The chief executive officer (CEO) of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Gbenga Komolafe, announced that the commission has secured more than $400 million in decommissioning liabilities while also enforcing stricter conditions on recent asset transfers.
Decommissioning liabilities refer to the anticipated costs of dismantling, removing, and restoring property, plants, and equipment to their original state once they reach the end of their useful life.
In a statement released on Thursday, Komolafe made the disclosure during his address at the Nigerian Extractive Industries Transparency Initiative (NEITI) Companies Forum in Lagos.
Represented by Efemona Bassey, deputy director of human resources, corporate services & administration, the NUPRC presented on the theme, “Divestments, Liabilities, and the Impact of Ongoing Reforms on Extractive Companies in Nigeria”.
“The results from 2024 speak for themselves. Over US\$400 million in pre-sale decommissioning and abandonment liabilities have been secured through Letters of Credit and escrow accounts,” Komolafe stated.
He explained that Nigeria is drawing from costly global experiences to safeguard its oil and gas industry.
Komolafe pointed to international cases, including the North Sea, where decommissioning costs are projected to reach £27 billion by 2032; the Gulf of Mexico, with costs surpassing \$9 billion; and Alberta, Canada, where more than 97,000 inactive or abandoned wells could result in decommissioning and abandonment costs between C\$30 billion and C\$70 billion.
He also referenced Australia, where Northern Oil & Gas left behind liabilities exceeding AU\$200 million in 2019.
According to him, these experiences shaped recent divestment approvals, including NAOC’s transfer to Oando Energy Resources, Equinor’s to Chappal Energies, Mobil Producing Nigeria Unlimited’s to Seplat Energies, Shell Petroleum Development Company (SPDC)’s to Renaissance Africa Energy, and TotalEnergies’ to Telema Energies.
“Without a robust and enforceable framework for abandonment and decommissioning, divestment transitions can create lasting financial and environmental burdens,” he warned.
Komolafe highlighted Nigeria’s approach, guided by sections 232 and 233 of the Petroleum Industry Act (PIA), which make licensees and lessees fully accountable for decommissioning and abandonment of petroleum wells, facilities, utilities, plants, and pipelines.
He added that every 2024 divestment served as an opportunity to validate and strengthen the commission’s framework.
“Host Community Development Trust obligations are fully honoured. Environmental remediation commitments worth over US\$9.2 million have been pledged while awaiting the formal gazetting of the ERF Regulations,” Komolafe noted.
The CEO further revealed another achievement “through our divestment framework, it is important to highlight another milestone”.
“Since April 2023, we have approved 94 Decommissioning and Abandonment (D\&A) plans, in strict alignment with the PIA,” he said.
“These approvals represent total liabilities of \$4.424 billion, arising from all Field Development Plans submitted within this period, and will be remitted progressively over the production life of the respective fields into designated escrow accounts.”
Komolafe concluded by noting that the commission has resolved a long-standing dispute with international oil companies (IOCs) over escrow account domiciliation. He added that the regulatory framework, developed after broad stakeholder consultations, is now awaiting approval and gazetting by the ministry of justice.