Petroleum Products Marketing: How to Start

Petroleum Products Marketing

Petroleum products marketing in Nigeria is one of the business that guarantees huge profit taking within a reasonable period of time from setup. This article contains practical guides and directions on how to go about the whole process of setting up your petroleum products marketing business in Nigeria.

The first step to be taken by the prospective investor is registration of limited liability company with Corporate Affairs Commission (C.A.C), Abuja. The investor should contact a competent lawyer to ensure that the company is duly registered.

It should be noted here that if touts are allowed to carryout the registration, one could fall victim of fake registration which can affect the company transactions in future especially when opening account with bank. Because, bank will definitely confirm the genuine status of the company with C.A.C (corporate affair Commission on). A minimum share capital of N500,000 should be detailed enough to contain the primary objective of the company which in this regard is petroleum product marketing.

Land Acquisition – This is another important aspect of the business. The investor should look for a landed property of at least two plots, in commercial area and well located and accessible. I recommend that the land should be along the high way or any busy/heavy traffic route.

Survey and Building Plan – A competent surveyor must be used for this exercise in order to avoid mistake that could be expensive to correct. Also he could assist for the building plan by using qualified architect for the architectural design of the filling station. At the final stage of this exercise approve building plan is expected (given). Three set of approve plans showing the building existing or proposed on the site and the relation of the site of the roadways to the adjoining property. Soil test and permission to construct filling station by DPR.

Original Fire Certificate – This has to be signed by the chief federal/state fire officer or by an officer authorized to do so. That the arrangement proposed for the filling station fire prevention is satisfactory.

A letter of approval – You get this from the town planning authority of the area you want to construction the filling station on the proposed site. This is very important, else, your construction work will be suspended halfway.

Police Report – an original certificate signed by a station police commissioner or a superior police officer in charge of police motor traffic division that the site and layout of the proposed site will not create unnecessary traffic hazard.

Petroleum Products Marketing
Petroleum Products Marketing

Also check : The most popular filling station in Nigeria

Tax clearance certificate – You need to get this for the proceeding three years. Since the company has just been registered, one – year tax clearance could be accepted. The above documents are submitted under the company’s letter headed paper to the department of petroleum resources (DPR) for permission to construct or build a filling station.

Minimum Required Facilities

In Addition to The Storage And Dispensing Facilities at Petrol Station

Filling Station Building – The building in any filling station depends on the capital available to the investor. At least this should consist sales room, office, store s and toilet.

Fore Court – This very important aspect of station construction that the concrete floor of the station. This contains distinct IN/OUT.

Bound Walls – This involves fencing of the station.The bound walls of minimum height of 1:2 meters-demarcating the petrol station from the adjoining properties.

Adequate Draining System – These should be proper drainage system to prevent flooding. This is for easier movement of vehicle in and out of the station

Water & Electricity – These are also vital utility that is needed in any filling station. However, because of unreliability of PHCN in this country as of now, most filling stations have a stand by generator to compliment the service of PHCN.

Safety Devices – In any filling station, there should be potable fire extinguishers, service periodically at least one on each pump island and one each at lubricating bay office and generator house.

No Smoking Signs – Conspicuously displayed at the station’s premises. This information is very important to both operator of the stations and the customer (motorists). This is to avoid fire disaster because of highly inflammable petroleum products being sold in the station.

Dry Sand Buckets – This is another safety measure to avoid fire accident in the station. At least one should be each beside of the pump islands.

First Aid Box (Well Stocked) – At least there should be provision to take care of primary injuries to the workers before the help of health workers are required. The first aid box should contain; iodine, cotton wool, plasters, scissors, Violette paint etc.

Refuse Containers – All around the premises, there should be refuse containers that will enable the workers at the station to dispose of soiled rags, empty oil cans etc.

Trained Petrol Station Attendants – This could be done in several ways. Training consultants would train the staff. They could be sent for training attachment in any existing and functional filling station in the area. Here, marketing strategies of petroleum products would be taught. Ways of dealing or relating to customers and handling of cash are also important aspect that training of attendants is inevitable. They should also be taught on good house keeping of the entire petrol station premises.

Details Of The Procedures Of Obtaining DPR Storage License

When the filling station has been completed, under regular inspection by the department of petroleum resources (DPR). The marketer can then apply for DPR storage license by submitting the following documents.

Three set of approved plans, an original fire certificate signed by state fire service officer, a letter of approval from the Town planing Authority, survey plan, An original certificate signed by a state police commissioner or superior police, Evidence that the company is dully registered with C.A.C, Tax clearance certificate for the proceeding three years, certificate/memorandum and Article of Association of the company; Also lead proof test of the storage tanks.

All the above documents with the photograph of the station are submitted under company’s letter headed paper to the Department of petroleum resources (DPR) for storage license.

Documents Required For Bulk Purchase Agreements

Once storage license is issued, the next stage is to apply for lifting right and bulk purchased from petroleum pipeline marketing company (PPMC). The following documents are required for lifting right and bulk purchase agreement.

