In a revelation from the latest Oil and Gas Industry Report for 2021 by the Nigeria Extractive Industries Transparency Initiative (NEITI), the Federal Government disclosed that 23 oil blocks, managed by both local and international oil companies under crude oil Production Sharing Contracts (PSC) with the Nigerian National Petroleum Company Limited (NNPCL), failed to produce crude or were inactive during the reviewed year.
Production Sharing Contracts involve the contracted oil company funding operations for exploring, developing, and producing petroleum within a concession area. If successful, the company pays Petroleum Profit Tax, royalty, and other bonuses and levies to the government, recovering its costs through ‘Cost Oil.’
The report also identified six inactive blocks, bringing the total to 26 inactive or non-producing oil blocks during the review period. Notable PSC contractors involved in the non-producing blocks included Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, Texaco Nigeria Outer Shelf Limited, Star Deep Water Petroleum Limited, and Statoil Nigeria Limited.
NEITI’s observations indicated that only 12 (34%) of the PSC blocks recorded production, contributing 242.96 million barrels, representing 42.92% of the total production of 566.13 million barrels. The report recommended a review by the Nigeria Upstream Petroleum Regulatory Commission and NNPCL to address technical and operational constraints, optimize production, or consider license revocation and allocation to other interested parties.
NNPCL responded, explaining that PSC blocks the transition from exploration/appraisal to production over time. It was noted that some blocks were still at award status, and a few would soon attain production status.
The Federal Government collaborates with indigenous and foreign oil firms through PSC to explore and produce Nigeria’s crude, making these contracts significant partnerships in the country’s oil and gas sector.