I.

EXECUTIVE SUMMARY

Aernero A Gos Stoton2021

Ethiopia is known to have 428,000 barrels of proven oil reserves, ranking 98th in the

world. Total oil reserves in Ethiopia are less than even a single year of oil consumption,

making Ethiopia highly dependent on oil imports in order to sustain its consumption

levels.

The oil and gas industry is one of the biggest and lucrative industries. In- fact, it is

probably one of the most vital sectors of the economy because every other industry is

dependent on its output; which are petroleum products.

The demand of crude oil in the country is increasing everY year by I0%. Currently.

there are more than 831,265 vehicles in the country. The fuel consumption would surge

to 3.4 million metric tons in 2017. Ethiopia consumes daily one million liters of benzene,

6.5 million liters of diesel' and two million liters of jet fuel. The annual kerosene

consumption is 260,000 metric tons. The country has 13 fuel depots in different parts of

the country that can store 360,000 cubic meters of petroleum products.

The fuel retail industry is not growing in a manner consistent with the country's

development and the growing number of vehicles.

Debre Markos town is road dependent economy and one of the destinations of the

northern tourist circuit (Historic Route) and the Great Renaissance Dam with its

spillover effects on tourism & business that requires a lot of gas stations to provide

services to travelers. Roads are crossing to Dembecha-Finote Selam-Injibara-Metekel

zone of Benishangul Gumuz as well as Bahir Dar-Gondar and roads to Dejen-Addis

Ababa are all crossing the town. No doubt it is a busy highway and a busy town with

growing population, which is highly suitable for gas stations.

The owner of project is Ato Ayemero Adane, a resident in Debre Markos town, and
engaged in marketing of wheat & manufacturing of wheat flour. He has planned to

establish a standard gas station on 2,150 sqm plot of land with a storage capacity of 300,000 liters chat
provides gas filling services and products offering such as retailing of

gasoline (perol), diesel and lubricants for motor vehicles to highly esteemed customers.

It also run a café, convenience store (mini supermarket), car wash, and other related

automobile repair services. The project involves the installation of 6 tankers with

capacity of 50,000 liters each (3 tankers for diesel, 2 tankers for benzene and f tanker

for kerosene) and 6 dispensers. It also involves the construction of canopy structure,

office, cafeteria with toilets and showers, car wash room, tyre repair workshop and

entry and exit roads.

The total investment requirement for the establishment and operation of gas station is

estimated at Birr 23.8 million, out of which Birr 15 million is bank loan. The bank oan is

supposed to be repaid in 10 years with grace period of one year, his residential homne in

Debre Markos and the fixed assets of the gas station as collateral.

The project is financially viable with an internal rate of return (|RR) of 25 % and a net

present value (NPV) of Birr 14.3 million, discounted at I6.5%.

2. INTRODUCTION

As a matter of fact, as more citizens acquire automobiles, as per capita disposable

income continued to increase and the total vehicle miles increased and this zives room

to increase in the demand of gasoline.

The petroleum demand of Ethiopia has dramatically increasing by 10% on average due to

the country's rapid economic growth. Ethiopia currently is a "Road Dependent"

economy. About 90% of freight and 95% of the passenger transport happens by road

vehicles which are reported to consume 65% of imported fossil fuels. Nevertheless,
Ethiopia's per capita consumption is very low as compared to its counterpart road

dependent economies.

Currently, there are about 83 1,265 vehicles (ETA) and total number of filling stations in

the country is not more than 660 (EPSE). Most of the vehicles and gas stations

concentrated in Addis Ababa (62%) whereas the regional towns are underserved when

it comes to the delivery of fuel. The country targets to import three million metric tons

of refined petroleum. The nation yearly consumes two million metric tons of diesel,

288,000 metric tons of benzene and 7I0,000 metric tons of jet fuel.

The number of depots in the country is low when compared with the huge demanid of

oil in the country. The four international giants -- Mobil, TOTAL, Agip and Shell -- had

monopolized the Ethiopian market for 50 years. After the liberalization of the oil

distribution market, foreign companies like Oil Libiya, Nile Petroleum and Kobil entered

the Echiopian market. Yetebaberut Petroleum, National Oil Company of Ethiopia

(NOC), TAF Oil and Dalol Oil are some of the local oil companies that joined the

market in the past 12 years. Agip, Mobil and Shell have already pulled out of the

Ethiopian market.

