How to Start LPG Business, Approval and Licensing

We explained history of Gas in Nigeria, how to start LPG Business and LPG or Gas business opportunities, the necessary approvals, LPG Design & Construction and LPG License requirements in Nigeria. Every process in LPG / Gas Plant Design and Installation and Licensing are managed by Department of Petroleum Resources (DPR). They issue Oil & Gas Permits and Licenses in Nigeria.

History of Gas in Nigeria,

Oil and gas production in Nigeria dates back to 1958, when the first oil discovery well was drilled in Oloibiri (present day Bayelsa State, Niger Delta Region). A noticeable increase in gas production commenced in the early 1970s, ultimately rising above 2.7 bscf/d by 1979. By this time, a domestic market had been created for the consumption of produced gas in the eastern part of the country, close to the gas source. Since 1990 gas production has steadily increased with daily production rising above 8.2 bscf/d in 2015.


Contact: Gas Station Contruction Company


The steady increase in production in recent times is strongly linked to the discovery of more non-associated gas (NAG) reserves in deeper reservoirs, the development of deep offshore oil fields with huge associated gas (AG) reserves, participation in the gas export business through the Nigerian Liquefied Natural Gas (NLNG) Company, and increasing demand for local gas supply for power generation. In 2015 there were 39 companies directly involved in oil and gas production in Nigeria, producing natural gas from 189 fields with daily AG production of 4.74 bscf/d and NAG production of nearly 3.46 bscf/d.

Forecasts indicate that Nigerian domestic gas demand, coupled with regional demand from the greater West Africa region, may push annual gas production in Nigeria beyond the 10 bscf/d mark by 2020. The global population is expected to rise to nearly 10 billion people by 2050, spurring global energy demand to levels nearly 60% higher than today by 2060.


Read: LPG / Gas Plant Design and Installation Requirements


Gas Utilization

Gas utilisation in Nigeria commenced in 1963 with gas sales by the Shell Petroleum Development Company of Nigeria (SPDC) to industrial users in Aba. In its bid to create value for AG, which was routinely being flared by operators, the Government initiated several projects to increase gas utilisation in the country from the mid 1960s to the late 1990s. These projects included gas supply to thermal power plants in Delta state, the Port Harcourt refinery in Rivers State, Power Holding Company of Nigeria (PHCN) Sapele, Delta Steel Aladja, Nigerian Fertilizer Company of Nigeria (NAFCON), the Ajaokuta Steel complex, the Egbin Thermal Power Station and the Aluminium Smelting Company of Nigeria (ALSCON) in Ikot Abasi).

The development of the Nigerian LNG project was pivotal to increased gas utilisation in Nigeria and to creating a position in the international market. Other major sources of gas demand today include the West African Gas Pipeline Company (WAGPCo), the Escravos Gas to Liquid Plant (EGTL), the SPDC Afam Power Plant and numerous gas plants operated by producing companies to process gas and recover natural gas liquids for export to international markets.

Oil and gas producers were also encouraged to utilise the produced AG for gas-lift, fuel for production operations and re-injection into the reservoir for conservation and reservoir pressure maintenance. Accordingly, of the 4.74 bscf/d of AG produced in 2015 about 4.26 bscf/d representing nearly 90% was utilised either by consumption or re-injection back into the reservoir.

Gas Flaring in Nigeria

All AG was routinely flared and disposed-off into the atmosphere during the early days of oil production in Nigeria. This practice of flaring 100% of AG lasted until the commencement of gas supplies to industrial users in Aba in 1963. In spite of this early source of utilisation and other government schemes, over 95% of AG was routinely flared over the next 15 years. Despite the intervention of the government, gas flaring increased sharply in the 1970s due to increased oil production that was triggered by higher international crude oil prices. Conversely the slowdown of crude oil production in the 1980s brought about a reduction in AG production and gas flaring. At the dip of production in 1987, flaring of AG had dropped from over 95% to 70%.

It was the commencement of production at the Nigeria LNG plant, however, that brought about a major leap in gas flare reductions in Nigeria. Since 1999, a variety of gas utilisation schemes and regulatory interventions forced gas flaring down to the current position of 11.4%. The ultimate goal for the government is to eliminate routine gas flaring by 2020, with unavoidable gas flaring limited to 2% of total gas production.


Read: Local Content (NOGIC JQS) Registration


What is LPG and its Properties & Composition?

