A significant shift is taking place in Nigeria’s upstream oil and gas sector where indigenous energy companies are increasingly entering the field and positioning themselves to compete on a larger scale. Local oil companies (LOCs) are acquiring assets divested by International Oil Companies (IOCs) while emerging firms are successfully securing blocs in marginal fields and shallow waters. The past year has been particularly noteworthy, marked by the completion of major divestment deals and conclusion of the 2024 bid round.
A new era seems to have begun with new entrants in the industry securing lucrative oil wells during the just-concluded 2024 bid round, a process overseen by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) and marked by transparency. This was the first bid round since the enactment of the Petroleum Industry Act (PIA) in August 2021 and the first fully supervised by the Commission. Engr. Gbenga Komolafe, the Commission Chief Executive (CCE), described the moment as pivotal: “This Licensing Round (2024) is not merely a commercial exercise; it is a bold declaration that Nigeria is ready for business.”
Chapter 4 of the PIA supports indigenous oil companies in Nigeria’s upstream sector. It stipulates provisions for marginal fields. These fields, defined as dormant or categorised as marginal before January 1, 2021, are convertible to Petroleum Prospecting Licenses (PPLs), allowing indigenous firms to benefit from favourable terms. Such fields must have been discovered but left untapped for at least ten years from the initial discovery date. The PIA also prioritises local content and transparency, creating a more conducive environment for indigenous participation. It was the cornerstone of the 2024 Licensing Round as it introduced several attractive fiscal regimes designed to stimulate investment.
Section 7(t) on the other hand empowers the NUPRC to conduct periodic licensing rounds, granting PPLs and Petroleum Mining Leases (PMLs) to prospective investors. The Commission has a responsibility to ensure transparency, governance and accountability in managing the country’s petroleum resources. In discharging this mandate, the commission embarked on the completion of existing bid rounds and initiated the 2024 round. The 2024 round had special interest in local entrepreneurs.
The commission had a fundamental role in supporting indigenous oil companies through regulatory oversight, cooperation facilitation and promotion of local content initiatives. This was meant to encourage local participation in the industry and enhance contributions to Nigeria’s energy security. The commission, nonetheless, has a responsibility to ensure compliance among indigenous oil companies through operational monitoring, regulatory reviews and stakeholder engagement, while actively collaborating with the Independent Petroleum Producers Group (IPPG) to tackle compliance challenges and promote inclusion in the regulatory process. Also, indigenous firms facing funding difficulties are assisted by streamlining licensing and approvals, fostering production-based lending and collaborating with financial institutions, thereby creating a more supportive environment.
Nigeria is rich in crude oil, condensate and natural gas reserves, accounting for over 30 per cent and 33 per cent of the continent’s total oil and gas reserves, respectively. The country also possesses a diverse array of renewable energy resources. Its future is largely linked to the development of key mature hydrocarbon fields, which offer substantial opportunities for growth. These include Nsiko Field (OML 145), Bonga Southwest/Aparo Field (OML 118) and OML Egina South Field (OML 130). These fields, including others in development, form a fundamental part of Nigeria’s long-term strategy to increase production capacity and maximise its reserves. Nigeria targets oil and condensate output of 2.06 million barrels per day (bpd) for 2025 and 2.6 million (bpd) in 2026.
Lately, there have been concerted efforts to leverage this endowment and boost Nigeria’s economy, through attractive incentives to investors. For instance, on February 28, 2024, President Bola Ahmed Tinubu signed three Executive Orders as part of a government initiative to enhance investment opportunities in the country’s oil and gas sector. The aim was to improve the efficiency and attractiveness of the sector, with deliberate incentives for oil and gas development, including measures to prevent local content bottlenecks from hindering development and firm directives for reducing contracting costs and timelines to enhance global competitiveness and achieve a higher rate of return on investments. This marked a significant step in a transformative agenda aligned with stringent international standards and commitments.
