FEASIBILITY REPORT

SKID MOUNTED MODULAR LIQUIFIED

PETROLUEM GAS (LPG) FILLING
PLANT
PREPARED FOR:

XXXXXXX

PREPARED BY:

STEMGART VENTURES,
MOBILE: +234 (0) 805 641 6008
PHONE: +234(0) 703 327 8516
Email: [Link]@[Link]
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

TABLE OF CONTENTS

CHAPTER ONE ...................................................................................... 4

1.1 THE ASSIGNMENT ........................................................................... 4
1.2 EXECUTIVE SUMMARY ..................................................................... 4
CHAPTER TWO ...................................................................................... 8
2.1 THE NIGERIAN ECONOMIC AND INVESTMENT REVIEW ............................ 8
2.2 LP GAS INDUSTRY IN NIGERIA'S ECONOMY ............................................ 8
CHAPTER THREE ................................................................................. 10
3.1 COMPANY FORMATION..................................................................... 10
3.2 OWNERSHIP STRUCTURE AND BOARD REPRESENTATION ..................... 10
3.3 SHAREHOLDERS .............................................................................. 10
3.4 MANAGEMENT................................................................................. 10
CHAPTER FOUR .................................................................................. 12
4.1 PROJECT DESCRIPTION .................................................................... 12
4.2 PROPOSED PROJECT LOCATION ........................................................ 14
4.3 RAW MATERIALS ............................................................................. 14
4.4 PACKAGING MATERIALS ................................................................... 15
4.5 MANPOWER DEVELOPMENT AND TRAINING ........................................ 15
4.6 TECHNICAL MANAGEMENT ............................................................... 16
4.7 TECHNICAL & REGULATORY REQUIREMENT ....................................... 16
4.7.1 PROCEDURE & REQUIREMENTS FOR THE GRANT OF APPROVAL TO
CONSTRUCT AND OPERATE A LIQUEFIED PETROLEUM GAS (LPG) PLANT.
....................................................................................................... 16
4.7.2 STORAGE TANKS DESIGN SPECIFICATIONS AND FITTINGS ......... 17
4.7.3 CONTAINER FILLING SHEDS ....................................................... 17
4.7.4 PRE -LICENSE INSPECTION ......................................................... 18
4.8 ENVIRONMENTAL FACTORS .............................................................. 18
CHAPTER FIVE .................................................................................... 19
5.1 PROJECT COST ............................................................................... 19
5.2 FINANCING PLAN............................................................................. 19
5.3 DETAILS OF INVESTMENT COST ......................................................... 20
5.3.1 Land Acquisition and Development ........................................... 20
5.3.2 Buildings ................................................................................. 20
5.3.3 Plant and Machinery ................................................................ 20
5.4 ESSENTIAL SERVICES/UTILITIES ........................................................ 20
5.5 VEHICLES ....................................................................................... 20
5.6 OFFICE FURNITURE, FITTINGS AND EQUIPMENT ................................. 21
5.7 PRELIMINARY AND PRE-OPERATIVE EXPENSES: ................................... 21
5.8 WORKING CAPITAL .......................................................................... 21
5.10 CONTINGENCIES ............................................................................ 22
CHAPTER SIX ...................................................................................... 23

© STEMGART VENTURES 2018

 Feasibility report for Skid Mounted Modular LPG -Filling Plant

6.1 INTRODUCTION............................................................................... 23
6.2 PRODUCT IDENTIFICATION ............................................................... 23
6.3 LOCATIONAL ADVANTAGE ................................................................ 24
6.4 SUPPLY ANALYSIS............................................................................ 24
6.4.1 Marketers and Distribution Facilities - Nigeria .......................... 24
6.4.2 Marketing and Distribution Facilities - Lagos ............................ 25
6.5 DEMAND ......................................................................................... 27
6.5.1 Demand Analysis ...................................................................... 27
6.6 MARKET ACCEPTABILITY .................................................................. 33
CHAPTER SEVEN ................................................................................. 35
7.1 PROFITABILITY AND FINANCIAL ANALYSIS .......................................... 35
7.2 UTILITIES ....................................................................................... 35
7.3 MAINTENANCE ................................................................................ 35
7.4 ADVERTISEMENT AND SELLING EXPENSES .......................................... 35
7.5 DEPRECIATION ................................................................................ 35
7.6 AMORTIZATION ............................................................................... 36
7.7 FINANCE CHARGES .......................................................................... 36
7.8 TAX PROVISION ............................................................................... 36
7.9 PROFITABILITY ANALYSIS ................................................................. 36
7.10 CASH FLOW ANALYSIS .................................................................... 37
7.11 BALANCE SHEET ANALYSIS.............................................................. 37
7.12 SENSITIVITY ANALYSIS ................................................................... 37
7.13 INTERNAL RATE OF RETURN ........................................................... 38
7.14 BREAK EVEN POINT ........................................................................ 38
CHAPTER EIGHT .................................................................................. 39
8.1 RISK ANALYSIS: ............................................................................... 39
8.2 FUNDING ........................................................................................ 39
8.3 RAW MATERIALS SUPPLY .................................................................. 39
8.4 COMPETENT TECHNICAL EXPERTISE .................................................. 39
8.5 SWOT ANALYSIS .............................................................................. 39
8.7 SUGGESTIONS ................................................................................. 40
8.8 RECOMMENDATIONS ........................................................................ 41
Revenue – Appendix 1(A) .................................................................. 42
Estimate of Working Capital – Appendix 2 ......................................... 43
Project Profit and Loss Account – Appendix 3(a) ................................ 44
Cash Flow– Appendix 3 (b) ................................................................ 45
Balance Sheet Projections – Appendix 4 (N ‘000) ................................ 46
Cost of Management and Labour – Appendix 5 ................................... 47
Break Even Point Analysis – Appendix 6 ............................................. 48

© STEMGART VENTURES 2018

Page 3 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER ONE

PREAMBLE

1.1 THE ASSIGNMENT

Following initial consultation with the Directors of XXX Limited, the company commissioned
our firm to carry out a feasibility study of their proposed Skid Mounted Liquefied Petroleum
Gas (LPG) retail business to be located at strategic high density residential areas across
Nigeria with the following terms of reference:

a) To determine the investment cost of setting up a modern pilot quick service Skid
Mounted Retail LPG filling Plant in Lagos state, covering both the fixed and floating
assets, as well as the working capital requirement.

b) To propose a suitable financing structure for the project.

c) To investigate the demand and supply structure of the products and justify the
establishment of this project on the basis of the market analysis.

d) To investigate the stock requirements, their sources and cost implications as well
as the strategies for an uninterrupted supply to guarantee optimal capacity
utilization.

e) To analyse and advise on the required plant and machinery, and to ensure complete
configuration, reliable operation and high quality products.

f) To prepare detailed financial projections and demonstrate the ability of the

company to service its debt obligations and make reasonable returns to
shareholders.

g) To recommend an appropriate Organizational and Management structure, and to

ensure effective management of the company.

h) To prepare Draft and Final Reports on the result of the various investigations,
advising on the feasibility or otherwise of the project.

The study was done based on information collected from the sponsors as well as from
primary and secondary sources.

The information gathered from various sources were analysed and an in-depth feasibility
report was put in place.

The summary of the report is given hereunder.

1.2 EXECUTIVE SUMMARY

a) Company: XXX Limited

b) Registered Address: XXXX

c) Proposed Plant Site: XXXX

d) Ownership structure: 100% Nigerian.

© STEMGART VENTURES 2018

Page 4 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

e) Products: Retail LPG bottled in 12.5kg, 15kg and 45 kg bottles

f) Proposed Machinery Supplier

i. KiaKiaGas Limited, 68 Olonode Street, Off hughes street, Alagomeji,

Yaba, Lagos. Website: [Link]

ii. SarGas Energy, 4th Floor, God’s Grace Plaza, 65 Allen Avenue, Ikeja,
Lagos. Website: [Link]

g) Project cost.

