NUPRC enforces drill-or-drop rule for oil blocks

By AYOOLA OLAOLUWA 

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has declared that the era of oil companies holding on to exploration licences for years without developing the assets is officially over, as new provisions under the Petroleum Industry Act (PIA) compel operators to either develop their fields or relinquish them.

The Commission Chief Executive of the NUPRC, Oritsemeyiwa Eyesan, disclosed this while receiving a delegation from the Petroleum Directorate of Sierra Leone at the commission’s headquarters in Abuja.

Eyesan also expressed satisfaction with the level of investor interest recorded so far in Nigeria’s 2025 oil licensing round, describing the number of applicants as encouraging despite stricter bidding conditions introduced by the regulator.

This was contained in a statement issued on Friday by the Head of Media and Corporate Communications at the commission, Eniola Akinkuotu.

According to Eyesan, the response from investors to the licensing round has demonstrated renewed confidence in Nigeria’s upstream petroleum sector following regulatory reforms introduced by the Petroleum Industry Act.

She said the ongoing exercise involves 50 oil blocks currently on offer, adding that the strong level of participation was recorded despite a rule limiting companies to a maximum of two blocks, whether bidding individually or as part of a consortium.

“For the 2025 licensing round, we have 50 oil blocks on offer. And the outcome of the pre-qualification submission was a demonstration that there is indeed a very good appetite for the bid round”, Eyesan said.

She explained that the commission deliberately introduced restrictions on the number of blocks that companies can bid for in order to prevent asset hoarding and encourage wider participation from investors.

According to her, the policy ensures that exploration assets are allocated to companies that are genuinely ready to invest and develop them.

Eyesan also disclosed that the commission had taken additional steps to strengthen transparency and investor confidence in the licensing process.

She said the regulator engaged an independent audit firm to review the digital bidding system and validate its integrity.

“In order to ensure total transparency in the licensing round, the commission added an extra layer of validation by partnering with a reputable audit firm to interrogate the system and validate that the system is foolproof. The result of that exercise will be made public just to boost investor confidence”, she stated.

The NUPRC boss said the introduction of the “drill or drop” provision under Section 94 of the Petroleum Industry Act has fundamentally changed the way exploration licences are managed in Nigeria.

She noted that the provision compels operators to either commence exploration and development activities within a specified timeframe or surrender the licence to the government.

According to her, the reform has eliminated the longstanding practice where companies held on to oil blocks for decades without developing them.

“One of the beauties of the PIA is Section 94, which compels operators to either commence work or relinquish the licence, what we call the drill or drop provision.

“The PIA also opened opportunities for both small and big players because there is now a drill or drop provision in the Act. So we have cured the problem of uncertainties”, Eyesan said.

She explained that prior to the reform, some operators retained prospecting licences for as long as 20 years without carrying out meaningful exploration work, thereby slowing down Nigeria’s efforts to expand its petroleum reserves.

“In the past, we had operators who had 20-year licences and sat on these blocks and did absolutely nothing.

“Now we have moved from that era to drill or drop. So we have more assets in the basket, which has given us the impetus to even consider holding bid rounds more frequently, possibly on an annual basis”, the CCE noted.