NAWSI LPG LIMITED

PREPARED IN SEPTEMBER, 2020

OFFICE: FARE COMPLEX, LEVEL-2,
11/8/E
FREE SCHOOL STREET, PANTHA
PATH, DHAKA-1205
BANGLADESH

MOTHER STATION: MONGLA

BAGERHAT, BANGLADESH

LP Gas Terminal Project Feasibility

 Report
Construction of Mounded Type 3000 MT X 2 No’s
Tanks, Total 6,000 MT LPG Import Terminal
 LP Gas Terminal Project
FeasibilityReport

Index

Chapter Subject Page No.

Chapter-01 LP Gas Business 01
01.01 Introduction 01
01.01.01 LP Gas Business Background in Bangladesh 01
01.01.02 Prospect of LPG Business 01
01.01.03 Govt. Policy for Promotion of LPG Sector 04
01.01.04 Market Areas and Plant Location 05

01.02 Business Planning 06

01.02.01 Short Term/Immediate Planning 06
01.02.02 Long Term Planning 06
01.02.03 Current Status of LPG Business 07
01.02.04 Business Basic Objectives 08
01.02.05 Business Wider Objectives 08

Chapter-02 Technical Analysis 10

02.01 Project Design Basis 11
02.01.01 Import Based LPG Terminal 12
02.01.02 LPG Bulk Storage and Cylinder Filling Plant 12
02.01.03 Overall Plant Production Capacity 12
02.01.04 Port and Jetty Facility 12
02.01.05 LPG Bulk Storage System 13
02.01.06 LPG Cylinder and Road Tanker Filling System 13

02.02 Process Description 14

02.02.01 Feed Products Specification 14
02.02.02 Description of Plant Facilities 15
02.02.03 LPG Dolphin Jetty System 15
02.02.04 LPG Bulk Storage System 17

02.03 LPG Bottling System 18

02.03.01 Design Basis 18
02.03.02 LPG Filling Hall 18

Chapter-03 Market Analysis 20

03.01 Introduction 21
03.01.01 Background Information 21
03.01.02 Competitive Fuels 21
03.01.02.01 Piped Natural Gas
03.01.02.02 Kerosene
03.01.02.03 Fuel wood

03.02 Market and it’s Structure

03.02.01 Definition of Market
03.02.02 Market Penetration by Orion
03.02.03 Marketing Campaign

03.03 Customer Structure

03.04 Affordability

03.05 Distribution and Marketing Network

03.06 Analysis of Competitors

03.06.01 LPG Competitors/Operators in Bangladesh
03.06.02 Market Share of LPG Competitors
03.06.03 Brief on Competitors/Operators

Chapter-04 Analysis of Environment 33

04.01 Protection of Environment 34
04.01.01 Environment Protection Law 35

04.02 Urgent Environmental Issues in Bangladesh 36

04.03 Environmental Impact 36

04.04 Social Impact 37

04.04.01 Profile of a Domestic LPG User/Position of a Woman 38
04.04.02 Employment Aspects 38

04.05 Economic Development in Bangladesh 38

04.05.01 General 39
04.05.02 GDP 39
04.05.03 Inflation 39
04.05.04 Employment 39

04.06 Overview of Commercial Energy Sector 39

Chapter-05 Raw Materials and Supplies 42
05.01 LP Gas Cost Price 43
05.01.01 International Crude Oil Market and Price 43
05.01.02 Implications for Financial Model 44

Chapter-06 Organization and Human Resources 45

06.01 Company Status 46
06.01.01 Organizational Structure 46
06.01.02 Board of Directors 47
06.01.03 Management and Staff 47

06.02 Plant Operations and Business Management 47

06.02.01 Vice President (Eng.& Dev.) 47
06.02.02 Vice President (HR & Admin.) 47
06.02.03 Vice President (A/C & Fin.) 47
06.02.04 Vice President (Sales & Marketing) 47
06.02.05 Vice President (Operations & Bus. Dev.) 47

06.03 Human Resources and Expenditure 48

06.04 Overall Management of ..........Gas Ltd. 48

Chapter-07 Organization and Overhead Costs 49

07.01 Proposed Factory Overhead 49
07.01.01 Factory Salary & Wages 50
07.01.02 Cost of Plant Office Vehicles Fleet 50
07.01.03 Cost of Different Utilities 50
07.01.04 Cost of Fuels, Lubricants and Other Items 51
07.01.05 Cost of Repair and Maintenance 51
07.01.06 Cost of Stationery and Printing 51
07.01.07 Cost of Washing and Cleaning 52
07.01.08 Cost of Workers’ Uniform 52
07.01.09 Miscellaneous Factory Overheads 52
07.01.10 Total Cost: Factory Overhead 52

07.02 Proposed Administrative Overheads 53

07.02.01 Expenditures of Accounts and Finance Depts. 53
07.02.02 Expenditures of Comm. And Admin. Depts. 53

07.03 Proposed Marketing Overheads 54

07.03.01 Marketing Operations Department 54
07.03.02 Expenditures of Marketing Operations Dept. 55

07.04 Sales Forces 55

07.04.01 Expenditures of Sales Forces 55
07.04.02 Sales Promotion Team 55
07.04.03 Expenditures of the Sales Promotion Team 55

07.05 Training and Conferences 56

07.05.01 Expenditures of Training and Conferences 56

07.06 Medias 58
07.06.01 Advertisement on Television 58
07.06.02 Advertisement on Radio 58
07.06.03 Making Advertisements 58
07.06.04 Advertisement on the Newspapers 58
07.06.05 Advertisement on Billboards 58
07.06.06 Expenditures on Media 59

07.07 Proposed Distribution Overhead 60

07.07.01 Expenditures of Vice President (Distribution) 60
07.07.02 Expenditure Details of Vice President (Distribution) 60
07.08 Distribution of Cylinders from Bottling Plant 61
07.08.01 Distribution of Cylinders from Main Plant to Depot 61
07.08.02 Distribution of Cylinders from Depot. to Distributors 61

Chapter-08 Final Analysis and Invest. Appraisal 62

8.1 Financial Analysis and Invest. Appraisal 62

08.02 Discount Rate 63

08.03 Currency Ratios 64

08.04 Dollar/Euro 64

08. 05 Taka/Euro 64

08.06 Taka/Dollar 64

08.07 Total Investment 65

08.08 Operational Costs 66

08.09 Taxes 66

08.10 Sales Prices 67

08.11 Cost Prices 67

08.12 Production Capacity 68

08.12.01 Sales Based on Supply Capacity 69

08.12.02 Refill Rate 69
08.12.03 Cost of Distribution 70
08.12.04 Depreciation 70
08.12.05 Scenarios 70

08.13 Table of Discounted Cash Flow (DCF) 71

08.13.01 Net Present Value (NPV) 72
08.13.02 Sensitivity 72
Chapter-09 Risk Analysis 73
09.01 Risk Assessment 73

09.02 Technical Risk 74

09.02.01 Ground 74
09.02.02 Civil Works 75
09.02.03 Planning 75

09.03 Country’s Political Risk 75

Chapter- 01
LP Gas Business
01.01: 01.01.01: LP Gas Business Background in Bangladesh:

PREFACE

THE RATIONALE:

Liquefied Petroleum Gas (LPG) is one of the most clean and environmental friendly fuels. It is an
exceptional energy source due to its origin, benefit, application and its industry. It is a vital source of
energy for 100s of millions of people through the world. It is easily portable which can be transported
stored and use virtually anywhere and there is a sufficient reserve to last for many decades. LPG has
been used widely in Europe, America &Worldwide. If used as a cooking fuel it will save green
vegetation’s of the country to decrease greenhouse effect as well as environmental pollutions.

LP Gas Limited, the first LPG bottling plant in the country which was installed at North Patenga,
Chittagong. It was setup based on the LPG available from crude oil processing at ERL in the year 1977-
1978as a project of Bangladesh Petroleum Corporation (BPC). Installed capacity of this plant was 6000
MT/year. With the enhancement of LPG production by ERL the capacity of LP Gas Limited (LPGL)
was subsequently increased to 15000 MT/Year in three different phases. A second LPG Bottling plant of
8000 MT/Year capacities was installed 1977-98 as a project of BPC at Kailashtilla, sylhet. This was
done based on LPG extracted from Natural Gas Liquid (NGL) fractionation by RPGCL. Total LPG
Production in the country is inadequate against estimated demand of not less than 8.00 Lakh MTPY
which is being radically increased day by day for short supply of natural gas as cooking fuel.

On the other hand, Petrobanglahas installed a Natural Gas Condensate FractionatingPlant

(Refinery) at Kailashtila, Sylhet which producesLPG approx. 5,000 MTPA and it is being
bottled by another LPG Bottling Plant at Kailashtila and marketed through the above 3 (Three)
Oil Marketing Companies since 1998. But these LPG (20,000 MTPA) produced in the
Government Sector isvery insufficient to meet the country’s increasing demand.

Therefore, a huge market demand encouraged private sector to come into this business and
4(Four) companies (import based) installed storage and bottling plants at Monglaand
Chittagong. They are Bashundhara LP Gas Ltd. at Mongla (1999), Wesfarmers KleenheatElpiji
atMongla (2001), Summit Surma Petroleum Co. Ltd. atMongla (2001) and Totalgaz BD
(Premier LP Gas) Ltd. atChittagong (2002).

Besides, JamunaSpacetechJV Ltd. and Bangladesh Oxygen Ltd. have installed 2(Two)LPG
Storage and Bottling Plants at Bogra and are buying bulk LPG locally from the Government
(BPC) and other private LPG import-based companies.

LPG means liquefied petroleum Gas which is a mixture of Liquefied propane and Butane. It has a vapor
pressure not exceeding 200 pa and temperature of 300 degree centigrade. it is colorless, odorless ,
mixture of hydrocarbon and liquefiable under reduced temperature orb moderate pressure. This is an
intermediate product between natural gas and crude oil. LPG is one of the most clean and environmental
friendly fuels. It will improve standard of livelihood for the people of the country and save time
especially for womenfolk of all community to deploy themselves to the socio- economic activities. LP
Gas is one of the common fuels in our country where natural gas is not available. Gradually it has
become a popular fuel in our country.

Bangladesh Petroleum Corporation (BPC) is a statutory organization of the Government under the
Energy & Mineral Resources Division (E&MRD) engaged to supervise, co-ordinate and control all the
activities relating to import, storage, marketing and distribution of petroleum products in the country and
to develop and establish infrastructure facilities in relation to petroleum. As part of its mandate BPC is
also involved in import of Liquefied Petroleum Gas (LPG) and all activities related to LPG supply and
distribution through different government and private sector channels.

Present LPG supply in the country is approximately 100,000 MT per year of which around 20,000
MT/year is produced in public sector. The estimated demand for LPG in the country is over 500,000 MT
per year with the increase in demand being driven by the shortage of gas supply for cooking fuel.

To address the shortage of cooking fuel for households, the government has decided to take up a project
for “Construction of LPG Import, Storage & Bottling Plant at Kumira or any suitable Place at
Chittagong Including Import Facilities of LPG, Jetty, Pipelines & Storage Tanks under PPP” (the
Project). The production capacity of this proposed Project has been planned for 100,000 MT per year.

INDUSTRY CONTEXT:

Boasting an annual 11% growth rate, LPG industry is one of the most promising industries in the current
business scene. The mention growth is expected to escalate as the market for LPG will expand due to
lack of natural gas in the future. In 2013, Platts energy estimated that our reserves would be exhausted
within the next decade. Given this statement, competition is surging rapidly and there are already six
established LPG downstream operations, which are providing 1.1 lakh tones worth of LPG annually in
the market. But still there is a huge demand for LPG cylinders 3 Lakh tones, which is almost three folds
of the supplied amount2. Also. because of this supply-demand mismatch, the price station at retail level
market is extremely volatile and reported to be borderline amoral. Though industry players adjust their
prices with international price points at the beginning of every month, numerous cases of price deceits
are witnessed all around Bangladesh owing to lack of customer awareness. For example in the time
period of January 2014 to November 2014 international (Saudi Aramco Pricing) LPG price (Per Ton)
went down from $1218 to $648 but at Bangladesh retail level the price remained almost the same.

The country’s LPG sourcing is almost wholly import based where 80% of the marketed LPG is being
sourced from foreign refineries. Most of them are situated Saudi Arabia, U.A.E, Malaysia, Singapore
etc. The rest of it is sources by the Government run Bangladesh Petroleum Corporation (BPC).

The current customer’s sets are mostly based on urban and peri-urban setting. But the target group will
encroach into almost all clusters of the demographics as LPG is user friendly, more environment
friendly than alternative fuels and also the predicted exhaustion of natural gas supply. Price is still
working as a barrier to entry. For example an average size Bangladeshi household needs 2 cylinders of
12 liters LPG per month totaling up to BDT 3000 Expenditure as fuel cost4. This is around 5 times the
expense. If natural gas grid connection were available for that household.
Industries are also adopting LPG uses as their current fuel policy because of the natural gas
infrastructure failure. Given the huge market potential, the Government of Bangladesh (GOB) has
granted more than thirty new licenses to private operations that are willing to setup downstream LPG
operations. Going forward policy decision may even mandate to switch off natural gas connections to
residential areas.

01.01.02:Prospect of LPG Business:

A huge change occurred with the introduction of Natural Gas as cooking fuel to the domestic sector.
Conventional cooking fuels such as wood, coal, sawdust, dry leaves gradually became less preferential
to the users because of availability of Natural Gas and LP Gas. LP Gas became popular and established
its demand in gas-starved areas especially in the Western region of the country. In Dhaka and other
district cities of the Eastern region of the country found a growing demand of LPG because of cost and
difficulties of Natural Gas connection. A minimum 3 (Three) months’ waiting period and Connection
Fee of Tk. 15,000/= are required for a Natural Gas connection. On the other hand, LPG connection is
immediately available for Tk. 3,000/= only and can be connected on demand. Conventional fuels
(wood, sawdust, coal etc.) are not comparable with LPG. Only Kerosene is an alternate fuel to LPG but
due to LPG’s high calorific value and ease of use, it becomes popular as domestic cooking fuel.
Presently Petroleum crude and it’s products’ prices are high and such, similar case is for LPG also. Now
12.0Kg LP Gas is sold to the consumer at a price of Tk. 1,000/=. Still, due to growing population, this
price is being accepted by the consumers.

