pre lpg plant

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Prefeasibility report | www.nairamarkets.com

PRE-FEASIBILITY REPORT

LPG Refilling Plant in Nigeria

By

Fatdeo & Associate Ltd

www.nairamarkets.com [email protected]

08105630157, 08077918755

August, 2015

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PURPOSE OF DOCUMENT The purpose of this report is to introduce the subject matter and provide a general idea on the said subject.

All the materials included in this document is based on Data/Information gathered from various sources And it is based on certain assumptions although due diligence has been taken to compile this document, the contained information may vary due to change in any of the concerned factors, and the actual result may differ from the presented information

FATDEO & ASSOCIATE does not assume any liability for any financial activity or other loss resulting from this report in consequence of undertaking this activity, therefore , we advise users of this report to conduct a feasibility study based on actual project parameters , prospective user of this report is encourage to carry out his/her own due diligence & gather any information he/she considers necessary for making informed decision.

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EXECUTIVE SUMMARY

Petroleum products are among the most valuable natural resources abundantly

available in our country. Nigerians and people everywhere use petroleum products as a

fuel in their automobiles, generating sets, industrial plants and for cooking purposes,

thus making petroleum products an essential commodity that is needed for the daily

operations of individual, industrial and national activities.

Undoubtedly a vast investment potential exists in the domestic liquefied petroleum gas

filling sub-sector of the Oil & Gas Industry in Nigeria. A large proportion of the middle

and upper socio-economic class of people depend on gas for cooking purposes. So are

industries, government establishments, hotels, hospitals, restaurants, bakeries e.t.c

A statistic for the country some years ago showed that a mere 5% of the consumption

potentials of LPG were attained. It is therefore evident that we have a long way to

saturate the Nigeria LPG Market if it were to be fully developed because if a domestic

consumer is sure of getting LPG when and where he needs it at the right price, he would

most willingly convert from firewood, coal or kerosene to LPG.

With huge gas reserves of 185 trillion cubic feet and the Nigerian government's strong

commitment to developing the gas industry through the Gas Master Plan, there are a lot

of emerging opportunities for investors in the sub- sector.

With less than one kilogram me per capita consumption, Nigeria ranks among the

lowest liquefied petroleum gas consuming states in Africa despite its huge gas resources.

Today, Nigeria consumes about 110, 000MT per annum and we have about 130 LPG

plants and 7,000 retailing outlets. If we can move the consumption level up to

750,000MT per annum, we expect to have about 250 LPG plants and 74,970 retailing

outlets.”

More succinctly, a captive market of over 165 million people makes investment in LPG

bottling plant viable since one of the challenges the Federal Government as well as LPG

operators are forced to grapple with is how to popularize the use of cooking gas in

Nigeria.

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Following the unprecedented demand for LPG in Nigeria and attendant scarcity of the

product which has resulted in sharp and arbitrary price increases, the distribution of gas

products has been deregulated. Consequently, private individuals and firms can now set

up LPG plants.

This report highlights the step-by-step procedure required for the setting up of a

Liquefied Petroleum Gas {LPG} Storage and Distribution filling station.

According to a world bank report in 2010 over 50 percent of the world‟s population

directly or indirectly depends on hydrocarbon and petroleum products for survival.

The capacity of the proposed LPG storage and distribution facilities would be around 80

tons, whereas, filling capacity would be about 5 tons per day (400 cylinder of 12.5 kg

weight based on 8 hours shift). The required startup capital estimate of the business is N

61,170,000.00 and it would be funded from 30% equity N 18,351,000.00 and 70% loan

42,819,000.00. The loan would be used to finance our purchase on installation of the

production plant and the working capital.

We expect to generate a net profit after tax of N 45,402,320.82 and N 57,149,826.54 in

the first and second year with the repayment plan of two {2} years with moratorium

period of two {2} months. The assumed interest rate for the loan is 25%.

The company is owned by the promoters and the total manpower required to run the

business is about 13 persons comprising of 2 skilled and 11 unskilled workers.

1.0 Project Brief

The objective of this document is to provide information regarding investment

opportunity for starting a LPG (cooking gas) refilling plant in any big city in

Nigeria.

LPG production is a capital intensive business and requires huge investment

depending upon the technology and methodology employed for the extraction

and processing of LPG. However, LPG Marketing and distribution needs

comparatively less investment and can be considered by the Small and Medium

scale investors.

The capacity of the proposed LPG storage and distribution facilities would be

around 80 tons, whereas, filling capacity would be about 5 tons per day (400

cylinder of 12.5 kg weight based on 8 hours shift).

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1.1 Proposed Business Legal Status

The legal status of business tends to play an important role in any setup; the proposed

LPG refilling plant is assumed to operate on as a private limited company. As it is

mandatory for oil and gas companies to incorporate as a limited liability company.

Name Description Requirement to obtain

Expected date of issue

Renewal date

Company Registration

Grants the holder a right do business with the registered business name. It is issued by Corporate Affairs Commission {CAC}

Details of company, company seal, passport and statutory fee.

Issued Life

Tax Registration

{TIN}

Grants the holder permit to do business and for tax collection to be easy.

Details of company

Issued Life

1.2 Opportunity Rationale

Nigeria has so many investment opportunities in various sectors, amongst all The oil

and gas sector gas is the most promising for investors .

