Energy Market

How to Setup New Cooking Gas Plant (2023)

LPG cooking gas plant

Do you want to start one business that its profitability is insanely awesome because people can’t STOP cooking food. That business is in cooking gas plant. To set it up profitably you have to follow the right steps and professional advise.  This business is very lucrative if you set it up the best way.

And I’m going to show you all about this business, how you can start it on small investment; how you can even have it where the consumers live that are easily accessible to buyers.

however, all you need to know how to start this cooking gas plant immediately is here- faster than you can read this article. If you haven’t read most of my startup articles here, please do so, and you will find other businesses I have shared that can help you create your source of income.

How LPG Cooking Gas Plant

Currently, the cooking gas plant is a very costly investment. In fact, DPR (The Directorate of Petroleum Resources) doesn’t want it easier, either as a way to protect big investors or simply because government would like this business to remain in the exclusivity.

Also, only a minimum size of 100 by 100 square feet of land space DPR can approve for the cooking gas plant setup. That’s at least a plot of Land. Although in some states you will require two plots of land to get an equivalent land size to match the DPR requirement.

In Lagos and most other states, you will need two plots of land to get this size of the area for the gas plant. Lagos lands are sold 120 by 60 square feet.

While Abia, Imo, Awka, Enugu and in most other states the size of a plot of land is 100 by 50 square feet. I’m only aware that Delta and Edo is exactly 100 by 100 square feet sizes for plots of land.

So, at the current land arrangements, you probably would be spending so much on just land acquisition alone before even considering other colossal cost implication of cooking gas plant.

Estimated LPG Cooking Gas Plant Cost Analysis

For example, a 10-tonne cooking gas plant setup can cost around N40 million to N100 million to fully setup – including all the regulatory documents, land purchase, building construction, operation cost and gas plant equipment. Most importantly, considering that the location of your gas plant is more important than any amount you can ever invest.

That is not a manageable amount to come by these days. That does not exclude the fact that your cooking gas plant has to be setup in outskirt of town – in remote locations that is far from the city center where most of the consumers live.

That is not an excellent site for a business that wants to be profitable. Its also a reason many gas plants suddenly started to shut down, as they become unprofitable. If you locate outside the busy city, and someone sets up close to the city, you will automatically lose most of your customers patronage. There’s no mystery to it. That’s just how location based business works.

If for any reason you want to setup in outskirt of the town, ensure the area is a fast developing one as well. You don’t need to wait 5 to 10 years when that areas opens up before you start making profit. Think first about the customers of today, and tomorrow, before thinking of those in forever.

Related: How LPG Gas Plant Works – A Complete Setup Guide

Leasing A Petrol Station for Startup:

You should set it up in the city where the consumers live. And beat all regulatory limitations that cooking gas plant have, by building a mini cooking gas plant that can be set up even in busy areas using already existing filling stations or land (if you can afford the cost of land at the city center).

Note that DPR is not against setting up cooking gas plants in the cities. Their rules says not to setup in residential area. every city has both residential and commercial areas. So, you can setup in commercial areas. Anywhere a petrol station is allowed legally, a gas plant Cam be allowed there too.

This mini cooking gas plant are capacities from 5 metric tons down to 2.5 metric tons plants. You can also setup inside a petrol station if the station is big enough and meets DPR requirement for an add-on LPG license. And you can find such location within the city Centre’s or close enough to where the consumers can access you.

One of the 5 year plan of the government through its new gas policy is to make cooking gas accessible to the consumers. So, your mini cooking gas plant is in line with government policy.

But you will still need to get DPR to approve it for you. There’s also space restriction requirements to meet. Most times, it advisable to conduct location assessment before applying for DPR approval. Reason is, once you have applied for approval if your location is rejected, you also lose the money you might have paid to government for the approval. You can hire a consultant to conduct this assessment for you. It’s not expensive at all.

 

 

LPG Plant Location Assessment Report:

Starting a business in uncertainty and fear is worse. You could lose your investment. Invest little to get your location assessed by a professional LPG consultant.  An LPG gas consultant would charge between 100,000 to 150,000 naira to conduct this assessment for you, if you have a consultant near you t might be less. But where you can’t find one around, it would cost you more to cover costs like transport, hotel accommodation and feeding for a day or two, considering where the consultant is coming from.

One thing to consider here is that it’s cheaper to avoid mistakes than correcting costly errors of an LPG setup in a wrong location. Cooking gas is a location based business. Get it right from start. Avoid guessing, it can lead to much regrets later. Location assessment will give you the facts of your location. Its a physical assessment of your location.

