaches, the real test is whether the threat of losing valuable petroleum assets will finally turn awarded acreage into producing fields.
As a deadline of October 31, 2026 set by Nigeria’s upstream petroleum regulator elapses, a difficult question before a group of oil and gas investors is: can they justify holding petroleum assets they have yet to develop, or will they risk losing the right to control them?
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has given holders of Petroleum Prospecting Licences (PPLs) awarded under the 2020 Marginal Field Bid Round, the 2022/2023 Mini Bid Round and the 2024 Licensing Round until the end of the month to explain their progress, identify the obstacles delaying their work and present credible plans for meeting their obligations. Companies that fail to satisfy the requirements could face regulatory sanctions, including the possible loss of their licences.
The directive, contained in a September 14 circular signed by the commission’s chief executive, Oritsemeyiwa Eyesan, is more than another regulatory reminder. It signals a firmer approach to an issue that has long complicated Nigeria’s ambition to maximise its petroleum resources: the distance between awarding an oil block and developing it into an economically productive asset.
For a country that depends heavily on petroleum earnings to support public finances and foreign exchange inflows, an undeveloped oil block is not simply a private investment waiting for the right moment. It represents a resource whose potential contribution to production, government revenue, employment and energy security remains unrealised.
Yet the question of who stands to lose a licence is more complicated than a list of companies approaching the deadline. The NUPRC has not publicly identified, in the cited directive, a definitive list of individual licence holders that will lose their assets on October 31. Rather, it has instructed affected licensees experiencing constraints to disclose their compliance status, explain their difficulties and submit mitigation measures alongside revised implementation timelines. The circular is a general advisory, not a formal notice of default.
That distinction matters. October 31 is the deadline for the required disclosure, not an announced date on which every underperforming licence will automatically be cancelled. What follows will depend on the obligations attached to each licence, the operator’s actual performance and the regulatory process applicable to any alleged default.
Nevertheless, the message from the regulator is unmistakable: securing an oil block does not confer an indefinite right to hold it without fulfilling the commitments on which the award was based.
The legal foundation for this position is the Petroleum Industry Act (PIA) 2021, which governs the award and administration of petroleum licences. Under the framework cited by the Commission, a Petroleum Prospecting Licence comes with a defined period for exploration and specific obligations that must be met within the applicable term. The relevant provisions include Sections 77, 78 and 88, alongside Sections 96 and 97, which provide the basis for addressing defaults and revocation.
In practical terms, the regulator is seeking to enforce the principle commonly described as “drill-or-drop”. Investors are expected to develop their assigned acreage in accordance with approved work programmes or risk being required to relinquish it. Depending on the circumstances, enforcement could include refusing an extension, requiring the surrender of acreage, calling in work performance security or commencing revocation proceedings.
For the companies concerned, the consequences could reach beyond the loss of a licence. An award represents an opportunity to establish an asset, attract financing, negotiate partnerships and build a future production business. Losing that opportunity may also undermine the value of money and effort already committed to preliminary studies, commercial negotiations and project planning. The precise financial exposure, however, will depend on each company’s contractual arrangements and the stage reached in its development programme.
The stakes are particularly significant for the 2020 Marginal Field Bid Round. That exercise produced 50 Petroleum Prospecting Licences, with the regulator previously projecting that the fields could deliver approximately 58,000 barrels of oil per day and 87 million standard cubic feet of gas per day. Those figures represented projected potential, not proof that the entire volume had subsequently been developed or brought into production.
Five years after that round, the question is no longer only whether investors were interested enough to secure the assets. It is whether they have translated those awards into the exploration and development activities required to unlock their value.
The problem is that an oil field does not move from paper to production simply because a licence has been issued. Exploration requires technical expertise, geological data, equipment, capital and a credible plan for bringing hydrocarbons to the surface. Where commercial discoveries are made, operators must still navigate development costs, infrastructure requirements, security concerns and the process of bringing production facilities online.
The NUPRC has acknowledged several of these difficulties. In its September circular, it identified financing constraints, rig availability, insecurity, host-community engagement, inadequate infrastructure, regulatory approvals and disagreements among partners as factors that could delay the execution of approved work programmes. It also indicated its willingness to help resolve difficulties within its statutory authority.
This acknowledgement introduces an important distinction in the debate. A company that has deliberately held an asset without making the required investment presents a different case from an operator that has made genuine progress but encountered serious obstacles beyond its immediate control. Effective enforcement must be able to distinguish between the two without allowing explanations to become an indefinite excuse for inactivity.
For instance, an operator struggling to secure financing may need additional investment partners, a revised funding structure or a phased development plan. A company facing difficulties with rig availability may need to renegotiate its work schedule. Where disputes between joint-venture partners have stalled a project, resolving questions of operatorship, financial contributions and decision-making may be essential to getting work moving again.
However, the regulator has made clear that these challenges do not automatically exempt licence holders from their obligations. Nor does engaging the commission suspend the licence term. In particular, internal disagreements among partners cannot, by themselves, justify a failure to meet agreed commitments.
This places the burden squarely on the operators to demonstrate not just that they have encountered difficulties but that they understand what has gone wrong and have a workable plan to address it.
Meanwhile, the deadline raises questions about how effectively Nigeria has monitored the progress of petroleum assets since their award. If companies can hold licences for extended periods without meeting important milestones, how early are signs of underperformance identified? Are work programmes sufficiently monitored to allow intervention before delays become serious? And how can the regulator ensure that the next licensing round produces measurable development rather than another collection of promising awards awaiting implementation?
For serious investors, predictable rules are essential. They need to know that licence obligations will be enforced fairly, that the terms of their awards will be respected and that genuine operational problems can be addressed through established procedures. Equally, investors who meet their obligations need confidence that competitors will not enjoy an unfair advantage by securing acreage and postponing the investment required to develop it.
For the NUPRC, the challenge will be to ensure that enforcement is neither arbitrary nor ineffective. Revocation may be necessary where obligations have been breached, and the applicable legal process supports that outcome. In other cases, a viable corrective plan could offer a better route to unlocking the resource. The commission itself has stated that its objective is to increase production, not simply to take licences away.
Ultimately, October 31 should be judged not by the number of warnings issued but by the progress that follows. If non-performing operators are held accountable and viable assets move closer to development, the deadline could strengthen confidence in Nigeria’s petroleum licensing system. If it produces another round of explanations without measurable change, the country risks repeating a familiar cycle: allocating valuable resources, waiting for investment and then asking why the promised production has not materialised.