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1. INTRODUCTION
Islamic Republic of Pakistan is a fast growing economy. The prospectus and interests of
China and land locked states of former U.S.S.R. in obtaining Seaway from Pakistan and
heavy local and foreign investment in Gawadar port and city are factors likely to boost
economic activity in Pakistan.
The policy of Commercial Banks and Development Financial Institutions (DFIs)
to increase the number of vehicles by providing micro financing has resulted in an ever
growing requirement of fuel for means of transportation. However, due to the ever-
growing increase in the prices of petrol and diesel, there is not only a heavy toll on the
import bill of the country but it also is a major cause of concern for consumers in terms of
affordability. Another issue in this regard is the atmospheric pollution caused by these
conventional fuels in such large quantities that it has lead the country to the necessity of
the use of a cheaper and environment friendly fuelling option. The ultimate solution to
this problem is in the shape of Compressed Natural Gas (CNG), introduced in the year
2000 in our country; it is 30% cheaper that petrol and is also environment friendly.
The CNG has now become a major area of investment in the petroleum sector and
is being actively promoted as the ultimate fuelling alternative across the entire
automotive industry in Pakistan. Towards this end, the Government of Pakistan has taken
certain concrete steps, like price affordability, in order to promote the use of natural gas
as a fuel substitute in automobiles. Present official statistics reveal that over 1.4 million
vehicles have been converted to CNG so far all over Pakistan. At present there are around
1450 CNG1 Refueling Stations across the country which is an insufficient number to meet
the rising demands of CNG in the coming years. To encourage the needed investment in
opening of new refueling stations, Government of Pakistan has officially declared
business of CNG as an industry.
1.1 Brief History of CNG:
Natural Gas, in the form of Compressed Natural Gas (CNG) is similar to the gas used at
homes, methane (CH4), and is pressurized to high pressures around 200 bars or 3000 PSI
1 http://209.85.175.104/search?q=cache:n7byiFwmODgJ:www.khattaksons.com/joomla/index2.php%3Foption%3Dcom_content%26do_pdf%3D1%26id%3D17+CNG+station+ rocess&hl=en&ct=clnk&cd=1&gl=pk
- 2 -
(pounds per square inch)2. It is stored in cylinders designed and manufactured specifically
to fit this purpose in any type of vehicle. It has been used as a transportation fuel in
vehicles for more than 60 years around the world. Comprised of about 95% methane, its
clean burning properties, abundant supply and relatively low cost have made it a popular
and environmentally sensitive fuel choice for drivers in Europe, Russia, South America,
Australia and New Zealand, and the United States and Canada. There are over 1 million
Natural Gas Vehicles (NGVs) on the road worldwide with thousands of public, fast-fill
refueling stations to support them.
Some common vehicle applications for NGVs are:
Transit buses
Taxi cabs
Heavy duty trucks
Commuters
Small and large commercial fleets
Light duty trucks and vans
Forklifts
Ice resurfacers
While most current NGVs on the road are generally gasoline-powered vehicles with
Natural Gas fuel components added, or ‘aftermarket’ conversions, the Original
Equipment Manufacturers like Ford, GM and DaimlerChrysler are producing NGVs right
at the factory. These factory-built NGVs come in bi-fuel and mono-fuel platforms, and
are designed for use in commuter, taxi, commercial and heavy-duty vehicle segments.
1.2 Overview of CNG Industry in Pakistan3
The Compressed Natural Gas has been in use as an alternative fuelling option since 1940
and over the years the technology has undergone constant modification and refinement.
In recent years the CNG usage has immensely increased due to its affordable costs and its
environment friendly nature. However, some challenges that should serve as the potential
for growth and overview of the industry are outlined below:2 CNG Conversion Center Handbook: HSE Management System3 http://209.85.175.104/search?q=cache:n7byiFwmODgJ:www.khattaksons.com/joomla/index2.php%3Foption%3Dcom_content%26do_pdf%3D1%26id%3D17+CNG+station+ rocess&hl=en&ct=clnk&cd=1&gl=pk
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1.2.1 Uneven Distribution of CNG Stations across the Country
Larger towns and cities are saturated with CNG Refueling Stations but the same is not
true for other towns and suburban areas. The reasons may be attributable to the lack of
gas distribution, land issues, and higher setup costs etc. this gives rise to long waiting
queues and complaints about decline in quantity and quality of compressed gas and other
facilities.
1.2.2 Lack of Quality Control over Refueling Stations
Since majority of CNG Refueling Stations are being installed by individual private
companies and small businesses, therefore, there is no consumer recognized CNG
Refueling Station quality brand that is trusted for quality and performance across the
country.
1.2.3 Huge Investment Required in Establishing Refueling Stations
A typical CNG Station costs anywhere between Rs. 20million to Rs. 35 million,
excluding land costs. Inability to finance a project is one of the biggest reasons why only
30% of all Oil and Gas Regulatory Authority (OGRA) license holders were able to
establish CNG Refueling Stations since 1994.
