Project Management

Table of contents

INTRODUCTION....................................................................................................................3 BACKGROUND PROBLEM ANALYSIS.............................................................................5 GOALS ....................................................................................................................................6 OBJECTIVES...........................................................................................................................7 MARKET ANAYSIS...............................................................................................................7 PROJECT PLAN (METHODOLOGY)...................................................................................8 Project Monitoring..................................................................................................................18 Project evaluation ..................................................................................................................19 Total budgeting.......................................................................................................................19 Project profitability analysis...................................................................................................21 Annexure -1............................................................................................................................22 Annexure II...........................................................................................................................24 Annexure-III...........................................................................................................................25 Annexure-IV...........................................................................................................................26 Annexure-V............................................................................................................................27 PART I....................................................................................................................................27

ACKNOWLEDGEMENT
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Project Management

Thanks to almighty Allah for enabling me to fulfill all the requirements for the completion of this report. It would not be a justice in presenting this report without mentioning the people around me who have been inextricably related with the completion of this report. For assisting me in all respect and regards to complete this report my heart felt thanks to my course coordinator Mr. Naeem Bukhari, who enriched my knowledge with wealth led ideas to pursue and power of writing this report. It could not have been possible to accomplish this report without her thoughtful guidance and expertise. It is also a great pleasure to record honorable regards to all those who helped me lot in learning and enhancing my knowledge and ability during this report especially to Mr. Nadeem Shah (Manager, Caltex, F-8 markaz ayuab market), Mr. Imran Moonis (owner of CNG station at Sheikhupura) and Mr. Altaf hussan ansari ( Deputy Director OGRA) helped me a lot for this project report.

SAJJAD AHMED RAUF

EXECUTIVE SUMMARY
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Project Management

Today the most profitable and for the safe investment the business which is to be considered in Pakistan is the CNG station. This is considered it as most economic viable business and gives good return to the investors. Though the period of investment in the start is longer which consist of about 9 to 11 months But the most important point is the this business has no any kind of risk but only the certain criteria has to fulfilled while running the business that is to keep the health and environment safe and should follow the safety measures and there is no threats from the environment and as well to the environment. The area which we have selected is the most suitable area for the business out side the populated area, the first and for most requirements for CNG stations. During the project various people helped me to go through the whole process of CNG station. Total overall project cost is approximately about the Rs.45000000. though it seems a huge cost at the start but the return of the project is for the longer period and all the project is done with proper planning and guideline and all the criteria try to fulfill before the start of the object like license from the ministry of petroleum and gas. And then the NOCs are followed. Throughout the project it is monitored well and all activities shown in this project is properly sequenced according to the project.

INTRODUCTION
Compressed Natural Gas (CNG) essentially consists of methane as an alternate fuel source for vehicles. It is the most environmentally friendly, safe, and economical fuel source on the market today. As

Project Management opposed to popular belief, CNG is not a new fuel source; rather it has been in use for quite some time now. Vehicles in the United States of America, United Kingdom, Canada, China, India, Argentina, Brazil and Pakistan are being run on this fuel. In most developed countries CNG is being promoted for environmental reasons as opposed to economic reasons in developing countries like Pakistan. CNG is an old and well-proven fuel alternative and with the passage of time and due to demands of the consumer a lot of R&D and innovations have taken place. CNG equipment manufacturers have been investing a lot of money in research and development so as to improve this technology and make it convenient and available for consumers globally. Natural Gas is one of the most valuable natural resources abundantly available in our country. The people of Pakistan have been using the petroleum products as a fuel in their automobiles, thus spending a huge amount of foreign exchange on import of petroleum products. Moreover, the Government of Pakistan has taken certain concrete steps in order to promote the use of natural gas as a fuel substitute in the automobiles. Due to the efforts made by the Government and comparatively low prices of gas, more than 800,000 vehicles have already been converted to operate on Compressed Natural Gas (CNG) fueling system all over Pakistan. Due to high cost of petroleum products, lots of vehicles are switching over to CNG. At present, there are more than 950 CNG stations operating in the Country and this number is insufficient to meet the rising demand of CNG in the coming years. The total project cost for setting up the CNG filling stations has been estimated at Rs.31.13 million. It includes land, building, CNG equipment and machinery, spares, along with the preliminary expenses and working capital. Compressed Natural Gas (CNG) is produced when the natural gas is compressed into cylinders to be used as a fuel in the automobiles. The compressed natural gas has been used as an automobile fuel since 1940, and over the years, the technology has been modified and refined. In the recent years, the usage of CNG as an automobile fuel has significantly increased because of its low cost and environment friendly nature.

