Nigeria has many revenue problems; one of its most notorious issues is idle blocs. The issue is not an easy one to understand because it has several layers with many different sides.
When an oil executive at the last NOG Energy Week said Nigeria’s underutilised oil blocs have a front-role seat in the country’s quest to achieve its ambitious target of 7 percent GDP growth, the task at hand for Nigeria came into better perspective.
At the energy event held in Nigeria’s capital state, Abuja, speakers pinpointed lack of funding and technical expertise to regulatory bottlenecks, fiscal uncertainty, and protracted legal disputes as reasons for scores of undeveloped or idle oil and gas blocks.
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This idleness represents billions in locked potential revenue and stunted contribution to the national economy, where the oil sector’s GDP contribution lingered around a modest 5.5 perc in 2024, despite its historical dominance in foreign exchange earnings.
The untapped potential
Nigeria sits atop 37.2 billion barrels of crude oil reserves and 210 trillion cubic feet of proven gas reserves but decades of regulatory bottlenecks, security challenges, and underinvestment have left vast swathes of its hydrocarbon resources unexploited.
Oil receipts fund the country’s budget, but many oil and gas projects lie idle, threatening the target set over a decade ago to raise reserves to 40 billion barrels.
These big-ticket projects include: Zabazaba’s 150,000 bpd; Chevron Nsiko project,100,000 bpd; Exxonmobil’s Bosi, 140,000 bpd; Satellite Field development phase, 80,000 bpd; and Ude, 110,000 bpd.
Oil experts surveyed by BusinessDay Nigeria said the country must urgently begin the process of optimising its idle assets.
They however said it will require disciplined planning, economic reforms and consistent government policies that can inspire investor confidence.
They said the projected gains from Nigeria’s oil and gas sector following the passage of the Petroleum Industry Act (PIA) have remained a mirage, as poor implementation of vital provisions of the Act leaves principal actors in a battle for supremacy and revenue.
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Bureaucracy Huddle
“Officials at both regulatory and other agencies still demand bribes to attend to licences and approvals, and the delay in the process and bureaucratic obstacles have not changed,” a senior industry source, who asked not to be quoted, said.
Adeola Adenikinju, energy scholar at the University of Ibadan, said implementation of key components of the PIA has been slow, and timelines have not been adhered to as contained in the Act.
“Much of the expectations of stakeholders are yet to be met. There are still regulatory overlaps between the two industry regulators. The process of getting approval is still slow, deliberately hindered and costly,” Adenikinju said in a note.
In August 2021, former President Muhammadu Buhari signed into law the PIA, which had been in the making for over twenty years.
The PIA signed into law in August 2021, is one of the most audacious attempts to overhaul the petroleum sector. If implemented diligently, it can facilitate the country’s economic rejuvenation, by attracting and creating investment opportunities for local and international investors.
“Political interference and deliberate refusal to adhere strictly to the law have worsened fortunes of the sector to the pre-PIA era when opacity, graft and tardiness reigned unchecked,” another source attached to a tier one bank in Nigeria said.
Need for gas investment
Barth Nnaji, former minister of power has made a strong case for Nigeria to aggressively pursue investments in its natural gas sector for the nation to achieve its ambitious goal of a $1 trillion economy.
Nnaji, who also serves as the Chief Executive Officer of Geometric Power Group, highlighted Nigeria’s vast natural gas reserves, ranking ninth globally, and the paradox of the nation’s struggle to adequately power its 24 gas-fired power plants.
He highlighted the paradox of Nigeria struggling to harness its gas reserves domestically while over 80 million citizens lack electricity access.
“While efforts to export gas to Europe are commendable, domestic need must come first—because charity begins at home,” Nnaji said while delivering a lecture titled “Architecting the Energy Sector for Nigeria’s $1 Trillion Economy Vision”.
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“Drill or drop”
Recognising this critical gap, the Nigerian government, through the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), is taking a more assertive stance. Under the framework of the Petroleum Industry Act (PIA) 2021, a “drill or drop” policy is being enforced, threatening revocation of licenses for blocks left undeveloped for extended periods.
Heineken Lokpobiri, minister of state of petroleum resources (oil), recently underscored this, stating, “We cannot continue to have assets sitting idle for 20 to 30 years without development.”
This renewed vigour is accompanied by regular licensing rounds. Following a mini-bid round in 2022/23 and the 2024 round which saw 25 blocks awarded (including deep offshore blocks and marginal fields), NUPRC is preparing for the 2025 licensing round.
How to attracts IOC
Experts said attracting the significant investment needed to awaken these dormant giants requires more than just making blocks available; it demands a stable, attractive, and competitive environment.
Dapo Akinosun, senior partner at SimmonsCooper Partners said bureaucracy leads to rampant bribery and corruption with officials sometimes exploiting the bureaucratic complexity for personal gain thereby eroding trust and increasing operational risks.
“The prolonged processes for obtaining necessary licences and approvals can significantly delay projects, inflate costs, and deter potential investments,” Akinosun said.
“The lack of predictable timelines for regulatory approvals creates uncertainty, complicates project planning, and can discourage long-term investments,” Akinosun added.
On 28 February 2024, President Bola Tinubu signed three Executive Orders aimed at improving the investment climate and positioning Nigeria as the preferred investment destination for the petroleum sector in Africa.
BusinessDay’s findings showed one of the executive orders legally mandates that the contracting cycle be compressed to a maximum of six months.
This alignment with global industry standards significantly reduces delays that historically took up to two years or more, thus improving Nigeria’s competitiveness.
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The Executive Order also mandates NNPC, NUIMS, and NCDMB to implement a single-level approval process for requalification, technical, commercial, and final stages, and ensures that approval is issued within 15 days.
This is expected to eliminate redundant multi-stage approvals and ensure that regulatory approvals are obtained more efficiently, fostering timely project execution, and reducing compliance costs.
“While some executive orders have set timelines, additional orders could enforce strict penalties for regulatory bodies that fail to meet these deadlines. This would ensure that the stipulated times are not merely guidelines but are adhered to strictly, thereby reducing delays,” Akinosun said.
