As the February 27, 2026, deadline for pre-qualification looms, the Nigerian upstream sector finds itself at a pivotal crossroads. Launched by the Nigerian Upstream Petroleum Regulatory Commission (NUPRC) on December 1, 2025, the current licensing round is not merely another bid cycle; it is a high-stakes stress test of the Petroleum Industry Act (PIA) 2021 and Nigeria’s ability to remain “irresistible” in a tightening global capital market.
With 50 blocks on offer spanning onshore, shallow water, deep offshore, and frontier basins, the NUPRC is targeting an ambitious $10 billion in new investment. For the legal and commercial teams of prospective bidders, the “final countdown” requires more than just financial readiness; it demands a deep alignment with a new, transparent, and digitally-driven regulatory philosophy.
- The Numbers: 50 Blocks, One Goal
The 2025/2026 round is significantly larger in scale than the 2024 cycle. The NUPRC has curated a portfolio designed to balance “quick-win” brownfield assets with high-reward frontier exploration.
- Onshore & Shallow Water: 34 blocks (focused on rapid production ramp-up).
- Frontier Basins: 15 blocks (aimed at long-term reserve replacement in basins like the Anambra, Dahomey, and Chad).
- Deep Offshore: 1 block (representing the “crown jewel” for high-cap majors).
The regulator’s objective is clear: add 2 billion barrels of oil to national reserves and boost daily production by 400,000 barrels.
- Lowering the Barrier to Entry: Signature Bonuses
In a pragmatic shift from the “highest bidder wins” era, the NUPRC has capped signature bonuses between $3 million and $7 million. Historically, exorbitant signature bonuses acted as a front-end tax that drained capital before a single drill-bit hit the ground. By lowering this hurdle, the Commission is signaling that it values work programme commitment and speed to first oil over immediate treasury gains.
Legal Insight: While the entry fee is lower, the Performance Security (bank-issued bonds for 5% of the bonus) and the rigour of the Work Commitment are the new benchmarks for success.
- The “Drill or Drop” Mandate
Investors should pay close attention to the reinforced “Drill or Drop” policy. Under the PIA, the era of “warehousing” assets holding onto fallow acreage without active exploration is over. The 2025/2026 guidelines include strict relinquishment clauses. If a licensee fails to meet the minimum work programme within the initial three-year (onshore) or five-year (deepwater) term, the NUPRC is now empowered to revoke the license and re-award it to a more “vigorous” operator.
- Environmental, Social, and Governance (ESG)and the Host Community Development Trust (HCDT)
Beyond technical and financial capacity, the 2025/2026 round places unprecedented weight on sustainability and social license. Bidders must demonstrate clear decarbonization objectives and a robust framework for implementing the Host Community Development Trust (HCDT).
- Compliance is Mandatory: No bidder will scale the technical evaluation without a credible plan to remit the statutory 3% of operating expenses to host communities.
- The Benefit: Proper HCDT implementation is being marketed as a risk-mitigation tool to curb the oil theft and pipeline vandalism that have historically plagued the Niger Delta.
- Financial and Technical Hurdles
The NUPRC has set a high bar for “weak firms.” The financial capacity thresholds are non-negotiable:
- Deep Offshore: Minimum average annual turnover or cash-at-bank of $100 million.
- Onshore/Shallow Water: Minimum of $40 million.
- Technical Track Record: Bidders must prove at least three years of experience in subsurface, drilling, and production management.
Strategic Advice for Bidders
As we move toward the Technical and Commercial Bid stage (March 17 – June 12, 2026), the following strategic considerations are paramount:
- Consortium Building: For indigenous players, the NUPRC allows for the aggregation of financial capacity through consortia. Choosing the right technical partner is now more critical than the bid price itself.
- Data Prying: The digital portal is the primary interface. Early data acquisition from accredited vendors is a prerequisite for a compliant bid.
- Contractual Flexibility: Winners have the option to elect between a Concession or a Production Sharing Contract (PSC) framework. This choice will define the fiscal trajectory of the asset for the next 20 years.
The Road Ahead
The NUPRC plans to conclude the round with a Commercial Bid Conference in July 2026, with final ministerial approvals by October 2026. This aggressive timeline reflects a government in a hurry to monetize its hydrocarbon wealth before the global energy transition makes such assets harder to finance.
For the modern investor, the message is simple: Nigeria is open for business, but only for those who are technically competent, financially solvent, and socially responsible.
2025 Model Production Sharing Contract (PSC)
The 2025 Model Production Sharing Contract (PSC), is designed to govern the 2025/2026 Nigeria Licensing Round. It incorporates the latest provisions from the Petroleum Industry Act (PIA) 2021 and the 2025 Executive Orders on upstream competitiveness.
Summary of key fiscal and operational parameters
The 2025 Model PSC shifts from a high front-end load to a production-linked revenue model to de-risk the exploration phase.
- Signature Bonus: Rationalized to a range of $3 million – $7 million, significantly lower than historical rounds to encourage entry.
- Cost Recovery Limit: Capped at 70% of gross production. This allows contractors to recover capital (CAPEX) and operating (OPEX) costs more aggressively in early years.
- Dual-Taxation Structure:
- Hydrocarbon Tax (HT): 15% for Petroleum Prospecting Licences (PPLs) and marginal fields; 30% for Petroleum Mining Leases (PMLs) in onshore/shallow water.
- Companies Income Tax (CIT): Fixed at 30%. Deepwater operations remain HT-exempt but subject to CIT.
- Production Tax Credits (PTC): New incentives provide credits of up to $4.50/bbl for crude and $1.00/kcf for non-associated gas (NAG), scaled by reserve size.
- Profit Sharing & Revenue Ratios
The “Profit Oil” and “Profit Gas” (production remaining after Royalty and Cost Oil) are split between the Government and the Contractor.
- Operational & Compliance Mandates
The NUPRC has introduced stricter “Drill or Drop” provisions to eliminate asset “warehousing.”
- “Drill or Drop” Policy: PPL holders are strictly bound to their committed Work Programme. Failure to commence drilling or meet appraisal targets within the initial 3-year term (onshore) or 5-year term (deepwater) leads to automatic relinquishment.
Disclaimer: This article is provided for informational purposes and does not constitute legal advice. For specific inquiries regarding the 2025/2026 Licensing Round or the Petroleum Industry Act, please contact our Energy, Oil & Gas and Natural Resources Practice Group.
