A mini LPG depot is the solution to LPG distribution problem facing the country. According to statistics, Nigeria is having LPG supply problems, which is a result of limited storage facilities that is closer to most states in Nigeria.
Imagine that almost all the states in the west gets their supply from Lagos – including the North. Other locations where there’s LPG depots are Port Harcourt, Benin, Warri, Calabar and Akwa Ibom. Most these are coastal lines, since the supplies are done through ship. In the entire eastern and northern states, there no single LPG depot.
If you are thinking of an LPG investment that’s super profitable then you should be looking at mini LPG depot. The market potential is huge, and it can be conceptualized into a strong brand or monopoly.
I hate monopoly, but where you control the supply, distribution and sales in a market, you are the monopoly. Although, it’s capital intensive, but if you wish to go big you will need a good consultant to help you actualize the concept successfully.
How Mini LPG Depot Works
The challenges in the Nigerian LPG market created huge supply gap that’s becoming difficult to fill any other way. In all the years of existence of NNPC, the government organization that’s in charge of oil and gas, it has not been able to fill any of the existing supply gap.
But right now this gap can be filled with mini LPG Depot facility, by exploring the existing LPG regulations, with the right investment.
The idea requires you to identify a state or location that can cover multiple states LPG supply needs, and plant a mini depot there. This strategic location is your most epic advantage for a mini depot.
What’s Possible With Mini LPG Depot
You may want to know what’s financially possible as your returns from a mini LPG depot investment. If I may answer you from a statistical point of view, it will be a huge share of the 5 million metric tones of LPG domestic supply target.
Okay, that’s a general assumption. But if you critically look at the potential of a mini LPG Depot it’s huge.
Although, it depends on the mini LPG Depot business model you decide to adopt. If you agree to go with this model that would put you in an estimated financial position of over N500 billion annually. This estimate would depend on the network of your investment.
You should also know that so much resources is require to achieve a huge project like this.
The Role Of An LPG Consultant
It will be an error to want to embark on such project without proper guidance. You will need an experienced consultant who understands the business model of all the sides of LPG supply, distribution and retail.
A consultant who can properly encapsulate the whole concept of mini LPG depot. Help you put up a feasible plan. Help to search and advice on the right location for the mini plant. Help with the plan and execution of an effective marketing. Help to setup and manage the right team that would ensure the execution of the project. And be in the advisory team leader throughout the period of the project and beyond.
And talking about marketing – it must be prior and after the construction of the plant. During the course of feasibility plan, a marketing plan should be drawn with proper accountability of all the target retail plants within the defined market. This head count is important in established the profit potential of the project.
Basic LPG Depot Startup Requirements
The plan must be vast and inculcating every aspect of the business to give a full view of the investment. Cost shouldn’t be minimized. A proper analysis of all the risk, costs and requirements should be presented in the plan. A mini LPG depot business plan is required as a main requirement before anything else can be done.
It will give you the full overview of this project. At least, the plan should be able to do five things successful:
✅ Conceptualize the mini depot model and getting all regulatory approvals
✅ Identify a proper location suitable for a mini depot
✅ Address the issue of cost
✅ Create. a detailed marketing plan
✅ And get an estimated feasibility report
These are preliminary steps you have to take, even if it’s just to ensure the viability of the project before venturing into it. You shouldn’t even think going into a huge financial impact project like this one should be carried out without a proper assessments of the basic requirements before investing.
Analyzing Financial Requirements
It will not be proper to put together all the financial requirements without a proper business plan. However, I can give you an ‘tentative’ finance requirement, which can help you see where the money is going. That would give you an idea what would required financially.
✅ Large expanse of land – minimum of 2 to 3 acres of land
✅ LPG trucks – required number would depend on the operational plan
✅ Mini LPG plants – depending on your marketing plan
✅ Site construction – planning, materials and buildings
✅ Operational fund – needed for general operation which includes stock, maintenance, managing transportation, etc.