Currently, the fuel retail industry is not growing in a manner consistent with the

country's development and the growing number of vehicles. Many old gas stations have

either been shut down or have changed their business. Besides that most of the old

stations have a limited capacity of carrying large amount of fuel in their containers.

Ethiopian Petroleum Supply Enterprise (EPSE) has announced that it will built 160 oil

depots across the country to resolve the occasional shortage of petroleum

infront of commercial shops. Demand for a modern Gas Station that offers a complete
range of services is very high because none of the existing stations offer these services

other than selling kerosene, petrol and diesel.

The proposed Gas Station therefore seeks to fill this gap by offering a complete range of

services from selling petroleum products to greasing, air, car wash, wheel alignment &

balancing, café, restaurant facilities, bar, store facilities.

This project proposal is to establish a facility where the retailing or selling of perol is

Carried out to fill in the gaps in fuel retail business. It is intended to provide services like

car repair, car washing, shops, stores and restaurants to serve customers. The facility

can serve 6 vehicles at a time, and will have a storage capacity of 60,000 liters of oil.

3. PROJECT DESCRIPTION

A gas station is a facility that sells fuel and engine lubricants for motor vehicles. Fuel

dispensers are used to pump petrol/gasoline, diesel, kerosene and other types of fuel

into the tanks within vehicles and calculate the financial cost of the fuel transferred to

the vehicle. The convenience stores found in gas stations typically sell candy, soft drinks,

and snacks.

The works shall be executed over an area of 2, I 50m and shall comprise:

> Earthworks

> Drainage works

► Civil Engineering works

Builders works

► Concrete interlocking paving blocks

> Fuel dispensing pumps installation

Fuel tanks installations

> Plumbing works

> Elecrical works

> Construction of steel structure canopY

Petrol

Concrete structure construction

> Erection of elevated water storage tanks

Diesel

The proposed Gas Station will generate income by offering the following services and

products;

Construction of underground water storage tank.

Kerosene

Automotive services (e.g. tyre repairs, and car washes)

Selling automotive-related goods

• Retailing of Groceries and soft drinks et al

PROJECT MERITS:

Tourist stopover.

Ghc

(0911393499

0913683565)

KBUSINE

CONSU

On many occasions tourists get stranded for lack of accommodation when

rivers swell and roads become impassible. Other travelers also find it

difficult to find accommodation when their vehicles breakdown or

generally when they need to break on their long safaris.

When complete, the project will offer state of the art service which will

reduce the congestion and delays currently experienced with the local
petrol stations.

* It will reduce fuel prices and other services as a result of new competition.

There will be reduced cost of repairs since the long distances to the nearest

greasing garage.

4. MARKET ANALYSIS

4.I MARKET TRENDS

There is hardly anyone who doesn't have a need for gas, this is why it is really vital that

one keys into this industry. One of the trends in the gas station industry is that, in the

bid to stay afloat in the highly competitive gas station industry.

Industeial develonment has placed an enormous demand on foseil fvele duo to. tha

id uciOn ot power driven macnines ang means ot uansporL. Iransporauon aimost

completely relies (95%) upon petroleum products with the exception of some railway

transport that uses electrical power. While the use of petroleum for other economic

sectors, such as industrial activities and electricity generation has remained relatively

stable, the growth in the demand for petroleum is mainly attributed to the growth in

transportation networks.

In the case of Ethiopia, out of the total energy consumption, the share of fossil fuel (coal,

oil, petroleum and natural gas) was 6.3, 6.7 and 7.1 percent in 2007, 2008 and

2009,respectively, indicating a slight increase in the share of fossil fuel consumption of

the country.