The Liquefied Petroleum Gas (LPG) offers a tremendous investment opportunity within

the petrochemical industry. The LPG is an industry specifically developed to cater for

the nation‟s industrial and domestic gas requirements. LPG is needed in almost every

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aspect of economic activity. For instance, it is highly demanded by the automotive

industry, manufacturing plants and electricity generation via thermal energy

At the domestic level, most households, particularly the middle and upper classes of the

society now depend on gas for cooking purposes. Hotels, catering outfits, restaurants

and bakers all demand the LPG as an alternative source of energy since the firewood and

kerosene stove are fast becoming obsolete

With huge gas reserves of 185 trillion cubic feet and the Nigerian government's strong

commitment to developing the gas industry through the Gas Master Plan, there are a lot

of emerging opportunities for investors in the sub- sector With less than one kilogram

me per capita consumption, Nigeria ranks among the lowest liquefied petroleum gas

consuming states in Africa despite its huge gas resources.

The Federal Government, through the former Minister of State for Petroleum

Resources, Mrs. Dizieani Madukue , at the last African Summit of the World LP Gas

Association, made a pronouncement that Nigeria would develop cooking gas market

from the current 100,000 metric tones to one million MT per annum by 2015

Although, the market is currently fraught with decayed infrastructure, the five- year

growth projection of the Federal Government, according to experts, will attract

investment across the LPG value chain from storage, logistics, to filling plants and

cylinders, among others.

The need to increase LPG consumption in Nigeria cannot be ignored by anyone because

of the country‟s large latent demand potential and population.

Today, Nigeria consumes 100, 000MT per annum and we have about 130 LPG plants

and 7,000 retailing outlets. If we can move the consumption level up to 750,000MT per

annum, we expect to have about 250 LPG plants and 74,970 retailing outlets.”

More succinctly, a captive market of over 160 million people makes investment in LPG

bottling plant viable since one of the challenges the Federal Government as well as LPG

operators are forced to grapple with is how to popularize the use of cooking gas in

Nigeria.

Therefore, forward thinking investors interested in the Nigerian oil and gas industry will

make money from building cooking gas filling plants because LPG is a domestic product

that will eventually replace kerosene in the country due to its environmental friendly

nature.

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Following the unprecedented demand for LPG in Nigeria and attendant scarcity of the

product which has resulted in sharp and arbitrary price increases, the distribution of gas

products has been deregulated. Consequently, private individuals and firms can now set

up LPG plants.

1.3 Market Entry Timing

There is no specific time for the entry in LPG marketing. After allocation of quota from

the bulk marketer, a marketing company can start its operations immediately as

demand is persistent in urban areas

1.4 Recommended Project Parameters

Capacity Human resource

Technology location

Storage Capacity: 80 ton Cylinder Filling capacity: 5 ton per day

13 Local and Imported Machinery (German and USA)

Any urban City

1.5 Project Cost

The required startup capital estimate of the business is N 61,170,000.00 and it would be

funded from 30% equity N 18,351,000.00 and 70% loan 42,819,000.00.

Project cost IRR NPV (N) Payback period

N61,170,000 28% 22% 2 years

1.6 Break-Down Start-up

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Required Startup Capital Estimate

Items Amount

Pre-operating Expenses 54,650,000.00

Opening Stock 3,750,000.00

Initial Operating Expenses -2months 2,770,000.00

Total Startup Capital Estimated 61,170,000.00

1.7 Project cost

Equity 18,351,000.00 30%

Loan 42,819,000.00 70%

Total 61,170,000.00 100%

2.0 Market

2.1 Sector & Industry Analysis

LPG is a derivative of two large energy industries: natural gas processing and crude oil

refining. When natural gas is extracted from the earth, it is a mixture of several gases

and liquids. Methane, which is sold by gas utilities as “natural gas” constitutes about 90

percent of this mixture. Of the remaining 10 percent, 5 percent is propane and 5 percent

is other gases such as butane and ethane. Before natural gas can be transported or used,

the LP Gases (which are slightly heavier than methane, the major component of natural

gas) are separated out. Depending on the “wetness” of a producing gas field, gas liquids

generally contain 1%-3% of the unprocessed gas stream. Some LP Gases are also trapped

in crude oil. In order to stabilize the crude oil for pipeline or tanker distribution, these

“associated” or “natural gases” are further processed into LP Gas. Worldwide, gas

processing is a source of approximately 60% of LP Gas produced. In crude oil refining,

the LP Gases are the first products produced on the way to making the heavier fuels

such as diesel, jet fuel, fuel oil, and gasoline. Roughly 3% of a typical barrel of crude oil

is refined into LP Gas although as much as 40% of a barrel could be converted into LP

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Gas. Worldwide, crude oil refining is the source for the other 40% of LP Gas supplies

although the ratio between gas processing and refining varies among Petroleum

producing countries.

LP Gas production from these sources is a natural derivative. That means production of

LP Gas is assured since the primary motive for gas processors and refiners is to produce

fuels other than LP Gas but first the LP Gases are produced Although tied to the

production of natural gas and crude oil, LP Gas has its own distinct marketing

advantages and can perform nearly every fuel function of the primary fuels from whichit

is derived.