Table 1 Project Cost

COST ALREADY COST TO

INCURED BE TOTAL
COST ITEM
30/09/2018 INCURRED NGN"000"
NGN "000" NGN"000"

LAND & LAND DEVELOPMENT 0 5,000 5,000

BUILDINGS 0 1,100 1,100

PLANT AND MACHINERY 0 11,000 11,000

ESSENTIAL SERVICES/UTILITIES 0 350 350

PRICE CONTINGENCY 0 873 873

TOTAL FIXED ASSETS 0 18,323 18,323

MOVEABLE ASSETS 0 8,500 8,500

PRELIM. & PRE-OP. EXP. 480 880 1,360

WORKING CAPITAL 0 3,000 3,000

TOTAL CAPITAL COST 480 30,703 31,183

INTEREST DURING CONSTRUCTION 0 0 0

OTHER CONTINGENCIES 0 768 768
TOTAL PROJECT COST 480 31,470 31,950

© STEMGART VENTURES 2018

Page 5 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

h) FINANCING ARRANGEMENT:

Table 2 Financing Arrangements

EXISTING
ADDITIONAL TOTAL
FINANCING MODE 30/09/2018 %
NGN"000" NGN"000"
NGN"000"
PROMOTERS’
480 28,470 28,950 90.61%
EQUITY

LONG TERM LOAN 0 0 0 0.00%

OVERDRAFT 0 3,000 3,000 9.39%

TOTAL 480 31,470 31,950 100.00%

i) Summary of Financial Projections:

2019 2020 2021 2022 2023

Net Sales (N’000) 54,000 126,000 218,160 327,240 459,045
Profit before Tax 3,267 14,526 31,626 55,491 84,158
Profit after Tax 2,222 9,878 21,506 37,734 57,227
Return On Sales 4% 8% 10% 12% 12%
(%)

j) Manpower:
• Direct – 2

• Indirect – 2

Total 4

k) Capacity utilization

Year 1 2 3 4 5
(%) 60 70 80 80 80

l) Break – even point (1st year): 27.25 % of installed capacity

m) Return on Capital: 36.6%

n) Return on Equity (ROE): 39.2%

o) Revenue Growth Rate - CAGR: 5%.

p) Market prospect:

(i) Assured Local Market.

(ii) Proposed selling price policy is realistic and reasonable

© STEMGART VENTURES 2018

Page 6 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

q) Economic Justification

(i) Employment generation

(ii) Gross Value added is very high.

(iii) High Economic Rate of Return (ERR)

(iv) Revenue generation to Government through Tax

© STEMGART VENTURES 2018

Page 7 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER TWO
INTRODUCTION

2.1 THE NIGERIAN ECONOMIC AND INVESTMENT REVIEW

Despite their huge national energy resource, many Nigerians do not have access to quality,
modern energy services. For those with access, energy supply all too often lacks reliability,
especially in the case of Liquefied Petroleum Gas or LP Gas. Nigeria is a world-class
producer of an estimated 700 Kilo tons of LP Gas in 2016, but it consumed about 119 Kilo
tons that same year. It is baffling that a country which produces so much export-quality LP
Gas, consume so little of it, 1.9 kg/h/year or the smallest per capita consumption of the
Region, which stands at 3.82 kg/h/year for Cameroon and 7.28 kg/h/year for Ghana.

Nigeria produces large volumes of associated gas rich in natural gas liquids (NGLs) and LP
Gas, and nearly half of which is presently flared, a situation the Federal Government of
Nigeria (FGN) wants firmly corrected. The country also produces and exports large
quantities of LP Gas, which has raised many questions on why gas flaring continues and why
domestic usage is so low. Over 80% of 36 million Nigerian Households cook with kerosene
and wood.

Various Regional LP Gas Studies, undertaken revealed the very low per-capita usage of LP
Gas in Nigeria compared with other neighboring countries of West Africa. LP Gas enjoys
worldwide recognition as a clean, versatile, transportable, and environment-friendly fuel.
Preliminary investigation indicated certain problems in the Nigerian LP Gas sector, most
notably, an inadequate supply to the domestic market, lack of access to existing
infrastructure, and shortcomings in the institutional and regulatory framework.

The democratisation of the polity and the free market economy of the present government
appear to be a good terrain for the growth of the economy in the spirit of the Vision 2020.
It is expected that inflow of foreign exchange will be enhanced, as various strategic
alliances are being created. Internally, the Government is expected to regulate the
economy, constantly fine-tuning the monetary and fiscal policies by introducing measures
to pacify the turbulent environment in which investors find themselves. Funds are
expected to be made available to private investors in the form of soft loans for establishing
projects, which will utilize available local resources, and promote input-output linkages
within the country's manufacturing and energy sectors.

The country has the indices, (large population, varied natural resources, and expertise) for
rapid economic growth, it thus has a high potential for increased adoption of LPG due to
the country’s demographic profile and heavy consumption of other fuels (1.5bn liters of
kerosene in 2015 and 95.76mn tonnes of firewood in 2015). Domestic LPG demand is
expected to reach 1.7million tonnes in 2020 if Nigeria’s growth mirrors the Indonesian
growth rate.

2.2 LP GAS INDUSTRY IN NIGERIA'S ECONOMY

The LP Gas industry in Nigeria has experienced a dramatic contraction of its market in
recent years. This followed a period of rapid expansion in the number of licensed
marketers. Development strategies have given way to survival strategies, but with little
consolidation. However the growth trend seems to have revived.

Actual and potential LP Gas consumers face a marketplace of uncertain supply and
extremely volatile pricing. End user prices are effectively set by final resellers many of
whom exploit a real or contrived scarcity to raise prices arbitrarily. When LP Gas becomes
available, resellers are forced to reduce prices equally arbitrarily. Prospective consumers
are deterred by the uncertainty regarding future prices and availability.

© STEMGART VENTURES 2018

Page 8 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

The domestic LP Gas market depended effectively in the past on the refineries. The
refineries have proved to be unreliable suppliers to the extent that currently the domestic
market depends on imports and will continue to do so in the immediate short term.
Consumers have switched from LP Gas to kerosene, which has been cheaper and readily
available.

LP Gas importers usually pass their costs on to the consumers who find prices prohibitively
high. Import duty, VAT, shipping, and unnecessary and avoidable demurrage costs,
represent a significant part of current retail prices. Currently, road transport is the only
practical option for inland distribution.

The presence of 12.5, 13, and 15 kg cylinder sizes, in this particular range make it difficult
for consumers to make price comparisons while different valve /regulator combinations can
be a hazard as well as a constraint to switching between suppliers. Most countries have
standardized on a single cylinder capacity and on valve/regulator combinations. The
introduction of smaller (3 and 6 kg cylinders) may serve a particular niche market as well as
the 45 kg at the upper end of the range.

The ownership of cylinders, the right to refill them and responsibility for their maintenance
is left in the hands of user. Only two major marketers have introduced the use of composite
cylinders in the market.

XXX Limited, which is expected to start refilling in the year 2019, intends to take into
account these gaps in the industry and create a niche for itself in the industry.

© STEMGART VENTURES 2018

Page 9 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER THREE
THE COMPANY

3.1 COMPANY FORMATION

XXX Nigeria Limited (GNL) is a private limited liability company incorporated on the xth of
October 2018 with an authorized share capital of N100, 000 divided into 100,000 ordinary
shares of N1.00 each. To provide the company with adequate capital base for the
implementation of the proposed project, arrangement will be made to increase the
authorised share capital to N1.0 million by the creation of additional 900,000 ordinary
shares of N1.00 each, ranking pari-passu in all respects with the existing shares. The
Memorandum of Association of the company permits it to go into the purchase, storage,
bottling and sales of Liquefied Petroleum Gas (LPG). Both the Certificate of Incorporation
and the Memorandum and Articles of Association are available for inspection. Its registered
Office is at Magodo in Lagos. However, the Company’s certificate of Incorporation
[Link] and the Memorandum and Article of Association will be updated to reflect the
new additions.

The amended certified true copies of the above documents must be submitted to the
funding institution for scrutiny and they should be found satisfactory prior to disbursement
of the loan.

3.2 OWNERSHIP STRUCTURE AND BOARD REPRESENTATION

It is planned that the board of XXX Limited consist of three members. The board
representation can be changed, amended and altered after due process has been followed.

The present shareholders of the company have considerable business experience. They are
on the board of other successful companies.

3.3 SHAREHOLDERS
The three main shareholders of XXX Limited are Nigerians who have the means of increasing
their share capital in the company whenever the need arises.

3.4 MANAGEMENT
The XXX management team will be made up of the following: An Operations Manager and
an Accountant.

The Operations Manager will report to the Board the weekly activities of the company, and
turn in a report the monthly performance of the company to the Board of Directors.

The functions of other members of the management team are highlighted below:

Operations Manager: In addition to being responsible for the day to day running of the
company’s affairs, he or she shall directly be in charge of Operation of the plant. He or she
will develop operations plans and control to ensure efficient operations of the bottling
plant. He will liaise with the Accounts Department for the timely supply of required
feedstock to ensure uninterrupted supply. He or she will develop marketing strategies for
the company’s products.

He or she will vet and recommend for approval all maintenance schedules as may be
prepared by the equipment vendor. He is to see to the general safety of both men and

© STEMGART VENTURES 2018

Page 10 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

material through constant review of safety procedures and training. He will ensure the
efficient operation and maintenance of the company’s facilities.
A Technician with cognate experience in similar ventures will occupy this position.

