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Project Proposal For LPG in Eth PDF
Project Proposal For LPG in Eth PDF
Pa
ge
Title
No
I. Executive Summery
1
II. Background of the document
2
Overview of Ethiopia
2
Overview of Energy sources and energy policy in
Ethiopia
6
Overview of Ethiopian policy towards to LPG,
Kerosene and other related by products
8
III. Market Analyses
10
Nature and size of demand for petroleum products
10
Project ownership and structure
10
Proposed Location
11
Past Demand
11
Forecasted Demand
12
Supply & Distribution
13
Types of Products
14
Target customers
15
Competitors Analysis
15
Marketing
18
IV. Regulations, Licenses and incentives (Legal
analysis)
19
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Regulatory Requirements
19
License
19
Pre-Qualification for License
19
V. Environmental Analysis
20
Location of the project
20
Environmental analysis
21
VI. Financial Analysis
21
Initial Project Costs
21
Expansion Project Costs
22
Price of Fuel
23
Risk on investment for Petroleum investment
23
Income statement
24
VII. Conclusion
27
VIII. References
28
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
1. Executive Summery
The purpose and scope of this feasibility study is to assess the feasibility of
distributing
LPGs, petroleum and related products and lubricants like: Diesel Engine Oils,
Petrol
Engine Oils, Gear Oils, 2 stroke, Engine Oils, Brake Fluid, Hydraulic Oils and
Industrial
Gear Oils throughout Ethiopia as whole seller and retailer. In addition to the
provision
of Fuels, Lubricants, other specialized products like Modern Car wash, Lub change,
Supermarket, Cafes and Restaurant Services will be implemented by outsourcing to
others.
The project feasibility will form the basis of an important investment decision and
in
order to serve this objective, the document covers various aspects of the business
concept development, start-up, marketing, and finance and business management. The
document also provides sectoral information, brief on government policies and
international scenario, which have some bearing on the project itself. The report
divided in to nine parts with annex and reference.
The HASS petroleum Group is a regional Oil marketing company, incorporated in 1997,
with significant presence in East Africa and Greater Lakes region. From its
beginning
as a fuel seller, HASS petroleum is now a renowned Oil Marketer with full fledged
in
Kenya, Tanzania, Uganda, Southern Sudan, Rwanda, Burundi, and the democratic
Republic of Congo. And in 2013 it will start in Ethiopia after the legal and
investment
activities finalized.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Prepared by Grace Consultant
Version 1.0
Issue date May 30, 2012
Revision Date May 31, 2012
2. Background of the document
a. Overview of Ethiopia
Real GDP grew by an average of 11.3 percent per year for the last Seven consecutive
years (2003/04-2009/10), which is the highest among the non-oil producing economies
of Africa. During 2006/07, 2007/08 and 2008/09, the general annual inflation was
15.8,
25.3 and 36.4 percents, respectively, and dropped to 2.8 percent in 2009/10. These
were
largely driven by the trend of the food component of price which showed 21 percent
annual average growth during the indicated fiscal years. The budget deficit as a
percent
of GDP was only 1.3 percent in 2009/10
The Ethiopian economy has grown stronger as the transition from a command to a
market-based economy takes place. The former system of price controls has almost
been
discarded, the tax rates have decreased, and several private sector restrictions
have
been removed. Progress has been made on the implementation of reforms. Valued
Added Tax was introduced in the country in January 2003 and the import tariff
regime
has been reformed. The financial sector is also improving, with flexible interest
and
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
exchange rates that are market-determined. Ethiopia belongs to the COMESA
agreement. Member countries enjoy preferential trade terms. Ethiopia has similar
agreements with a number of countries and the EU.
In the Growth and transformation plan (GTP Plan), the government expected to boost
the real GDP from 10.1 to 14.9 percent. Projection of export of goods assumed to
grow at
a faster rate in response to the adoption of export promotion policy measures.
According to the GTP plan for the five years, exports of goods are expected to grow
by
36.6% in 2010/11 and 28.4% percent annual average in the remaining period. With
regard to transportation, in 2015, all Kebeles (100%) will connected to all weather
roads
with an average time of 1.4 hrs to reach nearest all-weather road .
The National Bank of Ethiopia is the central bank of the country. Commercial
banking
functions are performed by the state-owned Commercial Bank of Ethiopia (CBE) and an
increasing number of private banks . The number of banks operating in the country
reached seventeen: three of them government-owned and the rest private (NBE home
page).
