NUPRC Circular on Enforcement of Drill or Drop Provisions Under the Petroleum Industry Act, 2021: Some Public Law Considerations

While the policy objective underlying the Nigerian Upstream Petroleum Regulatory Commission’s (NUPRC) recent Circular[i] on the enforcement of the drill-or-drop provisions under the Petroleum Industry Act, 2021 (PIA) is clear, the Commission’s regulatory powers must also be exercised strictly within the boundaries of public law. Under Nigerian law, the exercise of statutory powers by a public authority is subject to established principles of administrative law. These principles govern not only the legal basis for regulatory action but also the procedures followed, the factors considered and the purposes for which statutory powers are exercised. We highlight some principles relevant to the NUPRC’s enforcement initiative and their implications for affected licensees.

1. Legality and the Limits of Statutory Powers (Ultra Vires)

The principle of legality requires a public authority to act within the powers conferred on it by law and to comply with the conditions governing the exercise of those powers. An administrative authority cannot enlarge its statutory mandate through a circular, policy statement or administrative practice. A decision taken outside the scope of its enabling legislation may be declared unlawful and set aside by a court.

In the context of the drill-or-drop initiative, the NUPRC must identify the specific legal basis for each enforcement measure it seeks to adopt and satisfy the applicable statutory conditions. A general policy circular cannot, for instance, create new grounds for revocation, impose unauthorised penalties or dispense with procedures prescribed by the PIA. The Commission must also respect the statutory allocation of powers between itself and the Minister under the PIA. The validity of any enforcement measure will therefore depend on the relevant statutory provision, the nature of the decision and compliance with the conditions applicable to it.

2. Audi Alteram Partem: The Right to Fair Hearing

The principle of audi alteram partem, meaning “hear the other side”, is a fundamental component of natural justice. It requires a decision-maker to afford a person a fair opportunity to respond before making a decision that adversely affects that person’s rights or interests, where such an opportunity is required by the applicable law and the circumstances of the decision. For drill-or-drop enforcement, the relevant question may center around whether an affected licensee has been afforded the opportunity required by law to address the alleged default and explain any material circumstances affecting performance. Where the proposed action engages a statutory notice or hearing procedure, the Commission must comply with that procedure. A general circular inviting compliance reports does not, without more, establish that all procedural requirements for a subsequent adverse decision have been satisfied.

3. Assessment of Relevant Factors vs. Unlawful Blanket Policies

A public authority exercising a statutory discretion must take account of considerations relevant to the decision and avoid allowing irrelevant considerations to determine its outcome. The related rule against fettering discretion requires an authority to remain willing to consider the circumstances of individual cases rather than mechanically applying a policy that prevents the proper exercise of its discretion. Accordingly,  the NUPRC must therefore evaluate the relevant circumstances of each affected licence individually. Applying a rigid, blanket policy across all operators without considering material differences between their circumstances may constitute an unlawful fetter on administrative discretion. For instance, the Commission’s acnowledgement of key operator issues[ii] should ideally translate into meaningful consideration of the circumstances relevant to each enforcement decision. A decision that disregards a material force majeure claim, an outstanding regulatory approval or other relevant impediment may be open to challenge, depending on the applicable licence terms and legal framework.

4. Exercise of Power for a Proper Purpose

The proper purpose doctrine requires a statutory power to be exercised for the purpose for which it was conferred. A public authority may act within the literal scope of a power and yet exercise it unlawfully if its decision is directed at an extraneous purpose rather than the objective contemplated by the enabling legislation.

The NUPRC’s objective of preventing acreage hoarding, encouraging exploration and promoting the development of petroleum resources is consistent with the policy underlying the drill-or-drop regime. However, regulatory powers must not be used for collateral purposes, such as penalising a licensee for challenging an earlier regulatory decision, favouring a competing entity or securing an unrelated administrative advantage.

The legality of an enforcement decision will therefore depend not only on whether the Commission possesses the relevant power but also on whether that power has been exercised for a purpose permitted by law. Accordingly, evidence that a decision was driven by an improper purpose may provide grounds for judicial review.

5. Rule Against Bias (Nemo Judex in Causa Sua)

The rule against bias, expressed in the maxim nemo judex in causa sua, means that no person should be a judge in their own cause. It requires public decision-makers to act impartially and avoid actual bias or circumstances giving rise to a legally sufficient apprehension of bias.

The NUPRC’s involvement in investigating and determining alleged non-compliance does not, by itself, establish a breach of this principle as regulatory authorities commonly perform investigative, supervisory and decision-making functions within the same statutory framework. The legal question is often whether the process and circumstances of a particular decision satisfy the applicable requirements of impartiality. The principle is concerned with the integrity of the decision-making process, not merely with the fact that the regulator is enforcing its own regulatory framework.

