PIA amendment: FG may revoke dormant oil wells licences

The House of Representatives has commenced moves to amend the Petroleum Industry Act to make provision for non-producing oil wells to lose their operational licences.

On September 26, 2024, the House passed for first reading “A bill for an Act to amend the Petroleum Industry Act, 2021 to provide for licensing requirements for the operation of oil wells, petroleum prospecting licenses and, for revocation of licenses from non-performing oil fields and for related matters.”

The bill sponsored by the member representing Ideato North/Ideato South Federal Constituency, Imo State, Ikenga Ugochinyere, is expected to make a return on the floor of the Green Chambers in the weeks ahead.

A copy of the bill cited by The PUNCH revealed that the proposed law seeks amendment to Section 81 through the insertion of new sub-sections 2 and 3.

On licensing requirements for petroleum mining lease, sub-section 2 provides that

“A petroleum mining lease shall be granted under sub-section 1 of this section where the holder of a petroleum prospecting licence shows a minimum crude oil refining capacity of 50,000 barrels per day.”

The amendment in sub-section 2(a) allows licensees with little refining capacity to come together to operate.

“Any petroleum prospecting licensee without the minimum crude oil refining capacity specified in this section may form a consortium consisting of not more than five licensees and such a consortium shall be granted a license for the field.”

Sub-section 2 (b) of the bill powers the Nigerian Upstream Petroleum Regulatory Commission to provide the framework for the operations of such company consortiums.

Revocation of licences

The bill in sub-section 3 provides that “Where a licensee fails to produce the required capacity of crude oil for a continuous period of two years, the commission shall revoke the licence of that licensee. This provision shall also apply to the consortium under sub-section 2.”

The bill further clarified what constitutes a non-producing oil field.

“In this section (3a), an oil field shall be considered non-producing if there has been no crude oil production, reinjection for storage, or any other approved operational activity from that oil field over a continuous two-year

period.

3(b) provides that “The commission shall prescribe regulations and guidelines for monitoring oil well performance, criteria for determining non-performance, notification procedures prior to revocation, and the revocation process under this section.”

Since its enactment in 2021, there have been calls from stakeholders including the Host Communities of Nigeria Producing Oil and Gas, Independent Petroleum Producers, and Oil Producers Trade Section, among others for the amendment of the PIA.