CONVERSION AND RENEWAL OF PETROLEUM LICENCES AND LEASES IN NIGERIA: WHAT THE 2026 REGULATIONS MEAN FOR UPSTREAM PETROLEUM OPERATORS

1.    INTRODUCTION

The Nigerian upstream petroleum sector continues to undergo significant regulatory restructuring under the Petroleum Industry Act, No. 6 of 2021 (“PIA“). A key development in this evolution is the enactment of the Conversion and Renewal (Licences and Leases) Regulations, 2026 (the “2026 Regulations“), issued by the Nigerian Upstream Petroleum Regulatory Commission (the “NUPRC“).0F[1]

The 2026 Regulations which replaces the Conversion and Renewal (Licenses and Leases) Regulations, 2022 (the “2022 Regulations”) establish a comprehensive framework governing the conversion, renewal, extension, and restructuring of upstream petroleum licences and leases, including Oil Prospecting Licences (“OPLs“), Oil Mining Leases (“OMLs“), Petroleum Prospecting Licences (“PPLs“), Petroleum Mining Leases (“PMLs“), and marginal field interests. Beyond procedural administration, the 2026 Regulations introduce substantive fiscal adjustments, mandatory environmental and social funding obligations, and enhanced regulatory control over asset lifecycle transitions. This briefing note examines the key changes introduced by the 2026 Regulations and their implications for upstream stakeholders.

2.  SCOPE OF APPLICATION

The 2026 Regulations apply to the following categories of upstream petroleum asset transitions:1F[2]

§  conversion of existing OPLs to PPLs or PMLs under Sections 92, 93, and 94 of the PIA;

§  conversion or renewal of OMLs into constituent PPLs and PMLs under Section 93(1) of the PIA;

§  conversion or renewal of OPLs at or following their termination or expiration under Section 303(1) of the PIA;

§  conversion of existing marginal field licences to PPLs or PMLs under Section 94(1) and (2) of the PIA;

§  conversion of commercial discoveries made within a PPL to PMLs under Section 79 of the PIA;

§  grant of a PML for commercial discoveries to a licensee of a PPL under Section 81(1) of the PIA;

§  extension of the duration of a PPL for the optional extension period under Section 77(1) and (2) of the PIA; and

§  renewal of PMLs for successive terms under Sections 86(6) and 87 of the PIA.

Notably, the 2026 Regulations provide that a reference to the licensee of a PPL in Section 81(1) of the PIA includes the holder of an OPL, expanding the scope of parties eligible to apply for PMLs for commercial discoveries.2F[3]

3.  APPLICATION PROCESS

An application for the conversion or renewal of a licence or lease shall be submitted by the operator of the asset to the NUPRC. . The operator must act on behalf of all licensees or lessees and must obtain the prior written consent of  all licensees, lessees, or contractors affected by the application, with evidence of such consent submitted with the application.3F[4] Applications must be made in a form prescribed by the NUPRC and must include the applicant’s contact details, details of the licence or lease, the type of model contract (if applicable), names of all licensees or lessees, a signed letter authorising the applicant to submit the application, and evidence of rent paid.4F[5] Additional technical requirements apply depending on the type of application, including maps delineating proposed licence and lease areas, work programmes, field development plans, performance securities, and rent computations.5F[6]

The 2026 Regulations impose strict deadlines for submissions. Conversion applications for OPLs and OMLs under Sections 92 and 93 of the PIA must be made at least sixty (60) days before the conversion date (the earlier of 16 February 2023 or the expiration of the licence or lease). Conversion applications for marginal fields under Section 94(1) and (2) of the PIA must be made within sixteen (16) months of the effective date of the PIA. Conversion applications for commercial discoveries to PMLs must be made within twenty-four (24) months of declaring the commercial discovery. Renewal applications for OMLs under Section 93 of the PIA and PMLs under Section 87 of the PIA must be made at least twelve (12) months before expiration. Extension applications for PPLs under Section 77(1) and (2) of the PIA must be made at least three (3) months before expiration of the initial exploration period.6F[7]

Where an applicant selects a potential appraisal area, potential retention area, or potential lease area, the applicant must submit an appraisal programme or make the relevant statutory declaration within one (1) year of the conversion date. Failure to do so results in automatic relinquishment of the relevant selected area.7F[8] This provision introduces a time-sensitive discipline on acreage retention.

