How Much Does It Cost to Convert an Oil Furnace to Natural Gas

Converting an oil furnace to a natural gas system involves several cost factors, permitting, and trade-offs in efficiency and maintenance. This article breaks down typical price ranges, the steps involved, financing options, and tips to reduce overall conversion cost while highlighting the key considerations homeowners should weigh when planning a conversion.

Item	Typical Cost Range (USD)
Gas Line Installation (from street)	$500 – $3,500+
Gas Furnace Unit	$1,500 – $6,000+
Oil Tank Decommissioning	$500 – $3,000
Venting / Chimney Modifications	$300 – $1,800
Labor and Conversion Parts	$800 – $2,500
Permits and Inspections	$100 – $1,000
Average Total Conversion Cost	$4,000 – $15,000+

Overview Of Converting An Oil Furnace To Natural Gas

Converting an oil furnace to natural gas typically requires replacing the heat source, connecting to a gas supply, modifying venting, and decommissioning the oil tank. Homeowners face variable costs driven by gas availability, existing ductwork condition, local codes, and desired furnace efficiency. A conversion may lower fuel costs and maintenance but requires upfront investment and coordination with utility companies.

Major Cost Components

Gas Supply And Gas Line Installation

One of the most variable expenses is supplying natural gas to the home. If natural gas service is already available at the street or property line, the cost is primarily for a service lateral and meter hookup. If not, extending the utility main can be costly and may be shared among neighbors.

Typical costs for a gas line connection range from $500 to $3,500+. Trenching, permits, inspection, and meter installation are included in that range. Long distances or rock/difficult terrain increase costs substantially.

New Gas Furnace Or Conversion Kit

In many cases, replacing the oil furnace with a dedicated gas furnace is the recommended approach rather than using a conversion kit. High-efficiency gas furnaces (80% to 98% AFUE) cost more up front but deliver better fuel savings.

Furnace unit costs vary: basic gas furnaces often start around $1,500, mid-range units $2,500–$4,500, and top-tier high-efficiency models $5,000–$8,000 or more. Adding a variable-speed blower and multi-stage gas valve increases price.

Venting, Chimney, And Flue Modifications

Oil furnaces often use different flue systems than high-efficiency gas furnaces. Installers may need to line or cap an existing chimney, install PVC venting for condensing units, or modify exhaust pathways for safe operation.

Venting costs typically run between $300 and $1,800 depending on materials and workmanship required. Good venting is critical for safety and code compliance.

Oil Tank Removal Or Decommissioning

Removing or professionally decommissioning an underground or aboveground oil tank is an important step. Tank removal prevents leaks and future liability but adds cost.

Decommissioning an aboveground tank may cost $500–$1,200. Removing an underground storage tank (UST) is more complex and can cost $2,000–$10,000+ if contamination remediation is needed. Costs vary by state and local environmental rules.

Labor, Permits, And Inspections

Licensed HVAC contractors are required for furnace installation and gas work in most jurisdictions. Labor costs include disconnecting the oil system, installing the gas furnace, piping, venting, startup, and inspection.

Typical combined labor, permit, and inspection fees range from $800 to $2,500. Urban areas and licensed specialists command higher rates. Always budget for permit fees and a final inspection to avoid compliance issues.

Factors That Influence The Total Conversion Cost

Availability Of Natural Gas Service

If a natural gas main is already on the street, costs are much lower than when extending service. In rural areas, homeowners may need to choose between extending a pipeline or switching to propane, which changes the cost calculus.

Furnace Efficiency And Type

Higher efficiency furnaces save fuel but cost more up front. Condensing gas furnaces (90%+ AFUE) require PVC venting and condensate drainage but offer best lifetime savings. Non-condensing furnaces have lower initial cost but reduced savings.

Home Size And Ductwork Condition

Replacing an undersized furnace or upgrading ductwork increases cost. If existing ducts leak or are poorly sized, additional sealing, balancing, or replacement may be necessary to achieve expected efficiency gains.

Local Labor Rates And Code Requirements

Labor and permit costs vary widely across states and metro areas. Some jurisdictions require specialized inspections or environmental clearances for oil tank removal, adding to the expense.

Underground Tank Contamination Risk

If an underground oil tank has leaked, cleanup costs can be significant. Soil testing, remediation, and long-term monitoring drive up total conversion expense and may involve environmental agencies.