LPG: is Liquefied Petroleum Gas or liquid petroleum. Liquefied Petroleum Gas – LPG – constituents are primarily propane, butane, isobutane, butylene, propylene and mixtures of these gases. LPG gas constituents are produced from crude oil reefing and natural gas processing. They are liquid under pressure and gas at room temperature and pressure.

Liquefied Petroleum Gas (LPG) is mixture of flammable hydrocarbon gases that include propane, butane, isobutane and mixtures of the three LPG gases. LPG is commonly used for home heating gases, cooking, hot water, and autogas – fuel for LPG cars and vehicles.

LPG is made up of carbon and hydrogen atoms forming propane and butane whilst natural gas is made up of lighter methane, the simplest carbon and hydrogen molecule.

LPG is comprised primarily of propane and butane LPG heating gases, whilst the natural gas primary constituent is methane. LPG is made up of a group of flammable hydrocarbon gases that are liquefied through pressurisation and commonly used as fuel. Natural gas is liquefied cryogenically. 


Read: LPG / Cooking Gas Plant Approval Requirements


LPG Business Opportunities in Nigeria

As Nigeria’s gas reserves increased by 7.3 percent from 187 trillion cubic feet (tcf) to 200.79 tcf, And FGN Plan to End Gas Flaring has tabled a huge business opportunity in Oil & Gas business especially, LPG in Nigerian.

It is important to note that Liquefied Petroleum Gas (LPG) has been underutilized for decades in Nigeria and Liquefied Petroleum Gas (LPG) business is a way to go in Nigerian Oil & Gas business.

With the authorities in charge that has intentionally made kerosene to be scarce in Nigeria, reason for this is best known to them has also fueled the demand for LPG in Nigeria. If you go to 100 petroleum filling station that has Kerosene pump, you will find out that the 100 petroleum filling station will not have kerosene from year to year.

You can only find kerosene in authorized dealers or popularly known as Black Market and highly under refined.

Kerosene, also known as paraffin, lamp oil, and coal oil (an obsolete term), is a combustible hydrocarbon liquid which is derived from petroleum. Low income earners or poor people in Nigeria are the one mostly using Kerosene and this populist constitute 70% – 85% population.

People have also discovered that cooking gas is a better alternative to kerosene because not only does it cook food faster, make pots clean, but it is also ultimately cheaper.


How to start LPG Business

However, Liquefied Petroleum Gas (LPG) is average cost intensive business. Starting from approval for construction location, obtaining necessary approval, constructions and license to operate.

Land: Apart from the fact that generally, you need a space for your business, in the case of cooking gas, the aspect of land is even more crucial simply because of the environmental and health implications of cooking gas. Therefore, in accordance to the requirement of the DPR (Department of Petroleum Resources), the position of the plant must be at least 15meters from any building containing flammable materials, for instance, residential buildings, filling shed among others.

Obtaining Necessary Approval: This could be one of critical stages. You need necessary approval from authorities before you can construct and go for DPR license.

The key approval are as follows:

  • Town Planning Permit
  • Approved drawings
  • Fire Officer (federal/state) Approval

DPR License: Liquefied Petroleum Gas (LPG) or cooking gas license is the last approval or license to obtain before starting your LPG business in Nigeria.


 Read: LPG Licence Requirements


How to Start LPG Business, cooking gas

First is to register your business with CAC (Corporate Affairs Commission). This is the governing and regulatory body for businesses in Nigeria. The next thing to do is decide the state in Nigeria you want to start the LPG business.


Read: Business or Company Registration Service in Nigeria.


Different states have different laws governing businesses and maybe cooking gas or LPG business in particular.

Marketing: Nigerians are known to not take marketing seriously, especially when it has to do with small businesses. But we have to come to the realization that if you do not create awareness, there is a likelihood that people would not know about it. There are a lot of people that would naturally be in need of whatever you are selling but when they have no idea you are selling, then your opening a business would most likely be an exercise in futility. If you want your business to be known, you have to make conscious effort to make it known. However, it is important to note at this juncture that there is a difference between doing something and doing it well. You have to master the art of marketing and advertising. If you can afford it, you could always consult with an advertising firm and if you can’t, just be creative about what would work in that locality.

Similarly, it would do you a world of good to get training. You might find it demeaning to go apprentice in an established plant for a while but it would be beneficial. There are a lot of intricacies and secret strategies of the business that would be somewhat esoteric and you would not be privy to if you do not get into the system

Therefore, you may need a consultant to assist in some of the LPG business requirements like approvals and license.


Read: LPG Plant Construction Approval & Licensing Procedures