Country's total population is about 160 Million out of which only 30% or less have access to Natural
Gas and such 112Million populations is in dire need of cooking fuel. If 10% of these huge populations
use LP Gas as cooking fuel, monthly consumption would be 40,320 MT(assuming 5 members’ family is
using 18 KgLPG/month). In this regard, a number of surveys have been conducted at different times
since 1989 to evaluate the prospect of LPG as follows:

Table-1:LPG DemandScenario in Bangladesh

Study Sources/Agents Year Annual Demand (MT)

RTM Engineering Ltd., Canada. 1989 3,00,000

LPG Forum, Bangladesh 1997 2,00,000
Market International Inc., USA. 1998 3,50,000
Different Private Studies 1998 2,65,000
-do- 1999 2,70,000
-do- 2005 4,50,000
-do- 2008 5,25,000
-do- 2009 5,70,000
 Table-2: LPG Local Production & Import in Bangladesh
(Year-Wise in MT)

Year BPC Jamuna BOC Basundhara Kleenheat Summit Totalgaz TOTAL

(Local) (Local) (Local) (Imported) (Imported) (Imported) (Imported)
1979 94 94
1980 2,692 2,692
1981 4,586 4,586
1982 4,875 4,875
1983 4,371 4,371
1984 6,228 6,228
1985 7,117 7,117
1986 8,936 8,936
1987 9,062 9,062
1988 9,186 9,186
1989 9,260 9,260
1990 9,486 9,486
1991 7,870 7,870
1992 8,109 8,109
1993 9,885 9,885
1994 12,632 12,632
1995 15,757 15,757
1996 13,448 13,448
1997 15,948 15,948
1998 13,629 13,629
1999 9,259 2,500 11,759
2000 12,037 3,000 5,520 20,557
2001 16,197 4,000 8,579 28,776
2002 15,261 5,000 2,000 12,755 1,450 407 36,873
2003 14,807 5,600 2,300 14,400 3,120 1,539 1,980 43,746
2004 14,626 6,800 2,500 14,700 4,250 4,777 4,572 52,225
2005 16,865 7,800 2,700 9,000 4,888 3,047 8,722 53,022
2006 20,220 8,100 3,100 8,000 5,621 2,140 10,876 58,057
2007 22,367 8,900 4,000 8,500 6,464 606 9,984 60,821

From the above scenario, it is clear that LPG consumption in the year 2000 was approx. 20,557 MT and
consumption trend for the last 7 (Seven) years shows a rapid growth, e.g. in 2007: 60,821 MT, even
when the international LPG price has been kept going up. On the other hand, the different studies show
that the actual hidden demand is much more than the consumption pattern. But due to uncontrolled
market price and some unexpected hurdles of availability, people are at a distance from the surveyed and
expected market demand.LPG has already established its market with clear prospect as an economic and
environment friendly fuel in different arena of consumptions.There is a huge untapped market yet to be
explored and encouraged.

01.01.03: Govt.Policy forPromotion of LPG Sector:

Presently, the Govt. has given high priority to projects that stimulate the use of Liquefied Petroleum Gas
(LPG) in order to minimize the increasing load on Natural Gas and deforestation and to reduce air
pollution in the country. In this context, the Govt. has drastically reduced the Import Duty of LPG from
45% to only 5% (Ref: National Energy Policy) in order to keep the price within the normal reach and
purchasing capacity of the common people and to stimulate the greater use of LPG in the country.The
only competing fuel is Natural Gas. But the Govt. has decided to stop providing further Natural Gas
domestic connection since June 2006. Because of the high population growth,the availability of cooking
fuel has become a real crisis in the country. Therefore, the demand of LPG and Kerosene is growing
tremendously. But as a clean fuel, always LPG has got the preferential choice to the people whereas
other sources of domestic fuels like firewood, sawdust,leaves of tree, cow dung, bamboo, jute sticks are
also fulfilling a major part of requirement of the villagers. Although Bangladesh has discovered Coal
Mines still coal is not a familiar and popular cooking fuel so far. So, the Govt. has liberalized their
control by permitting and welcoming the Private, Foreign, Joint Venture, Multi-National investors to
invest in the LPG field. And such Totalgaz- France,Mobil-USA, Kleenheat-Australia, Spacetech-India,
Teledata-India have invested in this LPG field with different Bangladesh Companies.

On the other hand, the expansion and maintenance of the Natural Gas Transmission and Distribution
Network is highly capital intensive resulting in a non-profitable gas pipeline and being provided to the
city dwellers only at a highly subsidized price. In the recent years, all donors, i.e. IDA (World Bank),
ADB, DFID and others, as well as, private sector operators of International Oil Companies (IOC's) have
been pressing hard to the Govt. to withdraw subsidies from piped Natural Gas. It is also not possible to
reach all the townships and semi-urban areas with this type of gradual and slow expansion of the Natural
Gas Network whereas Millions of potential customers are looking forward for uninterrupted supply of
clean kitchen fuel, particularly bottled LPG.The Govt. allocates the smallest percentage of the natural
gas for domestic purposes and also intends to maintain the same policy even, if new gas fields are also
discovered. The Govt. has to supply a majority of the natural gas to the power stations. Thus the market
of LPG is likely to grow bigger and bigger by the time Orion comes into production.On the other hand,
the Govt. also intends to promote the use of environment friendly substitute and discourage the use of
fuel wood. The forests of Bangladesh are becoming barren and likewise the Govt. wishes to restrict the
use of fuel wood with the arrival of other substitutes such as LPG.The restriction of the use of fuel wood
shallplay an active roll and it would be an added incentive for LPG market. Moreover, it has been
proved that 80% of the urban households use fuel wood. This means that a majority of the population
would have no other alternative but to use LPG.In September 1995, the Government has formulated
“The National Energy Policy” which covers all the above statements

01.01.04: Market Areas and Plant Location:

Since the South- South West zones are seriously fuel-starved area, therefore, to maintain the smooth
supply at a reasonable competitive price, Orion has rightly planned to set up a 30,000 MTPA Capacity
LPG Import, Storage, Bottling, Distribution and Marketing Terminal.Distances(in Km) of Orion LP Gas
Terminal from various major marketing cities would be as follows:

1. Bagerhat (55),
2. Khulna (50),
3. Jessore (120),
4. Satkhira (110),
5. Kushtia (190),
6. Faridpur (225),
7. Barisal (150),
8. Dhaka (220/330),
9. Meherpur (180),
10. Magura (150),
11. Shibchor (160),
12. Gopalganj (100),
13. Madaripur (155),
14. Dinajpur (310),
15. Thakurgoan (540),
16. Tangail (335),
17. Bhairab (280),
18. Comilla (420),
19. Laxmipur (380),
20. Rajshahi (350),
21. Darshana (195),
22. Patuakhali (250),
23. Pirojpur (190).

Besides, all other areas are also counted and taken into consideration for marketing in gradual phases of
market development and acquisition. The marketing master plan is to market Orion Gas products all
over the country. The Orion Gas Products Distribution would be arranged by Orion and by the
Dealers/Distributors themselves in a consistent frame work developed by Orion.

01.02.01: Business Planning:

01.02.01.01: Short Term/Immediate Planning:

Business would be started with a very dynamic mode to establish a very good competitive wining image
to the Dealers/Distributors/Clients. People have a common fascination towardthe brand name of the
product and such we do believe that “Orion Gas” would be the sweet and popular name in LPG Sector
also. By appointing country-wide Dealers/Distributorsand creating Orion Gas Network and a
prospective image through an uninterrupted steady supply of gas products, we would establish our
credentials to win in the competitive market environment.Through the continuous severe persuasions in
the market by an efficientSales and Marketing Team headed a strong and aggressive target oriented
Marketing Manager, Orion Gas market would be created and established. It would require a strategic
planning.

01.02.01.02: Long Term Planning:

There is a good scope of bulk LPG business in industrial sectors like Private Small Bottling Plantse.g.
JamunaSpacetechJV Ltd., Bangladesh Oxygen Ltd. and future similar upcoming bottling
stations/projects. Totalgaz, Basundhara, Kleenheat, BPC are doing this bulk LPG businesses. We have
50 MT Capacity Digital Weigh Bridge Scale and 10 MT, 15 MT, 20 MT Capacity Road Tankers for this
purpose. As per our Plant location, this Plant is in a better position (shorter distance, less traffic etc.) and
we can make the bulk LPG business with the prospective clients. There are some factories who produce
Aerosol Insect Spray, Room Air Freshener/Deodorant, Human Body Spray etc. and they also purchase
bulk LPG. Though the bulk sales volume is low but the margin is high and the volume would be
increased gradually.We may also set up an Air Freshener, Insect Spray, Body Spray Plant for this
purpose.

01.02.01.03: Current Status of LPG Business:

As the population is growing continuously and standard of life is ascending high, demand of LPG is also
going up. But presently the price of every thing has moved up abnormally. One cylinder (12.0 Kg) LPG
is now being sold at Tk. 1,100.00. Though it is very high but people are still buying it. If the price comes
down any way, the demand would increase tremendously.

On the other hand, traditional domestic fuel, i.e. firewood has become not only costlier but also scarce
and highly inconvenient to use in the attached Kitchen of the dwelling houses or flats or apartments or
multi-storied buildings. Land is very scarce in Bangladesh, therefore, people cannot afford to build a
detached Kitchen. Thus, at present, the use of firewood (biomass) and Kerosene (SKO) in the attached
Kitchens have become much inconvenient.Furthermore, the country has a very scarce land of 6.40
Million Acres as forest area while One Third of the country's total land is either rivers or water bodies or
forestless open and agricultural land. Source of firewood has become highly scarce due to increasing
demand for uses of timber and wood for other purposes. As estimated by the Department of Forest of
Bangladesh, there will be an acute shortage of firewood to the sum of 250MMCFD by 2015.

Based on the previous, the Department of Environment (DOE) in Bangladesh has therefore, imposed a
lot of restrictions for the use of firewood and cutting of trees without official permission. This implied
that the country has no other option but to explore alternative sources of domestic fuel. For this, the
Government has allowed import, storage and bottling of LPG in the private sector.The country has a
large potential for using LPG as clean and convenient fuel. A large part of the total population
(150Million) is facing serious environmental crises and acute problems of air pollution in the townships
and major cities of Bangladesh.Therefore, on the backdrop of country’s present commercial energy
supply constraints, the Government’s special consideration about privatization of LPG businesses and
the environment friendliness of LPG; Orion Group, represented by Orion Gas Limited, is planning to set
up an LPG Import, Storage, Bottling, Distribution and MarketingPlant atMongla Port Industrial Area,
Bagerhat with an envisaged capacity of 30,000 (60,000 M3) MTPA.

01.02.01.04: Business Basic Objectives:

The primary purpose of this study is to prove that the envisaged construction of the LPG Import,
Storage, Bottling, Distribution and Marketing Plant is technically as well as economically or financially
feasible.

01.02.01.05: Business Wider Objectives:

The construction of the LPG Import, Storage, Bottling, Distribution and Marketing Plant is based on a
wider objective aiming at the following Spin-Offs:

i) Economic Spin-Off:New jobs will be generated in the region in order to operate the plant.

ii) Public Health Spin-Off: The public health will be improved. Among all the energy sources in
Bangladesh, biomass is playing the most vital role. According to an estimate, biomass/wood accounts
for about 70% of the total energy consumption. Although properly burning of biomass creates less
greenhouse gasses than LPG. But,in Bangladesh, this is not done properly, resulting in harmful flue
gases on the local level.

iii) Environmental Spin-Off: Reducing the use of biomass will reduce deforestation. Deforestation
causes:
 Fertile soil to be blown away or to be washed into rivers, leading to soil erosion, drought,
flooding and loss of wildlife creating natural imbalance which is essentially important,
 It may also increase the Carbon Di-Oxide content of the atmosphere and intensifythegreenhouse
effect, because there are fewer trees absorbing Carbon Di-Oxide from the air for their
photosynthesis,
  It ultimately leads to famine and is thought to be partially responsible for the flooding of
lowlying areas of Bangladeshbecause the trees help to slow down water movement.

iv) Social Spin-Off: The social circumstances of the most people in the rural area will improve whereas
most of the rural people are not connected or cannot be connected to the Natural Gas Grid.In this case,
the availability of bottled LPG will improve their living standards.

Chapter-02

Technical Analysis

02.01: Project Design Basis:

02.01.01:Import Based LPG Plant:

The Plant would be located at the East bank of the River- Possurin the Mongla Port I/A, Mongla,
Bagerhat which is at a distance of 65 Nautical Miles from the Fairway Buoy situated at Lat. 21º 26'N
and Long. 89º 34.4’ E in the Bay of Bengal. But there is a draft restriction in the Mongla Port Jetty
which is maximum 7 Meters and usually the draft remains as 5 Meters only which would allow the
berthing of only 2,000 MT NWT LPG Tanker Ship.

02.01.02: LPG Bulk Storage and Cylinder Filling Facility:

There would have 2 (Two) Units Spherical Storage Tanks of each 1,500 MT Storage Capacity, i.e. there
would have a total 3,000 MT bulk LPG Storage Capacity. Basundhara has also got the same storage
capacity. This capacity has been calculated on the basis of Monthly (Daily Single Shift) Filling Capacity
(25 Days x 12.0 Kg x 10,000 Cylinders/Day). Therefore, always 1 (One) imported shipment of 2,000
MT would be in line process and such, at the end of every month, there would be received a shipment of
2,000 MT bulk LPG. When there would be LPG receiving in one tank, then, production/filling would
be commenced from the other tank. Basundhara has got 24 Filling Machines and currently, there would
be 24 (Twenty Four) Filling Machines installed and would be ready for filling and there would have
another 6 (Six) Machines Positions vacant and ready to be fitted with machines. And such, at our
convenient requirement stage, another 25% Filling Capacity may be enhanced easily. Due to
competition and survival in the market, LPG Storage Capacity has been kept as the same of Basundhara
and Filling Capacity have been kept 25% more than that of Basundhara for a greater market acquisition.

02.01.03: Overall Plant Capacity:

The overall production capacity of the Plant would depend on the following parameters:

02.01.03.01: Port and Jetty Facilities:

The available draft of the River-Possur in the Summerwill not be more than 7Meters. Therefore, the
NWT of the LPG Tanker Ship is limited to 2,000 MT within which bulk LPG Cargo would be in the
range of 1,800 MT~2,000 MT per parcel. The bulk LPG Storage Tank ispressurized and total annual
import has been calculated as 30,000MT.Based on theabove NWT Capacity, LPGTanker Ship (Parcel)
will arrive every 25 days. The Jetty Capacity is designed to 2,500 MT (5,000 M 3)having berthing facility
with an unloading pump capacity of 300 MT (600 M3)/Hr. Therefore, a parcel of the above load would
take around 6~7 Hrs. to unload in the shore tank (LPG Storage Tank) of the plant.

02.01.03.02: LPG Bulk Storage System:

The design of bulk LPG Storage System has been done as per import capacity of30,000 MTPA. But
Storage Capacity is based on the total content of the LPG Tanker Ship and a capacity to overcome a
maximum delay of 12 working days (i.e. 2 weeks) in the arrival of the ship. This results in a total net and
safe storage capacity of 3,000 MT. For an average operating temperature of 20°C, the density of
imported LPG (Propane:Butane = 50:50) is 0.538 Kg/M3. Therefore, the required storage capacity
corresponds to a total tonnage of 3,000 MT (i.e. working volume of 6,000M3) per month.The maximum
safe filling level is based on the maximum rise in product temperature that may occur in practice. With
an ambient temperature rise at around 30°C, the calculated maximum safe filling degree is 85% by
volume.With this maximum filling degree, the total storage tonnage is 3,000 MT i.e. by volume it is
6,000 M3. To meet this requirement, installation of 2 Units of 1,500 MT (3,000 M 3 each) Spherical
Tankshave been considered in the Plant Design.

