Short Profile for 60,000 MTPA LPG Import, Storage and Bottling Plant

What is LPG?
LP Gas (or LPG) stands for "Liquefied Petroleum Gas". The term is widely used to describe two prominent members of a family of light hydrocarbons called "Natural Gas Liquids" (NGLs): propane (C3H8) and butane (C4H10). The other two members of the NGLs family, ethane and condensates, have their own distinctive markets. In a gaseous state at normal atmospheric pressure and temperature, LPG becomes a liquid at 15C when the pressure is lowered to between 1.7 and 7.5 bar. This facilitates both storage and transportation. 1 liter liquid propane = 270 liters gaseous propane at 15C. Propane starts vaporizing above -45C and butane above -2C (excluding its use in cold environments). Industry experts predict that there will be enough LPG to satisfy anticipated demand for all uses in the foreseeable future.

Source of LPG
LPG supply comes from two sources: 66% is automatically generated from gas fields as an associated gas when natural gas is extracted from the reservoir. A balance of 34% comes from crude oil refining as a by-product of the cracking process. With refinery capacity growing and strong grows in the production of Liquefied Natural Gas (LNG) the production of LPG will increase substantially over the coming years. The major LPG exporting countries are Saudi Arabia, Qatar, and Malaysia etc. from where LPG can be brought to Bangladesh. Saudi Aramco and Petronas Malaysia already supplying bulk LPG in Bangladesh. Another large LPG trading company of the world Petrodec also invested in Bangladesh in Kleenheat Gas.

Use of LPG
Only LP Gas can serve such a wide variety of uses as cooking fuel for the family in Spain and the community kitchen in India, refrigeration for the shop owner in Brazil, Autogas for taxis in Philippines, welding for the car manufacturers in Germany, heat for the family home in Hungary, heat to provide lift for the first solo non-stop round the world balloon trip, hair spray for the Hollywood stars and life savings for Mount Everest climbers. Even the Olympic torch is LP Gas powered. That is why it is sometimes referred to as the worlds most multi-purpose fuel.

LPG Demand in Bangladesh

Some studies conducted by world renowned agencies earlier. This is directly quoted from BPC document (Development Project Proposal for 100000 MTPA Capacity LPG Bottling Plant at Mongla, Bagerhat)

Government & Private Sector in Bangladesh altogether bottle around 70,000 to 80,000 MT of LPG per year of which around 20,000 MT of inland produced LPG are being bottled by Government Sector against the present total demand of not less than 5,00,000 MT per year. Two feasibility studies regarding prospect of LPG as a cooking fuel in Bangladesh have already been done earlier, the abstract of the studies are presented below: 1. RTM Engineering Ltd., Calgary, Alberta, Canada conducted a feasibility study in 1989 to determine demand of LPG in Bangladesh on behalf of Canadian International Development Agency. RTM determined 2,589,600 LPG Potential Urban Households in Bangladesh in 1995 with a yearly growth rate of 4% and these Potential Urban Households will use 1.45 cylinder LPG (1 cylinder = 12.50 Kg) per month. The income of these Potential Urban Households were over Tk.2000.00 per month at that time. RTM's projection of yearly LPG demand in Bangladesh in 1995 for Urban Household Cooking were as follows: Yearly LPG demand in Bangladesh in 1995 for Urban Household Cooking with a growth rate of 4% over 1989 = 2,589,600 x 1.45 x 12.5 x 12/1000 MT = 563,238 MT. 2. In 1997 Bangladesh Petroleum Corporation and Petronas, Malyasia jointly appointed M/s. Martech International, Inc, USA to conduct a feasibility study on the demand of LPG in Bangladesh. Martech's yearly projection of LPG demand in Bangladesh in the years 1997, 2000, 2005 and 2010 were respectively 675,503 MT, 745,124 MT, 889,347 MT and 1,060,656 MT. Hence, the current demand for LPG as a domestic cooking fuel is not anyhow below 500000 MT per year.

Current and future situations

Right now Bangladesh is going through a big crisis of natural gas. Pipeline natural gas connections to households have been stopped for almost 3 years. Policymakers are saying that in future no pipeline natural gas would be used for cooking purpose. LPG would be one of the viable options for cooking for most of the households. There are several industries like glass and ceramics, autobricks etc. where they have to use burners. LPG would be the possible solution where natural gas is not available. For welding purpose use of LPG is increasing very fast.

There is a huge gap between demand and supply in LPG sector in Bangladesh. According to Ministry of Energy of Bangladesh the gap is over 400,000 MT in the year 2012.