2.2 Sector Characteristics and Overview

The gas sector has remained the most challenging in the oil and gas industry. The slow

development of domestic gas is due to the huge resources needed to gather and process

associated gas, which has led to flaring of the bulk of the daily gas production (over 200

bcf). Concerned with the loss of revenue and wastage of the nation‟s gas resources, the

environmental impact of gas flaring on the local ecosystem and global warming, the

Federal Government came up with several policy initiatives to end gas flaring. While the

efforts of the FG and industry operators has led to a reduction in percentage of gas

flared, the objective of zero flare is far from being achieved as the industry has missed

the initial target of year 2004, and is currently grappling with challenges of meeting the

revised target of 2008. While the percentage of gas flared compared to production has

reduced from more than 80% in the 1980‟s to less than 33% in 2007, there has been no

real reduction in the total volume flared(approximately 800 billion cf) due to increased

production.

Government aspirations for the gas sector is to attain a balance between domestic and

export gas, achieve delivery of gas to power plants and diversity revenue base by

generating as much revenue from gas as oil.

To achieve these objectives, a three pronged approach was initiated. These are; the

development of a Natural Gas policy, Fiscal Reforms/ Legislative Reviews and a Gas

Master Plan.

The Natural Gas Policy was approved in March 2008 by the President. It is aimed at

promoting a public- private sector partnership for the orderly and rapid

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commercialization of Nigeria‟s natural gas resources for the development and

diversification of the economy. It is aimed at recovering optimum revenue from gas

utilization.

There are five classes of gas, Natural Gas, Liquefied Natural Gas (LNG), Compressed

Natural Gas (CNG), Industrial Gas (IG) and Liquefied Petroleum Gas (LPG). BOC Gas is

the major dealer of Industrial gas, while Gaslink is a major dealer of Compressed

Natural Gas (CNG).For the domestic market, gas is being leveraged as the fuel to power

Nigeria‟s economy. Currently 15 new gas fired power plants are under construction and

will add over 7 gigawatts of electricity to the national grid. The growth in the power

sector is expected to translate to an increase in gas demand from 1 bcfpd in 2007 to

about 3 bcfpd in 2010 representing over 50% annual growth. The fertilizer sector also

has an expected demand of over 1 bcfpd.

Liquefied Petroleum Gas (LPG) is a by-product of natural gas and is usually sold FOB

under a 12-monthcontract. LPG production started in 2003. It consists of refrigerated

grade of commercial propane and commercial butane, which are sold separately.

Condensate exports started in 2000.

In Nigeria the proportion of Propane and Butane in LPG is 70:30. LPG is a long

established, well accepted, but minor component of energy supply in Nigeria. It is used

principally as a cooking fuel in households and in catering. However, LPG is a clean,

versatile fuel with a wide variety of other uses in household, commercial, and industrial

energy applications.

LPG is produced in oil refining and in gas processing. It represents a modest part of

refinery output- typically 2-3 percent. Commercial grade LPG is primarily a mixture of

butane and propane and the ratio of these constituents can vary widely.

Although normally used in gaseous form, LPG is readily transformed to liquid for

storage and transport. Liquid LPG weighs about half as much as water and is much

more energy intensive than in gaseous form. However, these useful attributes come at a

cost in that the LPG container must be robust, and the gas must be drawn from it in a

controlled manner.

Hence, LPG storage and transportation tends to be more expensive than other fuels.

Initially, LPG distribution was handled only by those oil marketing companies with

retail operations in the country. However, they were soon joined by a small group of

"independents" that is, companies whose sole business is the marketing of LPG and the

appliances and equipment associated with its use.

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The petroleum marketers purchased and maintained their own LPG cylinders which

were branded and fitted with their distinctive valve. Consumers were given cylinders

(usually in exchange for a cash deposit) which were refilled by the marketer. The

distinctive valve and ownership of cylinders effectively discouraged consumers from

changing suppliers. That system required that the marketer invest in cylinders to

support those being used by consumers, and thus maintain the supply chain. The

marketer accepted the obligation to maintain the cylinders and had the opportunity to

do so when they were returned to him for refilling.

Market penetration was low, partly because the initial cost (cooker, cylinder deposit,

and LPG fill) was beyond the reach of the majority of Nigerians. This affected the growth

of the market as households prefer relatively cheap alternatives like firewood, coal and

kerosene. In the 1980s, there was growing awareness of social and environmental

problems associated with the dependence on wood fuel, especially in the Northern

states. Given the popularity of LPG with those Nigerian households that had access to it,

the potential for domestic LPG production and its widespread international use in rural

energization, the government initiated a "butanization" program and authorized NNPC

to construct a network of strategic depots for the primary distribution of LPG, which is

managed by PPMC. Nine butanization depots were constructed at strategic locations

throughout Nigeria (at Lagos, Calabar, Enugu, Ibadan, Ilorin, Makurdi, Kano, Gombe

and Gusau). All but one - Apapa, Lagos - were situated alongside existing white products

depots and were to be supplied from the refineries at Kaduna, Warri and Port Harcourt.

A Merox unit was added at Kaduna to enhance the output of LPG.

However, while the white products are supplied to the depots by pipeline, road

transportation was judged the practical mode to transport LPG to the inland

butanization depots. There was an established coastal movement of LPG from the

refineries to the marketers' storage terminals in Lagos port and the butanization depots

at Calabar and Lagos were to be similarly supplied.

