HOW TO START AN OIL MARKETING COMPANY IN NIGERIA

The petroleum industry has been one of the sectors in Nigeria to invest in. Nigeria is one of the largest producers of oil in the world according to statistics. The Nigerian economy is also dependent on the oil and gas sector. The oil business is not only for those who are wealthy, even though any average person can invest in the person

There are different types of petroleum products that one can venture into in Nigeria. These products include

• DPK: Dual purpose kerosene or kerosene
• HHK: Household kerosene
• LPG: Liquefied petroleum gas
• HPFO: High pour fuel oil
• LPFO: Low Pour Fuel Oil
• ATK: Aviation Turbine Kerosene
• PMS: Premium Motor spirit or petrol
• Base oil or lubricants
• AGO: Automotive gas oil or diesel

There are different mediums one can adopt to market the oil products. This is also known as the downstream petroleum sectors which is responsible for supplying consumers with products

1. Filling station

One of the common ways of those in the downstream petroleum sector adopt is by owning a filling station. The filling station is able to market various petroleum products to the consumers. Filling stations are mostly found on highways and where there is traffic

2. Oil and Gas spillage cleaning company

Another way is by starting an oil and gas spillage cleaning company that will clean up places where spilling of oil has occurred during the oil drilling process. There are few oil and gas spillage cleaning company in Nigeria and it is also very profitable

3. Lubricant production, marketing and retailing

This is also another way joining the oil and gas business. This deals with the manufacturing of lubricants which are used for various machineries. This is also another profitable business

4. Investment in shares

Oil and gas companies in Nigeria are listed on the Nigerian stock exchange (NSE). The price of shares of the oil and gas companies in Nigeria are high and rewarding. One can acquire the services of a stockbroker to help with the acquisition of shares

5. Oil servicing company

One can also start an oil servicing company that will be responsible for running maintenance services for oil companies

6. Cooking gas

One can also become a retailer of the cooking gas in order to bridge the gap with the consumers. This doesn’t require much to set up and the demand for cooking gas services is on the rise in Nigeria

7. Haulage company

One can also start a haulage company by transporting various petroleum products from different points with the use of tankers. This might include the movement of petrol from the seaport where the drilling is made to the refinery where it will be processed or from the refinery to the filling station where it will be distributed to consumers

8. Diesel supply

This is also inexpensive and it involves the obtainment and distribution of diesels to various points. It is one of the most profitable oil and gas business because most companies use diesel for power generation.

PROCEDURES AND GUIDELINES ON HOW TO START AN OIL MARKETING COMPANY IN NIGERIA 

In order to start an oil marketing company in Nigeria, the following steps and procedures must be followed and adhered to

• Make a decision on the services you want to offer

The oil and gas sector in Nigeria is broad with different downstream businesses that one can indulge in. These services include

1. Owning a Filling station
2. Owning an Oil and Gas spillage cleaning company
3. Lubricant production, marketing and retailing
4. Oil servicing company
5. Cooking gas
6. Haulage company
7. Diesel supply

The entrepreneur might decide to start with one and two and expand its services as the company grows or breakeven

• Develop a business plan

After making a decision on the services you want to offer, the next important step is to develop a business plan for your company that will help you plan ahead and ensure that your business is in good shape.  The business plan will allow the prospective owner of the business to know what it takes to start the business such as the equipment, finances and other important element. A proper business plan will include the following

• Executive summary (This will be done after the plan is written)
• Business Overview
• Market Overview: The Opportunity & Solution
• Competition
• Financial Highlights
• Our Ask
• The company overview

This is the introduction and description of your company. It covers the following details

1. Mission and vision
2. Overview of company history/capabilities
3. Product description and present stage of development
4. Competitive advantage (what’s different or better than competition)
5. Past customers and performance (if applicable)
6. Legal entity, hours of operation, location description and attributes
7. Structure & Ownership
8. Management Team
9. Intellectual property status (if applicable)
10. Commercialization strategies (if applicable – timeframe and actions to move from idea to marketplace

• Product and services

This covers the following:

