Open licensing of Oil Mining Leases (OMLs) started in the early 1990s in Nigeria, with terms offered between five and 20 years. Of the 105 currently active OMLs spread across the Niger Delta region, 31 are scheduled to expire in 2019, putting 460,000 barrels per day (bd) of oil production at risk.

51 OMLs and Oil Production Leases expired between 2010 and 2017, and operators were given the opportunity to either renew, subject to minimum work terms, or to relinquish. Significant opacity shrouds this process, and it appears efforts to open OMLs to competitive bidding since 2000 have failed.

Future licensing rounds will likely be delayed until full introduction of the Petroleum Industry Bill is achieved, potentially in 2019, though potential for slippage exists. Should further legislative delays occur then production across at-risk OMLs is unlikely to suddenly stop.

Remaining Reserves in ‘At-Risk’ Oil Mining Leases: Top-5 Operators (by Remaining Reserves)

Source: GlobalData Upstream Analytics

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By GlobalData

Instead, the uncertainty caused by such an event would likely drive reduced capital investment across affected OMLs, resulting in accelerated production declines across the country. This backdrop is likely to put the national government under significant pressure to advance the Petroleum Industry Bill in a timely manner to enable the Nigerian Petroleum Inspectorate’s quoted vision of achieving “optimal development of the petroleum industry in the overall interest of the people of Nigeria”.

Shell, ExxonMobil, Total and Chevron dominate the OML landscape, with each commanding oil reserves of around one billion barrels or more. Of these, only Shell has operated licenses expiring in 2019, and it stands to lose 182,000 barrels of oil production (gross) per day52% of Shell’s forecast Nigerian production in that year.

Nigeria is likely to experience a dramatic shift in the OML landscape in the next two years as mature licenses come to either expire, continue under revised fiscal terms or transfer to new operators. Opportunities exist for indigenous operating companies to acquire relinquished acreage that contain significant remaining reserves, though continued production levels will be highly dependent on their ability to finance ongoing capital requirements and offset the risks and operational challenges associated with both shared and aging infrastructure.