02.01.03.03: LPG Cylinder andRoad Tanker Filling System:

The total imported LPG will be bottled in various sizes of cylinders (viz.50/45/40/33 Kg,12.5/12.0 Kg
and 5.5/5.0 Kg etc.)as per delivery program and operations requirement at the Filling Plant and
distributed/marketed through country-wideDealers/Distributors network and also through direct sales to
the Commercial and Industrial Clients. And the bulk LPG would be delivered to the Commercial and
Industrial Clients through LPG Road Tanker which would be filled through Bulk LPG Pump and Road
Weigh Bridge Scale.
The design of the Cylinder FillingPlant is based onthe parameters described in the Table below:

Table-3: Design Parameters for Import Based LPG Plant

Parameters Qty.
Annual ImportedBulk LPG Qty. (MT) 30,000
Annual (12.0 Kg Cyl.) Bottling Capacity (No.) 30,00,000
Working Days per Year 300
Working Days per Month 25
Working Hours per Day 8
12.0 Kg Cylinder. Bottling Capacity per Day (MT) 120
12.0 Kg Cylinder. Bottling Capacity per Month (MT) 3,000
12.0 Kg Cylinder. Bottling Capacity per Day 10,000

02.01.03.04: Process Description:

Selection of type of bulk LPG storage system is based upon the ambient condition and
frequency of operation. According to this selection criteria,LPG bulk LPG storage in a country
like Bangladesh with a high frequency of movement of products and variations in bulk LPG
mixture demands an “Above Ground Pressurized Storage”system. And such 2 (Two) Units of
1,500 MT each above ground LPG Spherical Storage Tanks have been considered for this
Plant.

02.01.03.05: Feed Products Specification:

i) LPG Composition:
LPG is normally available as a mixture of mainly 2 gases (viz. Propane and Butane)in various
ratios. Usually, LPG comprises of Butane and Propane with 50: 50 ratiosin varying ranges of
(30%~ 70%):(70%~ 30%).Normally, imported LPG has a Butane and Propane contents ratio of
about 50:50. But for the Plant Design and Safety purposes, the composition of LPG has been
considered as:
 Table-4: Compositions of LPG
Compounds Compositions
Ethane Mole Ratio to Propane shall not
Propane Max. 70% by Volume
Butane Min. 30% by Volume
Pentane & Heavier Max. 2% by Volume
Density (Liquid) Range: 0.48 - 0.58 Kg/Liter

ii) Product (LPG) Specification:

There is no fixed specification for LPG to be delivered into the cylinders and to the other
FillingStations. The following criteria would be followed for Cylinder Design and Safety
purposes.

Table-5: 12.5 Kg LPG Cylinder’s Specification

12.5/12.0 Kg LP Gas Cylinder’s Major Specifications

Parameters Values Units
Design & QC Code DOT 4BA 240/BS 5045
Water Capacity 26.6 Liters
LPG Capacity 12.5 Kgs
Service Pressure 17.0 Kg/Cm2
Hydrostatic Test Press. 34.0 Kg/Cm2

02.01.04: Plant Facilities Description:

The entire Plant facilities can be divided into the following:
1. LPG Dolphin Jetty,
2. LPG Storage Tanks,
3. LPG Filling/Bottling Plant,
4. LPG Bulk Transfer/Road Tanker Filling Facility,
5. LPGRoadTankerWeighBridge Unit,
6. Pipe Lines (LPG, Air, Hydraulic Oil, Water etc.),
7. Electrical Switch Gear, MCC Panels&Stand-by Power Generation Facility,
8. Plant Mechanical Structures (Filling Sheds, Testing Sheds, Repair/Maintenance Sheds
etc.),
9. Plant Civil Structures (OfficeBuildings, Garage, Different Foundations, Roads, Yards,
Drains, Periphery Walls, Security Observation Posts/Towers, etc.),
10. Plant Utilities (Water, Gas & Electricity etc.) System.
02.02: LPG Dolphin Jetty System:
The LPG Jetty has been designed as Dolphin Type which consists of Working Platform,
Dolphin Piers, Berthing Piers, Bridge Approach, LPG Marine Loading andUnloading Arm,
Vapor Return Line, LPG Drain Tank with LPG Drain Pump and necessary utilities/supply
facilities as Electrical Connections, InstrumentsAir, Fire Water,Drinking Water etc.The
preliminary civil design of the jetty is based on common practice and constructability. The jetty
envisaged will consist of 4 (Four) Mooring Dolphins, 2 (Two)Breasting Dolphins, 1(One) Off-
Loading Platform and 1 (One)Trestle to the shore. Interconnecting Walkways will be provided
between the Dolphins and Platform. The overall distance between the Outer Mooring Dolphin
and Platform will be 140 (One Hundred and Forty) Meters. The berthing line is envisaged to be
approx. 60 (Sixty) Meters from the shore.The size of the Loading Platform is (L x W) = 10 M x
8M. This should be adequate to accommodate one Loading Arm with piggy-back Vapor Return
Line plus a simple Access Gangway, EFCValves, Fire Fighting Facilities etc. Top of concrete
of the deck is taken as 6 (Six) Meters above Low-Low Tide [High Tide = +3.8M plus waves].
The concrete deck platform will be supported on 10 (Ten) Piers (each of 762 mm diameter
steel piles with a wall thickness of 16mm). The top of the steel piles will be filled with concrete
for fire resistance. The piles will be painted from 5 (Five) Meters of the mud line [scour] up to
the concrete. Piles will be provided with sacrificial anodes for cathodic protection. Handrails will
be provided along the edge of the platform, these will be removable at the riverside.

The trestle will be approx. 5 (Five) Meters wide to allow for a 3 (Three) Meters wide pre-cast
roadway suitable for Pick Up size maintenance vehicle plus pipe-way for 8 Inch
diameterProduct/Liquid line, 6 (Six) Inchesdiameter Vapor Return line and 10-12
Inchesdiameter Fire Water line and Pipes for electrical and instrument cable trays. Supporting
Bends will have a spacing of 8 (Eight) Meters. Piles will be 762mm diameter same as the
platform. Pile Caps, interconnecting beams and deck slab will be pre-cast concrete. An
abutment will be provided at the shore side. No expansion loop is foreseen on the trestle.

2 (Two) Breasting Dolphins will be provided with an overall spacing between Dolphins of 35
(Thirty Five) Meters. The location of the Dolphins will be in such way that with fully compressed
fenders, the LPG Tanker Ship will stay clear of the off-loading platform. The fenders’ size
would be DXL = 1,000 mmx1,000 mm which would be made of steel panel and chain. All these
will be made of galvanized steel.The overall size of the Dolphins will be 4x3 Meters with a
height of 2 (Two) Meters and will be supported on 6 (Six) Inches Diameter and 762 mm Height
Steel Piles. 4 (Four) Mooring Dolphins will be approximately 4x4 Meters and will be provided
with double quick release mooring hooks. Optionally Electric Capstans can also be provided.
The Outer Dolphins will be provided with emergency evacuation ladders. The Dolphins will be
supported on 4 (Four) InchesDiameter and 762rnm Steel Piles, the interconnecting walkways
between Platform and Dolphins will be constructed from 36 (Thirty Six) InchesDiameter pipe
with a 1 (One) Meter wide walkway with galvanized steel gratings and handrails.

It has been assumed that the LPG Tanker Ships will have their own unloading pumps
(Capacity of 600 M3/Hr) for discharging the LPG. An 8" Diameter Unloading Arm with an
emergency release coupling system will be installed for transfer of the LPG to the Plant
Storage Tanks. To keep the storage facilities at the vessel “inert” and to reduce/eliminate
Hydrocarbon emissions, a Vapor Return Line with a 6" Diameter Loading Arm will be
installed.A Drain LPG Vessel will be installed to collect LPG from the unloading line and to
pump it by means of pump into the Storage Tanks.Loading Arms should be used to transfer
LPG into and from Tanker Ships because in comparison to hoses flexible arms:
 Are less prone to damage;
 Require less maintenance;
 Require less frequent testing;
 Economically advantageous over the life of the arm.
The Tanker Ship to unload containinga maximum of 1,900 MT LPG, it will take around 6~7
hours (1 working day) having an unloading capacity of 600 M3/Hr. pump.After unloading the
ship, the line between the loading arm and the Excess Flow Control (EFC) Valve at the Jetty
would be drained. The liquid content of the line will be stored in the LPG Drain Vessel.For an
8" Diameter line and an assumed length of about 45 Mpipe about 1.44 M3 needs to be stored.
With a maximum filling degree of 90%by Volume, the required volume is 1.6 M3. With a chosen
diameter of 1 M, the length of the LPG Drain Vessel would be about 2 M.To empty the LPG
Drain Vessel within 10 (Ten) minutes, the pump capacity would be 7.7 M3/Hr. The LPG Drain
Vessel remains under pressure, so the pump only needs to overcome the pressure drop due to
friction. It is assumed that a differential head of 100 mm will be sufficient.

02.03: LPG Bulk Storage System:

Due to the plot area restraints,only the above ground Spherical Storage Tank is practically
feasible solution. For storage of 3,000 MT (6,000 M3) bulk LPG, there would have 2 units of
Spherical Storage Tanks (Horton Sphere) of 1,500 MT (3,000 M3)each.The quantity in the
tanks will be foreseen with automated high-tech tank gauging system for imported parcel
receiving, custody transfer and production measurement purposes. The storage tanks’ liquid
level, pressure,temperature will be indicated by fitted instruments and monitored by remote or
auto-control system. It is assumed that the pipe lines from the Loading Arm of the Jetty to the
Storage Tanks would have a diameter of 8”~10”. These lines would have the same design
conditions as for the supply from Storage Tanks and vapor line to the Jetty.An LPG Storage
System with a high frequency of movement of products and variations in mixture
ratios(Propane and Butane), pressurized storage has been chosen.Storage capacity has been
designed on the basis of the available draft and berthing capacity of LPG Tanker Ship. And to
overcome a maximum delay of 2 weeks in the arrival of the Tanker, 2,000 NWT LPG Tanker
(Parcel Size of 1,850~1,900 MT) has been chosen. The volume of commonly produced
Spherical Tank is about 3,000M3. For storage of 6,000 M3bulk LPG, 2 Units Spherical Tanks
with a volume of 3,000 M3each are required.

02.04: LPG Bottling System:

02.04.01: Design Basis:
The design basis for the Bottling System is defined for a throughput of 30,000 MTPA as
follows:
Cylinder Fill Size (Kg) Throughput:MTPA No. of Cylinder/Year

12.0 30,000 24,99,900

02.04.02: LPG Filling Hall:

The Filling Hall would handle filling of the specified sizes of cylinders.For 12.0Kg cylinder, a
large Filling Carousel would be installed with 30 Filling Scales positions within which 24 Filling
Scales would be initially installed and the rest 6 Filling Scales’ positions would be kept vacant
for future capacity expansion program. For filling of bigger size cylinders ranging from 20 Kg ~
50 Kg Fill Sizes, there would have 2 units of Stand Alone Bigger Filling Machines in the Filling
Hall. This set up is designed for required capacity expansion in future which can be added as
and when required. The same thing applies for the filling of larger cylinder also. The current
designconfiguration is for 100% of the abovementioned 30,000 MTPA capacity.

The installation includes interconnecting conveyors, other equipments, accessories and

machineriessuch asChain Conveyor, Roller Conveyor, Automatic Electronic LPG Filling
Machine, Automatic Cylinder Weight Check Scale, Electronic Automatic Cylinder Gas Leak
Detecting Unit, Automatic Fill Correction Machine, Cylinder Valve Cap Machine, Cylinder Cap
Sealing Machine, Cylinder Evacuation Unit, Compressed Air (Pneumatic Control) System,
Hydraulic Control System, LPG Pipe Line Pressure Regulator etc.There would have a Main
Switch Board and a Motor Control Circuit (MCC) Panel for the Filling Hall.There would have
different necessary piping from the Jetty, Storage Tanks, Air Compressor, Gas Compressor
and Gas Pumpetc.The power consumption is estimated as approximately 250 KW and the air
consumption is approximately 180 M3/Hr. at 7 Kg/Cm2pressure for the filling plant.

The vacant cylinders that would come for refilling from the Distributors/Dealers would be
unloaded from the trucks and be submitted for a visual inspection, if necessary, only minor
repair shall be done and if there is major maintenance issue, in that case, the cylinder would
be replaced with good ones from the buffer stock and subsequently, LPG cylinders would be
filled through automatic Electronic Filling Machines fitted in a Carousel. The filling method is
based on gross weight of the cylinder. During filling of the cylinders, leakage of the valve may
be traced. Theseleaky cylinderswould be placed within a rack and connected to the Evacuation
Pump Unit. The Evacuation Unit will drain these leaky cylinderswhich are rejected through the
electronic leak detection system. It consists of a skid with a LPG Compressor and 2 (Two)units
LPG Day Tanks.The Cap Sealing Unit will fix a Plastic Cap and Sleeve on the valve of the
filled LPG Cylinder. There would have a LPG Cylinder Valve Repair Unit in another shed which
is related to the filling system.
 Chapter-03
Market Analysis
03.01: Introduction:

03.01.01: Background Information:

Most of the of the gas resources is the major North-South (Jamuna – Ganges-Meghna) River
System which divides the country. All the gas-reserves found to date are located on the East
side of this river system. The difficulty and attendant high capital cost of a river crossing has so
far excluded the West side consumers from the benefits of natural gas as a fuel. The plans for
extending the natural gas network to this part of the country have been developed and
subsequently studied by several financial institutions. Finally the Government has decided to
extend of the gas network since the high capital costs in combination with the insufficient cash
flow could never make extension commercially viable. These plans will, therefore, not be
realized in the foreseeable future.

In the Eastern Zone of the country,Natural Gas mains have been installed to which every
major urban center is connected. There is, however, limited impact on the households. The
individual connections to households are still not very common. Only in the cities, connections
to the households are made; however, the distribution grid is not extended to the sub-urban
areas, since again the capital costs are too high to make such an extension feasible. This
leaves also in the Eastern Zone of the country a big market for LPG. The total potential market
is, therefore, calculated by taking the total number of households in Bangladesh minus the
natural gasconnected households, it stands as -??

03.01.02: Competitive Fuels:

In fact, there are 3 (three) competitive energy sources for domestic use:
 Piped Natural Gas,
 Kerosene,
 Fuel Wood.
03.01.02.01: Piped Natural Gas:

At present, the total number of natural gas connected households is around

20,08,000-??.Natural Gas is distributed through a pipeline network in Bangladesh by 6(Six)
Government owned companies, namely:

o Titas Gas Transmission and Distribution Company Ltd. (TGTDCL),

o Jalalabad Gas Transmission and Distribution Company Ltd. (JGTDCL),
o Bakhrabad Gas System Ltd. (BGSL),
o Paschimanchal Gas Distribution Company Ltd.(PGDCL),
o Karnafuli Gas Distribution Company Ltd. (KGDCL),
o Gas Transmission CompanyLtd. (GTCL).

