Upstream Regulator Secures $400m In Oil Wells Closure Costs

Nigeria is leveraging global experiences to protect its oil and gas sector from costly liabilities, having secured over $400 million in decommissioning and abandonment obligations from oil wells, the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has revealed.

The NUPRC chief executive, Gbenga Komolafe, shared this milestone on Wednesday, during the Nigerian Extractive Industries Transparency Initiative (NEITI) Companies Forum in Lagos.

Represented by the deputy director Efemona Bassey, Komolafe emphasised how Nigeria has drawn lessons from the financial burdens seen in global divestment cases such as those in the North Sea, Gulf of Mexico, Canada, and Australia, where decommissioning costs have escalated into billions of dollars.

“Nigeria is not immune to these challenges. To avoid such costly mistakes, the country, through the Petroleum Industry Act (PIA) and subsequent regulatory actions, has taken bold and decisive steps,” he said.

The CCE stated that the lessons from these experiences guided the recent divestment approvals from NADC to Cando Energy Resources, Equinor to Chappal Energies, Mobil Producing Nigeria Unlimited to Seplat Energies, SPDC to Renaissance Africa Energy, and TotalEnergies to Telema Energies.

The CCE said, “Without a robust and enforceable framework for abandonment and decommissioning, divestment transitions can create lasting financial and environmental burdens.

“Nigeria is not immune to this challenge, and if we are to avert costly mistakes. It is precisely to avoid this outcome that Nigeria, through the Petroleum Industry Act and subsequent regulatory actions, has taken bold and decisive steps”

The NUPRC boss highlighted Nigeria’s response to the recent divestments, which is in accordance with Sections 232 and 233 of the PIA, which place full responsibility for the decommissioning and abandonment of petroleum wells, installations, structures, utilities, plants, and pipelines on licensees and lessees.

Similarly, Chapter 3 of the PIA and Section 104 establish specific obligations for host community development and environmental remediation, respectively.

He said each of the 2024 divestments provided a critical opportunity to put the Commission’s Divestment Framework to the test and action: rigorously assessing the technical capacity of acquiring entities, verifying their financial strength, and securing decommissioning and abandonment obligations through upfront escrow arrangements.

Komolafe said, “The results from 2024 speak for themselves. Over US$400 million in pre-sale decommissioning and abandonment liabilities have been secured through Letters of Credit and escrow accounts.

“Host Community Development Trust obligations are fully honoured. Environmental remediation commitments worth over US$9.2 million have been pledged while awaiting the formal gazetting of the ERF Regulations.”

The CCE said beyond the significant progress achieved through our Divestment Framework, it is important to highlight another milestone.

“Since April 2023, we have approved 94 Decommissioning and Abandonment (D&A) plans, in strict alignment with the PIA. These approvals represent total liabilities of $4.424 billion, arising from all Field Development Plans submitted within this period, and will be remitted progressively over the production life of the respective fields into designated escrow accounts,” he added.

He further disclosed that the Commission has addressed a long-standing concern with the IOCs regarding the domiciliation of the escrow accounts; and the regulatory framework, developed after extensive consultations with industry stakeholders, is now awaiting gazetting by the Ministry of Justice.

He acknowledged the invaluable role of NUPRC partners, NEITI and Oil Producers Trade Section (OPTS).

According to him, as the moral compass of the extractive industry, NEITI has consistently ensure d that NUPRC embedded transparency and disclosure in all its regulatory processes while OPTS, the united voice of producers, has supported us in shaping regulations that balance industry realties with national priorities.

He added, “In addition to divestments, the Commission has been working together with operators, particularly members of OPTS, on life extension projects, ranging from facility integrity audits to subsea upgrades and enhanced reservoir management measures that sustain safe production, delay decommissioning, reduce environmental risks, and secure resilience across our mature fields.