The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has announced that it has secured over $400 million in pre-sale decommissioning and abandonment liabilities through Letters of Credit and escrow accounts.
The development was disclosed by the NUPRC Chief Executive, Gbenga Komolafe, during his remarks at the Nigerian Extractive Industries Transparency Initiative (NEITI) Companies Forum in Lagos.
The NUPRC boss, who was represented by the Deputy Director, Human Resources, Corporate Services & Administration, Efemona Bassey, spoke on the theme, “Divestments, Liabilities, and the Impact of Ongoing Reforms on Extractive Companies in Nigeria.”
The NUPRC boss said the Commission had drawn lessons of divestments in the North Sea, where decommissioning is estimated at £27bn by 2032, the Gulf of Mexico costing over $9bn, and in Canada’s Alberta, more than 97,000 inactive or abandoned wells now carry an estimated decommissioning and abandonment cost of between C$30bn and C$70bn.
In Australia, Northern Oil & Gas Australia in 2019 left behind liabilities of more than AU$200m.
The CCE stated that the lessons from these experiences guided the recent divestment approvals from 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.
The CCE said, “Without a robust and enforceable framework for abandonment and decommissioning, divestment transitions can create lasting financial and environmental burdens.”
The NUPRC boss highlighted Nigeria’s response to the recent divestments in line with Sections 232 and 233 of the PIA, which place full responsibility for the decommissioning and abandonment of petroleum wells, installations, structures, utilities, plants, and pipelines on licensees and lessees.
Similarly, Chapter 3 of the PIA and Section 104 of the PIA establish specific obligations for host community development and environmental remediation, respectively.
He said each of the 2024 divestments provided a critical opportunity to put the Commission’s Divestment Framework to test and action: rigorously assessing the technical capacity of acquiring entities, verifying their financial strength, and securing decommissioning and abandonment obligations through upfront escrow arrangements.
Komolafe said, “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.
“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.”
The CCE said beyond the significant progress achieved 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.
”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,” he added.
He also disclosed that the Commission has addressed a long-standing concern with the IOCs regarding the domiciliation of the escrow accounts, and the regulatory framework, developed after extensive consultations with industry stakeholders, is now awaiting gazetting by the Ministry of Justice.