Table-6: Total No. of Domestic Users

Name of Natural Gas Companies No. of Connections

1. Titas Gas Transmission & Distribution Co. Ltd. 13,98,551
2. Jalalabad Gas Transmission & Distribution Co. Ltd. 1,17,137
3. Bakhrabad Gas Systems Ltd. 4,48,477
4. Pashchimanchal Gas Distribution Co. Ltd. 43,414
5. Karnafuli Gas Distribution Co. Ltd. ???
6. Gas Transmission Co. Ltd. ???
Total No. of DomesticCustomers 20,07,579

03.01.02.02: Kerosene:
At present, around 20% of the potential households for LPG use Kerosene whereas Kerosene
is not a popular fuel for the following reasons:

o The burners of Kerosene Stoves are very small. It may be used to cook 2-3 persons
only. At present, Kerosene Stoves are being used mainly by students and bachelors
who live away from their family in the cities. Most families in Bangladesh are much
bigger (average 6 persons). As a result, Kerosene is not popular to them.
o The heating efficiency of Kerosene is very little. The cooking time is, therefore, very long
and it is almost impossible to cook substances such as beef with Kerosene stoves.
 o It creates a terrible smoke and a pungent smell.
o LPG is a cheaper substitute. Kerosene is an oil product and it’s price is, therefore,
directly related to the regular oil price. This is true for LPG also but the calorific value
compared to the price makes LPG a cheaper alternative.

03.01.02.03: Fuel Wood:

Wood is one of Bangladesh's major natural and renewable resources. In addition to its
important use as a fuel, it is used as construction material as well as raw material in paper and
news print industries, matches and furniture industries. Wood is a commercially traded fuel in
the sub-urban and urban areas of Bangladesh. Besides household cooking, wood is also
widely used in restaurants and tea shops at which this project is also aimed. The increasing
scarcity of fuelwood is reflected in the rate of increase of fuelwood prices in recent years: the
rate of increase in fuelwood prices has exceeded the general rate of inflation. The Government
has enforced a ban on chopping trees from the natural forests since 1995which has marked
the concern of the Government for further deforestation. Only up to 10% of the total land of
Bangladesh is covered with the natural forest.Wood is, therefore, a scarce product and is
becoming more and more expensive each year.

03.02: Market and its Structure:

The market analysis begins with a review of the existing fuel consumption and price picture in
Bangladesh with a focus on the urban household sector. Based on the consistent Government
Policy to stimulate the use of LPG and on the apparent large market and high alternate price of
other competitive fuels in the urban household sector, it was decided to focus on urban
household cooking as the major basis for our LPG market assessment.

03.02.01: Definition of Market:

Reliable statistical data were available from Bangladesh Statistical Bureau.We defined 7
(Seven) LPG marketing districts covering the whole area of Bangladesh and the target group
within these regions. From the Statistical Yearbook, we can learn that the market per Division
is very big as mentioned below. The addressable numbers of LPG Domestic Users have been
calculated by subtracting the number addressable users of natural gas from the whole
domestic users which data were collected from the gas supplying companies. This means that
the potential user of LPG is the number of households mentioned below or in other words, the
Addressable (Domestic) LPG Market. Because of the increasing population of Bangladesh, the
number of potential
Households increases during the subsequent years. The numbers have been multiplied by
1.7% each year, being the rate of Annual Growth of the population.The average consumption
of LPG (Domestic) per year has been calculated as follows:

Table-7: Addressable Market

in BD Table-6:
(For Natural Gas: Domestic)
Year Year Year Year Year Year
2010 2011 2012 2013 2014 2015
Chittagong: MT/Yr. 405,011 411,897 418,899 426,020 433,263 440,628
Comilla: MT/Yr. 224,618 228,437 232,320 236,270 240,286 244,371
Sylhet: MT/Yr. 116,534 118,515 120,530 122,579 124,663 126,782
1,221,27 1,242,03 1,263,15 1,284,62 1,306,46 1,328,67
Dhaka: MT/Yr. 4 5 0 3 2 2
Barisal: MT/Yr. 373,251 379,597 386,050 392,613 399,287 406,075
Khulna: MT/Yr. 621,193 631,754 642,493 653,416 664,524 675,821
North Bengal: MT/Yr. 702,544 714,487 726,633 738,986 751,549 764,325
3,664,42 3,726,72 3,790,07 3,854,50 3,920,03 3,986,67
BangladeshTotal: MT/Yr. 5 2 5 7 4 4

Addressable NG Market in Bangladesh (Division-Wise).

The LPG equivalency of average Kerosene use is calculated at 0.89 cylinders (12.0 Kg) per
month for the “Keroseneonly” users in the group earning greater than Tk. 5,000/= per month.
In the same income group, the fuelwood users and/or combined fuelwood/Kerosene users
have a much higher LPG equivalent energy use at 1.20 and 1.25 cylinders per month
respectively. The average householduse is 1.60 cylinders/month of equivalent LPG. The
consumption per month expressed in Kg is 1.60 cylinders @ 12.0 Kg = 19.20 Kg/month which
is 230.40 Kg/year.

Moreover, since the cooking time augments when there is more prosperity, we assumed the
consumption to increase with the same rate at the GDPgrowth. The reason behind this, is that
people tend to eat more meat and more hot meals a day when they have more money
available. This is why consumption increases in the financial model over the years.
Table-7: Addressable Market
BD (For LPG: Domestic)
Year Year Year Year Year Year
Name of Divisions 2010 2011 2012 2013 2014 2015
Chittagong: MT/Yr. 88,292 89,793 91,320 92,872 94,451 96,057
Comilla: MT/Yr. 48,967 49,799 50,646 51,507 52,382 53,273
Sylhet: MT/Yr. 25,404 25,836 26,276 26,722 27,176 27,638
Dhaka: MT/Yr. 266,238 270,764 275,367 280,048 284,809 289,650
Barisal: MT/Yr. 81,369 82,752 84,159 85,590 87,045 88,524
Khulna: MT/Yr. 135,420 137,722 140,064 142,445 144,866 147,329
North Bengal: MT/Yr. 153,155 155,758 158,406 161,099 163,838 166,623
BangladeshTotal: MT/Yr. 798,845 812,424 826,238 840,283 854,567 869,094

Table-7: Addressable LPG Market in Bangladesh (Division-Wise).

As indicated above, the total potential LPG market in 2011 in Bangladesh at 100% market
penetration is around 8,12,424MT/Yr. It is easy to conclude that the market share of Orion
would be limited by it’sBottling Capacity: 30,000 MT/Yr.

The market share of Orion may be more in the first year of production (2012) as is indicated in
the above Table. A normal progress of market penetration would be 40% in Year-1, 60% in
Year-2, 80% in Year-3 and so on. If 40% of the addressable market is to be served, it would
require a good marketing and sales campaign. With a maximum capacity of 30,000MT/Yr.,
only 9% of the addressable market would be served. This percentage will decrease in the
subsequent years since the market will grow (Populations Growth + GDPGrowth).However, the
production capacity of Orion would be increased by 25% in the 3 rd year of operation (i.e. in the
Year- 2014) and such, the market share would be rationally increased rather than decreasing
in the addressable market size. It has been considered and demonstrated in the last 2 (two)
columns ofthe followingTable:
Table-8: Possible Market Share of Orion (in % & MT)

Particulars 2010 201 2012 2013 2014 2015

1
 % Share of AddressableLPG Market 0% 0% 40% 60% 80% 90%
Market Size (MT) - - 3,30,49 5,04,17 6,83,65 7,82,18
% Market Share of Orion (30,000 MT& 37,7500 95% 0
7% 4
5.5% 5
4.8%
MT)

The calculations have been made with the initial capacity: 30,000 MT/Yr.for the 1 st 2 years of
operation, i.e. 2012 & 2013and a 25% capacity enhancement in the Year-2014 & 2015have been
considered. It may be noted that this plant capacity enhancement provision has been kept for the
year-2014 and 2015 as shown in the above Table. The cylinders to be filled and sold are calculated
for 12.0 Kg Gas Fill Size only and filling of Commercial/Industrial Sizes Cylinders (i.e. 33/40/45/50
Kg etc.) have not been taken into calculation. Besides, bulk LPG Sale also has not been taken into
consideration. However, the buying and selling of bottles have been kept out of the calculation
model since this will be financed in a budget neutral (???) way and would, therefore, neither be an
income (??) nor an outflow (??) in the cash flow model.

03.02.02: Market Penetration of Orion:

Orion intends to penetrate the market in the Year-1 (i.e. Year- 2012) at a size of 80% of it’s
total capacity which is from a market point of view, this is very well possible since the market
demand is 11 times greater than Orion’s Plant Capacity. However, for a starting-up company,
a production of 80% of total capacity is a rather steep ramp-up, not very usual in commerce.
There are, however, the following reasons that make clear why Orion can reach this size:

a. LPG Market Scenario:At present, the market is in a severe crisis.

b. LPG as an Efficient Substitute: It has been explained before that approximately
demand in the households of the addressable market alone is approximately 8,26,238
MT/Yr. in 2012. The inhabitants are presently using fuel wood and Kerosene. LPG is
obviously a cleaner and a much more efficient substitute.
c. LPG asaCheaper Substitute: A family can actually save a considerable amount if they
areconverted to LPG.
d. Acceptance of LPG: The process of using LPG cylinders is not absolutely new to the
inhabitants. They have been using the LPG cylinders of Orion's competitors for a long
time. Moreover, surveys have proved that the majority of the population is both
financially capable and mentally disposed towards converting to LPG.
e. Efficient Marketing Campaign: An efficient marketing campaign will be conducted as
explained beneath.
 f. Distribution Density: Prior to going into commercial operation, the company intends to
work in such a way that the cylinders reach the customers with considerable ease. The
experience gained from establishment of Orion's competitors’ network and other sister
concerns, Orion Gas Ltd. will make use of the current distributions channels already in
operation with Orion’s competitors and the same of the sister concernsof the Orion
group.

03.02.03: Marketing Campaign:

Orion plans an extensive marketing campaign with a considerable sales force and marketing
exercise. It has the following features and has been further explained in Chapter -5.
a. Door to Door Marketing:
Orion plans to visit 5,00,000Nos. households in the first year of it’s operation. They would
perform all kinds of promotion activities (e.g. providing a Gas Lighter as a gift etc.). This
should act as an added incentive in encouraging the population to convert to LPG.
b. Sales Promotion:
Orion intends to employ a sales promotion team which would consist of 170 personnel (i.e.
72 District Sales Officers + 98 Delivery Assistants). This should ensure that the consumers
remain satisfied and feel that Orion products are easily reachable and duly promoted on a
regular basis.
c. Cooking Appliances:
Orion plans to make required cooking appliances (e.g. Regulator, Burner, Hose Pipe etc.)
available with the Distributors’/Dealers’ so thatthe people do not have to move to purchase
these materials from other points. This shall encourage the people to convert quickly.
d. Early Start:
Orion Gas Ltd. plans to employ it’s marketing staff 3 (three) months before going into
commercial operation. The District Sales Officers would require a training of 2 (two)
months. In this way, all marketing policies would be realized from the first day.
03.03: Customer Structure:
The total market for LPG intended to be supplied by Orion, can be divided in:
a) Domestic Users/Households: They are to be supplied with 12.0 Kg cylinder. This
group would normally require 18.0 Kg gas per month for a 5-members family, so they
would require 1.5 Cylinder Gas per month.
 b) Commercial Clients: Hotels, Restaurants, Hospitals, Clinics and the like, would be supplied
with bigger cylinders as 25 Kg/33 Kg/40 Kg/45 Kg/50 Kg cylinders.

c) Industrial Clients: Different Aerosol (Insecticides & Air Fresheners) Companies would be
supplied with 50 Kg cylinders or bulk LPG at their options.

d) Bulk LPG Clients:The condition of the natural gas supply from the National Grid is
facing a severe crisis whereas the hospitals, restaurants which should have no tripping
of gas supply, for these group of users like Hospitals, Aerosol Companies, Multi-Storied
Residential Complex, Colonies, Dealer’s/Distributor’s Mini Re-Filling Point would prefer bulk
LPG rather than bigger cylinders.

Initially Orion Gas Ltd. plans to go with 12.0Kg Cylinder with extensive logistics support for the
domestic users. At the second step, Orion would introducebigger size cylinders such as 25 Kg,
33 Kg, 40 Kg, 45 Kgand 50 Kg as well as bulk LPG supply to bulk respective clients.

03.04: Affordability:
In our market assessment, we focus on a higher income strata of Tk. 6,000.00/month. With an
initial investment of around Tk. 3,500.00 (around US$ 50.00) for cooking equipment and the
first 12.0 Kg bottle and in between Tk. 1,050-1,150 (US$ 15-16) for a refill, that is, in between
17% and 19% of the lowest income in this strata will be paid for cooking fuel. Among a
representative group of potential LPG users, 36% of the respondents said that they would
switch to LPG under these circumstances. If credit was made available for the initial
investment, affordability would be increased to 80% of the potential users. The acceptance of
the product is, therefore, very high.

Still, 17%-19% of total income to spend on cooking fuel seems to be very high, however, in
Bangladesh everyone is used to pay much more for cooking fuel when making use of
Kerosene or wood,. Since cooking fuel is a primary necessity of life, it is very likely that the
price of 1(one) Cylinder Gas Refill is between Tk. 1,050/= ~ 1,150/= will be afforded by the
monthly income strata of Tk. 6,000.00 and above.

03.05: Distribution and Marketing Network:

Orion Gas Ltd. would appoint country-wide Dealers/Distributors and these Dealers/Distributors
would purchase Cylinders, LPGas, Regulators, other related appliances from Orion Gas Ltd.
through a sustainable method.After establishing a consistent business relationship with Orion
Gas Ltd., they would be providedthe products on a Mixed Scheme (i.e. Cash &Credit Scheme)
basis designed by the concerned department. They would sell some productsto the Retailers
in cash and some in credit. And such, sales volume and market would be developed in a
rational way in the current competitive market situation. The credit would usually be provided
for 2(two)Supply Terms i.e. the distributors usually get the cash when they supply the third lot
of goods. The similar system is being followed by all consumer products industries in the
country.The Distributors’Commission would be approximately Tk. 100.00 and the Retailers’
Commission would be Tk.50.00.