Step-By-Step Conversion Process

1. Preliminary Assessment

A licensed HVAC contractor will evaluate the home’s heating load, ductwork, and whether natural gas service is available. This assessment establishes system size and identifies required modifications.

2. Obtain Quotes And Permits

Homeowners should obtain multiple quotes and verify that proposals include permits, inspections, and any utility coordination. Confirm whether the oil tank requires decommissioning or removal and whether soil testing is needed.

3. Schedule Gas Service Connection

If natural gas is available, schedule the utility company to run the service line and set the meter. Utilities may require easements or shared-cost agreements for main extensions.

4. Remove Or Decommission Oil Equipment

Drain and clean oil lines, disconnect the oil tank, and cap or remove the tank according to local regulations. Document the process for future property disclosure.

5. Install Gas Furnace And Venting

Install the selected gas furnace, connect to gas piping, set up venting and condensate drains if required, and commission the system for safe operation.

6. Inspection And Final Approval

Schedule local inspections for gas work, combustion safety, and any required environmental checks. Obtain final approval before using the new system. Keep documentation for resale or tax purposes.

Cost-Saving Strategies And Incentives

Choose A Right-Sized, High-Efficiency Unit

Balancing initial cost and long-term savings is key. A high-efficiency gas furnace with correct sizing can reduce monthly heating bills and often pays back part of the conversion cost over time.

Look For Utility Rebates And Federal Incentives

Many utilities offer rebates for high-efficiency heating equipment. Additionally, federal energy tax credits and state programs may reduce upfront costs for qualifying systems. Check local utility websites and the Database of State Incentives for Renewables & Efficiency (DSIRE).

Finance Or Spread Costs

HVAC contractors and utilities sometimes offer financing or low-interest loans for energy upgrades. Homeowners can also explore home equity loans or energy-efficient mortgages to spread conversion costs over time.

Bundle With Other Home Upgrades

Combining the furnace conversion with insulation upgrades or air sealing can magnify energy savings. Contractors may offer package pricing for multiple home efficiency improvements.

Comparing Alternatives: Propane, Hybrid, Or Heat Pump

Propane Conversion

In areas without natural gas mains, propane is a common alternative. Propane conversion costs are similar to natural gas, but fuel prices and delivery logistics differ. Propane requires an on-site storage tank and regular refills.

Hybrid Systems (Gas + Heat Pump)

A hybrid setup pairs a gas furnace with an electric heat pump, switching between sources for efficiency. Hybrid installations cost more initially but can provide best-in-class efficiency and flexibility.

All-Electric Heat Pump Option

All-electric heat pumps avoid fossil fuels altogether and may qualify for incentives. Cold-climate heat pumps perform well in many U.S. regions, but electrification may require electrical service upgrades and changes in operating costs depending on electricity rates.

Return On Investment And Payback Considerations

ROI depends on fuel prices, regional climate, furnace efficiency, and usage. Converting from oil to natural gas typically reduces fuel costs per BTU and lowers maintenance expenses, often yielding payback in 5 to 12 years for many homeowners.

To estimate payback, compare annual heating costs before and after conversion using local fuel prices, and include maintenance and possible increase in property value. Consider long-term fuel price volatility when modeling ROI.

Permits, Codes, And Safety Considerations

Gas conversions require strict adherence to local building codes and gas safety standards. Improper installation risks carbon monoxide, gas leaks, or fire hazards. Always use licensed professionals and obtain necessary permits.

Oil tank removal may trigger environmental notifications and requires documentation. Retain disposal or decommissioning records for future property transactions.

Questions To Ask Contractors

• Is the contractor licensed and insured for gas work in the jurisdiction?
• Does the quote include permits, inspections, and oil tank disposal?
• What is the proposed furnace’s AFUE rating and warranty?
• Will ductwork or electrical service require upgrades?
• Are rebates, tax credits, or financing options available?

Final Considerations Before Converting

Converting an oil furnace to natural gas can offer substantial savings and convenience but requires careful planning and accurate cost estimates. Evaluate gas availability, tank decommissioning risks, and the long-term benefits of a high-efficiency replacement.

Obtaining multiple competitive bids, checking utility incentives, and ensuring proper permitting and inspections will help reduce unexpected costs and ensure a safe, compliant conversion that improves home comfort and value.

Additional Resources

• Energy Star — Guidance on efficient heating equipment.
• DSIRE — Database of state incentives and rebates.
• American Gas Association — Information on natural gas safety and utilities.