Given its mandate, the NUPRC concluded the 2022/2023 licensing rounds and initiated the 2024 licensing round which it supervised from start to finish. This era presents significant opportunities for domestic and international investors in Nigeria’s hydrocarbon industry. The rounds were designed to align with global sustainability goals, ensuring that Nigeria’s oil and gas development meets both economic and environmental standards. The Commission, in line with the PIA, introduced comprehensive reforms and developed a regulatory framework aimed at modernising licensing processes, enhancing stakeholder engagement and ensuring environmental sustainability.
The aim, basically, was to attract both local and international investments that would drive growth and innovation. The Commission issued a licensing round guideline and published a plan for the blocks on offer. The 2024 round featured several blocks selected across varied geological terrains – from the promising onshore basins to the lucrative continental shelves and the unexploited depths of deep offshore basins.
To facilitate a smooth licensing process, there was a need for a visible roadmap for interested investors. NUPRC, the industry’s lead regulator announced the Licensing Round, which enthroned a pre-qualification process where companies had to demonstrate technical and financial capabilities, facilitated technical and commercial bid submissions, evaluated bids and hosted Bid Conferences. It subsequently supervised competitive bidding processes in line with those provisions. What follows is the award of licenses or leases and periodic assessments of the awardees.
The key objectives of the licensing round include: Growing the country’s oil and gas reserves through aggressive exploration and development, boosting production while expanding opportunities for gas utilisation across the value chain, enhancing energy security and economic growth, attracting investments while creating employment opportunities and enabling technology transfer and optimising the value of petroleum assets, and ensuring sustainable development of Nigeria’ untapped potentials.
The 2024 Licensing Round was unique in some ways. It featured investor-friendly terms, streamlined allocation, enabled collaboration for local content development and ensured sustainability commitments.
Specifically, local entrepreneurs were assured of tax incentives, access to resources and capacity building, among others. Launched in May 2024, the exercise offered twenty-four (24) selected blocks spanning onshore, shallow water and deep offshore terrains. Complementing these were the seven deep offshore blocks from the 2022 Mini Bid Round, bringing the total to thirty-one (31) blocks.
Several new companies entered the 2024 bidding process and won bids, even against long-standing and prominent entities. These include Sifax and Royal Gate Consortium, Oceangate Engineering and Oil and Gas Limited, Applefield, First E&P, MRS Oil and Gas Limited, Hakilat Oil and Gas Consortium Limited and Biswal Oil and Gas Limited, among others. This reflects increased interest in the country’s oil and Gas sector following regulatory changes.
Engr. Komolafe had maintained that the exercise was anticipated to be a significant success for Nigeria, representing a major step toward increasing the country’s oil and gas reserves through proactive exploration and development efforts. This initiative aimed to enhance production, expand opportunities for gas utilisation and promote comprehensive development across the upstream value chain. It also provided a chance to reaffirm Nigeria’s commitment to openness and transparency, in alignment with the principles of the Extractive Industry Transparency Initiative (EITI).
On a global scale, the Licensing Round is bound to benefit all stakeholders and, in the long run, contribute to sustained energy sufficiency. Notably, the process for the Licensing Round was designed with a focus on global energy sustainability goals. Implementation is targeted to address not only technical and commercial factors but emphasise strategies, processes and actionable plans that align with net-zero carbon emission targets, the elimination of gas flares, and overall environmental, social and governance (ESG) considerations.
While acknowledging the reality of energy transition and Nigeria’s readiness to capitalise on the opportunities arising from the evolving landscape, Nigeria sleeps well acknowledging that recent global events suggest the continued relevance of fossil fuels as a fundamental component of the global energy mix well into the future, even beyond the established 2050 targets for achieving net-zero carbon emissions.
The Nigerian 2022/2023 and 2024 licensing rounds therefore represented a fundamental opportunity for investment in the oil and gas sector, with a roadmap to attract local and international players.
– James, a communication specialist, is a Fellow of the Nigerian Guild of Editors
