PROJECT PROPOSAL

FOR
Caravan Fuel station and Modern Integrated
Transportation service

Location-Mekelle city, clustered for the sector

Project Promoter: Tesfu G.medhin
Cell phone-- +251-913-238-303
Consultant- Harmony Environmental and Developmental
consultancy plc

Cell-phone- 0914723591//0984065370
Mekell, Tigray, Ethiopia
May, 2023

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 I. EXECUTIVE SUMMARY

The country’s annual fuel import which is growing at a rate of 10 percent has reached 3.8 million
metric tons. The government spends more than USD three billion for the fuel import draining 80
percent of the country’s foreign currency. There are 13 oil depots in the country which in
aggregate can store 367,000cu.m (367 million liters) of petroleum products.

When the project is completed the country’s total oil storage capacity will increase to
607,000cu.m. The existing depots have the capacity to store 367,000cu.m of petroleum products
which can cover the country’s fuel demand for 35 days. The new depot terminal will boost the
total storage capacity to 607,000cu.m which will cover the country’s demand for 65 days.

Bearing in mind, the owner Ato Ataklti Tewelde of the envisaged project has planned to
construct a standardized oil depot a standardized oil depot for the distributing 1.5 million
liters regular, 1 million benzene and 1 million kerosene total store capacity 3.5 ML at a cost of
200,000,000 Birr at Mekelle city. In addition to the provision of Fuels, Lubricants, other
specialized products one stop service like Modern Car wash, Lubricant check & change, Tire
repair, wheel alignment check, Supermarket, Cafes and Restaurant Services will be implemented
by outsourcing to others. Area land request for the project is 10,000m2.

All the material included in this document is based on data/information gathered from various
sources and is based on certain assumptions. And as much as possible we used the most trusted
and recent sources for the study. The project will create job opportunity for 48 permanent and
240 temporary citizens.

The new depot will have a modern and efficient unloading and loading facility and a state-of-the-
art firefighting system. It will be environment friendly.

The Dibo petroleum Ethiopia is a regional Oil marketing company, incorporated in 2017, with
significant presence in all parts of Ethiopia. From its beginning as a fuel seller, Dibo petroleum is
now a newly established Oil Marketer with full-fledged in Mekelle city, and it will start in all
parts of Ethiopia after the legal and investment activities finalized.

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The market condition for the proposed products has vital role for the realization of the objectives
of establishment of the proposed project, there is excess demand for the product even at a fixed
price.

In addition to the above given facts, the envisaged project has also various socio-economic
importance for the country. It plays a crucial role in satisfying the domestic demand of petroleum
products, generating additional income for owner, creating permanent and temporary
employment opportunity for skilled, semi-skilled as well as unskilled workers directly plus
indirectly and contributes for government treasury in the form of tax.

The initial cost of the project is estimated to be 200 million (own equity birr 140 million and
with 60 million bank loan). Out of the total planned cost of the project, 70% or Birr
139,539,077.79 to cover partial cost of tankers, vehicles and Equipment. The remaining 23% or
Birr 45,291,187.41 for working capital including the additional machinery costs above 8% of
preproduction and interest Birr 15,169,734.79 is proposed to be equity contribution of the
promoter.

With these investments, the financial analysis results indicate that the project is expected to be
liquid and profitable throughout its life span. The projected profit and loss statement indicate that
the project will generate net profit of birr 2,404,926 and birr 4,357,167 during the first and 10th
project year respectively. Similarly, the cash flow projection indicates that the project will have
cumulative cash balances of birr 1,540,013 and birr 25,227,714 at first and last project year
respectively. The financial internal rates of return (FIRR) before and after tax are computed to be
35% and 26% respectively, which is the rate above the cost of capital. Furthermore, the project
has an after tax net present value (NPV) of Birr 218,714,875 at its discount rate. Results of the
sensitivity analysis made by reducing revenue by 10% and increasing operating costs and
investment costs by the same exhibited that there will be an after tax financial internal rate of
return of 15%, 18% and 24% respectively implying that the project is able to withstand adverse
circumstances.
Finally, with the available documents and based on the findings of the appraisal study, the
project is found to be viable.

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 II. BACKGROUND INFORMATION

II.1. The Applicant

 Company Name: Carivan Fuel station and Modern Transportation service
 Promoter Name: Tesfu G.medhin
 Address:
 Region: Tigrai
 City: Addis Ababa
 Mobile : +251 914723591/

II.2. The Project address: The same with applicant address.

 Certificates and Licenses
 Form of Organization:- Sole Proprietorship
 Legal form of Business:- Sole Proprietorship
 Type of project: - Oil Depot Storage and transport service
 Project Objective: - to deliver quality oil to customers on time

II.3. Brief History of the Company

The company have four oil terminals in Addis Ababa, with a total area of 8500m2 and now
request in Mekelle. Fixed Assets like Home, and 33 long vehicles and Sufficient money in Bank
more than300 million

Being encouraged by the favorable investment atmosphere such as provision of incentives, loan
facilitation, business management training and others, the promoter (Ato Tesfu G.medhin)
determined to invest his capital in areas where he can make a significance contribution in the
overall socio-economic development of the country. The promoter has significant experience in
fuel station and transportation service provision for more years in the different region and he has
good experience in timely paying of business tax. The promoter currently owns a project of fuel
station and other private business in Addis Ababa.

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III. DESCRIPTION OF ACTIVITIES AND TECHNICAL DETAILS
the envisaged project has planned to construct a standardized 8 oil depot, Garage, car washing
service, total transportation service with loading and un loading service, Super market, Guest and
parking service. house for the distributing 1.5 million liters regular, 1 million benzene and 1
million kerosene total store capacity 3.5 ML at a cost of 200,000,000 Birr at Mekelle city.
The depot receives, stores and distribute petroleum products
The oil depot typically has 8 tankage, all are below ground, Cantries (framework) for the
discharge of products into road tankers or other vehicles (such as barges) or pipelines.
Aboveground Storage Tank Facility 3 in numbers having capacity of total 1,5 million litter and
Belowground storage 3 in numbers for each oil discharge with a capacity volume of 2 million
litter
ANCILLARY EQUIPMENT

Road: safe distance

Parking:
Fencing: have fences and gates that can be locked.
• Lighting: to prevent vandalism and help detect spills at night.
• Signs: “No-smoking”, “Danger”, “Warning” or “Authorized Personnel Only”.

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 II.4. Significance of the Projects
The project primarily aims at improving the Infrastructure Development for fuel Product Storage
& Transportation service.
 To develop the storage facility of fuel product to ensure better availability of fuel product
in the Country particularly in the project area (Mekelle city).
 To fulfill the local fuel products demand of cities/towns.
The project will contribute towards the socio-economic development of the area. The direct and
indirect employment to the local population during the operation of the project for both skilled
and unskilled levels will be created thereby the local population will be benefited. The project
also envisages the development of planned green belt, which would not only enhance the
aesthetic quality of the area but also helps in creating better landscaping.
During construction phase, the project will also generate temporary local employment. In
nutshell, the project would create better infrastructure, better availability of petroleum products,
improve livelihood and socio-economic conditions.

II.5. Vision
Being one of the top ten Leading fuel and modern transport service supplier in the country in
2025

II.6. Mission
Provision of quality and standard fuel and gases, lubricants and holistic one stop service that
includes oil and lubricant checking, wheal balance and alignment check, car wash, parking, super
market, guest house and other related services for customers and participate in discouraging
deforestation through the promotion of using LPG for home consumption.

II.7. Objectives
The general objective of the project is to fill the demand and supply that has prevailed in the
towns in the availability of standardized and quality services of LPG, Lubricants, gas station, Car
wash, parking and sales of grease & engine oil by providing all aspects to the Maximum quality
requirements of the towns. Generally, to generate employment opportunity for unemployed
citizens, to fill the gap between demand and supply of standard service and generate revenue for
the promoter.

