Federal Government Plans License Revocation for Majority of 2021 Marginal Oil Fields

The Federal Government is taking action to revoke a substantial number of marginal oil field licenses issued in 2021. This move is aimed at encouraging active exploration and production within the sector.

Revocation of Marginal Oil Field Licenses

The Federal Government of Nigeria is reportedly contemplating the cancellation of numerous licenses granted to marginal oil field operators in 2023, particularly those that have remained non-operational. This decision comes more than 30 months after the government completed the acquisition process for these marginal fields and subsequently notified the winners.

The Minister of State for Petroleum Resources (Oil), Heineken Lokpobiri, made this revelation at the Nigeria Economic Summit in Abuja. According to his statement, out of approximately 100 licenses granted in 2021, only three of them are currently operational. The federal government has expressed its intent to revoke these permits once the three-year deadline for these operators to commence operations elapses.

It's noteworthy that this is not the first time the government has taken action to cancel such permits. In January 2022, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) revoked marginal oil fields awarded to 33 companies due to their failure to meet the 45-day deadline for paying the required signature bonus for the fields.

The government's decision to potentially cancel licenses underscores its commitment to promoting active participation and development within the oil and gas sector, ensuring that awarded licenses are utilized to enhance the nation's energy resources and overall economic growth.

What is the Minister saying?

Lokpobiri has revealed the government's intention to conduct a forthcoming oil bidding round. He pointed out that, of the roughly 100 licenses granted that year, merely three are currently in operation. Once the three-year timeframe for these licenses to commence operations lapses, the government intends to revoke them. Additionally, the government is preparing for an upcoming oil bidding round. This move underscores the government's commitment to ensuring that oil field licenses are actively utilized for operational purposes, thereby promoting further engagement and development within the oil and gas sector.

What you should know
  • Marginal fields are previously known oil or gas discoveries located within International Oil Company (IOC)-owned blocks, which have remained inactive for a minimum of a decade.
  • With the consent of the IOC, the Federal Government designated a piece of land surrounding such discoveries as a Marginal field.
  • The Department of Petroleum Resources (DPR) initiated the 2020 marginal oilfield bid round in June 2020, marking the first such round in 18 years. This round was open to indigenous oil and gas companies and investors seeking involvement in Nigeria's exploration and production sector.
  • The DPR subsequently shortlisted 161 successful companies, out of over 600 applicants for pre-qualification, to advance to the final stage of the bid round process for 57 marginal oilfields in Nigeria.
  • In March 2021, the Federal Government projected the Ministry of Petroleum Resources to generate $600 million following the acquisition and notification of winners in the bid round for new marginal oil fields.
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