Investing in LPG Bottling Plant By Godwin Uba 20 Jul 2010 Views: 489 Font Size: a / A The Governor of Central Bank of Nigeria, Malla m Sanusi Lamido Sanusi recently announced that about N140billion out of N200billion earmarked by the Federal Government of Nigeria for development of agriculture and small and medium scale industries in the related sectors of the economy is lying dormant. This implied that only about N60billion has been disbursed. The remaining N140billion has been channeled to financia l institutions for onward lending to prospective investors. It should be noted that this fund is meant for serious minded agricultural and allied projects investors in Nigeria and should be maximally utilised by investors for the growth of the country. For one to benefit from this fund, the first thing is to come up with comprehensive and bankable feasibility studies or business plan. plan. We will assist a ssist any prospective investor investor in identifying profitable projects in Nigeria a nd preparing comprehensive and bankable feasibility studies in any project(s) of his/her choice. Nigeria has so many investment investment opportunities in various sectors, gas & oil manufacturing, financial estates etc. The gas and oil sector as well as other sectors are expanding and investment opportunities open up on daily basis. For our economy to grow new productive industries must be established. This will generate employment provide raw materials for our industries; industries; generate physical development and above all self-sufficiency. The Liquefied Petroleum Gas (LPG) offers a tremendous investment investment opportunity within the t he petrochemical industry. The LPG is an industry specifically developed to cat er for the nations industrial and domestic domestic gas requirements. LPG is needed in almost a lmost every aspect of economic activity. For instance, it is highly demanded by the automotive industry, manufacturing plants and electricity generation via thermal t hermal 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 a n alternative source of energy since t he firewood and kerosene stove are fast becoming obsolete. Following the unprecedented demand for LPG in Nigeria a nd attendant scarcity of the product which has r esulted esulted in sharp s harp and arbitrary price increases, the distribution of gas products has been deregulated. Consequently, private individuals and firms can now set up LPG plants. Despite the de-regulation, a 12.5kg cylinder now sells for N2, 200-N3, 500 and this range is considered very high considering the fact that Nigeria is one the leading nations in natural oil production. That also points to the fact that more investors are needed in this t his area either engaging on bulk storage of LPG or engaging on refilling of gas cylinders at a batch.
The required raw material for this project will be sourced 100 per cent locally as a by-product of petroleum refining activities. Thus, our refineries at Warri, Port-Harcourt a nd Kaduna will supply the raw material. Apart from our refineries, there are individual marketing companies that ar e now engaged in importation of LPG. One can purchase from them at prevailing market prices. Details will be given to prospective investors. With particular reference to the tropics, LPG installations may be sited anywhere, but considering that by its nature, LPG is denser than air, one may be cautious about sitting them at the bottom of a valley. Other sitting requirement may be to try to minimize the potential risk to adjacent environment/property and vice versa. Other considerations to make include proximity to populated areas; proximity to public ways; risk from adjacent facility; storage quantities; present and future development of adjacent properties; topography including elevation and slope of the site; access for emergency response; availability of needed utilities; requirement for the receipt and shipment of products; local codes and regulations and prevailing wind conditions. Details will be given to pr ospective investors. Having chosen the site with the help of professionals/ consultants, the positioning or siting of the shell of pressurized LPG tank and line of adjoining property that may be developed should also be considered. Certain locat ions may not be used to accommodate LPG st orage tanks. Details will be given to prospective investors. Existing infrastructure should equally be considered. The required facilities include storage tanks, filling shed, containers, cylinders, and pump/compressor. There should also be a workshop for servicing cylinders. Machinery and equipment include gas storage tanks complete with fittings, filling heads and scales, chain conveyor, piping and valves as well as fire-fighting equipment. Labour requirement will include a plant manager, engineer, marketing manager, accountant, supervisors, operators, drivers and messengers etc. all employees should be trained on fire prevention and safety measures. Bold warnings against the use of na ked fire should be erected at strategic places. All the details including source of machinery and equipment, licensing procedure, plant layout, labour and management, filling operations, safety bankable feasibility report f or prospective promoters are available on request from the writer. The proposed plant will have a capacity for filling 500 cylinders or more (depending on the capacity the promoter wants) of 12.5kg each day. Operating at 75 per cent capacity for 280 days per annum, a total of 105,000 cylinders will be filled and sold at a conservative price of N2,000 each, thus generating a first year turnover of N126million. Plant capacity will be increased if the need arises. Viability analysis of the project indicates that the initial capital outlay of N23million will be recouped within the first year of business. The reason is not far fetched. Gas is obtained at a considerably cheap rate since Nigeria is abundantly blessed with the commodity. Apart from the short payback period, the NPV, IPR and profitability index all point to the immense financial benefits which will be derived by any serious investor who takes advantage of this investment opportunity offered by the gas industry. Financial
Estimates Pre-Investment (feasibility studies) N500, 000
Land & building (variable) N1, 500,000 Machinery & Equipment (depends on capacity) N10,000,000 Fixtures & fittings N120, 000 Project Vehicles N4, 000,000 Capital utilities N3, 500,000 Working capital N5, 000,000 Contingency margin N1, 000,000 Total take off cost N25, 620,000 It should be noted that this cost is variable depending on the location and cost of equipment. The best approach to taking investment decision is to commission professionals to c onduct feasibility studies and come up with a comprehensive feasibility reports. Implementation Process The project cost by our estimates is about N26, 000,000; though this can be scaled up on discussion with the writer the capacity issue and other factors. To go into this project, there is need to carryout a comprehensive feasibility studies and draw a very realistic business plan. After this the financing arrangement will be concluded.
There are opportunities for one to borrow from some specified financial institutions that will be given to prospective investors on request. The writer will assist in procurement and installation of all t he required machines & equipment, test running and training of the staff. Uba can be reached at" mailto:
[email protected]" or
[email protected] Tags: Business