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The project has the following Specific objectives:-
 The project will contribute to national energy security by providing additional volume of
crude oil and natural gas reserving capacity and stablize markets.
 Discourage deforestation through promoting the use of LPG and renewable source of
energy for home consumption
 Creating continual return to the promoter of the project from the capital investment in the
form of profit
 Contributing its side for expansion of gas station investment and developing healthy
business competition in the towns
 Reduce the problem of Gas Availability through Increasing fuel storage capacity for
diesel, petrol and aviation fuel within the approved project constraints
 Create Employment opportunities for local community during its construction and its
operation, which is one of the vital problems facing the country
 Generate additional revenue for the government in the form of tax receipts
 Being an input of developmental efforts exerting by government bodies, especially by
providing gas, which is the blood of every operation
 Provision of one stop service that includes car wash, oil and lubricant level check, wheal
balance and wheel alignment checking, parking service, transport service , super market
and related service with the fuel station in the compound.

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IV. KEY SUCCESS AND RISK FACTORS

IV.1 Key Success Factors

 The Key Sub Sector Success Factors

- Continuous innovation by adopting new technology related to consumers demand
- Quality service
- Introduction of good management practice
- Responding quickly to changing economic forces, changing policies, tax free or reduction
while importing technologies and other investment items
- Growing oil demand in urban centers, due to urbanizations, increase in vehicles and
change in life style

3.1 Risk assessment

Factors which should be considered when assessing a storage installation include:

 storage capacity;
 location of the tank, in relation to site boundaries, buildings, process areas and fixed sources
of ignition
 design standards for the installation;
 quantities and locations of other flammable liquids;
 quantities and locations of other dangerous substances;
 tank contents and any likely residues;
 activities on adjacent premises;
 training and competence of site operatives;
 supervision of staff;
 frequency of deliveries;
 loading and unloading operations;
 inspection and maintenance;
 The surrounding environment.

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3.2 Risk Mitigating Measures

 Flammable liquids should be stored in tanks or containers and systems constructed to a

national or international standard to ensure their strength and integrity
 Separation is an important means of providing protection for tanks containing flammable
liquids
 Good ventilation ensures that any flammable vapors given off from a spill, leak or release
will be rapidly dispersed.
 In certain areas, flammable atmospheres may occur either during normal operation or due
to accidental spills or leakage.

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V. MARKET STUDY

4.1. Overview of Ethiopia

Ethiopia is an independent republic which lies in the north-east corner of Africa and forms part
of the North East African Region. The capital city is Addis Ababa, headquarters of the African
Union (AU). Since the secession of Eritrea in 1993, Ethiopia has been a landlocked state.
The Ethiopian economy is based on agriculture, which accounted, in 2014/15, for about 42
percent of the gross domestic product (GDP), 75.9 percent of foreign currency earnings. In
2014/15, the industrial sector, which mainly comprises small and medium enterprises accounts
for about 13 percent of GDP. The services sector accounts for about 46.1 percent of GDP.

Real GDP grew by an average of 11.3 percent per year for the last ten consecutive years
(2003/04-2014/15), which is the highest among the non-oil producing economies of Africa.
During 2006/07, 2007/08 and 2008/09, the general annual inflation was 15.8, 25.3 and 36.4
percents, respectively, and dropped to 2.8 percent in 2014/15. These were largely driven by the
trend of the food component of price which showed 21 percent annual average growth during the
indicated fiscal years. The budget deficit as a percent of GDP was only 1.3 percent in 2014/15.

The Ethiopian economy has grown stronger as the transition from a command to a market-based
economy takes place. The former system of price controls has almost been discarded, the tax
rates have decreased, and several private sector restrictions have been removed. Progress has
been made on the implementation of reforms. Valued Added Tax was introduced in the country
in January 2003 and the import tariff regime has been reformed. The financial sector is also
improving, with flexible interest and exchange rates that are market-determined. Ethiopia
belongs to the COMESA agreement. Member countries enjoy preferential trade terms. Ethiopia
has similar agreements with a number of countries and the EU.

In the Growth and transformation plan (GTP Plan), the government expected to boost the real
GDP from 10.1 to 14.9 percent. Projection of export of goods assumed to grow at a faster rate in
response to the adoption of export promotion policy measures.

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According to the GTP plan for the five years, exports of goods were expected to grow by 36.6%
in 2010/11 and 28.4% percent annual average in the remaining period. With regard to
transportation, in 2015, all Kebeles (100%) will connect to all weather roads with an average
time of 1.4 hrs to reach nearest all-weather road.

The Ethiopian tax law provides for the imposition of direct and indirect taxes. The direct taxes
are divided in to five categories: personal income tax, rental tax, withholding tax, business profit
tax and other taxes. The main types of indirect taxes applicable are value added tax, custom duty,
excise tax and turn over taxes.

Ethiopia has abundant supply of skilled workers in various fields at internationally competitive
rates. Wages and salaries vary on the type of profession and level of skill required. They are
determined by agreement between the employer and the employee.

In conformity with the international conventions and other legal commitments, Ethiopia has
enacted its labor law to ensure the worker-employer relations be governed by the basic principles
of rights and obligations with a view to enabling workers and employers maintain industrial
peace and work in spirit of harmony and cooperation.

The labor law has fixed hours of work as eight hours a day and thirty-nine hours a week. Work
done in excess of these hours is deemed to be overtime. Labor disputes in Ethiopia are resolved
through the application of the law, collective agreements, work rules, and employment contracts.
Foreign investors obtain work permits for their expatriate employees directly from the Ethiopian
Investment Agency (EIA). The EIA processes applications of work permits in an hour.

There are no free trade zones in Ethiopia. Addis Ababa, the capital city, is linked by road to the
port of Djibouti, at the Gulf of Aden. The port of Berbera in Somaliland and Port Sudan are other
external trade routes that provide services for export-import trades of the country. Another
potential port accessible to Ethiopia is Mombassa in Kenya. In order to ensure efficient, cost
effective and reliable import and export movement of cargo to and from the sea ports of
neighboring countries, the government has established the Dry Port Service Enterprise. The

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Enterprise is currently operating two dry ports which are located at Modjo, in the Oromia
Regional State, and at Semera, in Afar Regional State.

4.2. Overview of Energy sources and energy policy in Ethiopia

Ethiopia’s known energy resources essentially consist of wood fuels, animal dugs and
agricultural residues, which are overexploited, and hydropower, which are being exploited, crude
oil which is largely untapped. Ethiopia has proven reserves of fossil fuels in the form of natural
gas and coal as well. The energy resource potential of the country includes several hundred
million tons of coal and oil shale, and over 70 billion cubic meters of natural gas. However, only
a very small portion of this potential is developed owing to lack of financial resources, skilled
manpower and more importantly appropriate policy and planning. (GTZ (2007)
According to the 2007 World Development Report (World Bank, 2007), the per capita
commercial energy for Ethiopia in 2004 was 44 Kilograms (Kg), while for low income
economies it was on the average 369 Kg and for high income economies it was 5066 Kg.
Table: Rural and urban energy sources

Energy Source Rural (%) Urban (%)

Firewood and Charcoal 82.2 74.47

Dung 9.8 7.8
Agricultural residues 8.4 6.3
Kerosene 0.0 7.6
LPG 0.0 0.6
Electricity 0.6 12.0
Sources: GTZ, 2008
As you can see from the above table, nearly all the remaining energy needs particularly for
domestic purposes are covered by fuel wood, the supply of which has led to a very rapid
depletion of the natural forest resources and vegetation cover. Due to frequent usage of fuel
wood for energy supply in the country, the forest resource coverage has dropped from 35 percent
coverage to less than 3 percent. As a consequence of increased environmental degradation,
Ethiopia is facing a cyclical draught and famine.

