Nigeria’s Upstream Decommissioning & Abandonment Regulations 2026: Key Changes And Commercial Implications

Introduction

Decommissioning and Abandonment is an unavoidable reality of upstream oil and gas operations. Every field has a life cycle, and at the end of that cycle, upstream operators are obligated to safely plug wells, dismantle facilities, and restore the environment; a process that is technically complex, capital intensive, and increasingly subject to regulatory scrutiny.

In Nigeria, the monitoring and enforcement of upstream decommissioning and abandonment obligations have grown considerably based on a combination of the global push toward environmental accountability, and the recent wave of upstream mergers and acquisitions.

The Nigerian Upstream Petroleum Regulatory Commission (“NUPRC”) has issued the Nigerian Upstream Decommissioning and Abandonment Regulations 2026 (the "2026 Regulations"), repealing the 2023 regulations and introducing material changes to decommissioning and abandonment obligations, such as the timelines for submitting decommissioning and abandonment plans and changes to the establishment & domiciliation of the decommissioning and abandonment fund.

Below we examine decommissioning and abandonment through a practical lens; highlighting the key changes introduced by the 2023 regulations and implications for upstream operators, financiers and parties engaged in upstream mergers and acquisitions

Overview of the Decommissioning and Abandonment Framework

Upstream decommissioning and abandonment in Nigeria is governed by the Petroleum Industry Act, 2021 (“PIA”) and the 2026 Regulations issued pursuant to the PIA.

The PIA¹ defines Decommissioning and Abandonment as “the approved process of cessation of operations of crude oil and natural gas wells, installations, plants and structures, including shutting down an installation’s operations and production, total or partial removal of installations and structures where applicable, chemicals and all such other materials handling, removal and disposal of debris and removed items, environmental restoration of the area after removal of installations, plants and structures”.

Decommissioning and abandonment obligations are triggered at the natural end of a field's productive life, whether for economic reasons (such as where the cost of continued operations exceeds the value of recoverable reserves), technical or legal reasons, (including the expiry, surrender, voluntary relinquishment, or revocation of a licence or lease). They may also be triggered by a regulatory directive from the NUPRC, which has the power to direct an operator to commence decommissioning and abandonment at any time, irrespective of the timing proposed in the operator's decommissioning and abandonment plan.²

The PIA requires that all decommissioning and abandonment activities must comply with good international petroleum industry practice³ and guidelines issued by the NUPRC; and in the case of offshore operations, by the standards prescribed by the International Maritime Organisation (IMO) on offshore petroleum installations and structures.⁴

Decommissioning and Abandonment Plan

A critical compliance requirement under the PIA and 2026 Regulations is that every licensee or lessee⁵ engaged in upstream operations must maintain an approved decommissioning and abandonment plan (“D&A Plan”). The plan serves as the operator’s high-level roadmap for how an asset will be decommissioned over its lifecycle and is required to state the amount to be contributed annually to the decommissioning and abandonment fund (“D&A Fund”)⁶.

Under the 2023 regulations, the D&A Plan was required to be submitted within one year of the regulations coming into force.7 However, the 2026 Regulations align submission with the relevant stage of the asset’s development. As such, under the 2026 Regulations8:

• • holders of a Petroleum Prospecting Licence ("PPL") submit their D&A Plan with their application for approval of the Work Programme for the PPL;
• • holders of a Petroleum Mining Lease ("PML") submit a D&A Plan with their application for approval of a Field Development Plan ("FDP"); and
• • operators with an existing D&A Plan in an approved FDP are required to submit an updated plan within six months of the commencement of the 2026 Regulations. Therefore, previously approved D&A plans must be updated and submitted on or before 9 September 2026.

Decommissioning and Abandonment Fund 

Given the scale of decommissioning costs, and the fact that they arise at the least convenient times, i.e., when production has stopped or is no longer profitable, the PIA requires operators to fund these obligations in advance and ringfence the cost for decommissioning and abandonment progressively during the productive life of the asset, rather than being treated as a future problem. 

The rationale is simple: without a dedicated funding mechanism, the burden of decommissioning can fall back on the State if an operator defaults, becomes insolvent, or exits the asset.

Under the PIA9, the amount to be contributed to the D&A Fund is derived from the approved D&A Plan. It is based on a reasonable estimate of total decommissioning costs, projected on a nominal basis and spread over the expected life of the asset. Contributions are made annually and are subject to periodic review.

One of the more practical improvements introduced by the 2026 Regulations is the clarification of the domiciliation of the D&A Fund. Under the 2023 regulations, the D&A Fund was required to be held with the Central Bank of Nigeria (“CBN”), except for international oil companies (IOCs) in joint venture or production sharing contract arrangements with the Nigerian National Petroleum Company Limited (“NNPCL”) who were permitted to hold not more than 85% of their annual contribution to the fund in a qualifying financial institution offshore.¹⁰

In practice, this created a significant implementation challenge, as the CBN’s statutory mandate does not extend to maintaining accounts for non-State-owned entities. Under section 27(b) and (c) of the CBN Act, the CBN is only authorised to open accounts for, or accept deposits from, Federal, State and Local Governments, as well as funds, institutions and corporations of such Governments, banks and other credit or financial institutions.

The 2026 Regulations resolves this by permitting the Fund to be held with any financial institution in Nigeria or offshore that meet the approved credit ratings.¹¹ IOCs are required to hold 15% of their annual contributions in a qualifying Nigerian financial institution.

The 2026 Regulations also revise the timelines for establishing the D&A Fund. For new licenses, holders of a PPL and PML are required to establish the Fund within 180 days of approval of the work programme and grant of the lease, respectively¹². For existing assets without an approved D&A Plan, the operator must first submit a D&A Plan within six months of the commencement of the 2026 Regulations and then establish the Fund within 180 days of plan approval.¹³

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