Related: How To Pick Most Viable Location For Cooking Gas Plant

Advantages of Leasing Than Buying:

You are getting the picture clearer now. There is no city in Nigeria where you can’t find filling stations in major city area to locate your mini cooking gas plant. The cost of buying lands is increasing daily. It may discourage small investors from tapping this huge potential in cooking gas plant business.

In fact, in major roads leading to many estates and even GRA’s we have filling stations. And these are the routes gas consumers take to work and their homes. The best location always wins in this business.

They pass these filling stations every day, and many of them never go to the outskirts of towns even in a whole year, unless when they are travelling or visiting someone there. Consumers no longer fancy going into the bush to buy cooking gas.

These stations are your secret weapon to set up your cooking gas station closer to the consumer. Although you will still need approval for them. And the requirement for a skid plant in a filling station might also make some filling station not suitable.

Now, you have to follow my instructions on how to go about it. It’s not every filling station that may be ideal for it.

LPG Plant Long Lease Option

Some petrol stations are too crowded and don’t have even enough space for their own business and so can’t accommodate a cooking gas plant by the side. However, you can also lease an empty land. Although, that would require paying more money for regulatory approval.

So, looking for a petrol station with a spacious environment is vital. Also, you can choose to lease the entire petrol station and add your cooking gas plant as a side business.

Or you rent space from the owner of the station for your cooking gas plant. I recommend the lease of 3 to 5 years. It will also be much cheaper because you get to pay in bulk and that gives you advantage to negotiate the rent lower.

If the site is perfect, I recommend you make an extended contract. And there is an excellent reason for that too. But if you are not so sure the site is excellent for cooking gas business, just do a short lease and add a renewable clause that won’t allow the owner kick you out after the end of the lease, Unless you still want to continue doing business there.

Business Plan & Viability Report

Once you have a location that you can use for your cooking gas plant, the next thing will be to conduct a feasibility study. I recommend you hire a good gas consultant. But ensure that it’s a custom report.

Some even copied from consultants and be marketing it online. They are not LPG consultants. They only sell you a copied business plan without any professional advise.

I advise that you shouldn’t buy this kind of plan. Such business plan is copy and paste for the sole purpose of getting your money. You can’t present such plan to a bank. You’re probably not the first who may have presented that copy to a financial institution for a loan application.

That plan is never written for the success of your own business. And it’s the same report that they give to everyone. The just update and add customer details and location and they have a business plan for you.

LPG Business Plant Content

However, I strongly recommend you actually hire a consultant and pay him for a custom business plan with feasibility study. It may cost you around N50,000 to N150,000 for a 2.5MT or 5MT plant capacity but anything above that may cost more. It will be professionally done and customized to your need and location.

I recommend it – just go for the custom business plan to be prepared specifically for you with your location target. It will help you start, build and sell profitably. Anything less than that is a waste of your money.

[A] Executive Summary

[B] PART ONE: LPG Plant Overview

  1. Introduction to LPG Business
  2. LPG Vision & Mission Statement
  3. Business Objective
  4. Best Value Proposition
  5. Factors of Success In LPG Business
  6. Current Status of LPG Plant
  7. Brief on the LPG Industry
  8. Impact of LPG On The Local Economy

[C] PART TWO: LPG Marketing Plan

  1. LPG Product Description
  2. LPG Plant Business Model
  3. LPG Gas Opportunity
  4. LPG Pricing Strategy
  5. LPG Target Market
  6. LPG Distribution & Delivery Plan
  7. Promotional Strategy
  8. LPG Competitive Advantage

[D] PART THREE: LPG Investment Plan

  1. Location Assessment Report
  2. LPG Raw Materials
  3. Cooking Gas Dispensing Equipment
  4. LPG Distribution Process
  5. LPG Production Cost
  6. LPG Stock Control Process
  7. Operational Activities
  8. Project Implementation Schedule

 [E] PART FOUR: Organizational & Management Plan

  1. Ownership Of The Plant
  2. Profile of the Promoters
  3. Management Staff & Support Units
  4. Salary Financials & Schedule

[F] PART FIVE: LPG Funding & Loan Plan

  1. LPG Financial Assumption
  2. LPG Initial Capital Estimation
  3. Source of Capital
  4. Loan Security & Repayment Plan

[G] PART SIX: Risks & SWOT Analysis

  1. LPG Business Risks
  2. SWOT Analysis

Cooking Gas Plant Approval Requirement

The next plan will be to get the necessary approvals. You may also need to hire a consultant if you don’t know how to go about it. But cost of securing approval for setting up inside a petrol station and on empty land are not the same. You can find other of my report on this business for more details.