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According to the GTP Plan, by 2015 maintaining facilities and construction of the storage for
petroleum, the reliable and steady supply of petroleum will be secured. In the next five year it is
planned to increase the present generating capacity which is 2000 MW to 8,000 up to10, 000MW
at the end of the plan period (2014/15) with electricity power coverage of the country to 75%. In
addition by 2015:

 Increase the production of bio- ethanol to 194.9 million litter at the end of the planning
year through coordinating the governmental and private sugar industries,
 Increase production of bio diesel up to 1.6 million litters through involvement of Private
investors, farmers, etc. In general, the development of bio-fuel will generate 1 billion
dollar foreign currency,
 Increase the number of blending facility of benzene-ethanol from 1 to 8 and that of
biodiesel to 72 by oil companies.
 Sea port utilization ratio will reach 60:30:10 for Djibouti, Berbera and Port Sudan,
respectively
 Fuel transportation by Ethiopian ships will reach 3.6 billion ton in 2014/15

Ethiopia has vast hydropower resources and only a small fraction has been developed. The
developable hydropower potential is estimated at 30,000 MW, located primarily along the Blue
Nile and its tributaries.

Very limited and very few proportion of the population in Ethiopia have access to modern fuels.
The per capita modern energy consumption is about 0.02 tones of oil equivalent (TOE), which is
one of the lowest in the world(ESMAP-Energy Sector Management Assistance Programme
Ethiopia-Energy Assessment Report No. 179/96.)

To initiate production and utilization of potential energy sources, the Government of Ethiopia for
the first time has approved a National Energy Policy, which was issued in May 1994. The policy
clearly identifies the need for the promotion of private sector participation in the energy sector
development. The New Investment Code Proclamation No. 37/1996 and the Amendment Code
Proclamation No. 116/1998) further strengthened this initiative. And, for the exploration and
exploitation of petroleum resources, which also includes gas resources, the Government has
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issued Petroleum Operations Proclamation No.295 of 1986, Petroleum Operations Income Tax
Proclamation No.296 of 1986 and a Model Production Sharing Petroleum Agreement (1994).

C. Overview of Ethiopian policy towards to LPG, Kerosene and other related by products
Ethiopia, at the moment, is a net importer of petroleum products. White and black petroleum
products are imported directly by the Ethiopian Petroleum Enterprise (EPE) through third party
suppliers. Upon receipt from third party suppliers, EPE stores the products at Horizon Terminal
in Djibouti and then distributes the different grades mainly Gasoline (Benzene), Gas Oil
(Naphta), Kerosene, Light fuel oil, Heavy fuel oil and Jet fuel to Oil companies and these
companies distribute the fuel through a fixed margin structure set by the government. In addition,
EPE imports Gasoline (Benzene) from Sudan. For the supply of Gasoline in Addis Ababa, EPE
has made an agreement with Nile Petroleum, a Sudanese Oil Company operating in Ethiopia,
where the latter conducts blending of Gasoline with Ethanol (E5) at its depot in Sululta
(Northern Part of Addis Ababa with 15 KM distance from the center) and distributes E5 to Oil
Companies.
The market is regulated by the Restatement of the Distribution Agreement (DA) which gives the
power of supervision to the Ministry of Trade and Industry (MoTI). The authority to set and
monitor petroleum product prices and margins is granted to the MoTI through the DA, and the
DA also provides for monitoring and related activities of petroleum sector regulations, such as
operations, safety and environmental issues.
All of Ethiopia’s petroleum products are imported. Ethiopian Petroleum enterprise is responsible
for the procurement of petroleum products through competitive international bidding on and as –
needed basis. International oil companies like Total, NOC, and Oil Libya handle distribution.
These companies in the market are granted an oligopoly in downstream operations by virtue of
the Distribution Agreement (DA) and in effect, the companies are self-regulating in many
respects. Petroleum, Ethiopia’s major source of commercial energy is crucial to the functioning
and growth of the economy.
Ethiopia is also believed to hold a huge potential for energy and mining. The nation’s current
efforts in the areas of hydroelectric power projects and exploration of Oil and Gas are clear
testimonies of the government’s determination to unleash its natural resources. Ethiopian
industry, transport and commercial sectors largely depend on imported fuel. The amount of

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foreign currency spent for the importation of petroleum products is very significant and it is
between 19 to 28 percent of the export earnings (National Bank of Ethiopia, 2004.)

Distribution of Petroleum
To date, petroleum products distribution activities are done according to the Restatement of the
Distribution Agreements signed periodically between the MoTI and the petroleum distribution
companies (whole sellers) like Total, NOC, Oil Libya operating for more than 30 years in
Ethiopia. The Government organ that signed the Distribution Agreement and regulates the
implementation and overall petroleum distribution operation is MoTI. Distribution Agreement
focuses on the process of delivery, supervision, measurement, accounting procedures, price
determination, transportation etc.

The Government is the one that determines the inland wholesale and retail selling prices.
According to the Agreement, the Government takes factors such as CIF (cost of insurance and
freight) cost of product, transport, duties and taxes, company's marketing expenses, profit and
dealer's commission into account for petroleum price determination.

5.1. Nature and size of demand for petroleum products

Petroleum is one of the most traded items in the world. Petroleum is a necessity product and the
nature of its demand is inelastic. Unlike other businesses whose demand is impacted by price and
other economic variables, the consumption of petroleum products in Ethiopia continues to
increase even in the face of any economic slowdowns.
Demand for petroleum products such as Fuels & lubricants in Ethiopia are massively growing at
an average rate of 10% over the last ten years (since 2004). As of 2015, the overall size of
demand for fuels & lubricants amounts 2.8 billion liters and 30 millions liters respectively.

5.2. Past Demand

According to MOT report due to the increasing price of petroleum, most vehicles currently are
Naphta and those vehicle which are using Benze are converted in to Naphta
Inspected and Registered Vehicles by License and Plate Type
Type of License 1999/00 2000/01 2001/02 2002/03 2003/04 2004/05 2005/06 2006/07 2007/08 2008/09

Government 16,081 16,611 17,278 17,070 17,424 20,013 21,581 27,365 27,210 31,200

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 Mass organization 239 256 294 261 780 1,657 2,271 2,880 3,852 4,417
UN 1,015 1,001 954 1,056 1,045 1,202 1,221 1,548 1,386 1,589
C.D 819 815 921 1,060 672 1,050 1,099 1,394 1,318 1,511
Aid Organization 3,794 4,280 4,219 4,052 4,393 4,384 4,828 6,122 6,292 7,216
OAU 134 132 157 217 192 225 250 317 330 379
Commercial 30,851 33,311 34,995 34,931 36,703 50,046 58,120 73,697 81,761 93,752
Taxi 10,156 10,632 12,010 12,506 12,395 14,523 20,062 25,439 34,282 39,310
Private Commercial 9,859 10,661 11,531 8,245 13,508 14,988 17,263 21,890 24,014 27,536
Private cars 42,258 43,858 47,905 53,540 58,696 58,221 65,930 83,600 89,555 102,690

Total 115,206 121,557 130,264 132,938 145,808 166,309 192,625 244,252 270,000 309,600

Most oil products are consumed in the transportation sector, which accounts for at least two-
thirds of the country’s total petroleum product consumption. The sectoral breakdown is
approximately as follows: Transport 69%, Industry 10%, Households 21%. Currently the number
of vehicles is double in the last five years as one can see private vehicles Licensed in Addis
Ababa (AA) passes 200,000 and now it reaches B-05000. At the end of 2016, the total amount of
vehicles in Ethiopia was estimated to pass 500,000. And this does not include heavy duty
construction machineries such as Loader, Excavator, Grader and Agricultural machineries such
as Tractors, Combine harvesters and other motor driven machineries.

