How to Start an Oil and Gas Company

1. Define your business model

You need to be clear from the outset as to whether you will be operating within the upstream,
midstream, or downstream sector. To make a well-informed decision, you might need to gather
more information about the requirements as well as the pros and cons of each and figure out
which seems most suitable for you.
2. Market research
There is much more to learn and understand about the oil and gas industry than meets the eye.
And since you are planning to join this market as a new player, you need to conduct extensive
research to understand the intricacies of the market and pitfalls or challenges that new entrants
are likely to encounter.
In addition, an extensive research of the market will help you know the required startup costs,
required equipment, competition, strategies for success and other relevant information about the
business.
3. Write your business plan

Every business needs a business plan. In fact, oil and gas businesses need it even more as it helps
you plan the various phases of the business and increases your chances of success. Although
developing your business plan is no guarantee of your businesss success, not having one is the
recipe for failure.

Your business plan includes the goals and objectives of your business, required startup costs,
operation plan and cost, market analysis and competition, projected income over the first few
years, marketing strategy, unique selling point, exit strategy, and other vital information about
your business.

Not only will your business plan guide you through the processes of starting and growing your
business, but it will also come in handy when you need to procure startup funding from
investors, venture capitalists, and loan-issuing institutions.

4. Fulfill the required paperwork

Starting an oil and gas business requires registering the business and obtaining business licenses
and permits. These vary by state and country, so you need to contact the appropriate local
agencies to find out what applies in your state or country. Other paperwork includes requesting a
tax ID and obtaining insurance.

5. Find a good location

6. Buy and install the necessary equipment

7. Hire employees

8. Market your oil and gas business

We did not go into specific details regarding choosing a location, buying equipment, hiring
employees, and marketing your business because how you will implement each of these steps
depends on the sector of the oil and gas industry you have chosen to operate in.

For example, the ideal location, required equipment, and suitable employees for a company
operating in the upstream sector will differ from those of a company operating within the
downstream sector. Yet, this article is meant to be a brief guide, not a comprehensive resource on
the topic.

To find out about the ideal location and required equipment for a company in your chosen sector,
you will definitely need to consult other resources or contact an expert with years of experience
in that sector.


Oil and gas production is serious business, so you need to invest lots of money, time, and effort
to succeed in the long term. This article explains some basic concepts in the oil and gas industry
as well the steps involved in starting an oil and gas company.

Over the years, the oil and gas business has undergone various changes, and now, it has become
a much-organized business. It comprises three sectors:

The upstream sector
The midstream sector
The downstream sector
All the sectors are very lucrative, and each has its own fair share of market players. Are you
wondering what these sectors mean? Heres an explanation

The upstream sector entails oil prospecting and exploration, drilling for oil, and drawing it
out of the ground. These activities are the earliest stages of oil production.
The midstream sector entails transportation, storage, and wholesale marketing or crude or
refined petroleum products. Activities in this sector are aimed at moving crude oil from the
site where it is drawn to refineries where it will be processed into the various petroleum
products.
The downstream sector entails storage of petroleum products as well as transportation,
marketing, and everything else that happens until the products finally get to consumers.
Although several products are made from crude oil, only four of them are in huge demand.
These are:

Petrol or gas (also called gasoline or PMSpremium motor spirit)
Diesel (also called AGOautomotive gas oil)
Kerosene (also called paraffin or DPKdual-purpose kerosene)
Cooking gas (also called LPGliquefied petroleum gas).
The demand for these four products is high because they are widely used for everyday activities
such as transport, domestic cooking, and so on. With the above in mind, lets now look at the
steps involved in starting an oil and gas company.



It is a Mega Bucks Business! Petrol, Kerosene, Diesel, LPFO, Kerosene & Crude Oil sellers and
investors in the energy sector are swelling their bank accounts everyday with huge cash.
This is because the world depends on energy and power.
Offices, residences, factories, businesses, government departments, and other agencies are
spending millions weekly on diesel consumption, especially due to the epileptic power supply in
the country, and this is the big opportunity for Oil & Gas suppliers. It takes a big chunk of their
profits. Diesel has become a money guzzler for these organizations. But to you the Oil Business
mogul, it is a money spinner! And the good news that you the Oil & Gas baron will be smiling to
the bank daily with almost a larger chunk of the profit these companies make daily.
Government establishments, offices, banks, residences and other agencies are spending millions
weekly on diesel consumption and this is the big opportunity for suppliers.

It takes a big chunk of their profits so much so, that today diesel usage has become every CEOs
nightmare.
Nigeria is a country with many festive seasons - Sallah, Christmas, New Year, and Easter period
- a lot of traveling take place at these periods shooting up diesel consumption to amazing heights,
coupled with the fact that power situation has gone worst, making a few people rich.
The doors to the oil industry is open and everybody can benefit.
The profits are massive. With one deal alone you can make between =N=50,000 and =N=10
million trading products from the automotive gas oil (AGO) (what we commonly call diesel) to
the PMS, that is petrol, and then DPK - the dual purpose kerosene.

Whats The Profit Level Like?

