This topic came by demand from numerous people calling and writing, asking us how they could start an oil and gas business as a beginner or from fresh.
For long, we promised to write on this topic, we are fulfilling the promise with this write-up as if you follow it, you all start your legitimate Oil and Gas Business in Nigeria.
Also, you are free to write to us if you encounter any challenge or need an assistance.
There are many oil and gas businesses or services OR Product delivery you can start in the industry. You need to start from services/ products you know more or you have a comparative advantage.
Procurement and Supplies have many opportunities as everything used in oil and gas activities are being supply from office consumables Like paper, printers, computers, lightning, etc. Also, Procurement and Supplies of oil tools, safety materials and other materials used in the field.
Repairs and maintenance of equipment, both repairs in the office base and repairs in the fields, these are areas you can start when you want to go into oil and gas business in Nigeria.
In fact, there are various areas to start in the Nigerian oil and gas Downstream operations. Downstream operations are oil and gas processes that occur after the production phase to the point of sale.
Downstream operations are the processes involved in converting oil and gas into the finished product. These include refining crude oil into gasoline, natural gas liquids, diesel, and a variety of other energy sources. Downstream business includes oil and gas exploration, extraction, refining, transporting (oil tankers and pipelines), and marketing of petroleum products with other oil and gas post-production activities.
I will like to point out LPG business in Nigeria. there are growing opportunities in LPG businesses also. Read our post, LPG Business opportunities & How to start LPG Business in Nigeria.
The steps and regulation of starting Oil and Gas business or company is Nigeria could differ from starting other type of business like Cement business, mining, agriculture etc. Companies that provide goods and services in Oil and Gas industry in Nigeria are called OIL and GAS COMPANIES.
To set up a business to provide goods or services to the Nigerian oil and gas industry follows the following steps.
Registration of Business/ Company or Incorporate
Registration of company or Incorporate of company in Nigeria is solely done by Corporate Affairs Commission (CAC). It takes a minimum of 4 – 14 days to complete.
The minimum share capital is one (1) million share capitals for Nigerian citizens.
As at the time of writing this blog, it could cost you Eighty Five Thousand Naira (₦70,000) to incorporate a company one (1) million share capitals.
Besides, it is advisable to increase your share capital to five (5) million share capital so as to fit in into major categories that may share capital.
You may need a lawyer or legal firm in Nigeria. We can recommend Veraz Advocate a legal firm in Nigeria, they can be of help for those who do not have lawyer that will help them cut cost and be mindful of board composition if you are providing a service that requires certification. e.g. if engineering services then ensure a COREN holder in on board of directors, for food, you need a certificate from good university or a NAFDAC certificate. Read more about Incorporate of company in Nigeria
OBTAIN TAX IDENTIFICATION NUMBER (TIN).
This will enable you to open a corporate company bank account for your company in with Nigerian banks. You this done with Nigerian Federal Inland Revenue Service.
DPR permit is a permit that allows an organization to operate in Nigerian Oil and Gas industry. Application takes 4 – 14 working days to be completed.
There are three OGISP categories of DPR permit you can use to operate in Nigerian Oil and Gas industry. These are “OGISP General Category”, OGISP Major Category” and “OGISP Special Category” DPR Permits.
General DPR permit allows to do deliver minor goods and services. Application fee is 5,000.00 Naira only.
Major Category of DPR allows you to deliver majority goods and services in Nigerian Oil & Gas industry business. There are thousand and one goods and services this permit can offer you. Application fee is 5,000.00 Naira only.
I will advise a beginner to start Major Category of DPR permits.
As you desire to increase your capacity, you can then consider a “Special Category” of DPR permit. Though, there are some goods and services you may not be allowed to deliver in Nigerian Oil and Gas Industry without special category permit. Special Category DPR Permit application fee is 250,000 Naira. When you start contemplating those specialized services, some services will mandate you have a five (5) minimum level of share capital.
All DPR permits application attracts some service charge; some requires DPR inspections and certifications.
