BUSINESS IN REFINING OF USED LUBRICATING OIL IN UGANDA

 BUSINESS IN REFINING OF USED LUBRICATING OIL IN UGANDA

Introduction

This business idea is for refining of used lubricating oil. Lubricating oil is extracted from crude petroleum by a process of distillation. It falls under the category of high value products and the demand for it keeps on growing. The market size is big as it is used for any machine or instruments to increase their efficiency and longevity; to reduce the wear and tear caused by friction. It can be refined to make it very close to original lubricating oil. The business idea is premised on production of 3,500 liters of refined lubricating oil per month which translates into 42,000 liters per year. The revenue potential is estimated at US$ 10,530 per month translating into US$ 126,360 per year with a profit margin of 20%. Total investment requirement is US$16,800 for the first year of the project.

Production Process

The used lubricating oil is collected in tanks. The oil is transferred to a dehydration tank through a pump and subsequently heated to separate water from oil. The moisture-free oil is transferred to a settling tank and is treated with concentrated sulfuric acid for impurities to settle down. The mixture is again heated under vacuum for 3-4 hours and the clear liquid is siphoned and additives are mixed to give desired properties.

Capital Investment Requirements in US$

Capital Investment Item Units Qty @ Amount
Storage Tank No 2 800 1,600
Settling Tank No 1 2,500 2,500
Aid Treatment Tank No 1 1,750 1,750
Vacuum Distillation No 1 2,000 2,000
Receiver for fuel dilution No 1 2,500 2,500
Gas Absorber No 1 1,250 1,250
Horizontal plate No 2 450 900
Condenser made of M.S plate No 1 1,500 1,500
Laboratory testing Equip Set 1 1,000 1,000
Oil fired burner No 1 1,500 1,500
Drums No 20 15 300
Total       16,800

Production and Operating Costs in US$

Cost Item Units @ Qty/ day Pdn cost/ day Pdn cost/ month Pdn cost/ year
Direct Cost            
Used lube oil Ltrs 0.7 80 56 1,456 17,472
Concentrated Sulfuric acid Ltrs 1.5 30 45 1,170 14,040
Fuller Ltrs 1.5 20 30 780 9,360
Lime kgs 1.15 15 17.25 449 5,382
Additives Ltrs 0.5 15 7.5 195 2,340
Sub-total         4,050 48,594

General Costs(Overheads)

Labour 4,000 48,000
Rent 250 3,000
Utilities(water & power) 200 2,400
Other Costs(Miscellaneous) 500 6,000
Depreciation(Asset write off) Exp 350 4,200
Sub-total 5,300 63,600
Total Operating Costs 9,350 112,194
  1. Production costs assumed are 312 days per year with a daily capacity of 135 liters of Refined Lubricating Oil.
  2. Depreciation (fixed asset write off) assumes 4 years life of assets written off at 25% per year for all assets.
  3. Direct Costs include materials, supplies and other costs that directly go into production of the product.
  4. A production month is assumed to have 26 days.

Project Product costs & Price Structure

Item Qty/ day Qty/ Yr Unit cost Pdn/Yr Unit px T/rev
Refined Lubricating Oil 135 42,000 2.66 112,194 3 126,360

Profitability Analysis in US$

Profitability Item Per day Per Month Per Yr
Revenue 405 10,530 126,360
Less: Production and Operating Costs 360 9,350 112,194
Profit 45 1,181 14,166
       

Market Analysis

There is a high demand for lubricating oil compared to its supply both in urban and rural areas and this is because about two thirds of the lube oil is used by industry while the remaining one third goes for automobiles. And it is also used for blending in various types of like spindle oil, transformer oil, axle oil and hydraulic oil, etc.

Availability of Raw materials and Equipments

Raw materials like used lube oil, lime and additives can be got locally from Kilembe mines and can be imported from Libya while equipments like Absorber and Vacuum pump for distillation can be imported from China and Japan.

Capital Investment Requirements in US Dollars Project Product Cost and Price Structure

 

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