• Definition of Products or Services to be Sold
• Product Viability
• Technology
• Industry analysis, market analysis and marketing strategy
• Swot analysis
• Market analysis
• Market size(Estimate of the total market size for the product or service and trends
• Quantification of the size of each market segment in terms of (Naira spent, units used, number of people, percent of income etc.)
• Competition to the business
• Market Segmentation and Demographics
• Customer Profile(Actual and potential purchasers of product or services by market segments)
• Barriers to Entry
• Marketing/sales plan
• Management and operations
• Summary of risks involved
• Professional and advisors
• Financials
• Cash flow projection and/or existing (3 years) with breakeven analysis
• Income/Expense projection and/or existing (3 years with ratios and benchmarks to industry)
• Sources and uses of funds (funds needed, owner equity, how funds will be used/start-up cost analysis
• Funding
• Amount of Money Sought
• Use of Proceeds
• Project implementation schedule if any

• Registration with the Corporate Affairs Commission

The next step is the registration with Corporate Affairs Commission (CAC) in Nigeria that is responsible for the registration of businesses in Nigeria. The cost of registration depends on the type and size of the business that you are venturing into. This step is taken by businesses that want to be recognized in Nigeria. The minimum share capital is 1 million shares.

• Acquiring a land space

After registration of the company name and other elements with the Corporate Affairs Commission (CAC) in Nigeria, the next step to take is to acquire a land space for the business. The business location must be in a commercial area that is easily accessible and has heavy traffic routes

• Surveying Land

After acquiring the land, the next step is to do a proper survey of the land. This will be done by acquiring the services of a surveyor in order to ensure that the land is fit and proper for building a filling station.

• Obtaining a fire certificate

A fire certificate is needed before starting an oil marketing company. The certificate can be gotten from the state fire service in Nigeria

• Obtain a letter of approval

A letter of approval must be gotten from the planning authority in the state where you want to start your filing station. This must be gotten before the construction starts or the operation would be suspended halfway

• Obtaining a police report

This can be gotten from any police station and it is required to prove that your business will not cause any traffic hazard to the citizens.

• Obtain a tax clearance certificate

After obtaining the police report, the next step is to obtain a tax clearance certificate from the State Inland Revenue service which your company will be located.

• Obtain a Department of Petroleum Resources (DPR) permit

This can be gotten from the office of the Department of Petroleum Resources (DPR) in the state where your company will be situated in and other relevant documents that will be needed for the construction of your company. The application of a DPR permit takes 4-14 days to complete

The requirements for obtaining a Department of Petroleum Resources (DPR) permit includes

1. Certificate of Incorporation
2. A certified true copy of Memorandum and Articles of Assoc.
3. Other company incorporation documents, such as CAC Form 1.1 or CAC Form CO2 & CAC Form CO7
4. Current Tax Clearance Certificate
5. List of Equipment/Facility available to the company
6. Receipt of payment of the Employee’s Compensation Scheme (Nigeria Social Insurance Trust Fund)
7. Medical Retainership Agreement with a hospital.
8. Company’s Profile
9. Staff’s list (including the position and qualification of staff)
10. DPR endorsed the request for the expatriate quota (where applicable)
11. List of approved expatriate quota position and their Nigerian understudies (where applicable)
12. Proposed training programme for Nigerian staff for the current year
13. Registration by a relevant professional body (where applicable)
14. Technical agreement or MOU with Nigerian Company/DPR accredited laboratory (where applicable)
15. Health, Safety, Environment and Community (HSEC) Management System

• Start construction

After obtaining a Department of Petroleum Resources (DPR) permit, the next step to take is the construction of the oil marketing company or filling station. When building a filling station, there are necessary and relevant facilities that must be included based on the Department of Petroleum Resources (DPR) standards. These relevant facilities include

1. A surrounding fence of the filling station
2. Electricity and constant water supply
3. An underground storage and dispensing facilities for dispensing petroleum. At least 4 dispensing pumps is needed
4. A good drainage system must be present to allow flow of liquid
5. Safety equipment such as dry sand buckets and fire extinguishers are important in the case of an outbreak
6. No smoking signs in order to prevent a fire outbreak from happening
7. First aid box
8. The first aid box should contain; iodine, cotton wool, plasters, scissors, Violette paint etc.
9. Refuse containers

• Obtain a Department of Petroleum Resources (DPR) storage license

After the construction of the filling station has finished, the owner of the company is to inform the Department of Petroleum Resources (DPR) so that they can inspect the property and equipment in order to ascertain whether it was built according to standards. The following must be provided in order to obtain a Department of Petroleum Resources (DPR) storage license

