The Opportunity

CNG FILLING STATION

Introduction

We are providing investment opportunities in small but profit able project in the shape of Turbo Fast CNG
Filling Station.

The promoters company having valuable expertise of management in various industries in local and international
market offers a unique investment proposal to foreign and Pakistani investors in setting up a chain of CNG filling
stations in major cities and on highways of the province of Punjab.

The investor(s) will be advised to start the chain with 5 filling stations with an objective to grow to claim major
market share in the industry. Size of the investment will be approximately between 30 to 50 million Pak Rupees for
setting up one CNG filling station depending upon the variable factor of cost of land in selected areas while prices of
plant and equipment remain almost the same irrespective of the site area. Safe net profit margin is more than 30% of
sale and pay back period is projected as 4 to 6 years depending upon size of investment and locality.

Islamic Republic of Pakistan is a fast growing consumer economy. Prospectus and interests of China and land locked
Central Asian Independent States (former USSR) in obtaining Seaway from Pakistan and subsequent unprecedented
foreign and local investment in development of Gawader port and city are the factors likely to stimulate an economic
activity in the country never witnessed before.

Ever-growing requirement of fuel for means of transportation has been further geared up with dramatic increase in
number of vehicles resulting from heavy micro financing by Commercial Banks and Development Finance
Institutions (DFIs) in recent years. This requirement is understandably going to experience unseen peaks of demand in
near future owing to the aforesaid factors.

Increase in prices of conventional fuels like petrol and diesel is causing not only a heavy toll on import bill of the
country and consequential problems in balance of payments but is creating a deterrent for millions of consumers in
form of affordability of POL. Environment concerns surfacing from the atmospheric pollution caused by use of
conventional fuels in such large quantities is yet another factor leading to necessity of the use of a cheaper and
environment friendly fueling option.

The ultimate solution to the problem is use of CNG (Compressed Natural Gas) as fuel for domestic and commercial
vehicles; the gas having abundant tapped and untapped resources in the country is more than 30 % cheaper than petrol
and is absolutely not an atmospheric pollution hazard. This option was put to experience on a considerable scale in the
year 2000. However the explosive nature of this option raised valid concerns of safety and the use of CNG remained
quite limited for couple of years. Government responded to the call very efficiently by addressing these concerns
through creation of a number of highly effective regulatory authorities and agencies. Gradually use of CNG has
become so popular that many car manufacturing facilities in the country like Suzuki Motors, Hundai Motors etc have
started manufacturing cars with factory fitted CNG option.

Present official statistics reveal that over one million cars have so far been converted to CNG and Government of
Punjab (most affluent province of the country) has declared that all the buses in major cities will be converted to CNG
by end of year 2008. However number of CNG filling stations remain less than 800 in no. and to narrate this shortage
of filling stations as insufficient will be understatement of the gap between demand and supply of CNG where
average queue time to get a fill is about 20 minutes on highways and 10 minutes on city pumps. To encourage much
needed investment in opening of new filling stations Government of Pakistan has officially declared business of CNG
as an industry.
The above indicates an investment opportunity where an industry is fully ripe yet far from perfect competition and
level of saturation.

PURPOSE OF THE DOCUMENT

The objective of the pre-feasibility study is primarily to facilitate potential entrepreneurs to facilitate
investment and provide an overview about CNG Filling Station business. The project pre-feasibility may 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, production, 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. This particular pre-feasibility is regarding “CNG
Filling Station” which comes under “Petroleum” sector.

CRUCIAL FACTORS & STEPS IN DECISION MAKING FOR INVESTMENT

Key Success Factors

Following factors are the key in making this project profitable:

Location of the project will play a pivotal role in the successful running of the CNG station. The daily
turnover of the cars largely depends on this important factor.

Selection of proper equipment is another key for carrying out the successful operations of the proposed
project.