Large quantities of LPG are being extracted in gas- processing projects. It must be

acknowledged that the composition of some of the exported product makes it unsuitable

for the local market and the export infrastructure is not readily adaptable to domestic

supply.

The LPG industry comprises the players in the marketing and distribution chain—

traders and shippers, road haulage contractors and manufacturers/vendors of LPG

cylinders, tanks, appliances and ancillary equipment.

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Normally, LPG production is merely incidental to the mainstream operations of the

refineries but often LPG must be removed (to a greater or lesser extent) in order to meet

product specifications, notably that of gasoline, or Petroleum Motor Spirit (PMS).

Therefore, LPG production is primarily a function of crude oil process runs. Surplus

LPG can, when necessary, be flared at the refinery. A refinery may have to be shut down

if certain heavy products cannot be evacuated and storage capacity is exhausted, but not

LPG. This flexibility may influence evacuation priorities to the disadvantage of the LPG

market.(World Bank/Energy Sector Management Assistance Programme (ESMAP)).

The World Health Organisation has estimated that if half of the people in the world

currently cook with solid fuels switch to LPG, it could provide health and productivity

gains of more than $900 billion over the next decade. World Bank estimates the size of

the industry at 500,000 tonnes every year and 2007 consumption at 90,000 tonnes.

Over the past few years, the bulk of Nigeria‟s LPG supply was imported from Amenham

(UK) and the Mediterranean by two companies: Le-Global Gas and Hyson. However it

was insufficient to cater to the growing demand by the local market. The Obasanjo

Regime thus suspended the NLNG‟s sixth train and directed that it improve supply to

the local market. Following which NLNG appointed more companies to lift gas from its

Bonny Plant.

This development has reversed the declining supply of LPG, which was caused largely by

the country‟s dependence on imported gas, with Le Global, controlling about 80% of the

supply.

This explains the reason why the former President Olusegun Obasanjo directed the

NLNG to suspend the sixth export train and commence the supply of LPG to the

domestic market. NLNG was expected to provide a mother ship capable of lifting LPG

from its jetty in Bonny to other smaller vessels that will move the products to the city

ports like Lagos, Port Harcourt, Warri and Calabar.

NLNG obtains most of its natural gas supplies from Shell, produces LPG and supplies to

the domestic consumers through six off-takers. The following companies are the

suppliers of LPG to the local Market:

• Hyson, a subsidiary of NNPC

• Le Global Oil and Gas Limited

• Chimons Simeons

• Linetrade

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• Harig Gas

• Greenfield International Energy Services Limited

There are 210 major bottlers, of which 70 are presently active and about 1,000 retailers.

Total is the major player among the retailers. The bottling plant is easy to set up. Hence,

the industry has many bottlers. Thirty percent of the LPG bottling activities are

controlled by three major oil companies. These are Total, AP and Oando. While the

remaining 70% is carried out by Independent players, among these are, Technogas,

Hydros and Smartgas. Smartgas is the only independent bottler operating retail

marketing.

The major marketers have about 100,000 to 200,000 LPG cylinders. In recent times,

price of LPG has gone way beyond the reach of the average Nigerian. The steady

increase in prices of LPG since the 1990s continues to be the biggest problem to its

growth.

However, as at May 2008, the cost of a 12.5kg cylinder cost about N2, 500; a decrease

from N5,000 before NLNG started production. Nigeria has the lowest consumption of

the product in the West African sub-region.

Problems which have afflicted the Nigerian LPG sector have included ailing refineries,

inadequate seaport facilities to receive large gas laden ships, lack of appropriate

regulation, unreliable and erratic supply, high cost of gas compression and the

downright non-availability of LPG at affordable prices, for the low income group. The

problems also include unethical and bad practices, which discourage genuine private

investment in gas production and distribution.

In March 2008, the President approved the New National Gas Pricing Policy. The New

National Gas Policy aims to improve infrastructure, clarify the legal framework and shift

the focus from exports to domestic consumption. The policy aims to ensure short and

long term gas availability at affordable prices, for all domestic consumption and for

sectors that have significant multiplier effects on the national economy.

The new policy for the country‟s strategic industrial sector, comprising industries that

require gas as their main feedstock such as fertiliser and methanol producers, is

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expected to make such industries as competitive as their counterparts in other low-cost

gas producing countries.

The new gas policy further stipulates that all operators in the country‟s oil industry must

realign their gas development portfolios in order to ensure that gas resources which are

rich in natural gas liquids (NGL), including condensate and LPG, are preferentially

deployed for domestic use rather than export. All oil & gas developers in the country are

expected to allocate a specified amount of gas from their reserves and annual production

to the domestic market.

A Department of Gas is to be established in the Federal Ministry of Energy to oversee

the implementation of the new gas policy and regulations.

2.3 Market Information

2.3.1 Current Market

Currently out of 150million households in Nigeria, 7 million rely on LPG, and the rest on

conventional fuels like coal, firewood, kerosene, dung cake etc, which indicate the strong

demand for Liquefied Petroleum Gas (LPG) sector.

2.3.2 Market Demand

LPG demand in Nigeria is largely dependent on the price on HHK (house hold

kerosene)Current DAILY demand for LPG in Nigeria is put at 192,000KG per

day15,360 cylinders of 12.5kg capacity per day ,or 21 .875 litres

2.3.3 Supply & Product Pricing

Nigeria Current Status: Supply & Pricing

Until the year 2000, all domestic LPG was provided by the refineries. This LPG

was largely butane rich LPG (>90%).Butane LPG prices ex-refinery was in the

region of N 40,000 per ton. Domestic cooking gas sold at Naira 400 per 12.5 kg

cylinder.

