Nigeria’s oil and gas service companies are facing growing risks of losing contracts, financing and operational access as regulators tighten environmental, social and governance (ESG) compliance requirements across the upstream sector, Certified ESG and Sustainability Expert, Tunbosun Afolayan, has warned.

In a statement yesterday, Afolayan said many service companies still wrongly assumed ESG obligations were solely the responsibility of operators, leaving them vulnerable to stricter regulations, supply-chain scrutiny and tougher financing conditions.

She explained that recent regulatory actions, rising gas-flaring penalties and new emissions reporting standards signal a major shift in Nigeria’s compliance environment, with the implications now extending beyond operators to contractors and service providers.

According to her, the discontinuation of gas-flaring monitoring by the National Oil Spill Detection and Response Agency (NOSDRA) in late 2025 has been followed by tougher reporting requirements from the Nigerian Upstream Petroleum Regulatory Commission (NUPRC).

She noted that NUPRC has directed operators and service providers to adopt Intergovernmental Panel on Climate Change (IPCC) measurement-based emissions reporting by the third quarter of 2026, with full Tier 3 verification systems expected by January 2027.

Afolayan said the move marked a clear transition from policy-driven expectations to a stricter compliance regime built on transparent and verifiable environmental reporting.

She also pointed to the Petroleum Industry Act (PIA) 2021, noting that while the law imposes direct obligations on operators, its impact is increasingly spilling over into the supply chain.

Under the PIA, upstream licence holders are required to commit three per cent of their yearly operating expenditure to Host Community Development Trusts (HCDTs). However, she cited findings showing that nearly 30 per cent of licence holders were yet to establish compliant trust structures as of June 2025.

According to her, when host community arrangements become subjects of regulatory review or disputes, contractors often bear the brunt through project delays, restricted site access and prolonged contract execution.

The ESG expert said mounting regulatory pressure has forced operators to strengthen supply-chain requirements, leading to greater demands for environmental performance records, incident reports and health, safety and environment (HSE) documentation from contractors.