Proposal for an LPG Plant
1. LPG IN NIGERIA –A PERSPECTIVE
1.1. Undoubtedly a vast investment potential exists in the domestic gas filling sub-sector of the Oil & Gas industry. A large proportion of the middle and upper socio-economic class of people depend on a gas for cooking purposes. So are industries, government establishments, hotels, hospitals, restaurants, bakeries e.t.c.
1.2. However, a combination of factors which include scarcity due to the breakdown of the refineries, high retail price and prohibitive cost of gas appliances led to steep decline in consumption thereby ranking the country lowest within the West African sub region. Nigeria’s annual consumption averaged about 60,000 MT in 2009.
1.3. The good news is that the situation has changed for better since 2009. With huge gas reserves of about 180 trillion cubic feet and government’s strong commitment to developing the gas industry through the Gas Master Plan one of the emerging opportunities for investors is in LPG bottling plant.
1.4. The LPG industry is already experiencing a boom with more depots springing up, which will make supply of LPG to the filling plants much easier.
Operators of refilling plants stand between the LPG depot operators and the retailers and they are the ones who refill empty cylinders of LPG with the product. Besides having their own cylinders and filling them, they also take and refill cylinders from retailers of LPG.
From all indications, LPG supply no longer poses a challenge to the filling plants because it is now very robust.
Specifically, it is claimed that the supply of LPG from NLNG and through importation has reached 600,000 metric tons per annum as at December 2018, up from 60,000 metric tons per year in 2009, a growth of about 1,000 percent.
With problem of supply being resolved and influx of more cylinders for domestic use, use of LPG to power automobiles as AUTOGAS and power generation, the stage is set for rapid growth of the LPG business.
With a plan to grow the LPG business to 5million tons per year in 2022 up from more than 1million metric tons in 2020, it is certain that the LPG market in Nigeria is growing fast, and very far from saturation and hence an investors delight.
2.ECONOMICS & PROFITABILITY
Gas storage capacity is the most important factor for marketing capacity, unit cost and overall profitability.
A storage capacity of 40,000 litres is recommended for this project. This abridged financial plan is based on this and the following other assumptions:
I. Gas will be delivered to the plant in 35,000 litres road tankers.
II. At least 2 road tankers will be supplied and sold per month
III. The catchment areas for a gas plant usually extend beyond the immediate neighborhood. Reliability of supply, accurate fill quantity and competitive pricing determine the extent of consumer patronage.
3. FINANCIAL PROJECTIONS:
a) Capacity Utilization
Based on 2 tanker loads (40 tons) per month and assuming all is filled in 12.5kg for the purpose of this exercise while recognizing that some quantity will be demanded in 50kg, 6kg,3.5kg and bulk delivery to eateries, hospitals, hotels etc. An increase of 10% per year is also assumed in the 3 year projections.
Cost and selling prices are assumed constant as change in one affects the other.
1. Project is capable of paying back within 2 years.
2. An investment for auto gas system could be added subsequently. This will increase turnover and profit
Incorporating autogas cylinder filling system into cooking gas filling plant/petrol stations.
INCORPORATING AUTOGAS CYLINDER FILLING SYSTEM INTO COOKING GAS FILLING PLANT/PETROL STATIONS
Following the removal of the fuel subsidies by the Nigeria government opportunities have emerged for the use of LPG as an alternative to gasoline (PMS) commonly known as petrol.
LPG Auto gas at $0.4 per litre could be sold up to 20% cheaper than petrol at $0.5 per litre resulting in significant cost savings and reduction in harmful emissions such as CO2.
Also there are reasons to believe that LPG will become even cheaper in future given the commitment of the oil and gas sector of the economy to convert more of the gas being flared into LPG & LNG for domestic and industrial use. It is also pertinent to mention that the LPG Auto gas installation could exist with the petrol system in the same auto mobile.
This allows for flexibility if there is shortage of any of LPG or petrol.
The development and realisation of the benefits therefore engender GOOD MARKET POTENTIAL FOR LPG AUTO GAS FILLING STATIONS IN OUR COUNTRY.
Although the idea of this project is still relatively new in our country, there already exists AUTO GAS filling stations in the country notably in Lagos especially for heavy duty trucks, trailers and fork-lifts. No doubt it will be advantageous to be an early entrant in order to avail the early mover advantage.
(B.) PROJECT IMPLEMENTATION
(a.) This will consist of:
(i.) Having the Auto gas filling system as an addendum to the normal cooking gas cylinder filling plant sharing the same gas storage and other infrastructures and utilities.
Or having the AUTO GAS filling system side by side with petrol stations with its own storage and other related facilities.
(ii.) Provision of LPG AUTO cylinders for sales to customers.
(iii.) Provision for petrol to LPG carburetors/ejector conversion kits and training of personnel for same.
(b.) COST IMPLICATIONS
Available on request.
4. DESIGNS, PROCUREMENT AND CONSTRUCTION LOGISTICS
(i.) Preliminary Consultation for technical, regulatory advice and project feasibility services if required.
(ii.) Plant Design and processing for statutory approvals including:
- Town Planning
- Fire Service
- Safety, Health and Environment/EIA.
- The Police
B. procurement and construction logistics:
(i.) Machinery and Equipments
(a.) Storage Tanks
They are designed according to pressurised equipment standards and labelled according to ASME (American Society of Mechanical Engineers) specifications with manufacturer’s pressure testing certificate and backed up with DPR pressure testing certificate.
Tank is supplied complete with safety valves and fittings.
(b.) Other Equipments
This include pumps, piping, fittings, central valves, filling systems and safety equipments made to industry standards with empahasis on safety and economics.
(ii.) Civil Works
These include construction of tank plinths, pump house and filling shed to industry specifications and safety standards.
(iii.) Installation & Commissioning
This consist of the complete installation of the piping and instrumentation works as set out in the drawings and schedules.
This is followed by testing of the system for freedom from leakages, proper circulation and tightness at all joints and fittings.
(i.) Land Space:
Acceptable storage capacity is related to the size of land.
Generally, the bigger the land space, so may be the tank capacity in accordance with industry standards.
A site office with usual conveniences is a necessity.
Boundary wall to fence off intruders is also necessary.
(iii.)Power and Water Supply:
Are also necessary for operational and general purposes.
D. COST ESTIMATES
Cost estimates are available for different plant capacities, namely;
- 5,000 Litres
- 10,000 Litres
- 20,000 Litres
- 40,000 Litres
- 50,000 Litres etc.
E. TERMS OF PAYMENT
Stage wise payments are proposed in line with project size and peculiarities.
These are generally as follows:
1.For commencement of design and processing for statutory approvals.
2. For procurement of items with long lead times for delivery such as storage tanks.
3. For civil works
4.For procurement of other items with short lead times for delivery.
5. For installation and commissioning.