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From year 2000 onwards, because the refineries were epileptic, prices of refinery

LPG gradually shot up to N 90,000 per ton. Domestic cooking gas sold at Naira

1,500 per 12.5 kg cylinder

By 2006, refineries were almost shutdown. Consequently LPG prices shot up

further to Naira 150,000 per ton. Hyson and Lee Global started LPG importation.

Imported LPG attracts 40 % duty.

By 2007, prices became astronomical- up to Naira 250,000 per ton. LPG for

cooking gas retailed at more than Naira 3,000 per 12.5 kg cylinder. Domestic

LPG consumption dropped dramatically.

In 2008, NLNG butane LPG was available through 6 off takers at a price of

around Naira 150,000 per ton ex Lagos PPMC depot.

With the arrival of NIPCO PLC, LPG is now available at around Naira 100,000

per ton ex-Lagos depot

3.0 Raw Material Requirement

The only raw material for the LPG marketing and distribution business would be LPG.

For the proposed project, about 5 ton of LPG will be required as raw material on daily

basis at initial stages of the project. The requirement of LPG would increase by 10%

annually with an increase in supply with the same proportion.

4.0 Plant & Machinery Requirement

Machinery required for the LPG distribution plant would include the following:

No Machine Required no of unit

Unit price Total cost

In naira

Local/ imported

1 Storage tanks( 40ton)

2 4,000,000 Local

2 Filling dispenser

4 500,000 Imported

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3 pumps 2 1,100,000 Imported 4 cylinders 5 Support

structures ( piping and valves)

Imported

6 Fire equipment

Local

Total 19,850,000

There are few local suppliers/ manufacturer of storage Tanks and other related

machinery for LPG distribution setup. During the course of study for this pre-

Feasibility, we have contacted the following local manufacturer and fabricator of LPG

distribution setup

5.0Technical & Regulatory Requirement

5.1 Procedure& Requirements For The Grant Of approval To Construct And

Operate A Liquefied Petroleum Gas (Lpg) Plant.

Application Procedure

In accordance with Part VI Section Sub 87 -section (2) of the Petroleum Regulation

1967, Petroleum Gas plant or installation shall be constructed or modified without

approval granted by the Director of Petroleum Resources.

Accordingly, all applications for approval to construct/modified a Liquefied Petroleum

Gas plant or installation shall be addressed to the Director of Petroleum Resources, 7,

Kofo Abayomi Street, Victoria Island, Lagos, Nigeria giving full details of the proposals.

Each application shall be accompanied by three copies of the following:

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Detailed approved plans drawings showing the existing or proposed buildings on

the site and the relative distances to the roadways and adjoining properties.

Piping and instrumentation diagram of the Gas filling Plant and Sectional design

drawings of the storage tanks.

Certificate signed by the Chief Federal/State Fire Officer or an officer authorized

by him in that behalf, that he is satisfied with the proposed arrangements for the

prevention of fire.

A letter from the appropriate Town Planning Authority, authorizing sitting of the

Liquefied Petroleum Gas filling plant at the proposed arrangements for the

prevention of fire.

An evidence that the company is duly incorporated by the Federal Ministry of

Trade to deal in Petroleum products.

A current 3-year tax clearance certificate. Codes, Standards and Specifications

adopted in the design of the tanks.

Non-Destructive Examination report or Pressure test report of storage (Pressure)

tank.

Please note that an application fee of N10, 000.00 in Bank Draft drawn in favor of

"Federal Government of Nigeria, DPR Fees Account" is payable on submission

B. Regulations And Conditions Governing The Construction Of Liquefied Petroleum Gas

(Lpg) Bottling/Filling Plant.

Introduction

Liquefied Petroleum Gas must be stored under pressure in vessels designed to

withstand safely the vapor pressure at the maximum temperature. Construction of such

vessels must be to an acceptable design codes such as:

a) The American Society of Mechanical Engineers (ASME) boiler and Pressure Vessel

Code for unified pressure vessels. Code reference ASME.

b) The American Petroleum Institute Standard 2510 (2)

c) British Standard (BS) 1500 Part 1, fusion Welded Pressure Vessels for use in the

Chemical, Petroleum and Allied Industries or BS 1505.

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d) Nigerian Standards Organization approved standard on pressure vessels and

liquefied Petroleum Gas containers. NIS 220/85.

e) BS 5500 for new vessels design, construction, test and certification.

5.2 Storage Tanks Design Specifications and Fittings

Tanks for the storage of Liquefied Petroleum Gas shall be designed for a working

pressure corresponding to the vapor pressure at the highest temperature that the

tanks are likely to reach.

Each storage tank should be fitted with a pressure gauge and devices for

measuring the liquid content and its temperature. The maximum quantity of

Liquefied Petroleum Gas filled into anyone tank should be such that at the

maximum operating temperature it would not occupy more than 95% of the

capacity of the storage tank.

Excess flow valves should be fitted to prevent the loss of Liquefied Petroleum

Gases from storage tanks and transport tanks, and especially to protect points

where flexible hoses are used.

Remote controlled hydraulically operated shut-off valves should be fitted to each

storage tank.

