Wednesday , 6 July 2022
An aircraft refuelling before departure.

Jet A1 Conundrum: An industry in desperate need for solutions

 

WHAT solutions are available to halt a trend that is decades old? How do you end a crisis that is not only crippling aviation but even the average man? The fact that Nigeria finds itself in this precarious situation with the airlines unable to access or get right pricing for Jet A1 has been decades in the making.

 

Is it lack of planning? Lack of infrastructure? Greed? Ineptitude by those in power? Or a combination of all of these factors? Be that as it may, it would seem the only way to get to a solution this time, is to go through the challenge, at least that is what the airlines are currently doing and it has not been easy.

 

After last week’s botched operational shutdown due to pricing and unavailability of Jet A1, Nigerian airlines are still reeling out their uncertainties with regards flight operations with the latest writhing coming on the 16th May, as operators stressed that their operations hang by the thread.

 

 

This latest complain is coming just days after the National Assembly was reported to have secured 6m liter Jet fuel deal from the Nigerian National Petroleum Cooperation ( NNPC), a deal which came with availability but not pricing as the Group Managing Director, Male Kyari could not guarantee the product price since it is globally market-driven.

 

Pre- planned shutdown, airlines had complained of buying products from oil marketers at N700 per liter, but the Major Oil Marketers Association of Nigeria ( MOMAN) countered that claim stressing that the product was sold at N558 per liter.

 

Even the Ministry of Aviation seem like an onlooker as it can only appeal for amelioration of the current situation, the realities on ground is far more than meets the eyes.

 

The Minister, Senator Hadi Sirika in an interview said the problem was older than the Buhari administration and said investors are not refining Jet A1 because its requirement in the nation is not sufficient to encourage someone setting up a refinery

 

Minister of Aviation, Hadi Sirika in a recent interview talked about the reason the challenges persists and what government is imploring the NNPC to do.

 

He said,” Jet A1 is not localised in Nigeria and there is a global problem that is: very high cost of oil, the Ukraine/ Russian crisis, there is low capacity; there are so many factors plus there is a huge demand. The population of the world is increasing and so there is huge demand and the demand is getting larger. It’s worse in some countries than it is in Nigeria both in terms of pricing and availability and its something the airlines have to understand and live with and them being in the sector, they should be providing solutions and not increase the problem.

 

“We don’t want the fares passed on to the passengers of course you’ll kill the sector or make the transport unattractive but a middle ground can be found.

 

“In Nigeria what we are going to do, NNPC will look at a way to get the Majors to import the product and once there is supply, there will be lesser demand and the price would stabilise. We can also look at how we revamp the Port Harcourt refinery, the issue is not the Buhari administration, the issue has been there since day one. Our inability to refine Jet A1 because of its quality of the requirement in the nation, it is not sufficient enough to encourage someone setting up a refinery just for that

 

“And when you have to bring in from broad look at the landing costs, taxes and all that.

 

 

Group Captain John Ojikutu however disagreed with those using the Russia/Ukraine war as a band aid to explain away the Jet A1 situation stressing that it all bores down to poor planning.

 

Ojikutu said,”We can not use the Ukraine/Russia war as the reason for increasing costs of Jet-A1 when we are producing 2m barrels of crude a day for export and 250,000 barrels per day of this is what is needed for refining by our of four refineries for daily need, now exported for refining and returned. The remaining 1.75m barrels are sold and money shared between NNPC and the foreign explorers ExxonMobil, Total, She’ll, etc.

 

 

Even if the Dangote Refineries will produce from 650,000 barrels per day from the 2m per day and we continue with our export as it stands today we will still have more than one million barrels to sell and get forex. The Ukraine /Russia war has nothing to do with our crude oil production and consumption Our problems are poor planing of our department programme and lack of periodic maintenance of our economic infrastructure and nothing more

 

He had some fixes to the situation and given that aviation is virtually a dollar-based industry he canvassed,”First, all aviation operators should open a common domiciliary account with the CBN; forex earnings made should be deposited into the account and collect naira equivalent. The naira collected should be returned whenever there is need for the forex. This will step down the pressure on the available forex for other government economics and social programmes.

 

 

On the refineries he said, “If the NNPC refineries are getting beyond repair, encourage the immediate opening of the Dangote Refineries and start the production of Jet-A1 and PMS that is taking N1trn annually as subsidies.

 

“Repair the pipelines that supply Jet-A1 to the MMA that consumes about 5m litres daily and stop the cost of transportation and demurrage on fuel which are additional cost to the cost of fuel. The gathering of tankers at the airport is a source of security threats to the airport. Moreover, using unregulated tankers to transport fuel have been sources of contamination of fuel and therefore safety concerns to flights operations as many AIB reports have shown.

 

“I have recommended that the NNPC and the major fuel marketers should jointly repair the pipelines that got ruptured in 1992 or the marketers and the airlines operators do same otherwise the repairs should be given to an interested company as concession. We have no business importing fuel if we have development programme for our Refineries and energy supply.

 

As the industry continues to wait for a solution, air fares may climb to a point where only a few would be able to afford, and if this happens the much-vaunted volume will shrink and affect the economies of these airlines: a recipe for the businesses to go under.

 

An Oil marketer and Chief Executive Officer and Executive Secretary of MOMAN, Clement Isong who spoke to our correspondent some months back, said the high cost of crude in the market and difficulty to access foreign exchange has made it strenuous for oil suppliers who are liable to deal with people willing to pay advance, i.e the foreign airlines.

 

 

He and another player in that industry and aviation consultant, Mr. Babatunde Adeniji surmised jet fuel is now about 40% of airline operating cost and knowing this huge cost, they have to make strategic moves or tinker solution to this situation.

 

 

 

About NigerianFlightDeck

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Nigerianflightdeck is an online news and magazine platform reporting business stories with a bias for aviation and travel. It is borne out of the intention to inform, educate as well as alter perceptions with balanced reportage.

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