The Ethiopian tax law provides for the imposition of direct and indirect taxes. The
direct taxes are divided in to five categories: personal income tax, rental tax,
withholding tax, business profit tax and other taxes. The main types of indirect
taxes
applicable are value added tax, custom duty, excise tax and turn over taxes.
The labor law has fixed hours of work as eight hours a day and thirty-nine hours a
week. Work done in excess of these hours is deemed to be overtime. Labor disputes
in
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Ethiopia are resolved through the application of the law, collective agreements,
work
rules, and employment contracts. Foreign investors obtain work permits for their
expatriate employees directly from the Ethiopian Investment Agency (EIA). The EIA
processes applications of work permits in an hour.
All transactions in foreign exchange must be carried out through authorised dealers
under the control of the National Bank. Payments abroad for imports require
exchange
licences, obtainable upon presentation of a valid importer’s licence, exchange
licences
are also granted in any convertible currency requested. All imports require a
licence.
There are no free trade zones in Ethiopia.
Addis Ababa, the capital city, is linked by road to the port of Djibouti, at the
Gulf of
Aden. The port of Berbera in Somaliland and Port Sudan are other external trade
routes
that provide services for export-import trades of the country. Another potential
port
accessible to Ethiopia is Mombassa in Kenya. In order to ensure efficient, cost
effective
and reliable import and export movement of cargo to and from the sea ports of
neighboring countries, the government has established the Dry Port Service
Enterprise.
The Enterprise is currently operating two dry ports which are located at Modjo, in
the
Oromiya Regional State, and at Semera, in Afar Regional State.
Ethiopia’s known energy resources essentially consist of wood fuels, animal dugs
and
agricultural residues, which are overexploited, and hydropower, which are being
exploited,, crude oil which is largely untapped. Ethiopia has proven reserves of
fossil
fuels in the form of natural gas and coal as well. The energy resource potential of
the
country includes several hundred million tons of coal and oil shale, and over 70
billion
cubic meters of natural gas. However, only a very small portion of this potential
is
developed owing to lack of financial resources, skilled manpower and more
importantly appropriate policy and planning. (GTZ (2007)
According to the 1997 World Development Report (World Bank, 1997), the per capita
commercial energy for Ethiopia in 1994 was 22 Kilograms (Kg), while for low income
economies it was on the average 369 Kg and for high income economies it was 5066
Kg.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Table: Rural and urban enrgy sources
As you can see from the above table, nearly all the remaining energy needs
particularly
for domestic purposes are covered by fuel wood, the supply of which has led to a
very
rapid depletion of the natural forest resources and vegetation cover. Due to
frequent
usage of fuel wood for energy supply in the country, the forest resource coverage
has
dropped from 35 percent coverage to less than 3 percent. As a consequence of
increased
environmental degradation, Ethiopia is facing a cyclical draught and famine.
According to the GTP Plan, by 2015 maintaining facilities and construction of the
storage for petroleum, the reliable and steady supply of petroleum will be secured.
In
the next five year it is planned to increase the present generating capacity which
is 2000
MW to 8,000 up to10, 000MW at the end of the plan period (2014/15) with electricity
power coverage of the country to 75%. In addition by 2015:
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Ethiopia has vast hydropower resources and only a small fraction has been
developed.
The developable hydropower potential is estimated at 30,000 MW, located primarily
along the Blue Nile and its tributaries.
Very limited and very few proportion of the population in Ethiopia have access to
modern fuels. The per capita modern energy consumption is about 0.02 tones of oil
equivalent (TOE), which is one of the lowest in the world(ESMAP-Energy Sector
Management Assistance Programme Ethiopia-Energy Assessment Report No. 179/96.)
Ethiopia, at the moment, is a net importer of petroleum products. White and black
petroleum products are imported directly by the Ethiopian Petroleum Enterprise
(EPE)
through third party suppliers. Upon receipt from third party suppliers, EPE stores
the
products at Horizon Terminal in Djibouti and then distributes the different grades
mainly Gasoline (Benzene), Gas Oil (Naphta), Kerosene, Light fuel oil, Heavy fuel
oil
and Jet fuel to Oil companies and these companies distribute the fuel through a
fixed
margin structure set by the government. In addition, EPE imports Gasoline (Benzene)
from Sudan. For the supply of Gasoline in Addis Ababa, EPE has made an agreement
with Nile Petroleum, a Sudanese Oil Company operating in Ethiopia, where the latter
conducts blending of Gasoline with Ethanol (E5) at its depot in Sululta (Northern
Part
of Addis Ababa with 15 KM distance from the center)and distributes E5 to Oil
Companies.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
The market is regulated by the Restatement of the Distribution Agreement (DA) which
gives the power of supervision to the Ministry of Trade and Industry (MoTI). The
authority to set and monitor petroleum product prices and margins is granted to the
MoTI through the DA, and the DA also provides for monitoring and related activities
of
petroleum sector regulations, such as operations, safety and environmental issues.