Ethiopia's consumption of fuel has been increasing from time to time. The share of the in 1997/98
increased to 95.6 percent in 2010/11. Road ransport took about two hirds

of the share while the balance went to air ransport

Road sector gasoline fuel consumption per capita (kt of oil equivalent) in Ethiopia was
reported at 2.01 in 2009, according to the World Bank collection of development

indicators, compiled from officially recognized sources. Hence, for thề purpose of this

projec gasoline fuel consumption per capita of 3.5 is used to estimate the demand for

the product.

In addition, the demand for kerosene is growing at the rate 5.6% per annum as per

capita income and population growth are increasing in Ethiopia. Kerosene consumption

is a log log (double logarithm) non linear function of per capita income through time. It

is an ideal demand function. The demand for total kerosene consumption is income

elastic and the elasticity coefficient is 8.9 in Ethiopia. This indicates that as income

increase kerosene consumption increases, a l% increase in per capita income will result

in 89% increase in cOtal kerosene consumption, ie. more han a proporionate increase

dusat fu kecosene.

4.2 DEMAND PROJECTION

Debre Markos town has 7 gas stations having smaller storing capacity. Accordinz to

2015/16 Annual Statistical Bulletin, it has estimated population of 107,234. H we assume

the tourist arrivals to be 10%, the total population served by the town is estimated at

T17,957. Calculating the total consumption of fuel by multiplying population in service

and per capita consumption, it is 412,85 | liters. The town serves as a hub for Gozamin

woreda and others. Hence, it is assumed that 60% of demand for fuel of the woreda wil

be supplied by the town. But, taking the conservative growth rate of 10% in fuel
The demand for fuel in Debre Markos town in he coming ten years expected to reach

2.691,971 liters, which is double of the isting capacities of zas stations, calls for the

establishment of additional 4-5 gas stations with che capacity of 200,000 to 300.000

liters.

4.7CMPETITIVE ADVANTAGE

There are 7 gas stations in and around Debre Markos town. This goes to show that

there is stiffer competition in the industry. The competitive advantage is being a

standard gas station facility that offers additional complementary services that will

definitely help us attract and retain customers.

Another competitive advantage is the vast experience of owner, who is highly

experienced and understands how to grow business from the scratch to becoming a

national phenomenon. So also the wide varieties of other complimentary services and

products that it offers and of course its exXcellent customer service culture will definitely

count as a strong strength for the business.

4.0FNO ARNEN33iKAIEGY

Áig u deby IOr ne proposeu gas slauon is ging to De driven Dasicaily oy

making available standard and safe gasoline and diesel et al, excellent customer service

and provision of complimentary services.

les unique sellingt proposition is that it has Various complemenary service offerings such

as convenience store, coffee café, snacks bar, vulcanizing services, wheel balancing

wheel alignment. carwash and automobile repairs and maintenance services. It will also

retail lubricants and other related productS.

In view of that, it is going to adopt the following strategies o ensure that it does not

only attract customers but ensure that they become loyal customer.
lntroduce the gas station by sernding introductory letters to residence, transport

companies, merchants and other stakeholders both in Debre Markos and in

oher towns in the zone

Open its gas station with a party so as to capture the attention of residence who

are our first targets

Advertise the gas station on national dailies, local TV stations and local radio

Station

Promote the gas station online via our official website and all available social

media platforms

Continuously Improving the performance of its brands

Hire the services of experts to make its brands the first choice for in Debre

Markos and other cities where we will open a gas station

•Delivering consistent customer experiences to all our clients; making its first

ICS gas station

Position its signage / flexi banners at strategic places

Create a loyalty plan that will enable it reward its regular customers

4.9 PRICING STRATEGY

It is the wish f all businesses to have a pricing system that will yield loads of profits for

them: as such we are working on having very competitive pricing. The proposed Gas

Engage on road shows within its neighborhood to create awareness for its

Laundromat business.

doesn't intend to charge less than its competitors are offering in Debre Markos town.

The prices of its products (snacks, cup of coffee, cigar, detergents et al) and services
(vulcanizing. wheel balancing. wheel alignment, car wash, and automobile repair and

services) will be same as what is obtainable in any part of the city.

