Oil and Gas Licenses in Nigeria: Procedure and Requirements to Start a Nigerian Oil and Gas Company

Introduction

An oil and gas company is a business entity involved in the exploration, extraction, production, refining, and distribution of oil and gas resources. These companies play a crucial role in the global energy sector and can be categorised into different segments based on their operations.

To start an oil and gas company in Nigeria, several critical steps must be followed, given the industry’s regulatory environment and the necessity for substantial capital investment. This article provides a comprehensive overview of the steps involved. 

Types of Oil and Gas Companies

1. Integrated Oil and Gas Companies

These companies work in all phases of the oil and gas industry, including upstream (exploration and production), midstream (transportation and storage), and downstream (refining and commercialization). ExxonMobil and Chevron are two major firms that serve as examples. Their comprehensive strategy enables them to manage the whole supply chain, increasing efficiency and risk mitigation. 

2. Upstream Companies

These firms often known as Exploration and Production (E&P) companies, specialise in the exploration and extraction of oil and natural gas. They carry out high-risk operations to identify and drill wells for hydrocarbon production. 

3. Midstream Companies

Midstream companies transport and store crude oil and natural gas. They run pipelines, shipping and storage facilities, which connect upstream production to downstream refining processes. This sector often has smaller risks than upstream activities.

4. Downstream Companies

These companies refine crude oil into finished goods like gasoline, diesel, and heating oil. They also handle the delivery of these products to customers using retail outlets Downstream operations are focused on marketing and selling refined products. 

5. Oilfield Service Companies

These businesses provide necessary services and equipment to support oil and gas extraction and production, such as drilling, well construction, and maintenance. They do not actively participate in the production of oil and gas, but they are essential to the operational success of E&P firms.

Steps to Starting an Oil and Gas Company in Nigeria

1. Company Registration

The first step is to get your firm registered with the Corporate Affairs Commission (CAC). The Companies and Allied Matters Act of 2020 (CAMA), governs the establishment of this entity. Only Nigerian-incorporated companies are permitted to operate in the exploration, production, and distribution of oil and gas in the Nigerian petroleum industry. Every foreign firm wishing to provide oil services in Nigeria must register in Nigeria, unless the Federal Government has exempted it under CAMA regulations.

2. Tax Clearance and Compliance

You must first register with the Federal Inland Revenue Service to collect a Tax Clearance Certificate (TCC). This certificate indicates that your company completed its tax requirements for the previous year, which is required for different permits in the oil and gas sector.

3. National Investment Promotion Commission (NIPC) Registration

In order to comply with the National Investment Promotion Commission Act, which controls foreign investments in Nigeria, your company must first register with the NIPC before incorporating with the CAC.

4. Social Insurance and Pension Registration

Register with the Nigerian Social Insurance Trust Fund (NSITF) to ensure compliance with employee welfare laws. This registration is required for getting operational licenses. Furthermore, if your company has five or more employees, you must register with the National Pension Commission (PENCOM).

5. Obtaining Necessary Licenses and Permits

You will need several permits to operate in the oil and gas sector:

• Department of Petroleum Resources (DPR) Permit: Required for all oil and gas operations. The DPR grants various types of permits depending on the nature of your business activity.

• Nigerian Content Development and Monitoring Board (NCDMB) License: This license confirms compliance with local content laws and is necessary for companies intending to operate in Nigeria’s oil and gas sector.

• Industrial Training Fund (ITF) Certificate: This certification is necessary for organizations with a minimum turnover and is intended to promote skill acquisition in the industry.

6. Developing a Business Plan: A comprehensive business plan is essential for laying out your company’s goals, operational strategy, financial projections, and market analysis. This document will direct your business operations and is frequently necessary to secure funding.

7. Funding and Capital Requirements: Starting an oil and gas company demands a large investment, particularly for exploration and drilling operations. To reduce financial risks, make sure you have enough funds or try forming partnerships.

8. Exploration & Operations: If you intend to engage in oil drilling and exploration, you will require an Oil Prospecting License (OPL). This is a highly regulated industry, which requires significant investment in equipment and technological competence.

9. Consider Alternative Business Models: If capital is limited, consider beginning with less capital-intensive initiatives in the oil and gas sector, such as:

• Equipment leasing
• Oil and gas consulting
• Brokerage for petroleum products
• Retail of cooking gas or lubricants

Conclusion

Nigeria’s oil and gas industry is highly profitable, but establishing a company requires mastering technical regulatory frameworks, obtaining permits, and guaranteeing legal compliance, regardless of the country’s capital requirements.

By Adeola Oyinlade & Co.

Adeola Oyinlade & Co.; a leading full-service law firm in Nigeria provides help and offers advisory to both local and foreign clients on oil and gas related matters in Nigeria. 

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