Here you will also need the corporation of the petrol station owner. I also recommend that you hung your lease payment on the approval of the place for a cooking gas plant. Some petrol stations license are not up to date.

So you don’t pay until DPR approves that station for gas business. That would give you the corporation of the station owner.

LPG Plant Approval Stages

There may be several different approvals before DPR but that’s the work of a consultant is to help you with, so hire one for it if you must. But if you have the time do it yourself.

Apart from the government fees, a consultant may take N100, 000 to N300,000 as a fee for this consulting services. Also, let me recommend that you might need a police report and fire service approval.

A cooking gas plant consultant, will help you every step of your project and also handles training of your staff and safety trainings for the cooking gas plant operations.

These might cost you up to N100,000 depending on the city. Then DPR charges are not so official. There are many charges to it. It not fixed or stipulated. Maybe because it’s done by an external body outside DPR or simple a way DPR staff can extort more money for themselves.

Don’t ignore the Nigerian factor as well. There are money through the backdoor before even the payment payable to the government.

LPG Cooking Gas Plant Setup Cost

If all these processes are done that you now have the station to use and it has been approved by DPR, then we move on to building the cooking gas station. Let me explain here that this kind of gas station is easily moveable since you are not the owner of the station.

Also, if the site is not doing so well and you wish to move to another place, it’s easily transferable. However, the cost implication for setting up may not also be fully captured here.

There may be civil works required which cannot be quantified without a professional assessment of the site and the level of work needed. But the cost of installation of the gas station is based on the capacity you can afford.

I always recommend you go for 2.5 tons for a start. The equipment price is between N8 million to N10 million for brand new. If you can offer two of these to make it 5 tons, it will be perfect. The reason is so that you don’t always run out of gas entirely before you get a new supply if your plant is in a remote location or where gas supply maybe difficult to reach easily.

As one tank is emptied, you are selling from the second tank while you call for a refill of the empty container. Also, these small capacity is what can be approved for a gas station. I don’t recommend building a single 5-tonne capacity either. And the significant size of 10 tons is only reserved for cooking gas plant that is setup on a full land.

There are also other cost implications, which I have explained in another article HERE.

LPG Cooking Gas Supply

Once you setup you can now buy cooking gas to sell to customers. Now that your gas station is built and ready to go, you will need to order your first gas and start selling immediately. By the time your building, the neighborhood will be asking, what are they building here?

So, you have already done publicity, and now people are expecting to start buying cooking gas from you – don’t disappoint them. If you have the 2.5 tons, which is 2,500 KG capacity, then you should be budgeting around N1,250,000 or more as price may go up  to fill this tank, depending on the current prevailing rate.

However, this is just an estimate because the gas price is not fixed. It changes regularly. Also, note that the price is inclusive of transportation cost. Some delivery trucks charge between N20 to N30 per KG. If you Multiply it by 2,500 KG, you will get an idea of the gas rate. I know the current retail price is N680 per KG.

Although like I said, this price can change, it’s as at the time of my writing. It can be lower or higher, but just know it’s moving and it’s not a static price. I hope this is very enlightening for you. If you need more clarification or need a business plan or a location assessment report done for you, please call or WhatsApp: 07087770518.

Conclusion

Starting a mini cooking gas plant maybe ideal if you have a petrol station that meets DPR requirement you can use. Your turnover for this business is usually high if you market it well.

However, make sure it’s strategically located, if not the purpose would have been defeated as well. Cooking gas customers that would patronize you will do so for their convenience. Study what they bigger plants are doing and see how you can match the convenience to your customers.

Finally, note that your setup cost can be around N6 million to N8 million. That’s if everything is done well and you followed proper advise. You can talk to me about your project and let’s reason it together and best way you can achieve it. And having someone to discuss with can help you articulate your challenges and ways to overcome them.

MORE RELATED POSTS:

How To Invest In Highly Profitable Cooking Gas Business

And – How To Start Top 3 Cooking Gas Businesses In Nigeria

Chinedu David
About The Author: Chinedu David An inspiring writer with several years of experience in journalism, consulting and training. Worked with Success Digest magazine for over a decade. Founded MyStore - an online store in 2013. Trained several startup entrepreneurs in telecom sector, LPG (oil & gas), and on Cryptocurrency investment. A born again christian, who's committed to spreading the gospel of Jesus Christ with passion. Drop a comment below and he will respond to your query. He can also be reached via email: nedu@myblog.com.ng or Call/Text/WhatsApp: 07087770518
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