How Nigeria is Turning Idle Oil Blocks Into a Race for Investment, Production and Revenue

For decades, Nigeria’s oil and gas industry has faced a paradox that has become increasingly difficult to ignore: the country has substantial petroleum resources, but too much of that potential has remained underground, undeveloped and disconnected from the economic activity it could generate.

Oil and gas blocks have been awarded, discoveries have been made and reserves established, yet some assets have remained inactive for years. While operators delayed development, Nigeria continued to grapple with declining investment, ageing infrastructure, weak production growth and pressure on government revenues.

Now, the Federal Government is attempting to change that equation through the enforcement of the “Drill-or-Drop” principle, a policy that places greater emphasis on what licence holders actually do with the acreage they receive.

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has made the position increasingly clear: petroleum acreage is not meant to be held indefinitely. Companies that receive licences are expected to meet their statutory work commitments, undertake approved programmes and move their assets towards development. Where they fail to do so, the acreage can eventually return to government.

At first glance, Drill-or-Drop may appear to be primarily about licence enforcement. Its potential implications, however, are considerably broader.

If effectively implemented, the policy could become a mechanism for recycling dormant acreage, attracting fresh capital, accelerating exploration and development, increasing crude oil and gas production, creating jobs, stimulating the oilfield services sector and expanding government revenues.

The policy is emerging at a particularly important moment for Nigeria’s petroleum industry.

Why Nigeria is Enforcing Drill-or-Drop Now

Nigeria’s decision to intensify the enforcement of Drill-or-Drop is rooted partly in the sharp decline in investment that has affected the upstream sector over the past decade.

NUPRC Chief Executive, Oritsemeyiwa Eyesan, recently highlighted the scale of that decline, noting that Nigeria attracted as much as $26bn in oil and gas investments in 2014. By 2023, annual investment had fallen to around $2bn.

That decline was not simply a financial statistic. It affected the entire upstream ecosystem. As exploration budgets were cut, geoscientists and petroleum engineers lost opportunities. Operators increasingly concentrated on maintaining existing assets rather than committing large amounts of capital to new exploration and development. Infrastructure was also affected by years of inadequate investment.

Speaking in March on the skills gap created by the decline in offshore investment, Eyesan said, “So, in the past we had operators who had 20-year licenses and sat on these blocks and did absolutely nothing. Now, we have moved from that era to drill or drop.”

That statement captures the central philosophy behind the current policy. The government wants to move away from a system in which acreage can remain tied up for prolonged periods without meaningful activity.

Under the Petroleum Industry Act, petroleum acreage comes with obligations. Licence holders are expected to execute approved work programmes and meet minimum work commitments within the prescribed periods.

The NUPRC’s September 2026 circular on Drill-or-Drop enforcement applies to petroleum prospecting licences awarded under the 2020 Marginal Field Bid Round, the 2022/2023 Mini Bid Round and the 2024 Licensing Round.

The commission said operators that fail to meet their obligations could face refusal of licence extensions, relinquishment, the calling in of work performance securities and revocation proceedings.

But the NUPRC has repeatedly stressed that the objective is not simply to revoke licences. The objective is to get the acreage working.

That distinction is important because a revoked licence has little economic value if it simply remains dormant. The potential benefit comes when inactive acreage is either developed by its existing operator or returned to government and subsequently offered to an investor with the capital and technical capacity to develop it.

In that sense, Drill-or-Drop is designed to create movement in Nigeria’s upstream sector. Acreage should move from licensing to exploration, exploration to drilling, drilling to discovery, discovery to development and development to production.

The policy is therefore being enforced against the backdrop of a much larger effort to restore investment and production.

From Idle Acreage to New Investment and Production

The NUPRC has increasingly incorporated the Drill-or-Drop philosophy into Nigeria’s licensing strategy.

At the commercial bid conference for the 2025 Licensing Round, Eyesan made the commission’s expectations clear to prospective awardees.