5.3. Forecasted Demand

According to Transport ministry, the growth of vehicles is 7% and 9.4% for Minibus and Bus’s
respectively. Based on the above data the forecasted number of the vehicles in the country for the
coming 10 years is as follows:

Type of 2017 2018 2019 2020 2021 2022 2023

License
Government 37,960 39,478 41,057 42,699 44,407 46,184 48,031
Mass orga 5,374 5,589 5,812 6,045 6,287 6,538 6,800
UN 1,933 2,011 2,091 2,175 2,262 2,352 2,446
C.D 1,838 1,912 1,988 2,068 2,151 2,237 2,326

Aid Org 9,131 9,496 9,876 10,271 10,681 11,109 11,555

OAU 461 480 499 519 539 561 583
Commercial 146,915 160,725 175,834 192,362 210,444 230,226 251,867

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Taxi 60,250 65,913 72,109 78,887 86,303 94,415 103,290

Private Comm 42,204 46,171 50,511 55,259 60,454 66,136 72,353

Private cars 250,061 273,567 299,282 327,415 358,192 391,862 428,697

Total 555,776 604,976 658,680 717,305 781,309 851,192 927,503

The above projection does not include heavy duity construction machineries, Agricultural
machineries and two wheel motorcycles.

5.4. Supply & Distribution

Ethiopia’s current refined petroleum products are delivered at the port of Djibouti and Port
Sudan and trucked more than 600 KM and more than 1,500KM respectively inland by many
tanker trucks that use the road in each direction.
Total Amounts of petroleum imported and consumed
year Petroleum Products By Quantity In Metric Tone (MT) Total
LPG MGR Jet/Kero Gasoil LFO HFO
1997/98 4,401 122,995 252,302 557,640 107,576 - 1,044,914
1998/99 1,304 135,469 238,836 542,936 96,025 - 1,014,571
1999/00 1,283 142,526 224,177 548,787 61,566 54,954 1,033,293
2000/01 - 129,964 225,431 610,835 49,149 61,973 1,077,352
2001/02 - 133,111 259,786 623,197 40,688 80,894 1,137,677
2003/04 - 130,415 294,699 688,527 40,770 90,078 1,244,489
2004/05 - 146,094 334,638 773,256 43,185 110,048 1,407,221
2005/06 - 137,193 370,401 811,689 41,521 117,198 1,478,002
2006/07 - 143,743 402,311 905,478 42,255 116,429 1,610,216
2007/08 - 139,093 482,173 1,073,148 49,692 138,059 1,882,164
2008/09 - 150,099 506,497 1,203,567 36,421 116,506 2,013,089
2009/10 - 155,806 529,857 1,237,922 10,714 100,967 2,035,265
2010/11 - 141,397 558,462 1,213,751 37,613 99,563 2,050,787
Source: Ethiopian Petroleum Enterprise (EPE)
From the total 2,050,787 , 1,913,610 MTR is consumed by transport sector and the remaining by
industries and others. In 2012, the daily consumption of oil in Ethiopia reaches 51,960 bbl/day.

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 5.5. Types of Products
1. Fuel products: Gasoline (Benzene), LPG (Liquefied Petroleum Gas),Gas Oil (Naphta)
and Kerosene , Aviation fuels (Avgas and Jet A-1)
2. Lubricants, Bitumen and greases.
3. In addition to the provision of Fuels, Lubricants and other specialized products like
Modern Car wash, garage and wheel alignment, Supermarket, guest house, loading and
unloading service, parking, Cafes and Restaurant Services will be added by leasing out
our premises to companies that offer these services.

5.6. Target customers

 Commercial fuel stations
 Commercial and private transporters
 Private vehicle owners
 Government and non-government Vehicles and machineries
 Construction companies
 Power Generation
 Agricultural companies
 Manufacturing :Cement, Metal/Steel, Pulp and Paper, Sugar
 Mining

5.7. Competitors Analysis

Fuels are generally homogeneous products from the same source, transported the same way and
are generally sold in a similar manner. The market for fuels is therefore very competitive since
product differentiation is closely tied to the marketer's corporate reputation. Therefore our
company will identified ourselves as the fuels supplier of choice through our innovative
approach to marketing and competitive pricing.
Currently, there are very few Oil Companies operating in Ethiopia. The current players are
TOTAL, National Oil Company (NOC), Oil Libya, Yetebaberut Beherawi Petroleum
S.C(YBP), Kobil Ethiopia, Nile Petroleum, Wadi Al Sundus (WAS) Petroleum Ethiopia, and
TAF, Genet Petrolium, Gomechu oil. As compared to neighboring countries, Ethiopia has fewer
numbers of Oil Companies with less competition. A case in point is Uganda and Kenya where
over 50 independent companies are engaged in the distribution of petroleum products with
aggressive competition in the industry. Despite persistent and increasing growth in the demand
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for petroleum products, the network expansion (the number of outlets being built) and supply by
existing Oil Companies is not adequate. Recent trends in the exit of multinational Oil Companies
is further weakening the strength of the Oil Industry to service the growing demand of the nation
for petroleum products. In view of the current trends in economic growth and government’s plan
to invest millions of dollars

5.8. Marketing
The company will offer retail customers the most convenient ways to fuel through our Service
Stations. In addition to cash payments for fuel and other non-fuel purchases, the company will
introduce various fuel management systems to make fueling at the outlets an enjoyable
experience. For the example, the company will have special Fuel card and coupon in addition to
VISA card. The fuel cards are available to our customers on Pre-paid and Post-paid terms and
most of them are enabled for both fuel and non-fuel purchases at our Service Stations. In
addition to the comfort associated with the use of the fuel cards as a mode of payment, it will
offer irresistible discounts for Card holders. Our excellent customer service, irresistible product
offers, competitive pricing and eye catching branding will make us the marketer of choice in all
our markets.

6. Regulations, Licenses and incentives (Legal analysis)

6.1. Regulatory Requirements

The legal status of business tends to play an important role in any setup; the proposed petroleum,
LPG and lubricant Marketing and Distribution business. The company is assumed to operate on
as a private limited company as it is mandatory for an oil or gas company to register as a private
limited company.

6.2. License
Any company willing to distribute and market Oil and Gas needs to obtain a license from OGRA
(Oil & Gas Regulatory Authority). Additionally, license from Explosive department is also
required for the proposed LPG marketing and distribution business.
OGRA (Oil & Gas Regulatory Authority) issues provisional licenses to technically and
financially sound applicants/ parties for construction of works commensurate with their work
program, for a period of one year. OGRA inducts reputable third party inspectors to

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check/monitor compliance with the terms and conditions of licenses. The licenses can be
cancelled in case of non-compliance with licensing terms and conditions.
Pre-Qualification for License
Following requirements are required to be fulfilled for obtaining a license:
 Pay Order / Bank Draft /- in favor of Oil & Gas Regulatory Authority, as License fee
 Minimum capital requirements:
o 100,000USD for foreign investors
o 600, 000USD if in joint venture with local investors
 Proof of registration of the Company (Company incorporation certificate).
 Memorandum and Articles of Association.
 Location of the tentative / proposed site.
 Financial Competence Certificate issued by a Bank (original and stamped).
 Minimum Work Program:
 Number of storage tanks and capacity of storage tanks.
 Bottling facility capacity.
 Quantity of LPG to be distributed per day or per month.
 Identification of areas where distribution& / marketing of LPG is planned.

