PROPOSAL FOR BULK IMPORT/SALE OF AUTOMOTIVE GAS OIL

BY

MOPEX OIL AND GAS LIMITED, NIGERIA

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Friday January 12, 2018

The Managing Director/CEO

CANE Digital Services Limited
27A, Adediran Ajao Crescent
Ajao Estate, Anthony
Lagos

Dear Sir,

PROPOSAL FOR PROJECT FACILITATION OF 12-MONTHS IMPORT OF AUTOMOTIVE GAS

OIL

Introduction
Over the successive years from 1970, the Nigerian petroleum products refining and
distribution market has experienced a gradual degradation of its crude oil refining and
distribution infrastructure. By 1999, the Federal Government had decided to resolve
the perpetually-scarcity of refined products at service stations across the country.

This was evident in the government’s final decision to deregulate the downstream
sector of the petroleum Industry. This singular decision suddenly opened a market that
was previously the exclusive preserve of the international majors – ExxonMobil,
Chevron-Texaco, Total, Elf, Agip, African Petroleum, etc. – to indigenous
importers/marketers.

Particularly, the government deregulated the market for Automotive Gas Oil [AGO] to
encourage independent traders augment the supplies of government.

Since the latter deregulation, several indigenous petroleum products marketing

companies have made firm inroads into the yawning market for importation and trading
of refined products – with some traders holding sway across the West African sub-
regional market. Prominent players include Sahara Energy, Oando, Forte Oil [Formerly
African Petroleum], MRS Oil/Gas, North Bridge, Ascon and NIPCO. It is a verifiable fact
that the indigenous trading companies currently have over 35% of the trade volume of
refined products into Nigeria.

The opportunity for these indigenous traders is underpinned by the fact that the
operation of refineries over the years has proven unsustainable for the Nigerian National
Petroleum Corporation [NNPC] - which has since distanced itself from the
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refining/distribution business. The decision, for the NNPC, is not unconnected with the
opaque and unattractive pricing programs of successive political administrations trying
to eke out relevance for political patronage – coupled with the high cost of distribution
infrastructure.

Importation/Distribution Landscape For AGO

Currently, the indigenous importers/traders account for over 35% of fuel imported into
the Nigerian market. These products are traceable to government-managed jetties of
the Petroleum Products Marketing Company [PPMC] itself a subsidiary of the NNPC

Market Distribution

 Abuja: 3%
 North Central: 17%

 North East: 4%

 North West: 5%

 South West: 31%

 South East: 10%

 South South: 30%

From the above, it is evident that the southern Nigerian market accounts about 70% of
demand with the south-western axis [Lagos, Ogun, Oyo] accounting for about 31%.

Furthermore, the market is not consistent with long-proven laws of demand and supply
characterised by:

 Price increase is induced by a failure of demand to match supply;

 Supply always increases to match demand;
 Demand drops to over-inflated pricing;
 Demand increases to highly-reduced pricing;

Time Frame
Mopex has established, from several years of delivering marine logistics [lease/charter,
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anchorage, etc] services to various importers/traders, that a 30-day turn around is
sufficient to off-load and dispose of 50,000 Metric Tonnes of AGO offshore Nigerian
waters.

Funding
Mopex has secured formal quotes from our European refiners at a price of US$285 per-
Metric Tonne [US$285/MT] for an initial 50,000 MT consignment monthly for a trial 12
month contract. We project an additional US$35 per-Metric Tonne [US$35/MT] to cover
sundry marine and operating expenses. Thus, a total cost of $16,000,000.00 [Sixteen
Million US Dollars, Only] – is to be applied on a monthly-revolving basis for the 12-month
tenor. See attached Cashflow for Return on Investments [RoI] analysis.

Return On Investment (ROI)

The proposed investment is capable of return within 8 months of commitment based on
the refiner’s aggressive price offer which makes it attractive for to any wholesale-
buyers at Any Safe World Port [ASWP]. That is, the consignments can be sold anywhere
in the world.

