• Sunday, May 26, 2024
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Abandoned pipelines seen denying Nigeria’s aviation industry full benefit of Dangote Refinery

Abandoned pipelines seen denying Nigeria’s aviation industry full benefit of Dangote Refinery

Against reports that Dangote Petroleum Refinery’s products would drastically reduce the price of aviation fuel, BusinessDay’s findings show that Nigeria’s aviation industry will not get the maximum benefit, as the pipeline meant to transport aviation fuel to the Lagos local airport has continued to sit dysfunctional for 32 years.

The pipeline, which has remained damaged for 32 years, would have eased fuel supply to airlines in the busiest airport in the country, industry stakeholders said.

Stakeholders say if the pipeline were functional, trucking of aviation fuel to the airport would be avoided, thereby reducing the overall costs incurred by airlines which are eventually transferred to the passengers as part of ticket costs.

BusinessDay checks also show that airlines operating in Nigeria pay a lot of money for aviation fuel because of the cost of demurrage and other logistics to fuel tankers.

John Ojikutu, industry expert and the CEO of Centurion Aviation Security and Safety Consult, wondered why the pipeline designed to transport fuel from Ejigbo to the Murtala Muhammed Airport (MMA) Lagos could not have been repaired since 1992 after it was ruptured.

“It would have cost about $9.2m then to replace the ruptured pipes but sadly, nothing was done or had been seriously considered to be done. Rather, tankers have been bridging the supply from the NNPC depots, with the cost of transportation and demurrage added, and having to for days and sometimes weeks to discharge at the airport depots.”

Ojikutu mentioned that aside from the logistics-driven high cost of fuel, there has been evidence of fuel contamination in many Nigerian Safety Investigation Bureau (NSIB) accident reports.

He alleged that several suggestions had been made to concerned agencies of the federal government to make the repairs of the pipelines since 2002 but none have shown any serious concern.

“The pipeline which ran to the airport from the Shagamu Fuel Depot ( a distance of over 50km) had since about 10 years ago been diverted to Ejigbo a distributor of less than 20km to the MMA which should reduce the cost of replacing the damaged pipelines and therefore the cost transportation and the cost of the fuel.

“Overall, the high cost of aviation fuel may not reduce significantly if the supply will continue with the trucking associated with demurrage charges for long periods of time for parking before discharge.

“Several political interests are involved in the line of aviation fuel supply and it is only the willing will of the honest ones in the administration of our government and the management of the agencies that can make the necessary and responsible change,” he said.

BusinessDay’s findings show that aviation fuel currently takes about 45 percent of the operating cost; labour, 17 percent; aircraft rent and ownership, 8.5 percent; non-aircraft rents and ownership, 7 percent; professional services, 4.5 percent; landing fees, 2 percent; food and beverage, 1.5 percent; maintenance materials, 13 percent, and transport related, 1.5 percent.

It costs about $3,000 to operate a B737 aircraft on an hour-long flight when aviation fuel was less than N100 per litre about five years ago. Similarly, when aviation fuel increased to N200 per litre, airlines operated a B737 aircraft at about $6,000 per hour. BusinessDay’s findings show that with the current exchange rate and increase in the price of aviation fuel, which currently cost about N1,500 per litre, airlines operate a B737 aircraft for over quadruple that amount.

BusinessDay’s checks show that in July 2023 aviation fuel cost N629 per litre, in August 2023 it cost N818 per litre, in September 2023 N897 per litre; in October 2023 N930 per litre, in November 2023 N991 per litre, in December 2023 N1,000 per litre.

In January 2024, fuel price further increased to N1,042 per litre, in February N1,316 and in March, N1,500 per litre.

Ibrahim Mshelia, a captain and owner of West Link Airlines Nigeria and Mish Aviation Flying School said that he is aware that there were hydrants within the airport where hoses are connected, making it easy for fuel to be supplied to the aircraft.

Mshelia said the infrastructure had been broken down for a long time ago and repairing it would ease the surface trucks moving around the airport.

“We have been using surface tanks to supply aviation fuel. Our roads will continue to be damaged because they have to truck the fuel from the factory to the airport. If they repair it and connect it directly from Dangote with a pipeline to the airport and use hydrants, it would be fantastic. It will ease a lot of problems for us,” he said.

He alleged that airlines are still being charged for the hydrant service when there has been no hydrant for a long time.

“It was during Jonathan’s time in office that I raised this question of why airlines still pay for the hydrant services and no one could answer it. For me, you cannot be charging for a hydrant. For every litre we buy, there are charges.

“If the hydrants are repaired, there would be more airplanes refueling at the same time, instead of waiting for one truck to discharge. If you have to carry the fuel to the aircraft as we do now, then you need as many trucks as possible.

“Fixing this infrastructure would cut down refuelling time drastically and improve departure timings and schedule timing. It will impact positivity even on passengers because when the airlines can turn around on time, the passengers also get to their destinations on time,” Mshelia said.

BusinessDay’s findings show that a one-way economy class ticket from Lagos to Abuja, Port Harcourt, Owerri and Uyo which cost N55,000 to N65,000 last year now costs between N100,000 to N150,000 on Air Peace; N90,000 to N150,000 on United Nigerian Airlines; and N130,000 to N190,000 on Ibom Air. Ticket prices have continued to increase to reflect fuel prices.

Olumide Ohunayo industry analyst and Director of research, Zenith Travels told BusinessDay that he worked with the Federal Airports Authority of Nigeria (FAAN) in getting FAAN to see how they fix the pipeline at no cost as they plan to recover the costs from the operators when the operation starts.

Ohunayo said that after proper analysis, they found out that it was not going to be economically viable because there were some commissions that would have to be paid because of developments that have happened around it.

“All the pipes will have to go out and they will bring a new set of pipes. When FAAN looked at the costs, they just opted out. So I really don’t know whether it is still economically viable.

“I would rather support that other modular refineries that are seeking for crude oil should be given crude oil so they would also start rolling out. Those interested can start with other ones rather than PMS.

“This will help bring down the aviation fuel price. Other modular refineries should be encouraged. We should not just wait for Dangote. We would have competitive suppliers. This way, the consumers will benefit,” he said.

At the time of sending this report, the Federal Airports Authority of Nigeria, (FAAN) was yet to respond to calls and emails with questions regarding the report.