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How To Start A Crude Oil Brokerage Business In Nigeria
Becoming an oil broker can be a lucrative career for those with
a strong interest in the energy industry. Oil brokers are
responsible for facilitating the buying and selling of crude
oil, refined products, and other energy-related commodities.
They act as intermediaries between buyers and sellers,
negotiating deals and ensuring that transactions are executed
smoothly.
To become an oil broker, one must first gain a solid
understanding of the energy markets and the various factors that
affect supply and demand. This requires a deep knowledge of the
industry, including an understanding of how oil is produced,
transported, and refined. It also requires a strong grasp of
economic and geopolitical factors that can impact the price of
oil, such as changes in supply and demand, political
instability, and environmental regulations.
Here, the broker initiates the deal between a crude oil buyer,
which is mostly an oil trader or refinery, and the crude oil
seller, which in this case, is the company buying from the
Nigerian National Petroleum Corporation (NNPC) to resell to the
international buyer, or the oil regulatory body of the country
you reside in.
Crude oil brokerage is one of the most profitable oil and gas
segments for entrepreneurs who have no money to venture into the
trade. Since it involves arranging a transaction for a
commission of about $1 per barrel, it makes it an excessively
lucrative venture for crude oil brokers who land major crude oil
supply contracts.
Facts Of Crude Oil Brokerage
You’re only brokering a transaction between a crude oil buyer
(oil trader or refinery) and a crude oil seller (the company
getting crude oil from the NNPC).
The buyer would be asked to show proof of finance before
shipment is made.
The crude oil broker is paid about $1 per barrel sold by the
crude oil seller.
You can venture into crude oil brokerage by partnering with a
person who has an allocation from the government or that buys on
OFF-OPEC basis.
As a crude oil broker, you can venture into this business with
$0.
Nigeria produces one of the most demanded crude oil in the
world: Bonny Light Crude Oil (BLCO).
Some other crude oil products in Nigeria include Qua Ibo,
Escravos blend, Brass River, Forcados, Pennington Anfan, and
over 15 more light crude oils.
Crude oil is measured in barrels.
Setting Up Your Crude Oil Brokerage Business
Step 1: Register A Company
Before you venture into the crude oil brokerage business, you
should first register a company. By doing this, you form a legal
structure that separates your personal liabilities from your
business’s.
Step 2: Identify A Firm With Crude Oil Allocation Or That
Purchases On PLR Basis
After registration, partner up as a broker with a company who
already has a crude oil allocation from the NNPC. Having a crude
oil allocation means you have a fixed allocation issued to you
for a fixed amount of time. This could mean having 20 million
barrels of crude oil allocated to a business for a period of one
year.
The largest problem the industry faces is most allottees don’t
have the funds to even fulfil their allocations, and as a
result, are always welcoming crude oil brokers who are ready to
trade through their allocations for a commission.
Another way is to broker for companies who sell on OFF-OPEC
basis. Those who legitimately do this purchase the crude oil on
Provisional Lifting Rights procedures, at a discount, and ship
to the crude oil buyer at a discount.
Step 3: Find A Crude Oil Buyer
After forming a partnership with a crude oil seller, the next
step is to find a crude oil buyer. Organizations who buy crude
oil products are oil traders and refineries, and as a result,
are constantly on the lookout for companies that can meet up to
their supply needs.
You can reach out to them via their company’s phone numbers,
emails, LinkedIn, or even via recommendations.
Step 4: Link Them To The Crude Oil Seller
Now you’d need to ensure they send a Letter of Intent based on
what has been realistically agreed, and it should be addressed
to the crude oil seller through your company. After which the
crude oil seller could either send a Corporate Offer or send the
final contract.
Step 5: Crude Oil Seller Ships The Oil To The Crude Oil Buyer
Now the crude oil seller would purchase the crude oil from the
NNPC on FOB terms and ship the oil to the crude oil buyer
anywhere they are in the world.
Step 6: You Are Paid About $1 Commission Per Barrel Sold
After shipment is complete and the crude oil seller has received
payment, depending on your agreement with the crude oil seller,
you could earn up to $1 per barrel, which the company would then
credit your company’s bank account. If your banking coordinates
were listed in the contract, the crude oil buyer would also pay
your commissions directly.
The interesting part of the crude oil brokerage business is most
supplies are always in millions of barrels. So if your
transaction covered 1 million barrels of crude oil, for
instance, the crude oil buyer would pay about $1 million Dollars
in commissions, since commission could be around $1 per barrel.
Since there’s usually a total commission of about $4 to be paid
in every transaction, if you’re not in a long list of brokers,
you could earn up to $1 per barrel, making it a full $1 million
Dollars.
If you’re lucky enough, you could get a much larger contract
that covers a monthly supply to the crude oil buyer for a period
of time, possibly running into years. The high returns from this
venture make it one of the most profitable oil and gas business
opportunities in the world because as a crude oil broker, you
only require $0 to run your operations.
One of the best ways to gain experience in the oil brokerage
industry is through internships. These programs offer valuable
hands-on experience in the field and provide an opportunity to
learn from experienced professionals. Interns can work on a
variety of tasks, including market research, data analysis, and
client communication.
Overall, gaining experience in oil brokerage is crucial for
success in the industry. Internships and entry-level jobs
provide valuable opportunities to learn from experienced
professionals and develop the necessary skills for a career in
oil brokerage.
The crude oil brokerage business is an oil and gas business
where success is heavily based on having a wide network,
carrying out smart marketing, and being trustworthy &
knowledgeable through the entire process. By building a strong
reputation and always delivering on your promises to your
clients, you’d succeed a whole lot easier.
Overall, becoming an oil broker requires a combination of
industry knowledge, networking skills, and the ability to adapt
to changing market conditions. With dedication and hard work, a
career in oil brokering can be both rewarding and challenging.
Get our training guide on how to set up a Crude Oil Brokerage
Business In Nigeria The body of this work is formed from
consulting experienced and relevant people running the Crude Oil
Brokerage Business In Nigeria, to get first-hand information
about the success secrets and marketing strategies deployed to
achieve business success
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