Brief Description of the project

The Plant encompasses of a LPG storage facility of capacity around 6,000 MT by a combination of 2 or 3 spherical tanks. LPG Import Jetty will be installed with necessary Unloading Arms. There will be a Filling Carrousel for filling of LPG Cylinders. One filling carrousel with required filling speed will be installed to reduce the requirement of electric power and to reduce the cost of maintenance. The filling process will be fully automatic. Other accessories like LP Vapor Compressor, Bullet Tank, Truck Filling system will be as per the design. There will be a highly reactive firefighting system including an electrical fire water pump, one jockey fire water pump and one diesel fire water pump. Gas detection system for the whole plant and fire detection system will also be installed. LPG Storage Tanks Pre-fabricated steel tanks. Design pressure spheres: 18 Bar(g), Design temperature 60 C. Materials A516 Gr. 70, Corrosion allowance 3 mm. Number of Tanks and Capacity: As required. LPG Buffer Vessel The placement of this vessel with a higher elevation it will assure the right NPSH available for the pumps towards the filling area. LPG vessel capacity as per requirement Design pressure of 18 Bar(g), Design temperature of 60 C. Materials A516 Gr. 70, Corrosion allowance 3 mm Vapor Recovery Compressor The Vapor return/recovery compressor will work to liquefy the LP Vapor.

LPG Filling System One LPG filling system with 60 filling scale with a capacity of 2000 cylinder/hour as minimum and with provision for increasing, considering the following specifications: i. Type of LPG Cylinder to be filled through the Carousel: Different types of Domestic Cylinders, Industrial Cylinders or Special Purpose Cylinders fitted with Self Closing Vertical Valve with Safety Release Arrangement. ii. Filling Method: High Speed filling/Digitally Controlled with +/- 50.0 gm or better accuracy Empty Cylinder Shade Size and dimensions as required. Filled Cylinder Shade Size and dimensions as required. Compressed Air System: Required units Screw Air Compressor fitted with Pre Filter, After Filter, with drier, filter etc. for pneumatic control system will be installed. Hydraulic/pneumatic Control System: Complete hydraulic/pneumatic control circuit for LPG Storage Tanks and other ancillary plant installations will be used. LPG Cylinder Re-Testing Unit: A complete Cylinder Retesting (Hydro-Pneumatic) Unit should be included with required number of cylinder testing capacity. Plant Safety and Security System: The overall Plant Safety and Security System with the personal Protective Equipment (PPE) and Health, Safety and Environmental (HSE) Equipment will be installed as per requirement like Portable Oxygen Meter, Explosives Level Meter, and Flame Detector etc. Other equipment like LPG Leak Detector, Gas Musk, Ultrasonic Thickness Meter, Ex-Proof Safety Torch, LPG Specific Gravity (Density) Meter, Safety Tools Set with Tool Box, Safety Belt, Ex-Proof Safety Lights along with shades for the Plant Premises and different facilities/utilities buildings/structures.

Fire Water Pond Such facilities adjacent to the plant to be mentioned by the bidder supported by design and drawing. This should include complete pumping system with fire-fighting system. LPG Unloading Facilities: Marine unloading arm 10 class 300#, vapor connection 6 class 300# Hydraulic operated. Unloading metering and pressure control unit 10 class 300# for liquid metering and one metering and pressure control section for the return of the vapor to the ship, line size 6 class 300#. Mass flow metering unit for measuring the mass of unloaded LPG with required specification Test Facilities for Quality of LPG There will be a Testing Lab for testing the Quality of imported LPG

Major Items of the plant with approx. price breakup

SL 1 Short Description LPG Storage Tanks Total Volume= 30,000 M3 5 units of 6000 M3 may be installed Jetty Equipments Marine loading Arms Mass Flow Metering Units Civil construction of Jetty Filling Hall Equipments Flexspeed System LPG Pumping, LPG Compressor, Air Compressor, Truck Loading Unit, Fire Water pumps etc. Pipings, Tubings, Fittings Civil works Shipment Charges, Duty and Taxes etc Other Expenses Total Units 2 Unit Cost 6,000,000 1 3,000,000 3,000,000.00 Total Cost 12,000,000.00

1 1 1 1 1 1

3,500,000 700,000 1,000,000 1,000,000 1,500,000 1,000,000

3,500,000.00 700,000.00 1,000,000.00 1,000,000.00 1,500,000.00 1,000,000.00 23,700,000.00

4 5 6 7 8

Budget for the project

Item Major Equipment Land LPG Import Capital Cylinder Import/making Capital Others Total Amount in USD 23,700,000.00 3,000,000.00 12,000,000.00 10,000,000.00 2,000,000.00 50,700,000.00

Recent Market price of LPG In the following Table, recent market price of Propane and Butane is shown
Month Jul-12 Jun-12 May-12 Apr-12 Mar-12 Feb-12 Jan-12 Dec-11 Nov-11 Oct-11 Sep-11 Aug-11 Jul-11 Jun-11 May-11 Apr-11 Mar-11 Feb-11 Jan-11 Average Propane 575 680 810 990 1230 1010 850 770 750 735 790 835 815 855 945 875 820 820 935 846.84 Butane 620 765 895 995 1180 1040 910 820 810 815 865 885 855 925 995 890 860 810 920 887.11

We can take the average value of last 18 months international price for future reference and calculations. If we consider 50-50 blending of propane and Butane, the LPG Price would be around 870 USD per MT.

