Are you interested in starting an oil and gas company? Do you need a sample oil and gas business plan template? Do you live in an oil rich region like Nigeria, Angola, Kuwait, United States, Saudi Arabia, Iraq, etc; and you want to legally tap into the lucrative business opportunities in the oil and gas industry? If you answered YES to any of the questions above, then I advice you read on with keen interest.
The oil and gas industry is one of the most lucrative industries in any economy. In fact, it has created more billionaires in the world than any other industry. However, tapping into this money-spinning market requires huge startup costs, and this is why many entrepreneurs balk whenever they think about taking a plunge.
The process of starting an oil and gas company is more complicated than starting most other types of companies as the industry is strictly regulated locally and internationally. And getting the required startup funding could take time.
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? Here’s 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 PMS—premium motor spirit)
- Diesel (also called AGO–automotive gas oil)
- Kerosene (also called paraffin or DPK—dual-purpose kerosene)
- Cooking gas (also called LPG—liquefied 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, let’s now look at the steps involved in starting an oil and gas company.
Starting an Oil and Gas Company – Sample Business Plan Template
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 business’s 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
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.