5.3 Tank Location & Safety Distances

5.3.1 Location and Spacing

The distance given in Tables 1,2, and 3 below indicate the minimum approved distances

from above- ground/underground tanks and refer to the horizontal distances between

the nearest point on the storage tank and a specified feature, e.g. an adjacent storage

tank, building or boundary.

The distances apply to both spherical and cylindrical tanks.

5.3.2 BUNDS

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The provision of bund~, around LPG pressure storage tanks must be designed

and constructed in accordance code.

Separation kerbs of about one meter high should be provided to prevent spillage

reaching important areas, e.g. pipe track.

Pressure storage tanks for LPG be located within the bonded enclosures of Class'

A' or Class' B' product tankage or of low pressure refrigerated LPG tankage.

5.4 Container Filling Sheds

Filling Location pump manifold and with an acceptable design

Containers should be filled with LPG only in building designed for that purpose.

Filling buildings should be open-sided. The filling of containers should not be

done in cellars of upper storey of building.

Floor should be near ground level or raised to vehicle platform height.

A fence of at least 2 meters high should be provided to enclose the filling and

storage area if the filling is not carried out within a fenced area.

No duct, drain, or blow-off line should be directed into or discharged near sewer

systems or drains used for other purposes.

Water drains from the filling area should be provided with effective seals.

Piping should be protected by a casing.

Sufficient firefighting equipment should be provided at strategic places within the

premises and should have easy access.

Filling containers should not be stored in the container filling area.

(I) Adequate lighting should be provided to illuminate the working and storage

areas.

5.4.1 Filling System

Containers should be filled accurately and the quantity to be filled in any

container should not occupy more than 95% of the total capacity at a temperature

of 65 C.

The system should be designed in such a way as to minimize liquefied petroleum

Gas escape when the connection to the container valve is released.

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5.4.2 Portable Containers

Design and construction of Portable Containers should be designed, constructed and

tested in accordance with approval Nigerian Standard Organization specification for

LPG containers.

5.4.3 Storage of LPG Container

o The layout of the container store should be such as to facilitate quick

removal of containers in case of emergency.

o Containers should not be in proximity to corrosive or highly flammable

substances.

o Containers should be stored:

(i) Only in a place with adequate floor level ventilation and

5.4.4 Spacing For Bulk LPG Storage Tanks

Factors

Approved Spacing

1. Between LPG high Pressure Storage Tanks

One quarter of the sum of the diameter of the two adjacent tanks.

2. To Class ‘A’ or ‘B’ Product Tanks.

15 meters from the top of bund surrounding Class „A‟ or „B‟ Product Tanks.

3. To building containing flammable materials, e.g. filling shed, storage

15 meters

21


building 4. To boundary or any Related on water capacity of tank on

the following CUBIC METERS DISTANCE Up to 136 15 meters

Over 136 to 570Sq.m 25 meters Over 570Sq.m 30 meters

FACTOR APPROVES SPACING

Between Refrigerated Tanks One half of the sum of the distances of the two adjacent tanks.

To Class „A‟ or „B‟ Product Tanks One diameter of the largest refrigerated storage tank but not less than 30 meters

To Pressure Storage Tanks One diameter of the largest refrigerated storage tank but not less than 30 meters

To process unit, office building, workshop, laboratory, warehouse, boundary or any fixed sources of ignition

5.5 bLocation and Spacing for Tanks for Industrial, Commercial, Domestic

Bulk Storage

22


DISTANCE IN METRES

From Building or

Property Line

Between Tanks

Water

Capacity of

Individual

Storage

Above

Ground

Underground Above

Ground

Underground

1. Up to

500 Liters

None 3 None 2

2. Over 500

to 2,500

Liters

3 3 1 2

3. 2501 to

10,000

9 3 1 2

4. 10,001

to 150,000

18 3 2 2

(ii) At or above ground level, away from cellars, drains hollow etc. where vapor might

collect.

(d) Filling containers should not be exposed to excessive heat.

(e) Containers should be stacked in such a manner that they are at all times accessible

for inspection.

5.6 Pre -License Inspection

On completion of construction works, an inspection of the plant shall be carried out. The

following must be provided to facilitate licensing of the plant:

23


Mechanical leak tester

Decanting System

Gas detector

Cylinder maintenance facilities

Adequate Fire Extinguishers

Safety Signs in the plant.

Personnel Protective Wears for the operators

Certification from weights and measures, Federal Ministry of Industries that the

measurement facilities calibration is satisfactory.

Certification from the Standards Organization of Nigeria (SON) that the pressure

(storage) tank meets specifications and is safe to be used for the proposed

purpose.

Final Fire Safety Certificate issued by Federal or State Fire Department.

Applicants are to note that failure to meet the above statutory requirements or any other

statutory requirements, which may come into force during the construction of the plant,

may lead to non-licensing of the facility for operation.

6.0 Manpower Requirement

For efficient operation of this venture, both skilled and unskilled personnel are required. These consist of the production, administrative/account and marketing personnel. About ten (13) personnel are required for the project to take-off.

