The Federal Government may soon begin revoking the licenses of dormant oil wells, as the House of Representatives has initiated moves to amend the Petroleum Industry Act (PIA). The amendment would include provisions to withdraw licenses from non-producing oil fields, potentially reshaping the oil industry in Nigeria.
On September 26, 2024, the House of Representatives passed for the first reading a bill titled “A bill for an Act to amend the Petroleum Industry Act, 2021 to provide for licensing requirements for the operation of oil wells, petroleum prospecting licenses, and for revocation of licenses from non-performing oil fields.”
This significant bill was sponsored by Ikenga Ugochinyere, a representative from Ideato North/Ideato South Federal Constituency in Imo State. The bill is expected to return to the floor of the House for further deliberation in the coming weeks.
The proposed legislation seeks to amend Section 81 of the Petroleum Industry Act by adding two new sub-sections, which outline stricter licensing requirements for petroleum mining leases and penalties for non-producing oil fields.
According to the bill, oil companies must meet certain refining capacities to retain their licenses.
“A petroleum mining lease shall be granted under sub-section 1 of this section where the holder of a petroleum prospecting licence shows a minimum crude oil refining capacity of 50,000 barrels per day,” a portion of the bill read.
To accommodate smaller operators, the bill proposes that companies with insufficient refining capacity may form a consortium.
“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 license for the field,” the amendment explains.
This collaborative approach would allow smaller firms to continue operating without losing their licenses due to limited capacity.
The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) would be responsible for overseeing these consortiums and providing a regulatory framework for their operations.
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One of the most critical aspects of the amendment is the potential revocation of licenses for non-performing oil fields.
The proposed sub-section 3 states that “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 measure also applies to consortiums formed under the new provisions.
The bill further defines what constitutes a non-producing oil field.
“An oil field shall be considered non-producing if there has been no crude oil production, reinjection for storage, or any other approved operational activity from that oil field over a continuous two-year period,” the bill clarifies.
To ensure fairness and transparency, the Nigerian Upstream Petroleum Regulatory Commission will also establish guidelines for monitoring oil well performance. The commission will determine the criteria for identifying non-performance, issue notifications prior to revocation, and outline the revocation process.