INTRODUCTION

The Oil and gas industry remains the backbone of Nigeria’s economy, contributing the majority of government revenues and foreign exchange earning. Yet for decades, the sector has been criticized for secrecy, corruption, overlapping mandates and mismanagement. At the heart of many of these challenges are government contracts that determine how oil resources are explored, who gets what share of revenue, what obligations companies have to communities and how government regulators hold companies accountable for infractions that adversely affect host communities. Such contracts include; Production Sharing Contracts (PSCs), Joint Venture (JV) Agreements, Service Contracts, Marginal Field Agreements, Gas Supply and Purchase Agreements (GSPAs), Host Community Development Trust (HCDT) frameworks and various licensing arrangements governing exploration and production activities.

When contracts are hidden or poorly understood, the door opens to disputes, abuse and public mistrust. Transparency, therefore, is not just a technical legal requirement, it is central to building public confidence, attracting investment and ensuring that Nigeria’s oil wealth benefits its citizens.

The passage of the Petroleum Industry Act (PIA) 2021 marked a turning point. For the first time, Nigeria introduced a modern and comprehensive framework aimed at improving governance, accountability and transparency in the petroleum sector. This article explains how the PIA reshapes contract transparency, highlights key disputes that reveal remaining gaps, assesses the overall impact of these reforms and makes recommendations to strengthen transparency and ensure that Nigeria’s oil and gas contracts are more beneficial to all stakeholders.

MAJOR REFORMS UNDER THE PETROLEUM INDUSTRY ACT, 2021.

The PIA brought long-awaited clarity and restructuring to Nigeria’s petroleum industry and provides a coherent regulatory environment, separates regulatory from commercial functions, and mandates certain disclosures and oversight requirements. Key reforms include:

1. Commercialization of the Nigerian National Petroleum Corporation (NNPC) into NNPC Limited
One of the most significant reforms is the transformation of the former Nigerian National Petroleum Corporation (NNPC) into a fully commercial entity (NNPC Limited) incorporated under the Companies and Allied Matters Act 2020 (CAMA). Unlike the defunct NNPC, by the express provision of Section 53 of the Petroleum Industry Act 2021, NNPC Ltd is to operate strictly on a commercial basis, comparable to private companies. Thus, under Section 64(a) of the PIA, NNPC Ltd is exempted from the operation of the Public Procurement Act, the Fiscal Responsibility Act, and the Treasury Single Account. While the exemption of NNPC Ltd from the requirements of the Public Procurement Act, the Fiscal Responsibility Act, and the Treasury Single Account grants the NNPC Ltd operational flexibility, it raises transparency concerns since public oversight is limited.

In addition, NNPC Ltd is recognized as the concessionaire of all Production Sharing Contracts (PSCs), Profit Sharing, and Risk Service Contracts on behalf of the Federation. It lifts and sells royalty oil and tax oil, deducts an agreed 30% management fee (including the Frontier Exploration Fund), and remits the balance to the Federation pursuant to section 64(b) of the PIA. This reform eliminates the conflict of interest that hitherto existed when the NNPC acted as both operator and regulator.

2. Separation of Regulatory and Commercial Functions

Before the enactment of the PIA, the Department of Petroleum Resources (DPR) combined regulatory and commercial oversight functions, leading to inefficiency and conflict of interest. The PIA dissolved the DPR and created two distinct regulators:

• Nigerian Upstream Petroleum Regulatory Commission (NUPRC): Established under Section 4 of the PIA, 2021, the Commission regulates upstream operations including licensing, contract oversight, royalty assessment, and compliance. It plays a central role in ensuring that licensing rounds and contract awards follow competitive and transparent processes.
• Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA): Established under Section 29 of the PIA, 2021, the Authority oversees midstream and downstream operations such as refining, storage, transportation, distribution, and retail. Its role is crucial in ensuring fair pricing, efficient supply, and transparent allocation of resources in the domestic market.