1.2.4 Procedural and Departmental Difficulties
The process of installing a CNG Refueling Station is not only lengthy and cumbersome
but is also subject to the ever-increasing political problems and issues specific to local
authorities.
1.2.5 Lack of CNG Stations for buses and Trucks
Since heavy vehicles contribute more to the atmospheric pollution, there is a dire need to
convert all such vehicles to CNG technology.
1.2.6 Lack of Professional and Reliable CNG Conversion Facilities
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Quality control is crucial for conversion of a gasoline vehicle into a CNG vehicle, but
unfortunately there has been no quality control procedure for overseeing this conversion
across the country.
1.2.7 Limited Expansion of CNG Refueling Stations
Since the introduction of CNG in Pakistan, its expansion is limited to only those areas
where the gas pipeline is readily available. An area of potential growth that can overcome
this problem is the introduction of Mother-daughter stations and Mobile fueling stations.
In Pakistan, HDIP (Hydrocarbon Development Institute of Pakistan), M/s Safe s.r.l. and
Khattak Sons (Pvt.) Limited (KSL) are market leaders who have captured the market by
grabbing the opportunities in the aforementioned areas of growth.
1.3 Overview of CNG in Quetta
The business of CNG filling station has marked its place in the country through growth
during the last few years. This growth has opened up new opportunities and more CNG
filling stations are being setup all over Pakistan. However, the growth of CNG Refueling
Stations in Balochistan has been very slow despite a potential market demand. Currently
there are only three CNG Refueling Stations fully operational in the Quetta City. The
challenges outlined in the preceding section are primary concerns impeding the growth of
CNG industry in the province. The market for CNG is ripe for lucrative investment
thereby providing us with a potential opportunity to install and start a CNG Refueling
Station to target the large customer base in the Quetta city alone.
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2. PROJECT LIFE CYCLE:
The project life-cycle typically passes through four stages: definition, planning, execution
and delivery as shown on the figure below.
Figure 2.1 Project Life-cycle4
The project life-cycle for our project is discussed in this and the subsequent chapters.
2.1 Project Definition Stage:
2.1.1 Opportunity Rationale
This project will serve the following objectives:
It will help us to start a profit oriented business which has a high expected future
growth rate
It will help us target potential market by providing environment friendly and
quality fueling services at reasonable prices
4 Figure taken from the book “ Project Management: The Managerial Process” by Clifford F. Gray & Eric W. Larson
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It would also serve as a contributing factor to the growth of CNG industry in
Quetta city
2.1.2 Target Customers
The target customers for the proposed project would be the vehicles running on CNG fuel
in Quetta and its outskirts.
2.1.3 Name of the CNG Station:
The name of the CNG Station would be:
”SKYLINK CNG STATION”
The choice of this name for our project is based on the potential for growth in the Quetta
city which usually takes a backseat when it comes to investment in such projects where
the market supply does not meet the escalating market demand. We want to make the
Quetta based consumers feel that their needs are being catered to.
2.1.4 SWOT Analysis of the Project:
a) Strength:
i. Strategic location of the project with high daily turnover of cars
ii. Selection of proper CNG equipment from either M/s Safe s.r.l., KSL or HDIP
b) Weaknesses:
i. Weather conditions of Quetta, whereby lower gas pressures experienced in
winters
ii. Due to limited number of CNG Stations, long waiting queues would still be an
issue
c) Opportunities:
i. Provision of cheaper fuels to the consumers as compared to the petroleum
products
ii. Exemption of sales tax and custom duties on the import of CNG Kits, CNG
plant and Equipment
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iii. Provision of consultancy services by HDIP for parties interested in setting up
the CNG Refueling Station
d) Threats:
i. Market saturation due to a large number of entrants over a longer
period of time
ii. Threat of an increase in the prices of the natural gas by the government
iii. Current political scenario and law and order situation in the country
2.1.5 Legal Status of the Project:
The proposed legal status of our project would be a partnership among three members
because of the capital and services that each of us would be investing in this project. It
would, therefore, be comparatively easier to form, manage, administer and operate our
business in this setting.
2.1.6 Project cost:
The cost of project has been estimated as Rs.31.135 million including land, civil works,
CNG equipment and office equipment. Preliminary expenses and gas security charges are
estimated at Rs.0.8 million and Rs.1.8 million respectively. The CNG equipment would
comprise of gas compressor unit, dual hose dispenser, electric control panel, and storage
cascades/cylinders.