CNG STATION

Project Management

BACKGROUND PROBLEM ANALYSIS

Today in Pakistan the CNG is most economical fuel being used in the motor vehicles. The only reason is the increasing prices of the petrol and disel at the same time. Only due to this reason the no of vehicles 5

Project Management has been increased tremendously from last 2 years and along with this the investments are also is there in this sector. And still in Pakistan there is a great opportunities for this sector in Pakistan. The problem area which I have identified that the people are facing problem for CNG while traveling on motorway M2 from Lahore to Islamabad. On motorway there is only two CNG stations are working one is at SUKAKI and second is at BEHRA rest area. One site has been proposed by the government of Pakistan on CHAKRI rest area but it is still under consideration. The major problem which the people are facing while traveling toward the Islamabad there is no CNG station, they found the CNG station within the city of Islamabad. Secondly government is also interested in launching the CNG buses, which will open the big market for the investors again in this sector. The no of vehicles will again increase with the addition of buses and as well the no of CNG stations will also increase in this respect. So there is a open market for all people. So in this respect I am interested in launching the CNG station at my proposed location in Islamabad so that it may possible for the people to get the CNG fuel within the maximum reach of people.

GOALS

Project Management To provide the batter service and satisfy their need with profit making in order to save the environment.

OBJECTIVES
My objectives towards the this business is, To provide the solution of problem for the people using CNG vehicles To make my investment more safe and profitable To establish my business in the same sector and flourish it

MARKET ANAYSIS
Today in Pakistan the CNG is considered to be the most economical fuel which is being used. According to the market study when we undergo the demand study and supply forces both ends have tremendous

Project Management change during the last two three years. This business has been flourishing beyond the expectation of the government.

A.

Target Customers
My target customers all those who have vehicles on CNG and traveling from

Lahore to Islamabad.

B.

Market Demand
Traveling of the people has been increasing day by day and also due to main

factor of leasing the no of vehicles is also increasing and secondly the M2 is being connecting with maximum number of cities as days are passing and people are using their own vehicles to travel. Due to non availability of CNG after the M2 there is high demand for it. CNG is available within the city of Islamabad. And the proposed place also has importance due to the entrance from Rawalpindi.

C.

Market Supply
Market supply is also increasing as well the demand is increasing for the

CNG. People are investing in this business without any hesitation in their minds and secondly still there is large scope for the CNG stations in Pakistan.

D.

Industry Growth

There has been a tremendous growth in the CNG sector over the yeas. The total number of vehicles on CNG was 100,000 and CNG filling stations was 150 at the end of year 2000. The number of CNG vehicles and CNG filling stations has increased to 210,000 vehicles and 220 stations respectively and by the year 2005 they have tremendously grown up to 900 CNG Stations and 800,000 CNG fitted vehicles. The growth in terms of percentage is given in the following table: Growth Percentage of Vehicles Year No. Of Vehicles on CNG CNG Filling Stations 2004 450,0 00 550 2005(expe cted) 600,000 670 2005 (Actual)
800,000 900+

PROJECT PLAN (METHODOLOGY)

Project Management Project plan methodology includes the all phases including in the project plan. The some of the basic component involve in this phase are 1.Project selection 2.Project execution 3.Project monitoring 4.Project evaluation 5.Cost and productivity techniques

1.

PROJECT SELECTION:

We have already discuss the project selection tools and why we choose this business/project and we have discussed the risk analysis, geographical analysis, social analysis in the background of the project problem analysis 2.PROJECT

EXECUTION PLAN:

Project execution plan includes the following steps in the project of the CNG station. a.

WORK BRAEK DOWN STRUCTURE (WBS)

I.
1.

Initiation of the project

selection of the location The location which we selected for our CNG station is near before the chock of GOLRA sheriff after the M2 and the main reason of it is that the vehicles coming from the M2 and from Rawalpindi side. a. selection of the land The land which we have selected near the GOLRA sheriff is about 3 kinals and the front is about to 300 ft. b. contracting with the property dealer After words a property dealer will the hired for the purchasing of the land. For this purpose the property dealers in the JINNA SUPER and SUPER will be consulted.