1. Three set of approved plans
2. An original fire certificate signed by state fire service officer
3. A letter of approval from the town planning authority
4. The survey plan
5. An original certificate signed by a state police commissioner or superior police
6. Evidence that the company is dully registered with C.A.C
7. Tax clearance certificate for the proceeding three years
8. Certificate of memorandum and Article of Association of the company
9. Lead proof test of the storage tanks.
10. Photograph of the station are submitted under company’s letter headed paper

• Obtain a lifting right and bulk purchase agreement

After the Department of Petroleum Resources (DPR) storage license has been obtained, you will pay a visit to Petroleum Pipeline Marketing Company (PPMC) in order to get a lifting right and bulk purchase agreement

The documents required for bulk purchase agreements are

1. Storage and sale license of the filling station (from DPR)
2. Certificate of incorporation of the company
3. Tax clearance certificate memorandum and Article of Association
4. Certificate of occupancy or customary Rights of occupancy of the land where the petrol station is built
5. Letter of introduction from the bank.
6. Enlarge photograph of the station
7. Verification Report from PPMC Area office on the petrol station
8. Photographs and particulars of truck bearing the logo and name the company.
9. Fire Report
10. Police report
11. Approved building plan
12. Marketer’s form
13. Marketer letter headed paper

• Depot allocation

This is the final step before commencing full operations. This allocation enables you to lift petroleum products from the closest Nigeria National Petroleum Corporation (NNPC)

• Market and Brand your company

The next step I to market and brand your company by putting the word out about your filling station, having an attractive and branded logo t-shirts, placing adverts and telling your customers to make referrals on your behalf

• Hire and train employees

This decision could make or break your company. Various employees will be needed during the course of the business. The company will need to hire

1. Pump attendants
2. A manager
3. A managing director
4. An accountant
5. Those in charge of maintenance
6. Drivers

Personnel can be gotten through

1. Posting about the vacancy on your website and across any social media or email marketing channels
2. Asking your business network, as well as friends and family if they know anyone suitable
3. Adding the vacancy to general recruitment websites
4. Advertising the vacancy in industry trade media or local newspapers

• Launch your business

After you have commenced business, it is very important for you to provide quality petroleum products and ensure that you have a good reputation for the continuous growth and development of your company

ACTIVITIES AT THE FILLING STATION

• The minimum pumps required in station is 4-6 pumps for premium mild spirit (PMS petrol) one pump for Auto motive gas oil (AGO Diesel), one for Dual purpose kerosene (DPK),
• Also it is expected that one station manager, one supervisor and six attendants always in company uniform. Each attendant to man each pump. Island. The human relations of the staff matter a lot in determine the sales volume of the station.
• Once the loading truck arrived at the filling station. The truck is parked for about 15-20 minutes to allow product to settle down to its normal level.
• The manager takes haulage using haulage bar and compare the figure to that recorded by the company depot representative.
• Once the recorded figure by both parties is confirmed to be correct, the truck is allowed to discharge its contents and haulage bar is further used in the
  underground tanks to confirm the exact quantity of the discharged products.

COST OF ACQUIRING UNDERGROUND TANKS AND PURCHASE PUMPS

• UNDERGROUND TANKS

For a standard filling station, you need at least four underground tanks of 30,000 45,000 litres capacity.

To have a storage and standard under-ground tanks that will be durable for a number of years, it is advisable to used 4mm plate (thickness). There are some companies that specialize in this construction. Therefore it is estimated that each tank may cost as such as N500,000. However, buying the plates, employing the services of a welder can reduce the cost

• PURCHASE PUMPS

The minimum numbers of pumps required by the regulating body (DPR) is six pumps. This depends on available fund to the investor. You could go for new pumps or fairly used. Fairly used pumps may cost as much as N150,00 each, while new pumps could also cost as much as N500,000 – N1,000,000 and above.

Starting your own company in the oil and gas industry can be demanding or challenging  when it comes to the capital you need to invest, the time needed for the business to develop, the procedures, relevant documentations and your expertise.

Oil products marketing in Nigeria is one of the business that guarantees huge profit taking within a reasonable period of time from setup. If you want to start an oil product marketing in Nigeria, you must strictly adhere to all the documentations and needed facilities. See a consultant now to help you ease the stress of going through the long process on your own.For more information on how to start a oil marketing business in Nigeria, contact us on  08023200801, 08075765799, Email: info@qeeva.com

About the author

Onamakinde Dare Daniel is a highly motivated accountant with knowledge in Accounting, Taxation, Management, Audit, Costing and Research. He is keen on tax matters due to its ever dynamic nature.