The Government adjusts the gasoline price every month. Following the global price

decline, oil prices have been decreasing since 2013. The price of diesel is 0.6 U.S. (16.32

Birr). The price of gasoline is 0.69 U.S. Dollar (18.77 Birr) per liter. Fuel stations will

retail benzene at $0.74 per litre (20.13 Birr), white diesel at $0.63 per litre (17.14 Birr),

and kerosene at $0.6 per litre (l6.32 Birr).

Since March 202 1, the Ministry of Trade and Industry has announced the retail price

Marleoe nre ne follows

IABLE 3: PRICES OF PRODUCTS & SERVICES

S/N Description

Gasoil

Diesel

Kerosene

Lubricants

Unit

Price/liter

26:45

23.53

23.53
Marketing Plan

The marketing strategy of a gas station largely depends on the flexibility of the brand

and franchise agreement. Due to the very thin margins of a gas station and the price

sensitive market, most of the marketing is done on-site as a way to increase sales from

COVenjence stoe oairv

is refueling.

CUSTOMER LOYALTY

The customer loyalty for a gas station will depend upon the location of operations. If it

is an independently owned private brand, customer loyalty may only be advantageous if

the gas station serves the local market. If it is instead located along a highway targeting

tourists, for instance, then it may not be as applicable. Nonetheless, customer loyalty is

critical to he success of a ps staion because i proides consumers wih an incene

to e prelerence to something that wold ocherwise be considered a commodi

CROSS-SELLING STRATEGIES

oersw

their automobiles provides an opportunity to sell addiional products while they wait.

This means applying a combination of display advertisements special discounts and

testing the effectiveness of ad copy at the refiling station.

5. CAPACITY AND SERVICE DELVERY PLAN

The storage capacity of the gas station is 300.000 iters It is proposed to finish and refll

every two weeks (twice a month) 2ssuming working 365 dayslyear and 24 hoursa day.
6. INPUTS REQUIRED FOR GAS STATION

6.1 RAW MATERIALS

The raw materials used in gas station are fuel oil, lubricants and consumables for cafe

restaurant.

50g 1 ol products.. twice/mnonth

Prices of oil products as per the Ministry of Trade

Prices of oil products increases by 2.5% every year

The supplier provides the current price, Once everything is in order, he wholesale

Supplier generates the order and schedules he delivery

On he day of delivery, the driver loads up the tanker truck with the kind of fuel

requested and travels to the customer site. At the customer site, the driver offloads the

requested amount into the customer's storage tanks, At that point, the gas is available

for delivery to the pump. The driver then provides a bill of loading (BOL) to he

Customer. With the delivery done, the wholesale supplier will follow-up with the

Custonier to make sure the delivery went welI, This follow-up ensures that the

Customer is happy and will continue to be a customer.

For reliable, affordable supplies, retailers need to have a solid business relationship with

a wholesale supplier. This relationship ensures they get the deliveries they need at the

best prices possible.

Fuel is usually offloaded from a tanker truck into the tanks through a separate valve,

at all times. Most tanks can be accessed through a service canal directly from the

forecourt.

The basic services and'products are řetailing of gasoline (pèetřol), dresel, kerösene and
lubricants. It also run convenience stores found in filling stations typičally sell candy, soft

drinks, snacks and, in some cases, a small selection of grocery items in addition to car

wash, and tyre repairs.

Fuel dispensers are used to pump petrollgasoline, diesel and kerosene into the

tanks within vehicles and calculate the financial cost of the fuel transferred to the

vehicle.

Air compressor - used to inflate car tyres.

7.2 ENGINEERING

The owner has acquired a plot of land having area of 2,I50 square meters. As most

filling stations will be built in a similar manner, with most of the fueling installation

underground, pump machines in the forecourt and a point of service inside a building. 6

fuel tanks are deployed underground. The construction includes site work, office, toilets

& showers, convenience store, cafeteria, car wash, drainage, oil tanks and automobile

tyre and workshop. The total cost of construction is estimated at Birr 6 million. The

owner has built office, shower & toilets with estimated value Birr 4 million.