4.  APPROVAL PROCESS

The 2026 Regulations establish a two-stage approval process involving both the NUPRC and the Minister of Petroleum Resources (the “Minister”).8F[9] Upon receiving a complete application, the NUPRC has ninety (90) days to make a recommendation to the Minister to grant or refuse the licence or lease.9F[10] The Minister then has sixty (60) working days from receipt of the NUPRC’s recommendation to respond.10F[11] If the Minister approves the recommendation, the Minister communicates the approval to the NUPRC, and the licence or lease is issued once all preconditions are met.11F[12] If the Minister rejects the recommendation, the Minister must provide reasons, and the applicant may re-present the application within thirty (30) days of being informed of the rejection.12F[13] If the Minister does not respond within sixty (60) working days, the approval is deemed granted, subject to the fulfilment of all preconditions.13F[14]

5.  PRECONDITIONS FOR ISSUANCE

The 2026 Regulations require applicants to fulfil seven preconditions within sixty (60) days of the Minister’s approval (or deemed approval) before a licence or lease is issued.14F[15] The applicant must pay the applicable rent for the first year of the licence or lease; pay any renewal bonus; submit a work programme or field development plan with applicable performance security (a parent company guarantee, performance bond, letter of credit, or bank guarantee acceptable to the NUPRC); establish a Decommissioning and Abandonment Fund (the “D&A Fund”); establish an Environmental Remediation Fund (the “Remediation Fund”); establish a Host Community Development Trust f(“HCDT”) fund; and, for joint venture arrangements with the Nigerian National Petroleum Company Limited (“NNPCL “), provide a signed statement from NNPCL  confirming conformity with Section 92(3)(a) of the PIA.15F[16] If the applicant fails to meet any of these preconditions within sixty (60) days, the Minister’s approval is deemed withdrawn and the application is refused. There is no provision for extension.16F[17]

Regarding the D&A Fund, where no decommissioning and abandonment plan exists and PMLs have been selected, the applicant must present a plan within one year of the effective date of the PIA (August 2021). For most operators in May 2026, this deadline has passed. The NUPRC will approve or reject the plan within sixty (60) days of submission. Once approved, the D&A Fund must be established within three (3) months, and the first annual contribution must be made before the first anniversary of the PML’s effective date.17F[18] For the Remediation Fund, the applicant must make the required contribution under Section 103(1) of the PIA before signing any conversion contract or receiving any licence or lease.18F[19] For the HCDT fund, the applicant must incorporate the HCDT under Section 236 of the PIA, establish the HCDT fund under Section 240(1), and make the first contribution (3% of actual operating expenditure from the preceding financial year) before the NUPRC will sign any conversion contract or issue any licence or lease.19F[20] Unlike the 2022 Regulations, which set a fixed compliance date of 16 August 2022, the 2026 Regulations require HCDT establishment as an ongoing precondition at the time of application.

6.  FISCAL ADJUSTMENTS

The 2026 Regulations introduce several fiscal adjustments applicable upon conversion or renewal.20F[21] Signature bonuses do not apply upon conversion, but renewal bonuses do apply upon renewal.21F[22] Any rent paid under the PIA applicable to converted acreage will not be refunded or repaid.22F[23] Rent for the first year of a PPL or PML must be paid before the conversion or renewal date.23F[24]

For crude oil and condensates, the 2026 Regulations provide that for onshore, shallow water, and deep offshore acreages, the royalty rates are reduced to the rates based on production under paragraphs 10(2), (3), and (4) of the Seventh Schedule to the PIA. For frontier basins, the royalty rate of 7.5% remains unchanged upon conversion or renewal.24F[25] Royalty-by-price provisions under paragraph 11 of the Seventh Schedule apply upon conversion or renewal for onshore and shallow water acreages, as well as for Production Sharing Contracts (“PSCs”) in deep offshore, but do not apply for frontier basins.25F[26]

