How To Start Up Crude Oil & Gas Marketing Business In Nigeria..Secrets Nigerian Oil Millionaires Don’t Want You To Know
While oil prices have begun to rise again, it makes good sense to invest in the petroleum industry. Statistics have shown that Nigeria is one of the highest producers, as well as the highest consumers of petroleum products. We all know how the bulk of the Nigerian economy hinges on the oil and gas sector. It is common to hear Nigerians talk about their desire to be a part of this booming industry, but only a few actually take actions.
Many still hold to the belief that average persons cannot join the oil and gas game due to the huge financial requirements and risks involved. Although the main players in the oil and gas industry are usually the wealthy and influential, there are, however, many “ordinary” men and women that have invested in and are reaping great returns from the oil business.
The primary purpose of this article is to provide a fundamental knowledge about what it takes and how to start oil and gas business in Nigeria.
That being said, there are different types of petroleum products which one can decide to venture into in Nigeria. These products include the following:
DPK (Dual Purpose Kerosene) or kerosene
HHK (House Hold Kerosene)
LPG (Liquefied Petroleum Gas) or cooking gas
HPFO (High Pour Fuel Oil)
LPFO (Low Pour Fuel Oil)
ATK (Aviation Turbine Kerosene)
PMS (Premium Motor Spirit) or petrol
Base oil (lubricants)
AGO (Automotive Gas Oil) or diesel
It has been known that there is a high demand for most of the above-listed petroleum products in Nigeria, with a corresponding low supply. Despite the fact that there are numerous oil marketing companies in Nigeria, oil and gas supply has always been playing catch up to the high demand.
Different ways of joining the downstream petroleum industry In Nigeria
There are different business opportunities in the downstream (after production) oil and gas industry. These include:
- Owning a filling station: Although this business is capital intensive, it is one of the highly rewarding options in the oil and gas industry. Filling stations thrive in areas where there is traffic.
- Lubricant production and retailing: Lubricant production is another method of joining the oil and gas business. This profitable venture involves the production of high-quality lubricants which are in high demand in Nigeria. If the production of lubricants is too capital intensive for you, you can venture into the marketing of lubricant products.
- Investment in shares. Most of the oil and gas companies in Nigeria are listed on the Nigeria Stock Exchange. Investing in these companies is a rewarding venture as the shares of these companies are usually priced high. To partake in this, you will need to hire the services of a competent stock broker to help you in acquiring shares when they are affordable.
- Cleaning company: You can join the oil and gas industry by starting an oil spillage cleaning company. The operations of this type of companies depend on the spilling of oil in places where it is drilled. Although the work might be seasonal, it is nonetheless highly profitable as there are very few oil spillage cleaning companies in Nigeria.
- Start an oil servicing company: Oil servicing firms help in running maintenance services for major oil production companies like Chevron and Shell. This business is not easy to set up and may not be for everyone, as it requires a lot of research and a pool of engineering professionals for the maintenance.
- Be a retailer of cooking gas: This is a less-costly and lucrative business to set up. What you need is to get a shop in a neighborhood where cooking gas is in high demand. In addition to your shop, you will have to get gas cylinders for storing gas and a gas supplier.
- Start a haulage company: Petroleum product haulage involves the transportation of petroleum products from various points. An example is in the movement of petrol from the seaport to the refinery or from the oil depot to a filling station. For this business, you will need to have access or own trucks with competent drivers.
- Diesel supply. This is one of the less-expensive ways of joining the oil and gas business. It involves the obtainment and distribution of diesel. Diesel supply business is also one of the most profitable due to the fact that most companies in Nigeria use diesel for power generation. Take, for instance, a telecommunications company like Globacom which has several base stations in the country which are all diesel-powered; diesel suppliers stand to gain a lot when they are hired by such companies.
Enough of the preambles, let’s dive into the crux of the matter: how to start oil and gas business in Nigeria.
Basic Requirements For Starting An Oil & Gas Business In Nigeria
To be able to successfully run an oil and gas venture, you will need to have access to the following:
- An oil depot: this is basically a depository for the petroleum products after importation or transportation. An oil depot can store as much as 50 million cubic meters of petroleum products. You don’t need to build an oil depot before you can start your oil and gas business, just know the location of the closest ones to you.
- Filling station and gas plant: these plants are essential for the distribution of the products. While you may not necessarily need an oil depot, it is important that you own at least a filling station or a gas plant. You can partner with somebody or a firm to acquire a filling station.
- Means of transporting the products: You will need trucks for transporting your petroleum products from the oil depot to the filling station. These trucks come in different sizes based on the volume (in liters) of the product they can carry at a time. Examples of truck sizes are 33,000Litres, 36,000Litres, and 66,000Litres).
These trucks are usually divided into three parts to accommodate a maximum of three different types of petroleum products. The partitioning is also done to allow for different persons or firms to transport their products in one truck. An example is where a 36,000Litres loaded truck is divided into three parts of 12,000Litres each.
Note that I did not mention that you must have all of the above-listed items; you only need to have access to some of them. With that out of the way let’s continue.
For starting an oil and gas marketing business in Nigeria, you will have to follow the steps below:
Step 1: Register your company with the Corporate Affairs Commission.
This is the first for any business which wants to be recognized in Nigeria. The cost of registration of organizations with the C.A.C will vary depending on the type and size of the business. For this, you’ll have to enlist the services of a qualified lawyer.
Step 2: Acquire land space for your business.
The next step that you need to take is to get a land for your business. When searching for a land, it is advised that you look for one that is located in a commercial area that is easily accessible and close to heavy traffic routes.
Step 3: Land survey.
The services of a quantity surveyor will be required here. This is to ensure that the land will be suitable for intended construction of a filling station. Moreover, the quantity survey can help in getting architects for the architectural plan of the station.
Step 4: Obtain a fire certificate.
For opening a filling station, it is important that you get a duly signed fire certificate from the state fire service.
Step 5: Obtain a police report.
This can be obtained from the closest police station to your site. A police report is required to prove that your business will not cause any traffic hazard.
Step 6: Get a tax clearance certificate.
After getting your police report, the next place to visit is the IRS (Inland Revenue Service) board office to obtain your tax clearance certificate.
Step 7: Get DPR permit
Visit the office of the DPR (Department of Petroleum Resources) in the state with the above-listed documents to obtain a permit for the construction of the filling station.
Step 8: Start construction
After obtaining the permission for the DPR, you can then go ahead to begin construction of the filling station. In building a filling station, there are important facilities which should be included, based on the DPR standards. These facilities include the following:
- Underground storage and dispensing facilities. At least a minimum of 4 dispensing pumps is needed in every filling station.
- This is the outer part of the filling station premises.
- Bound walls. This refers to the surrounding fence of the filling station.
- Good drainage system. A good drainage system is compulsory in every filling station to allow for the easy flow of liquid.
- Electricity and water
- Safety equipment such as fire extinguishers and dry sand buckets are very important in the event of a fire outbreak.
Step 9: Obtain DPR storage license.
When you are done with the construction of the filling station, you will have to inform the DPR so that they can inspect the station to ascertain if it was built to standard. If you passed the inspection, you can then go on to apply for the storage license. For this purpose, you will have to go with all the required documents.
Step 10: Get lifting right and bulk purchase agreement.
After obtainment of the DPR storage license, you will have to visit the petroleum pipeline marketing company (PPMC) to get lifting right and bulk purchase agreement.
Step 11: Depot allocation
This is the last step before commencing operations. The allocation enables you to lift petroleum products from the closest NNPC (Nigeria National Petroleum Corporation) depots.