8.1STEERIMANPCWER

Starting a standard gas station business would need the servces f the folowinz

professionals;

Manager

Accountant
Cashier

Pump Attendant

Convenience Store, Coffee Café, Snacks Bar,

Windshield, and sometimes checks the vehicle's oil level and tire pressure, then collects

Payment and perhaps a small tip,A minimum service gas station hastendants tat

operate the pumps alone.

ROLES AND KESPONSIBILITIES

Manager

Operation

Responsible for overseeing the smooth running of the gas statio2

Map out strategy that will lead to efficiency amongst workers

eauipmenr

remirements; caling for repairs.

DY ComDiering

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0911393499

0913683565

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Ensures that the gas station meets-the expected safet and-heath-standard at-all

times.

Convenience Store, Coffee Café, Snacks Bar, and Cigar Lounge

nteract with customers; take orders for coffee and snackei

Responsible for preparing different flavor and style of coffee for customers

Make lists of supplies in conjunction with the bar manager

Ensure that each cup of coffee that leaves the kitchen is tailor mnade and meet the

request of each customer

Responsible for quality control

Ascess Customer' nesde nd nrefaronra

repare inventory or purchase requisitions as needed to replenish supplies.

Ensure that the assigned bar area is fully equipped with tools and products

needed for Mixing beverages and serving guests.

• Responsible for managing the cigar lounge

Assess customers' needs and preferences and make recommendations

Make lists of supplies in conjunction with the management

• Prepare inventory or purchase requisitions as needed to re - stock the lounge.

Clear ashtrays regularly

Ensure that the assigned lounge area is fully equipped with tools and products

needed to by our clients

Accountant / Cashier

Responsible for preparing financial repgbust nd financial statements for

the organization

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0913683565)

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Provides managements with financial analyses. development budgets, and

accounting reports: analyzes financial feasibility for the most conplex proposed

projects; conducts market research to forecast trends and business conditions

Kesponsible for financial forecasting and risks analysis.

Performs cash management. general ledger accounting, and financial reporting

•Responsible for developing and managing financial systems and policies

Responsible for administering payrolls

Serves as internal auditor for the organization

PunpAttendantsagetaents w.R

Nluns che various gas pump machines (in fully services gas stations)

al arayses, cevaiopment Ducges, aiia

Assists customers as required by them especially on how to operate our gas

Pump machines (in self - service gas stations)

Provides change for customers

Handle any other duty as assigned by the gas station manager

Car wash

Wach 2nd thoroughlv clean cars (exterior ar n ching intarior cleanins and

kalidie aid move objects, sucih as glasses, dish and bottles, using hands and arms.

Cleans up after customers and clean work area.

Clears ashtrays as and when required.

Washes glassware and utensils after each use.

q°hc MA
S/N

* Handle any other duty as assigned by the gas station manager.

Security Guards

Maintains a clean working area by sweeping, vacuuming, dusting, cleaning of glass

doors and windows, etc. if required.

Ensures that toiletries and supplies don't run out of stock

Ensures that the facility is secured at all time

10

oralt eraffic and organize parking

Gives security tips to staff members from time to time

Patrols around the building on a 24 hours basis

TABLE 8: MANPOWER REQUIREMENT & COST (BIRR)

Submits security reports weekly

Handles any other duty as assigned by the gas station manager

Description

1Gas S tation Manager

2 Accountant

3 Cashier

4 Cookers

5 Waiters

6 Driver

7 Pump Attendant

Store, café & bar

Automobile repair

Car wash

11 Security Guards

Required

Ayermero A Gas Stauon/202

Monthly Sal

27

8,000.00

5,000.00

3,500.00

3,000.00

I,000.00

4,000.00

3,000.00

3,000.00

Annual Sal

3,500.00

3,500.00

3,000.00
96,000.00

60,000.00

84,000.00

72,000.00

48,000.00

48,000.00

108,000.00

216,000.00

84,000.00

84,000.00

108,000.00

1,008,000.00

25% benefits & social Security

8.2 TRAINING REQUIREMENT

9. FINANCIAL PLAN

Training is required for filling ştation petrol attendants on customer Service rezarding

politely greeting clients, fill up their gas tanks, clean their windshields, usher them out of

the filling station, request repeat visits and say a warm goodbye to them. The car washer

and others require training. The total cost of training is Birr 50,000.

