OIL & GAS: NUPRC OBTAINS $400M FOR ASSET DECOMMISSIONING AND ABANDONMENT LIABILITIES
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BY OWOLABI OLUWADARA
The Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, has revealed that Nigeria has attained over $400 million in decommissioning and abandonment liabilities, as the Commission implements more stringent regulations on recent oil and gas asset transfers.
Komolafe made this announcement on Wednesday at the Nigerian Extractive Industries Transparency Initiative (NEITI) Companies Forum in Lagos. He stated that this initiative is intended to protect Nigeria’s oil and gas industry from the expensive consequences faced by other regions.
A statement issued by NUPRC’s Head of Media and Strategic Communications, Eniola Akinkuotu, indicated that Komolafe, represented by the Deputy Director of Human Resources, Corporate Services & Administration, Efemona Bassey, addressed the topic: “Divestments, Liabilities, and the Impact of Ongoing Reforms on Extractive Companies in Nigeria. ”
He elaborated that insights gained from the North Sea, where decommissioning expenses are anticipated to reach £27 billion by 2032; the Gulf of Mexico, with costs surpassing $9 billion; and Alberta in Canada, which has over 97,000 inactive wells associated with liabilities estimated between C$30 billion and C$70 billion, influenced the Commission’s strategy.
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According to him, these insights guided recent divestment authorizations involving significant entities such as NAOC to Oando Energy Resources; Equinor to Chappal Energies; Mobil Producing Nigeria Unlimited to Seplat Energies; SPDC to Renaissance Africa Energy; and TotalEnergies to Telema Energies.
“Without a robust and enforceable framework for abandonment and decommissioning, divestment transitions can impose enduring financial and environmental burdens,” Komolafe stated. “Nigeria is not exempt from this challenge, which is why decisive measures have been implemented under the Petroleum Industry Act and regulatory actions to avert high-cost errors. ”
He noted that each divestment for 2024 underwent meticulous evaluation, encompassing assessments of technical and financial capacity, as well as upfront escrow arrangements for decommissioning responsibilities.
“The outcomes for 2024 are indicative of our efforts. Over $400 million in pre-sale decommissioning and abandonment liabilities have been secured through Letters of Credit and escrow accounts,” he remarked. “Obligations for Host Community Development Trust are fully honored, while environmental remediation commitments amounting to over $9.2 million have been affirmed. ”
Komolafe further disclosed that since April 2023, NUPRC has sanctioned 94 Decommissioning and Abandonment (D&A) plans in accordance with the PIA. These represent liabilities totaling $4.424 billion, which will be progressively deposited into designated escrow accounts over the lifespan of the respective oil fields.
During the event, NEITI’s Executive Secretary, Dr. Orji Ogbonnaya Orji, underscored that adherence to NEITI’s audit process is not discretionary but a legal obligation for companies operating in Nigeria’s extractive sectors.
He emphasized that transparency and accountability are essential for cultivating investor confidence, enhancing public trust, and aligning Nigeria’s extractive industry with global best practices.
Dr. Orji added that the NEITI Companies Forum has evolved into a pivotal platform for promoting closer collaborations with oil, gas, and mining firms while enhancing Nigeria’s overall business climate.
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