Nigeria’s upstream petroleum regulator has intensified efforts to ensure that oil exploration assets are actively developed, declaring that companies that fail to work on their licensed blocks will no longer be allowed to hold on to them indefinitely.
The move is part of broader regulatory reforms aimed at boosting investment, accelerating exploration activities, and maximising the value of Nigeria’s vast hydrocarbon resources.
Officials say the new policy framework introduced under the Petroleum Industry Act (PIA) is already reshaping how oil blocks are allocated and managed, ending a long-standing practice where some operators retained licences for decades without carrying out meaningful exploration work.
NUPRC enforces drill-or-drop rule for oil blocks
The announcement that NUPRC enforces drill-or-drop rule for oil blocks signals a significant shift in the management of upstream petroleum assets in Nigeria.
According to the Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission, Oritsemeyiwa Eyesan, the new regulatory environment requires operators to either commence exploration and development activities within the approved timeframe or relinquish their licences to the government.
Eyesan made this known while receiving a delegation from the Petroleum Directorate of Sierra Leone at the commission’s headquarters in Abuja.
She explained that the provision, popularly known as the “drill-or-drop” rule, is contained in Section 94 of the Petroleum Industry Act, which fundamentally altered how exploration licences are managed.
The rule ensures that oil blocks are awarded only to companies that are prepared to invest in exploration and production activities rather than holding assets for speculative purposes.
Ending decades of asset hoarding
Industry regulators say the decision to enforce the drill-or-drop policy was driven by years of stagnation in exploration activities caused by operators holding licences without developing the assets.
According to Eyesan, there were instances in the past where companies retained prospecting licences for as long as two decades without undertaking significant exploration work.
“In the past, we had operators who had 20-year licences and sat on these blocks and did absolutely nothing,” she said.
With the enforcement of the new rule, companies must now demonstrate clear plans to drill or develop the assets within a specified period or risk losing the licences.
Analysts say the policy will help return dormant oil blocks to the government’s portfolio, allowing them to be reallocated to investors willing to commit resources to exploration.
Renewed investor interest in oil licensing round
As NUPRC enforces drill-or-drop rule for oil blocks, the regulator also reported encouraging investor participation in Nigeria’s 2025 oil licensing round.
Eyesan disclosed that the licensing round has attracted strong interest from both domestic and international companies despite stricter conditions introduced by the commission.
The exercise currently involves 50 oil blocks located across several of Nigeria’s major sedimentary basins.
These include the Niger Delta, Anambra Basin, Bida Basin, Benue Trough, and the Chad Basin, areas considered to hold significant untapped hydrocarbon potential.
According to the commission, the strong level of participation indicates growing confidence among investors following regulatory reforms introduced under the Petroleum Industry Act.
Limits introduced to ensure fair participation
To discourage speculation and asset concentration, the commission has introduced new restrictions on how companies can participate in the licensing round.
One of the key rules limits companies to bidding for a maximum of two oil blocks, whether individually or as part of a consortium.
The regulator explained that the policy was deliberately designed to prevent companies from acquiring multiple blocks without the financial capacity or technical expertise to develop them.
By limiting the number of blocks per bidder, the commission aims to encourage wider participation from investors while ensuring that the assets are allocated to companies capable of developing them.
Strengthening transparency in the bidding process
The regulator has also taken additional steps to ensure transparency and credibility in the licensing process.
Eyesan disclosed that the commission engaged an independent audit firm to assess and validate the digital bidding system used for the licensing round.
According to her, the independent review was introduced as an additional layer of accountability designed to assure investors that the process is fair and secure.
The outcome of the audit, she added, will be made public to reinforce confidence in Nigeria’s upstream regulatory framework.
Industry observers say such measures are critical in attracting global energy companies and institutional investors to participate in exploration projects.
Boosting Nigeria’s oil reserves and production
Energy analysts believe that the strict enforcement of the drill-or-drop rule could play an important role in boosting Nigeria’s crude oil reserves.
Nigeria currently holds one of the largest proven hydrocarbon reserves in Africa, but exploration activity has slowed in recent years due to regulatory uncertainties, security challenges, and global energy transition pressures.
By ensuring that licensed blocks are actively explored, regulators hope to accelerate discoveries and increase long-term production capacity.
As NUPRC enforces drill-or-drop rule for oil blocks, the government expects the reform to unlock dormant assets and stimulate new investment across the upstream petroleum sector.
Regional collaboration in petroleum governance
The visit by the Sierra Leone delegation also highlights growing regional cooperation in petroleum sector governance.
The Director-General of the Petroleum Directorate of Sierra Leone, Foday Mansaray, said the delegation came to Nigeria to learn from the country’s regulatory experience.
He noted that Sierra Leone is keen to deepen collaboration with Nigeria in developing its own hydrocarbon sector.
According to him, the visit could pave the way for the signing of a Memorandum of Understanding that would support capacity building, regulatory cooperation and knowledge sharing between both countries.
Outlook for Nigeria’s upstream sector
Experts say the enforcement of the drill-or-drop policy marks an important milestone in Nigeria’s ongoing effort to reform its petroleum industry.
If effectively implemented, the policy could unlock billions of dollars in investment, accelerate exploration, and strengthen Nigeria’s position as one of Africa’s leading energy producers.
With the ongoing licensing round expected to run until mid-2026, industry stakeholders will be closely watching how the new regulatory framework shapes the future of Nigeria’s upstream oil and gas sector.
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