“To the bidders who will emerge successful today, an award is not a trophy to be held. It is an obligation to invest, drill, develop and produce. Our message is therefore clear: drill or drop. Work programmes must be implemented, financial commitments must be honoured and agreed milestones must be achieved.”

That statement changes the meaning of a petroleum licence. An oil block is not valuable simply because it has been allocated. Its real economic value is realised when capital is deployed, wells are drilled, reserves are developed and hydrocarbons are produced.

The 2025 Licensing Round attracted almost 300 expressions of interest. Of 286 prequalification applications, 196 companies were prequalified, while 143 firms submitted 200 technical and commercial bids covering 37 of the 50 assets offered. Thirteen blocks that did not attract successful bids are expected to return to the bid basket.

The significance of the process therefore lies not only in the number of companies that participated. The real test comes afterwards. Will successful bidders drill? Will they invest? Will discoveries move towards development? Will projects reach FID? Will production eventually begin?

Those questions are at the centre of the new regulatory approach.

The NUPRC has said it wants licensing rounds to become more regular, potentially taking place annually and, if possible, twice a year.

“These will be annual, if possible, even twice-annual events. At a minimum, we’ll be going to the market on an annual basis,” Eyesan told S&P Global recently.

The intention is to create a continuous pipeline of investment opportunities. That could also increase competitive pressure among existing operators. If new acreage is regularly introduced while non-performing acreage is returned to the market, companies holding licences would have greater incentive to demonstrate that they can develop their assets.

The approach is particularly relevant to Nigeria’s crude production ambitions. The country is targeting 2 million barrels per day in the near term and 3 million barrels per day by 2030.

NUPRC has projected that the latest licensing round could contribute about 300,000 barrels per day of additional output within the first three years of development, while successive rounds could potentially generate between 300,000 and 600,000 barrels per day.

The commission has also said it expects increased participation from indigenous operators and new entrants, particularly as some international oil companies continue to restructure their portfolios. This could create opportunities for companies capable of deploying capital and technical expertise to assets that have remained underdeveloped.

But licensing alone will not deliver those barrels. The acreage must be drilled, developed and connected to infrastructure. That is where the wider investment challenge begins.

The Long Road From Discovery to Development

One of the clearest illustrations of Nigeria’s problem is the $800m Ima Gas Project, jointly developed by AMNI International and TotalEnergies.

The field was discovered in 1973 but only reached Final Investment Decision in September 2026. More than five decades therefore passed between discovery and FID.

The project is expected to begin production in 2028, with plateau production of about 350 million standard cubic feet of gas per day. Its output is expected to supply roughly one-third of the gas required for the expansion of NLNG Train 7.

Ima demonstrates the enormous gap that can exist between discovering a resource and converting it into economic value.

Minister of State for Petroleum Resources (Oil), Senator Heineken Lokpobiri, used the FID ceremony to call for shorter development timelines.

“I don’t see the reason why it would take you years to be able to get to FID,” he said. “Going forward, I appeal to the industry that let’s try and see how we can negotiate these FIDs within a shorter period.”

The minister noted that the Ima partnership itself took more than two years from the initial handshake to FID.

The implication for Nigeria is significant. Every year between discovery and development is another year in which the country does not receive the production, employment, taxes, royalties and wider economic activity associated with the project.

This is why the government’s Drill-or-Drop strategy is closely connected to its wider push for faster investment decisions. Pressure on licence holders to work their acreage must be accompanied by efforts to shorten the time required to approve and finance commercially viable projects.

The country’s gas ambitions make that urgency even greater.

Minister of State for Petroleum Resources (Gas), Ekperikpe Ekpo, linked the Ima development to Nigeria’s target of raising national gas production.

“With this development today and the expectation of the first gas in 2028, the push towards the target of Mr President of 12 BCF by 2030 is assured,” Ekpo said.