Ethiopia is also believed to hold a huge potential for energy and mining. The
nation’s
current efforts in the areas of hydroelectric power projects and exploration of Oil
and
Gas are clear testimonies of the government’s determination to unleash its natural
resources. Ethiopian industry, transport and commercial sectors largely depend on
imported fuel. The amount of foreign currency spent for the importation of
petroleum
products is very significant and it is between 19 to 28 percent of the export
earnings
(National Bank of Ethiopia, 1999.)
Distribution of Petroleum
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
The Government is the one that determines the inland wholesale and retail selling
prices. According to the Agreement, the Government takes factors such as CIF (cost
of
insurance and freight) cost of product, transport, duties and taxes, company's
marketing expenses, profit and dealer's commission into account for petroleum price
determination.
3. Market Analyses
Petroleum is one of the most traded items in the world. Petroleum is a necessity
product
and the nature of its demand is inelastic. Unlike other businesses whose demand is
impacted by price and other economic variables, the consumption of petroleum
products in Ethiopia continues to increase even in the face of any economic
slowdowns.
Demand for petroleum products such as Fuels & lubricants in Ethiopia is massively
growing at an average rate of 10% over the last five years (since 2004). As of
2009, the
overall size of demand for fuels & lubricants amounts 2.5 billion liters and 25
millions
liters respectively.
Project ownership and structure
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Proposed Location
The head office of the company will be Addis Ababa with rented building
and leased
land for the depo. The two filling stations will be located in the two
commercial areas:
Akaki Kality Area in which the biggest get with high volume of traffic
from and to port
Djibouti, Awassa, Harere, Awassa and Arbaminch. The second station will
be around
Addis Ketema, the second biggest get, which serves Gojam, Gonder and Port
Sudan.
Other outlets will be opened in Adama, Shahemene, Bahirdar, Wolliso,
Nekemitte,
Dessie, Mekele, Assosa, Debire Markose and Gonder in collaboration with
private
retailers.
A. Past Demand
07
2007/08
09
1. Government
16,081 16,611 17,278 17,070 17,424 20,013
21,581 27,365 27,210 31,200
2. Mass
organization 239 256 294 261 780 1,657
2,271 2,880 3,852 4,417
3. UN
1,015 1,001 954 1,056 1,045 1,202
1,221 1,548 1,386 1,589
4. C.D
819 815 921 1,060 672 1,050
1,099 1,394 1,318 1,511
5. Aid
Organization 3,794 4,280 4,219 4,052 4,393 4,384
4,828 6,122 6,292 7,216
6. OAU
134 132 157 217 192 225
250 317 330 379
7. Commercial
30,851 33,311 34,995 34,931 36,703 50,046
58,120 73,697 81,761 93,752
8. Taxi
10,156 10,632 12,010 12,506 12,395 14,523
20,062 25,439 34,282 39,310
9. Private
Commercial 9,859 10,661 11,531 8,245 13,508 14,988
17,263 21,890 24,014 27,536
244,25
270,000
309,60
4
2 0
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Sources: Ministry of transport
Most oil products are consumed in the transportation sector, which accounts for
at least
two-thirds of the country’s total petroleum product consumption. The sectoral
breakdown is approximately as follows: Transport 69% , Industry 10% ,Households
21% .
B. Forecasted Demand
Type of
2013 2014 2015 2016 2017 2018 2019
2020 2021 2022 2023
License
1.
Governme
32,448 33,746 35,096 36,500 37,960 39,478 41,057
42,699 44,407 46,184 48,031
nt
2. Mass
organizatio
4,594 4,777 4,969 5,167 5,374 5,589 5,812
6,045 6,287 6,538 6,800
n
3. UN
1,653 1,719 1,787 1,859 1,933 2,011 2,091
2,175 2,262 2,352 2,446
4. C.D
1,571 1,634 1,700 1,768 1,838 1,912 1,988
2,068 2,151 2,237 2,326
5. Aid
Organizati
7,505 7,805 8,117 8,442 8,779 9,131 9,496
9,876 10,271 10,681 11,109
on
6. OAU
394 410 426 443 461 480 499
519 539 561 583
7.
