Every year, as activities begins to wind up, most people begin to make plans for the coming year. And as most people also lost their livelihood due to the pandemic, there’s limited funds available for startups of any business. As you plan to invest in cooking gas plant in this new year, I want to show you how to reduce LPG setup cost.
It’s okay to start early making plans for the new year. The pandemic may seem like a bad omen, but it also exposed things in the LPG plant business. As investors tries to save cost of setup, new revelations of doing things are also emerging.
One of it is how to reduce LPG setup cost. This will change the way you see LPG cost analysis in the coming year. Generally, LPG investment cost went down as against what it cost prior to this point.
What LPG Setup Cost Was Reduced?
There are three main cost factor in setting up LPG plant in Nigeria. Let me list the three in no particular order:
- Land or Location
- DPR licensing
- LPG plant equipments
These three are the real cost factor in LPG plant setup. You can see how they affect the business and their different roles as well. Let me take each one briefly to help you recap it better.
Land Or Location:
This one is what determines the profitability of the LPG plant. You can’t trade this one for anything else. The best location will always win in this business. That’s why you should invest in the best location.
That starts with buying land in a choice location. However, whether you buy in a choice location or not, it’s recommended that you conduct a location assessment. This report gives you clear insight on the viability of the location for LPG plant setup. A proper location assessment would cost between N200,000 to N300,000 depending on the part of the country you reside.
This one is just the referee of the business. Without them you cant even start the business. So, you shouldn’t try to outsmart the referee for any reason. Get all the necessary approvals, and follow proper procedures as recommended by DPR.
If possible, hire a consultant to handle your DPR licensing process. Depending on your location, a consultant can take between N300,000 to N800,000 to help you process your DPR licensing.
LPG Plant Equipments:
Now, the last one on the list is even what makes your business work. It’s the soul of your business. Without this you don’t have a gas plant. You may have all the best idea on how to setup LPG plant but if you don’t get to the point where you build the gas plant, you don’t have any business.
Who builds your equipment and the cost implication is one factor you can control. And there are many options to this regard. You can choose to buy used or brand new equipments, Chinese equipments, or European equipment for your setup. Whatever you finally decide to choose is good. You only need to weigh its pros and cons.
The best LPG equipment is not just the cheaper one but the equipment with a longer lifespan. Remember, it’s going to be used on a daily basis. There would be normal worn and tear. The longer it takes for major tear and worn to show up the more cost it saves you.
How To Reduce LPG Setup Cost
So, it’s important how you handle the costs associated with the setup. Although, you may not be able to determine the kind of cost you get when buying a land for the gas plant location. This one maybe beyond your control. If you happen to save cost during the process, good. But don’t expect anything out of the ordinary.
The two known areas where cost is possible now is both DPR licensing and plant equipment purchase. Of course, DPR license was reduced from as much as N3.5 million cost implication to now around N2 million by DPR. That was government own way of deepening the increase in the number of gas plants in the country.
When it comes to LPG equipment, nothing actually changed in price. Yes, it wasn’t like price suddenly dropped. If there’s anything strange about Nigerians commerce is increase in dollar exchange. And that further increased the cost of LPG equipments. So, what really changed?
Since cost of LPG setup increased due to the exchange rate, most investors are looking at directly importing LPG plant equipment themselves, instead of buying from local dealers. This will reduce LPG setup cost by almost 50 percent.
Importing LPG Plant Equipment
Some people may become apprehensive when the issue of importation comes up. They start thinking of dollar exchange, shipping fee, duty fees, clearing fee and wharf rat (if you know what that means). But all that shouldn’t bother you at all. The idea of importing your gas plant equipment is to reduce LPG setup cost.
However, if you follow my guide you will have a successful import transaction. So, let’s get started. Your gas consultant should also be able to help you with reputable LPG equipment vendors to import from.
The first thing to consider when importing your LPG plant equipment is the supplier. In this case, we are referring to foreign manufacturers. You can find them in either China, Turkey, Germany and some other European countries. I strongly recommend that you buy from either China or Turkey. Most of them advertise online on social media as well.
China Versus Turkey LPG Equipment
I think the difference between these two are not that much, but I will try to refer to those things that really matter in this business. If you are importing your LPG equipment from China, price maybe cheaper than what you get from Turkey. So, if the cost is of major interest, then China is your target for a supplier.
Turkey is also cheap considering the cost here in Nigeria. And there is no much price difference between China and Turkey prices. It’s just some fraction of change. So, it might not make much difference cost wise if you buy directly from either China or Turkey.
However, when it comes to warranty, China doesn’t give any. You must know that what you paid is at owners risk. But with Turkey LPG equipment you get up to 20 years warranty on the tank itself, 2 to 3 years on the dispensers and 2 years on the pumps. You should discuss all these issues with your supplier when ordering. It’s always better to involve your gas consultant when doing this negotiations.
Shipping, Clearing And Transportation
Once you have ordered the LPG plant equipment from either China or Turkey as I advised, your next line of action would be to ship it to Nigerian and transport it to your plant location. You should put the cost implication in your advisement.
Let start by looking at shipping cost in this regard. There’s no fix shipping cost, since size and weight is under consideration when shipping LPG equipments. But one thing is certain, the cost won’t be so cheap but it won’t be too high to cost more than it would cost if you had bought the equipment from local vendors.
Remember that those local dealers also shipped it from overseas. They paid shipping and added the cost in their equipment sold to you. So, whether you bought locally or imported it yourself, you are still paying for the shipping.
Another cost input is clearing fee and transportation to your plant location. Yes, after you paid import duty you still need to move the equipment to site where it will be finally installed. Duty is charged by custom and a haulage company would be needed to transport it in a big truck to your location.
Installation, Maintenance And Training
Now, who installs your equipment is critical. Remember I advised you earlier to hire a consultant during the discussion with the equipment supplier. A consultant may charge you N50,000 to N200,000 to be involved in this kind of negotiation. The consultant would ensure all the components and installation gadgets are included in the shipment.
Another way to go about this is to hire a consultant who has technical installation know-how. That way you hire the consultant both as an expert and the equipment installer. Because the challenge of importing LPG equipment is the installation. Don’t trust most of the so called ‘engineers’.
Different LPG equipments comes with different design specifications. An engineer need to understand the particular installation guide to do an efficient job installing it. Remember, this is gaseous product and should be handled with the strictest care.
Also, the maintenance is another thing. Outsource it to the right consultant or company. You need prompt response when there’s any maintenance issue. That also includes training your initial workers during takeoff.
Starting a cooking gas plant is cost demanding. That’s because you have to deal with land owners and at the same time equipment vendors. These are what drives up LPG setup cost. If you can acquire a less expensive land in a viable location and reduce the cost of LPG equipment, your startup cost will be minimal.
Moreover, you should engage the services of a cooking gas consultant when executing your LPG plant project. In the multitude of counsellors there’s safety. But the most important safety here is the installation process, which your experienced consultant would help you achieve successfully if you carry him along with your LPG equipment importation.