In a startling revelation, the Nigerian government has disclosed that a staggering 23 Oil Blocks in Nigeria managed by both international and local oil companies, operating under crude oil Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Company Limited (NNPC), have failed to yield any crude oil production. This revelation comes from the latest Oil and Gas Industry Report for 2021 released by the Nigeria Extractive Industries Transparency Initiative (NEITI), a federal agency tasked with monitoring the nation’s extractive industries.
Production Sharing Contracts are agreements where contracted oil companies finance exploration, development, 23 Oil Blocks in Nigeria and petroleum production within a designated concession area. In return, these companies are subject to paying Petroleum Profit Tax, royalties, and other government bonuses and levies once successful production is achieved. Such agreements effectively relieve the government of the financial burden associated with exploration and production.
According to the NEITI report, only 12 out of the 35 PSC oil blocks recorded any production in 2021. Furthermore, six of these blocks were completely inactive. These startling statistics highlight a significant underutilization of valuable oil reserves and potential revenue generation. Among the notable companies failing to produce crude from selected blocks were Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, and Texaco Nigeria Outer Shelf Limited, among others.
NEITI’s analysis further revealed that the 242.96 million barrels produced from these PSCs accounted for only 42.92% of the total oil production of 566.13 million barrels in the same year. This means that despite contributing substantially to the total production volume, only 34% of the allocated PSC blocks were actively producing.
The implications of this revelation are profound, as the unproductive PSC arrangements represent a significant opportunity cost for the Nigerian government. NEITI recommended immediate action, urging the Nigeria Upstream Petroleum Regulatory Commission (NUPRC) and NNPC Ltd to swiftly address the technical and operational constraints that have hindered production from these idle PSC blocks. The agency even suggested the possibility of license revocations and reassignment to other interested parties if the issues cannot be resolved.
NNPCL, in response to the findings, explained that some blocks were still in the exploration/appraisal phase or at award status, with certain contractors yet to provide budget and work programs for various reasons. The national oil firm expressed optimism that two to three of these blocks would soon transition to production status.
These revelations underscore the need for the Nigerian government and its partners, both domestic and foreign, to optimize their collaboration and ensure the full utilization of the nation’s oil resources to maximize revenue and energy security while fostering economic growth.
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