03.06: Analysis of Competitors:

03.06.01: LPG Competitors/Operators in Bangladesh:
Since 1978 till now, there are 8 (Eight) Nos. of LPG Plants in Bangladesh in which the Govt.
(BPC) owns 2 (Two) Plants (i.e. LPGL, Chittagong and LPGL, Kailashtila), Bashundhara,
Kleenheat, Totalgaz, Jamuna, Summit/Teledata and BOC. The following table would show
their prime details:

Table-9: List of LPG Companies/Competitors/Operators

No. of
LPG Storage Market
Filling Sources of LPG
Companies/Operators Capacity Volume
Machine
1. LP Gas Ltd., BPC, BPC
1,550 MT 10 20,000 MT
North Patenga,Chittagong. Refineryproduced
Petrobangla
2. LP Gas Ltd., BPC,
150 MT 12 8,000 MT Refinery
Kailashtila, Sylhet.
produced
3. Union LP Gas Ltd.
(Basundhara),Mongla, 3,000 MT 24 20,000 MT Imported
Bagerhat.
4.
WesfermersKleenheatElpij 1,725 MT 12 8,000 MT Imported
i Ltd., Mongla, Bagerhat.
5. Premier LP Gas Ltd.
(Totalgaz), Solimpur,
2,500 MT 12 10,000 MT Imported
BoroKumira, Fouzderhat,
Chittagong.
6. JamunaSpacetech JV Locally
Ltd., 9 Mile, Jamalpur, 290 MT 15 10,000 MT purchased&
Bogra. imported.
 7. Summit Surma
Petroleum Co. Ltd.
820 MT 12 8,000 MT Imported
(Teledata), Mongla,
Bagerhat.
8. Bangladesh Oxygen Co.
Locally
Ltd., Sirajganj More, 40 MT 4 5,000 MT
purchased
Bogra.

03.06.02: Market Share of the LPG Competitors:

The market share and participation may be described on some data base of year-2007 as
follows:
Table-10: Competitors’ Market Share/Position: 2007

Sales
BPC
Share/ Jamuna BOC Basundhara Kleenheat Summit Totalgaz
(Govt.)
Company
Sales in
22,367 8,900 4,000 17,883 6,464 606 9,984
MT
Share% 32.12% 12.77% 5.74% 25.70% 9.28% 0.86% 14.34%

It may be noted that Summitwas not operating their Plant properly and such the Company has
already been sold to an Indian Company in 2009 named Teledata Marine Solutions Ltd. who
has also keptthis Plant “Inoperative” and ultimately they have offered this Plant “Rental” to
Jamuna who has already started operation of this plant. Actual market share of the Plant in the
past years was about 8%~10%. Recently Jamuna has already imported 800 MT bulk LPG
through their first consignment.

03.06.03: Brief on Competitors/Operators:

1.Company:Union LP Gas Ltd.(Bashundhara)

Filling/Bottling Plant: MonglaPort I/A, Mongla, Bagerhat.
LPG Bulk Storage Capacity: 3,000 MT (6x500 MT Spherical Storage Tanks)
Filling/Bottling Capacity: 106 MT/Day (i.e. 8,833Cyl./Day)
Type of Cylinder Filled: 12.0 Kg.
Source of Bulk LPG:Import from Singapore/Malaysia/Thailand/UAE.
Price:
Fill/Refill Size Gas/Refill Price/Cylinder
12.0 Kg Tk. 1,050.00

Special Note:
Bashundhara has got their own Cylinder Manufacturing Plant. This plant is currently producing
only 12.0 Kg cylinders. But they may go for producing larger cylinder if required.

2.Company:JamunaSpacetech Joint Venture Ltd.(Jamuna)

Filling/Bottling Plant: 9 Mile, Jamalpur,Bogra.
LPG Bulk Storage Capacity: 200 MT (4x50 MTHorizontal Bullet Storage Tank)
Filling/Bottling Capacity: 41 MT/Day (i.e. 3,416 Cyl./Day, 12.0Kg Cyl.)
Types of Cylinder Filled: 5.0 Kg& 12.0 Kg
Source of Bulk LPG:Local Sources like BPC, Petrobangla, Totalgaz, Kleenheat. Recently,
they have started to import bulk LPG using Summit Surma(Teledata) LPG Jetty.
Price:
Fill Size Gas/Refill Price/Cylinder
12.0 Kg Tk. 1,050.00
5.0 Kg ??

Special Note:
The Plant is situated atBograhaving no import facilities. For this reason,earlier they could not
import bulk LPG. Recently, they have started to import bulk LPG using Summit
Surma(Teledata) LPG Jetty. Still they have an agreement with BPC to get 166 MT/month bulk
LPG from LP Gas Ltd., Chittagong and/or Kailashtila Plant, Sylhet at a very low and subsidized
(Govt.) price.Besides, they use to purchase bulk LPG from other importers also like
Totalgaz,Bashundhara, Kleenheatetc. Because of getting the Govt. bulk LPG, they are in an
advantageous position in competitive pricing. Recently, they have purchased theCylinder
Manufacturing Plant from JanataMoulding& Engineering Works Pvt. Ltd. (JanataCylinder),
BSCIC I/A, Pabna which would start productionof both 5.0 Kg and 12.0 Kg cylinders soon.

3. Company: Wesfarmers KleenheatElpiji Ltd.(Kleenheat)

Filling/Bottling Plant: MonglaPort I/A, Mongla, Bagerhat.
LPG Bulk Storage Capacity: 1,800 MT (1x1,800 MT Spherical Storage Tank)
Filling/Bottling Capacity:60 MT/Day (i.e. 5,000 Cyl./Day, 12.0Kg Cyl.).
Types of Cylinder Filled: 12.0 Kg, 33.0 Kg, 40.0 Kg, 45.0 Kg& 50.0 Kg
Source of LPG:Import from Singapore/Malaysia/Thailand/UAE.
Price:
 Fill/Refill Size Gas/Refill Price/Cylinder
12.0 Kg Tk. 1,050.00

50.0 Kg Tk. 4,375.00

Special Note:
Wesfarmers KleenheatElpiji Limited (WKEL) was formed to develop an LPG Importation,
Storage, Bottling, Distribution and Marketing business in Bangladesh. Their major
shareholders are:
1. Wesfarmers Energy, Australia,
2. Elpiji (M) SdnBhd, Malaysia&
3. The Palmal Group of Industries, Bangladesh.
There is a provision to double their bottling capacity and have their own Cylinder
Manufacturing Plant in Australia and Malaysia.

4.Company:Premier LP Gas Ltd. (Totalgaz)

Filling/Bottling Plant: Solimpur, BoroKumira, Fouzderhat, Chittagong.
LPG Bulk Storage Capacity: 2,500 MT (1x2,500 MT Spherical Storage Tank)
Filling/Bottling Capacity:60 MT/Day (i.e. 5,000 Cyl./Day, 12.0Kg Cyl.).
Types of Cylinder Filled: 12.0 Kg & 33.0 Kg.
Source of LPG:Import from Singapore/Malaysia/Thailand/UAE.
Price:
Fill/Refill Size Gas/Refill Price/Cylinder

12.0 Kg Tk. 1,050.00

33.0 Kg Tk. 2,900.00

Special Note:
Initially 12.0 Kg Refill Size has been introduced by Totalgaz. Ultimately, all other companies
have started this 12.0 Kg refilling due to compete and sustain in the market. Another exception
is still with them which no company has followed, that is, their Cylinder Valve Size is of 20 mm
diameter whereas all other companies’ cylinders are of 22 mm diameter, i.e. all others’
cylinders are exchangeable or cross refillable from themselves (which is, of course, illegal)and
such cross filling/refilling is being done indiscriminately. But Totalgaz Cylinders (because of 20
mm version valve) are not possible for cross filling unless otherwise valves are changed to 22
mm version. In this respect, they are safe to some extent from cross filling and such achieving
the business target.

Chapter-04
Analysis of Environment
04.01: Protection of Environment:

04.01.01: Environment Protection Law:

Protection of the environment in Bangladesh has been enacted by The Environmental
Conservation Act – 1995 (ECA: 1995) which applies to air, water and ground emissions in the
form of gas, celluloid, liquid, semi-solid, solid wastes disposal andit also applies to generation
of noise. This law has been applied to the whole land, air, water, flora and fauna. The
Government of Bangladesh has enacted the Environmental Conservation Act: 1995 in order to
provide for the conservation and improvement of environmental quality and to control and
mitigate pollution of the environment. This requires that all projects undergo a comprehensive
environmental review. Section-12 of the Act stipulates that "No industrial unit or project shall be
established or undertaken without obtaining environmental clearance from the Director
General of the Department of Environment (DG-DOE) in the manner prescribed by the Rules".
The Act has also bestowed Rule-making power to the Government which requires that Rules
to be made to "evaluate, review the Environmental Impact Assessment (EIA) of various
projects and activities and procedures to be established for approval". The Department of
Environment (DOE) which has become a statutory body under the Environment Conservation
Act (ECA) is responsible for the environmental review of all development projects in
Bangladesh.

In August 1997, Environmental Conservation Rules: 1997 has been promulgated and among
them, there are specific rules related to mandatory requirement for a certain project to obtain
Environmental Clearance. This requires Environmental Assessment Studies to be conducted
and the report to be submitted along with different other papers and information for
consideration of DOE to obtain the Environmental Clearance.

Bangladesh is a party to the following international agreements: Biodiversity, Climate Change,

Desertification, Endangered Species, Environmental Modification, Hazardous Wastes, Nuclear
Test Ban, Ozone Layer Protection, Wetlands etc.

04.02: Most Urgent Environmental Issues in Bangladesh:

The current issue of environment in Bangladesh is that many people are landless and forced to
live on and to cultivate flood-prone land. There is limited access to potable water, water borne
diseases are prevalent. Water pollution, specially of fishing areas, results from the use of
commercial pesticides.
There are intermittent water shortages because of falling the water level in the Northern and
central parts of the country.
Relevant to this project is that, there is severe soil degradation and severe deforestation, partly
due to overpopulation.

04.03: Environmental Impact:

The development of expanded LPGstorage and distribution as foreseen in this project will be
relatively caring in terms of environmental impact. The specific environmental regulations
directed to this project will have primarily an impact on the LPG Plant atMongla. The Technical
Report elaborates in Chapter-7 on the environmental and safety measures at the site
atMongla. As far as distribution is concerned, filled cylinders will be transported throughopen
trucks throughout the country. Orion Gas cylinders will be of an excellent quality so that any
accident for bottled LPG will be safely prevented.

The large scale utility of LPG for domestic cooking, devastating deforestation will come to an
end which will also help prevent further erosion of soil. At present, below 10% land of the
countryis covered by forest. The Government has formulated a National Forest Policy in 1994
which envisaged the necessityofforestation of 20%land by the year-2015. Under this policy, the
Government has enforced a ban on cutting of trees in 1995 in reserved forest areas that show
their concern for further deforestation. With an annual growth rate of 1.7%, the situation
becomes grimmer every year. An average family of 4~6 members uses 160 to 200 Kg of
firewood per month. Alternative sources of cooking fuel will have to be made available in
sufficient quantities in order to counteract, or at a minimum, to stem further denudation of
forest resources. Therefore, from all these important points and issues, this LP Gas Project is
contributing to a great extent to achieve this goal.

04.04: Social Impact:

04.04.01: Profile of a Domestic LPG User/Position of a Woman:

The socio-economic profile is based on a population study of 561 people who have already
switched on using LPG. The typical domestic LPG user tends to be a full-time housewife
between 25 and 45 years of age. She lives with her husband and children and is part of a
family with at least 4, often 6 members. She has had less than 10 years of schooling but is
unlikely to be illiterate. Combined monthly income for the family is not less than Tk. 5,000/=.
Most homes in the survey (58%) has spent between 3~4 hours for cooking per day; 33% has
spent2~3 hours for cooking and the rest (9%) has spent1~2 hours while using LPG.

The potential users for LPG are currently using Firewood (the majority: +/- 75%),Kerosene and
Electric Stoves also. Their expenditure on thesefuel sources is much more than they would
spend on LPG. A great advantage, therefore, of this project is that, it would save much money
for the individual households. The use of Electric Stoves is often on illegal and unsafe
connections. The reasons for preferring LPG to other sources of fuelsare convenient which
includes the attributes to the living standard, economy, cleanliness, efficiency, time saving etc.
Gathering firewood (in case, the wood is not for sale or simply too expensive), performed by
women and children are specially very timeconsuming. Furthermore, in comparison with
Kerosene, the cooking time when using LPG is far less since the heating value of Kerosene is
far less than LPG. Time saving is, therefore, a great advantage with the introduction of LPG.
The time saved by cooking with LPG would mainly be devoted towards housework: 51%.
However, 26% would like to spend much of this time undertaking an incomegenerating activity
such as sewing, selling of processed foods, making fishing net for shrimp culture etc. Those
respondents who would not participate in income generating activities told that they would not
do so as they are lacking in capital. Their requirement level (Gas Refill Price) ranges between
Tk 500~700.00.

Over 70% felt that woman could participate as retailers. Wholesaling was considered more of a
'male' person’s job, only 10% mentioned that women could handle this work. Those who
believed that woman could not participate in retailing/wholesaling of LPG, based their views on
the notion that women are less capable, lacked of mobility, have no capital or would not be
permitted to do so by their husbands/guardians. Improvement of the position of women
regarding this project is, therefore, mainly in timesaving and considerable saving in household
expenses. The social impact of this project is, therefore, very positive on the high income
groups as well as on low income groups also.

04.04.02: Employment Aspects:

The direct employment generated by this project during operation will be around 1,000 (one
thousand) people.In the factory at MonglaPortI/A, around 150 people will be employed. During
1.5 years’ construction period several classes of Bangladesh people will find a job.
Furthermore, employment would be generated for the distribution network likeSales and
Distribution Officers, Truck Drivers etc. for Distributors/Dealers/Retailers. Finally, the
Administration and Marketing Division will require new personnel altogether around 500~600
persons. And such, total direct new job creation will occur around 1,000 (one thousand)
people. Besides, there would have some indirect employment also with Distributors/Dealers.

04.05: Economic Development in Bangladesh:

04.05.01 General:
Despite all sustainable domestic and international efforts to improve economic and
demographic prospects, Bangladesh remains one of the World's poorest, most densely
populated and least developed nation. The economy is largely based on agriculture, that is, the
cultivation of paddy/rice is the most important activity of the economy. Major impediments to
the growth include frequent cyclones and floods, the inefficiency and bad performance of state-
owned enterprises.This is also true for the main competitors of Orion Gas Ltd. It may be noted
that a rapidly growing labor force cannot be absorbed by only agriculture sector, delayed
exploration of energy resources (i.e. natural gas), inadequate power supplies and slow
implementation of economic reforms. The Government has made some headwaysfor
improving the overall climate for foreign investors and liberalizing the capital markets. In this
view, the Government has lately negotiated with some foreign oil and gas exploration
companies for countrywide distribution of cooking gas. They would construct the natural
gaspipelines and also power plants to use natural gas.
04.05.02 Economic Indicators:

a) GDP:
According to CIA Report, the actual growth of GDP is 5.7% (Estimate of 1999) whereas the
Economic Intelligence Unit applies a rate of 4.7%. Out of the prudenceaccounting rules, the
later figure has been used in the calculation model. The GDP per capita (i.e. purchasing power
parity) is US$1,600.00 (Estimate of 2009). The GDP composition per sector is:Agriculture-
18.7%, Industry- 28.7% and Services- 52.6% (Estimate of 2009).

b) Inflation:

The Inflation Rate (consumer prices) is 5.1 %(Estimate of 2009).

c) Employment:

The labor force is 72.5 Million people (Estimate of 2008-2009) of which 45% earns from
agriculture, 25% from services and 30% from industry(Estimate of 1995-1996).The
unemployment rate is high: 2.5%.

