In a recent report published by the Nigeria Extractive Industries Transparency Initiative (NEITI), it has been disclosed that no fewer than 23 oil blocks, managed by a combination of international and local oil companies under crude oil Production Sharing Contracts (PSCs) with the Nigerian National Petroleum Company Limited (NNPC), failed to produce crude oil or remained inactive throughout 2021.
This revelation comes as a matter of concern for the Nigerian government and the oil industry as a whole.
PSCs are contractual agreements wherein oil companies are responsible for financing exploration, development, and petroleum production within a designated concession area.
In return, these companies are subjected to paying Petroleum Profit Tax (PPT), royalties, and other government-imposed levies. They are entitled to recover their costs through ‘Cost Oil.’
The NEITI report for 2021 revealed that out of the 23 oil blocks that did not produce crude, six were completely inactive, indicating a significant underutilization of valuable resources.
Notable companies such as Esso E&P, Nigerian Agip Exploration, Shell Nigeria Exploration and Production Company, and Texaco Nigeria Outer Shelf Limited were among those that failed to extract oil from selected blocks.
Conversely, 12 PSC blocks did achieve production, contributing 242.96 million barrels to the nation’s total production. However, this represents just 34% of the allocated blocks.
The NEITI report emphasized the need for regulatory bodies like the Nigeria Upstream Petroleum Regulatory Commission and NNPC Ltd to swiftly address technical and operational issues plaguing the idle PSC blocks to optimize production.
In response, NNPC Ltd acknowledged that some blocks were still in the award status, and reasons from regulatory to business operations had delayed progress. They expressed optimism that two to three blocks would soon achieve production status.
This report underscores the importance of efficient management and utilization of Nigeria’s valuable oil resources.
It calls for immediate action to ensure that these idle blocks contribute to the nation’s economy and energy security, rather than remaining dormant.
