Wednesday, February 28, 2024

How to Start a Petrol Station Business in Kenya

By Justus Kiprono

Petrol stations are establishments that sell petroleum fuels like diesel, motor spirit (premium petrol), and regular petrol to vehicle owners. These facilities may also deal in other engine lubricants, kerosene, and cooking gas sold to customers.

Depending on its size, petrol or fueling stations may also have additional car-related services like oil checks, repairs, air for tyres, plus minimum to full car service.

Available statistics from a report tabled in Parliament in early 2022 by the Ministry of Energy indicate that there are slightly over 4,000 registered fueling stations in Kenya, with a majority (324) located within Kenya’s capital Nairobi.

Also, another set of data from the Energy and Petroleum Regulatory Authority (EPRA) for the financial year that ended June 2022 denoted a 10.92% increase in the quantum of petroleum products imported into the country through the Open Tender System (OTS) to 5,539,884 cubic meters compared to 4,994,577 cubic meters sourced over the same period in the financial year ended 2020/2021.

These data sets allude that petrol stations are a great business because the demand for fuel in Kenya is constantly growing; if you are keen to start a petrol station in Kenya but uncertain about how to get started, this is a step-by-step guide on how to kickstart your dream to a reality by offering the concepts behind this lucrative business.

How to open a petrol station

Just like any other enterprise, the petrol station business in Kenya needs flexible and good planning to set yourself on the path to success as an entrepreneur.

According to businessman Jacob Simiyu of Jadedo Investments, which vends fuel along Eldoret – Iten Road at Sinai, proper organizational skills are essential for the long-term survival of the fuel business.

From his interview with Bizna Kenya, here is how to start a petrol station business in Kenya:

1. Think out your petrol station business plan

As an aspiring business owner, having a detailed or well-written business plan will help you validate your idea as it communicates a strategic plan for your business by identifying potential problems and opportunities.

Simiyu says that a business plan is a critical modelling tool for any new business creation as it enables one to gain insights, especially as it projects possible competitors and analyzes the concepts of supply and demand.

“Before starting a petrol station business anywhere in Kenya, it is important to map out how your business will operate. You will know possible customers and the right location to put your facility. Ask yourself; are there big oil companies around where you want to set up your business? It will come in handy when tackling issues of competition. However, competition brings about the urge to do better in business, boosting its efficiency,” he stated.

He added that at this stage, an entrepreneur learns about the right location with a comprehensive trade network for the petrol station business. He hinted that the best location is along major highways, cities, and town suburbs because of affordable rent prices.

2. Notify the respective county government

When your business plan is ready and set to start the petrol station business in Kenya, visit the county government wherein the prospective fueling station sits to obtain construction approval from relevant authorities.

This process is absolutely free, and at the county government offices, you are supposed to check in with the fire department for business location risk assessment alongside the National Environment Management Authority of Kenya (NEMA) to obtain an Environmental Impact Assessment (EIA), which sifts the environmental impact of your project.

Here are the requirements for the construction of a petrol station in Kenya:

  • Applicant’s company registration certificates for developing firms
  • Copies of applicants’ national ID
  • Proof of land ownership of legitimate lease agreement
  • Valid EIA license from environmental authority NEMA
  • Permit to construct auxiliary lanes from relevant authorities like Kenya National Highways Authority (KeNHA) or Kenya Urban Roads Authority (KURA)
  • Permission to undertake construction from County Physical Planning Office
  • Detailed construction drawings of petrol station design from certified engineers

A review of your application to construct a petrol station in Kenya takes approximately 45 days or less, after which you may begin its construction.

3. Build your petrol station

How to Start a Petrol Station Business in Kenya - Bizna Kenya
How to Start a Petrol Station Business in Kenya – Bizna Kenya

After gathering the required certifications and receiving a go-ahead to start your petrol station in Kenya from the county government, it is time to zero in on its construction in the desired place with customer convenience.

A standard petrol filling station has storage tanks, digital dispensing pumps, wash and service bays, air and water dispensing fittings, lubrication equipment, and other mechanic vices. All of these are expensive to acquire.

For instance, according to petrol vendor Simiyu, it costs between Ksh300,000 to Ksh700,000 to put up 20,000-litre underground storage tanks that conform with minimum standards set by EPRA, Ksh20,000 for single piping, Ksh580,000 to purchase double fuel dispensers with breakaway valve or a price of Ksh320,000 for single fuel dispenser, all with piston meters and encoders to track fuel output.

Also, petrol business hopefuls have got to pay around Ksh5,000 to Ksh10,000 for fuel pump installation costs. With a viable startup capital, building a petrol station takes approximately one month before becoming fully operational.

Capital investments should also include around Ksh3 million for sourcing petroleum from oil marketing companies. One should also pay for a single business permit that goes for around Ksh10,000 to Ksh50,000, depending on the county’s set trade laws, and Ksh5,000 for a fire permit.

The average cost of starting a petrol station business in Kenya is approximately Ksh5 million to Ksh8 million, inclusive of fueling station equipment, construction materials, and labour. However, this figure may be higher or lower depending on the size of the petrol station and whether the land on which it’s constructed is personal or leased.

Biggest Oil Marketing Companies in Kenya 2023

To determine the biggest Oil Marketing Companies (OMS) in Kenya, we used data from Biannual Energy and Petroleum Statistics Report for the financial year 2022/2023, which provides information on the top companies that trade petroleum products; diesel, petrol, kerosene, and LPG in terms of market share.

Here are the top 10 oil marketing companies in Kenya:

Rank Oil Marketing Company Market share
1 Vivo Energy Kenya Limited 22.79%
2 Total Energies Marketing Kenya PLC 16.39%
3 Rubies Energy Kenya PLC 10.93%
4 Ola Energy Kenya Limited 7.64%
5 Oryx Energies Kenya Limited 5.51%
6 Stabex International Limited 3.84%
7 Be Energy Limited 3.64%
8 Galana Oil Kenya Limited 2.65%
9 Lake Oil Limited 2.14%
10 Hass Petroleum Kenya Limited 1.94%

Bottom Line

Is the petrol station business profitable in Kenya? Yes, the fuel business can be very lucrative for risk-takers since it has high average profitability. However, the margin of profit can be impacted by fluctuating international prices, the degree of competition, and the strength of demand.

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