The Petroleum Industry Act (PIA) 2021 was hailed as a transformative legal framework for Nigeria’s oil and gas industry, providing a long-overdue update to a sector governed for decades by outdated laws. Among the many changes introduced by the PIA is a redefinition of how upstream petroleum assets are licensed, including the termination of the marginal fields programme as it was previously understood. However, this shift has created a degree of legal ambiguity, especially for operators awarded marginal fields during the 2020 bid round. This article examines the legal and policy evolution of marginal fields in Nigeria, the implications of the PIA, and the regulatory and structural reforms required to resolve outstanding uncertainties and strengthen indigenous participation.

Marginal fields in Nigeria were formally introduced as part of a deliberate strategy to increase the participation of indigenous companies in the upstream oil and gas industry. The first bid round in 2003 allocated 24 marginal fields to 31 Nigerian companies. These fields were often undeveloped discoveries from larger oil mining leases held by international oil companies (IOCs), typically considered uneconomical or technically challenging for the leaseholders to develop. The rationale was that indigenous companies, with lower overheads and a willingness to operate on a smaller scale, would find these assets viable.

Following the initial round, the government delayed subsequent licensing for many years, despite interest and pressure from industry players. It was not until June 2020 that the Department of Petroleum Resources (DPR) launched a second marginal field bid round, offering 57 fields across onshore, swamp, and shallow offshore terrains. The process attracted over 600 bids and was seen as an opportunity to catalyse indigenous capacity, especially in the context of a global push for energy transition and revenue diversification.

However, the legal foundation of this 2020 licensing process became uncertain with the enactment of the Petroleum Industry Act in August 2021. The PIA overhauled Nigeria’s petroleum legal regime, including the introduction of a new licensing structure that replaced existing titles such as Oil Prospecting Licences (OPLs) and Oil Mining Leases (OMLs) with two new categories: Petroleum Prospecting Licences (PPLs) and Petroleum Mining Leases (PMLs). The PIA also eliminated the discretionary categorisation of marginal fields. Under Section 94 of the Act, a marginal field is now defined strictly as a field declared marginal before 1 January 2021, or a field left undeveloped for seven years prior to the commencement of the Act. More significantly, the Act prohibits the future declaration of new marginal fields.

This has profound implications for the 2020 awardees. Although the bid round concluded before the PIA’s enactment, many companies did not sign field development agreements or pay signature bonuses until after August 2021. As such, there is legal uncertainty as to whether these fields are governed by the repealed Petroleum Act or fall within the scope of the PIA. The Nigerian Upstream Petroleum Regulatory Commission (NUPRC), the successor to the DPR, has not issued a definitive public position on this matter. The absence of clear transitional provisions or public regulatory guidance exacerbates the confusion.

The PIA introduced a performance-based licensing regime, wherein licensees are expected to meet specific work programme milestones within defined timelines. For example, PPLs are granted for exploration and appraisal activities with a term of up to six years, while PMLs cover development and production phases for a duration of twenty years. This regime discourages speculative holding of assets and promotes efficiency and accountability. However, it remains unclear how these rules will be applied to marginal field operators whose awards straddled the pre-PIA and post-PIA regimes.

Furthermore, while the PIA seeks to create a more structured and transparent oil and gas regime, it also presents challenges for marginal field operators who historically relied on regulatory discretion and negotiated arrangements. These operators now face a stricter legal and administrative environment that demands clarity on licence conversion, host community development obligations under Chapter 3 of the Act, and compliance with environmental and fiscal provisions. The introduction of the Host Communities Development Trust (HCDT), which mandates that 3% of an operator’s annual operating expenditure be contributed to a fund for the benefit of host communities, introduces new financial and operational obligations.

Beyond legal uncertainties, marginal field operators continue to face structural challenges. Access to finance is perhaps the most significant. Many awardees from the 2020 round are relatively small firms lacking the financial muscle or collateral required to secure commercial funding. The delay in regulatory approvals and lack of legal certainty further deter lenders, who view the assets as high-risk. A number of operators are therefore unable to progress to field development, raising the risk of asset dormancy or forced divestments.

Technical capacity is another critical hurdle. Many indigenous firms awarded marginal fields have limited experience in field development, reservoir management, or crude evacuation logistics. They often rely on foreign technical partners to fulfil operational requirements, which increases costs and dilutes the local content value. While the Nigerian Content Development and Monitoring Board (NCDMB) provides support mechanisms, including partial guarantees and partnerships through its Nigerian Content Intervention Fund (NCIF), access remains uneven and insufficient for the scale of development required.
Crude evacuation remains a persistent bottleneck. Many marginal fields are not connected to major trunk lines or terminals and must depend on alternative evacuation methods such as barging or trucking. These methods are expensive, logistically complex, and vulnerable to sabotage, oil theft, and regulatory bottlenecks. The increasing incidence of oil theft in the Niger Delta has led to production losses and revenue leakages, further eroding the commercial viability of marginal field operations.

In light of these challenges, a number of legal and policy recommendations emerge. First, the NUPRC must issue a comprehensive transitional framework clarifying the legal status of marginal field awardees from the 2020 bid round. This should cover licence conversion procedures, regulatory timelines, applicable fiscal terms, and obligations under the Host Communities provisions. Such clarity would enhance regulatory certainty and unlock stalled investments.

Second, the government should consider incentivising infrastructure-sharing models. Joint use of pipelines, terminals, processing facilities, and security services can reduce operational costs and create economies of scale. This will require tailored legal instruments, including template joint operating agreements and cost-sharing frameworks.

Third, access to finance should be broadened through collaborative mechanisms between the NUPRC, NCDMB, and Nigeria’s development finance institutions. One approach is to establish a dedicated Marginal Field Development Fund, supported by a mix of public guarantees, local content funding, and concessional financing. This could lower risk perceptions and attract private capital.

Fourth, future licensing processes—if reopened through a future amendment of the PIA—should apply stricter pre-qualification criteria that prioritise financial capacity, technical competence, and a robust local content strategy. Awarding fields to under-resourced companies undermines long-term development goals and frustrates policy objectives.

Finally, stronger monitoring and enforcement mechanisms are needed. Awardees who fail to meet development milestones within agreed timelines should be subject to field revocation, with the assets reallocated to qualified operators. This would align with the performance-based ethos of the PIA and discourage speculative hoarding.

In conclusion, while the PIA has reshaped Nigeria’s upstream oil and gas legal framework, the marginal field programme remains at a crossroads. Without decisive regulatory action, the gains of indigenous participation risk being eroded. Addressing the legal ambiguities, financial bottlenecks, and infrastructure gaps will be crucial to reviving confidence in the programme and sustaining Nigeria’s local content aspirations in the upstream sector.

Author Bio: Oluwatumininu Odunuga is a practicing energy lawyer with over six years’ experience advising local and international corporations in the oil and gas sector on mergers and acquisitions, project and corporate finance, corporate restructuring, and the resolution of commercial disputes.