Table 2.1: Project Investment
The proposed project investment is based on the assumption of 40% debt and 60% equity
to be split equally among the three investors: Mr. Faisal Baqi, Mr. Masood Ahmed and
Miss Sana Arif Ansari. The following is an account of the expected returns on
investment:
5 Source: Small and Medium Enterprise Development Authority (SMEDA)
Fixed Investment Rs. 30,750,140
Working Capital Rs. 377,390
Total Investment Rs. 31,127,530 million
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Internal rate of return (project) 23.1%
Internal rate of return (equity) 41.5%
Net Present Value @ 20% Rs. 3,401,246
Payback period– based on cash inflows 4 years
Table 2.2: Project Returns
2.1.7 Viable Economic Size:
Considering the market trends and number of vehicles being converted into CNG fueling
system, initially the project would be able to attract and serve a minimum of 250 vehicles
per day in order to operate at breakeven.
2.1.8 Proposed Capacity:
The equipment for CNG refueling station that has been considered for this project is Safe
CNG Technology which is relatively more efficient and effective of all types of
equipment available in the market. The chosen equipment is expected to refuel
approximately 60 vehicles per hour. Twin hose dispenser accompanies this equipment
and it handles refueling of two vehicles at a time.
2.1.9 Proposed Location:
The proposed locations for the CNG filling station that has been considered in Quetta are
as follows:
Sariab Road, Quetta
Zarghun Road. Quetta
Jinnah Road, Quetta
Air Port Road, Quetta
2.2 CNG Policy6:
The Government of Pakistan has offered a number of incentives for encouraging the use
of CNG in the country. Some of these are summarized below:
i. Strong Government commitment to promote usage of CNG
6 Link: http://www.hdip.com.pk/hydrocarFSUB.htm
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ii. Liberal policy of providing license for CNG retailing
iii. Deregulated market price of CNG (for the consumers)
iv. Priority of providing natural gas connection to CNG stations
v. Exemption of import duty and sales tax till June 2005 on import of machinery and
vi. equipment, CNG kits and cylinders
This has provided a boost to the industry, and so far, more than 1.4 million vehicles have
been converted to CNG and more than 1450 CNG stations are operational. According to
International Association for Natural Gas Vehicles (IANGV) statistics, Pakistan is ranked
third in the CNG-using countries after Argentina and Brazil.
2.2.1 CNG Consultancy Services:
HDIP is offering consultancy services to the investors, which include the whole range of
activities like formation of company, selection of site, legal formalities, design of station,
specifications of the equipment, selection of equipment, selecting and appointing the
contractor, training of manpower, commissioning and supervision, etc. depending on the
clients’ needs.
2.3 Regulations, Licenses and Incentives:
2.3.1 License:
Obtaining a license from Ministry of Petroleum and Natural Resources is a pre-requisite
for setting-up the CNG station. The license is granted for a period of maximum 15 years.
The cost associated with this license is Rs.25, 0007. A sample form “Requirements for a
CNG License” is attached in Appendix 1.
2.3.2 Certificate (by HDIP):
After the installation of the required equipment for CNG refueling station, HDIP will
inspect the working of the equipment, and once satisfied, will issue a certificate verifying
that the installed equipment is up to the required standards. The cost associated with this
certification is Rs.35, 000.
7 As per Rule 7, S.R.O.714.(1)/92. of Notification issued on Islamabad, the 13th May, 1992. Government of Pakistan, Ministry pf Petroleum and Natural Resources
- 10 -
2.3.3 No Objection Certificates8:
No Objection Certificate (NOC) will be required from the following departments prior to
the commencement of the business:
i. Concerned development authority of the city (Quetta Development Authority in
case of Quetta)
ii. Traffic Engineering and Planning Authority (TEPA)
iii. Traffic Police (SSP)
iv. Department of Civil Defense
v. National Highway Authority (NHA)
vi. Central Board of Revenue (CBR)
vii. Civil Administration-Tehsil Municipal Administration (TMA)
viii. Irrigation Department
ix. Forest Department
x. Explosives Department
The cost associated for obtaining the above NOCs is estimated at Rs.100, 000.
2.3.4 Incentives
Sales Tax
The import of CNG equipment is exempted from sales tax.9
Custom Duty
The CNG equipment is also exempted from the custom duties as per the above-referred
SRO.
2.3.5 Regulatory Requirements
Quality Certificate
SRO.38 (1)/98 dated 21st January 1998 has been amended on April 11, 2002 and the
“Quality Certificate” from original manufacturer has been made mandatory. This
certificate should state that the equipment meets the safety standard as laid down in
Pakistan CNG Rules 1992. The designated third party inspector witnesses this Quality
Certificate. The cost of third party inspection is $500.
8 Source : Small and Medium Enterprise Development Authority9 S.R.O. No.38 (1)/98 dated 21st January, 1998
- 11 -
List of Equipment
The list of equipment and their various manufacturers has also been mentioned in the
same amended SRO whose import is exempted from custom duty and sales tax.
Income Tax on the Import of CNG Equipment
Income Tax, at the rate of 6%, is payable by the importer on the import of CNG
equipment.
Income Tax
The income of the CNG refueling station is not exempted from the income tax. The
investor has to pay tax on his/her income according to the nature of the business entity.