Maintenance Manager: He or she will head the Maintenance Division. He or she shall be
responsible for all maintenance activities of the company.
The incumbent shall be a Nigerian Engineer with not less than 5 years cognate experience
with at least two in an L P Gas Bottling plant. His or her field of specialisation could be
Mechanical or Electrical Engineering and the qualification must be registered with Council
for the Regulation of Engineering in Nigeria (COREN).

Accounts Manager: He or she will ensure the optimal utilisation of the company’s
resources - human, materials and finance. He or she will enforce discipline and good labour
relations. He or she will keep record of all company assets and ensure maximum returns on
the utilisation of the assets.

A qualified Accountant with ICAN or ACCA qualification or [Link]. Accounting will hold this
position. He or she must have not less than two years cognate experience in a
manufacturing outfit.

Marketing/Sales Manager: He or she will be responsible for the supervision of the

Marketing and Purchasing Departments, which form the Commercial Division. He or she
must ensure that the right quality of goods are purchased and sold. He or she will conduct
periodic research on market situations as well as on the availability of good raw materials
for management decisions. He or she will advise management on the current market prices
and product distribution dynamics.

The incumbent must be a graduate of Economics or any of the Social Sciences and must
have undergone practical training/experience in Marketing/Purchasing. He or she must
have not less than 5 years relevant experience.

Manager (Safety): He or she shall be responsible for the development of safety plans,
training, design and implementation of Fire Fighting procedures. He or she shall also be
responsible for the overall safe operations of the plant. The incumbent must have at least
an HND certificate in Engineering and Have safety certification in Fire Fighting with not less
than four years experience.

© STEMGART VENTURES 2018

Page 11 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER FOUR
THE PROJECT

4.1 PROJECT DESCRIPTION

XXX Nigeria Limited is proposing to establish modular skid mounted LPG retail dispensers at
strategic high-density residential areas across Nigeria. The concept is to provide quick
service refilling of Cooking Gas cylinders within easy to reach of residential locations. Each
unit to be used will have the following annual installed capacities based on one shift of
eight hours per day and working 300 days in a year.

(a) L P Gas – 250,000 kilograms per annum

The project thus involves the acquisition, installation and operation of skid mounted,
Storage and dispensing equipment for retailing Liquefied Petroleum Gas as cooking gas to
Nigerian households.

In Nigeria, Liquefied Petroleum Gas (LPG or LP Gas) is a long-established, well-accepted,

but minor component of energy supply. It is used principally as a cooking fuel in households
and in catering. However, LP Gas is a clean, versatile fuel with a wide range of other uses
in household, commercial, and industrial energy applications and examples of these can
also be seen in Nigeria.

LP Gas is produced in oil refining and in gas processing. It represents a modest part of
refinery output—typically 2–3 percent—but may be more significant in gas processing.
Commercial grade LP Gas is primarily a mixture of butane and propane and the ratio of
these constituents can vary widely.

Although normally used in gaseous form, LP Gas is readily transformed to liquid for storage
and transport. Liquid LP Gas 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
LP Gas container must be robust, and the gas must be drawn from it in a controlled
manner. Hence, LP Gas storage and transportation tends to be more expensive than other
fuels. This is significant in a country such as Nigeria.

Originally, LP Gas was available only from the coastal refineries at Port Harcourt and Warri.
Distribution was largely restricted to Lagos and to towns close to the supply sources. The
opening of a third refinery in Kaduna created a source of LP Gas for northern states and the
possibility of wider availability. To date, the "midstream" oil and gas sector (for example,
gas processing) has not developed as a source of LP Gas supply for the domestic market.

There are three methods for the production of LPG: 1) Extracted from natural gas: 2) By
product of Oil refining process: 3) Produced during Oil refining process.
However, it should be noted that from natural gas, LPG can only be extracted from the
points where propane and butane is mixed with the natural gas in certain quantity. In the
following lines production/extraction process of LPG from natural gas has been elaborated.

The patented AET Process LPG Recovery Unit technology utilizes non-cryogenic absorption
to recover C2+ or C3+ natural gas liquids (LPG’s) from natural gas streams. The absorbed
LPG’s in the rich solvent from the bottom of the LPG absorber column are fractionated in
the solvent regenerator column which separates LPG’s overhead and lean solvent produced
at the bottom. After heat recuperation, the lean solvent is pre-saturated with absorber
overhead gases. The chilled solvent flows in the top of the absorber column. The separated
gas from the presaturator separator forms the pipeline sales gas.

Depending upon the economics of ethane recovery, the operation of the AET LPG plant can
be switched on-line from ethane plus recovery to propane plus recovery without affecting

© STEMGART VENTURES 2018

Page 12 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

the propane recovery levels. The AET LPG plant uses lighter lean oils. For most
applications, there are no solvent make-up requirements. AET can design retrofits for heavy
lean oil facilities.

Figure 1 Production Process Flow Diagram

© STEMGART VENTURES 2018

Page 13 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

4.2 PROPOSED PROJECT LOCATION

4.2.1 INTRODUCTION
The major factors that usually influence the choice of the location of any business include
availability of inputs, market, skilled labor, energy, water and other infrastructural
facilities as well as the owners and the government preferences. This project will be
located at Anthony Village, Kosofe LGA, Lagos state, Nigeria.

4.2.2 SITE ANALYSIS

It is proposed that XXX’s pioneer refilling plant will be located on 500 square meters of land
at XXX Lagos State. The location is about one kilometres from mende in Lagos, another one
kilometre from Onigbongbo and Maryland Lagos, and is located at the centre of Kosofe
L.G.A. thus enabling it to serve this middle class suburb.

Anthony Village has all the required infrastructural facilities, which XXX can benefit from.
There are modern means of transporting both bulk gas and filled cylinders to and from the
plant site. Electricity is available in the locality from where the company will tap its
requirements. Anthony village is centrally located within Kosofe Local Government Area
with a population of 1,102,661 people1, and about 50,000 middle class households.

Ogudu G.R.A and Oworonshoki which are major residential areas that fall within the same
vicinity as the XXX site. Gbagada, Ifako Soluyi and Ojota, which all fall within Kosofe L.G.A
are also major residential and commercial areas of Lagos. As a result of its location, labour,
both skilled and unskilled is readily available in abundance. More importantly, any raw
materials that might be imported through the port in Lagos can be transported easily and at
very reasonable cost to the plant location.

4.3 RAW MATERIALS

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 a weekly 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.

Until the year 2000, the refineries provided all domestic LPG. This LPG was largely butane
rich LPG (>90%), and all four refineries—Old Port Harcourt, New Port Harcourt, Warri, and
Kaduna—were built with the capacity to fractionate LP Gas to butane and propane. By
2006, refineries were almost shutdown. Consequently LPG prices shot up. In 2008, NLNG
butane LPG was available through 6 off takers and this was further boosted with the arrival
of NIPCO PLC’s LPG supply.

NLNG obtains most of its natural gas supplies from Shell, produces LPG and previously
supplied the domestic consumers through six off-takers. The following companies were the
only suppliers of LPG to the local Market:

• Hyson, a subsidiary of NNPC

• Le Global Oil and Gas Limited
• Chimons Simeons
• Linetrade
• Harig Gas
• Greenfield International Energy Services Limited

Today offtakers have increased from 6 to 20.

1
2016 estimates

© STEMGART VENTURES 2018

Page 14 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

[Link] Transportation to Bottling Refilling Plant

Currently, inland transportation of LP Gas is by road and is likely to remain so in the

immediate future. Road transport is not ideal over long distances but, at present, is the
only practical method, given the limitations of the rail system.

Generally, bulk LP Gas transport is in marketer-owned road tankers with only limited hauler
participation. Some marketers will transport LP Gas (usually from a supplying refinery to a
cylinder filling plant) on behalf of other marketers

4.4 PACKAGING MATERIALS

XXX products will be packed in L P Gas Cylinders of 12.5 and 45 kg. Previously there were
only two manufacturers of LP Gas cylinders—Nigerian Gas Cylinder Company (NGCC), based
in Ibadan and Midland Gas Cylinders (Midas), based in Abeokuta. Both have accreditation
from the Nigerian Standards Organization and have facilities for cylinder reconditioning,
testing, and revalidation. The status of Midas is unclear. A third company—Setamec,
formerly based in Isolo, Lagos— is no longer active in cylinder manufacturing. NGCC has
stated it is in imminent danger of closing down. However this year, Techno Oil Limited will
commission its fully automated manufacturing facility expected to produce five million
(5,000,000.00) cylinders of various sizes annually.