Commerci 102,565 112,206 122,753 134,292 146,915 160,725 175,834
192,362 210,444 230,226 251,867
al
8. Taxi
42,062 46,015 50,341 55,073 60,250 65,913 72,109
78,887 86,303 94,415 103,290
9. Private
Commerci
29,464 32,233 35,263 38,578 42,204 46,171 50,511
55,259 60,454 66,136 72,353
al
10. Private
cars 174,573 190,983 208,935 228,575 250,061 273,567 299,282
327,415 358,192 391,862 428,697
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
3.2 Supply & Distribution
Ethiopia’s current refined petroleum products are delivered at the port of Djibouti
and Port Sudan and trucked more than 600 KM and more than 1,500KM
respectively inland by many tanker trucks that use the road in each direction.
Quantity in
MT
Petroleum Products Consumed in Transport Sector By
Total
Quantity
Amount of
Road Transport (Motor
Petroleum
Aviation
Vehicle)
Products
Year
MGR
Consumed
Sub-Total
(Motor
in
Gasoil Jet/Kerosene
Transport
Gasoline
Regular)
Sector
1997/98
122,995 557,640 680,635 252,302
932,937
1998/99
135,469 542,936 678,406 238,836
917,241
1999/00
142,526 548,787 691,313 224,177
915,490
2000/01
129,964 610,835 740,799 225,431
966,230
2001/02
133,111 623,197 756,308 259,786
1,016,095
2002/03
148,555 679,281 827,837 259,630
1,087,467
2003/04
130,415 688,527 818,943 294,699
1,113,642
2004/05
146,094 773,256 919,350 334,638
1,253,988
2005/06
137,193 811,689 948,882 370,401
1,319,283
2006/07
143,743 905,478 1,049,221 402,311
1,451,532
2007/08
139,093 1,073,148 1,212,241 482,173
1,694,414
2008/09
150,099 1,203,567 1,353,666 506,497
1,860,163
2009/10
155,806 1,237,922 1,393,728 529,857
1,923,584
2010/11
141,397 1,213,751 1,355,149 558,462
1,913,610
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Source: Ethiopian Petroleum Enterprise (EPE)
From the total 2,050,787 , 1,913,610 MTR is consumed by transport sector and the
remaining by industries and others.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
3. In addition to the provision of Fuels, Lubricants and other specialized
products
like Modern Car wash, Lub change, Supermarket, Cafes and Restaurant Services
will be added by leasing out our premises to companies that offer these
services.
Although the company planned to distribute the above product in the first few years
of
the project, at the expansion stage other related activities like distribution of
tier,
petrochemicals for paint and detergent will be added.
Currently, there are very few Oil Companies operating in Ethiopia. The current
players
are TOTAL, National Oil Company (NOC), Oilibya, Yetebaberut Beherawi Petroleum
S.C(YBP), Kobil Ethiopia, Nile Petroleum, Wadi Al Sundus (WAS) Petroleum Ethiopia,
and TAF. As compared to neighboring countries, Ethiopia has fewer numbers of Oil
Companies with less competition. A case in point is Uganda and Kenya where over 50
independent companies are engaged in the distribution of petroleum products with
aggressive competition in the industry. Despite persistent and increasing growth in
the
demand for petroleum products, the network expansion (the number of outlets being
built) and supply by existing Oil Companies is not adequate. Recent trends in the
exit of
multinational Oil Companies is further weakening the strength of the Oil Industry
to
service the growing demand of the nation for petroleum products. In view of the
current trends in economic growth and government’s plan to invest millions of
dollars
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
in infrastructure, hydropower projects, mining and others sectors, the current gaps
between demand and supply in the petroleum sector is wide.
Company Address No of Products
stations
TOTAL +251 011 465 11 25
Petroleum, LPG,
lubricants
NOC
Petroleum, LPG,
lubricants
lubricants
WAS
Petroleum,
lubricants
TAF
Petroleum,
lubricants
Dalol 251 114 163838 /
Petroleum,
165757
lubricants
Ghion Gas Plc 251-011-2793360 251- One filing Gas
only
011-2794771 station and
220
distributers
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
All Products Volume Trend (September. 2010 & 2011)
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
As you can see form the above table, the LPG distribution is pretty low compared to
the
demand and consumption of other fuel sources like dung, fuel wood and the like.