2.4 Market Analysis:
As previously mentioned, due to awareness about the environmental safety and
low fuel prices of CNG driven vehicles, a fast growth in the CNG industry has been
witnessed. Upon conducting a market analysis we have come to know that as more and
more vehicles are undergoing conversion to Natural Gas Vehicles (NGVs) the demand
for installation of more CNG Refueling Stations has increased. Currently, car
manufacturers are providing built-in CNG equipment cars, which have tended to remove
the timidity of many consumers regarding use of CNG fitted cars.
2.4.1 Market Demand:
At present there are more than 1.4 million vehicles having been converted to
NGV, and this number would have been increased further as we prepare this report.
Another reason for the increase in CNG equipped vehicles in the 30% reduced price of
the fuel as compared to petrol. Today many brands of cars come with a built-in CNG
fueling system. This has also lead to the rise in CNG market demand.
2.4.2 Market Supply:
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Total number of CNG stations in Pakistan is only 1450, which is quite low for
meeting the growing demand of CNG. Apart from these CNG stations, a number of
investors have filed for CNG stations licenses which are still under perusal by OGRA
2.4.3 Potential Competitors:
As mentioned above at present there are only three CNG Refueling Stations in
Quetta that would represent the potential competition for us. Following is the list of the
currently operational CNG stations10 accompanied by their location and date of first
operations:
i. Name : HDIP Bank Colony,
Location: Sabzal Road, Off Sariab Road, Quetta.
Date Started: 29/1/2003.
ii. Name: M/s Blue Zone International (pvt. Ltd.
Location: On PSO Retail Outlet, Askari Petroleum, 27-Askari, Opposite Askari
Park on Airport Road, Quetta Cantt.
Date Started: 17/01/2006
iii. Name: Army Welfare Trust
Location: Zarghoon Road, Quetta
Date Started: 02/08/2006
3.0 PROJECT PLANNING STAGE
10 Taken from the list issued on operational CNG Stations in Pakistan as on April 10th, 2007
- 13 -
3.1 Defining Project Scope (Step 1)
3.1.1 Scope Statement
To construct a high quality CNG refueling station in Quetta within 1.5 years at a cost not
to exceed PKR 32 million.
3.1.2 Deliverables
2 dual-hose CNG pumps with sheds
A 250 square feet storage cascade and compressor unit with underground gas
pipes
A 200 square feet land covering 1 office room, 1 bathroom, 1 control room and 1
ware house.
6750 square feet (approximately) of flooring covered with tuft tiles.
3.1.3 Milestones
The project will be completed in 6 stages.
1. Registration and grand of license by Oil and Gas Regulatory Authority (OGRA)
and permit approval by other departments - January 1, 2008 (1 month)
2. Foundation poured for civil construction - February 1, 2008 (2.5 months)
3. Dry in, framing, flooring, plumbing, gasification, electrical work, civil,
architectural and mechanical inspection passed – April 16, 2008 (6 months)
4. Furnishing, decoration and landscaping – October 16, 2008 (0.5 months)
5. Selection and Installation of CNG equipment and machinery – November 1, 2008
(1.5 months)
6. Final inspection and operationalization - December 16, 2008 (0.5 months).
3.1.4 Technical Requirements11
a) Specification for land, building and civil works:
Minimum of 9000 square feet of land with at least 75 feet front opening
Civil works 2250 square feet (approximately)
Flooring with tuft tiles on 6750 square feet area
11 Source: Small and Medium Enterprise Development Authroity
- 14 -
b) Specification for compressor and cascade/storage room:
Minimum 1 meter distance required between walls and compressors
Minimum 1 meter distance required between compressor and cascade
cylinders
Fired rated walls with RCC (Reinforced Cement Concrete) structure must be
used in cylinder storage and compressor room
Asbestos roof of the storage and compressor room which should not be of
permanent nature.
Structure must pass local building and seismic codes
8-15 PSIG (pounds per square inch gauge pressure) of pressure would be used
Compressors should be able to operate efficiently in temperatures ranging
from -25 C to 60 C12
Compressors must also be able to operate efficiently when low inlet pressure
For 40 kg CNG cylinder, 6.6 cubic meter of gas would be used
For 50 kg CNG cylinder, 11.12 cubic meter of gas would be used
3.1.5 Limits and Exclusions
Only 4 cars can be served at one time
The chosen equipment can refuel approximately 50 cars per hour
3.2 Establishing Project Priorities (Step 2)
Since CNG technology demand great precision and accuracy, hence, performance
specifications cannot be compromised. We know that CNG industry is a fastest growing
in Pakistan and many competitors are present in the market. So we want to reduce time to
take advantage of this opportunity. In the process, however, cost is being compromised
and we allow budget overrun of not more than Rs. 0.87 million.
