FG: Era of Holding Nigeria’s Oil, Gas Assets as Souvenirs Over

*Drill-or-drop policy: Operators returning assets voluntarily, says Lokpobiri *Explains how exit of EPC firms pushed up project costs *Kachikwu: How govt interference delayed decisions as NNPC GMD *Ekpo: Nigeria’s 215TCF gas reserves must lead to higher domestic supply *NEITI: NUPRC has brought greater openness to oil bid rounds Emmanuel Addeh in Abuja The federal government has declared an end to the era of oil companies holding petroleum assets without developing them, insisting that operators must either invest in production or relinquish their licences under the drill-or-drop provisions of the Petroleum Industry Act (PIA). Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, said the policy has empowered the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) to recover undeveloped assets and make them available to investors willing and able to develop them. Also, a former Minister of State for Petroleum Resources, and Group Managing Director of the Nigerian National Petroleum Corporation (NNPC), Prof. Ibe Kachikwu, has recalled how government interference and cumbersome approval processes delayed decisions and constrained investment during his tenure at the national oil company. In the same vein, Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, said Nigeria must translate its 215 Trillion Cubic Feet (TCF) of proven gas reserves into higher domestic supply, stronger infrastructure and industrial growth over the next five years.Similarly, the Olu of Warri, Ogiame Atuwatse III, has maintained that the PIA has brought greater calm and responsibility to oil-producing communities by giving them a clearer stake in petroleum operations through Host Communities Development Trusts (HCDTs).They all spoke in a series of interviews published in ‘Upstream Gaze’, a special edition of a quarterly magazine by the NUPRC to mark its fifth anniversary. Lokpobiri said the policy had helped make petroleum assets available for fresh investment, with 50 assets recently offered for bidding and another licensing round in the offing.The drill-or-drop policy, provided for under the PIA requires oil and gas companies to develop their licensed petroleum assets within the stipulated period or risk losing them to the government. The policy empowers the regulator to revoke or recover licences for undeveloped assets and make them available to investors willing and capable of putting them into production.Essentially, it is designed to discourage speculative ownership and the hoarding of oil blocks which has been the norm, accelerate exploration and development, attract fresh investment, increase crude oil and gas production, and help Nigeria achieve its production targets. Lokpobiri said: “The drill-or-drop provision is one of the most consequential provisions of the PIA. It has kept operators on their toes. If you do not develop your assets within the provisions of the law, the NUPRC has the authority to recover those assets and make them available to investors that are willing and able to develop them. “The era of holding assets as souvenirs or symbols of wealth is gone: you either drill or drop. Some operators are now willing to relinquish assets voluntarily because that may be preferable to regulatory recovery. Others are reassessing their portfolios and recognising that certain assets no longer fit their development plans.”He also attributed the increase in active drilling rigs to reforms and improved regulatory activity, saying the number had risen from between 10 and 14 in 2023 to more than 60 currently.However, the minister said the departure of major Engineering, Procurement and Construction (EPC) contractors, deep-offshore contractors and other service providers had contributed to higher project costs in Nigeria, following prolonged uncertainty before the passage of the PIA. According to him, inadequate project activity had made it difficult for contractors to sustain their operations, prompting some to leave the country and reducing competition in critical areas of the industry.“The cost of our projects became higher than in some other jurisdictions because there was limited competition and insufficient project activity. Contractors can only survive where there are projects to execute. If the project pipeline dries up, they will leave,” he said.“Many contractors therefore left the country, leaving only one or two providers in some areas and contributing to prohibitive costs. That was a major challenge, but we are now working to bring them back.” Lokpobiri said the government was engaging contractors in Europe and America to encourage their return, while pursuing fiscal, operational and regulatory reforms to improve Nigeria’s competitiveness.He added that a recent presidential executive order was expected to help unlock almost $50 billion in deep-offshore investments, while the re-entry of shut-in wells following recent divestments was contributing to production growth. He cited developments following Seplat Energy’s acquisition of ExxonMobil’s assets and Renaissance Africa Energy’s acquisition of Shell’s onshore assets as examples of efforts to revive previously inactive wells.Looking ahead, Lokpobiri said Nigeria could significantly increase crude oil production over the next five years if investment commitments and development programmes materialised, projecting a potential output range of 3 million to 5 million barrels per day. Kachikwu: Govt Interference Hobbled My Work as Minister Also, former Group Managing Director of the NNPC and former Minister of State for Petroleum Resources, Prof. Kachikwu, has recalled how government interference and cumbersome approval processes delayed decisions and constrained investment during his tenure at the national oil company. Kachikwu said the petroleum industry had suffered from excessive government control, which restricted managerial independence and made it difficult to implement decisions quickly, even when the commercial case for action was clear.