For natural gas and natural gas liquids, the 2026 Regulations introduce a significant incentive for domestic gas utilisation. For onshore and frontier basins, the royalty rate of 7% applicable to natural gas and natural gas liquids is converted to 5%. For shallow water and deep offshore acreages, the royalty rate of 5% remains. However, for natural gas utilised in-country, the rate reduces to 2.5% across all onshore, shallow water, and deep offshore acreages.26F[27] The determination of whether natural gas is utilised in-country is subject to applicable regulations.27F[28]

Royalties apply from the first Computation Day of the calendar month following the conversion or renewal date.28F[29] While “Computation Day” is not defined in the 2026 Regulations or the PIA, the Petroleum Royalty Regulations, 2022 establish that royalty statements commence from the month in which regular production begins.

7.  JOINT VENTURE AND PRODUCTION SHARING CONTRACT PROVISIONS

Where an application relates to conversion from an OPL or OML under a joint venture arrangement with NNPCL , the NUPRC will not sign a conversion contract unless NNPCL  has confirmed in writing that the conversion conforms to the provisions of Section 92(3)(a) of the PIA.29F[30]

For PSCs renegotiated with NNPCL  as concessionaire under the PIA, the area to be retained from the OML must be the larger of 40% of the OML or all areas and zones designated by the lessee under Section 93(1) of the PIA. Any area not retained under this formula must be relinquished on the renewal date, and the retained area is subject to a work programme commitment backed by a performance security.30F[31] These retention rules do not apply to PSCs renegotiated before the effective date of the PIA (August 2021). Operators with legacy PSCs should confirm whether their contracts fall within this grandfathering exception.31F[32]

Under the 2022 Regulations, where a PSC involved an NNPCL-held licence or lease, NNPCL  was the applicant of record. The 2026 Regulations have changed this approach. The operator now makes the application on behalf of all licensees or lessees, subject to the prior consent of all licensees, lessees, or contractors.32F[33] This change is commercially practical, as the operator typically holds the relevant operational and financial information required for the application.

8.  WHAT OPERATORS SHOULD DO NOW

All upstream operators with OPLs, OMLs, or marginal field licences should immediately calculate the expiration date of each licence or lease. For OPLs and OMLs subject to conversion, the relevant date is the earlier of 16 February 2023 or the expiration of the licence or lease. In May 2026, most will be approaching expiration.33F[34] Operators should submit renewal applications at least 12 months before expiration for OMLs and PMLs,34F[35] and for PPL extensions, submit at least three months before expiration.35F[36] The three funds (decommissioning, environmental remediation, and HCDT) should be established before submitting the application or immediately upon receiving ministerial approval, as the 60-day post-approval window is short and non-extendable.36F[37] For joint venture arrangements with NNPCL , operators should obtain the required confirmation of conformity before the NUPRC will sign any conversion contract.37F[38] Operators should also review royalty calculations to confirm eligibility for the 2.5% in-country gas utilisation rate and document the supply chain and end-use of natural gas to support any claim.38F[39]

Operators with pending conversion or renewal applications should verify that the operator has obtained written consent from all licensees, lessees, or contractors, as a missing consent letter is grounds for rejection.39F[40] They should confirm that the 60-day precondition window has not expired; if ministerial approval was received more than 60 days ago and any precondition remains unfulfilled, the approval is deemed withdrawn.40F[41] If the Minister rejected the NUPRC’s recommendation, operators should re-present the application within thirty (30) days of receiving the rejection.41F[42]

CONCLUSION

The 2026 Regulations repeal the 2022 Regulations and provide clearer rules for converting legacy titles to PIA-compliant licences and leases. Key changes include expanded scope, operator-led PSC applications, HCDT compliance as an ongoing precondition, and refined fiscal adjustments. The 60-day precondition window and mandatory establishment of three funds are the most operationally significant requirements. Failure to meet these timelines results in automatic refusal. Upstream asset rights in Nigeria are increasingly contingent on demonstrable compliance, financial preparedness, and active development.

Please do not treat the foregoing as legal advice, as it only represents the public commentary views of the authors. All enquiries on this should be directed to the key contacts.