Time Performance Cost
Constrain Ο
Enhance Ο
12 http://www.khattaksons.com/joomla/index.php?option=com_content&task=view&id=20&Itemid=34
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Accept Ο
Table 3.1: Project Priority Matrix
3.3 Work Breakdown Structure (Step 3)
The WBS defines all the elements of the project in a hierarchical framework and establishes
their relationships to the project end item(s). The WBS for the CNG Refueling Station is
shown in the figure on the next page.
3.4 Coding Refueling Station (Step 4)
1. CNG Refueling Station1.1 Human Resource Management
1.1.1 Recruitment1.1.1.1 Selection1.1.1.2 Training
1.1.2 Compensation1.1.3 Management Structure
1.2 Design and Build1.2.1 Permit and licences1.2.2 Main Building
1.2.2.1 foundation Poured1.2.2.2 Erect Framework1.2.2.3 Install Plumbing1.2.2.4 Install Water Supply1.2.2.5 Install Telephone lines1.2.2.6 Electric work1.2.2.7 Furnishing and Fixtures
1.2.3 CNG Station Infrastructure1.2.3.1 Sheds for Dispensers1.2.3.2 Install Refueling Pumps1.2.3.3 Install Storage Cascade and Compressor Unit1.2.3.4 Lay Gas pipeline1.2.3.5 Flooring and Landscaping
1.3 Test1.3.1 Test fixtures1.3.2 Module test1.3.3 Pilot test
CNG REFUELING STATION
HUMAN RESOURCE MANAGEMENT
DESIGN AND BUILD TEST
RECRUITMENT COMPENSATIONMANAGEMENT
STRUCTURETEST
FIXTURESTEST
MODULEPILOT TEST
PERMIT & LICENSES
MAIN BUILDINGCNG STATION
INFRASTRUCTURE
SHEDS FOR
DISPENSERS
INSTALL FILLING PUMPS
STORAGE CASCADE & COMPRESSOR UNIT
FLOORING & LANDSCAPING
LAY GAS PIPELINE
FOUNDATION POURED
ERECT FRAMEWORK
INSTALL PLUMBING
INSTALL WATER SUPPLY
INSTALL TELEPHONE
LINE
ELECTRIC WORKS
FURNISHING & FIXTURES
SELECTION TRAINING
- 16 -
Figure 3.1: Work Break Down Structure
- 17 -
3.5 Project Networking:
Project network is a logical diagram developed on the basis of information presented in the table below.
The following table presents all the necessary details related to the network diagram, like, activities and
their description, logical sequence and the interdependencies of activities. Project networking diagram is
shown in the fig. on next page.
ACTIVITY DESCRIPTIONIMMEDIATE
PREDECESSORACTIVITIES
IMMEDIATESUCCESSOR ACTIVITIES
ALL PREDECESSORS
ACTIVITIES
A Permit and licenses ------- B,Q ------
B Site Clearing A C,E ------
C Foundation poured B D A
D Erect framework C E,G,H,I,J,O A,B
EExcavation for utility trenches
B FA
FInstall gas & other utility lines
D,E MA,B,C
G Install wiring D K A,B,C
H Install plumbing D K A,B,C
IPlaster walls & sheds for dispensers
D KA,B,C
J Install sidings D L A,B,C
K Decorate interior G,H,I N A,B,C,D
L Finish exterior J N A,B,C,D
MInstall storage & cascade unit
F NA,B,E
NInstall filling pumps & other machinery
K,L,M PA,B,C,D,E,F,G,H,I,J
O Flooring & landscaping D U A,B,C
P Test fixtures & modules N UA,B,C,D,E,F,G,H,I,J,K,L,M
Q Recruit Human Resource A R ------
R Select Human Resources Q S A
S Provide Training R T A,Q
T Assign duties S U A,Q,R
Table 3.2: Project Networking
- 18 -
F
E M
G
I A B C D H K N P
Q J L
O
R
= Activity13
S T = Dummy14
Activity = Event15
Figure 3.2: Activity on Arrow (AOA) Network Diagram
13 An activity is a task of the project that consumes time while people and/or equipment either work or wait. 14 Dummy Activity is an activity that does not consume time; it is represented on the AOA network as a dashed line. It is used to ensure a unique identification number for parallel activities and used to maintain dependencies among activities on the project network.15 An event is a point in time when an activity(s) is started or completed and it does not consume time.