These are just the obvious financial requirements. You also have to consider consultancy fees, DPR licensing, environmental assessment study, host community fee (where applicable), some other procurements and logistics issues, etcetera.
However, a comprehensive mini LPG depot business plan will help put all these finances into proper perspective.
Getting Financial Support
Unless you can afford to offset the huge financial requirement, you may be needing financial support. Although, it’s easier to approach the banks here but that won’t guarantee success unless you have the right people to back the project.
Another source of financing might be getting foreign investors. Since it’s an oil and gas industry, it’s much easier to convince foreign investors to partner with you. However, you will also be required to meet some conditions to get such funds.
Moreover, one sure way to pull this whole thing through is to use your connections. Even if you are not a successful businessman or know people who do, you can approach business partners with a clear cut goal and feasibility projections.
Investors, whether local or foreign would like to see the potentials of any prospect before they can part with their money. You need to put out some convincing proposals with your business plan. However, foreign investors might want to see more than just that. They are more concerned about your involvement and what you stand to lose if the business should fail in your hands.
Location Requirement & Assessment
Money maybe key to this project, but the importance of location cannot be over emphasized. You need the right location for a successful mini LPG depot. A bad location is bad for business.
So, how do you begin to ensure that you get the right location for your mini LPG depot? The first step would be to define the scope or model of your mini LPG business. Your scope is important, because it helps to define your revenue target and best model to achieving it.
Some mini depot can target just the state where it’s located, while some can go beyond one state to target multiple states. Your model should be what defines your location. Your consultant should help draft the model based on your target and financial investment.
Even the location can be defined in the model based on your target consideration and closeness to the target markets.
Distribution & Supply Requirements
Mini LPG depot is just a supply and distribution outlet for LPG products. Your only advantage is closeness to your target market. As more and more LPG plants are being setup across the country, the demand for LPG products are increasing, even so is the cost of the products and transportation.
Your business is to provide LPG products to your market faster than the main depots. Most LPG plants would take advantage of your fast supply to restock LPG. So, you have to ensure the process of distribution is made available to speed the process.
You would be needing LPG trucks for this project. The best option is buying and utilizing your own supply trucks. This concept is cheaper and easier to control. However, you can also work in partnership with independent LPG truck owners to fulfill your supply needs.
Addressing Your Target Customers Needs
You should identify your customers, know what they supply challenges are, and make provisions for the right incentives to encourage them. Whatever your business model will be, let it focus on addressing the problems of your target market. That’s the best way to win your market.
If you don’t know what the real challenges in your target market is, then don’t venture into mini LPG depot. You may think you know just by reading this article, but that’s not entirely true. This post is addressing a general market view. The actual problem in each market maybe slightly different from this.
And it’s those slight difference that makes your target market unique. Depending on the model you may decide to adopt, don’t just think the only problem your main customers (the LPG plants) has is supply challenges.
How to Fight Competition
If you think because there are no competitors in the mini LPG depot business now that it would remain so for long, wait till you see how many investors that have read through this post, and how many are already consulting with me on it.
While I may not give you information about others seeking to embark on the same project, I can help you understand how to prepare against competitors. That doesn’t mean your competitors can’t do the same. But it helps you to position your business well in your target markets before they arrive.
One of the models of mini LPG depot is to create your own network of LPG retail plants across your target markets. This gives you a huge market potential and helps you position yourself in the best location across the city or your target market.
The more retail plants you have the more customers you can reach directly. This model works best than selling to existing retail plants, who may also have other supply sources, and may shift interest at any time.
A mini LPG depot is one of the most successful business ideas that has come out of LPG industry. It’s like the modular refinery model. If you want to make it a huge success, it would require huge finances. But if you consider how much turnover this could generate for you, then you will agree with me that it’s worth a venture.
I have tried in my own way to give moderate estimates in terms of revenue projection. But the real revenue can only be determined by the business model and how much investment you are willing to put in.
Note that it’s not a project for Beginners. You must have access to huge financial support or know partners who can command such funding. If you are interested in embarking on this project please make sure to start first with a comprehensive business plan.