Minister Warns Oil Companies to Boost Production or Forfeit Licenses
At the Nigeria Oil and Gas (NOG) Energy Week, the Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, delivered a stern warning to oil companies operating in the country. He stated that the government would no longer tolerate companies that hold onto oil and gas licenses without actively developing the assets.
The minister’s remarks underscore a renewed push by the Tinubu administration to reverse Nigeria's declining oil production. He noted that despite the implementation of the Petroleum Industry Act (PIA) and other reforms aimed at creating a better investment climate, oil output remains lower than it was before the PIA was signed into law.
Key points from the minister's warning and the administration's policy include:
"Drill or Drop" Policy: Lokpobiri emphasized that companies lacking the technical or financial capacity to develop strategic resources must either "step aside or step up through genuine partnerships." This move is a clear enforcement of the "drill or drop" provisions within the Petroleum Industry Act, which are designed to prevent licenses from being held for speculative purposes.
Review of Agreements: The minister announced that President Tinubu has directed the Nigerian National Petroleum Company Limited (NNPC Ltd) Board to review all existing operatorship agreements. This is a direct action to align industry operations with national development goals.
Addressing Underperformance: Lokpobiri expressed frustration with companies that use licenses as leverage to access capital, which is then diverted to unrelated ventures. He described this practice as detrimental to the country's economic progress.
New Fiscal Incentives: The government has introduced executive orders and fiscal incentives, including performance-based tax incentives, for operators who can demonstrate cost savings and efficiency. Lokpobiri's warning comes as a reminder that these incentives require a corresponding commitment to investment and production.
Production Targets: The government has set an ambitious crude oil production target of 2.1 million barrels per day for 2025. The minister's warning is part of a broader strategy to achieve this goal and maximize revenue from Nigeria’s oil and gas sector.