0
65
7
11
21 3 4 10
12
18
14
15
13
9
8
17
16
- 19 -
3.6 TIME ESTIMATION FOR ACTIVITY DURATION:
ACTIVITY OPTIMISTIC*(to)
MOST LIKELY*
(tm)
PESSIMISTIC*(tp)
ESTIMATED TIME*
te = [to+4tm+tp]/6A 2 4 6 4B 3 4 5 4C 4 5 6 5D 6 7 8 7E 1 2 3 2F 2 4 6 4G 0.5 2 3.5 2H 1 2 3 2I 2 4 6 4J 1 2 3 2K 2 3 4 3L 2 3 4 3M 1 4 7 4N 4 5 6 5O 4 6 8 6P 3 5 7 5Q 2 3 10 4R 0.5 2 3.5 2S 1 2 3 2T 1 2 3 2
* All activity durations are measured in weeks
Table 3.3: Estimated Duration of Activities
Optimistic time (to): It is the time required if no hurdles or complications arise
Most likely time (tm): It is the time in which the activity is most likely to be completed
Pessimistic time (tp): It is the time required if unusual complications or difficulties arise
- 20 -
3.7 DETERMINATION OF THE CRITICAL PATH: A critical path is the longest activity path(s) through the network. The critical path can be
distinguished by identifying the collection of activities that all have the same minimum slack.
There are four steps involved in the determination of the critical path.
EOT: Earliest Occurrence Time calculated as:
EOTij = Max [ EOTi + D ij ]
where i, j represent activities i and j
Dij = Duration of activity ij
LOT: Latest Occurrence Time, calculated as:
LOTi = Min [ LOT i – Dij ]
SLACK: Difference between LOT and EOT
Table 3.4: Calculation of Slack
ACTIVITY FLOATS:
EVENTS EOT LOT SLACK = LOT - EOT0 0 0 01 4 4 02 8 8 03 13 13 04 20 20 05 10 19 96 14 23 97 22 24 28 22 24 29 22 24 210 24 24 011 27 27 012 32 32 013 26 35 914 8 29 2115 10 31 2116 12 33 2117 14 37 2318 37 37 0
- 21 -
There are three measures of activity floats, each of which calculates a different amount of delay
that can be assigned to a particular activity without delaying the project. These are:
i) Total floatTotal float = LOTj – EOTi - Dij
ii) Free float Free float = EOTj – EOTi - Dij
iii) Independent float Independent float = EOTj – LOT i – Dij
where i, j represent activities i and j Dij = Duration of activity ij
ACTIVITY TOTAL FLOAT FREE FLOAT INDEPENDENT
FLOATA 0 0 0B 0 0 0C 0 0 0D 0 0 0E 8 0 0F 8 0 | 8 |G 2 0 0H 2 0 0I 0 0 0J 2 0 0K 0 0 0L 2 2 0M 9 9 0N 0 0 0O 9 0 0P 0 0 0Q 21 0 0R 21 0 | 21|S 21 0 | 21|T 21 0 | 21|
Table 3.5: Calculation of Floats
From the table we can see that activities A, B, C, D, I, K, N, P and U cannot be delayed
because they lie on the critical path 0 – 1 – 2 – 3 – 4 – 10 – 11 – 12 – 18 – 19. Therefore, there is
no flexibility in scheduling these activities.
- 22 -
= Activity
F = Dummy Activity
4 = Critical Path
E 2 M 4 = X is Event, Y is
0 EOT & Z is LOTG 0 2
A B C D I 4 K N p 4 4 5 7 3 5 5
H 2 0
Q 4 J 2 L 3
O 6
0
R 2 0
S T
2 4
Figure 3.3: Network Diagram Showing Critical Path
1837 37
510 19
313|13
420 20
722 24
614 23
1232|32
1127|27
1024|24
14| 4
28| 8
822|24
922|24
1510|31
1612 33
1716 37
00| 0
148 29
1326|35
XY Z
GENERAL MANAGER
HUMAN RESOURCE MANAGER
PROJECT MANAGER PROCUREMENT
MANAGER
SECTION HEAD ENGINEERING
SECTION HEAD ADMIN
SECTION HEAD MATERIALS MANAGEMENT
SECTION HEAD ASSEMBLY & TEST
MECHANICAL
CIVIL
ELECTRICAL
BUDGET
SCHEDULES
REPORTS
SUBCONTRACTORS
PARTS
KITS
SCHEDULING
SUB-ASSEMBLY
ASSEMBLY
TEST
- 23 -
Figure 3.4: Organizational Chart
- 24 -
4. PROJECT COSTS16
The details of the cost of project are as follows:
Items Rupees
Land (9000 sq. ft.) 17,000,000
Building - civil works 1,700,000
CNG Equipment 8,732,100
Stores & Spares 513,040
Office Equipment 100,000
Furniture & Fixtures 85,000
Gas Security 1,800,000
Preliminary Expenses 820,000
Working Capital 377,390
Total 31,127,530
Table 4.1: Project Costs
4.1 Project Financing
The total cost of the project is Rs.3 1.13 million including the working capital of Rs.0.377 million.
The sponsors of the project will contribute Rs.18.68 million and the bank will finance the
remaining amount of Rs.12.45 million.
4.2 Project Details
4.2.1 Location
For setting up a CNG filling station, location is the prime factor. As per the requirements of the
Government of Pakistan, the filling station must be situated in a commercial area. CNG filling
stations are not allowed to be installed in the residential areas.
