FEASIBILITY STUDY FOR A

GAS STATION IN PLARIDEL BYPASS (BULACAN)

1. Executive summary
2. Introduction
3. Proposed Business Legal Status
4. Project Cost
a. Viable Economic Size
b. Proposed Capacity
c. Proposed Location
5. Market Analysis
6. Target Customers
a. Market Demand
b. Market Supply
c. Industry Growth
7. Regulations and Licenses
a. Guidelines for setting up a fuel filling station
b. License
c. Certificate (by DPR)
d. NOCs
e. Income Tax
8. The Project CONCEPT
a. Project Cost
b. Project Financing
c. Project Details
9. Manpower Requirement
10. Basis for Financial Projections
a. Inflation Rate
b. Revenue Assumptions
c. No. of Cars
d. Petrol per Vehicle
e. Depreciation on Assets
i. Accounting Profit
ii. Taxable Profit

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 1
 iii. First Year Allowance
iv. Multiple Shift Allowance
v. Amortization of Preliminary Expenses
vi. Working Capital
vii. Accounts Receivables
viii. Advances to Employees
ix. Accrued Utilities and Power Expenses
x. Accounts Payable
xi. Value Added Tax Payable
xii. Value Added Tax
xiii. Ratio/Financial Analysis
f. Alternative Investment Opportunity
11. Financial Analysis

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 2
1. EXECUTIVE SUMMARY

1.1 PURPOSE OF THE DOCUMENT

The objective of this feasibility study is to have proof and analysis for the benefits of
this business. This will aid the investors of the gas station business stated in this
document. This will help the decision-making process, understand various aspects of
the project from start-up, production, marketing, finance and business management.

This particular pre-feasibility is regarding “Fuel Filling Station” which comes under
“Petroleum” sector.

1.2 CRUCIAL FACTORS &STEPS IN DECISION MAKING FOR INVESTMENT

Key Success Factors
Following factors are the key in making this project profitable:
 Location of the project will play a pivotal role in the successful running of the fuel
station. The daily turnover of the cars largely depends on this important factor.
 Selection of proper equipment is another key for carrying out the successful
operations of the proposed project.

1.3 OPPORTUNITIES
The proposed project would have a number of competitive advantages:
 The project will increase the number of fuel stations in Plaridel, Bulacan and
provide fuel to more customers, reducing the problem of fuel scarcity in the area
and reducing the cost.
 Plaridel Bypass (Bulacan) being a new commercial area and a good location
because of the high rate of vehicular movement in and out of the new road.

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 3
Threats
The proposed project will be facing the following threat:
 Market saturation over a longer period of time due to a large number of entrants and
Plaridel Bypass (Bulacan) being a rural location
 Threat of likely increase in the prices of the petroleum products by the government as
a result of the planned deregulation and removal of fuel subsidy

2. INTRODUCTION

Petroleum products are among the most valuable natural resources abundantly
available in our country. Filipinos and people everywhere use petroleum products as
a fuel in their automobiles, generating sets, industrial plants and for cooking purposes,
thus making petroleum products an essential commodity that is needed for the daily
operations of individual, industrial and national activities. Bulacan being an oil
producing nation however still relies on imported petroleum products for the servicing
of the economy. Such petroleum products as Diesel, Unleaded and Premium gas
products utilized by almost everybody on daily basis at an average of 10 million litres
daily usage.

Due to increasing level of standard of living, more Filipinos are increasing the number
of cars on the road, the need for constant power supply to aid uninterrupted production
of goods and services and also for domestic use more Filipinos are increasing the
demand for fuel in order to enjoy the usage of their generating sets and industrial
plants

The total projected cost for setting up a standard fuel filling station in Plaridel Bypass
(Bulacan), we have estimated at PHP 11,570,000 million. It includes building, fuel
dispensers and other equipments, spares, along with the preliminary expenses and
working capital. It excludes land costs and other insurance costs.

The available local petroleum products, i.e. Diesel, Unleaded and Premium are
basically produced from crude oil, and procured in nearby depot of Dinalupihan,
Bataan.

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 4
3. PROPOSED BUSINESS LEGAL STATUS

The proposed legal structure of the business entity is a corporation registered as ASIA
OIL PETROLEUM CORPORATION while ASIA OIL is the trade name.

4. ESTIMATED COST OF PROJECT

The cost of project has been estimated as PHP 11.57 million including civil works,
fuel dispenser equipment, underground tanks and office equipment. Preliminary
expenses and Petroleum licensing and other regulatory charges are estimated at
???? and ???? respectively. The diesel, unleaded and premium equipment
comprises of dual hose dispensers and electric control panels.