NSITF is one of the requirements to obtain your company DPR permit. Your fee will depend on your staff salary assessment and can be concluded in 5 working days.
Company Tax Clearance Certificate is an important and a mandatory document for a company to operate officially in Nigeria. Tax Clearance Certificate (TCC) in Nigeria is an important document issued by Federal Inland Revenue Service (FIRS) or States Inland Revenue Service showing that applicant’s tax affairs are in order. TCC in Nigeria is necessary for various corporate transactions by both individuals and corporate organizations in Nigeria.
As one of the requirements for obtaining DPR permit is company tax clearance, whether newly registered or old, commenced business or not, you must get this. Where you have not commence business or newly registered, the certificate will indicate it.
NOGIC JQS AND NCDMB. The Nigerian Content Development and Monitoring Board (NCDMB) was established by the president, Dr. Goodluck Ebele Jonathan following the signing into law of the NC act on 22nd April, 2010.
NOGIC JQS was created in line with section 55 of the act which states that the board shall establish, maintain and operate a joint qualification system (JQS) in consultation with industry stakeholders which shall be administered in accordance with provisions set out in the regulations to be made by the Minister in accordance with the provisions of this ACT.
SET UP AN OFFICE, TECHNOLOGY AND FEW STAFF.
Office size does not matter but location is very important. As a beginner, office location may be better located at Port Harcourt or Lagos State. Nigerian Oil & Gas Free Zone could be another good place to rent office for your Oil & Gas business in Nigeria.
Number of staff, you can start with one or two admin staff and one operational staff.
REGISTER WITH PRODUCTION COMPANIES IF YOU ARE SERVICE COMPANY.
If your company is into production of Oil and Gas, you may not need this step. For service delivering company, most of oil and gas production companies (multinationals) will want you to register with them before you can do business with them. Companies like SHELL, NLNG, TOTAL E&P Limited etc.
Time frame to registering with multinational differs from one company to another. Some companies, their system of registration is so difficult that you may not complete registration without securing consultancy firm like AZIZA Nigeria.
REGISTER WITH NATIONAL PENSION COMMISSION (PENCOM).
This is not compulsory for newly companies whose staff strength is below five or so. This mostly comes as a requirement to register with Nigerian Petroleum Exchange (NipeX), a division of NNPC. PENCOM is for employee contribution.
PENCOM certificate are gotten when your company is making contribution to the scheme and can be gotten in 5 working days.
Unlike some of the federal agency that have online portal for application, ITF application is still manually done in Nigeria as at the time of this write up.
REGISTER WITH NIGERIAN PETROLEUM EXCHANGE (NIPEX).
NIPEX, an arm of National Petroleum Investment Management Services (NAPIMS) is the online meeting place for purchasers (IOC, NOC) and suppliers (you).
You can do your Oil and Gas business in Nigeria for years without registering with NipeX. This is because, there many minor jobs and contracts in the Nigerian Oil and Gas industry that does not go through NipeX bidding system.
I must note here that you cannot be a good player in Nigerian Oil and Gas industry without registering with NipeX. All major contracts and Jobs are carried out in NipeX bidding platform. Contracts below N25 million can be won and executed by company without going through NipeX platform or registration.
NipeX application fee is N25,000 for new applicants. Time frame to complete the registration is what I cannot mention in this blog.
SECURE TECHNICAL PARTNER MEMORANDUM OF AGREEMENT.
Not mandatory especially if you have in-house capability to provide service. Typically however, you need to find a foreign supplier to strategically ally with. Be sure to secure a Memorandum of Agreement NOT Understanding.
Start business. Good marketing strategy is highly needed as a new business. Invitation to bid will also be coming to your company from NipeX, NNPC and other organizations you registered with.
Note: Some of these permits, certificates or registrations are not compulsory to start. But you will surely meet some of them as you progresses in the Nigerian oil & gas business.
AZIZA Nigeria No. 1 business support body in Nigeria especially in Oil and Gas industry. We help you in all the steps listed above and advice you more on how to run a profitable Oil and Gas business in Nigeria.