Position Number of Persons Monthly Salary

24


Managing Director 1 N 150,000

Marketing Manager 1 N 100,000

Plant Engineer 1 N 100,000

Plant Supervisor 1 N 80,000

Accountant 1 N 80,000

Dispatch supervisor 1 N 50,000

Operator Dispenser 3 N 90,000

Drivers 2 N 70,000

Office Assistant 1 N 30,000

Security 1 N 25,000

TOTAL 13 N 775,000

25


Proposed Organogram

7.0 Critical Success Factor of the Business

The location of our business in Lagos state is very critical to the success of the business

because it would ensure easy access to the raw material. Easy access to the raw material

would ensure continuous production and at the best price possible.

Other critical success factor to consider are listed below

Access to capital: It is important to have access to capital to acquire, upgrade and

maintain equipment and facilities and keep afloat working capital. Also funds

must be available to meet contingent needs of the company.

Tenured Sales Contract: The Company shall endeavour to discover and secure

long term supply contracts with major Liquefied Petroleum Gas {LPG} buyers.

Managing Director

Procurement, Production and Quality Control

Manager

Factory Workers Mechanic Store and front

desk officer

Sales and Marketing Manager

Security Officer

26


Professional Management of Project: The plant shall be managed by experienced

and technically competent professionals to ensure that the organisation‟s plan, as

well as targets can be realised in good time.

Organisational Structure: Controls must be put in place to avoid theft and

maintain product quality. A lean and entrepreneurial organization structure

ensures that the interest of staff and that of the owners are closely aligned.

Innovation: The Company needs to take into consideration customers‟ judgment

of their service. They must also be proactive in anticipating customer‟s future

demands and position themselves to meet such demands.

Product Quality Standardisation: This guarantees that at any time, the quality of

Liquefied Petroleum Gas {LPG} stored and sold will be maintained.

Trained Manpower: There must be continuous in-house and external training

suited to the needs of both the skilled and semi-skilled staff.

Identification and Management of Channels: Marketing through Channels and

distribution will be critical to the success of the marketing efforts.

Health, Safety & Environment: One of the important success factors will be the

strict adherence to health, safety and environmental issues in the running of the

plant.

Faster Turnaround Time: We will ensure that delivery time is adhered to and as

much as possible deliveries are made possible in advance of set dates

In order to ensure that we succeed in meeting the most critical requirement, the

following steps must be followed

Develop a business/market plan for our growth requirement

Share our plans and dreams as indicated and enumerated in our

business plan

Implement the plan properly as conceived, develop a strategy and

move from “Plan” to “Action” and mobilizing all stake holders in the

process

Review progress regularly with clearly defined milestones to measure

performance

27


7.1 SWOT Analysis

This analysis evaluates the strengths, weaknesses, opportunities and threats associated

with the project.

Strength

There is a ready market for Liquefied Petroleum Gas {LPG} all year round

Availability of labour locally

The presence of the equipment suppliers and technical partners

Professional input through professional managers and Consultants

Central and accessible location

Weaknesses

Unavailability of raw materials

Availability of experts for plant maintenance

Lack of adherence to business plan recommendations

Opportunities

Proximity to the busiest markets

Competitive pricing

Government incentive supports agricultural business

There is a large demand for Liquefied Petroleum Gas {LPG}

Potential to create employment opportunities.

Possible business expansion into production and sales gas cylinders and other

accessories

Improving national economic environment.

High prospects due to continuing economic stability.

Threats

Availability of quality spare parts

Political instability in the years to come

28


Instability in Government‟s policies

Disruption of power supply thereby causing over-reliance on generators

Other competing Liquefied Petroleum Gas {LPG} storage and distribution plant

8.0 Financial Analysis

Table 3.4: Opening Stock

Stock / Item Quantity Unit Cost Total

Liquefied Petroleum Gas 25 150,000 3,750,000.00

Total 3,750,000.00

8.1 Income Statement

Table 17:Bi-Monthly

Profit and Loss

Statement (24 Months)

Compone

nts

1 2 3 4 5 6 7 8 9 10 11 12 TOT

AL

TOTAL

SALES

52,000,000.

00

52,0

00,0

00.0

0

52,0

00,0

00.0

0

52,0

00,0

00.0

0

52,0

00,0

00.0

0

52,0

00,0

00.0

0

56,0

00,0

00.0

0

56,0

00,0

00.0

0

56,0

00,0

00.0

0

56,0

00,0

00.0

0

56,0

00,0

00.0

0

56,0

00,0

00.0

0

648,0

00,0

00.0

0

TOTAL

COST

37,500,000.

00

37,50

0,00

0.00

37,50

0,00

0.00

37,50

0,00

0.00

37,50

0,00

0.00

37,50

0,00

0.00

40,0

00,0

00.0

0

40,0

00,0

00.0

0

40,0

00,0

00.0

0

40,0

00,0

00.0

0

40,0

00,0

00.0

0

40,0

00,0

00.0

0

465,0

00,0

00.0

0

GROSS

PROFIT

14,500,000.

00

14,50

0,00

0.00

14,50

0,00

0.00

14,50

0,00

0.00

14,50

0,00

0.00

14,50

0,00

0.00

16,00

0,00

0.00

16,00

0,00

0.00

16,00

0,00

0.00

16,00

0,00

0.00

16,00

0,00

0.00

16,00

0,00

0.00

183,0

00,0

00.0

0

EXPENSE

S

-

29


Operatin

g

Expenses

2,770,000.0

0

2,770

,000.

00

2,770

,000.

00

2,770

,000.

00

2,770

,000.