Justification
In Nigeria, today, it is unarguable that the importation of AGO has assumed permanence
pending the government’s ability to guaranty adequate supply from its refineries.
Unfortunately, this situation will persist as the government is extensively handicapped
by poor power supply and porous unsecured pipelines network across the country.

Over the years, Mopex has leveraged its vantage position of delivering quality marine
logistics services to the leading indigenous importers/traders to understand the supply-
chain dynamics for AGO importation and distribution.

It is for same reason that the company has strategically focused on the wholesale side
of the market – with point of exchange at Lagos Outside Bar [or Blue Line]. This strategy
minimizes the overheads of berthing that otherwise erode substantial profits for
importers/traders.

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 MOPEX OIL & GAS LTD.

COSTING FOR 12-MONTH CONTRACT FOR 50,000 MT - AUTOMOTIVE GAS OIL

[AGO]

[$]
TOTAL QUANTITY IN METRIC
TONNES = 12 X 50,000 MT [600,000MT]

Projected Bulk Sale Price @ $400/MT = 240,000,000.00

LESS EXPENSES:
= (171,
Refiner’s Price to Lagos Blue Line [Outside Bar] @ $285/MT 000,000.00)

Marine Logistics/Handling Charges @ $32/MT = (19,200,000.00)

Transaction Brokers Fees @ $2/MT = (1,200,000.00)

NUPENG Fees @ $1.00/MT = (600,000.00)

Bank Interest Charges @ $10.73/MT = (6,438,000.00)

GROSS PROFIT IN US DOLLARS [$] = 41,562,000.00

Less Tax @ 30% [$]: = (12,468,600.00)

NET PROFIT [$]: = 29,093,400.00

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 MOPEX OIL AND GAS LIMITED

CASH FLOW STATEMENT AS AT 05/04/2019.

DETAILS UNITS (MT) $

INFLOW A

Sales @ $400/MT 600,000 240,000,000.00

192,000,000.0
Investments (DLC) 0

TOTAL INFLOW A 432,000,000.00

OUTFLOW B 390,438,000.00

Purchases @ $285/MT 600,000 (171,000,000.00)

Marine Logistics/Handling@
$32/MT 600,000 (19,200,000.00)

Investments (DLC) (192,000,000.00)

Transaction Brokers Fees @ $2/MT [$] (1,200,000.00)

NUPENG (Union Fees) @ $1/MT (600,000.00)

Bank Interest Charges @ $10.73/MT (6,438,000.00)

GROSS PROFIT 41,562,000.00

Less Tax @ 30% of Gross Profit (12,468,600.00) 12,468,600.00

NET CASH FLOW (A-B) 29,093,400.00

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 MOPEX OIL AND GAS LIMITED
Trading Profit and Loss Account As at 05/04/2019

Detail [$] TOTAL [$]

Sales 240,000,000.00
192,000,000.0
Investment (DLC) 0 432,000,000.00

Cost of Sale (190,200,000.00)

Investment Servicing (382,200,000.00
(DLC) (192,000,000.00) )

Total Cash After Sale 49,800,000.00

Other Income 0.00

Total Profit After Sale 49,800,000.00

Less: Expenses:
Transaction Brokers Fees @ $2/MT (1,200,000.00)

NUPENG (Union Fees) @ $1/MT (600,000.00)

Bank Interest Charges @ $10.73/MT (6,438,000.00)

Depreciation @20% - (8,238,000.00)

Gross Profit 41,562,000.00

(12,468,600.00
Less Tax @ 30% )

Net profit 29,093,400.00

APPROPRIATIONS 0.00

MOPEX OIL & GAS LTD 100% 29,093,400.0

Ship Handling/Management, Oil & Gas, Supply of Marine Equipment’s, Ship Brokers
 29,093,400.0 0
0

For: MOPEX OIL AND GAS LTD.

Joshua oluwashanu
(Managing Director/CEO)

Ship Handling/Management, Oil & Gas, Supply of Marine Equipment’s, Ship Brokers