Initiation of the project will be with the following steps

c.

purchasing of the land

Project Management Then the land will be purchased, the estimated cost of that land we selected is about 30,000,000. 2. acquiring of the license & NOC With the purchase of the land the process for the acquiring of the license and various NOCs has been started, the following steps are involved in this which are given below. Refer to annexure -I a. contacting the govt. agencies For this the government agencies will be contacted in which oil and gas regulatory authority is first ministry of the government which will be contacted and this ministry issues the license for the CNG station and the cost involve in this process is Rs. 25,000 which is the license fee. b. fulfilling the required criteria Then all the criteria is fulfilled by the investor or the owner of the business to be established and various documentation is required is there, which has to be provided on demand. c. getting the NOCs Concerned development authority of the city Traffic Engineering and Planning Authority (TEPA) Traffic Police (SSP) Department of Civil Defense National Highway Authority (NHA) Central Board of Revenue (CBR) Civil AdministrationIrrigation Department Forest Department Explosives Department NOCs are taken from different ministries, which are as follow,

These all NOCs are required before to set up the project and the total time required to cover up all these NOCs is about to 2 to 3 months. The cost attached to this process involve is about Rs.

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Project Management 300,000. Now different agents are also involved in this process and people hire their services to get all these NCOs which minimize their costs in such a way that they can save the time on fulfilling all the requirements and visiting the different offices. The cost involved in it is about to Rs. 500,000. Which covers all the expenses and the business man can get all these NOCs and documents (license) without any trouble.

II.
1.

MATERIAL INPUTS
ELECTRICITY:
One of the main input required for the CNG station is electricity to run the machinery and the sponsor for the electricity is WAPDA and the Rs. 0.35 million is required for obtaining the electricity connection and there is no security deposits are required for the electricity connection.

2.

NATURAL GAS:

Second important element required for the CNG station is natural gas. In Islamabad the natural gas is being provided by the Sui Southern Gas Pipeline limited (SSGPL). The connection is requiring the some security deposits and the amount required for obtaining that connection is about Rs. 75000 and the security deposits are the Rs 1.8 million. This whole process required time for almost 2 months. Please refer the annexure -II III.

Budgeting
Budgeting involve the all terms of financing and this portion tells us about the how our

project will be budgeted and with what ratio. 1. loan and equity ratio The total equity ratio for this project will 60% and 40 % will be the debt ratio. Loan is must for this type of the project because that the land which we are going to purchase is somehow costly and the machinery involve in export for the CNG stations 2. contacting with different banks Different banks are then consulted for the loan and different financial institutions for the services they provide at what rate. who will provide you maximum time period for the return of that money and whose interest of the loan is suitable to our project.

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Project Management

3.

loan from the bank After selecting the bank the loan is then approved by the bank from the higher management and loan is handed over to the business man and the overall time span for this process is about to 1 to 2 months, but it should be according to the plan of the rest of the project.

IV.

CNG equipments
CNG equipments are the basic function of the project, do you think that with out taking the products we can run the projects. One of the basic drawback of this project is that most of the equipments are not local made, actually all these equipments are imported from the different countries the list is given below and secondly the CNG equipments can be imported by two ways, A) B) The following are the CNG equipment list, Gas Compressor The purpose of compressor is to compress the gas enabling it to discharge the gas for refueling. This compressor requires an input pressure of 8 or 15 PSIG 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. This panel will be mounted in the control room. Storage Cascade Storage cascades/cylinders are used to store the natural gas. 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. CNG Dispenser high flow dual hose Through the banking sector (letter of credit). By the different agents working in the market,

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Project Management 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 CNG filling station equipment. In this pre-feasibility report, a British origin compressor6 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.

CNG Dispenser Suppliers The Central Board of Revenue (CBR) has specified the list of compressors, storage cylinders, CNG vehicle cylinders, CNG machinery & equipment and conversion kits. For

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Project Management the convenience of investor, a list of some of the available equipment and machinery is given below: Suppliers Name Rix Services, New Zealand Compare UK Ltd, UK Norwalk Company Inc. USA Sulzer Burckhardt Engg. Works Switzerland Safe s.r.l Italy Available Models 2JJS3G-178, FX-150, 3KX3G-40, 6W5G-150 Gazpack 36, Gazpack37 C-75-3, C150-4, NQSV3 C40111S, C50214S SW75SE-F1-EM, SW110SE-F1EM, SW110-F1-EM, SW132-F1-EM, SW90F0, 35-EM CNG90, CNG 125, CNG250 ZW-3.45/250JX, ZW-5.0/1-23, ZW5.52/0.5-250JX L-3.8/1-250, L-3/1-250, L5/0.56-250, L-2.9/0.56-250, L-4.65/0.56250, W3.8/0.56-250, W-3.8/1-250 RHINO PAR-75VE 4-8 RHINO PAR-1-DE 4-82 RHINO-PAR 150DE4-10 Apollo VR-550 5409.2NG.EU 650.250.20-IFDE

Hurricane, Grimmer Industries, USA Chengdu Jinxing Chemical Machinery and Equiment Factory, China Chonqing Air Gas Compressor Factory, China

Intermech Ltd. NewZealand Unigas NewZealand Compare Mahle GmbH, Germany Sicom SRL , Italy 650.250.20-

V.

construction at SITE
Construction at site will be started after the placing an order for the CNG equipments and the main construction includes the building.