4.2.2 Land
16 All the financial information presented here is based on rough cut estimates.
- 25 -
A minimum of nine thousand (9000) square feet of land with at least 75 feet front opening is
required for installing CNG Refueling Station. An amount of Rs.17 million has been allocated for
the acquisition of nine thousand square feet of commercial land in Quetta in the areas of Airport
Road.
4.2.3 Building
There are certain civil works required to be carried out at the proposed location. The civil works
would be carried out on an area of 2250 square feet. The rest of the area will be floored with tuft
tiles. Civil work includes the following:
Office
Control Room
Compressor and Cascade/Cylinder Storage Room
Shed for Dispenser
Toilet/washroom
Underground Gas Piping and Power Cables
Flooring
The total cost of construction is estimated at Rs. 1.7 million. Details for the said cost are as
follows:
Description Cost per sq. ft. Cost
Office, control room, compressor and
cylinder storage room, shed and
toilet/washroom (2250 sq. ft.)
500 1,125,000
Underground gas piping - 200,000
Flooring (6750 sq. ft.) 45 303750
Contingencies - 71,250
Total cost - 1,700,000
Table 4.2: Construction Cost (Amount in Rupees)
4.2.4 Material Inputs
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There are two main inputs required for the CNG filling station, one is the natural gas and the other
is electricity. The sponsor of the project is required to obtain both the connections from the
relevant authorities i.e. WAPDA and Sui Southern Gas Pipelines Limited (SSGPL). The cost
associated with obtaining the gas connection is Rs. 75, 000/-. In addition to this, a minimum
security deposit of Rs.1.8million is also required to be deposited with the concerned authority.
Bank guarantee is also acceptable in case of gas security. An amount of Rs. 0.35 million is required
for obtaining electricity connection. There is no security deposit required for the electricity
connection.
4.2.5 Stores & Spares
The whole equipment required for setting up a CNG filling station is imported. Therefore, it is
required to build an inventory of necessary spare parts to meet the unforeseen circumstances such
as breakdown or any other fault in any part or equipment. For this purpose, a stock of necessary
spare parts worth $8,000 will be imported along with other equipment to maintain a minimum level
of spare parts.
4.2.6 Furniture and Fixtures
Furniture and fixtures mainly include tables, chairs, sofas, fans & lights, carpet, curtains and fire
extinguishers. It is estimated that the furniture and fixtures of Rs. 85,000 would be purchased.
4.2.7 Office Equipment
Some office equipment is also required for the proposed project. A provision of Rs. 100,000 ha
been made for acquiring the required office equipment.
4.3 Manpower Requirement
Manpower requirement for the CNG filling station includes manager, cashier, dispenser, operators,
accountant, watchman and sweeper. The total staff strength would be 13 persons for the two shifts.
The staff salaries for year one are shown on next page:
Designation No. of Employees Salary per Month Total Salary per
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for two Shifts Month (Rupees)
Manager 1 20,000 240,000
Deputy Manager 1 10,000 120,000
Accountant 1 6000 72,000
Cashier 2 4500 108,000
Dispenser 4 3500 168,000
Operator 2 5500 132,000
Watchman 2 3500 84,000
Sweeper 1 2500 30,000
Total - - 954,000
Table 4.3: Manpower Requirement
4.4 Assumptions
For estimating the financial figures and for calculating revenue, following assumptions were
made:
i. Depreciation rates
Building 5 %
CNG Plant & Equipment 10%
Office Equipment 20%
Furniture and Fixtures 10%
Table 4.4 Depreciation rates
ii. Tax rates
Table 4.5: Tax rates
iii. Sales tax
Building 5%
CNG Plant & Equipment 10%
Office Equipment 10%
Furniture and Fixtures 10%
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The sales tax levied by Government of Pakistan is charged to the customers at the rate
of 15% on the sale of gas. These funds are deposited after every 14 days in favor of
Government of Pakistan.
iv. Number of Cars:
It is also estimated that in the first year of operations the CNG Refueling Station would
serve 250 cars on average, starting from 210 cars per day in the first month of its
operations and going to 290 cars at the end of its first year. The growth in the number of
cars served per day is estimated to grow at the rate of 20% per year for the first 4 years
of its starting and the rate would become constant at 15% thereafter.
v. Gas per Vehicle:
Our CNG Refueling Station would serve two types of CNG Cylinder capacities, 40kg
and 50 kg. Gas of 6.6 and 11.12 cubic meter can be filled in the cylinders of 40kg and
50kg respectively. A weighted average of 9.31 cubic meters of gas per vehicle has been
taken for the revenue calculations.
