Divestments: FG Secures $400m In Pre-sale Decommissioning, Abandonment Liabilities
By Sunday Etuka, Abuja
The Federal Government secures over $400 million in pre-sale decommissioning and abandonment liabilities from the 2024 divestments in the nation’s upstream oil and gas sector.
Commission Chief Executive of the Nigerian Upstream Petroleum Regulatory Commission (NUPRC), Engr. Gbennga Komolafe, who disclosed this said the amount was secured through Letters of Credit and Escrow Accounts.
Engr. Komolafe, who also informed that Host Community Development Trust obligations were fully honoured, added that Environmental remediation commitments worth over US$9.2 million have been pledged while awaiting the formal gazetting of the ERF Regulations.
“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,” he said.
Speaking on Wednesday at the Nigerian Extractive Industries Transparency Initiative (NEITI) Companies Forum, held in Lagos, the CCE noted that the country is applying lessons from costly global divestment cases to safeguard its oil and gas sector.
NUPRC’s Head of Media and Strategic Communications, Eniola Akinkuotu, in a statement, revealed that the CCE 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 from the divestments of 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$30 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.
“Nigeria is not immune to this challenge, and if we are to avert costly mistakes. It is precisely to avoid this outcome that Nigeria, through the Petroleum Industry Act and subsequent regulatory actions, has taken bold and decisive steps.”
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.
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 further 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.
He acknowledged the invaluable role of NUPRC partners, NEITI and Oil Producers Trade Section (OPTS).
According to him, as the moral compass of the extractive industry, NEITI has consistently ensured that NUPRC embedded transparency and disclosure in all its regulatory processes while OPTS, the united voice of producers, has supported us in shaping regulations that balance industry realities with national priorities.
He added, “In addition to divestments, the Commission has been working together with operators, particularly members of OPTS, on life extension projects, ranging from facility integrity audits to subsea upgrades and enhanced reservoir management measures that sustain safe production, delay decommissioning, reduce environmental risks, and secure resilience across our mature fields.”