Project Investment (1 year)

Land Lease (2,000sqm) 720,000
Fixed Investment 8,000,000
Working Capital – Petroleum 1,320,000
Working Capital – People 1,530,000
Total Investment 11,570,000

The proposed pre-feasibility is based on the assumption of 50% debt and 50% equity.

The project seems to be viable with the following returns on investment.

Project Returns
Net Present Value @ 20% 2,314,000
Payback period – based on cash inflows 5 years

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4.1 VIABLE ECONOMIC SIZE

A minimum of 145 cars is required to be filled daily in order to operate at breakeven.

The estimate is based on an average purchase per car of PHP 500. Considering the
market trends and number of vehicles in use in Plaridel Bypass (Bulacan), this ranges
of fleet of government vehicles, fleet of transporters plying within the town and other
neighboring towns and villages. Also, the heavy vehicular traffic of travelers from other
parts of the country to the east, it is estimated that, the project would be able to attract
and serve at-least 145 vehicles per day. This does not include the increasing number
of motor cycles and those who purchase fuel for their generating sets.

4.2 PROPOSED CAPACITY

The equipment for dispensing petroleum products that has been considered for
preparing this prefeasibility study is of imported origin. This equipment is relatively
more efficient and effective of the all types of equipment available in the market.
Various other types of equipment are also available at lower prices. The chosen
equipment is capable of refueling 50 vehicles per hour. Twin hose dispenser
accompanies this equipment and it handles refueling of two vehicles at a time.

4.3 PROPOSED LOCATION

The proposed locations for the fuel filling station in Plaridel Bypass (Bulacan) are as
follows;
 ?????
 ?????
 ?????

The project may also be established in commercially viable area of town.

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 6
5. MARKET ANALYSES

The efficient distribution of petroleum products has always been part of the
Government’s petroleum policy, which is reflected in the efforts made by the
government establishing DOTC approved stations across various locations in the
country in order to meet the increasing demand for petroleum products.

5.1 Target Customers

The target customers for the proposed project would be the private and commercial
vehicles running on Petrol fuel, private and commercial motor cycles, owners of
generating sets for private and commercial usage.

5.2 Market Demand

At present there are more than 10,000 vehicles plying within Plaridel Bypass (Bulacan)
being a crossroad for other towns of Bulacan and gateway to Nueva Ecija which
includes transporters from Metro Manila, or Southern Luzon on a daily basis. Due to
the increasing demand for cars and, the demand for petroleum products have been
on the rise as a result.

5.3 Market Supply

Total number of fuel filling stations that are fully operational in Plaridel Bypass
(Bulacan) nearby area is only 15, which is quite low for meeting the growing demand
for petroleum products.

5.4 Industry Growth

There has been a tremendous growth in the downstream petroleum sector over the
years. The total number of vehicles within Plaridel Bypass (Bulacan) was 5,000 and
functional fuel filling stations were 10 at the end of year 2010. Currently, the number
of vehicles and petrol filling stations has increased to over 10,000 vehicles and 15

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 7
 functional stations respectively and by the year 2020 they grow up to 25 functional
Stations and over 15,000 vehicles as a result of increasing commercial activities and
the building of an airport in San Miguel, Bulacan which is close Plaridel Bypass area.
The growth in terms of percentage is given in the following table:

Table 5-1 Growth Percentage of Vehicles

Year 2018 2020 Percentage
Increase
No. of Vehicles 10,000 15,000 33%
Petrol Filling Stations 10 15 50%

The above growth rates present an opportunity for the new entrants to earn profits by
setting up new petrol filling stations to meet the growing demand.

6. REGULATIONS AND LICENSES

6.1 License

Obtaining a license from ???? is a pre-requisite for setting-up the Motor Fuel Filling
station. The cost associated with this license is PHP 50,000 (????).

6.2 Certificate (by ????)

After the installation of the required equipment for the Fuel filling station, ???? 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 ????.

6.3 NOCs

No Objection Certificate will be required from the following departments prior to the
commencement of the business:
 ???

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 8
 ????
????
The cost associated for obtaining the above NOCs is estimated at PHP ????

6.4 Income Tax

The income of the Petrol filling station is not exempted from the income tax. The
investor has to pay corporate tax according to the nature of the business entity. The
current project is being operated as a private limited company, so the income tax is
payable at the prevailing rate.

6.5 GUIDELINES FOR SETTING UP OF MOTOR-FUEL FILLING STATIONS

BASIC PRINCIPLES
????

General Conditions of Sitting:

1. ????

Frontage:
???
Area: ???