“The oil sector could be very frustrating because there was a great deal of government interference. In my case, I had the rare privilege of serving as both GMD of NNPC and Minister of State. Dealing with the investment process at NNPC was difficult because you could hardly do anything without government approval. “The lack of independence constrained decision-making. The oil sector was run almost like a conventional government agency, which limited creativity. One of the things I tried to do when I came in was to bring more of a private-sector orientation into NNPC and the Ministry. It took quite a while for the system to adjust to new ways of doing things,” he explained.He said the absence of clearly defined institutional powers under the old Petroleum Act meant investment decisions often depended on the initiative of individual officeholders, while the PIA had introduced greater clarity on responsibilities and institutional independence.However, Kachikwu expressed concern that significant government control remained and that the new law had yet to deliver the scale of investment anticipated. He noted that much of the investment recorded since the PIA’s passage involved domestic acquisitions, mergers and takeovers of existing assets, rather than the development of major new production platforms and floating production facilities at the expected pace.Kachikwu also argued that Nigeria needed to raise its production ambitions beyond the federal government’s 3 million barrels per day target, saying the country had the potential to produce 4 million barrels daily by 2030. “I think Nigeria could do four million barrels per day by 2030; targeting three million barrels may be underestimating our potential. We have to recognise that oil will not simply remain in the ground waiting for us indefinitely,” he said.“The world is changing. Electric vehicles are expanding, solar power is growing, alternative energy systems are developing and new producing countries are entering the market. The world will not wait while we increase production gradually. We need a significant volumetric shift and we should sit down and ask what would it take to reach four million barrels per day,” he added. He said Nigeria needed to identify the investments, projects, infrastructure and timelines required to achieve the higher target, warning that the country was competing with emerging oil producers, including Guyana and Namibia, for international capital.Predictable fiscal terms, transparency, competitive project economics and timely government decisions, he stressed, were essential to attracting the investments required to increase production. Ekpo: Enormous Gas Resources Must Benefit Nigerians In the gas sector, the Minister of State for Petroleum Resources (Gas), Ekpo, said Nigeria must translate its 215 trillion cubic feet of proven gas reserves into higher domestic supply, stronger infrastructure and industrial growth over the next five years.He reiterated that the country was targeting gas production of 10 billion standard cubic feet per day by 2027 and 12 billion standard cubic feet daily by 2030, but achieving the goals would require faster development of non-associated gas resources and sustained investment in processing and pipeline infrastructure. “Over the next five years, Nigeria must convert its 215 trillion cubic feet of proven gas reserves into increased production, stronger infrastructure and sustainable industrial growth. Success must ultimately translate into reliable gas supply for power generation, fertiliser production, petrochemicals, manufacturing, Liquefied Petroleum Gas and Compressed Natural Gas, alongside sustained regional gas supply projects and Liquefied Natural Gas exports,” he said. On the Compressed Natural Gas (CNG) initiative, introduced to provide a cheaper transport alternative following the removal of the petrol subsidy, Ekpo said the planned national network of refuelling stations was being expanded from 500 to 1,000.He repeated that more than $2 billion had been catalysed in the CNG ecosystem since 2023, supporting 120,000 vehicle conversions, more than 400 certified conversion centres and over 90 operational refuelling stations.He said the priority was to extend access beyond major cities and ensure that the lower cost of CNG translated into reduced transport expenses for Nigerians. NEITI: NUPRC Has Improved Licensing Processes Speaking on transparency in the upstream sector, the Executive Secretary of the Nigeria Extractive Industries Transparency Initiative (NEITI), Musa Adar, commended the NUPRC for improving licensing procedures, disclosure and regulatory oversight since its establishment under the PIA. Adar, who chaired the House Committee on Petroleum Resources (Upstream) in the Ninth National Assembly, said the law had created a clearer institutional and regulatory framework after years of concerns over transparency, accountability and disclosure.“The NUPRC, as one of the institutions established under the Act, has helped to improve the licensing process, strengthen disclosure and provide more structured oversight of upstream operations. These are commendable developments,” he said. On the 2025 licensing round monitored by NEITI, Adar said the organisation was awaiting its final report and would not pre-empt its conclusions, although preliminary feedback from field officers had not identified any material misalignment in the process.He called for further improvements in disclosure, accountability and regulatory responsiveness, noting that investors valued regulators that were firm, fair, transparent and predictable.Adar also argued that Nigeria’s ambitions should extend beyond crude oil production to greater domestic refining and petrochemical processing to retain more value within the economy and reduce exposure to imported refined products. Olu of Warri: Indigenes Now Have Clearer Stake in Oil Sector For his part, the Olu of Warri, Ogiame Atuwatse III, said the PIA had brought greater calm and responsibility to oil-producing communities by giving them a clearer stake in petroleum operations through Host Communities Development Trusts (HCDTs).He said the framework had improved communities’ understanding of their entitlements and created incentives to protect petroleum infrastructure, although official data would be needed to establish the extent of any reduction in sabotage.The PIA requires oil companies to contribute 3 per cent of their actual operating expenditure for the preceding financial year to the applicable HCDT. “As someone who is on the ground, I would say that it has brought a sense of calm. There is also a clearer sense of direction and consideration. Before the PIA, these obligations were not set out in law in the same way. Today, the framework is captured in black and white and stakeholders have greater clarity about what is expected.“When people know that a defined percentage is available, there can be better planning and consideration of development priorities. That goes a long way towards giving communities a sense of ownership and belonging,” he posited.