After companies meet the pre-qualification criteria’s the following criteria’s should be
fulfilled:
 Professional competency papers from ministry of trade & investment.
 Licensing & regulation kit from the investment office shall be filled
 Through principal registration the minimum legal competency requirement to be fulfilled
are:
o 5000m3 tanker
o Minimum 6 stations of which two must be ready for functioning and the rest will
function within 5 years.
o Local investors shall be willing to work in joint venture with Foreign Investors if
need arises.

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However to distribute LPG, establishment of stations is not necessary. With regard to lubricants,
companies cannot distribute lubricants alone; it should be along with petroleum in which Pre-
Qualification & Qualification requirements should be fulfilled.

6.3. Proposed Location

The head office of the company will be in Mekelle and Branch offices in all regions of the
country with rented building and leased land for the depot and fuel stations. The oil depots will
be constructed at the major corridors such as Mekelle.
Table: Distance to ports from Mekelle the capital city of Tigray Regional State (2023)

Port Distance (In kilometre) Road

Djibouti 837 Via Mille, Chifra, Alewuha
708 Via Semera, Yallo, Mekoni
680 Via Serdo, Afdera, Shiket
910 Via Addis Ababa, Gelafi
Sudan 1579 Via Kesla, Gedarif, Humera
1339 Via Kesala, Humera, Shire
1881 Via Addis Ababa, Metema, Azezo,
Anjibara
Massawa 391 Via Asmera, Adigrat
1163 Via Addis Ababa
Assab 835 Via Elidar, Dessie

6.4. Price of Fuel

A government committee also revises the retail prices of petroleum products at least every three
months. Lubricants and greases, however, are being directly imported by the Oil Companies with
the intervention of government in setting prices on a quarterly basis. The margin set by the
Ethiopian government on lubricants and greases is attractive as compared to the slim margin on
fuel. In the year 2008, the overall consumption of fuels in Ethiopia was over 2 billion liters. By
the same year, nationwide Lubricants and greases consumption was over 25 million liters. The
consumption of both fuels and lubricants is consistently increasing by 10% on a year on year
basis and the trend in growth is expected to continue in a similar pattern over the next years.
Increased economic activity coupled with increased government spending in the areas of
infrastructure, power, mining and other sectors continues to further expand the demand for

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petroleum products. For long, few multinational oil companies with little competition to satisfy
the increasing demand had controlled the petroleum industry.
IV. TECHNICAL ASPECT OF THE PROJECT

IV.1 Land and Building and Construction (Working Area)

The total land area required by the envisaged plant is 10,000 m2 of which the 4,800 m2 will be for
the construction of the Tankers with the pipe lines and other installations, the 1320 m 2 will be for
Utility area, guest house, car wash, Administrative Building and Other building Blocks. The rest
3880 m2 will be for the parking, Roads, Green Belt area, Fire water storage area, and
Miscellaneous. The project will have 8 fuel tanks each with capacity of 50,000-100,000 liters in
the first phase. The total expenditure on building, fuel tank and pipes installation is estimated at
Birr 3.5 million.
S.No Land use parameter Area (m2) percentage %
1 storage tanks area 4,800.00 54.0
3 Utility area 150.00 1.5
4 Administrative Building 320.00 3.2
Guest house 300.00
Car wash 300.00
5 Other building Blocks 250.00 2.5
(Canteen, storage yard)
6 parking 520.00 5.2
7 Roads 1,450.00 14.5
8 Green Belt area 1,100.00 11.0
9 Fire water storage area 100.00 1.0
10 Loading Unloading area 200.00 2.0
11 Misc (TLF, open space, 510.00 5.1
scrap yard, lube oil, TT
parking, officer’s coloney
etc.)
TOTAL 10,000.00 100

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4.2. Location and layout of tanks
The proposed project is located in Tigrai Region state, Mekelle city. The company request land
to Mekelle City administration. The location and layout of a storage installation should be
selected with care. The aims are to protect people and property from the effects of a fire at the
tank, and to protect the tank from fires which may occur elsewhere on site.
Storage tanks are located above ground, underground or in mounds. Each location has different
advantages and disadvantages. Storage at ground level in the open air has advantages because
leaks are more readily detected and contained, and any vapor produced will normally be
dispersed by natural ventilation. Examinations, modifications and repairs are also easier, and
corrosion can be more readily identified and controlled.

Underground or mounded tanks give better fire protection and save space, but leakage resulting
from damage or corrosion may be difficult to detect. This could lead to ground contamination,
environmental impact to land, surface water and groundwater, and possible fire and explosion
risks to nearby buildings and basements.

When we selecting the location of a single or multi-tank installation, we should consider the
distance of the proposed storage from:

 the site boundary and any off-site receptors such as vulnerable populations or sensitive
environments;
 on-site buildings, particularly those that are occupied;
 fixed ignition sources;
 storage or processing of other dangerous substances;
 Road or rail tanker transfer facilities.
Other factors to consider are:
 the position of the tanks (above ground or below ground);
 their size and capacity;
 Their design (fixed roof or floating roof).
Tanks should not be located:

 under buildings;

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  on the roofs of buildings;
 in positions raised unnecessarily high above ground level;
 on top of one another;
 Above tunnels, culverts or sewers.

Tank locations inside buildings should be avoided

Design Considerations for increased Safety:
a. All Tanks are atmospheric & are designed as per IS 803 & API 650 guidelines.
b. Design of tanks is considering wind pressure & seismic activity.
c. Tank shell plate calculations are based on Joint efficiency factor of 0.85 with corrosion
allowance of 1.5 mm.
d. Steel plates used for tank fabrication are as per IS 2062 Grade B.
e. All material used for piping/flanges confirm to relevant API/ASTM & ANSI standards.
f. Tanks shall be provided with Breather/ Conservation valves & Emergency vents as per
API 650/ API 2000 requirements.
g. Tanks are provided with double seal (primary & secondary) to prevent escape of vapour
& exposure to atmosphere as per API 650 guidelines.
h. All electrical equipment’s/motors/switches etc used inside hazardous area are either
intrinsically safe or Ex proof as per relevant zone classifications.
i. Body earthing & grid system is ensured for all product tanks & pipelines to discharge
static charges effectively & to prevent any generation of heat/spark. Continuity between
various pipe sections & valves are ensured.
j. Roads inside the hazardous area of Installation are restricted to vehicles required for
operational, maintenance and safety/security reasons and allowed only with proper safety
fittings and ensure the same by well-established checking procedure at the entry gate.
k. Road widths, gradient and turning radii at road junctions are ensured to facilitate
movement of the largest fire-fighting vehicle envisaged in the event of emergency.
l. Vehicles with spark ignition engine only are allowed inside hazardous area. Vehicles with
internal combustion engine (compression ignition) & with PESO (Petroleum and Explosive
Safety Organization) approved spark arrestor fitted on the vehicle.