The size of the petrol filling station shall not be less than
a) 31 X 17 M in the case of petrol filling station with kiosk without service bay
b) 37 X 31 M in the case of petrol filling station with service bay

Buffer Strip
1. ????

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7. THE PROJECT CONCEPT

7.1 Project Cost

The details of the cost of project are as follows:

Table 7-1 Project Costs

Items in Construction
Land (2,000 sq. m) 720,000
Building – Civil Works 2,650,000
Dispensers, Underground Tanks & Other Equipment 1,500,000
Fuel Tanker Truck 3,500,000
Office Equipment 100,000
Furniture & Fixtures 50,000
Licenses / Permits 200,000
Working Capital – Petroleum 1,320,000
Working Capital – People 1,530,000
Total 11,570,000

7.2 Project Financing

The total cost of the project is PHP 11.57 million including the working capital of PHP
2.85 million.

7.3 Project Details

7.3.1 Location

For setting up a Fuel filling station, location is the prime factor. As per the requirements
of the local government, the filling station must be situated in a commercial area. Fuel
filling stations are not allowed to be installed in the residential areas.

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7.3.2 Land

 A minimum of two thousand (2,000) square meters of land with at least 75 meters front
opening is required for installing Fuel filling station. An amount of PHP 720,000 has
been allocated for the leasing two thousand square meters of commercial land in
Plaridel Bypass (Bulacan) area. A comparison of costs of commercial land in the
various areas of Plaridel Bypass (Bulacan) is given below for reference purpose.

Table 7-2 Approximate Cost of Land in the Proposed Areas

Location Price Range for 2,000 Sq.m

San Miguel 1,000,000
San Rafael 800,000
San Ildefonso 900,000

7.3.3 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 1,000 square feet. The rest of the area
will be floored with concrete. Civil work includes the following:
 Office
 Shed for Dispenser
 Toilet/washroom
 Underground Tanks and Power Cables
 Flooring

The total cost of construction is estimated at PHP 2.65 million. Details for the said cost
are as follows:

FEASIBILITY STUDY FOR A GAS STATION IN PLARIDEL BYPASS (BULACAN) – Nikko Longalong 11
 Table 7-3 Construction Cost (Amount in PHP)
Description Cost
Office, shed and toilet/washroom ????
Underground Tanks & gas piping ????
Flooring (2,000sq.m) ????
Contingencies ????
Total Cost 2,650,000

7.3.4 Equipment

The following equipment is required for a Fuel filling station:

 Gas Compressor
The purpose of compressor is to compress the fuel enabling it to discharge the
petrol for refueling. This compressor requires an input pressure of 8 or 15
PSIG5 from the main gas supply with the outlet pressure of 3,625 PSIG. With
this discharge pressure, the equipment can refuel 50 vehicles per hour.
 Electric Control Panel: Electric control panel is required to operate the gas
compressor.
 Priority Panel for Vehicle Priority: During rush hours, the compressor is directly
connected to the dispenser, bypassing the storage cascades/cylinders with the
help of priority panel, facilitating the refueling of vehicles at a faster rate.
 Fuel Dispenser high flow dual hose: Gas is filled into the vehicles with the help
of dispenser. This dual hose dispenser is capable of handling two vehicles at
a time.

There are various foreign manufacturers providing the fuel filling station equipment. In
this pre-feasibility report, a imported origin compressor has been selected. This
equipment is selected because of its low electricity consumption, higher outlet
pressure, low maintenance, durable working, longer periods between overhauls and
good market repute and presence.

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 The total capacity of the selected equipment is 400M3/Hr with a total power load of 93
KW. All the Fuel filling station equipment is foreign manufactured and imported on the
specific requirement of the sponsor by the authorized agent. Usually, the equipment
is delivered within 12 to 16 weeks from the receipt of purchase order and initial
payment.

7.3.5 Suppliers

Products will be sourced directly from Dinalupihan, Bataan which is an accredited

marketer with reliable and high quality products and delivery time.

7.3.6 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 PHP
50,000 would be purchased.

7.3.7 Office Equipment

Some office equipment is also required for the proposed project. A provision of PHP
100,000 have been made for acquiring the required office equipment.

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8. MANPOWER REQUIREMENT

Manpower requirement for the Fuel 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 as follows:

Table 8-1 Human Resource Requirement

Designation No of Employees Salary per month Total Salary per
month
Cashier 3 12,500 37,500
Operator 9 10,000 90,000
Total 12 127,500

9. BASIS FOR FINANCIAL PROJECTIONS

9.1 Inflation Rate

10% inflation rate has been considered while making the projections for cost of sales,
operational expenses and salaries. The prices for electricity, operational expenses
and staff salaries are increased by 10% every year as a result of inflation.