Ownership of cylinders is a critical issue as it raises questions regarding the right to refill
and the obligation to maintain. There is uncertainty—and not a little confusion—about the
ownership of LP Gas cylinders, a problem not peculiar to Nigeria. Resolution of this
uncertainty is essential. In most countries, the LP Gas marketer owns and maintains the
cylinder while the consumer pays rental, or a deposit, for its use.

The original marketers issued cylinders to their appointed distributors and consumers but
retained ownership, together with the sole right to refill and responsibility for safety and
upkeep, including periodic testing and revalidation. This system began to break down when
NNPC introduced cylinders of which the user (in many cases) became the owner and when
new independent marketers and distributors entered the market. The objective of
standardization of valves for easy interchangeability of cylinders encountered opposition
and was dropped at a time of indifferent governance. In recent years, there has been some
importation of used cylinders by traders.

4.5 MANPOWER DEVELOPMENT AND TRAINING

(a) Staffing:

The estimated manpower to operate and maintain the plant facilities at the initial stage,
including the technical and general administration of the plant is about 4. This estimate
covers the top management; middle and junior level executives and other supporting staff.

© STEMGART VENTURES 2018

Page 15 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

The breakdown of the manpower requirement for the factory is as follows:

S/N Category Direct Indirect Total

Top
1 1 1
Management
2 Other Managers 0
3 Senior Staff 1 0 1
4 Other Staff 1 1 2
Total 2 2 4

4.6 TECHNICAL MANAGEMENT

Although proposals for the supply of plant and machinery for this project are being
obtained from some suppliers, it is advisable to ensure the reliability of the suppliers
through the preparation of Plant and Machinery Supply Agreement, incorporating
guarantees and Spare parts back up. In view of the need seamless operations, an
experienced Operations Manager would be appointed, and training will be arranged with
the assistance of the Machinery Suppliers.

4.7 TECHNICAL & REGULATORY REQUIREMENT

4.7.1 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, No
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. Three
copies of the following shall accompany each application:

ü Detailed approved plans drawings showing the existing or proposed buildings on the
site and the relative distances to the roadways and adjoining properties.
ü Piping and instrumentation diagram of the Gas filling Plant and Sectional design
drawings of the storage tanks.
ü 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.
ü 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.
ü An evidence that the company is duly incorporated by the Federal Ministry of Trade
to deal in Petroleum products.
ü A current 3-year tax clearance certificate.
ü Codes, Standards and Specifications adopted in the design of the tanks.
ü Non-Destructive Examination report or Pressure test report of storage (Pressure)
tank.
ü Specified application fee Paid Electronically in favour of "Federal Government of
Nigeria, DPR Fees Account" is payable on submission

© STEMGART VENTURES 2018

Page 16 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

[Link] 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:

i. The American Society of Mechanical Engineers (ASME) boiler and Pressure Vessel
Code for unified pressure vessels. Code reference ASME.
ii. The American Petroleum Institute Standard 2510 (2)
iii. British Standard (BS) 1500 Part 1, fusion Welded Pressure Vessels for use in the
Chemical, Petroleum and Allied Industries or BS 1505.
iv. Nigerian Standards Organization approved standard on pressure vessels and
liquefied Petroleum Gas containers. NIS 220/85.
v. BS 5500 for new vessels design, construction, test and certification.

4.7.2 STORAGE TANKS DESIGN SPECIFICATIONS AND FITTINGS

ü 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.
ü 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.
ü 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.
ü Remote controlled hydraulically operated shut-off valves should be fitted to each
storage tank.

4.7.3 CONTAINER FILLING SHEDS

ü Filling Location pump manifold and with an acceptable design

ü Containers should be filled with LPG only in building designed for that purpose.
ü Filling buildings should be open-sided. The filling of containers should not be done
in cellars of upper storey of building.
ü Floor should be near ground level or raised to vehicle platform height.
ü 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.
ü No duct, drain, or blow-off line should be directed into or discharged near sewer
systems or drains used for other purposes.
ü Water drains from the filling area should be provided with effective seals.
ü Piping should be protected by a casing.
ü Sufficient firefighting equipment should be provided at strategic places within the
premises and should have easy access.
ü Filling containers should not be stored in the container filling area.

Adequate lighting should be provided to illuminate the working and storage areas.

[Link] Filling System

ü 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.

© STEMGART VENTURES 2018

Page 17 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

ü 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.

[Link] 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.

[Link] Storage of LPG Container

ü The layout of the container store should be such as to facilitate quick removal of
containers in case of emergency.
ü Containers should not be in proximity to corrosive or highly flammable substances.
Containers should be stored: Only in a place with adequate floor level ventilation

4.7.4 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:

ü Mechanical leak tester

ü Decanting System
ü Gas detector
ü Cylinder maintenance facilities
ü Adequate Fire Extinguishers
ü Safety Signs in the plant.
ü Personnel Protective Wears for the operators
ü Certification from weights and measures, Federal Ministry of Industries that the
measurement facilities calibration is satisfactory.
ü 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.
ü Final Fire Safety Certificate issued by Federal or State Fire Department.

4.8 ENVIRONMENTAL FACTORS

L P Gas is actually reputed as one of the most environmentally friendly sources of energy in
the world. However as is common with all fuels the major considerations of the plant will
be safety of operation, leakage and fire prevention.

Throughout LP Gas marketing, including the primary distribution stage, health, safety, and
environmental issues mostly relate to safety. LP Gas is hazardous unless kept under control
and risk tends to be highest during product transfer, for example, during loading and
discharge operations.

Apart from following the Petroleum Regulations 2002, which contains information on
minimum safety distances, safety system requirements, and so forth, the plant will be
equipped with early leak detection systems and fire prevention & fighting systems. It will
also have in place a comprehensive and practical fire emergency response plan.

© STEMGART VENTURES 2018

Page 18 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER FIVE

THE PROJECT COST

5.1 PROJECT COST

The total project cost is estimated at N31.95 million, including a working capital provision
of N3.0 million. The estimated value of existing investments, which is stated as cost
already incurred, as at September 30, 2018 is N 0.48 million only.

The breakdown of the project cost is summarized below:

INCURRED COST TO BE INCURRED TOTAL

31/09/2018
COST ITEM N’000 FOREIGN LOCAL
N’000 N’000 N’000
LAND & LAND DEVELOPMENT 0 0 5,000 5,000
BUILDINGS 0 0 1,100 1,100
PLANT & MACHINERY 0 7,700 3,300 11,000
ESSENTIAL SERVICES/UTILITIES 0 0 350 350
TOTAL FIXED ASSETS 0 7,700 9,750 17,450
MOVEABLE ASSETS 0 0 8,500 8,500
PLELIM. & PRE-OP. EXP. 480 0 880 1,360
WORKING CAPITAL 0 0 3,000 3,000
TOTAL PROJECT BASE COST 480 7,700 22,130 30,310
INTEREST DURING CONSTRUCTION 0 0 0 0
CONTINGENCIES & PROVISIONS 0 0 1,640 1,640
TOTAL PROJECT COST 480 7,700 23,770 31,950

5.2 FINANCING PLAN

The estimated total project cost of N31.95 million is proposed to be financed as follows:

EXISTING COST ADDITIONAL TOTAL

COST
31/09/2018
FINANCING MODE N’000 N’000 N’000 %
SHARE CAPITAL 480 28,470 28,950 90.61%
LONG TERM LOAN 0 0 0 0.00%
WORKING CAPITAL 0 3,000 3,000 9.39%
TOTAL 480 31,470 31,950 100.00%

This financing arrangement gives a Debt/Equity Ratio of 1:9, this ratio is considered
satisfactory. The foreign portion of the term loan will be used to import the plant and
machinery.

© STEMGART VENTURES 2018

Page 19 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

5.3 DETAILS OF INVESTMENT COST

5.3.1 Land Acquisition and Development

The promoters of the project are already in discussions for lease of 500 square meters of
land at at No. 1 Thomas Olaniyan Street, off Bush Street, Anthony Village, Kosofe L.G.A.,
Lagos State. The proposed property is fully fenced with sandcrete block and properly gated.
It is estimated that the land will cost about N2.0 million Per Annum.

5.3.2 Buildings

The skid mounted filling plant requires an overhead protective cover to keep the plant safe
from the elements. The covers will be strong, well built structures suitable for the purpose
of manufacturing. The bottle refilling plant will cover 25.15 m². Other buildings include the
office hub (5.82m²), Generator house (3.80m²), Toilet/washrooms (1.4 m²) Perimeter
fence built with wire gauze. It is estimated that about N1.1 million will be expended on
erecting these facilities

5.3.3 Plant and Machinery

A portion of the long–term loan of N55.0 million will be used towards procuring the process
equipments as well as cover other expenses.

5.4 ESSENTIAL SERVICES/UTILITIES

Water: is require for general safety and fire fighting purposes. Water is also needed for the
general cleaning of the facilities as well as for general use on the factory complex. A
borehole will be sunk at a cost of N1.4 million.