NNPC Ltd has said Nigeria is targeting 10 Bcf/d of gas production by 2027 and 12 Bcf/d by 2030, building on more than 215 Tcf of proven gas reserves.

The challenge is therefore not simply finding more resources. It is bringing existing discoveries and new resources into production.

That is also why the speed of Final Investment Decisions matters. The longer projects remain in the pre-development stage, the longer Nigeria waits to monetise its resources.

The government’s objective is to reduce that delay while ensuring that projects are commercially and technically viable.

What Nigeria Must Fix to Unlock More Barrels and Gas

Drill-or-Drop can create pressure to develop acreage, but it cannot solve all the structural challenges confronting Nigeria’s upstream industry.

Financing remains one of the biggest. Oil and gas developments require substantial capital, particularly offshore projects. Companies must finance seismic work, drilling, facilities, pipelines, processing systems and other infrastructure before they begin generating revenue.

Lokpobiri has urged Nigerian financial institutions to support new projects, while the government has pointed to regulatory and fiscal reforms under the Petroleum Industry Act as part of its effort to improve investment conditions.

But the availability of capital will ultimately depend on commercial viability. Investors will consider expected production, costs, fiscal terms, infrastructure, security, crude prices, gas markets and the time required to recover their investments.

Infrastructure is another major constraint.

At NOG 2026, indigenous operators warned that increasing production would require not only aggressive drilling but also the rehabilitation of ageing infrastructure.

Executive Director, Oando Plc, Dr. Alex Irune, argued that Nigeria has significant technical production capacity that is not being fully utilised.

“There is at least another million barrels to come from the indigenous players who currently produce approximately 60% of today’s production. So, it’s our time,” Irune said.

“It’s local companies that started at a thousand barrels a day and have grown to produce hundreds of thousands of barrels a day. It is these same companies that have built out every part of the value chain to domesticate value creation and keep it within the country. That’s the story. That’s what will get us to three million barrels.”

He also stressed the importance of protecting existing production while developing new resources.

That is a crucial point because Nigeria cannot achieve higher national output simply by adding new production if existing fields continue to decline.

Shoreline Group Chief Executive, Kola Karim, also identified ageing facilities and evacuation infrastructure as critical challenges.

The condition of such infrastructure has direct implications for Drill-or-Drop.

An operator can drill a productive well, but if the pipelines, compressors, flow stations or export systems cannot handle the additional volumes, the expected production gains may not materialise.

This makes infrastructure rehabilitation an essential companion to the policy.

ND Western Chief Executive, Lanre Kalejaiye, similarly stressed that production optimisation must extend beyond drilling.

His company plans to drill 20 wells over three years on OML 34, split between oil and gas wells, while deploying technologies such as horizontal drilling, dual completion and gas lift.

These investments demonstrate how the development of existing assets can complement the allocation of new acreage.

The same principle applies to human capital.

Eyesan has warned that years of declining offshore investment have contributed to a skills gap across Nigeria’s petroleum industry.

The loss of exploration activity affected geoscientists, petroleum engineers and other technical professionals.

The industry now needs a new generation of workers equipped for a more technology-driven upstream environment.

Eyesan identified digitalisation, artificial intelligence, data analytics, advanced subsurface and reservoir management, commercial and fiscal expertise, gas development, asset integrity, health and safety, decommissioning and multidisciplinary project leadership among the skills required.

“What happened in 2014 is not what we are facing today because the digital age has taken over the business,” she said at an industry event in August.

“So, you’re not just looking at a driller anymore. Today, you are talking about digital. You must know how to digitally drill.”

That means a revival in upstream investment could have a human-capital effect as well as a production effect.

More exploration and development projects would create demand for engineers, geoscientists, technicians, project managers, logistics professionals and other workers across the petroleum value chain.

Beyond Licences: Measuring the Real Economic Impact

The ultimate test of Drill-or-Drop will not be the number of licences revoked.

It will be what happens to the acreage after enforcement.