00

2,770

,000.

00

3,02

0,00

0.00

3,02

0,00

0.00

3,02

0,00

0.00

3,02

0,00

0.00

3,02

0,00

0.00

3,02

0,00

0.00

34,74

0,00

0.00

Interest

1,784,125.0

0

1,784

,125.

00

1,784

,125.

00

1,784

,125.

00

1,784

,125.

00

1,784

,125.

00

973,1

59.0

9

973,1

59.0

9

973,1

59.0

9

973,1

59.0

9

973,1

59.0

9

973,1

59.0

9

16,54

3,704

.55

Depreciat

ion

980555.555

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

980,

555.5

6

11,76

6,666

.67

Rent

1,000,000.0

0

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

1,00

0,00

0.00

12,00

0,00

0.00

TOTAL

EXPENSE

S

6,534,680.5

6

6,534

,680.

56

6,534

,680.

56

6,534

,680.

56

6,534

,680.

56

6,534

,680.

56

5,973

,714.

65

5,973

,714.

65

5,973

,714.

65

5,973

,714.

65

5,973

,714.

65

5,973

,714.

65

75,05

0,371.

21

NET

PROFIT

BEFORE

TAX

7,965,319.4

4

7,965

,319.

44

7,965

,319.

44

7,965

,319.

44

7,965

,319.

44

7,965

,319.

44

10,02

6,28

5.35

10,02

6,28

5.35

10,02

6,28

5.35

10,02

6,28

5.35

10,02

6,28

5.35

10,02

6,28

5.35

107,9

49,62

8.79

Income

Tax

398,265.97

398,

265.

97

398,

265.

97

398,

265.

97

398,

265.

97

398,

265.

97

501,3

14.27

501,3

14.27

501,3

14.27

501,3

14.27

501,3

14.27

501,3

14.27

5,397,

481.4

4

NET

PROFIT

AFTER

TAX

7,567,053.4

7

7,567

,053.

47

7,567

,053.

47

7,567

,053.

47

7,567

,053.

47

7,567

,053.

47

9,524

,971.

09

9,524

,971.

09

9,524

,971.

09

9,524

,971.

09

9,524

,971.

09

9,524

,971.

09

102,5

52,14

7.35

8.2 Loan Repayment Schedule

Table 5.2: Loan Repayment Schedule

Month

Principal Monthly Principal

Monthly Interest

Principal + Interest

Cumulative

0 42,819,000.

30


00

1 42,819,000.00

-

892,062.50

892,062.50

892,062.50

2 42,819,000.00

-

892,062.50

892,062.50

1,784,125.00

3 42,819,000.00

1,946,318.18

892,062.50

2,838,380.68

4,622,505.68

4 40,872,681.82

1,946,318.18

892,062.50

2,838,380.68

7,460,886.36

5 38,926,363.64

1,946,318.18

892,062.50

2,838,380.68

10,299,267.05

6 36,980,045.45

1,946,318.18

892,062.50

2,838,380.68

13,137,647.73

7 35,033,727.27

1,946,318.18

892,062.50

2,838,380.68

15,976,028.41

8 33,087,409.09

1,946,318.18

892,062.50

2,838,380.68

18,814,409.09

9 31,141,090.91

1,946,318.18

892,062.50

2,838,380.68

21,652,789.77

10 29,194,772.73

1,946,318.18

892,062.50

2,838,380.68

24,491,170.45

11 27,248,454.55

1,946,318.18

892,062.50

2,838,380.68

27,329,551.14

12 25,302,136.36

1,946,318.18

892,062.50

2,838,380.68

30,167,931.82

13 23,355,818.18

1,946,318.18

486,579.55

2,432,897.73

32,600,829.55

14 21,409,500.00

1,946,318.18

486,579.55

2,432,897.73

35,033,727.27

15 19,463,181.8

1,946,318.18

486,579.55

2,432,897.73

37,466,625.0

31


2 0

16 17,516,863.64

1,946,318.18

486,579.55

2,432,897.73

39,899,522.73

17 15,570,545.45

1,946,318.18

486,579.55

2,432,897.73

42,332,420.45

18 13,624,227.27

1,946,318.18

486,579.55

2,432,897.73

44,765,318.18

19 11,677,909.09

1,946,318.18

486,579.55

2,432,897.73

47,198,215.91

20 9,731,590.91

1,946,318.18

486,579.55

2,432,897.73

49,631,113.64

21 7,785,272.73

1,946,318.18

486,579.55

2,432,897.73

52,064,011.36

22 5,838,954.55

1,946,318.18

486,579.55

2,432,897.73

54,496,909.09

23 3,892,636.36

1,946,318.18

486,579.55

2,432,897.73

56,929,806.82

24 1,946,318.18

1,946,318.18

486,579.55

2,432,897.73

59,362,704.55

GRAND TOTAL

42,819,000.00

16,543,704.55

59,362,704.55

8.3 Key Assumptions

Loan tenor is 24 months

Interest on loan is 25%

Loan is 70% of the project cost, equity is 30%

Income tax at 30% / annum

32


Turnkey and Setup Service

Take advantage of our vast and extensive knowledge in the industry to assist you in

realizing your vision of building and managing this project. We offer to provide

Factory Designs, installations of Equipment‟s, Training, and product branding as

well as advisory Services for this project.

pre lpg plant

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