Road: The site is linked to Anthony (including Ajao Estate), Mende and Maryland which are
some of the major residential centres in Lagos State. There are other road networks, which
the company will benefit from.

Electricity: Given the epileptic supply of electricity in the country, provision has been
made for one (1) standby Generator of 10 KVA rating, to ensure an uninterrupted electricity
supply. This is planned to be acquired at a cost of about N0.35 million, including the
switchgear and cables. The company will also connect directly to the grid supply (415 V)
line.

Others: Other utility requirements are, fire-fighting equipment, Fuel storage tanks for
Diesel and Fuel Oils. This can be procured locally.

5.5 VEHICLES
The following provisions are made:

Cost
Type No. Use
(N'000)
10 Ton Truck – 2010 Toyota Dyna 2 Sales 8,000.00
Total 8,000.00

© STEMGART VENTURES 2018

Page 20 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

5.6 OFFICE FURNITURE, FITTINGS AND EQUIPMENT

A provision of N0.27 million has been made to cover the cost of buying computers, photo
copiers, Air conditioners, Tables, Chairs, Filling Cabinets, electrical fittings, carpets, etc.
The amount is to be apportioned as follows:

Equipment Type N'000

Office Equipment 200
Office Furniture 50
Fittings 20
Total 270.00

5.7 PRELIMINARY AND PRE-OPERATIVE EXPENSES:

These Preliminary expenses would be on; Company Formation, Feasibility Study, Travelling/
Hotel Expenses, Administrative Expenses, Consultancy Expenses and Miscellaneous
activities. About N1.36 million would be spent as follows:

To be
Incurred Total
Item Incurred
N’000 N’000 N’000
Company Incorporation Expenses 0 300 300.00
Travelling Expenses 0 0 0.00
Licensing 0 580 580.00
Feasibility Study 336 144 480.00
Miscellaneous 0 0.00 0.00
TOTAL 336.00 1,024.00 1,360.00

5.8 WORKING CAPITAL

A working capital requirement of N3.0 million is estimated for the first year of operation.
This is broken down as follows:

Item Stock N'000

level
(days)
Cash at Hand 60 650
Stock LPG 7 1,354
Work-In-Progress 1 193
Stock Filled Cylinders 2 387
Accounts Receivable 2 514
Accounts Payable 2 -100
TOTAL 2,999

© STEMGART VENTURES 2018

Page 21 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

5.10 CONTINGENCIES
Three types of contingencies are provided for in our estimates. These are:

• Physical - This is to make provisions for the cost of items that may have been
inadvertently omitted in the course of estimating the machines.

• Price - This is to provide for possible cost escalation arising from increased price of
goods due to inflationary pressure.

• Currency Fluctuations - It is assumed that the exchange rate of the Naira to other
foreign currencies may increase to N360 for US Dollars.

© STEMGART VENTURES 2018

Page 22 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER SIX
MARKET ANALYSIS

6.1 INTRODUCTION
XXX Limited is XXX Nigeria Limited is proposing to establish modular skid mounted LPG
retail dispensers at strategic high-density residential areas across Nigeria, to fill LPG
cylinders for use as fuel for cooking. The gas is to be sourced from Major marketer of LPG
who imports the product.

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.

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 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 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.

6.2 PRODUCT IDENTIFICATION

LPG is an abbreviation for "liquefied petroleum gas" and encompasses several products in
the hydrocarbon family; compounds composed of carbon and hydrogen of varying molecular
structures. Propane and butane are the two best-known hydrocarbons that are used as fuel
in homes, businesses and industries. In the international markets, LPG predominantly refers
to a propane-butane mixture. These mixes may vary in composition from ones that are
predominantly butane to ones which propane is the principal constituent. LPG, whether
butane or propane, is unique in that it can be transported and stored as a liquid but when
released it will vaporize and burn as a gas. Also, LPG can easily be changed from either
liquid state or gas state.

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

© STEMGART VENTURES 2018

Page 23 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

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 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.

No other commercial fuel has these characteristics. Natural gas, for example, cannot be
transported in a tank in any meaningful quantities unless it is either compressed to
extremely high pressures or chilled to 259°F (-126°C), at which point it liquefies.

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.

Even when compressed, it contains only a fraction of the useful energy of the identical
volume of liquid state LPG.

In Nigeria, LPG is used predominantly for cooking. It is normally sold in cylinders of size 3,
6, 12.5 and 45 kg, even though other sizes 13, 14, 50 kg exist the former mentioned sizes
are the most popular sizes.

6.3 LOCATIONAL ADVANTAGE

XXX Limited will be located on 500 square meters of land at Anthony Village, off Bush
Street, in Lagos State. The plant will be located central to Kosofe Local Government Area,
which happens to be the third most densely populated Local Government Area in Lagos. It
will be about 700 meters from Ajao Estate and about 1.2 kilometers from Aworojobe Estate
Mende. Anthony Village has all the required infrastructural facilities which XXX can benefit
from. There are modern means of transporting both feedstock and filled cylinders to and
from the plant site. Electricity is available in the locality from where the company could
tap its requirements. The Anthony village where the plant complex will be located is a
major residential area. Maryland and Mende which are major residential and commercial
areas fall in the same catchment area as the XXX site. As a result of its proximity to Ojota,
labour, both skilled and unskilled is readily available in abundance. The initial distribution
outlets (using Street Retailers) will be located in Anthony and Mende, with a view to
spreading to other areas in Lagos as time goes on.

6.4 SUPPLY ANALYSIS

6.4.1 Marketers and Distribution Facilities - Nigeria

From our market research, we have put together a summary list of the LP Gas plants
nationwide. This denotes a total of 200 LP Gas plants nationwide, though not every single
plant may have been picked up. Obtaining definitive data can be difficult. The list also does
not include the nine-butanization depots. The list is divided geographically, as this is
obviously interesting to determine which plants can be serviced from which butanization
depot or refinery. The LP Gas plants are broken down geographically as seen inTable 4
below.

© STEMGART VENTURES 2018

Page 24 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Table 3 L P Gas Plants nationwide

Sources: (1) NALPGAM

(2) Stemgart Ventures.- Market Investigation, June 2018

6.4.2 Marketing and Distribution Facilities - Lagos

There are about 53 large and medium sized companies currently in the L P Gas bottling
processing industry.

The list of companies, Location and their storage capacities is given below

Table 4 Details of Marketers L P Gas Plants in Lagos

© STEMGART VENTURES 2018

Page 25 of 48
Feasibility report for Skid Mounted Modular LPG -Filling Plant

© STEMGART VENTURES 2018

Page 26 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

6.5 DEMAND
6.5.1 Demand Analysis
[Link] Household Cooking/Lighting Demand

Household energy demand arises from lighting, media, cooking, space heating/cooling,
water heating, refrigeration, and power-operated appliances. Electricity is at the top of the
hierarchy of household energy supply sources and commands an image of modernity,
versatility, and cleanliness. It is indispensable for media and powered appliances, and is
preeminent in lighting, space cooling, and refrigeration.

Gas is less versatile and is ranked lower than electricity. It is often the preferred fuel for
cooking and can be substituted for electricity in some other household energy applications.
Gas includes natural gas and LP Gas. In Nigeria, natural gas is used almost exclusively for
power generation and industry, while household gas is LP Gas.

Kerosene is ranked lower again, lacking the versatility of electricity and the cleanliness of
gas, but capable of providing sufficient heat for cooking and a reasonable standard of
lighting.

Candles and battery-operated lamps serve a single need, lighting, in a very limited fashion.
They have the advantages of portability and of quick response in a power failure. Candles
have a low unit purchase price.

Collectively, biomass fuels (for example, wood, crop residues, dung) rank lowest among
household fuels, being bulky, dirty, and lacking in versatility. They are normally associated
with economic and social deprivation, but, nevertheless, wood is preferred for certain
rituals and for specialized or festive cooking. There is growing recognition of health risks
(especially for women and smaller children) in the use of biomass as cooking fuel. However,
for the poorest households, biomass may represent the only accessible fuel.

[Link] Economic and Demographic Data

With a population of around 150 million people, Nigeria is the most populous country in
Africa. Despite a long-established drift to the towns and cities, the majority are rural
dwellers and more than half the workforce is engaged in agriculture. The highest
population density is in the central lowlands and in the west of the country. The largest
city, Lagos, has an estimated 16.5 million inhabitants. Nigerians have a life expectancy of
53 years with infant mortality of about 75 per 1000 live births.

[Link] Competitive Fuels

The household survey findings show that more households would use LP Gas and existing
consumers would increase their usage, probably at the expense of kerosene, if the price
differential between these fuels can be reduced.

