Profit Analysis of a 20 Metric Ton LPG (Cooking Gas) Plant in Kano, Kano State, Nigeria

Establishing a 20 Ton LPG(Cooking) Plant anywhere in Nigeria remains a wise investment decision, as a result of the impressive profit margin the business guarantees, if and only if, the basic conditions for the business to thrive, are put in place.

Supply of 20 Metric Tons of LPG to Kano, the capital of Kano State

 Nearest LPG Depots

1.         Prudent Energy LPG Depot , Oghara, Delta State

Price of 20 Metric Tons of LPG (as at 27/04/2020) – N3,080,000

§  An alternative and nearer LPG depot is the Soraz refinery in Zinder, Niger Republic(less than 300km from Kano). But because the LPG produced in the refinery usually has a higher percentage of propane than the LPG produced in Nigeria, it is a less attractive option.

Landing Cost of 20 Metric Tons of LPG in Kano

·         Ex-depot Price of 20 Tons of LPG : N3,080,000

·         Cost of Renting a 20 Ton LPG Bridger (Tanker) from Oghara (Delta State) to Kano : N550,000

·         Union Fees and Miscellaneous – N40,000    

·         Total Landing Cost of 20 Tons of LPG in Kano – N3,670,000

 

20 Metric Tons of LPG = 20,000kg = 1600 Bottles of 12.5kg

So in essence, we have exactly 1600 bottles of 12.5kg in a 20 Metric Ton supply.

Therefore the landing cost of 12.5kg of gas in an LPG (Cooking Gas) Plant in Kano =N3,670,000/1600 = N2293.75

           Now, per every 20 Metric of LPG stock received, approximately 60 bottles of 12.5kg of gas (amounting to 750kg) will be lost due to the following reasons.

*      Venting of LPG cylinders during the refilling of gas

*      Overfilling of LPG Cylinders

*      Loss/non-recovery of LPG vapor in the supply tanker since most LPG Plants do not have LPG Compressors that recover vapor from the supply tanker. Gas plants that have LPG Compressors may not lose more than 10 bottles of 12.5kg of gas

*      Possible leakage from valves, hose, welded points, pressure relief valve, strainer, pump etc..

           The loss of 60 bottles of 12.5kg out of 1600 bottles( 20 Metric Tons) is calculated thus:

         1600-60(bottles of 12.5kg) = 1540 bottles

Therefore, 1540 bottles of 12.5kg of gas will be used for the profit calculation.

Revenue for 20 Metric Tons LPG Plant in Kano

P.S: The retail prices (for home and other LPG users) and bulk sales prices(for LPG Retailers/resellers) used in this analysis are for locations where the LPG market is very competitive. For less competitive locations, the prices can be adjusted upward , which implies that the profit margin will also increase correspondingly.

v  Recall that the landing cost of 12.5kg of gas at an LPG Plant in Kano = N2293.75

v  The average retail(home and end user) price of 12.5kg of gas at an LPG Plant in Kano = N3000

v  The average bulk(retailer/reseller) price of 12.5kg of gas at an LPG Plant in Kano = N2550

            Now, a typical Cooking Gas Plant will sell 2/3 of its 20 Metric Ton stock to LPG Retailers(resellers)

Therefore : 2/3x1540 = 1026.6 ~1027 Bottles

Ø  Total number of 12.5kg bottles sold to LPG Retailers/Resellers =1027 Bottles

Ø  Total number of 12.5kg bottles sold to home and end users of LPG(Retail) =1540-1027= 513 Bottles

Ø  Total Amount realized from sales to LPG Retailers/Resellers = 1027 x N2550 = N2,618,850

Ø  Total Amount realized from sales to home and end users(Retail) = 513 x N3000 = N1,539,000

Ø  Total amount realized from sales to LPG Retailers/Resellers and home/end users of LPG = N2,618,850 + N1,539,000 = N4,157,850

 

  •          Total Revenue for 20 Metric Tons of LPG: Total Amount realized – Landing cost of 20 Tons = N4,157,850 – N3,670,000 = N487,850
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  •         Now, the average estimated time for an LPG Plant with a modest turnover to exhaust a 20 Metric Ton stock is three days.
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  •          Total Revenue for one week = N487,850 x 2 = N975,700
  •         Total Revenue for one month = N975,700 X 4 = N3,902,800

P.S : Some LPG Plants with a high turnover exhaust up to 40 Tons + of LPG in a day.

Monthly Operating costs

Personnel Salaries (3 Gas Attendants, 1 Manager and 2 security Men) – N210,000

Power Bills/ Fuel for Generator – N70,000

Government Dues – N15,000

Maintenance Cost – N65,000

Stationeries, kits and miscellaneous – N50,000

Total Monthly Operating Costs – N410,000

 Total Monthly Profit for an LPG Plant in Kano

Total Profit per Month = Total monthly Revenue – Monthly Operating costs = N3,902,800 – N410,000 = N3,492,800