Poor access to dollars blamed for aviation fuel scarcity

Airlines are struggling to get aviation fuel, also known as JET A1, because importers cannot access foreign exchange from the official interbank window to bring it into the country.

The managing director of one the major players in the downstream of the petroleum industry told BusinessDay that since oil marketing companies that usually bring aviation fuel could not muster enough resources to buy foreign exchange in the black market because it is too costly to do so, they have decided not to import.

A source at Sahara Energy Resources Limited, a major supplier of aviation fuel said:  “The world has not run short of aviation fuel, so that should tell you it must be a matter of demand and supply. Where demand is high (Nigeria) but supply is inadequate (Nigeria) . You asked why?  The answer is twofold, one, lack of access to foreign exchange from official channels and two, lack of local production or access from the refineries, which would have been paid in naira.”

The price of aviation fuel is deregulated, but marketers say sourcing dollars from the black market would make the landing price too costly and force airlines to hike their fares to unaffordable levels for many Nigerians.

Already, the scarcity of aviation fuel is causing significant flight disruptions.  The scarcity of the product has also led to a more than 100% increase in the price of the product.

  Aviation fuel, which was previously sold for N120 per litre, is currently selling at N240 to N350 per litre, due to the scarcity. This has led to domestic airlines warning that   if no urgent action is taken to improve the supply of aviation fuel, they may be forced to suspend their services.

Ola Banji, spokesman Arik Air, disclosed in a statement that the scarcity of aviation fuel is taking a toll on Arik Air due to the airline’s large scale of operations, with flights delayed and in some cases cancelled across the country, especially for airports without airfield lighting.

With a daily fuel need of about 500,000 litres and an average of over 100 daily flights, Arik Air is particularly affected by this scarcity, which is the fourth this year alone. One of the airline’s flights from Lagos to Johannesburg some days back, had to be routed via Port Harcourt on account of the need to lift fuel.

BusinessDay investigations also show that out of the six marketers that supply the product, only one still had stock as at 20 November and the price has risen to N248 per litre in Lagos and N351 per litre in Abuja.

One of the marketers issued a Notice to Airmen (NOTAM) last week, alerting of non-availability of the product in Lagos. Another marketer said it was running out of stock in Lagos with limited supplies in Port Harcourt and Abuja.

Oil marketers have attributed the scarcity and high price of the product to a weaker naira.

Lukeman Animashaun, director of engineering of Medview Airline, said aviation fuel now constitutes about 60 to 70 percent of the total cost of flight operations for Nigerian airlines and that margins are thining or cancelling out, yet airlines are struggling to stay aloft.

“We are getting the product at N248 per litre in Lagos. The price is increasing everyday, but the price of ticket sales has not changed. Every day, the price of aviation fuel is going up, but passengers will not understand this.

“If we increase the price of tickets to reflect the increase in fuel costs, the passengers would not be able to fly. There is no airline that is making any profit. Now, cost of fuel constitutes 60 to 70 percent of operational cost. It is more challenging when we consider the cost of fuel for our London flight, now that we are the using the higher capacity Boeing B747.

“That aircraft takes about 160,000 litres of aviation fuel and we cannot imagine refuelling our aircraft in any of our neighbouring countries; it is the foreign airlines that do. Our London flights are already booked and we can never disappoint our customers,” Animashaun said.

Chris Ndulue, managing director, Arik Air, said the airline’s major supplier of aviation fuel is Total, but the company did not have the product as at Wednesday last week.

Ndulue observed that marketers have been leveraging on foreign exchange from their upstream partner, Texaco, so the problem is enormous if the company cannot source and supply Jet A1.

He noted that the scarcity has added to the challenges of doing business.

BusinessDay’s findings show that all domestic airlines consume one million litres of aviation fuel daily. This shows that at the rate of N120 per litre, airlines pay a sum of N120million daily on fuel but at the current rate of N250 to N350 per litre, airlines will have to pay N250million to N350million daily on aviation fuel.

Kingsley Ezenwa, communications manager of Dana Air, told BusinessDay that operators cannot rule out the fact that foreign exchange has been one of the reasons why the product has become scarce since refining is done overseas and paid for in dollars.

The airline has also said it is doing everything possible in its capacity to ensure on- time performance of its flights.

According to Ezenwa,  “the unexpected scarcity disrupted our flights only on Monday, but I can assure you that we are currently operating scheduled flights on-time.’’

Nogie Meggison, President, Airline Operators of Nigeria has called on the Federal Government to repair the Warri refinery to ensure steady supply of aviation fuel.

John Ojikutu, Secretary General, Aviation Safety Round Table Initiative, (ART) told BusinessDay that the aviation fuel price is also linked to neglect in repairing the pipelines and failure to revive the Warri refinery’s Jet A1 pipeline –hydrant system for supplying aviation fuel.

Ojikutu mentioned that other reasons are costs of transportation, demurrage on the tankers and insufficient number of fuel dispensing trucks.

BusinessDay checks also show that up till 1992, jet-A1 supply to MMA was through pipelines from Ejigbo or NNPC depot. The supply from the MMA depot to the hydrants on the apron where fuel is dispensed to aircraft, were done also through the pipelines.

Though Nigeria’s three Refineries in Warri, Port Harcourt and Kaduna have capacity to produce aviation fuel but they have all gone almost dormant as they barely even produce the basic fuel like the PMS.

But recently the Port Harcourt Refining Company said it is set to commence the production of Aviation Turbine Kerosene, popularly known as aviation fuel or JetA1, the Nigerian National Petroleum Corporation has said.

Bafred Enjugu, Managing Director, PHRC, disclosed this in a presentation made to Maikanti Baru, the Group Managing Director of NNPC, during an official tour of the 210,000 barrels per day facility.

Enjugu said the refinery had met all the international parameters for the production of aviation fuel.

He was quoted in a statement from the NNPC on November 18 to have said, “The good news from our stand point is that we have scored 24 out of the 24 parameters for the production of aviation fuel and I must say that this is made possible because of the never-give-up attitude of workers of the great PHRC.”

  He said the refinery had successfully blended ATK and was only waiting for appropriate conditions to commence full-scale production of the product in response to demand of the aviation sector.

Olusola Bello & Ifeoma  Okeke