The PIA strengthened Nigeria’s transparency regime by requiring the disclosure of beneficial ownership of oil and gas assets. In line with Nigeria’s obligations under the PIA and the CAMA 2020, the Nigerian Oil and Gas Asset Beneficial Ownership Register (NOGABOR) was established by the NUPRC in December 2022. NOGABOR is a public register designed to enhance transparency, prevent corruption, and allow stakeholders to trace the individuals who ultimately control oil and gas assets. This helps fight corruption, hidden interests, and revenue leakages.

4. Transparency in Competitive Bidding and Licensing Rounds
The PIA mandates that oil blocks and licenses must be awarded through open and competitive bidding. Now contracts and licenses must be awarded through open, competitive bidding, rather than closed-door deals. For example, recent Production Sharing Contracts (PSCs) for PPL 2000 and 2001 awarded to Total Energies-Sapetro were conducted under the 2024 licensing round in compliance with Section 73 of the PIA. This process has been hailed as a model of transparency and competitiveness.

TRANSPARENCY CHALLENGES AND KEY DISPUTES IN PRACTICE

Although the Petroleum Industry Act (PIA) 2021 has introduced a more transparent legal framework for Nigeria’s oil and gas sector, several challenges still remain. Practical experience indicates that implementation of the law remains a challenge and recent events show that the transparency reforms are still being tested. The list below highlights some of these challenges:

Contract Disputes and Regulatory Overlaps
Contract disputes in Nigeria’s oil and gas sector arise from disagreements over how contractual obligations, such as gas supply, payments, operational duties and divestment rights should be interpreted or performed. Due to the complexities of these contracts, minor disagreements can quickly escalate into lengthy litigation.

A clear example is the long-standing dispute between Global Gas and Shell over the alleged failure of Shell to supply wet gas to Global Gas pursuant to a Gas Processing Agreement. While this dispute was still being contested in court, Shell decided to sell its Nigerian assets (SPDC) to another company, Renaissance Africa Energy Holdings, and Global Gas objected to the sale, arguing that the regulator (NUPRC) should not approve the sale because Shell still had unresolved contractual obligations and a court case was already ongoing. Despite the pending litigation, Shell completed the sale in March 2025. The appeal against the judgment of the Court of Appeal in that case (Shell Petroleum Development Company (SPDC) V. Global Gas & Refining Limited (2023) LPELR – 59838 (CA) is now before the Supreme Court.

Furthermore, regulatory overlaps may occur when multiple agencies with similar or conflicting mandates like NUPRC, NMDPRA, the Nigeria Extractive Industries Transparency Initiative (NEITI) and environmental authorities exercise authority over the same issues. For instance, NUPRC collects Beneficial Ownership (BO) data for upstream operators (NOGABOR) while NEITI also collects BO data for its transparency reports. Thus, Companies may face duplicate requests from multiple institutions.

This creates uncertainty about which regulator has final decision-making power. Together, these disputes and overlaps create an unpredictable environment where business decisions, legal processes, and regulatory approvals can clash, raising concerns about consistent oversight, respect for court processes and the accountability of major industry players.

2. Concerns Over Contract Awards and Value for Money
Civil society groups like the Citizens Advocacy for Social & Economic Rights (CASER) have criticized some contracts awarded by the NUPRC, particularly around metering and field development studies for duplicating services or lacking competitive processes. These disputes highlight transparency gaps in procurement: Are contracts truly open and competitive, or do they sometimes slip into favouritism, duplication, or wasteful spending? For the public, opaque awards translate into misused resources and reduced trust in government reforms.

3. Uneven Implementation of Beneficial Ownership Disclosure
The launch of the Nigerian Oil and Gas Asset Beneficial Ownership Register (NOGABOR) in 2022 was a landmark step. It allows the public to see who the real, ultimate owners of oil and gas companies are, reducing the risk of hidden interests or corruption. However, implementation has been patchy. Some companies delay or only partially disclose ownership information, undermining the usefulness of the register.

