House of Representatives Moves to Amend Petroleum Industry Act, Targeting Non-Performing Oil Wells
The Nigerian House of Representatives has begun the process of amending the Petroleum Industry Act (PIA) to include provisions that would strip operational licences from non-producing oil wells. This development marks a significant shift in how the government intends to manage underperforming oil assets and stimulate more active participation in the country’s oil sector.
On September 26, 2024, the House passed for its first reading A Bill for an Act to Amend the Petroleum Industry Act, 2021, focusing on licensing requirements for oil wells and petroleum prospecting. It also sets out conditions for the revocation of licences from operators who fail to meet minimum production benchmarks.
The bill, sponsored by Ikenga Ugochinyere, the representative for Ideato North/Ideato South Federal Constituency in Imo State, is expected to return to the floor of the Green Chambers in the coming weeks for further debate and consideration.
A copy of the bill, seen by The PUNCH, outlines amendments to Section 81 of the Petroleum Industry Act. Specifically, the proposed changes introduce new sub-sections (2) and (3) to tighten licensing conditions for oil prospectors and producers.
The revised sub-section 2 stipulates that any company seeking a petroleum mining lease must demonstrate a minimum crude oil refining capacity of 50,000 barrels per day. This measure is designed to ensure that only serious, capable operators are granted leases, thereby reducing dormant or inactive oil fields.
A key provision within this section also allows smaller operators to band together in consortia. “Any petroleum prospecting licensee without the minimum crude oil refining capacity specified in this section may form a consortium consisting of not more than five licensees, and such a consortium shall be granted a licence for the field,” the bill reads. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) will be empowered to develop the framework for these consortiums’ operations.
Sub-section 3 further clarifies the conditions under which licences may be revoked. It states, “Where a licensee fails to produce the required capacity of crude oil for a continuous period of two years, the commission shall revoke the licence of that licensee.” This clause will also apply to consortia formed under the new regulations.
The bill goes on to define what constitutes a “non-producing” oil field, specifying that any oil field with no crude oil production, reinjection for storage, or any other approved operational activity for a continuous two-year period will be deemed inactive. The NUPRC will be tasked with developing the guidelines for monitoring oil well performance, determining non-performance, and managing the process of licencerevocation.
Calls for amendments to the PIA have grown louder since its enactment in 2021, with various industry stakeholders—including the Host Communities of Nigeria Producing Oil and Gas, Independent Petroleum Producers, and the Oil Producers Trade Section—urging the government to introduce stricter regulations and reforms. These groups argue that current regulatory frameworks allow inefficiencies to persist, particularly in underperforming or dormant oil fields.
If passed, this new legislation could usher in a wave of regulatory changes aimed at revitalising Nigeria’s oil industry, ensuring that both local and international operators maintain active participation or face losing their stakes in the sector. The focus on creating consortia for smaller operators also signals a shift towards collaborative, capacity-building efforts to unlock more value from the country’s rich oil reserves.
As the bill moves through the legislative process, it will likely face intense scrutiny from industry players, but proponents argue that these amendments are essential to driving greater efficiency, accountability, and productivity in Nigeria’s oil sector.