Calculation formula for end user price of Cylinder

Now we can calculate the end user price using following table: Item Market Price of LPG Freight (Gulf to BD) CFR Price Conversion rate CFR Value in Taka Insurance CIF Value Landing Charges Assessable value ATV PSI Charges Duty Paid Value Port Dues & Carriage Inwards Offshore & C&F Charges LC & Documentation Charge Landed Cost Financing Cost Total Cost Per Ton 1 Ton =83.33 Cylinders Raw Material Cost per Cylinder Plant Operation Expenses Salary Expense Delivery Expenses Cylinder Maintenance Expenses Profit Margin per Cylinder Price before VAT VAT Price after VAT Dealer Margin Dealer Price Sub-dealer/retailer Margin End user price Unit/Description Per Ton Per Ton Per Ton USD to BDT Per Ton 0.5% of CFR CFR + Insurance 1% of CIF Value CIF+Landing Charge 4% of Assessable Value 1% of Assessable Value AV+ATV+PSI 1% of CIF Value 0.5% of CIF Value 0.5% of CIF Value D.P.V+P.Due+C&F+LC at 18% for 4 month (6%)

Yearly Average

Amount 870.00 70.00 940.00 82.00 77080.00 385.40 77465.40 774.65 78240.05 3129.60 782.40 82152.06 774.65 387.33 387.33 83701.36 5022.08 88723.45 83.33 1064.72 10.50 3.60 30.00 2.50 150.00 1261.32 7.50 1268.82 50.00 1318.82 30.00 1348.82

USD USD USD Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka Taka

In comparison we can have a look on local private operators current profit margin as:
Market Price of LPG (July 2012) Freight (Gulf to BD) CFR Price Conversion rate CFR Value in Taka Insurance CIF Value Landing Charges Assessable value ATV PSI Charges Duty Paid Value Port Dues & Carriage Inwards Offshore & C&F Charges LC & Documentation Charge Landed Cost Financing Cost Total Cost Per Ton 1 Ton =83.33 Cylinders Raw Material Cost per Cylinder Plant Operation Expenses Salary Expense Delivery Expenses Cylinder Maintenance Expenses Price before VAT VAT Price after VAT Dealer Margin Dealer Price Sub-dealer/retailer Margin All included cost End User Price per ton per ton per ton USD to BDT per ton 0.5% of CFR CFR+Insurance 1% of CIF Value CIF+Landing Charge 4% of Assessable Value 1% of Assessable Value AV+CD+AIT+PSI 1% of CIF Value 0.5% of CIF Value 0.5% of CIF Value D.P.V+P.Due+C&F+LC at 18% for 4 month Raw Material Import cost

Profit Margin per Cylinder

September 2012

600.00 USD 100.00 USD 700.00 USD 82.00 Taka 57400.00 Taka 287.00 Taka 57687.00 Taka 576.87 Taka 58263.87 Taka 2330.55 Taka 582.64 Taka 61177.06 Taka 576.87 Taka 288.44 Taka 288.44 Taka 62330.80 Taka 3739.85 Taka 66070.65 Taka 90.00 734.12 Taka 15.00 Taka 8.60 Taka 30.00 Taka 2.50 Taka 780.22 Taka 7.50 Taka 787.72 Taka 50.00 Taka 837.72 Taka 40.00 Taka 887.72 Taka 1450.00 Taka 563.00 Taka

Rough calculation of return

Our target plant capacity is 60000 MT per year means there will be 49,99,800 units of filled cylinders per year. Our basic assumption is average 150/200 Taka profit per cylinder excluding all type of expenses. Now we can have a look on yearly net profit from the plant according to yearly bottling capacity:
Plant Capacity (MTPA) 60000 100000 150000 200000 250000 Cylinder per Year 4999800 8300000 12450000 16600000 20750000 Per Cylinder Net Profit 150 Tk 150 Tk 150 Tk 150 Tk 150 Tk Yearly Net Profit (Taka) 749,970,000.00 1,245,000,000.00 1,867,500,000.00 2,490,000,000.00 3,112,500,000.00 Per Cylinder Net Profit 200 Tk 200 Tk 200 Tk 200 Tk 200 Tk Yearly Net Profit (Taka) 999,960,000.00 1,660,000,000.00 2,490,000,000.00 3,320,000,000.00 4,150,000,000.00