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 IV.2 Machineries and Equipment’s
S.N Type of construction Measurement Quantity Unit Total Unit Total cost in
area in area in cost birr
m2 m2
1 Gas station(for Number 8 300 600 1000 600,000
burying gas tankers)
Gas station machine 8

Canopy 1

Crane with 20 tone

2 -Car wash “ 1 60 60 8000 480,000

3 Other constructions “
- Other building Number 1 300 300 LS 2,000,000
Blocks (Canteen,
storage yard)
Guest house(G+3) 1 300 300 LS

Garage
- Parking Number 1 631 222 9500 250,000
- guard house “ 1 18 18 2500 45,000
4 -For fencing of - - 150,000
compound
3,525,000

Furniture
S.N Items Measurement Qty Unit cost Total cost
1 chair number 25 12000 300,000
2 Office desk with drawer “ 10 18,000
180,000
3 Shelves with metal “ 6 25000 250,000
4 Computer, Printer & Fax 200,000
Sub total 5350 220,000

Other Supplies
S.N Items Measurement Qty Unit cost Total cost
1 Over All Numbers 25 1200 57600

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 2 Over coats “ 50 1200 57600
3 Safety Shoes “ 40 2000 432000
4 Boots Pairs 20 250 36000
6 Soaps and detergents box - - 150,000
7 Plastic Gloves Number 150 230 138000
8 Eye -glass Number 50 250 18000
9 Non durable equipments l/s
and other miscellaneous 150,000
850,200

Repair and Maintenance

Rate in
S.N Items cost Depreciation cost
percentage
1 Buildings 2% 290,000
2 Equipments and machineries 2% 240,000
3 Furniture 5% 11,800
Sub total 541,000

IV.3 Vehicles
As the project is oil transportation and supplying which is highly inflammable, tanker truck is
also the most important investment item for transportation of oil from the supplier to the project
site and final product from the project site to the market. Its total cost is Birr 17,780,000. Detail
is depicted on the below table.

IV.4 Utilities
As it is obviously known, utilities like electric power, water and communication devices like
telephone, internet and fax are among important facilities that supposed to be fulfilled for smooth
operation of every project.
UTILITIES REQUIREMENT AND COST
Sr. Utility Unit of Qty. Unit Cost
No. Measure price (Birr)
1. telephone L/s 48,000
Electric Kwh 152,000
Water M3 30,000
Firefighting chemicals L/s 40,000

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 Fuel for generator L/s 174,320
Total 444,320

IV.5 Production Process and Production Capacity

There is no manufacturing process involved in the terminal.
The process involved can be divided into
 Receipt of finished petroleum products (MS, HSD, SKO) through Rail Wagons.
 Unloading of Products (MS, SKO & HSD) from Tank trucks occasionally (TLD).
 Receipt of Ethanol through Tank trucks (TLD)
 Receipt of Bio Diesel through Tank trucks (TLD)
 Pump House Operations (PHO)
 Tank Lorry Filling (TLF) operations of MS, Ethanol Blended MS, HSD, Blended Diesel
& SKO
 Ethanol, Blue Dye & Bio Diesel Dosing
 Storage of petroleum products in storage tanks fabricated as per international standards.
 Dispatch of petroleum products through Tank Lorries.
The entire operation of RECEIPT, STORAGE AND DISPATCH of petroleum products is carried
out in a closed system thereby eliminating risk of spillage of products and to achieve enhanced
safety.

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 6.5. Technology (machinery & Equipment)
The machinery and equipment required by the project are listed below. The total cost of
machinery and equipment will be 2 million.

I. Product pump house (twd receipt & tt dispatch):

o PUMP HOUSE: 175 M X 6 M with new product pumps.
o PUMP HOUSE MANIFOLD: 175 M X 30 M

II. Product piping:

o Set of piping from TW Siding to the Product Tanks
o Set of piping from Product Tanks to the pump house and
o Set of piping from pump house to the Tank Lorry Filling (TLF) shed.

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III. Electrical facilities:
o TRANSFORMER & HT BREAKER
o NEW MCC PANEL: 1 SET.
o DG SETS: 1000 KVA x 2 nos & 500 KVA x 1 no (Shall be as per connected load &
design requirements)
o ELECTRICAL CABLING, LIGHTING, EARTHING.
o STANDBY GENERATORS

IV. Firefighting facilities:

o 24 M DIA X 14 M HIGH WATER TANK OF CAPACITY 6310 KL -3 NO:
o Fire Pumps: 5 no x 850 CUM/ HR x 105 M Head.
o Water Sprinkler system on proposed MS & HSD as per prevailing safety guidelines
issued by OISD
o Fixed Foam fighting system on proposed Diesel (HSD) and Petrol (MS) tanks as per
prevailing safety guidelines issued by OISD
o Centralized Foam Feeding system for fixed foam pourers & HVLR.
o Provision of Fire hydrant piping network for the entire depot facilities.

V. Other civil facilities:

o Room for the Transformer and HT Breaker
o Fire Pumps
o MCC room
o Dyke walls for proposed product tanks
o Roads and Storm water drains for the new product tank farms
o Driveway around TLF shed

VI. Automation of entire terminal:

o Tank Farm Management system: These shall comprise of automation of receipt of
products from PAJPL.

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 o Valve Automation system: All the Tank Body Valves and exchange pit valves shall be
automated including remote operation with necessary safety interlocks. Further, the tank
body Valves shall be fitted with Remote Operated Shut off Valves (ROSOV) to be closed
by a safety PLC in case of emergency. The same shall be in line with international SIL 2
requirements.
o Radar gages on all tanks: Each tank shall be provided with 2 nos SIL 2 certified Radar
gauges for automatic level measurement. The gauges shall function in remote for the tank
inventory and tank shut down procedures.
o Automatic Overspill Protection Switch: In addition to the dual redundant radar gauges on
each tank, an independent SIL 3 certified Level switch shall be provided for shut of the
tank in case of reaching high level alarm.
o Tank Lorry Filling System: The entire process of filling of the Tank Lorries shall be
automated along with necessary safety interlocks
o Access Control System: The system shall permit only authorized personnel to carry out
the operations within the terminal. The access shall be both role and application based
system.
o Control Room with equipment: The control room shall monitor and log all events
pertaining to the operation of the terminal on real time basis.

IV.6 ENVIRONMENTAL IMPACT ASSESSMENT

For new Oil Terminals an Environmental Baseline should be established by the OIL
TERMINAL Operator and submitted to the CA, as part of the operating permit application. The
Baseline Report should contain the information necessary to determine the state of soil and
groundwater contamination so as to make a quantified comparison with the state upon definitive
cessation of activities (decommissioning).

The Baseline Report should contain at least the following information:

(a) Information on the present use and, where available, on past uses of the site;

(b) Where available, existing information on soil and groundwater condition measurements
that reflect the state at the time the report is drawn up

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 (c) Where relevant existing information on nearby rivers or water courses that may be
adversely impacted by the OIL TERMINAL operations.

This recommendation applies to Oil Terminals involving the use, production, storage or transfer
of relevant hazardous substances with regard to the possibility of soil and groundwater
contamination, or having a potential adverse impact on other vulnerable parts such as water-
courses of the receiving environment at the site of the industrial facility.

Environmental Impact Assessment (EIA)

If applicable, an EIA should be a precondition for construction and operation of an OT, or to
major changes to the facilities at or operation of an existing OT. The EIA should address the
potential adverse impact of the oil terminal on the physical and social environment, in particular
aquatic environment. The EIA should be available for the general public and interested or
affected persons to comment and provide input to the assessment and to comment on or object to
the construction and operation of the terminal.

The Espoo (EIA) Convention sets out the obligations of Parties to assess the environmental
impact of certain proposed activities at an early stage of planning. It also lays down the general
obligation of Member States to notify and consult each other on all major projects under
consideration that are likely to have a significant adverse environmental impact across
boundaries. Among the proposed activities with a mandatory EIA are crude oil refineries and
major storage facilities for petroleum, petrochemical and chemical products.

