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Nigeria: NNPC Promises End to Aviation Fuel Crisis, Says Price Reduction to N200 Per Litre Not Feasible

Group Managing Director of the Nigerian National Petroleum Company (NNPC) Limited, Mr. Mele Kyari, on Thursday assured Nigerians that the company would work with relevant authorities to ensure that the

Mallam Mele Kyari

Group Managing Director of the Nigerian National Petroleum Company (NNPC) Limited, Mr. Mele Kyari, on Thursday assured Nigerians that the company would work with relevant authorities to ensure that the present crisis in the aviation sector was resolved.

That was as Director General of Nigeria Civil Aviation Authority (NCAA), Musa Shuaibu Nuhu, warned that the aviation industry might soon be shutdown, saying with the current jet fuel scarcity, it is not safe to fly anymore.

Kyari gave the assurance while addressing the leadership of the House of Representatives, who were investigating the sudden scarcity and high cost of aviation fuel.

At the meeting well attended by members of the House Committees on Petroleum Downstream and Upstream, Jet A1 marketers, and airline operators, the NNPC GMD regretted the late intervention, saying all the supply data showed there was sufficient Aviation Turbine Kerosene (ATK) in the country.

Given the current situation, Kyari advised airline operators to have the right commercial arrangement with their support petroleum products, particularly ATK.

Kyari said, “Why we didn’t act was that all the supply data we have showed sufficient ATK in the country. This means that it may be in the wrong hands. There’s frenzy in the market today, no one knows what the price will be tomorrow.

“That’s still not an excuse for escalation of prices, we will work with the relevant authority to ensure that if there’s any such thing, we will deal with it jointly as an industry. We will work together to ensure that this is resolved.”

Addressing the demand by airline operators and lawmakers that the fuel price should be reduced to at least N200 per litre, Kyari said it was not feasible, as they had no control over it. He said the price was determined internationally price.

He said, “It’s impossible; today the landing cost of ATK is N480, the price, we have no control on that.”
Responding to concerns raised by the lawmakers regarding the crisis in the energy sector, despite the passage of the Petroleum Industry Act (PIA), the NNPC GMD said PIA passage was not a mistake. He said the company would work with other stakeholders to ensure gaps in the sector are closed.

“Whenever there’s supply gap it is our role to ensure that supply gap is closed, we will work with the authority and other stakeholders to ensure that if there’s any gap that’s existing we fill it,” Kyari added

In his presentation, Director General, Nigeria Civil Aviation Authority (NCAA), Musa Shuaibu Nuhu, warned that they might shutdown aviation industry soon as it’s not safe to fly anymore.

Nuhu said, “Over the last couple of weeks we have seen a significant rise in the cost of aviation fuel. One year ago it was selling at N190 per litre and as of this afternoon it has gone for N670 per litre, what this has done is that it has increased the cost of operations.

“This is a significant safety concern to us, if airlines cannot have enough financial margin to comply with all the mandatory requirement then we really have to look at, God forbid I don’t want to come before this committee to explain why something happened.

“Every day it increases. I won’t be surprised tomorrow if it sells for N700 per litre. Considering the ticket price now, the airline industry cannot survive. The option is we shutdown, because they cannot generate enough revenues to operate safely.”

Earlier, Chairman of Air Peace, Allen Onyema, who spoke on behalf of the airline operators appealed to NNPC to ensure that in the coming days, the price of aviation fuel dropped to N200 per litre.

Onyema said, “That’s the only time we will be able to operate safely and ensure some running of the schedule operations in this country. I don’t know how they will do it but they should, it will be good because even at N200 it’s a lot for the airlines. Not N400 or any other higher price, as we are talking now it will soon hit N700 and possibly N1000.

“What happened in the last two weeks is alarming. From a price of N190 per litre two weeks ago, the price is now N670 as at today and we don’t know what it is going to happen.
“The government has done so much for us in this industry with the president granting us waivers. We held a meeting and decided to shut down our operations because of the cost of operation. We are owing so much money and we don’t want AMCON to come after us.”

Onyema added, “We cannot survive like this for another three days. We had to reduce our operations to 30 per cent because the product is not even available. So, I am surprised that the Executive Director said they have supplies to last 34 days. We are making so much sacrifice here.

“I am evacuating Nigerians from Poland and I had to pay three times the usual amount and I am not asking for a refund. So, something needs to be done and done fast.”
On his part, Executive Director, Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA), Ogbugo Ukoha, noted the role of the agency in regulating the industry, and issuing licenses to importers of the product. Ukoha said from his records, there was enough aviation fuel to last the country for 34 days. He also said that aviation fuel was one of the petroleum products that had been fully deregulated and was, therefore, controlled by market forces, adding that the authority has issued licenses to about 28 companies to import the product into the country.

But his explanation did not go down well with Deputy Speaker, Hon. Idris Wase, and other lawmakers.
Wase questioned why there should be scarcity of the product if there was enough supply to last for 34 days, alleging that there must be a cartel working hard to sabotage the efforts of the government.

Former CEO of Aero Contractors, Captain Ado Sanusi, told THISDAY on Wednesday that due to the scarcity and high cost of aviation fuel, fuel marketers now gave airlines new conditions for selling the product.
The marketers insisted that airlines must pay before the product was supplied to them, an aberration in an industry globally known for payment after purchase of the product.

Sanusi said, “You pay for fuel in advance, which is not done in the aviation industry. It will make operations very difficult and lead to more delays and cancellations. You cannot deposit money before you buy fuel.
“If nothing is done urgently, this may lead to the beginning of airlines going down because they cannot continue operating like this. The federal government should urgently look for solution to the problem.”

Sanusi said government must intervene by doing away with the middlemen, but allowing marketers to import the product and sell directly to the airlines.

He said, “These middle men don’t understand aviation. The marketers are part of the industry whose operations are approved by the Nigerian Civil Aviation Authority (NCAA). Ideally, the airlines can buy from the marketers who will issue them invoice and they pay in 24 to 48 hours.

“This is the way it is done. You cannot even deposit money with the marketers because if you do, they may not even have the product at the time you want it because of uncertainty and volatility in the supply of the product. If care is not taken, Nigerian airlines may go down.”

THISDAY also spoke with Managing Director of Clean Serve Energy Limited, Chris Ndulue, who explained the challenge the aviation fuel marketers were facing.

Ndulue stated, “There are three basic things: the cost of crude oil in the international market and the price of the dollar. We have failed to refine fuel locally, so we have to import. The price of crude oil has been rising and the price of dollar has been rising. Supply of the product has been facing disruptions because there is war in Europe. There is scarcity because people have not been producing, so price is rising. We need to start producing refined product here.

“The price of diesel has risen, that it is over N600. We need to refine crude oil here so that we end these disruptions and high prices,” Ndulue said.

THISDAY findings show that airlines spend huge operating fund on purchase of aviation fuel. A Boeing 737 Classic, for instance, consumes about 2, 300 -2, 500 litres of aviation fuel for one-hour flight. Airbus A320-200 consumes about 3, 125 litres of aviation fuel or 2,500kg per hour.

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