You have to reform the religion first (hold 3 or more holy places and have a moral authority of 50)
Then you can create the flame on any holy site you own.

Some words of caution though:
1. The Saphire Flame does not enjoy any protection from being attacked from draconic rulers. So when one of your vasalls has a de jure claim on the province he will likely attack and conquer it.
2. The Saphire Flame is rather weak in the beginning because, at least I think, the province is in the code not given to the flame but conquered by it, so it starts at 0 garrison and levy and with the new administration penalty.
3. If someone manages to conquer the flame it is gone for good. Unlike the pope who keeps the papacy title and remains head of the religion even when landless the saphire flame head loses the title when he loses the last province. And there is no way to recreate the flame as the title technically still exists (but is owned by no one).