Petroleum Products Marketing
Petroleum Products Marketing
  1. Storage and sale license of the filling station (from DPR) (1)
  2. Certificate of incorporation of the company
  3. Tax clearance certificate memorandum and Article of Association
  4. Certificate of occupancy or customary Rights of occupancy of the land where the petrol station is built (2)
  5. Letter of introduction from the bank. (3)
  6. Enlarge photograph of the station
  7. Verification Report from PPMC Area office on the petrol station
  8. Photographs and particulars of truck. (4) Bearing the logo and name the company.
  9. Fire Report
  10. Police report
  11. Approved building plan
  12. Marketer’s form
  13. Marketer letter headed paper

With all the above documents the marketer is qualified for bulk purchase and lifting right from PPMC. A marketer who has the foresight can easily spread his operations throughout all the depots in Nigeria by opening more outlets in other depots. In other outlets, it is only storage license from PDR that is needed to begin operation.

Also read: Wetstock Reconciliation: How Filling Station managers do it

Depot Operations

Assuming storage license has been obtained from DPR, lifting right and bulk purchase agreement from PPMC. Now allocation to lift the following products at NNPC Depots – DPK, PMS, AGO even LPFO will be given. This however depends on nearest depot to your filling station SOME OF NNPC LOADING

Lists Of Some Of The Depots In Nigeria

1. Satellite Depot Ejigbo (Lagos)
2. Mosimi Depot Shagamu
3. Ibadan Depot Ibadan
4. Ore Depot Ore Ondo Gate
5. Ilorin Depot Ilorin
6. Benin Depot Benin City
7. Warri Depot Warri (Refineries)
8.Port Harcourt Depot P.H.C (refineries)
9. Owerri Depot Owerri
10. Suleja Depot Suleja (Abuja)
11. Minna Depot Minna
12. Kaduna Depot Kaduna
13. Kano Depot Kano
14. Markudi Depot Markudi
15. Maduguri Depot Maduguri
16. Eungu Depot Enugu
17. Gombe Depot Gombe

Moreover, if can not meet all you need quantity you can sell in your outlets, you could buy yours from private depots in Apapa area of Lagos state. Such private depots are:

1. Ascorn Depot
2. Obat Depot
3. Ibeto Depot
4. Honeywell Depot
5. Zenon Depot
6. NIPCO Depot
7. MRS Depot etc.

The beauty of these depots to the marketer is that he would always sources products from nearest depot to their filling stations. Having pass
through all the above requirements and procedure, congratulations and welcome to the multimillion dollars industry. Yes; you have gotten every thing required to start this business. You need to secure an office space within NNPC premises. The cost is however very minimal since many marketers share the same hall.

You also need depot. The depot representative to be in charge of all company activities in the depot. The depot representative pays in draft issued in favors of NNPC on behalf of the company. NNPC expected each marketer to have sales representatives in each depot. For any marketer, it is expected that the company should have its own truck but this might be optional and depends on the available capital. Thereare always trucks at the depot for hiring.

Activities At Filling Station

The minimum pumps required by NNPC in station is 4-6 pumps for premium mild spirit (PMS petrol) one pump for Auto motive gas oil (AGO Diesel), one for Dual purpose kerosene (DPK), Also it is expected that one station manager, one supervisor and six attendants always in company uniform. Each attendant to man each pump. Island. The human relations of the staff matter a lot in determine the sales volume of the station.

Here, we are looking at normal situation of the market and not abnormal situation of scarcity of the products. It should be noted that profit in this business is base on the quantity of products you can sell in you station. However, under abnormal situation, no matter how remote your station is located, you will always make a sale. Once the loading truck arrived at the filling station. The truck is parked for about 15-20
minutes to allow product to settle down to its normal level.

The manager takes haulage using haulage bar and compare the figure to that recorded by the company depot representative. Once the recorded figure by both parties is confirmed to be correct, the truck is allowed to discharge its contents and haulage bar is further used in the
underground tanks to confirm the exact quantity of the discharged products.

Construction Of Underground Tanks

Construction of underground tank is one of the aspects of filling station that really consume money. For a standard filling station, you need at least four underground tanks of 30,000 45,000 litres capacity.

AGO = 30,000 – 45,000 litres
PMS = 30,000 – 45,000 litres
DPK = 30,000 – 45,000 litres

To have a storage and standard under-ground tanks that will be durable for a number of years, it is advisable to used 4mm plate (thickness). There are some companies that specialize in this construction.

Also read: 9 Amazing Ways You Can Avoid Being Cheated By Petrol Attendant

The actual price of each tank might note be easily determined because of Hyperinflation in our economy. Therefore it is estimated that each tank may cost as such as N500,000. However, buying the plates, you can employ the services of local welders on order to reduce the cost.

Purchase Of Pumps

The minimum numbers of pumps required by the regulating body (DPR) is six pumps. This depends on available fund to the investor. You could go for new pumps or fairly used (“Tokunbo”). Fairly used pumps may cost as much as N150,00 each, while new pumps could also cost as much as N500,000 – N1,000,000 and above. Petroleum Products Marketing

Setting Up An Operational Filling Station Office

For any independent oil marketing company in Nigeria, it is expected that the organization should have an office of operation. A well established oil marketing company should have:

  • Office of the managing Director
  • Office of the general Manager
  • Accounts department
  • Sales/marketing department
  • Maintenance department/drivers.