The official retail price of kerosene is N190 per liter, although the actual market price
ranges N250 [Average price per litre paid by consumers for National Household Kerosene
decreased by -1.00% month-onmonth and -1.29% year-on-year to N276.87 in July 2018 from
N279.67 in June 2018. States with the highest average price per litre of kerosene were
Yobe (N310.00), Nassarawa (N306.19), and Bayelsa (N304.72). States with the lowest
average price per litre of kerosene were Kogi (N238.89), Borno (N236.67) and Abia
(N227.50)] per liter depending upon scarcity and location. The retail price per 12.5 kg fill
of LP Gas ranged between N4,000 to N4,500, throughout the six survey locations
(discounting the lowest and highest prices). In a direct comparison, using the calorific
value/stove efficiency as set out in the World Bank/WLPGA West African Study; one can

© STEMGART VENTURES 2018

Page 27 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

determine the relevant net energy per Naira for kerosene and LP Gas for these price
ranges.

Kerosene:
Ø 37.5 MJ/Liter gross with 35 percent stove efficiency = 13.125 MJ/Liter

Ø Low-range energy output per Naira is 13.125 MJ/Liter x 1Liter/N227 = 0.058

MJ/Naira

Ø High-range energy output per Naira is 13.125 MJ/Liter x 1Liter/N310= 0.042

MJ/Naira

LP Gas:
Ø 48.4 MJ/kg gross with 45 percent stove efficiency = 21.78 MJ/kg

Ø Low range energy output per Naira is 21.78 MJ/kg x 12.5 kg/N4,000 = 0.068
MJ/Naira

Ø High range energy output per Naira is 21.78 MJ/kg x 12.5 kg/N4,500 = 0.061
MJ/Naira

The analysis shows that LP Gas is more cost effective than kerosene. Increased supply will
undoubtedly allow the market to expand and the LP Gas industry to achieve economies of
scale.

[Link] Household Survey

Based on the reports and survey questionnaires returned from the various marketing
executives, and on the statistical spreadsheets, the findings can be summarized as follows
for Lagos:

Lagos is a sprawling metropolis of an estimated 18.5 million people. All four socioeconomic
groups are represented in Lagos and its environs. For the Lagos survey, the sample size and
the number of field workers were increased. A total of 56 households were surveyed.

There are many cylinder filling plants and retail outlets for LP Gas in the Lagos area but
most are not located within close proximity of the residential areas. Also prices vary across
the year.

LP Gas is the preferred cooking fuel among the urban high- and middle income family’s 41
out of 56 households—while peri-urban and rural households expressed a preference for
kerosene.

Of the widely used cooking fuels, kerosene attracts the largest number of users—36 from 56
followed by LP Gas at 24. LP Gas is the cooking fuel most often used in urban households
while kerosene is the most often used fuel in peri-urban and rural households. Overall, the
percentage of households regularly using firewood is 15 percent but this rises to 50 percent
among rural dwellers.

Multiple cooking fuel usage is the rule in urban households with the choice at any given
time mostly depending on price and availability. Urban high-, and middle- income
households need kerosene as the reserve cooking fuel, when the preferred fuel, LP Gas, is
not available. They also need kerosene for lighting during power failures. Urban high-
income households may resort to firewood for festive occasions.

The perceived high cost (Not actually true our analysis shows that LPG is cheaper than
Kerosene) of LP Gas caused complaints from about 53 percent of households, 43 percent

© STEMGART VENTURES 2018

Page 28 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

said it was dangerous, while 24 percent complained about supply and the hassle associated
with obtaining refills. Satisfaction level was highest among the high-income groups.

A significant number of high-income households have access to privately generated

electricity. Generally, households depend on kerosene lamps, candles, and standby
generators for lighting during electricity outages.

Generally, self-collecting is the rule for LP Gas supplies but the survey noted many
instances of home delivery springing up in urban high-income and middle income areas.
While a household may be physically close to an LP Gas retailer, the time taken to obtain a
refill may vary in the range of 5 to 45 minutes, depending on traffic and whether the
nearest retailer has LP Gas in stock. Kerosene is more widely and readily available, often
from street hawkers and in small quantities.

At the time of the survey, LP Gas was readily available in Lagos at prices in the range
N4,000–4,500 per 12.5 kg fill. Respondents said that prices react quickly to reports of
scarcity and may reach N4,800– 5,000 for the 12.5kg fill.

Many would use LP Gas exclusively if it were regularly available

LP Gas stoves are available in urban stores and from some retailers. Prices range from
N5,800–6,500 for a single burner, N9,000–14,800 for double burners and up to N116,000 for
others. Stoves were available in one peri- urban location but not in rural areas.

6.6 MARKET SEGMENTATION

6.6.1 Introduction

Market research analysis was conducted in order to gather as much information on the
target market. This research was divided into three parts. The first covers the market and
customer’s needs. The second estimates the size of the market and the final part assesses
the competition.

6.6.2 Market Segmentation

In this section we have worked to determine which types of customers would be interested
in XXX products so they can be targeted directly through the marketing channels.

The four basic market segmentation strategies are based on:

• Behaviour (rate of usage, loyalty status, readiness to purchase etc.,)

• Demographics (age, gender, occupation, socio-economic group etc.,)
• Psychographics (personality, lifestyles etc.,)
• Geography (customer location, region etc.,)
2
For this survey, we considered Demographics & Geography. Our segmentation is as follows:

ü Men & Women: XXX’s demographics cuts across both genders, this is so because the
need to cook cuts across both genders.

ü 18-55 years: this must be taken into account with the next criteria. This
demographics contributes the largest percentage of the population

ü Household incomes = Middle class users will most likely to cook using LPG and will
be more open to purchase based on convenience.
The Nigerian Middle Class can be categorised as follows:

© STEMGART VENTURES 2018

Page 29 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

ü Their average monthly income is in the range NGN75,000-100,000 ($210- 300, or

roughly $2,500-3,500 pa).
ü The middle class make up about 23% of the Nigerian population, according to
African Development Bank (AfDB) data.
ü They are well educated – 92% have obtained post-secondary education or have
studied at an institution of higher learning. Educating their children well is a top
priority, and over half send their children abroad to complete their education.
ü A sizeable 76% of our sample works in the public sector; of those working in the
private sector, 38% run their own businesses.
ü Most live in leased/rented accommodation (68%) with an average household size of
3.7 people. The average number of children in each household is 1.6 (excluding
those away at school) vs a national average that is closer to 3; larger families are
more common in rural areas.
ü Nearly half have no immediate plan to move to a new house, 18% are planning to
move to a newly completed self-owned apartment and 8% are planning to move to
another rented apartment.
ü The average number of cars per middle-class household is 0.8 (around one third of
middle-class Nigerians have a car that is less than five years old);
ü The Nigerian middle class have a culture of saving, they care little about the
deposit rate and don’t expect to borrow from a bank. If they had the funds, they
would rather invest in land/property than shares or bonds. Most do not have
mortgages (which represent approximately 1% of GDP) or credit cards, though many
expect to apply for the latter. As in many emerging markets, the consumer lending
sector is woefully underdeveloped.
ü Their principal sources of information are TV and radio. Fifty-eight percent have
mobile internet access, and 32% shop online at least once a month.
ü The majority shop for foodstuff at open-air markets (73%), as well as use
convenience stores (62%). Twenty percent dine out at least once a week.
ü Only 15% have travelled abroad; 35% of households have at least one person with an
international passport. The UK is the most favoured travel destination.
ü Their key areas of concern over the next 12 months are the supply of electricity
and unemployment, with between 19-23% citing these as concerns; crime (25%)
and corruption (30%) are seen as key areas of concern.
ü Three-quarters are optimistic about the future of Nigeria.
ü A startling 96% of respondents are religious, and the third most cited reason for
optimism about Nigeria’s future is that God will make it better.

The table below shows the energy consumption pattern of the Nigerian Middle Class:

Household energy supply and usage, %

Average of total Average of Average of

sample responses from responses from
Lagos Port Harcourt
Average number of hours of electricity*
(hours) 8.75 7.5 10

Electricity 100 100 100

Gas supplied by bottled gas, gas cylinders or
gas from other sources 44.5 29 60
Gas piped directly into the home 2 0 4
Note: 8 Base = 1000 interviews

Also of all the respondents interviewed, 61% currently own gas cookers, while 18%
intend to purchase in the next 12 months.

© STEMGART VENTURES 2018

Page 30 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

6.6.3 Market Research

Having defined our market segmentation, we proceeded to perform a primary market
research to gather qualitative and quantitative data on our market niche. The tools that we
used were surveys, and interviews. Primary research involve sampling as little as 1 percent
of a target markets. The focus of our primary market research was to see if our proposed
Skid Mounted LPG refilling plant and its offerings was appealing to our market segmentation
in Anthony Village and environs.
We performed our primary market survey using Survey Monkey.

