The Nigerian government has reduced the signature bonus for oil blocks to between $3 million and $7 million as part of its 2025 petroleum licensing round. This move aims to lower barriers to entry and align with global best practices. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC) announced the new rates, which are significantly lower than the previous range of around $200 million.
In 2024, the government reduced the signature bonus payable by successful bidders from $200 million to $10 million. The NUPRC has now further reduced the rates, with deepwater investments attracting a $10 million signature bonus, while shallow water and onshore investments will attract $7 million. The commission surveyed international practices, including those in Brazil, to determine the new rates.
A signature bonus is a non-refundable payment made by a contractor to the government upon signing an agreement. The licensing round seeks to boost Nigeria’s oil and gas production, expand gas utilization opportunities, create jobs, and generate value for the government and investors. The exercise aims to grow Nigeria’s oil and gas reserves, enhance local content development, attract foreign direct investment, and contribute to global energy sufficiency.
The NUPRC has put up 50 petroleum prospecting licenses (PPLs) for bidding, covering onshore, shallow water, and deep offshore areas. Winners of the PPLs will have the right to extract and dispose of crude oil or natural gas during exploration or appraisal wells. The licensing round is open to both local and foreign companies, with a minimum financial requirement of $100 million average annual turnover for deep offshore blocks and $40 million for onshore and shallow water blocks.
The commission has also dismissed reports that it is withholding the Frontier Exploration Fund (FEF) from the Nigerian National Petroleum Company Limited (NNPC Ltd). The NUPRC stated that it has approved $185 million and N14.9 billion for the fund, which is controlled by the Central Bank of Nigeria (CBN). The commission’s role is to evaluate the work program submitted by NNPC before approving the release of the fund.
The reduction in signature bonuses and the licensing round are part of the government’s efforts to revitalize the oil and gas sector and attract investment. The outcome of the licensing round is expected to have a significant impact on Nigeria’s energy industry and economy. The NUPRC has assured transparency and fairness in the process, with the exercise scheduled to conclude within eight months.