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9.2 Revenue Assumptions

9.2.1 No. of Cars

Based on the survey of some Fuel stations in Plaridel Bypass (Bulacan), the number
of cars assumed for revenue projections is as follows:

Table 9-1 Detailed Projected Increase in Daily Cars

Years No. of Cars Average Daily Net Monthly
Profit per Car Revenue Revenue
2019 145 33 4,785 143,550
2020 200 35 7,000 210,000
2021 265 37 9,805 294,150
2022 300 40 12,000 360,000
2023 400 45 18,000 540,000

Table 9-2 Detailed Projected Net Revenue in 5 years Financial Period

Years Monthly Revenue Yearly Net Revenue
2019 143,550 1,722,600
2020 210,000 2,520,000

2021 294,150 3,529,800

2022 360,000 4,320,000

2023 540,000 6,480,000

18,572,400

The average number of cars in the first years is estimated at 145 cars per day, starting
from 120 cars per day in the first month and going up to 290 cars per day in the 12th
month. In the second year, it has increased to 303 cars per day. After second year,
number of cars is increasing at a rate of 20% till fifth year because the project would
be in its growth stage. An increase of 15% has been considered from sixth year,
because at that time, the project would be at its maturity stage.

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9.3 Accounting Profit

Depreciation on the assets has been charged at the following rates for the calculation
of accounting profits:

Table 9-3 Depreciation Rates

Building 5%
Fuel Plant & Equipment 10%
Office Equipment 20%
Furniture & Fixture 10%
9.3.1 Taxable Profit

For the purpose of calculating taxable profit, depreciation is calculated on the rates as
per the Income Tax Law, which is as follows:

Table 7-4 Tax Adjustments

Land 0%
Building 5%
Fuel Plant & Equipment 10%
Office Equipment 10%
Furniture & Fixture 10%

9.4 First Year Allowance

Other than the normal depreciation allowances, first year allowance is also provided
on the newly installed Plant and equipment for the purpose of providing benefit to the
entrepreneur. The first year allowance is calculated at 40% of written down value of
fuel plant and equipment.

9.5 Multiple Shift Allowance

In addition to normal depreciation and first year allowances, multiple shift allowance is
also provided for the plant and machinery, which operates on double or triple shift

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 basis. In this proposed project, fuel plant will run on two-shift basis during the whole
year. So multiple shift allowance is calculated and added to the depreciation of plant
and equipment for all the ten years. Multiple shift allowance has been taken as 66.6%
of the normal depreciation allowance.

9.6 Amortization of Preliminary Expenses

Preliminary expenses amounting to PHP 1,650,200 will be amortized at the rate of

20% per annum.

9.7 Working Capital

Working capital is calculated on the basis of following assumptions:

9.7.1 Accounts Receivables

Mostly, the sale of Petrol is on cash basis. However, some fuel filling stations do offer
a credit facility to reputable companies on agreed terms and conditions. Therefore,
receivables are estimated at 6% of the total sales amount.

9.7.2 Advances to Employees

Advances to employees are calculated on the basis of 30 days of both payroll and
staff benefits.

9.7.3 Accrued Utilities and Power Expenses

Normally, it would take 20 days to deposit the utilities (electricity, water and telephone)
bills. Therefore, utility expenses for 20 days have been taken as the basis for working
capital computation.

9.7.4 Accounts Payable

Cost of electricity for 20 days has been considered in calculating accounts payable.

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9.7.5 Value Added Tax Payable

Every company is required to deposit the amount of VAT collected from the
consumers, within 30 days. The same has been taken as the basis for calculating the
amount of sales tax payable.

9.8 VAT

The Value Added Tax levied by Government is charged to the customers at the rate
of 5% on the sale of fuel. These funds are deposited after every 30 days in favor of
the Federal Government through the Federal Inland revenue service.

9.9 Ratio/Financial Analysis

The figures for the rate of return on investment and return on equity are averaged for
the first five years to make it more reasonable.

9.10 Alternative Investment Opportunity

The cost of land is the major portion of investment in this project. If any investor does
not have enough resources for the acquisition of land, he/she also has another
alternative course of action to setup the fuel filling station without acquiring the land.
The investor can make investments only in the purchase of Fuel equipment and install
this equipment with any existing non functional petrol station. In this case, the
investment for installing the new equipment will be made by the investor and the space
will be provided by the dealer/owner of the existing petrol station. The investor will pay
15% commission on the total revenue to the dealer/owner of the petrol station.
Moreover, the investor can also avail lease facility from any leasing company on the
purchase of the equipment.

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10. FINANCIAL ANALYSIS

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