In order to calculate a sample size, we had to determine a few things about the target
population and the sample including:

Population Size — How many total people fit our demographic?

Margin of Error (Confidence Interval) — No sample will be perfect, so we needed to decide

how much error to allow.

Confidence Level — How confident do we want to be that the actual mean falls within our
confidence interval ? The most common confidence intervals are 90% confident, 95%
confident, and 99% confident.

Standard of Deviation — How much variance do we expect in our responses ? A safe

decision is to use 0,5.
Sample Size - Infinite Population (where the population is greater than 50 000)

Where :
Z = Z-value (1,96 for a 95 percent confidence level)
P = Percentage of population picking a choice (0,5)
C = Confidence interval, expressed as decimal (0,02)

The complete answers and results of the survey were analysed and below we present the
information that is most important to the project: the confirmation of the idea.

We see that a large majority of people are interested in the concept of the gas refilling
plant in Anthony village and subsequent introduction of the Smart Gas Monitors that will
enable them have real time tracking of the LPG stock.

© STEMGART VENTURES 2018

Page 31 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Would you be interested in a Gas refilling plant in

Anthony village
5.00%

95.00%

Yes No

Figure 2: Survey Result 1

Over 60% of the respondents purchased gas from informal street retailers. When asked why
they preferred them instead of gas refill plants, most quoted amongst other reasons,
proximity to home, and home delivery services offered by the street retailers. In summary,
most said if the ran out of LPG while cooking, they could put a call across to the retailer
and sure that the retailer would deliver the refill in less than 30 mins.

Who do you currently patronise for supply of LPG?

40.00%

60.00%

Informal Retailer LPG Refilling Plant

Figure 3: Survey Report 2

© STEMGART VENTURES 2018

Page 32 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Are you willing to pay for services like

screening of domestic staff and other screening
services
4.00%

96.00%

Yes No

Figure 4: Survey Report 3

Besides the primary research, we carried out secondary marketing research. This involved
the investigation of existing data sources and previously detailed relevant information. This
data was available through other publications or reports, newspapers, magazines, websites
etc. Secondary market research was easy to find, and much of it is free or low-cost.

The downside of secondary market research is that it is not customized to our needs, so it
is not as useful as primary market research.

We primarily used the Internet to screen interesting statistics on consumer behaviour,

prices, etc.

6.7 MARKET ACCEPTABILITY

For XXX to quickly gain market acceptance, it plans to leverage on its locational advantage.
The products will be made available all through, Anthony, Mende and Maryland through
efficient distribution channels. Contact details of the company will be distributed through
fliers, bulk SMS, Email to ensure that households can contact XXX when the run out of LPG.
It gas been discovered that one of the key service factors for patronage is delivery of Gas to
the households. Effective advertising and monitoring will be embarked upon almost
immediately the company commences operations.

In the future, XXX intends to procure and market Smart Gas Monitors/value regulator with
an internet connection that will help users monitor in real-time the level of LPG in a users
cylinder through the Gas App mobile application then sends them alerts to their mobile
phone on the level/status of their LPG and gas leakages through SMS and push notifications.

This will also help users never run out of gas by simply mounting the device on their LPG
cylinder then connect it with their mobile phones for either SMS or push notifications on
the level of the LPG . The app connects the customer to XXX database and will trigger
instant supply of filled cylinders to swap almost empty LPG cylinders. Gas consumption
statistics will also give XXX access to consumption statistics which will help us monitor and
know the customer’s monthly/yearly gas usage. The Smart Gas app also has a Gas Leakage
Detection and Alert to detect gas leakages and send a user an alert to their mobile phone
for immediate attention.

© STEMGART VENTURES 2018

Page 33 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

6.8 MARKETING STRATEGY

The next question we must ask ourselves is how we will reach our potential customers? How
canwe make them aware our gas refilling plant is available and convert them as our
customers? This will be realized by our marketing strategy.

There are three kind of marketing strategies:

Direct sales: this is done when a customer base exists, where XXX can directly reach out to
its customers usually by phone, by email or through direct personal contact.

Direct marketing: there is a straight communication to the customer (or potential

customer; this can be used on contact information from a database) with advertising
techniques such as SMS, email, interactive consumer websites, online display ads, fliers,
catalogue distribution, promotional letters, and outdoor advertising.

Mass marketing: Is the technique of trying to spread a marketing message, to anyone and
everyone who is willing to listen, through big audience media such as radio, television,
internet, etc.

For XXX, we have proposed the direct marketing strategy, considering the fact that most of
its prospective customer are residents of a particular catchment area:

XXX will distribute fliers and high traffic points at Anthony Village, Maryland, Mende,
Gbagada, Ilupeju and environs. The idea would be to have fliers at locations where most
of the residents of Anthony, Maryland & mende shop for groceries, including but not
limited to Maryland Mall, SPAR Ilupeju, Market Hubb Ikeja GRA, Dominos Pizza Maryland
etc.

XXX will also communicate via bulk SMS, Email to ensure that households within the
catchment area are made aware of its services and offerings.

Using social media, including Facebook, Instagram and XXX Website, the company will work
to create awareness of available services.

Making an app-specific web site. We will also promote our app through our firm’s website.
Setting up search marketing campaigns through search providers such as Google, Yahoo and
Bing.

The marketing strategy can be divided in two parts: A pre-launch and post-launch strategy.
The prelaunch strategy is used to create awareness and visibility. The goal is to try to
acquire the interest and build the curiosity of as many users as possible.
The post-launch strategy is used to maintain existing customers, to increase the conversion
rate and to create user retention.

© STEMGART VENTURES 2018

Page 34 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER SEVEN

7.1 PROFITABILITY AND FINANCIAL ANALYSIS

In estimating the operating expenses during the operational years, the following
assumptions and provisions are made:

(a) Capacity utilization is expected to start from 60 % in the first year and grow steadily to
90% in the fifth year when it is expected to stabilize.

(b) The plant annual installed capacitie is given as follows:

(i) 12.5 kg –20,000 cylinders per annum

(c) Average Factory prices are assumed as follows:

(i) 12.5kg N4, 000

7.2 UTILITIES
Utility costs include cost of electricity consumed by the filling plants, diesel consumed by
the generators, petrol, lubricants and other related costs. The company will at the initial
stage rely on a combination of Generators and utility supply Electricity. Thus, a provision of
0.6% of Net Sales revenue will be made available for utility costs.

7.3 MAINTENANCE
The proposed plant and machinery will be easily maintained at a relatively reasonable cost
since they are being purchased newly. However, the machines must be adequately
maintained for optimum performance. Hence, for the maintenance of the plant and other
fixed assets, a provision of 1.7% of the fixed assets cost has been made in the first year of
operation. This is expected to increase in consonance with capacity utilization of the plant
in subsequent years.

7.4 ADVERTISEMENT AND SELLING EXPENSES

Since XXX products are going to be new in the market, it is assumed that the company will
spend substantial amount on advertising and promotion. In this regard, an estimate of 5.5%
of Net Sales revenue is expected to cover the cost of advertisement in the media, sales and
distribution cost, as well as sponsorship of Internet marketing.

7.5 DEPRECIATION
Depreciation is computed on a straight-line basis using the following rates:

(i) Building 5%
(ii) Plant and Machinery 10%
(iii) Generators 10%
(iv) Other Utilities 10%
(v) Vehicles 20%
(vi) Office Furniture and Equipment 20%

© STEMGART VENTURES 2018

Page 35 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

7.6 AMORTIZATION
An amortization rate of 20% is applied on the following;

o Preliminary and Pre-operative Expenses

o Interest during Construction

o Legal documentation Fees

7.7 FINANCE CHARGES

It is assumed that the local long-term loan 22.5% per annum interest rate. The tenor of the
long-term loan is taken as 6 years, with one-year moratorium.

The short-term loan or overdraft facility, which will be used to finance the working capital,
is expected to be obtained at an interest rate of 22.5% per annum. This short-term loan is
expected to have tenure of three years, and a monthly repayment without any moratorium.

Provision is made for Bank charges, which may depend on the turnover of accounts in the
Banks.

7.8 TAX PROVISION

Tax provision of 30% and 2% on assessable profit have been assumed in the computation of
Company and Education Taxes respectively after provision has been made for capital
allowance.

7.9 PROFITABILITY ANALYSIS

The company’s Net Sales Revenue, after making provision for 5% VAT, is expected to rise
from N54.6 million in the first year to N459.04 million in the fifth year. Similarly, annual
Net Profit is expected to improve from N2.2 million in the first year to N57.2 million in the
fifth year. Excise duty is not expected to be paid by this company in the immediate future.

