Financial Energy Review
The 2024 oil licensing bid round in Nigeria has concluded with significant shifts in the oil industry, highlighted by the absence of major international oil companies (IOCs) in the bidding process. This year’s bid round has been described as a landmark event, marking a clear departure from previous years when IOCs were at the forefront, especially in bidding for deepwater oil blocks. However, in a striking development, the IOCs, with the exception of TotalEnergies, largely ignored the round, signaling their commitment to divest from fossil fuel assets as part of a global energy transition.
The bidding process concluded on Wednesday with the announcement of the winners by Gbenga Komolafe, the Chief Executive Officer of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC). The event, held in Lagos, revealed that Nigeria’s state-run oil company, the Nigerian National Petroleum Company Limited (NNPCL), had bid for three deep offshore blocks—PPL 303, PPL 305, and PPL 306—but lost out to competing firms. Despite its failure, Komolafe confirmed that NNPCL remains a “reserved bidder” for these assets, meaning the company could still acquire the blocks if other winners fail to meet their obligations.
In contrast, a number of indigenous and foreign companies succeeded in securing the rights to various blocks. Among the winners, TotalEnergies, the only major IOC to participate in the bid round, won one of the two blocks it contested for. Other winners included SIFAX & RoyalGate Consortium, OceanGate Engineering Oil and Gas Ltd, Homeland Integrated, and BISWAL Oil & Gas Ltd, among others.
Komolafe expressed satisfaction with the outcome, emphasizing that the process had been transparent and aligned with international best practices, a significant shift from previous rounds where disputes and accusations of lack of transparency were common.
“This is a historic day for Nigeria’s oil industry,” Komolafe said in a statement after the bidding process. “This is the first time we are conducting a licensing round that can be adjudged as fair, transparent, and in alignment with international standards. The Petroleum Industry Act mandates that we carry out these processes in a manner that reflects global best practices, and I believe today’s exercise shows that we are committed to that vision.”
In total, 31 oil blocks were offered, but only 25 attracted bids. The remaining six blocks will be included in the next round in 2025. Komolafe highlighted that the next bid round would focus on unexplored and undeveloped assets, particularly those that have been idle or underdeveloped.
“We must remain mindful of the challenges ahead,” Komolafe continued, addressing the gathered media. “Declining production levels and the pressures from global competition are pushing us to take strategic actions. The Petroleum Industry Act (PIA) has provided a unique opportunity to transform this sector and attract the right kind of investments to ensure Nigeria remains a key player in global oil production.”
One of the central themes of the 2024 bid round has been the country’s push for more efficient utilization of its oil reserves, particularly by activating the “drill or drop” provisions of the PIA. This provision allows for the reclamation of idle assets from companies that fail to explore or develop them within a set timeframe. Komolafe confirmed that the NUPRC had already started recovering idle assets to ensure they are put to use.
“We are ensuring that unexplored and underdeveloped assets do not remain idle,” said Komolafe. “Through the ‘drill or drop’ provision of the Petroleum Industry Act, we are engaging with stakeholders to retrieve these assets and put them back into the bidding process for those interested in developing them.”
The NUPRC has also committed to making licensing rounds an annual event to boost Nigeria’s oil production. Komolafe reaffirmed that the 2025 bid round would prioritize the exploration of natural gas assets and fallow fields, in line with Nigeria’s commitment to the UN Sustainable Development Goals (SDGs).
“We are not just looking at oil production,” he stated. “We are focusing on natural gas development as part of our strategy to diversify our energy resources. This will also help us support Nigeria’s commitment to the UN SDGs by reducing gas flaring and investing in cleaner energy solutions.”
On the international front, the participation of IOCs in the 2024 bid round was notably sparse. TotalEnergies, the French oil giant, was the only major IOC to secure a block. The absence of the likes of Shell, ExxonMobil, and Chevron has raised questions about the future direction of Nigeria’s oil industry, especially as these companies increasingly divest from fossil fuel projects in favor of greener, renewable energy investments.
Industry analysts have noted that this shift in the global energy landscape is having a direct impact on Nigeria’s oil sector, with foreign investment in oil exploration and production declining in favor of clean energy projects. Despite the challenges posed by this transition, Komolafe remains optimistic about Nigeria’s ability to navigate the changing energy market.
“It is important to recognize that while the global energy landscape is shifting, we have an opportunity to use the Petroleum Industry Act to make Nigeria’s oil and gas industry more attractive to investors,” he said. “We are committed to restoring investor confidence, ensuring that our industry remains competitive, and positioning Nigeria as a key player in both oil and gas development and the global energy transition.”
For the winners of the 2024 bid round, the next step is the issuance of provisional letters of award, which will specify the terms and conditions of the awarded blocks. The companies are expected to make payments for signature bonuses and adhere to the work program outlined in their agreements. Komolafe emphasized that these companies will be expected to explore and develop the awarded blocks, which, in turn, will help unlock further reserves and increase Nigeria’s daily oil production.
“We believe that by encouraging exploration and development, we will unlock new reserves that will help grow our national oil reserves and boost our daily production,” Komolafe said. “Our commitment is to ensure that these blocks are not only awarded but that they are also developed in a manner that benefits Nigeria and its people.”
Legal Adviser to the NUPRC, Olayemi Anyanechi, added that under the “drill or drop” provision, any bidder failing to explore their awarded assets within a set period would risk losing them to reserved bidders in the next round.
“As we move forward into the 2025 bid round, it’s important to note that companies holding on to unexplored assets will lose them if they fail to act,” Anyanechi stated. “This ensures that our resources are being utilized effectively and that there is always interest in developing Nigeria’s hydrocarbon resources.”
With the conclusion of the 2024 oil licensing round, the stage is set for more industry activity in the years to come, as Nigeria seeks to adapt to global energy changes while continuing to optimize its vast hydrocarbon resources.
