How To Commence An Oil And Gas Business In Nigeria – The oil and gas business is one of the most regulated industries, yet it remains one of the most profitable and risky. This is because crude oil/petroleum and its derivatives are important commodities that are consumed daily.
It is no secret that Nigeria as a country derives most of its revenue from the oil and gas sector. Wikipedia lists Nigeria as the world’s 12th largest oil producer, 8th largest exporter, and 10th largest proven reserves. (The country joined OPEC in 1971.) Oil plays an important role in the Nigerian economy, accounting for 40% of GDP and 80% of government revenue.
The oil and gas industry is just how it creates jobs and enriches people into billionaires and even billionaires. It’s no wonder people constantly get so much attention when trying to break into the market.
Joining the oil and gas business is not difficult. All you are required to do is to follow the steps discussed in this article.
How To Commence An Oil And Gas Business In Nigeria
1. Registration of Company
- Registration at Corporate Affairs Commission
This applies to all businesses owned by citizens, foreigners, or both. In corporate and related litigation, all companies must be registered with the Corporate Affairs Commission (CAC). The process is simple and is carried out online by CAC-approved agents.
This allows the company to acquire a separate legal entity under which it can sue, sue, and acquire assets. The documents provided to the company during registration ensure validity and build trust among customers. They are also the main documents needed to enter into a contract or open a bank account.
You can also register as a company (trade name). However, this will limit the types of permits granted for certain activities in the oil and gas sector.
- Registration at National Investment Promotion Commission
This is only necessary for companies with subsidiaries abroad. According to the National Investment Promotion Commission Act, all foreign-owned companies must register with the NIPC before starting operations in Nigeria after being listed in the CAC. - Tax Registration & Obtaining Tax Clearance Certificate (TCC)
It is recommended that a company wishing to engage in the oil and gas business register with the nearest branch of the Federal National Revenue Service (FIRS) and obtain a Tax Exemption Certificate (TCC). The tax exemption certificate simply proves that the company’s tax affairs for the previous year are in order and that there are no unpaid taxes.
One of the benefits of TCC is that it is essential for processing all permits in the oil and gas industry. - Register with the Nigerian Social Insurance Trust Fund (NSITF)
The system was established for the welfare of the employees. It protects private sector employees from financial difficulties in cases of old age, disability, termination of employment, and death to which they or their dependents are exposed.
Because Nigeria requires a license to operate in the oil industry, organizations engaged in this business must register with the NSITF and pay monthly retirement contributions or retirement benefits and other compensation for work-related accidents.
2. Obtain a Permit/License
- Obtain a Department of Petroleum Resources Permit
It is a department of the Ministry of Petroleum Resources (DPR) tasked with providing regulatory guidance along the oil and gas value chain in Nigeria. For all licenses in the oil and gas sector, applications are sought and received for a person or organization to operate there.
DPR grants Category 3 permits in the Oil and Gas Industry division (OGISP) based on the service provided by the company. The license categories are General, Basic, and Special.
The documents needed to process the permits include incorporation/registration documents received at the point of Incorporation Documents, Employee Compensation Scheme (NSITF), Tax Clearance Certificate, List of Equipment available to the Company, Details of Staff, Evidence of Medical Retainership with a hospital, Company’s Profile, etc.
Documentation and fees are different for each category of license requested.
- Registration with Nigerian Content Development and Monitoring Board (NCDMB)
NCDMB was founded in 2010 by the Nigerian Oil and Gas Industry Development Act. It is vital that content from the Nigerian oil and gas industry is recorded in the joint rating system as it integrates data on all major activities in the Nigerian oil and gas industry.
The Board oversees the oil and gas sector to ensure compliance with the provisions of the Nigerian context and objectives and targets capacity-building interventions that, among other things, deepen the capacities of indigenous peoples.
- Obtain the Industrial Training Fund Certificate
The ITF requires employers with a turnover of at least 50,000,000 (fifty pounds) or more than 5 employees to contribute 1% of the company’s payroll to the fund. Suppliers, contractors, or consultants who bid for government agencies or private companies are also required to make the same contribution.
Therefore, companies providing services in the oil and gas industry must obtain this certification as proof of their contribution to entertainment, which will be used to pool resources and promote and encourage skill development in industry and commerce. an adequate and locally trained workforce to meet the growing needs of the economy.
- Registration for Pension
Pensions can be registered with any Pension Fund Manager (PFA) in Nigeria. However, it is not required unless the company intends to register with the Nigerian Oil Exchange or the company has more than 5 employees. But it is better to register your employees with the company so that they can save for their pensions.
3. Registration with Nigerian Petroleum Exchange and Production Companies
- Register with Nigerian Petroleum Exchange
This step is not required but is recommended if the company plans to participate in bidding platforms for large contracts. This can be avoided if the company only signs small contracts. - Register with Production Companies
This is essential for gaining access to salable oil products and working with major oil-producing companies, particularly International Petroleum Corporations (IOCs). Manufacturing companies include Total, Shell, and others.
Risks Associated With The Oil And Gas Business
Like any risky business, the cooking gas business comes with its risks. The most common hazard associated with trading cooking gas is a fire explosion, and this is very common because LNG is flammable.
The good news is that if you are careful enough to catch a cylinder leak early, it can be easily avoided as it is one of the leading causes of fires and explosions.
Another risk is government regulation. If LPG prices continue to increase in the market, do you think customers will find it a bit difficult and laborious? The answer is yes because not all fingers are the same, so some customers may have to go back to using kerosene and firewood. And of course, your sales will suddenly drop.
Now that you are so aware of the risks, you should always be vigilant.
Conclusion
There are different job opportunities in the oil and gas market depending on resources or experience. However, it is recommended that an entity be registered before entering oil and gas operations in Nigeria, and proper licenses from the DPR and other relevant regulatory bodies are required once the license is granted.
Frequently Asked Question(s)
What is the minimum share capital for oil and gas company in Nigeria?
The basic minimum share capital required by CAC company registration for Oil and Gas company is One Million Naira (N1,000,000) share capital. Note: This is not the cost of registering Oil and Gas business/ company in Nigeria. Also, you can start Oil and Gas business in Nigeria with a Business Name registration.
How lucrative is oil and gas business in Nigeria?
Petroleum plays a large role in the Nigerian economy, accounting for 40% of GDP and 80% of Government earnings. With the oil and gas sectors being what it is, creating job opportunities and even enriching individuals into multi-millionaires and billionaires.
How can I invest in oil and gas with little money?
Several well-known oil stocks frequently trade for under $100 a share. ETFs are another inexpensive way to invest in oil. ETFs trade on an exchange and investors can buy individual shares of an ETF, similar to stocks. Many oil ETFs trade for $30 or less.
How do I start a small oil company?
- Learn more about the business.
- Craft your business plan.
- Select your source of raw materials.
- Find a good plant location.
- Get the funds.
- Choose suitable manufacturer and machines.
- Hire employees.
- Plan the packaging and distribution.
How can I invest in oil with little money?
If you want to invest in oil with little money, your brokerage account is probably the best place to look. With the new advent of no-fee stock trades at big brokerage houses, you can buy shares of stock without worrying about fees cutting into your investment.
Reference(s)
- mondaq.com – Nigeria: How To Start An Oil And Gas Company In Nigeria
- LinkedIn.com – 9 Ways To Join Oil and Gas Business in Nigeria with minimal capital
- thefilmaadvisory.com – How to Establish an Oil and Gas Company in Nigeria.
- makemoney.ng – How to start cooking gas business in Nigeria
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