1.

hiring the contractor For the construction the contractor will be hired after the reasonable negotiations.

2.

purchasing the raw material

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Project Management Then the required raw material will be purchased and the whole this process may require the 2 to 3 weeks. 3. start of the construction 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 tuff tiles. Civil work includes the following: Storage Room Cables 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 will be imported along with other equipment to maintain a minimum level of spare parts. Annexure-IV Flooring Shed for Dispenser Toilet/washroom Underground Gas Piping and Power Office Control Room Compressor and Cascade/Cylinder

Office Equipment Some office equipment is also required for the proposed project. Provision of Rs.100,000 has been made for acquiring the required office equipment.

VI.

Hiring of the employees

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Project Management Along with this the hiring of employees will be started. 1.hiring of the manager first of all we will hire the manager which will help in day to day operations at site. 2.hiring of the accountants Afterwards the hiring of an accountant is required which will help the business in financial and accounting matters. 3.hiring of the workers Hiring of the workers is a difficult job , for which the banner will be printed and hang it on the site. a. hiring of the skilled workers And at the same time the hiring of the skilled workers is also started in which the machine operators are involved and one of the watchman from some good security agency. b. hiring of the un skilled workers the people involve in the un skilled workers are sweepers and peons. List of all the people which are to hired at the CNG station are given below, human Resource Requirement Designat No. of Employees for ion two shifts Manager Accountant 4Cashier Operator Dispenser 2Watchmen S Total w e e p

1 2 2 2 14

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Project Management e r VII. erection of the machinery After the hiring of the employees which is not as much difficult due to unemployment reasons in the Pakistan, people are easily available for different placements and the next step is the erection of the machinery and after the 2 months approximately the machinery has been arrived at the site and the first function is to unload it and move it to the safer place and after wards the erection of the machinery has been started and main equipments includes the cascade cylinders and operator will be installed in the separate room constructed for it specially and the next step is the erection of the dispensers and their connection with the cascade cylinders. Technical assistance is provided by the agents who helped in the purchase of the machinery from abroad.

VIII.

Marketing the CNG station at M2 17

Project Management 1. Printing the brushers. The brushers will be printed at this stage for the awareness of the people and with the permission of the NHA they will be placed on every toll on the M2 motorway. Along this these brushers will be placed on all rest areas and this is only the one time activity that will cost some money and afterwards people will have know how about it who are regular 2. Distributing the brushers. After placing the brushers it will be ensure and make it easy to distribute to all vehicles traveling on M2 by giving them with the entrance ticket.

Project Monitoring
1. Follow up the licensing process In the project monitoring the follow up the licensing and NOC process will be fully monitor and will be followed up to the end. Along with this the connections for the both electricity and natural gas will be followed only due to the reason that weather there is any kind of hurdle or not. Because these two main part of the project is out of the control and they may take time beyond the expectations. 2. Follow up the CNG equipment stage after placing the equipments order they (agents) has to follow and the current status of the order will be checked according to time allocated and matching it with ongoing activities. 3. Following the construction and erection phase Again the work which is totally under the control, it does not mean that leave it that it will complete automatically within his own time, but it must be followed by with the full requirements and time bounds here the technicalities are involved and full attention should be paid to the project at this time and at this stage we came to know that how much of time we are according to our schedule.

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Project evaluation
Total budgeting
Item Land Building CNG equipments Stores & spares Office equipments Furniture & fixtures Gas security Preliminary expenses Working capital Total Depreciation on Assets Cost (in Rs.) 30000000 350000 9000000 650000 100000 100000 1800000 900000 450000 43350000

Accounting Profit
Depreciation on the assets has been charged at the following rates for the calculation of accounting profits, Depreciation Rates Building CNG plant and equipment Office equipments Furniture &fixtures Tax Adjustments Land Building CNG plant and equipment Office equipments Furniture &fixtures 0% 5% 10% 10% 10% 5% 10% 20% 10%

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Project Management

Working Capital
Working capital is calculated on the basis of following assumptions:

Accounts Receivables
Mostly, the sale of CNG is on cash basis. However, some CNG 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.

