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 |
- Production costs assumed are 312 days per year with a daily capacity of 135 liters of Refined Lubricating Oil.
- Depreciation (fixed asset write off) assumes 4 years life of assets written off at 25% per year for all assets.
- Direct Costs include materials, supplies and other costs that directly go into production of the product.
- 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