Are wells being drilled? Are discoveries moving towards FID? Are projects receiving financing? Are ageing facilities being rehabilitated? Is production increasing? Are gas projects reaching development? Are oilfield service companies receiving new contracts? Are Nigerian professionals finding new opportunities? And, ultimately, are government revenues increasing?

These questions are more important than the number of licences sitting on a government register.

A high number of revocations could simply mean that many operators failed to meet their obligations. It would not necessarily mean that Nigeria had achieved higher production.

The policy becomes economically meaningful when dormant acreage is transformed into productive assets.

That transformation could have implications across the economy.

Higher oil production could increase government revenues and foreign-exchange earnings.

Higher gas production could support power generation, industrial activity, LNG expansion and gas-based industries.

More drilling could stimulate demand for rigs, engineering services, logistics, marine operations, fabrication and other oilfield services.

New projects could create employment and training opportunities.

Greater indigenous participation could strengthen Nigeria’s domestic technical and financial capacity.

Regular licensing rounds could also create a more predictable pipeline of investment opportunities.

But none of these outcomes is guaranteed.

The NUPRC itself has acknowledged that operators can face challenges involving financing, rig availability, security, host-community engagement, infrastructure, regulatory approvals and partnership arrangements.

That means enforcement must operate alongside a broader effort to remove genuine obstacles to investment.

The regulator has required affected licence holders to notify it of their compliance status and identify constraints affecting their work programmes.

This provides an opportunity for the government to distinguish between companies that are simply failing to perform and those that are attempting to develop their assets but are encountering specific obstacles.

The broader economic argument was captured by Special Adviser to the President on Oil and Gas, Olu Verheijen, during the Ima FID ceremony.

“Resources do not create prosperity. A country can possess enormous natural wealth as we do and still struggle to convert it into investment, industries, jobs, and higher incomes. What matters is whether we create the conditions that allow capital, technology, and enterprise to turn these resources into productive economic activity, which is sort of the beginning of this journey today,” she said.

The statement goes to the heart of Nigeria’s petroleum challenge.

The country already has billions of barrels of oil and more than 215 Tcf of proven gas reserves.

What it needs is the capital, technology, infrastructure, skills and regulatory environment required to convert those resources into productive economic activity.

That is ultimately what Drill-or-Drop is attempting to force.

The policy changes the emphasis from simply possessing acreage to demonstrating performance on that acreage.

An oil block becomes less about ownership and more about development.

For Nigeria, that could represent a significant change.

The country’s upstream industry has spent years battling declining investment, ageing infrastructure, production disruptions and long project-development timelines.

The government now wants a different trajectory. It wants operators to drill. It wants investors to commit capital. It wants discoveries developed. It wants existing fields rehabilitated. It wants more oil and gas production.

And it wants the resulting activity to generate jobs, government revenue, energy security and broader economic value.

The Ima project shows what is possible when a long-dormant resource finally receives the investment required for development. Its journey from a 1973 discovery to a 2026 FID also shows the enormous cost of delay.

Drill-or-Drop is an attempt to ensure that future Nigerian petroleum assets do not spend decades waiting for development.

Its success will ultimately depend on whether the policy can create a functioning cycle in which acreage moves from licensing to exploration, exploration to drilling, drilling to development and development to production.

The real story, therefore, is not about how many licences Nigeria takes away. It is about how many dormant assets begin producing. It is about how much fresh capital enters the sector. It is about how many barrels and cubic feet of gas are added to national output. It is about how much revenue reaches government. It is about how many Nigerians find work in the resulting projects.

And it is about whether Nigeria can finally turn a greater share of the petroleum wealth beneath its soil and waters into sustained economic value above ground.

The ultimate race is therefore not between drilling and dropping. It is between inactivity and development. Between dormant acreage and productive assets. Between resources underground and revenue above ground.

And for Nigeria’s oil and gas industry, the outcome of that race could shape the next phase of the country’s upstream story.