5 PROJECT EXECUTION AND DELIVERY
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5.1 Implementation Stage
The third stage in the project life-cycle is that of execution or implementation of the proposed
project. On the basis of schedules and budgets developed and resources allocated to defined
activities we are in a position to determine a course of action to take to construct and run a CNG
Refueling Station on the proposed location. We have taken care to consider the following things
while implementing our project:
5.1.1 Acquisition of Land:
Before initiating the project idea, we decided upon the location(s) for the construction of
the CNG Station after careful analysis. Care was also taken in determining that no local,
religious or legal factors affected the choice of site, and it met all the requirements of the
OGRA and related authorities.
5.1.2 Tendering of Civil Works and Award of Contract:
i. The award of contracts for civil works and supply of equipments to experienced firms
on fair and equitable contractual obligations was done with special care because of the
hi-tech nature of our project where performance cannot be compromised.
ii. The construction firms for award of contract were short-listed on the basis of their
experience of similar work, financial standing, technical know-how, equipment
availability, managerial capability and their overall reputation.
5.1.3 Procurement of Machinery and Equipment:
It was ensured that the procurement of materials, machinery and equipment was done at the
right time, according to the schedules developed in the earlier stage.
5.1.4 Status Reports:
Monitoring and evaluation are the most important steps of the project life-cycle since they
not only provide useful and timely information to the project manager but also serve as a
feed-back mechanism for the policymakers. For measuring the progress, changes in
results, and/or achievements (output, effect and impact) of the project,
monitoring indicators serve as a yardstick. For our project the indicators used
are as under:
- 30 -
i. Fund releases for initiating the construction and procurement of
essential materials and resources
ii. Physical progress as per approved work scope and time schedule
iii. Staff and equipment usage rate
iv. Managerial performance, reflected in timely decisions, efficiency and
controls, rate of progress, and lack of labor conflicts
v. Technical efficiency, quality control standards, input usage rate, and
credit supply
vi. Economic parameters like capacity utilization, and yield
vii. Environmental parameters like pollution control and climate
considerations
Quarterly and annual status reports to monitor progress during the
implementation stage of our project are generated to track the following items:
i. Project’s approved cost, time schedule and objectives
ii. Item-wise physical and financial progress
iii. Any changes in the plan of work or envisaged activities, along with the
cost estimates and likely period of completion of the project
iv. Expected cost and time over-runs, and
v. Problems being encountered in the implementation of the projects with
proposals for remedial measures
5.2 Delivery stage
The CNG Refueling Station would be operational on the due date at the expected cost and
delivered to the customer.
5.2.1 Training
After complete installation customer and the selected staff would be given 4-week training,
as per the schedule on how to operate the CNG pumps and how to control the CNG
machinery installed on the station
- 31 -
5.2.2 Release of Resources and staff
The resources employed on different activities would be released one by one at the end or
near the completion of the project. The human resources working under the project
manager would also be released as their part of t he activities are completed.
5.2.3 Lessons learned
During the entire length of the project it was learned that investment into the CNG Station
o be done by investing only in the CNG equipment and machinery while partnering with
another person owning a petrol pump. The CNG machinery and equipment may either be
purchased or taken on lease.
Due to low competition in this sector due to only 3 CNG Refueling Stations in the city, the
market is very lucrative for investment purposes. However, over a period of 4 years
competition is expected to grow. As an expansion plan we expect to open another CNG
Station 2 years after the successful operations of this project.
- 32 -
- 33 -
REFERENCES:
Books:
1. Gray, Clifford F. and Larson, Erik W. Project Management: The Managerial Process, 3rd
Ed. The McGraw-Hill Co., 2006. (pp 61-73, 476)
2. Kezsbom, Deborah S., Schilling, Donald L., and Edward, Katherine A. (1976). Dynamic
Project Management: A practical Guide for Managers & Engineers. John Wiley & Sons,
Inc. (pg 31)
3. Manual for Development Projects: Preparation, Appraisal, Approval, Implementation,
Monitoring and Evaluation. (1991). Projects Wing: Planning and Development Division,
Government of Pakistan, Islamabad. (pp 92-93, 101, 106)
Web links:
1. http://www.smeda.org
2. http://www.hdip.com.pk/hydrocarFSUB.htm
3. http://www.ogra.org.pk/cats_disp.php?cat=21
4. http://209.85.175.104/search?q=cache:n7byiFwmODgJ:www.khattaksons.com/joomla/
index2.php%3Foption%3Dcom_content%26do_pdf%3D1%26id
%3D17+CNG+station+process&hl=en&ct=clnk&cd=1&gl=pk
5. http://www.khattaksons.com/joomla/index.php?
option=com_content&task=view&id=20&Itemid=34
BIBLIOGRAPHY:
1. http://micro.eon-ruhrgas.com/erdgastank/en/Erdgastankstelle2006.swf
2. http://www.freepatentsonline.com/5542459.html
3. http://209.85.175.104/search?q=cache:DKyr4E9HJmMJ:www.sngpl.com.pk/download/
madeeasy.doc+CNG+station+process&hl=en&ct=clnk&cd=4&gl=pk
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