A gas station business requires a huge amount of money for its establishment. The cost

may vary due to factors such as location, size of station, number of fuel pumps, type of

extra services offered.

Construction period
The financial analysis of the red pepper processing and packing project is based on the

data presented in the previous chapters and the following assumptions:-

Source of finance

Tax holidays

Bank interest

Discount cash flow

Accounts receivable

Raw material local

Work in progress

Finished products

I year

37 % equity 63 % loan

I years

16.5%

16.5%

30 days

252,000,00

30 days

1,260,000.00

5 days

30 days

MA7A

0911393499

0913683565

ESTMEN CONSUT
KNDS BUS

Cash in hand

Accounts payable

Capital required for a business can be classified under two main categories via.

2)

Fixed Capital

Working Capital

9.1 FIXED INVESTMENT:

SIN

TABLE 9: FIXED INVESTMENT

Fixed investment refers to investment in fixed capital or to the replacement ot

depreciated fixed capital. Thus, fixed investment is investment in physical assets such as

machinery, land development, buildings, installations, vehicles, or technology. Normally.

d company balance sheet will state both the amount of expenditure on fixed assetS

during the year, and the total value of the stock of fixed assets owned.
4coperating coSts

Description

Construction

Machines USD@44 Birr

Vehicles

Generator

5 days

30 days

Transformer

Fire Extinguishers

Total (Birr)

1,573,588.92

35,000,000.00

12,558,161.00

5,500,000.00

1,000,000.00

600,000.00

12,000.00

0911393499

0913683565

SST

BUS

4
6

Cash in hand

Accounts payable

S/N

Capital required for a business can be classified under two main categories via.

2)

Fixed Capital

Working Capital

9.1 FIXED INVESTMENT:

Fixed investment refers to investment in fxed capital or to the replacement of

depreciated fixed capital. Thus, fixed investment is investment in physical assets such 2s

machinery, land development, buildings, installations, vehicles, or technoloEy. Normally.

a company balance sheet will state both the amount of expenditure on fixed assets

during the year, and the total value of the stock of fixed assets owned.

TABLE 9: FIXED INVESTMENT

coperating coSts

Construction

Description

Machines USD@44 Birr

Vehicles

5 days

Generator

30 days
Transformer

Fire Extinguishers

Total (Birr)

1,573,588.92

35,000,000.00

12,558,161.00

5,500,000.00

|,000,000.00

600,000.00

12,000.00

0911393499

0913683565

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8USINE

Feniture & Etures

Water & Electric nstallation

Total

9.2 WoRKING CAPITAL

400,00000

The Capital required to run the day-to-day operation of an organization is known as

Working Capital, Working capital is the lfe blood and the centre of a business.

Adequate amount of working capital is very much essential for he smooth running of

the business. And the most important part is the efficient management of working
capital in right time. The liquidity position of the firm is totally effected by the

management of working capital.

• The work-in-progress stage

0000660

The working capital requirement depends on the working capital cycie. Working capital

Cycie is the period of tine, which elapses between the point at which cash begins to be

expended on the production of a product and the collection of cash from customer.

Cash is used to buy raw mnaterial and other stores, so cash is converted intO raw

material and stores inventory. Then the raw material and stores are issued to the

production department. Wages are paid and other expenses are incurred in the process

and work-in-process comes into existence. Work in-process becomes finished goods.

Finished goods are sold to customer on credit. In the course of time these customer

pay caslh for the goods purchase by them. 'Cash' is retrieved and the cycle is completed.

Thus, working capital cycle consists of four stage.

•The finished goods inventory stage

S7,24),7492

• The raw material and stores inventory stage

. The receivable.

the working capital cycle for the project is part of he operaing cOES calculated based

on the cycle of each operating & nonoperating cos items.

Operating Costs

puraeg costs are associated with the maintenance and administration of a business

on a day-to-day basis. perating costs include direct costs of zoods sold (COGS) and

othur operating expenses-often called selling, general, and administrative (SG&A}

which includes rent, payroll, and other overhead costs, as well as raw materials and
maintenance expenses.