The OIL TERMINAL Operator is responsible to prepare the EIA in a manner to conform to
applicable legal and regulatory requirements. The information to be included in the
environmental impact assessment documentation should, as a recommended minimum contain:
(a) A description of the proposed activity and its purpose;

(b) A description, where appropriate, of reasonable alternatives (e.g. locational or

technological) to the proposed activity and also the no-action alternative;

(c) A description of the environment likely to be significantly affected by the proposed activity
and its alternatives;

Page | 30
 (d) A description of the potential environmental impact of the proposed activity and its
alternatives and an estimation of its significance (for normal operations and when
accidental releases are considered);

(e) A description of preventive and mitigation measures to keep adverse environmental impact
to a minimum;

(f) An explicit indication of predictive methods and underlying assumptions as well as the
relevant environmental data used;

(g) An identification of gaps in knowledge and uncertainties encountered in compiling the

required information;

(h) Where appropriate, an outline for monitoring and management program and any plans for
post-project analysis; and

(i) A non-technical summary including a visual presentation as appropriate (maps, graphs,

etc.).

6.6. Safe Design

National standards for equipment design and operation where they exist should be implemented
and be the subject of inspection by the oil terminal operator and the CA. Wherever possible, the
design of equipment within an oil terminal should be to industry good accepted practice and
incorporate learning from relevant incidents (e.g. Buncefield Fire and Explosion).
The following key aspects for the design and operation of equipment related to hazard / detection
/ control and response have to be taken into account at three levels of protection:

6.6.1. Primary safety considerations:

(a) Tank design to meet appropriate local legal codes or industry standards (such as ASME,
DIN);

(b) Piping, valve, pumps and fitting design according to requirements for piping design to
meet appropriate local legal codes, or industry standards (such as DIN,ASA) ;

(c) Choosing construction material according to the mechanical, thermal, chemical and
biological stress of service;

(d) Isolating Valves should be “fire safe” to a typical industry standard;

Page | 31
(e) Outdoor over ground plant units should be protected against the force of buoyancy during
flood events and from mechanical damages due floating substances or objects;

(f) Underground containers and pipelines should be secured against the force of buoyancy;

(g) Level measurements devices should be installed, which include Low and High level
alarms;

(h) Overfill prevention devices – Level detection linked through a “logic solver” (hardware
or software) to interrupt flow in the event of a hazardous level occurring in a tank;

(i) Provision of equipment designed and managed (i.e. in accordance with ATEX 99/92/EC):

i. Electrical Systems (motors, instrumentation);

ii. HOil Terminal surfaces (pumps, gearboxes etc.);

iii. Electrostatic charge;

iv. Control of Oil Terminal work.

6.6.2. Secondary safety considerations:

(a) Storage tanks are normally located inside a retaining wall on a solid foundation (i.e. full
tank base coverage, not “ring” foundation, flat-bottom tanks should have a double-walled
and the between wall space monitored to detect leaks in the primary containment);
(b) Transshipment sites should have retention facilities capable of accommodating the
volumes of liquid that can escape until suitable measures or automatic safety systems
take effect (secondary containment);
(c) Underground pipelines should be double-walled or any detachable installed connections
and valves should be installed in monitored leak proof inspection chambers;
(d) Construction of containment should be impermeable: The integrity of sealed systems
must be in accordance with the physical-chemical properties of the substances handled.
The integrity of the containment should be demonstrated by generally accepted and
recognized testing method;
(e) The containment should have total volume appropriate to 110% of the largest tank or
25% of all the Tank volumes (whichever is the greater) , plus an allowance for maximum
daily rainfall

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 (f) Additional tertiary containment volume for fire water retention, which must be leak proof
and resistant to the firefighting water and foam. Needs to be considered. The size of the
fire water retention depends on following parameters:
i. Hazard of the stored substances;
ii. Readiness of the fire brigade and the predicted time to gain control of a
fire event;
iii. Predicted flow of fire water to control the fire event.
iv. Fire protection infrastructure (fire detection systems, fire extinguishing
system) ;
v. Total area of storage section;
vi. Height of goods stored in warehouses etc.
(g) Loading and Off-Loading inland waterway vessels-special care should be taken to
observe the process (ADNR 151412) ;
(h) Overflow detection devices, which act when a release has started. These could be situated
inside the secondary containment or in a piped overflow from a tank;
(i) Gas and Flammable Vapour Detection:

These act to detect flammable vapour in (e.g.) secondary containment. They are usually located
close to tanks and equipment such as pumps and overflow piping. They do not act to prevent a
loss of containment, but mitigate the potential scale of the event in the sense that they alert
process operators or in some cases initiate the fire protection system. There are several suitable
technologies used for detection including Infra-Red, Catalytic Oxidation etc.

6.6.3. Tertiary safety considerations:

(a) Meeting the hazardous area classification and management (e.g. electrical area
classification and zoning (for example, as described in the requirements of the EU ATEX
Directive 1999/92/EC)
(b) Operators should review and amend if needed, the management system for the
maintenance of equipment to ensure their reliability in operation. This includes:
i. Periodic proof testing of equipment to minimise the likelihood of equipment failure.
ii. Management of change (hardware, software, mode of operation, service (material stored
or transferred) personnel and frequency.

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(c) All elements of an overfill prevention system should be proof tested in accordance with
validated arrangements and procedures sufficiently frequently to ensure the required reliability
(e.g. probability of failure on demand) Safety Integrity Level (SIL) of protective systems; in the
case of Safety Instrumented Systems the Safety Integrity Levels is maintained in practice in
accordance with the requirements

Periodic test by (external) experts of the safety-systems

This test should be documented and retained by the OIL TERMINAL operator in equipment
files. Overfill prevention systems (i.e. the high-high level shut off devices) should be physically
and electrically separate and independent from the systems which are used to manage and adjust
the levels in tanks. It provides a warning that the tank rated capacity has been (or is about to be)
reached/exceeded and triggers a response:
Overfill protection systems including instrumentation, alarms and automated shutdown systems
should be assessed, to include the following:
(a) Design, installation, operation, maintenance and testing;
(b) Management systems;
(c) Redundancy level, diversity of measuring methods. (Avoiding common cause failures) ;
(d) Fail safe design principles, proof testing coverage and frequency;
(e) Consideration of common cause failures.
(f) Independence from the level control activity.

IV.7 Implementation Plan

The major activities that shall be done to implement the project includes procurement of tankers,
installing of procured machineries, recruitment of employees and training to key and technical
employees and issuance of machinery acceptance certificate. The project is expected to start
implementation in April, 2024 and commercial production is expected to commence in June,
2024. The detail of activities to be implemented and their respective time is presented in the table
below.

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Table 5.4: Implementation Plan of the Project

Sr. 202
2023
4
Type of Activities
No
Jan

Mar

Sep

Jan
May

Nov
Jul

Aug
Apr
Feb

Jun

Feb
Dec
Oct
.
1 Land request
1 Loan processing
Importing milk
2
processing plant
3 Vehicle Grace Period
4 Equipments
Machineries
Installation and
5 acceptance
certification
Recruitment of
6
employees
Commencement of
7 Production
8 Marketing

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V. ORGANIZATION AND MANAGEMENT

V.1 Organizational Structure

Caravan oil and transportation service Processing has engaged in Petroleum Company and
marketing projects. It requires number of skilled as well as semi-skilled human powers to
facilitate the service process. In the organization, different hierarchical levels require managing
the activities of the plant activities from starting to the end service delivery and marketing
process. Based on the operation and achievement of the desired goal for the establishment of the
project and strive to make a reasonable profit and operate in a cost effective manner, it is vital to
properly structure the organization set up of the factory.

The project is planned to be headed by the General Manager, who is responsible to control the
activities of all staffs of the organization. Under the General Manager, major operations are
performed by the middle level managements consist of Technical & Quality Control Division,
Administration & Finance Division and Marketing Division. Other technical staffs, subordinate
and assistant workers will also be assigned under all departments as required. Summarized
organizational structure of the project depicted on the following chart

Figure 6.1: Organizational structure of the project

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 General Manager

Production, Technical & Administration & Finance

Quality Control Division Division Marketing Division

Sales
Production Administration

Technical Finance Purchase

Quality
Control
Division

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V.2 Manpower Requirement and Training
Training is a process of enhancing the skills, capabilities and knowledge of employees for doing
a particular job. It is crucial for organizational development and success. It is fruit full to both
employers and employees of an organization. An employee will become more efficient and
productive if he/she trained well. As a result, continuous and related training is recommended as
deemed necessary.