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

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.

Accounts Payable
Cost of gas and electricity for 20 days has been considered in calculating accounts payable.

Sales Tax Payable

Every company is required to deposit the amount of sales tax collected from the consumers, within 14 days. The same has been taken as the basis for calculating the amount of sales tax payable.

Sales Tax

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Project Management 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.

Project profitability analysis

3. 4. Pay back method Payback period based on cash inflows is 4 years return on investment (ROI) Internal rate of return (project) is 23.1% Internal rate of return (equity) is 45% 5. 6. net present value (NPV) Net Present Value @ 20% is Rs. 3,401,246 internal rate of return (IRR)

Conclusion:

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Project Management This whole study tells us about the project or business that it is feasible or not. As we have already discussed that this business has enormous advantages and it is a safe investment for a batter return. The place which we have chosen is not a saturated and batter to opt for the business. This project though has a very large investment at the start but the return is safe and this project or business is evergreen through out the year. One of the main advantages of this business is that it has not at all the credit customers and it gives the batter and safe return of the investment as we have already discusses it. The risk in this business is so minimum though the costly item of the business is land but in Pakistan the property values has an increasing trends. When we talk about the geographical analysis the area which we have chosen is the best to suit business and there is no threat to my business as well. My business is totally safe toward the environment and there are no hazards from the business operations.

Annexure -1 22

Project Management

CNG Policy The Government of Pakistan has offered number of incentives for encouraging the use of CNG in the country. Some of these are summarized below: Strong Government commitment to promote usage of CNG Liberal policy of providing license for CNG retailing Deregulated market price of CNG (for the consumers) Priority of providing natural gas connection to CNG stations Exemption of import duty and sales tax till June 2005 on import of machinery and equipment, CNG kits and cylinders

This has provided a boost to the industry, and so far, more than 900,000 vehicles have been converted to CNG and 900 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.

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Project Management Annexure II CNG Consultancy Services HDIP is also 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.

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Project Management Annexure-III

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Project Management Annexure-IV

APPROVED CNG KITS AND CYLINDERS

CNG KITS

CNG CYLINDERS

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Project Management Annexure-V

Government of Pakistan Ministry of Petroleum & Natural Resources

NOTIFICATION
Islamabad, the 13th May 1992 S.R.O.714 (1)/92. In exercise of the powers conferred by section 2 of the Regulation of Mines and Oilfields and Mineral Development (Government Control) Act, 1948, (XXIV of 1948), the Federal Government is pleased to make the following rules, namely:PART I 1. Short title and Commencement. (1) these rules may be called the Compressed Natural Gas (CNG) (Production and Marketing) Rules, 1992. (2) They shall come into force at once. 2. Definitions. In these rules, unless there is anything repugnant in the subject or context, (a) area of operation means the area within which a licensee is authorized to compress natural gas distribution of CNG in automotive(s); (b) Authority means the Oil and Gas Regulatory Authority established pursuant to the Oil and Gas Regulatory Authority Ordinance, 2002; (c) consumer means any person or corporation who is supplied with compressed natural gas in his automotive(s) by a licensee for his own use but not for storage, processing, filling, sale or distribution; (d) container means any cylinder or vessel installed in an automobile or at CNG refueling station and used for storing, transporting and distributing CNG; (e) corporation includes any corporation, joint stock company, partnership association, business trust, organized group of persons, whether incorporated or not and receiver or trustee of any of them; 27

Project Management

(f) licensee means a person or a corporation who holds a license under Part II of these rules; (g) compressed natural gas or CNG means compressed gaseous fuel composed predominantly of methane (CH4); (h) meter means all equipment used for the purpose of measuring the quantity of CNG supplied, and includes all kinds of apparatus upon whose reading or indication for the supply or sale of specified or unspecified time; (i) sale price means the price of CNG to be charged by a licensee under an agreement from the consumer(s); (j) supply mains means a pipeline used for the transportation of natural gas for the purpose of sale to a licensee; and (k) works includes pipeline, machinery or equipment including civil works established or installed, owned, controlled, operated or managed in connection with the compression of natural gas for the purpose of storage, filling or distribution of CNG.

References
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Project Management

Mr. Nadeem Shah Manager Caltex , F-8 Markaz Ayaub Market Mr. Imran moonis Owner of the CNG Station Sheikhupura Mr. Altaf Hassan Ansari Deputy Director OGRA

Web sites
1) 2) 3) www.ogra.org.pk www.cng.com.pk www.skilfull.com

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