… Warns Oil Licence Holders to Develop Fields or Relinquish Acreage
• Marginal bid round, 2022/23 Mini Bid Round and 2024 Licensing Round winners affected
• Licence holders given until October 31 to disclose development constraints
• Regulator may refuse extensions, call performance bonds and begin revocation
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has moved to enforce the “Drill-or-Drop” provisions of the Petroleum Industry Act (PIA) 2021, warning holders of petroleum prospecting licences that undeveloped oil and gas acreage could be relinquished to the Federal Government.
The enforcement drive will affect non-performing licences awarded under the Marginal Field Bid Round, the 2022/2023 Mini Bid Round and the 2024 Licensing Round.
The commission said the move is part of its broader effort to increase Nigeria’s oil and gas production by ensuring that licensed acreages are actively explored and developed within the timelines prescribed by law.
In a circular issued to licence holders, the NUPRC reminded operators that petroleum prospecting licences are granted for defined periods and carry specific exploration and work commitments.
It said continued ownership of an acreage is conditional on the licence holder meeting those obligations within the applicable licence term.
NUPRC: Acreage Must Be Worked
The regulator said the PIA establishes a straightforward principle: oil and gas acreage is granted to be worked, while acreage that is not developed within its authorised term can return to the Federal Government.
The commission said Sections 77, 78 and 88 of the PIA, together with the default and revocation provisions under Sections 96 and 97, provide the legal basis for enforcing the policy.
Consequently, the NUPRC said it intends to take action against non-performing acreage.
Possible measures include refusing requests for licence extensions, requiring relinquishment of acreage, calling in work performance security and commencing revocation proceedings where applicable.
The warning represents a potentially significant shift for marginal and recently awarded fields, particularly where licence holders have yet to translate their awards into concrete exploration and development activity.
Financing, Security and Partner Disputes
However, the regulator stressed that its objective is to increase production rather than simply take licences away from investors.
The NUPRC acknowledged that operators can face legitimate obstacles in meeting their work commitments, including financing difficulties, limited rig availability, insecurity, host-community issues, infrastructure constraints, regulatory approvals and disputes between partners.
The commission said it is prepared, within the limits of its statutory mandate, to help licensees address such challenges and facilitate discussions where appropriate.
Licence holders experiencing difficulties have been directed to notify the commission by October 31, 2026.
Their submissions must set out their level of compliance with licence obligations, including execution of approved work programmes; the specific obstacles delaying operations; and proposed mitigation measures and revised implementation timelines.
NUPRC Draws Line on Licence Extensions
The commission, however, warned that engagement with the regulator will not automatically suspend the duration of a licence or exempt an operator from its contractual and statutory obligations.
It also said it would not assume jurisdiction beyond its legal mandate or override existing dispute-resolution mechanisms or the authority of the courts.
This is particularly relevant to joint ventures and other partnership arrangements, where disagreements over funding and operatorship can delay field development.
The NUPRC urged licence holders to ensure that partnership and financing agreements clearly address issues such as participating interests, operatorship, cash calls, defaults, assignment, changes in control, deadlocks and binding dispute-resolution mechanisms.
It said internal disagreements between partners would not constitute an excuse for failing to meet licence obligations.
Production Growth at the Centre of Policy
The enforcement of the Drill-or-Drop provisions comes as Nigeria seeks to raise crude oil and gas output, attract fresh upstream investment and maximise the economic value of its petroleum resources.
For the regulator, the central issue is no longer simply the award of acreage but whether licence holders are converting those awards into actual exploration, appraisal and production activity.
The NUPRC said the current circular is a general advisory and does not constitute a formal notice of default under the PIA or related subsidiary instruments.
Nevertheless, the notice places licence holders on clear notice that failure to progress their approved work programmes could expose them to regulatory action.
The commission said all enquiries concerning the directive should be addressed to Bashari Indabawa, Executive Commissioner, Exploration and Acreage Management, NUPRC.
The consequences for non-performing licence holders
The consequences for non-performing licence holders could be significant. Operators that fail to meet their approved work commitments may be denied licence extensions, required to relinquish their acreage, have their work performance securities called in or face revocation proceedings. The NUPRC, however, has indicated that its immediate objective is to get dormant or underdeveloped fields into production rather than simply take them away. Licence holders facing financing, security, infrastructure, rig availability, regulatory or partner-related challenges have until October 31, 2026, to disclose the constraints and submit credible plans for meeting their outstanding obligations.
The licence development consequences can be stated more clearly as follows:
- Failure to meet work commitments: A licence holder that does not carry out its approved exploration or development programme within the prescribed licence period risks losing the right to retain the acreage.
- No automatic extension: The NUPRC can refuse an application for extension where the licence holder has not fulfilled the required work programme.
- Relinquishment of acreage: Non-performing operators may be required to give up the affected acreage, allowing the Federal Government to make it available for future development.
- Work performance security can be called: Where applicable, the NUPRC can call in the work performance security provided by the licence holder to guarantee its commitments.
- Revocation proceedings: Persistent or material non-performance can lead to revocation proceedings under the Petroleum Industry Act.
- Partner disputes are not an excuse: Disagreements between joint-venture partners over financing, operatorship, cash calls or ownership do not suspend the licence holder’s obligations.
- Regulatory engagement does not stop the clock: Reporting financing, security, infrastructure or other constraints to the NUPRC does not automatically extend the licence term or excuse missed obligations.
- Opportunity to remedy constraints: The NUPRC is nevertheless giving affected operators an opportunity to disclose genuine obstacles and submit mitigation measures and revised development timelines by October 31, 2026.