04.06: General Overview of Commercial Energy Sector:

The indigenous energy resources of Bangladesh consist of the modest reserves of natural gas,
hydro-electric power and traditional fuels. About 55% of energy supply comes from traditional
fuels, 24% from natural gas, 19% from imported oil and only 2% comes from hydro-electricity.
Moreover, out of total non-renewableenergy consumption, about 60% is derived from
indigenous resources and the rest is met from imported Petroleum Oil and Lubricants (POL)
products and coal.

The present per capita consumption of non-renewableenergy resources in Bangladesh is,

however, about 64 KgOE which is one of the lowest in the world, while the same is 123 Kg in
Sri Lanka, 236 Kg in India and 267 Kg in Pakistan.

In this context, a very grim situation is prevailing in the Northern and the Western parts of the
country where piped natural gas supply is still not a reality like the Eastern part of the country
due to an extreme short supply of natural gas for more than 2 (two) decades. As a result,
bottled LPG supplied by the state owned(BPC) operator: LP Gas Ltd. is being sold at double or
sometimes triple rates than that of the state regulated price i.e. Tk. 1,050.00 per 12.50 Kg gas
cylinder. Thus, the economy of Bangladesh is passing through energy transition from
traditional energy use to commercial energy (LPG) use.

The total demand for this environment friendly, safe and clean commercial energy (LPG) is
accelerating with the increasing trends of changes in livelihood, urbanization and income level
that is expected to be 8,26,236 MT by the Year- 2012.

At the same time, constrained limited supply of locally produced LPG of 16,000 MT/Yr. by
which is the maximum capacity of country's only oil refinery: Eastern Refinery Limited. This is
being produced through imported crude oil processing as well as current year's anticipated
supply of 5,000 MT Natural Gas Liquids (NGL) through fractionation from gas streams through
Kailashtila NGL Refinery Plant of Petrobanglaagainst the backdrop of last year's sheer
household demand of 4,00,000 MT have made it evident that the alternative easy commercial
fuel like imported LPG could be the best and suitable solution to the present energy crisis.

In addition to the above huge initial cost involvement, higher transmission and distribution cost
of pipeline gas which has been calculated in “Gas System Development Plan-1996" at Tk.
21.75 per MCF for the South Eastern and the North Eastern region as well as Tk. 14.66 for the
rest of the region of the country. In supplying of the piped gas to the energy ridden Northern
andthe Western area of the country and increasingly depleting gas reserves have also
commanded the consideration of LPG uses based on import.

In recognition of the importance of LPG uses based on import, the main objectives of the
5thFiveYear Plan (1997 - 2002) of the Govt. among others is:
a) Toinvolveprivatesectorinoil and gasdevelopmentactivitiesparticularly in
exploration,production, transportation, distribution and marketing of CNG, LNG, NGL
and LPG,

b) To provide LPG in cylinder for rural people. However, statistical information on the gas
reserve of Bangladesh and consumption of gas by various sectors have been presented
in the Annex— 1 -??.
 c) The Government has also specifically emphasized and encouraged the increasing
private sector participation in petroleum businessspecially the importation, bottling and
marketing of LPG by private sectorthrough it’s formulated "Energy Policy- 1996."

The location of the Gas Transmission Regions of Bangladesh is shown in Annex—2 -??

Chapter-05

Raw Materials and Supplies

05.01: LPG Cost Price:
The LPG cost price is an important input factor in the financial model, however, this price is
hard to forecast with a reliable certainty. There are many things that affect the price of LPG,
e.g.Price of Crude Oil,Weather,Supply and Demand both of the West and the East of the
Suez,Market Perception, Traders’ Positions, Petrochemical Demand,Environmental
Regulations,Chartering/Transportation Cost,Distance ofProduction Site,Level of Sulphur etc.

Among all the above factors, the Crude Oil Price is the most vital and important which has
been elaborated below:

05.01.01: The International Crude Oil Market and Price:

In the international LPG market and it’s price history trend in the past, the LPG price
hasdirectly followed the trends of crude oil prices which is more sustainable and less
fluctuating.It may be mentioned that the downturns and upturns in LPG prices were not as big
as those of the Crude Oil. Oil prices behave in such a way like other commodity with wide price
swings at the time of shortage or oversupply. In the post World War-II era,crude oil prices have
been averaged as US$19.27 per barrel in 1996. Through for the same period, the median price
for crude oil was US$ 15.27 in 1996. It means that only 50% of the above period(1947~1997)
have oil prices exceeded $ 15.26 per barrel. Prices have only exceeded US$22.00 per barrel
in response to the war or conflict in the Middle East.

So, the apparent price increases after World War-II was just keeping up with inflation. The
recent upturn in oil prices is rather exceptional and is believed to come back on the same level
as in recent years. The long term view is almost the same. Since 1996, US Crude Oil prices
have been adjusted for inflation which is averaged asUS$ 18.63 per barrel. Fifty percent of the
time, prices were below US$ 14.91.

For the purpose of this business plan, a reasonable forecast of the development of the crude
oil prices should be considered for at least next 10 years. The International Energy Agency
(IEA) recently published “World Energy Outlook: 2009”. In the reference scenario, oil prices are
assumed to rebound with rising demand and supply costs. In real terms, the average IEA
crude oil import price, a proxy for international prices which in 2008 averaged around US$3.00
per barrel less than West Texas Intermediate (WTI), is assumed to reach US$87.00 per bbl in
2015, US$100.00 per bbl by 2020 and US$115.00 per bbl by 2030 (in year-2008 dollars). In
nominal terms, prices approach US$102.00 per bbl by 2015, US$131.00 per bbl by 2020 and
almost US$190.00 per bbl by 2030. Gas and coal prices are assumed to increase broadly in
line with oil prices, reflecting the dynamics of inter-fuel competition and rising supply costs.

05.01.02: Implications for Financial Model:

In the financial model which is based on constant price until 2010, an average Crude Oil Price
of US$ 21.00/bbland for 2011 and later, an increase of oilprice is foreseen of approximately
US$ 1.00/bbl/year. Since the price for Crude Oil (+/- US$ 33.00/bbl) at present, is much higher
than this US$ 21.00/bbl forecast, we assumed a gradual price decrease of crude oil to 2003.
This was based on the "Future Prices for Crude Oil" of International Petroleum Exchange
(IPE), published in “The Financial Times" of December 23, 2000. The forecast for 2001 were
stated to be: January: US$ 32.00, February: US$ 30.00, March: US$ 30.00, April: US$ 29.00,
May: US$ 28.00, June: US$ 28.00. The trend goes downwards, so we have assumed a
gradual decrease and an average over 2001 of US$ 28.00, over 2002 of US$ 25.00 and for
2003 of US$ 21.00.

A conversionfactor of 10.67 bblCrude Oil/MT LPG is applied between Crude Oil and LPG. We
have taken the spot crude prices of 1998 and 1999 and compared these with the average
Saudi ARAMCO CP "International Market Prices" for LPG over the same years. There
 appeared to be a conversion factor of 10.67 between the US$ price/barrel and the
"International Market Price" per MT LPG. This conversion factor has been applied for the next
12 years forecast in this model.

06.01.01: Organizational Structure:

Organogram of Orion Gas Limited

Board of Directors

Managing Director

Executive Director

VP (Eng.&
Dev.) VP (HR &Admin.) VP (Sales &Mktg.) VP (Ops. & Bus.
Dev.)

Regional
A/C & Fin. Officer Sales&Mktg.
Officer Network Dev. Officer
Plant
Manager Purchase Officer Sales
Officer
Admin.Officer Business Relations Officer
Maintenance Dept. Mkt. Dev.
Engineer Security Officer Supply
Officer
Operations Engineer Chain
Officer
Safety Engineer
Inspection Engineer Direct Sales Officer

Electrical Engineer Brand Officer

Operations Officer

Stores Officer
Board of Directors:

The main function of this body is to guide and control the management of the project
operations. Therefore, it would be regularly informed by the Vice President (Ops. & Bus. Dev.).

The board consists of several persons. The main function of this body is to guide and control
the management of Orion Gas Ltd. and is concerned with long term planning and future
business development and expansion plans.

Management and Staff:

The ManagingDirector would be responsible for overall general management of the company.
He would report to the Board of Directors at regular basis.

The daily operation of the project would be vested with the 'Executive Director' who will be
stationed at the project site on full time basis. The second stratum of the organization is formed
of 4 (four) line managers following the main 4 (four) functions within the organization:
Vice President (Eng. & Dev.),
Vice President (HR &Admin.),
Vice President (A/C & Fin.),
Vice President (Sales & Mktg.),
Vice President (Ops. & Bus. Dev.).

Plant Operations and Business Management:

Vice President (Eng. & Dev.):

He is the General Manager for LPG Import, Storage, Transportation, Bottling, Distribution and
Marketingmatters though the Plant which would be established at Mongla P/I. Under his
supervision, the unloading of bulk LPG at the Jetty Area, the storage of LPG in the Storage
Tanks, Cylinder Filling/Bottling, Bulk LPG Transportation,Distribution and Marketing and it’s
ancillary operations would be done. The technical support for Operations (Elect. & Mech.), Fire
& Safety, Construction, Repair& Maintenance (Civil, Elect. & Mech.), Inspection, Test& Quality
Control (QC), Expansion & Development etc. are also under the responsibility of the VP (E&D).
It also covers various other support services of utilities like air, water, electricity, fire, medical,
emergency, repair & maintenance etc.

Vice President (HR &Admin.)

He is the General Manager for the Human Resources and Administration, Recruitment,
Selection, Placement, Promotion, Punishment, Transfer and other legal matters.

Vice President (A/C & Fin.)

He is General Manager for the Company’s Accounts, Finance, Audits, Purchases, Imports,
Procurements, Appraisal, Valuation, Costing, Pricing, Profit and Loss etc.

Vice President (Sales &Mktg)

He is the General Manager for products sales and marketing, setting targets and achievement,
policies and strategies, analysis of competitors, market studies and revisions, advertisement
and promotion, products management and training, market research and development.

Vice President (Ops. & Bus. Dev.):

He is the General Manager of the total distribution network, supply chain management, dealers
and distributors’ management, feed back, comparison with competitors’ services and
introduction of new incentives in the dealers’ network.

Human Resources and Expenditure:

The total expenditure of the company would directly depend on the various types of human
resources required for different divisions to run the company business efficiently.

Overall Management of Orion Gas Limited:

Among 3 (three)Directors, only the Executive Director would be on the payroll of Orion Gas
Limited; he would draw the following remuneration:

Executive Director’sExpenses:

SI.No. Description Monthly Exp. (Tk.) Yearly Exp. (Tk)

1. Director’s Remuneration Taka
2,00,000.00 Taka
24,00,000.00
2. Director’s Allowance 25,000.00 3,00,000.00
3. Director’s Overseas Travel - 6,00,000.00
4. Director’s Local Travel & Convey. 5,000.00 60,000.00
Director’s Total Expenses 33,60,000.00

Chapter-07
Organization and Overhead
Costs
07.01: Proposed Factory Overhead:
07.01.01: Factory Salary &Wages:

It has been estimated that a total of 12 (Twelve)skilled workers will be required at the Filling
Hall. A reserve of 4 (Four) workers have been kept to cover for those workers who would be on
leave/for any holiday work.

Orion would like to keep 12 (Twelve) unskilled workers to help those at the Filling Hall, i.e.
there will be 2 (Two) extra workers at Filling Hall, 2 (Two) for the Repair/MaintenanceShop and
1 (one) for looking after the pumps.

Thus, Orion intends to employ 210 workers-??.

1:Factory Officers’ Salaries& Allowances:

No. Description Monthly Exp. Yearly Exp.

(Tk.). (Tk.)
1 Salary of Vice President ?? 2,00,000.00 24,00,000.00
(Plant)
2 Salary of Maintenance ?? 35,000.00 4,20,000.00
Engineer
3 Production Supervisor (1 for (15,000X3) 45,000.00 5,40,000.00
each shift)
4 Quality Control Inspector (1 for (15,000X3) 45,000.00 5,40,000.00
each shift)
5 Factory Admin.Officer (2 (10,000X2) 20,000.00 2,40,000.00
Junior Officer)
6 Junior Officer for Plant Stores (10,000X4) 40,000.00 4,80,000.00
& Operations (4 Persons)
7 Car Allowance (including (10,000x2) 20,000.00 2,40,000.00
Driver)
8 Officers’ Festival Allowance ?? 3,46,500.00 3,46,500.00

9 Food Allowance @ Tk. 40/= (40x16x25 16,000.00 1,92,000.00

Daily )
10 Purchase of Mobile ?? 14,000.00 56,000.00
Telephones (1for each Vice
President)
 11 Mobile Telephone Allowance ?? 3,000.00 36,000.00
Total: Factory Officers’ ?? ?? 54,90,500.00
Salary & Allowances

1. Electrical Engineer-??
2. Maintenance Engineer-??
3. Operations Engineer-??
4. Health & Safety Engineer-??
5. Inspection Engineer-??
6. Quality Control Engineer-??

2. Factory Staffs Salaries, Allowances and Wages-??

07.01.02: Cost of Plant Office Vehicles Fleet:

A complete Office Vehicles Fleet consisting of 6(Six) Units Office Car, 4 (Four) Units Open
Truck (for the East, West, North & South Bengal) for delivery/transportation of cylinders, 2
(Two) Units Bulk LPG Tanker/Lorry(for bulk LPG sale/decentralized Cylinder Filling Stations)
would be required to purchase for the Plant. And the above mentioned 6 (Six) cars would be
purchased e.g. 1 (One)Car is for the Executive Director, 4 (Four) Carsare for 4 (Four) Vice
Presidents and 1 (One)Micro Bus is for the Officers’ and Engineers’Transport Pool. The Plant
Site is 55 Km from Khulna and thus, they have to be provided with this transport facility to
attend Plant Office duly and to move to different concerned offices like Mongla Port Authority
(MPA) Office, MPA Jetty, Different Govt. Control and Monitoring Offices atBagerhat and
Khulnaand concerned business (Distributors, Dealers & prospective new points) locations.
Cost of the above complete Office Vehicles Fleet would be approximately Tk. 2.50Crores.