Employee remuneration and benefit are also an important factor for employee’s productivity.
Employee remuneration refers to the reward or compensation given to the employees for their
work performances. Similarly, benefits are any perks offered to employees in addition to salary.
The most common benefits are medical, disability and life insurance, retirement benefits and
fringe benefits. Both remuneration and benefits provide basic attraction and motivation to an
employee to perform job efficiently and effectively. These all are considered and included in
project cost. Therefore, the promoter is expected to works hard on their implementation for
success of the project.

Based on the organizational structure, planned required number of human resource with their
respective remuneration scale is depicted below.

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 Table 6.1 Manpower plan and with their respective salary

Monthly
Ser. No of Salary Scale Annual Salary
Categories of staff Salary
No. Employee (In Birr) (In Birr) (In Birr)
I General Manager Office
1.1. General Manager 1 20,000 20,000 240,000
1.2. Senior secretary 1 3,000 3,000 36,000
Sub total 276,000
Production, Technical & Quality
II
control Department
2.1. Department Head 1 15,000 15,000 180,000
2.2. Laboratory Technician 1 4,500 4,500 54,000
2.3. Collectors 2 2,000 2,000 48,000
2.4. Machine Operator 24 2,500 2,500 720,000
Sub total 1,002,000
Administration & Finance
III
Department
3.1. Department Head 1 15,000 15,000 180,000
3.2. Personnel 1 4,500 4,500 54,000
3.3. Accountant 1 4,500 4,500 54,000
3.4. Cleaner & Messenger 3 2,000 2,000 72,000
3.5. Guards 2 1,500 1,500 36,000
3.6. Drivers 1 4,000 4,000 48,000
Sub total 444,000
IV Marketing Department
4.1. Department Head 1 15,000 15,000 180,000
4.2. Sale persons 2 6,000 6,000 144,000
4.3. Purchaser 2 6,000 6,000 144,000
Sub total 468,000
Total 2,190,000
Employee’s beneficiary (15%) 328,500
Grand Total 44 2,518,500

N.B:- Salary is assumed to be increased by 15% per annum and there are about 80 causal
workers during construction and installation of the fuel station, construction of guest house, car
wash and others.

VI. FINANCIAL ANALYSIS

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 7.1. Breakdown of Investment Requirement

The total planned investment cost of the project is estimated to be Birr 200 million of which Birr
139,539,077.79 is fixed investment, Birr 45,291,187.41 working capital, and the remaining Birr
15,169,734.79 is pre-operating expense.

The detail of total investment is shown below table 7.1

Description Planned investment Share %

Amount ( Birr)

Land 1,475,680 70%

Building and Construction 31,000,009.87

Machinery & equipment 86,506,891.95

Office Equipment and Furniture & Fixture 300,245.08

Vehicles 17,780,000.00
Electric Transformer 3,476,250.89
Sub total 139,539,077.79
Working Capital 45,291,187.41 23%
Sub total 45,291,187.41 8%
Pre-operating Costs 364,026.26
Pre-production Interest 14,805,708.53
Sub total 15,169,734.79
Total cost 200,000,000.00 100%

7.2. Source of Fund

The owner will contribute 70 % of the total planned cost for procurement of tankers which is
birr 140,000,000. While the remaining 30% of planned cost which is birr 60,000,000 (birr for
working capital and birr for additional machinery cost above 5%) shall be covered by bank
loan. However, all the required working capital requirements. Detail of source of finance and
the debt equity ratio calculation is presented here under Table 7.2 and table 7.3 respectively.

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 7.3. Expected Financial Results
Here, our objective is to provide information about the financial position, performance and
changes in financial position of the project to make rational economic decision. Hereunder, we
will try to look Profit/loss or income statement forecast, cash flow and balance sheet projection,
financial rate of return and sensitivity of the project for potential variables.

7.3.1. Profit/loss forecast

Profit/loss forecast presents the results of project’s operations during a period of time. It shows
income earning from the project and expenses incurred in attaining the income. The projected
profit/loss statement of the project reveals that the project will earn profit of Birr 2,404,926
during its first year of its operation and earn profit of Birr 4,357,167 at the 10th end year of
projection. This indicates that the project could run profitable business venture and can maintain
objective of its establishment at competitive quality and price of the product.

7.3.2. Cash flow forecast

Cash flow projection provides a look at the movement of cash in and out of the project. It is
important in determining whether or not a company has enough cash to pay its bills, handle
expenses and acquire assets. Thus, it is important to give due attention to identify whether the
total inflows of the project have the capacity to cover all cash outflows during its operational
period. Unless, the project will faces liquidity crisis and fail before achieving its objective of
establishment.

Based on this fact, the forecasted cumulative cash balance shows a balance of Birr 111,540,013
in the first year and will grow up to Birr 325,227,714 at the end of project period, demonstrating
that the project will not face liquidity constraint to finance its operational costs as well as debt
obligation.

7.3.3. Balance Sheet Projection

Balance Sheet Projection is used to provide insight into assets and debts of the project at a
particular point in time. Total assets of the project expected to rise from Birr 119,427,171
during the first operational year to Birr 330,477,366 at the end of the project year.

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 7.3.4. Financial Rate of Return

Net Present Value (NPV) Internal Rate of Return

Before Tax 230,392,291 35%
After Tax 218,714,875 26%

7.4. Sensitivity Analysis

Under sensitivity analysis we tried to made assessments that compares the expected results with
possible results. The profitability of the project will vary under various circumstances that could
possibly happen. Thus, the project's sensitivity to adverse circumstance is analyzed from three
different scenarios: decrease in sales revenue by 10%; increase in operating costs by 10% and
increase in investment costs by 10%.

7.4.1. Decrease on Revenue

Based on financial our findings, when revenue decreases by 10% after tax IRR of the project
reduced from 26% to 15%. From this, we can say that the project is viable and can achieve its
objective of its establishment even in an adverse circumstance that may happen and trigger to
reduce its revenue by 10%.

7.4.2. Increase on operating Cost

Also, if the operating costs of the project may increase by 10% due to unforeseen circumstances;
other things remain constant, after tax IRR of the project anticipated to reduce to 18%. This
means, still the project has the capacity to cover its costs and make profit for stakeholders.

7.4.3. Increase on Investment

When investment cost increases by 10%, ceteris paribus, after tax IRR of the project anticipated
to reduce to 24%.

To sum up, the project is more sensitive to the sales performance. As a result, the company
should give more focus on pricing strategy and try to maximize its sales performance as much as
possible. Whatsoever will happen, the project has the capacity to absorb external shock and
attain its objectives of its establishment.

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VII. SOCIO ECONOMIC BENEFIT

As our country is among the world fastest growing countries, development and establishment of
petroleum service are very important unquestionably. It is possible to state enormous reasons.
Among, the followings are some of it:

 Create Job Opportunity: The contribution of oil in other social and economic aspect as
job opportunity creation for a lot of workforces and there by salary/wage income
generation for the employees is also significant. The number of workers engaged in the
sub sector is increasing for the last consecutive years. The project is expected to create
new permanent employments for about 53 skilled, semi-skilled and unskilled workers.

 Source of Government Income: government get income in the form of income tax from
permanent and temporary employee, and profit tax from the business.

 GDP Contribution: The sub sector is the major contributor for economic growth of the
nation service sector.

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VIII. CONCLUSION AND RECOMMENDATION

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