Nigeria's oil and gas industry is facing a critical challenge in balancing the need to prevent speculators from acquiring oil blocks without the capacity to develop them, and the need to attract capable investors to the sector. The International Energy Agency's World Energy Investment 2025 report estimates that energy investment in Africa is one-third lower in 2025 than it was in 2015, highlighting the need for Nigeria to create a favorable investment climate. The Petroleum Licensing Round (Amendment) Regulations, 2026, introduced by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), aim to address this challenge by making it harder for speculators to win acreage.
The new regulations address bidder qualification, reserve bidders, and guarantees, and provide for consortiums to participate in the licensing round. The consortium provisions allow firms to combine financial strength, technical expertise, and local knowledge, but the regulations must be clear on how these provisions work together. The designated operator must meet the prescribed criteria, but it is unclear whether the operator must also satisfy the financial test. Clarity on these provisions is essential for indigenous firms and international investors to participate in the licensing round.
The regulations also provide for up to four reserve bidders, which can help keep the process moving if a leading bidder fails to meet post-award conditions. However, reserve status is not proof of development capacity, and the same standards of scrutiny should apply to reserve bidders as to the winner. The guarantee provisions are another area where precision matters, as the cost to a bidder depends on how the security is provided. A guarantee is not automatically a cash payment equal to its face value, but it can attract fees, require collateral, or use credit capacity that a company needs for exploration and development.
The 2022 Petroleum Licensing Round Regulations already required bid guarantees and a work commitment guarantee equal to the value of the minimum and additional work programme commitments. The 2026 amendment retains that framework, with the Commission determining the amount where the guarantee itself is a bid parameter. The NUPRC's 2025 Licensing Round Guidelines make the need for clarification more apparent, as they use a minimum work performance security of 1 per cent of the proposed work commitment as a scored bid parameter.
The Petroleum Industry Act requires open, transparent, and competitive bidding, including electronic bidding open to the public in the presence of representatives of NEITI, the Ministry of Finance, and the petroleum ministry. The 2023 EITI Standard adds a useful global benchmark: disclose the procedures and criteria used to award licences, who received them, and the outcomes. Transparency is essential to ensure that observers can understand how the rules were applied.
The 2025 licensing round reported 143 companies submitting 200 bids for 37 of the 50 blocks on offer, with 13 blocks receiving no bids. However, these figures describe participation in that round and do not show whether the amended rules will increase development, narrow competition, or change the cost of entry. The Commission now has an opportunity to turn the amendment's intent into a stronger licensing system by clarifying the consortium tests, explaining how each security requirement works, and publishing the basis for its evaluations.
Success will be measured not just by the number of bids or blocks awarded, but by whether credible winners raise the finance, meet their work commitments, and move acreage towards development. Nigeria must make it harder to win acreage without the capacity to develop it, while also making the rules clear and financeable enough that capable bidders still want to participate. The discipline is necessary, as is the confidence that allows capital to respond.
Key points
- The new regulations aim to prevent speculators from acquiring oil blocks without the capacity to develop them.
- The regulations must be clear and financeable to attract capable investors to the sector.
- The Commission must clarify the consortium tests, explain how each security requirement works, and publish the basis for its evaluations to ensure a stronger licensing system.
