- 1 -

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

- 3 -

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

- 4 -

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.

- 5 -

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

- 6 -

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

- 7 -

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

- 8 -

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

- 9 -

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:

- 12 -

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

- 15 -

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

- 26 -

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

- 27 -

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%

- 28 -

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

- 29 -

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