Return on Sales is expected to rise from 4.1% in the first year to 12.5% in the fifth year. The
projected Profit and Loss Account is summarized below:

2019 2020 2021 2022 2023

Net Sales (N’000) 54,000 126,000 218,160 327,240 459,045
Profit before Tax 3,267 14,526 31,626 55,491 84,158
Profit after Tax 2,222 9,878 21,506 37,734 57,227
Return On Sales (%) 4% 8% 10% 12% 12%
Return On Equity (%) 8% 26% 44% 56% 63%
Return on Capital (%) 8% 21% 39% 53% 63%

© STEMGART VENTURES 2018

Page 36 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

These indicators show reasonable and satisfactory returns.

7.10 CASH FLOW ANALYSIS

The cash flow projection before and after financing is summarized below. The projections
show that the company will be able to generate sufficient funds to service its debt as well
as meet other operational requirements without difficulty.
The Cash Balance for the period is as follows:

Closing Cash Balance

(N’000) Current Ratio
2018
2019 9,378 8.1
2020 19,937 3.7
2021 23,956 3.5
2022 43,803 4.6
2023 67,355 6.7

7.11 BALANCE SHEET ANALYSIS

The projected Balance Sheet is shown in Appendix 7. Net Current Assets in the first year is
expected to be N10.35 million and would rise to N73.78 million in the fifth year. Retained
Earnings are expected to rise from N2.2 million in the second year to N64.61 million in the
fifth year and these will assist the company in meeting future investment plans from
internally generated funds. The summary of the projected Balance Sheet is given below:

2019 2020 2021 2022 2023

Paid Up Share Capital (N‘000) 26,150 26,150 26,150 26,150 26,150
Retained Earnings (N‘000) 2,222 12,099 22,852 41,719 64,610
Debt/Capital 0.00 0.20 0.12 0.05 0.00

The liquidity positions, as well as the financial leverage, over the projected period are
quite satisfactory.

7.12 SENSITIVITY ANALYSIS

The sensitivity of the project is tested on Sales and the cost of feedstock, using the
Opportunity Cost of Capital as 26.0%. The analysis shows that a 56.0% drop in revenue or
65.0% rise in the cost of operations will render the project unviable. The projections have
assumed very conservative estimates such that selling prices are not likely to drop by such
a rate, while increases in operational cost is most unlikely to be unnecessarily high. The
proposed prices are at par with prices in the industry.

The project is therefore not sensitive to changes in any of the variables.

© STEMGART VENTURES 2018

Page 37 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

7.13 INTERNAL RATE OF RETURN

Appendix 6c shows the Internal Rate of Return of 60%, which is very satisfactory, as it is
much higher than the highest borrowing rate of 27%. The high IRR value is considered good,
attractive and attainable.

Assumptions used in the calculations are:

- Projected life span of the project taken as 10 years

- 2018/2019 is taken as implementation period.

- Salvage value taken at 5% of Plant and Machinery, 10% of buildings, 100% for Land
and Land Development, 5% for utilities, 2.5% for Office Equipment/Furniture and
100% for Stock.

7.14 BREAK EVEN POINT

With the envisaged operation schedule, the company is expected to break even with
utilization at 27.25% of the installed capacity, with sales revenue of N24.52 million. This
capacity utilization is achievable in the first year of operation and is considered very
satisfactory.

© STEMGART VENTURES 2018

Page 38 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

CHAPTER EIGHT

RISK ANALYSIS AND CONCLUSION

8.1 RISK ANALYSIS:

The analysis in this report has been based on primary survey and secondary data from
published information. The analysis shows that the implementation and operation of the
project will not encounter much difficulty; however the following areas need to be closely
watched by the planners, the executors and the operators.

8.2 FUNDING
The Nigerian Economy is currently short of Long- Term loan able funds. This may lead to
unnecessary time and cost overruns, which in turn may derail the implementation plan. We
have therefore projected that we will initially try to raise most of the required capital
through the equity market, by private placement in three rounds. This will help to ensure
we deliver to schedule and profitably.

8.3 RAW MATERIALS SUPPLY

The main raw materials are LPG feedstock. To ensure regular supply, a firm arrangement
must be made with the various suppliers.

Tenured Sales Contract: The Company shall endeavor to discover and secure long term
supply contracts with major Liquefied Petroleum Gas {LPG} buyers.

8.4 COMPETENT TECHNICAL EXPERTISE

There is the risk of not being able to put a good management in place. Without a good and
experienced management team, the planned financial and economic returns will remain a
mirage.

This risk is guarded against by the plan to recruit key technical personnel that are dynamic
fresh minds, or recruit from L P Gas companies in the country.

8.5 SWOT ANALYSIS

The strengths, weaknesses, opportunities as well as the threats to the success of the
project are examined as follows:

Strength

a) Being a new plant, it has new, modern and functional facilities. The proposed
machinery suppliers are well known and their machines are very reliable.

b) Its location in Anthony Village makes proximity to the large Kosofe LGA markets
easily accessible.

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

© STEMGART VENTURES 2018

Page 39 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

d) Availability of labour locally

e) The presence of the equipment suppliers and technical partners

f) Central and accessible location

Weakness

a) Being a new business with no track record, it will need to make its presence felt in
the market immediately.

b) Unavailability of raw materials

c) Availability of experts for plant maintenance

Opportunities

a) The unique location will give it an edge over other filling plants in serving Kosofe
LGA.

b) Proximity to the busiest markets

c) Competitive pricing

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

e) Potential to create employment opportunities.

f) Possible business expansion into production and sales gas regulators and other
accessories

Threats

The existing major marketers have established names and it may be difficult to win over
customers. However, with high quality service and a good marketing strategy, the threat
can be overcome.

8.7 SUGGESTIONS
The following suggestions should be noted for successful implementation and operation of
the project.

In view of the state of the economy, prompt provision of funds must be made to avoid
unnecessary time and cost overruns.

The management of the company as proposed should be given free hand in running the
affairs of the company. In this regard, the management by a Operations Manager as
proposed should be put in place to ensure stability and growth.

There must be Machinery Supplier Agreement to ensure reliable performance of the

suppliers.

© STEMGART VENTURES 2018

Page 40 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Adequate training of the technical staff, both within and outside the country, is essential to
maintain international standard of the products so as to be able to effectively compete in
the market.

Regular and adequate maintenance system should be adopted to avoid frequent

breakdowns and leakages. This will ensure uninterrupted operations so that the desired
profitability level would be achieved.

There should be job description for all the positions in line with what has already been
done for management. The format of the job description should be standard design
describing basic job functions to be performed, academic/ technical requirements,
reporting structure etc.

8.8 RECOMMENDATIONS
Based on information gathered from our fieldwork and other researches on this project and
going by the analysis articulated in the preceding chapters of the report, we are convinced
that this proposal is worthwhile.

With a break-even point of 27.25% of installed capacity, the project will achieve
profitability right from the first year of operation when the plant would be operated on
only one shift per day. This implies that the project will break even if it operates only a
shift.
The proposed plants are to be sourced from a reliable company, with adequate spare parts
and technical services back up. The proposed machinery suppliers are known all over the
country and all their components are sourced from reputable companies.

The analysis has shown that the project is technically feasible. Economic analysis shows it is
desirable, while the established market and financial returns show it is viable.

We therefore, recommend the proposal for financial assistance and implementation for the
benefits of the generality of Nigerians.

In reviewing the financials below, calculated in Naira, the exchange rate of the Naira to US
dollars is N360/$1 (That is, three hundred and sixty naira’s exchange for one dollar).

© STEMGART VENTURES 2018

Page 41 of 48
Feasibility report for Skid Mounted Modular LPG -Filling Plant

Revenue – Appendix 1(A)

© STEMGART VENTURES 2018

 Feasibility report for Skid Mounted Modular LPG -Filling Plant

2.1.1 Cost of Revenue – Appendix 2

© STEMGART VENTURES 2018

Page 43 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Project Profit and Loss Account – Appendix 3(a)

© STEMGART VENTURES 2018

Page 44 of 48
Feasibility report for Skid Mounted Modular LPG -Filling Plant

Cash Flow– Appendix 3 (b)

© STEMGART VENTURES 2018

Page 45 of 48
Feasibility report for Skid Mounted Modular LPG -Filling Plant

Balance Sheet Projections – Appendix 4 (N)

© STEMGART VENTURES 2018

Page 46 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

2.1.2 Cost of Management and Labour – Appendix 5

© STEMGART VENTURES 2018

Page 47 of 48
 Feasibility report for Skid Mounted Modular LPG -Filling Plant

Break Even Point Analysis – Appendix 6

© STEMGART VENTURES 2018

Page 48 of 48