07.01.03: Cost of Different Utilities:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

1. Electricity Bill ?? ??
2. Gas Bill ?? ??
3. Water Bill ?? ??
4. Municipal Tax ?? ??
 5. Land Holding Tax ?? 5,000.00
Total:Different of Utilities ?? 1,56,300.00

1. Telephone Bill-??
2. Fax Bill-??
3. Mobile Bill-??
4. MPA Charge/Bill-??
5. RHD Charge/Bill-??

07.01.04:Cost of Fuels, Lubricants& Other Items:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp.(Tk.)

1. Fuels& Lubricants 10,000.00 1,20,000.00

2. Spare Parts ?? ??
Total:Fuels, Lubes& Other Items ?? ??

07.01.05: Cost of Repair & Maintenance:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

1. Repair &Maintenance (Plant M/C) 10,000.00 1,20,000.00

2. Other Maintenance (Vehicle etc.) ?? ??
Total: Repair & Maintenance ?? ??

07.01.06: Cost of Stationery & Printing:

No Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

.
1. Printing & Stationery 10,000.00 1,20,000.00
2. Newspaper and Periodicals 1,000.00 12,000.00
Total: Stationary & Printing ?? 1,32,000.00

07.01.07: Cost of Washing & Cleaning:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

1. Washing & Cleaning (Workers’ Uniform) 15,000.00 1,80,000.00

Total: Washing & Cleaning ?? 1,80,000.00

07.01.08: Cost of Workers’ Uniform:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

1. Washing & Cleaning(224*300*2) ?? 1,34,000.00

Total: Workers’ Uniform 1,34,000.00

07.01.09: Misc. Factory Overheads:

No. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

1. Medical Test, Medicine &Consumables 3,000.00 36,000.00

2. Sample Test & Analysis 500.00 6,000.00
3 Conveyance Allowance 1,000.00 12,000.00
4 Fire & Safety Drill 2,000.00 24,000.00
5 Entertainment Allowance 500.00 6,000.00
Total: Misc. Factory Overhead 7,000.00 84,000.00

07.01.10: Total Cost: Factory Overhead:

No. Items/Description Yearly Exp. (Tk.)

1. Factory Officers’ Salary & Allowance 1,14,84,000.00

2. Utilities 54,50,500.00
3. Fuels, Lubes &Other Materials ??
4. Repair & Maintenance 1,20,000.00
5. Stationery & Printing ??
6. Washing & Cleaning 1,32,000.00
7. Workers’ Uniform 1,80,000.00
8. Miscellaneous Factory Overhead 1,27,200.00

Total: Factory Overhead ??

07.02:Proposed Administrative Overheads:

The Head of Accounts and Finance would be designated as the Vice President (A/C & Fin.).
He would require 11 (Eleven) other Accountants to assist him and each of them would be
responsible for a particular department. 3(Three)Units Car would be purchased and allocated
for this department. 1(One) Unit car would be for the Vice President and other 2 (Two)Units
Microbus are for the Accounts Executives.

07.02.01: Expenditures of Accounts & Finance Departments:

No Description Monthly Yearly

. Exp. (Tk.) Exp. (Tk.)
1. Salary of Vice President (Finance & Accounts) 1,50,000.00 18,00,000.
2. Salary of Senior Executive (General Accounts) 35,000.00 4,20,000.0
 3. Salary of 2 Executives (General Accounts) (25,000.00X2) 50,000.00 6,00,000.0
4. Salary of Senior Executive (Sales Accounts) 35,000.00 4,20,000.0
0
5. Salary of 4 Executives (Sales) Accounts) (25,000.00X4) 1,00,000.00 12,00,000.
6. Salary of 2 Executives (Costing & Budget) (25,000.00X2) 50,000.00 6,00,000.0
7. Salary of Executive (Income Tax & VAT) 25,000.00 3,00.000.0
8. Peon & Cleaner (3,000.00X2) 6,000.00 72.000.00
9. Festival Allowance (2 Occasions) — 9,02,000.0
10. Car Allowance (1 Car + 2 Microbus) including (10,000.00X3) 30,000.00 3,60.000.0
Driver. 0
11. Lunch Allowance (@Tk. 40.00/Day) (1,000.00X17 17,000.00 2,04.000.0
Total: A/C & Finance Overhead 66,78,000.

07.02.02: Expenditures of Commercial & Administration Departments:

The Commercial and Administration Departments would be responsible mainly for all thecash
and bank transactions and for maintaining other necessary files (e.g. Different Transport Files,
Staff Personal Files like Appointment Letter Files, Increment Files, Promotion Files, Bonus
Files, Allowances Files, Legal Action Files, Govt. and Legal Matter Files and the like).

No Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

.
1. Salary of Senior Executive 25,000.00 3,00,000.00
2. Salary of Executive (1 Admin. & 2 Com) 60,000.00 7,20,000.00
(20,000.00 X 3)
3. Peon & Cleaner 6,000.00 72,000.00
(3,000.00 X 2)
4. Festival Allowance (2 Occasions) - 81,900.00
5. Car Allowance (1 Microbus) including 10,000.00 1,20,000.00
Driver
6. Lunch Allowance (6 x 40 x 6,000.00 72,000.00
25)
Net Expenditures

07.03: Proposed Marketing Overheads:

The proposed marketing overheads would consist of the following 5(Five)issues:

1. Expenditure of the Marketing Operations Department,
2. Expenditure of the Sales Field Force,
3. Expenditure of the Sales Promotion Team,
4. Expenditure ofLocal Training and Conference&
5. Expenditure ofAdvertising through Different Media.
Brief description of the above issues is given below:

07.03.01: Marketing Operations Department:

1. The Marketing Operations Department would be responsible for the formulation,
implementation, monitoring,evaluation and controlling of all kinds of policies of sales,
promotions and distribution.
2. The Head of the Department would be designated as Senior Vice President (SVP-
Marketing) and there would have 1 (One) Sales Manager (SM), 2 (Two) Assistant Sales
Managers (ASM) and 7 (Seven) Regional Sales Managers (RSM) who would be
appointed to assist him.
3. The members of this department would be provided with the following facilities:

a) Cars: As the Head of the Department would visit the market on a regular basis, therefore,
they would get personal carsand these carswould be made readily available for them for the
purpose.The type and features of the cars would vary according to the position of the
personnel. The SVP will get a brand new vehicle. And the others will receive reconditioned
Japanese Cars. It is assumed that 19 (Nineteen)Million Taka-?? will be required for this
purpose. This expenditure will come under the subject of Company Assets.

 Car Allowance:The Company would bear the cost and expenses of legal/Govt. fees,
fuels, lubes, drivers’ salaries,repair and maintenance expenses of these cars.
Therefore, an allowance for the car maintenance has to be allocated.
 Daily Allowance:The members of this team would have to make continuous tour to
monitor and review the actual market situation. So, expenditures to cover their food and
lodging expenses will have to be reimbursed through a systematic Daily Allowance
method.
 Up-keep Allowance: Up-keep allowances would be applicable only for the Regional
Sales Managers. The Company intends to bear their dresses’ purchase and laundry
bills. This would ensure that the officers would look smart when they work in the market.
 Entertainment Allowance: Themembers of the department shall often, have to treat
the Distributors, Retailers and Wholesalers to lunch, snacks and cola. The Company
would cover this cost of entertaining the customers.
  Incentives for Achieving Target: This would be applicable only for the Regional Sales
Managers. The Managers of 7(Seven) regions would be assigned with monthly targets
and they would be provided an incentive for achieving the same.
 Festival Bonus: In Bangladesh, it is customary to provide all employees with at least
45% of their basic salary on 2 (Two) religious festivals. Thus, festival bonuses would be
required to be a part of the expenditure incurred on the members of the above
departments.
 Transfer Allowance: Transfer Allowance would also be applicable only for the
Regional Sales Managers. If any Regional Sales Manager is transferred from one area
to another, an allowance would have to be paid to cover the cost of their transfers.
 City Allowance: The expenditure of certain regions is greater than those of the other.
For example, the expenditure of the Regional Sales Manager of Dhaka is likely to be
greater than that of Khulna is simply due to the higher standard of living. Likewise, an
extra amount would have to be allocated to the Managers who would be responsible for
covering the richer regions.
 Termination Benefit: In Bangladesh, a terminated employee has to be provided with
an amount equivalent to that which he would have received in 4 (Four) months. Thus, a
provision has to be kept for the Termination Benefit.
 Repair & Maintenance of Car:The Company would also requirepaying for the repair
and maintenance cost of the cars of the above mentioned departments. Thus,the repair
and maintenance would be a part of the expenditure.
 Annual Awards:The Company has also plans to provide annual awards to the
Regional Sales Managers who would perform according to the desired level.
 Mobile Telephone:The Company intends to provide all members of the Department
with Mobile Telephones. The Company would also have to bear the monthly charges of
the telephone.

07.03.02: Expenditure of the Marketing Operations Department:

Sl. Items/Description Monthly Exp. (Tk.) Yearly Exp. (Tk.)

No.
1. Salary of Senior Vice President 2,00,000.00 24,00,000.00
2. Salary of Sales Manager 50,000.00 6,00,000.00
3. Salary of 2 Assistant Sales Manager 60,000.00 7,20,000.00
(30,000.00 x 2)
 4. Salary of 7 Regional Sales Manager 1,40,000.00 16,80,000.00
(20,000.00 x 7)
5. Daily Allowance (Entire Dept.) 1,27,500.00 15,30,000.00
6. Car Allowance (Entire Dept.) 1,14,000.00 13,68,000.00
7. Entertainment Allowance (Entire Dept.) 32,000.00 3,84,000.00
8. Purchase of Mobile Telephones (11 x 1,54,000.00 1,54,000.00
14,000.00)
9. Mobile Telephone Allowance (11 x 66,000.00 7,92,000.00
6,000.00)
10. Festival Bonus (Entire Dept.- For 2 2,02,500.00 4,05,000.00
Occasions)
11. Miscellaneous Expenses (Entire Dept.) 5,000.00 60,000.00
12. City Allowance (7 Regional Sales 7,000.00 84,000.00
Managers)
13. Up-Keep Allowance (7 Regional Sales 7,000.00 84,000.00
Managers)
14. Incentive for Achieving Target (7 20,000.00 2,40,000.00
Regional Sales Managers)
15. Transport Depreciation Cost (Entire 88,000.00 10,56,000.00
Dept.)
16. Mobile Telephone Depreciation 3,208.00 38, 496.00
Cost(Entire Dept.)
17. Transfer Allowance (7 Regional Sales 5,000.00 60,000.00
Managers)
18. Repair & Maintenance (Entire Dept.) 5,700.00 68,400.00
19. Annual Award ( For Regional Sales -- 2,40,000.00
Manager)
20. Termination Benefit 5,000.00 60,000.00
Total: Expenditure of the Department 12,023,900.00

07.04: Sales Forces:

The proposed marketing network of the Companywould include an active field force. The field
force would consist of at least 72 young men-?? and each would be designated as District
Sales Officer (DSO).

Precisely, the team would need to monitor sales activities within the respective districts
through various communication media and frequent market visits. They would also have to
identify the weak districts and take adequate steps to develop the market. Moreover, the
members of the sales force would be held responsible for promoting the productsand services
of the Companyby physically visiting shop to shop basis.

Motor Cycles would have to be made available for each member of the team. If the districts
they have to cover are big and if it is not possible to do so without a handy transport, it is noted
that the cost of purchasingMotor Cycle would come under capital expenditure. The Cost of a
Motor Cycle would be approximately Tk.1,25,000.00.

The other facilities that have to be provided to the DSOs are similar to that of the Department
of Marketing Operations.
07.04.01: Expenditure of the Sales Forces:

Sl. Items/Description Amount Monthly Yearly Exp.

No. Exp. (Tk.) (Tk.)

1. Salary of 72 District Sales (72 X 6,000.00) 4,32,000.00 51,84,000.00

Officers
2. Daily Allowance (72 X 2,000.00) 1,44,000.00 17,28,000.00

3. Motor Cycle Allowance (72 X 500.00) 36,000.00 4,32,000.00

4. Entertainment Allowance (72X1,000.00) 72,000.00 8,64,000.00

5. Festival Bonus (For 2 Occasions) (72 X 3,200.00) — 388,800.00

6. City Allowance (50 X 700.00) 35,000.00 4,20,000.00

7. Up-Keep Allowance (72 X 500.00) 36,000.00 4,32,000.00

8. Incentive for Achieving Target (72 X 500.00) 36,000.00 4,32,000.00
9. Transport (Motor Cycle (72 X 2,000.00) 144,000.00 17,28,000.00
Depreciation) Cost
10. Transfer Allowance 5,000.00 60,000.00
11. Repair & Maintenance for Motor (72 X 50.00) 3,600.00 43,200.00
Cycle
12. Damaged Product Replacement 3,000.00 36,000.00
13. Termination Benefit 5,000.00 60,000.00
14. Annual Award -- 2,00,000.00
Total: Expenditure of the Dept. 1,20,08,000.00

07.04.02: Sales Promotion Team:

As discussed, the Company has plans to conduct a "door-to-door” marketing campaign. The
company supported by 300 (Three Hundred) men intends to cover 5,00,000 (Five Lacs)
households within a period of 6 (Six) months of operation.
An average Bangladeshi household consumes approx. 0.217 MT of LPG per year. Likewise,
the yearly demand of 5,00,000 (Five Lacs) households would be approx. 1,08,500 MT. If 60%
of the visited households start using an Orion LPG Cylinder, the company should have a sale
of approx. 65,100 MT in the first year.
The Company intends to conduct such a campaign only in the first year of it’s operation. Thus,
the members of the Sales Promotion Team would not be permanent employees of the
company. In Bangladesh, companies usually hire University Students for conducting such a
campaign. Orion could also do the same.
Our company also plans to provide every house-hold with a Gas Lighter as gift. The gift should
act as an added incentive in urging people to convert to LPG.
It is to be further noted that the company intends to conduct such a program at least 2(Two)
months before going into commercial operation. Moreover, the expenses of the promotional
team are big. Accordingly it should be better if the entire amount is adjusted in 4 (Four) years
(i.e. only ...??% of the amount could be shown in the Profit/Loss account of the first year. The
rest amount could be adjusted equally within the next consecutive 3 (Three) years.
The contract expenditure of the Sales Promotion Team is shown below:

07.04.03:Expenditure of the Sales Promotion Team:

SI. Items/Description Monthly Exp. Half Yearly

No (Tk.) Exp. (Tk.)
.
1. Contract Fee of Promotion Team (10,000.00 X 30,00,000.00 1,80,00,000.0
300) 0
2. Travel Allowance (10,000.00X300 30,00,000.00 1,80,00,000.0
) 0
3. Product Trial (800.00 X 300) 2,40,000.00 1,20,000.00

4. Gift for Household (5,00,000.00 X 2,50,00,000.0

50) 0
5. Up-keep Allowance (500.00 X 300) 1,50,000.00 9,00,000.00

6. Misc. Expenses 25,000.00 1,50,000.00

Total: Expenses of the 63,490,000.00

Department

07.05: Trainings& Conferences:

The District Sales Officers and the Members of the Sales Promotion Team would have to
receive professional training. In Bangladesh, there are a number of marketing firms who
provide such training facilities. Orion Gas Limited would need to go into contract with such a
firm.Moreover, regular in-house departmental conferences would be required to monitor and
expedite the sales activities. Brief details of these expenses are shown in the following table:
07.05.01: Expendituresfor Trainings& Conferences:

SI.No. Items/Description Monthly Exp. (Tk.) Yearly Exp.(Tk.)