Thus, an enforcement decision may be open to challenge where there is evidence of actual bias, a relevant personal or financial conflict of interest, or circumstances that would cause a reasonable and properly informed observer to apprehend that the decision-maker may not approach the matter impartially.

6. Rationality and Evidential Basis

The principle of rationality requires administrative decisions to have a defensible connection to the relevant facts, the governing law and the purpose of the power being exercised. A public authority must not act arbitrarily, disregard material evidence or base its decision on a material error of law.

In practical terms, a defensible enforcement decision by the NURPC should establish the relevant licence obligation, the applicable timeline, the available performance data and the legal basis for any finding of default. The Commission must assess the relevant licence instruments and work commitments rather than assume that an unsatisfactory operational outcome necessarily establishes a legally actionable default.

A finding of non-compliance may be open to challenge where it disregards a material condition, a pending regulatory approval or a legally recognised excuse relevant to the applicable work obligation. Although an administrative determination is not ordinarily subject to the criminal standard of proof of beyond reasonable doubt, the decision must rest on a rational and defensible evidential foundation.

7. Legitimate Expectation

The doctrine of legitimate expectation recognises that, in appropriate circumstances, a clear representation or established administrative practice may give rise to an expectation that a public authority will act in a particular way. The doctrine may protect an expectation that a prescribed procedure will be followed or, in circumstances recognised by law, that a substantive assurance will be honoured. This doctrine may be relevant where the NUPRC has made a clear and unambiguous representation, or established a consistent administrative practice, on which a licensee could reasonably rely. Formal approvals of revised work programmes or other regulatory assurances may be relevant, depending on their terms and the circumstances in which they were given.

A subsequent departure from such representations may be open to challenge where the applicable legal requirements are satisfied. Accordingly, licensees should preserve relevant approvals, correspondence and other regulatory communications that may establish the basis on which they planned or performed their work programmes.

8. Proportionality and Selection of Enforcement Measures

The principle of proportionality concerns the relationship between a legitimate regulatory objective and the measure adopted to achieve it. Where the law permits a public authority to choose between different measures, the exercise of that discretion may be scrutinised to determine whether the measure selected is justified in the circumstances and consistent with the governing legal framework.

Where the PIA permits a choice among enforcement measures, it may be prudent for the NUPRC to consider the nature, severity and duration of the non-compliance, the capital already committed, relevant third-party constraints and the operator’s efforts to remedy the default. Depending on the applicable statutory and contractual provisions, the measures in question may include refusing a licence extension, requiring acreage relinquishment, calling on work performance security or initiating revocation proceedings.

9. Duty to Give Reasons and Maintain a Defensible Record

The duty to give reasons requires a public authority to explain the basis of its decision where that duty arises under statute, applicable rules or the requirements of procedural fairness. Adequate reasons promote transparency and accountability and enable an affected person to understand the decision and assess whether there are grounds for challenging it.

Clear reasons and a properly documented decision-making process can help demonstrate that an enforcement decision was reached lawfully and rationally. In the drill-or-drop context, the NUPRC would have to provide clear reasons for adverse regulatory decisions where the law or the circumstances require it. A defensible administrative record would, among other things, identify the precise nature of the alleged breach, the relevant licence terms and statutory provisions, the evidence considered, the licensee’s representations and the legal basis for the enforcement measure selected.

Key Takeaways

Timely submission of the required compliance report and supporting documentation may prove material in any subsequent dispute, particularly in establishing the licensee’s position, standard of behaviour as well as the circumstances affecting performance and the steps taken to meet its obligations.

It may also be prudent for affected operators to undertake a preliminary assessment of potential judicial remedies before submitting their reports. Such an assessment can inform the presentation of relevant facts and supporting documentation, and help identify any legal issues that may arise if the Commission subsequently makes an adverse decision.

[i] By a Circular referenced NUPRC/1127/Vol.13/55 and dated 14 September 2026, the NUPRC announced its intention to enforce the drill-or-drop provisions against holders of Petroleum Prospecting Licences (PPLs) awarded under the 2020 Marginal Field Bid Round, the 2022/2023 Mini Bid Round and the 2024 Licensing Round. The Circular directs affected licensees to report their compliance status, identify operational constraints and submit mitigation plans with revised implementation timelines by 31 October 2026. It identifies potential enforcement measures including refusal of licence extensions, acreage relinquishment, calls on work performance securities and the commencement of statutory revocation proceedings. The Circular is reported to characterise itself as a general advisory rather than a notice of default under the PIA.

[ii] The Commission’s September 2026 Circular acknowledges that rig availability, financing, insecurity, host-community dynamics, regulatory delays and partner disputes can hamper performance.