NUPRC Secures $400m to Cover Oilfield Cleanup and Asset Transfer Liabilities

The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) has announced that it has secured more than $400 million in decommissioning and abandonment liabilities ahead of major oil and gas divestment transactions. The funds, lodged through escrow accounts and letters of credit, represent a significant regulatory milestone designed to ensure that oil companies meet their obligations to retire facilities, clean up the environment, and prevent the transfer of hidden liabilities during asset sales.

According to the commission, since April 2023, a total of 94 decommissioning and abandonment plans have been approved with cumulative liabilities put at $4.424 billion. The $400 million already secured marks the first tranche of this long-term commitment and reflects the new regulatory stance that no divestment will be approved unless adequate financial and technical guarantees are in place. NUPRC explained that the Petroleum Industry Act of 2021 provides the legal framework that requires licensees and lessees to take full responsibility for decommissioning petroleum wells, pipelines, installations, and other facilities once they reach the end of their productive life.

The regulator stressed that the move is necessary to protect Nigeria from the costly burden of abandoned oil and gas infrastructure. Around the world, several oil-producing jurisdictions have been left grappling with multibillion-dollar cleanup bills when operators exited without fulfilling their obligations. In the North Sea, for instance, decommissioning liabilities are projected to reach over £27 billion by 2032, while in the Gulf of Mexico, outstanding costs are estimated at more than $9 billion. Alberta in Canada faces between C$30 billion and C$70 billion in liabilities from thousands of inactive wells, and similar challenges have been seen in Australia. By insisting that companies operating in Nigeria set aside funds in advance, NUPRC is attempting to avoid similar long-term environmental and financial crises.

The commission highlighted that the new approach is being tested in ongoing divestments involving major international oil companies. These include the acquisition of NAOC by Oando Energy Resources, Equinor’s exit in favor of Chappal Energies, the purchase of Mobil Producing Nigeria Unlimited by Seplat Energies, Shell Petroleum Development Company’s transfer to Renaissance Africa Energy, and TotalEnergies’ divestment to Telema Energies. In each of these transactions, NUPRC has insisted on due diligence to confirm that the acquiring parties have the technical and financial capacity to operate safely while also securing legacy liabilities.

Industry observers note that this development may increase transaction costs and extend timelines for completing asset transfers, but it also strengthens Nigeria’s reputation as a regulator that prioritizes sustainability and accountability. For host communities, the measure provides reassurance that cleanup and remediation will not be neglected, reducing the risk of environmental degradation that has historically plagued oil-producing regions such as the Niger Delta. For government, it prevents fiscal surprises and enhances confidence in the implementation of the Petroleum Industry Act.

The commission disclosed that the $400 million already secured is only a first step in a progressive plan to recover the full $4.424 billion over time. Operators will be required to continue making provisions into escrow accounts or obtain bank-backed letters of credit to cover their share of liabilities as their operations proceed. NUPRC also confirmed that regulations guiding the environmental remediation fund and host community development trust obligations are being finalized and will be gazetted to ensure clarity and compliance.

Despite the progress, experts caution that challenges remain. Enforcement will be critical to ensure that companies continue to meet obligations long after transactions are completed. Transparency in tracking how funds are secured and applied will also be vital, with organizations such as the Nigerian Extractive Industries Transparency Initiative expected to play a strong oversight role. There are also calls for more engagement with host communities to build trust and ensure that funds set aside are used effectively to address environmental and social impacts.

The securing of $400 million in decommissioning liabilities represents a watershed moment for Nigeria’s oil and gas sector. It underscores a new era in which asset transfers are no longer just financial transactions but must be accompanied by strong guarantees that legacy issues will be managed responsibly. As the country continues to navigate a wave of divestments by international oil companies and the rise of indigenous operators, the commission’s stance is sending a clear message that the era of neglected liabilities is over. If consistently enforced, the framework could shield the country from the mistakes witnessed in other oil-producing regions and provide a safer, cleaner, and more sustainable energy landscape for Nigeria’s future.