1. Training of District Sales Officers -- 15,00,000.00
2. Training of Sales Promotion Team -- 10,00,000.00

3. Training Materials/Requirements -- 2,00,000.00

4. Monthly Conference with District Sales 20,000.00 2,40,000.00
Officer
5. Monthly RSM's Conference 20,000.00 2,40,000.00
6. Annual Conference 10,00,000.00
Total: Expenditure of the Department 41,80,000.00

07.06: Medias:
A significant proportion of the marketing expenditures would be required to allocate for Medias.
Brief details of the plan for Media’s expenditures are given below:

07.06.01:Advertisement on Television:
The company plans to air a total 3(Three) advertisements per day. Each advertisement is likely
to be for 30 seconds long and the average cost of telecasting such an advertisement is
Tk.40,000.00.

07.06.02:Advertisement on Radio:
Orion Gas Ltd. plans to air approximately 200 advertisements per month on Radio. The cost of
doing suchadvertisement would be Tk. 1,56,000.00.

07.06.03:Making Advertisements:
Orion Gas Ltd. plans to make 2(Two) different advertisements for both the Television and
Radio.

07.06.04:Advertisement on the Newspapers:

The average cost of providing a moderate size advertisement on the First Page of a daily is Tk.
50, 000.00. Orion Gas Ltd. has made a monthly budget of Tk. 4,00,000.00 for the newspapers:

07.06.05:Advertisement on Bill Boards:

The average yearly cost of hiring a large sized bill board is approximately Tk. 2,00,000.00. The
cost varies on the location and size. Orion plans to make a yearly allocation of Tk.
30,00,000.00 for this purpose.

07.06.06: Expenditures on Media:

 Net Expenditure on the Marketing Department
SI. Items/Description Monthly Exp.(TK.) Yearly Exp. (Tk.)
No.
1. Adverts. on Television (40,000 x 3 x 365) 3,650.000 43.800.000

2. Adverts. on Radio (780 x 200 x 12) 156.000 1.872.000

3. Cost of Making 2(two) TV Advertisements -- 4.000.000

4. Cost of Making 2(two) Radio Adverts. -- 40.000
5. Adverts. on Newspapers 400.000 4.800.000
6. Adverts. on Bill Boards - 3.000.000
Expenditures of the Department 57,512,000

07.07: Proposed Distribution Overhead:

Sl. Items/Description Yearly Exp. (Tk.)
No.
1. Expenditure of Marketing Operations 1,20,23,900.00

2. Expenditure of the Sale Force 1,20,08,000.00

3. Expenditure of the Sales Promotion Team (showing ¼ of the 1,58,72,500.00
first year)
4. Expenditure on Training & Conference 41,80,000.00
5. Expenditure on Media 5,75,12,000.00
Net Yearly Expenditures on Marketing ????????

The proposed Distribution Overhead of Orion Gas Limited may be divided into 3
(Three)categories as follows:
1. Expenditure of the Vice President (Distribution),
2. Distribution of Cylinders from the Bottling Plant to 7 (Seven)Depots.,
3. Distribution of Cylinders from 7 (Seven) Depots to the Distributors .
Brief details of the above categories are described below:

07.07.01:Expenditure of the Vice President (Distribution):

The Head of the Distribution Process would be designated as the Vice President (Distribution).
He would be held responsible for overseeing the distribution process, depot sales and for
managing the company products like LPG Cylinders (Vacant & Filled: Domestic &
Commercial), LPG Regulators (Domestic & Commercial), LPG Cylinder Valves, Supply of Bulk
LP Gas within the country-wide network. The expenditure of the Vice President may be
described as follows:

07.07.02: Expenditure Details of the Vice President (Distribution):

SI.
SI. Items/Description
Items/Description Monthly Exp.Monthly
(Tk.) Yearly Exp. (Tk.)
Yearly Exp.
No.
No. Exp. (Tk.) (Tk.)
1. Cost ofofTransporting
Salary Vice PresidentCylinders from
(Distribution) Filling -
1,00,000.00 4,16,00,000.0
12,00,000.00
2. Plant to the Depot (@ Tk.8.00/Cylinder)
Daily Allowance 8,000.00 0
96,000.00
3. Cost of Transporting
Car Allowance Cylinders from Depot
10,000.00 1,04,00,000.0
1,20,000.00
4. toFestival
FillingPlant
Allowance - 0
90,000.00
5.
Total: Yearly Expenditure ofDistribution -???- 52,000,000.0
Purchase of Mobile Telephone - 14,000.00
6.
0-??
Mobile Telephone Allowance 6,000.00 72,000.00
Total: Expenditure of the Vice 15,92,000.00
President

07.08: Distribution of the Cylinders from the Bottling Plant:

As discussed, cylinders can be distributed from the main plant with the aid of hired Transport
Agencies. The cost of doing so has been shown in the following table:
07.08.01: Distribution of the cylinders from the Main Plant to the Depots:
It is to be noted that the Distribution Overhead from the Filling Plant has been calculated on
the basis of achieving a yearly target sale of 65,000 MT-??. The average cost of transporting a
cylinder from the Filling Plant tothe Depots has been calculated to be Tk. 8.00 -?? while the
cost of returning thecylinders to the main plant has been shown as Tk. 2.00-??

The cost of the cylinder return journey is little as the trucks of the contracted transport
agencies would always have to come back to the plant. Thus the contracted transport
agencies would agree at a lower rate. Otherwise, they would be making a loss by sending
empty trucks.

07.08.02: Distribution of Cylinders from the Depots to the Distributors:

Orion Gas Ltd. plans to distribute the cylinders from the depots to the distributors and
shopkeepers with the aid of Delivery Assistants, Depot Chiefs and Drivers.

In this regard, the company intends to employ 98 (Ninety Eight) Delivery Assistants out of
which 14 (Fourteen) will be posted at the Depots (2 at each Depot). These persons would have
to collect the payments from the Distributors/Dealers and ensure that the cylinders reach the
Distributors and Dealers in good condition and in time.

While the other 84 (Eighty Four) Delivery Assistants would be held responsible for ensuring the
cylinders to reach the Retailers and Shopkeepers of the respective Distributors according to
the delivery schedule. Moreover, they would also need to see that the Shopkeepers return the
empty cylinders in time. It seems that this work should be done by the Distributors.
InBangladesh, the company shall have to perform the same. The Distributors do not feel eager
to employ these workforcesrequired to do so.The Expenses of Distribution of cylinders from
the Depots to the Distributors may be described as:

Chapter-08
Final Analysis and Investment Appraisal

08.01: Financial Analysis and Investment Appraisal:

As elaborated below, from a financial point of view, the project is healthy and has a satisfying
possibility to grab the opportunity. The following assumptions and adjustments in the financial
model are made:

08.02. Discount Rate:

The financial analysis is computed against constant costs in real terms. As far as the prices
are increased over the years by inflation, this is included in the discount rate (consisting of a
rate for inflation, interest and risk). The discount risk is estimated at 20%. This is high,
however, the inflation in Bangladesh is fluctuating, around 9% in the year 2008 and 5.1% in the
year 2009, the interest will be around 8% and then, some is left for risk that would be a risk of
the country rather than a risk to the project itself.

08.03: Currency Ratios:

The model is calculated with the following currency ratios. All the figures are in the financial
model represent US Dollars.

08.04: Dollar/Euro:
Dollar/Euro Currency Ratio: 0.753523
Euro/Dollar Currency Ratio: 1.32710

08.05: Taka/Euro:
Taka/Euro Currency Ratio: 0.0108789
Euro/Taka Currency Ratio:91.9212

08.06: Taka/Dollar:
Taka/Dollar Currency Ratio:0.0144374
Dollar/Taka Currency Ratio: 69.2647

08.07: Total Investment:

The total investment is made based on costs estimated.
08.08: Operational Costs:
The operational costs for the Bottling Plant and marketing activities are based on the previous
study. The operational costs for the Bottling Plant are based on the data provided by Gemco.
The number of workers for each department of the Bottling Plant is estimated. The wages for
these workers are based on the initial estimated costs for the bottling plant provided by Orion.

Sources/Items Yearly in USDollar

Director In-Charge
Factory Labor Cost of Bottling Plant
Factory Labor Cost of Cylinder Filling Line
Factory Utilities
Factory Administrative Overhead
Factory Repair & Maintenance
Factory Administration & Finance
Cylinder Distribution

08.09: Taxes:

08.10: Sales Prices:

08.11: Cost Prices:

08.12: Production Capacity:

08.12.01: Sales Based on Supply Capacity:

Compared to the previous study, the sales numbers are based on cylinder filling capacity
instead of market demand. So, within this model, filling capacity is the key and thus determines
what can be sold and how many bottles can be put into market. So, the filling capacity of
cylinders within this model is taken as a constraint. Market demand isnot a constraint as it is
much larger than the current filling capacity.
Currently the installed Cylinder (12 Kg Cyl.) Filling Capacity of the Plant would be 10,000
Cyl./Shift/Day which may be increased to 12,500 Cyl./Shift/Day. There is a capacity expansion
facility in the filling Carousel.This capacity is based on 100% efficiency within the production
line which may not be realistic. It is more likely that the efficiency rate of the production line will
vary between 70% and 85%. Within the basic scenario a 75% efficiency rate is taken into the
financial model.

The bulk LPG Storage Capacity of the plant is 3,000 MT (6,000M 3) and the Annual Bottling
Capacity is 30,000 MTPA whichmeans 25,00,000 Cyl./Yr. (expandable up to 30,00,000
Cyl./Yr.).The production capacity is too small to fulfill the potential market demand at the start
of operations. Therefore,on preferential base and business perspective, it is wiser to import a
good quantity of cylinders up front. According to Gemco, it is viable to import about 1,25,000
cylinders-??at the start of production. Therefore, we have included 20,000-?? upfront produced
cylinders in the base scenario. This implies that already some operational costs related to the
production of cylinders are taken on the account of 2002-??.

From thefirst year of the operations, not only 12.0 Kg type Cylinders would be filled but also
the commercial/industrial (33/40/45/50 Kg) Cylinders would be filled, this will lead to the first
positive cash flows. As the company is generating positive cash flows the possibility arises to
import 5 Kg as well as 33/40/45/50 Kg bottles. Within 2/3 years, the full capacity of the filling
line will be used.

08.12.02: Refill Rate:-??

The refill rate is determined at 5 for 12.0 Bottles and 7 for 2 Kg bottles. Out of prudent reasons
these refill rates are taken. A higher refill rate implies a higher IRR, a shorter payback period
and higher positive cash flows.

08.12.02: Cost of Distribution:-??

In the initial financial model the cost of distribution for Orion were taken into account. Decided
by Orion is that they will outsource it's distribution activities. Assumed is that the costs for
outsourcing is equal to the costs of having distribution department within the own company.

08.12.03: Depreciation:-??
Depreciation period is 12 years. The costs of depreciation are calculated over the total
investment minus the management costs.

08.12.04: Scenarios:-??
Standard Rule in financial world is that the IRR must be higher than the discount rate. Only
then, it is attractive to invest in a certain project. The IRR is the discount rate that makes the
NPV equal to zero. In the base scenario the IRR without ORET funding is 16% whereas it is
26% with ORET-funding. The discount rate is estimated at 20%. These IRR ratios are based
on the scenario that 25.000 cylinders are produced up-front.
This graph shows that the discounted cash flows are positive through time, which implies that
the business model is sustainable over time.

08.13: Table of Discounted CashFlow (DCF):-??

08.13.01: Net Present Value (NPV):-??

Based on an IRR of 26%, the NPV is $6.275.405,- with ORET Funding, whereas it is $
-5.021.210,-without ORET Funding.The discounted pay back time is 9 years. As the amount of
upfront bottles increases the IRR increases to 28% if 80.000 bottles are produced. The pay
back period decreases subsequently to 8 years.

08.13.02: Sensitivity:-??
The financial model is very sensitive for prices. If the revenues totally increase with 10% the
IRR becomes about 33%. If revenues are 10% lower than estimated the IRR is 16% resulting
in a negative NPV of $3.3 million. This would also result in a pay back period that will take
longer than 13 years. This scenario is not very probable as market demand is much higher
than the quantity of LPG that can be supplied.
If the total costs increase, the IRR will be 20% with ORET funding. If total costs are 10% lower
that expected the IRR is 30%. All the IRR are based on a scenario's with ORET funding. For all
these scenarios the IRR's without ORET Funding stay under 20% (discount rate). This implies
that the NPV stay negative within these scenarios. Thus, in any case the project is not feasible
without ORET funding.
 Chapter- 09
Risk Analysis

09.01: Risk Assessment:

In general, for risks assessments, every variable has to be taken into consideration for which
1% change results in 1% change or more of NPV or IRR. This variable that causes 1% change
in NPV or IRR is a critical one and needs to be estimated as reliable as possible.

09.02: Technical Risks:

From a technical point of view the project is not too complicated, no such special state of the
art technology is being used., the technology applied is widely applied all over the world, this is
true for the whole plant: the spherical tanks for gasstorage, the bottling or cylinder filling plant.
Some risks are there in technical field related to the general risk of "delay in construction time".
It takes longer for the plant to come into operation when construction time is delayed. During
this delay, the financing costs will continue and pay-back of loans will be delayed as well.
Risks that can cause delay are as follows:

09.02.01: Ground:-??
It is difficult to assess exactly the structure on the ground and some set backsmay occur.The
ground needs preparation in order to bear the heavy load of Spherical Tanks at site.

09.02.02: Civil Works:-??

For 4 Million Euro (??) the simple civil works (buildings) are going to be constructed by
aBangladesh Contractor. Delivery on time depends on the accuracy of this Contractor. These
kinds of risks are usually covered by applying fines upon late delivery clause agreed/signed
between Owner and Contractor.

09.02.03: Planning:
If one element in the construction of the whole plant is delayed, it willaffect the remainder of
the project works. For this, we will refer to the Implementation Schedule and PlanningChart of
the Plant Engineering and Technical ConstructionContractor (EPC Contractor) of this project.
All the technical risks summoned up may, at its worst effect, cause delay in construction time.
This isan acceptable risk, earnings will just come in V* to a 1 year later, the financing costs will
augment, this can, however be borne-??

09.03: Country’sPolitical Risk:

In the discount rate,it was calculated with a 20% discount rate. This is a high rate mainly
because of the country’s political risk. Inflation is high (9%) the remainder is to cover interest
and country’s political risk. For the remainder of the risks, the reader is referred to the
beginning of this chapter (sensitivities).-??