The office of the managing director like any other organization serves as the chief executive officer of the company. This is where most of the
decisions on how to manage and run the affaire of the company take place. The MD decides on how to control the finance and operation of the company.

The general manager sees to the over all operations of the company from filling station to the depot operation. He also sees to the account and the marketing department activities.

An accountant usually controls the account department. He is also in charge of the company’s activities with the bank. He ensures that the sales in station are adequately accounted for. He also ensures that Bank draft are obtained and given to the depot manager or representative to load any of the company product allocated by PPMC. The accountant must be vigilant and honest in order to be able to monitor fraudulent practices of the station managers and the attendants. Their sharp practices might affect the sales in the station. Petroleum Products Marketing

Sales/Marketing Department

This is another important department as far as sales of petroleum products such as AGO, LPFO, DPK, PMS to industries. The sales officer or manager visits companies to obtain LPO (Local purchase order) for the company and also he ensure that a product is supplied to the company as stipulated in LPO. And prompt payment by the company supplied.

Some materials that are required in this department are as follow

  1. Daily sales records for each station
  2. Customers credit/Debit cards
  3. Invoice
  4. Receipts
  5. Waybills.

The waybill is usually attached to NNPC meter Ticket for each depot loading. The account department should continually liaise with the sales so that accurate record of the loading at the depot will be accurately recorded. If the company account department is computerized, then all records of payment by the customers and loading at depot should be stored in the adequate records for all refers records for an auditor of the company to prepare the company annual report to determine the performance of the company. That is, profit and the loss account of the

Maintenance Department

This department always employ the services of pump maintenance to service pumps at the stations. Some company also employs mechanics either full time or part-time base to maintain and repaired company trucks and vehicles. Drivers of the company are also included in this department.

Problems Arising In Petroleum Products Marketing In Nigeria

Petroleum Products Marketing
Petroleum Products Marketing

However, the following problems may arise in transit because transportation is usually handily by third party contractor by customers themselves.

  • Shortage in loaded quantity
  • Delay in supply of products
  • Adulteration, contamination and theft of products.
  • Armed Rubbery in the filing station

It is therefore necessary to have a good knowledge of the approved standard procedures for handling all petroleum products in the industry. All petroleum products whether Petrol, Kerosene, low-pour fuel oil and high-fuel oil are usually supplied in bulk truck of various capacities, Calibrated by approved independent petroleum inspectors. The problem associated with adulteration, contamination and theft of petroleum products are best addressed through proper understanding of the following:

– Name and address of the marketer
– Name and address of transporter, Truck registration number
– Date of calibration compartment tank heights
– Haulage certificate number
– Name, address, stamp and signature of the approved calibration firm.

LOADING: The petroleum marketing strictly ensures compliance with the rules, regulations and produces for loading petroleum products. The following information is provided on the copy of delivery invoices to the consumers.

– Depot location
– Date and time of loading
– Haulage measurement of the compartments
– Seal numbers on the ma hole covers and control valves.
– Authorized signature.

DELIVERY: At the arrival of the product at the consumer location, the designated receiving officer must ensure that the following guidelines are followed to ensure that quantity and quality of the products are maintained.

– Collect the dispatch note and haulage certificate form the truck driver.

– Note the time of arrival and ensure that the truck is positioned on level ground before commencing the process of discharging the product.

– Confirm that seal on the man hole covers and internal control valves are still intact and that their numbers correspond to those indicated on the dispatch note.

– Confirm the product quantity supplied as indicated, using a hydrometer thermometer, T- bar haulage paste and water finding paste.

– Confirm the product type with the color code on the truck as indicated by the waybill.

– Confirm that they’re no water in each compartment by smearing the water finding paste on the T-bar and lowering it through the man hole hatch. The paste changes from golden to a brilliant red colour if water is present.

– Confirm the haulage reading of each compartment by smearing the haulage paste on the T- bar and lowering it through the hatch cover into product.

Fire Control Measures

Petroleum Products Marketing
Petroleum Products Marketing

Petroleum products have high flammability and therefore fire hazards. The triangle of combustion consists of the fuel heat to raise its temperature from the ambient to the flash point and then fire or ignition point and oxygen to support combustion continuously. Therefore, the recommended method of extinction of petroleum fire is to remove any one or more sides of the triangle of combustion by: Petroleum Products Marketing

(a) Starvation – removal of the source of fuel
(b) Smothering – reduction of source of oxygen
(c) Cooking – absorption of temperature.

Therefore, setting up petroleum products marketing company is a profitable venture and this depends on management of both human and financial resources of the company. Below is specimen Agreement between NNPC (DPR, PPML) and the petroleum marketing company.: Petroleum Products Marketing

(i) Approval to operate filling station.
(ii) Petroleum storage and sale license by DPR.
(iii) Agreement for the bulk purchase (Petroleum products for distribution within Nigeria)
(iv) Photograph of a standard filling station.

Wow, we hope that has help you in your Petroleum Products Marketing engagement. for more information, contact me. Before that, please share to friends