4. Balancing Transparency with Commercial Confidentiality
One of the thorniest issues is how much of an oil and gas contract should be made public. On the one hand, host communities, investors, and civil society deserve to know fiscal terms, royalties, ownership details, and environmental obligations. On the other hand, companies argue that certain clauses are commercially sensitive. If too much is hidden, transparency loses meaning; if too much is revealed, investors may fear loss of competitiveness. Nigeria still struggles to strike the right balance, leaving room for suspicion and disputes.

5. Risk of Conflicts of Interest and Exemptions
NNPC Limited’s exemptions from procurement and fiscal responsibility laws, while commercially beneficial, means that its vast control over oil lifting, marketing, and PSCs could operate in opacity unless checked by NEITI and NUPRC audits. This creates what may be called the “transparency dilemma” of NNPC Limited. Thus, strong oversight is required to ensure transparency in oil sales, remittances and contract management.

6. Delay in Judicial and Regulatory Responses
Transparency also depends on timing. Court injunctions, arbitration awards, or regulatory approvals often take too long, or they happen at cross purposes. Slow or inconsistent processes weaken the credibility of transparency reforms

IMPACT OF TRANSPARENCY REFORMS

Despite these gaps, reforms under the PIA have already produced visible results:

1. Improved Investment Climate, transparent bidding and clearer rules have boosted investor confidence. Nigeria announced on 17th of September 2025 at Africa Oil Week that 28 new Field Development Plans (FDPs) approved in 2025 alone carry capital-expenditure commitments totalling US$18.2 billion. According to the NUPRC, those 28 FDPs are expected to unlock 1.4 billion barrels of oil and 5.4 trillion cubic feet of gas, adding about 591,000 barrels per day of oil production potential and 2.1 billion standard cubic feet per day of gas.
2. Revenue Protection and Accountability. With NEITI audits and public disclosure, it is harder for revenues, royalties, or signature bonuses to be diverted. Discrepancies are identified more quickly.
3. Building Public Trust: Making contracts and ownership visible empowers citizens, communities, and the media. Greater openness reduces suspicion and helps communities see benefits from local projects.
4. Legal and Regulatory Clarity -Disputes like Shell vs Global Gas push courts and regulators to clarify the law, setting precedents that shape future contract enforcement.

RECOMMENDATIONS FOR STRENGTHENING TRANSPARENCY.

To strengthen transparency and deepen public confidence, we suggest that Nigeria should:

1. Enforce Disclosure obligations rigorously, by making beneficial ownership and contract publication mandatory, with strict penalties for non-compliance.
2. Build Institutional and Civil Society capacity, by investing in training for regulators, judiciary, and civil society groups to interpret contracts and monitor compliance.
3. Safeguard Regulatory Independence by ensuring that NUPRC and NMDPRA remain independent of political and commercial influence, especially if managing contracts shifted from NNPC.
4. Define transparency boundaries, by specifying which contract terms (e.g., fiscal obligations, environmental commitments, community obligations) must always be public, while allowing limited confidentiality on commercially sensitive details.
5. Speed Up Judicial and Regulatory Processes and ensure that disputes and approvals are resolved quickly so they do not undermine public confidence or delay enforcement of transparency.
6. Promote public engagement and provide communities with simplified versions of contracts that affect them, using plain language summaries and accessible data platforms. A study of other countries such as United Kingdom, Norway, Ghana, Mexico etc show that transparency thrives when disclosure is mandatory, verified independently, digitized, and linked to tangible consequences.
We believe that combining these measures will strengthen public trust, attracts investment, and reduces opportunities for corruption.



CONCLUSION

The Petroleum Industry Act 2021 has laid the foundation for a more open and accountable oil and gas sector in Nigeria. Competitive licensing, beneficial ownership disclosure, and stronger regulator-civil society collaboration show genuine progress.

However, transparency must go beyond “laws on paper.” True reform depends on consistent enforcement, capacity building, and protection against conflicts of interest. For Nigeria to ensure its vast hydrocarbon wealth serves national development and public welfare, transparency in contracts is not optional, it is indispensable.