Why have major International Oil Companies such as SHELL, MOBIL & AGIP have
left the Ethiopian Market?
There are two basic reasons why these multinational companies are leaving not only
the
Ethiopian market in Particular but also the African market. First reason is Safety.
The
stringent operational safety requirements such companies have has made their
continual operation in the Africa market very difficult due to increased number of
fatalities due to high degree of exposure and unsafe road conditions.
Second reason is “Shift in strategy” Most of the multi-national Oil Companies are
engaged in both up-stream and down-stream business. When such companies compare
exportation & production with the distribution business, the income from up-stream
taker the lion’s share. Hence they have embarked on a strategy which they call
“focus
on upstream, profitable down-stream” As a result, they are divesting their
resources
from their down-stream business in Africa and expanding their investment into more
profitable and emerging markets such as China, India, Indonesia etc.
3.6 Marketing
The company will offer retail customers the most convenient ways to fuel through
our
Service Stations. In addition to cash payments for fuel and other non-fuel
purchases, we
have innovated various fuel management systems to make fueling at our outlets an
enjoyable experience. For the example, we will have special Fuel card and coupon in
addition to VISA card. The fuel cards are available to our customers on Pre-paid
and
Post-paid terms and most of them are enabled for both fuel and non-fuel purchases
at
our Service Stations. In addition to the comfort associated with the use of our
fuel cards
as a mode of payment, we will offer irresistible discounts for Card holders. Our
excellent customer service, irresistible product offers, competitive pricing and
eye
catching branding will make us the marketer of choice in all our markets.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
4. Regulations, Licenses and incentives (Legal analysis)
The legal status of business tends to play an important role in any setup; the
proposed
petroleum, LPG and lubricant Marketing and Distribution business. The company is
assumed to operate on as a private limited company as it is mandatory for an oil or
gas
company to register as a private limited company.
4.2 License
Any company willing to distribute and market Oil and Gas needs to obtain a license
from OGRA(Oil & Gas Regulatory Authority). Additionally, license from Explosive
department is also required for the proposed LPG marketing and distribution
business.
OGRA (Oil & Gas Regulatory Authority) issues provisional licenses to technically
and
financially sound applicants/ parties for construction of works commensurate with
their work program, for a period of one year. OGRA inducts reputable third party
inspectors to check/monitor compliance with the terms and conditions of licenses.
The
licenses can be cancelled in case of non-compliance with licensing terms and
conditions.
Pay Order / Bank Draft /- in favor of Oil & Gas Regulatory Authority, as
License fee
Minimum capital requirements:
o 100,000USD for foreign investors
o 600, 000USD if in joint venture with local investors
Proof of registration of the Company (Company incorporation certificate).
Memorandum and Articles of Association.
Location of the tentative / proposed site.
Financial Competence Certificate issued by a Bank (original and stamped).
Minimum Work Program:
Number of storage tanks and capacity of storage tanks.
Bottling facility capacity.
Quantity of LPG to be distributed per day or per month.
Identification of areas where distribution& / marketing of LPG is
planned.
After companies meet the pre-qualification criteria’s the following criteria’s
should be
fulfilled:
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Professional competency papers from ministry of trade & investment.
Licensing & regulation kit from the investment office shall be filled
Through principal registration the minimum legal competency requirement
to be fulfilled are:
o 5000m3 tanker
o Minimum 6 stations of which two must be ready for functioning
and the rest will function within 5 years.
o Local investors shall be willing to work in joint venture with
Foreign Investors if need arises.
However to distribute LPG, establishment of stations is not necessary. With regard
to
lubricants, companies cannot distribute lubricants alone; it should be along with
petroleum in which Pre-Qualification & Qualification requirements should be
fulfilled.
5. Environmental Analysis
The company will have its head office in Addis Ababa. The company will also
construct
its mini depot in the outskirt of Addis Ababa during its first five years of
operation.
The company will have carefully identified strategic cities, towns and locations at
which
its service stations are going to be build. As a strategy, we will focus to
optimally invest
in trade areas with significant traffic flow and locations, which are convenient
and
accessible for motorists. In addition to the traditional channel of providing
service
solely through service stations, the company will also introduce its unique channel
to
provide service by getting much closer to end users.
b. Environmental analysis
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
development activities likely to impact adversely on the environment must be
subject to
Environmental Assessment. The objective of the LI is to ensure that such
development
activities are carried out in an environmentally sound and sustainable manner.