Consider this: A truck of 33,000 litres to end users like filling stations, companies, banks telecom
stations, etc, sold with a profit margin of between N5.00 and N10.000, you could be generating a
profit of 33,000 x N5.00 = 165,000 or N330,000 per deal, contract or transaction. Imagine
having several deals.

Despite the massive agitation for the adoption of alternative renewable energy resources, oil still
remains the number one because 99.99% of all vehicles and machines use either PMS (Petrol) or
AGO (Diesel). So the demand for petroleum products is not going anywhere in the nearest future
because it will take decades before the concept of renewable energy will fully be accepted.

Now running a business in the oil and gas is a very lucrative venture, many have become
millionaires and few went on to become billionaires as oil and gas (Black Gold) merchants.
Below are some people who made their wealth in the oil and gas industry.

1. Oil Drilling and Exploration

Venturing into oil and gas exploration is the most risky but profitable business in the petroleum
sector. To venture into this field, you will need massive amount of capital, heavy machinery, a
highly competent technical team and an approval from the government. In Nigeria, such
approval is called an Oil Prospecting License (OPL). Companies operating at this level include
Exxon Mobil, Texaco, Chevron, Conoil, etc.

2. Equipment Leasing

Now if you lack the financial muscle or capacity to venture into oil exploration, you can still tap
into the wealth by setting up an equipment leasing company specifically to serve the petroleum
sector.

3. Petroleum Refining

Another profitable business in the oil and gas sector is petroleum refining. Now you can setup
your own small private refinery and compete with the giants, since oil is a commodity that has no
unique selling point. For instance, with the deregulation of the downstream sector in Nigeria, and
the current upstream deregulation plus the planned subsidy removal; setting up a private refinery
is the next business that will kick off in Nigeria.

4. Crude Oil Exportation

5. Fuel Importation

6. Offshore Trading

Now some oil shipping tankers dont have the right to sail through the waterways of certain
countries, so what they do is to sell of their oil at the border to a merchant whose ship have the
right to enter the country. If you have the financial capacity and logistics to buy these products
offshore at a bargain, you can make some profits from the margin

7. Oil Farm / Depot

You can also setup a tank farm and sell petroleum products to distributors and retailers. In this
case, you will need to build massive tank farms or reservoirs to store your products as you will
either import your own products, or source your products from the local refineries or buying
from the oil tankers.

8. Fuel Haulage and Logistics

Do you want to operate a business in the oil and gas sector but you want to avoid the hassles of
getting a license and the strict compliance required to run an oil company? Then you can simply
purchase trucks and haul petroleum products for marketers from the depots to their desired
destinations.

9. Filling Stations You can also setup a fuel station and retail petroleum products such as PMS
(Petrol Motor Spirit), AGO (Diesel), DPK (Kerosene) to domestic and commercial users.

10. Petrochemicals refining You can also venture into the production of petrochemicals such as
Benzene, Ethylene, Ammonia, Toluene, etc.

11. Domestic Kerosene Retailing

Just recently, I have started seeing mini fuel stations with just a pumping machine; within some
streets in Lagos, Imo and some others states. This mini fuel stations are simply retailing
Kerosene to households and domestic users. If you dont have the funds to purchase motorized
pump-machines, you can start by using big barrels. But remember that you must be licensed
before you can start this business.

12. Gas Wholesaling and Retailing You can also setup a gas plant, or a wholesaling point. Or
better still, you can retail domestic gas like ethane and butane, etc.

13. Petroleum Supply on Contract Basis

You can also supply AGO (Diesel) to companies that run heavy duty power generators like
banks, manufacturing firms, telecom companies, etc. You can also supply aviation fuel to
airlines on demand-and-supply basis.

14. Oil and Gas Consulting

Have you being employed in the oil and gas industry for a long time? Do you have the skill and
experience? Do you understand the modus operandi of some specific oil businesses?

Then you can become a consultant with expertise in the oil and gas industry. Your duty here is to
offer advice and guidance to entrepreneurs and investors seeking to venture into the oil and gas
industry. You can also help them scale the hurdles of the oil industry.

15. Oil and Gas Brokerage Services

Even if you have no money to venture into the oil and gas business, you can still profit from the
industry by offering brokerage services between buyers and sellers of petroleum products.

16. Blogging You can also start a blog profiling oil and gas companies; and keeping the
stakeholders abreast with the happenings in the oil and gas sector.

17. Publish a Magazine Just as in the case of blogging, you can start a hard cover magazine
focusing on the oil and gas sector.

18. Start a TV Show production

You can also launch a TV show targeting the oil and gas sector. You can profile and interview
entrepreneurs in the oil sector, review the challenges in the petroleum sector, etc.

19. Oil and Gas related services

You can also start an oil and gas services company. Your company can choose to offer services
such as safety, hazard control, pipeline installation, other installations, pipeline monitoring and
security, etc.

20. Invest in Oil and Gas companies

Now if you lack the capital or the entrepreneurial prowess to venture into the oil and gas
business, you can still make money off the industry by investing in a reputable oil and gas
company with proven track record. Just ensure you do your due diligence before you invest a
dime.