• Tuesday, February 27, 2024
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Downstream firms post 47% revenue growth in aviation fuel despite hurdles

Downstream firms post 47% revenue growth in aviation fuel despite hurdles

Nigerian downstream firms have recorded a 47 percent rise in earnings from aviation fuel despite challenges surrounding contamination of aviation fuel in the first half of 2023.

In Africa’s biggest economy, oil marketing companies saw their combined aviation fuel revenue at a cumulative N116.48 billion in the first half of 2023 from N79.22 billion in the same period of 2022.

“This may be due to additional and increased volume activities in crude terminal operations, reorganisation of operations by flight companies and even more particularly, multi-faceted increase in flight ticket prices, both of which must have contributed to retaining market activities,” Joshua Olorunmaiye, an oil and gas lawyer said.

He added, “We must consider that air transportation is critical to businesses and any economy, for that matter. Thus, despite the well-known crises, it generates earnings from both passengers and cargo transportation.”

“Unfortunately, the jet fuel crisis in the aviation sector is one that has refused to go away, and of course, has resulted in scarcity of the product and the ripple effects of flight delays, rescheduling and cancellations.

Read also: Downstream firms Q1 results: The good, bad and ugly

“In the absence of any positive intervention, we may face a situation where airlines face technical difficulties and in worse scenarios, become insolvent,” Olorunmaiye said.

“Aviation fuel revenue increase is simply because more people travel by air and the sheer number has led to more aviation fuel purchase plus the fact that a few new airlines have also come into operation which means that the demand for aviation fuel has surged. We mostly underestimate Nigeria’s mass markets,” said Ayodele Oni, partner, energy practice group at Bloomfield LP.

The firms’ financial books analysed are Total Energies, Conoil, and MRS Oil. Eterna did not account for its aviation fuel revenue and Ardova’s financial report was inaccessible on the Nigerian Exchange Group and via its website upon writing this article.

TotalEnergies revenue from aviation fuel grew to N30.21 billion in the first half of 2023 from N25.08 billion in the first half of 2022.

The firm’s revenue increased to N274.6 billion in the first half of 2023 from N209.01 billion in the first half of 2022.

Conoil’s revenue from aviation fuel amounted to N84.28 billion in the first half of 2023 from N50.69 billion in the first half of 2022.

The firm recorded a total revenue of N87.14 billion in the first half of 2023 from N56.24 billion in the first half of 2022.

MRS Oil aviation revenue stood at N1.99 billion in the first half of 2023 from N3.45 billion in the first half of 2022.

The firm’s revenue grew to N59.65 billion from N42.66 billion in the comparable periods.

Read also: Aviation fuel production needs policy to grow, diversify sources – IATA

The aviation sector in Nigeria has been under intense pressure since 2023 with incidents of contaminated Jet A1 fuel as water was discovered from commercial aircraft tanks.

The development led to the suspension of all Boeing 737 aircraft belonging to Max Air by the Nigerian Civil Aviation Authority in July 13, after a huge volume of water was discovered in the fuel tank of one of its aircraft.

The authority had blamed the airlines and pilots for the development, insisting that they are responsible for the quality of fuel dispensed into their aircraft tanks.

An incident of multiple failure water tests upon refuelling a domestic airline occurred in July 17, 2023, in Lagos.

There was another incident of APU shutdown due to heavy water contamination which occurred on July 7, 2023, in Yola. Also, there was an incident of APU shutdown during engine start due to fuel contamination on April 28, 2023, in Abuja.

An incident of inflight engine failure following a fuel filter bypass occurred in April 30, 2023, in Abuja although in all the incidents, no accident was recorded.

The House of Representatives has resolved to set up an ad hoc committee to investigate cases of aviation fuel contamination.

The house gave the mandate to investigate the increasing incidences of aviation fuel contamination and possible non-adherence to standard operating procedures by players in the aviation industry.

The Nigeria Civil Aviation Authority also said it will check the activities of unapproved aviation fuel marketers involved in supplying contaminated aviation fuel, also known as Jet-A1, to unsuspecting airlines.