Opportunities

The proposed project would have a number of competitive advantages:

The project will provide cheaper fuel to its customers compared to the petroleum products which are
already on the higher side.

Government has exempted the imposition of sales tax and custom duties on the import of CNG kits and
CNG plant and equipment,

HDIP, a non-profitable organization working under the umbrella of Ministry of Petroleum and Natural
Resources, provides consultancy services to the interested parties for setting up the CNG filling stations.

Threats

The proposed project will be facing the following threat:

Market saturation over a longer period of time due to a large number of entrants

Threat of increase in the prices of the natural gas by the government

PROJECT PROFILE

Opportunity Rationale
 Due to the environment friendly nature and low cost of natural gas, Hydrocarbon Development
Institute of Pakistan (HDIP) has recognized the need and necessity to promote the use of CNG as a fuel
in automobiles. HDIP has pioneered the use of environment friendly CNG in road transport as an
economically viable fuel, which can substitute the imported petroleum products.

Project Brief

The business of CNG filling station has marked its place in the country through growth during the last
few years. This growth has opened up new opportunities and more CNG filling stations are being setup
all over Pakistan. The prime reason for this is the low cost of the fuel. Along with that, CNG fuel is less
hazardous to the environment as compared to the traditional petroleum fuel.

Proposed Business Legal Status

The proposed legal structure of the business entity is either sole proprietorship or partnership.
Although selection totally depends upon the choice of the entrepreneurs.

Project Cost

The cost of project has been estimated as Rs.35.00 million including land, civil works, CNG equipment
and office equipment. Preliminary expenses and gas security charges are estimated at Rs 1.00 million
and Rs.2.00 million respectively. The CNG equipment comprises of gas compressor, dual hose
dispenser, electric control panel, and storage cascades/cylinders.

Project Investment

Fixed Investment Rs. 34,300,000

Working Capital Rs. 700,000

Total Investment Rs. 35,000,000

The proposed pre-feasibility is based on the assumption of 100% equity. However the composition of
debt and equity can be changed as per the requirement of the investor.

The project seems to be viable with the following returns on investment.

Project Returns

Internal rate of return (Equity) 30% (Conservative)

Payback period - based on cash inflows 4 to 6 Years

Proposed Location

The proposed locations for the CNG Filling stations in Lahore are as follows

¾ Multan Road, Lahore

¾ Wapda Town, Multan

¾ High Way Jhung

¾ Bhawalpur Road.
 The said project may also be established in commercial area of any other city.

CNG Policy of Govt

The Government of Pakistan has offered number of incentives for encouraging the use of
CNG in the country. Some of these are summarized below:

o Strong Government commitment to promote usage of CNG.

o Liberal policy of providing license for CNG retailing.

o Deregulated market price of CNG (for the consumers).

o Priority of providing natural gas connection to CNG stations.

o Exemption of import duty and sales tax till June 2005 on import of machinery and

equipment, CNG kits and cylinders.

More information’s of the following nature on the project can be shared with serious investors during the
meeting with the Promoters delegation from Pakistan.

ƒ Market Analysis.

ƒ Viable economic Size

ƒ Proposed Capacity.

ƒ Market Demand, Market Supply & Industry Growth.

ƒ Licenses & Incentives

ƒ Man Power Requirements.

ƒ Financial Analysis

ƒ Project Income Statement.

ƒ Project Balance Sheet.

ƒ Project Cash Flow Statement

ƒ Cost of Sales, Working Capital & Ratio Analysis.

DISCLAIMER
The purpose and scope of this information memorandum is to introduce the subject matter and provide a
general idea and information on the said area. All the material included in this document is based on
data/information gathered from various sources and is based on certain assumptions. Although, due care and
diligence has been taken to compile this document, the contained information may vary due to any change in
any of the concerned factors, and the actual results may differ substantially from the presented information.
The prospective user of this memorandum is encouraged to carry out additional diligence and gather any
information he/she feels necessary for making an informed decision.

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