The Department was in 1975, constituted into the Ministry of Petroleum Resources (MPR) after energy matters were excised and transferred to another arm of Government. Through the proclamation of Decree 33 of 1977, MPR and NNOC were merged to form the Nigerian National Petroleum Corporation (NNPC). This was in a bid to optimise the utilization of the then scarce local manpower resources in the public sector of the industry. The Decree also created the Petroleum Inspectorate as an integral part of the Corporation and granted it a semi-autonomous status, with its Head reporting to the Minister of Petroleum Resources, who also doubled as Chairman of NNPC. The Petroleum Inspectorate continued to regulate the industry but was barred by the Decree from engaging in any commercial transactions or being involved in the commercial decisions of the Corporations.

In 1985, a new Ministry of Petroleum Resources (MPR) was again created, while the Petroleum Inspectorate remained in the Corporation and retained its regulatory functions. On the 23rd of March 1988, with the commercialization of NNPC, the Petroleum Inspectorate was excised from the Corporation, due to the non-commercial nature of its functions, and merged with the new MPR to form its technical arm. The Department has continued to oversee all the activities of companies licensed to engage in any petroleum activity in the country, with the objectivity of ensuring that national goals and aspirations are not thwarted, and that oil companies carry out their operations according to international oil industry standards and practices. It keeps records and other data of the oil industry's operations and informs Government about all activities and occurrences in the petroleum industry.