Ecologically sound development of the region is possible when energy needs are
integrated with environmental concerns at local and global levels, for which an
integrated planning framework would be necessary.
The implementations of the project will respect environmental rights and objectives
enshrined in the Constitution by predicting and managing the likely adverse
environmental impacts, and will maximize the socio-economic benefits.
6. Financial Analysis
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
6.2 Expansion Project Costs (‘000) in Birr
A government committee also revises the retail prices of petroleum products every
three months. Lubricants and greases, however, are being directly imported by the
Oil
Companies with the intervention of government in setting prices on a quarterly
basis.
The margin set by the Ethiopian government on lubricants and greases is attractive
as
compared to the slim margin on fuel. In the year 2008, the overall consumption of
fuels
in Ethiopia was over 2 billion liters. By the same year, nationwide Lubricants and
greases consumption was over 25 million liters. The consumption of both fuels and
lubricants is consistently increasing by 10% on a year on year basis and the trend
in
growth is expected to continue in a similar pattern over the next years. Increased
economic activity coupled with increased government spending in the areas of
infrastructure, power, mining and other sectors continues to further expand the
demand for petroleum products. For long, few multinational oil companies with
little
competition to satisfy the increasing demand had controlled the petroleum industry.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
The current distributors margin and retailers margin is as follows:
As you we can see from the above table, Jet fuel is the cost profitable business.
The price
and the profit margin for lubricants and other oils are put on range with high
profit
margin.
The nature of investment on petroleum business is such that once the network of
service
stations are build, the amount of capital investment on fixed assets will be
minimal
whilst a significant proportion of investors’ capital will be circulating on stock
of
petroleum products. Stock and inventory being the next liquid form of asset next to
cash, being engaged in the sectors provides investors with flexibility to diversify
business. In addition, Oil Companies are also enjoying a 15 days credit on supply
of
fuels from Ethiopia Petroleum Enterprise (EPE), an incentive the Ethiopian
government
has provided to facilitate a smooth distribution of the products across the
country. From
control point of view, the petroleum business is a safe business for investors as
costing
and pricing mechanisms are highly transparent and automated.
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Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Income
Statement (‘000) birr
2013 2014 2015 2016
2017 2018 2019 2020 2021 2022
2023
Number of
stations
Owned by
company 2 3 5
Number of
stations
Netw Owned by
ork Dealers/retail
Plan ers 11 15 19 23
29 37 46 57 72 89 112
Estimated
industry
Sales Volume 2,559,287 2,815,216 3,096,737 3,406,411
3,747,052 4,121,758 4,533,933 4,987,327 5,486,059 6,034,665
6,638,132
-
MGR Market Share 255,929 295,598 341,415 394,335
455,457 551,102 666,834 806,869 976,312 1,181,337
1,429,418
1,934
Profit Margin 617 707 791 885 989
1,106 1,237 1,383 1,547 1,730
Estimated
industry
Volume 5,635 6,198 6,818 7,500 8,250
9,075 9,982 10,981 12,079 13,287 14,615
Sales
-LFO Market Share 563 682 750 825 907
998 1,098 1,208 1,329 1,462 1,608
25
Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Maintenance 390 540 713 703 879
1,099 1,373 1,717 2,146 2,682 3,353
cost
Salary and
admin cost 1200 2100 3560 4272 5126
6152 7382 8858 10630 12756 15307
26
Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
7. Conclusion
To summaries, future trends in Petroleum, lubricant and LPG market will influence
the
future demand of and supply. Numbers of vehicles are increasing at tremendous rate,
due to the government policy towards industry led agriculture and a lot of heavy
industries like textile and metal opened industries in the country. According to
Central
statics Survey; between 1998 and 2002 the number of manufacturing industries
increased form 1,43 to 2172. In addition, the awareness of the community to use LPG
increase from day to day. The other competitive advantage of the sector is since
there
are very few companies which distribute Petroleum (9), Lubricants and LPG (4),
Based on the project evaluation criteria’s, the project is feasible enough (please
see the
following table)
27
Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC
Reference
12. Oil Price and Profit margin , Ministry of trade and transport and Ethiopian
petroleum
enterprise
28
Draft Feasibility Study for Distribution of petroleum, LPG and Lubricants
throughout Ethiopia HASS PLC