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One Week to Christmas: Jet A-1 Scarcity Choking Aviation Sector



  • One Week to Christmas: Jet A-1 Scarcity Choking Aviation Sector

Ubong Williams, who resides in New Jersey, in the United States was penultimate week on a short trip to Nigeria to attend to some family issues.

Before his arrival in the country, Williams had requested a relative to purchase an Arik Air return ticket on the Lagos-Uyo route, as he was scheduled to spend a number of days in Uyo, Akwa Ibom State.

He had his first taste of disappointment from the indigenous airline when the first leg of the trip, which was to be aboard Arik Air flight W3 616, from Lagos to Uyo, on November 28, was rescheduled from 10am to 12pm “for operational requirements.”

After 13 days in Uyo, Williams was to return to Lagos State on December 11, so as to catch his Virgin Atlantic flight the following day to the United States.

But on Friday, December 9, the airline had communicated a three-hour rescheduling of the flight to him, via a text message. Again, the rescheduling was blamed on “operational requirements.”

However, at the Ibom International Airport, in Uyo, on Sunday December 11, Williams was shocked to find out that there was no one at the Arik Air counter. Having arrived the airport two hours ahead of the expected take-off of Arik Air flight W3 617 to Lagos, he thought he was too early for check-in and so drew himself a seat.

Before long, words started filtering in that the flight may have been cancelled owing to scarcity of aviation fuel, which is hitting the country for the umpteenth time this year.

Williams who had been joined by other Lagos-bound passengers was growing increasingly frustrated with the lack of information, and knew nothing about the scarcity of aviation fuel. Alas, at 3:12pm, he got a text message from the airline that the flight, which was to take-off at 3:10pm, had been rescheduled for the next day.

Now livid with rage, Williams and all other flustered would-be passengers on that flight had to explore other ways of furthering their movements, having been abandoned at the airport by Arik Air.

While some of the aggrieved returned home or to hotels as the only other Lagos-bound flight by Dana Air was fully booked, Williams was much concerned about getting to Lagos, in order to catch his flight to the States, in order to catch up with appointments there, and to escape a $200 fine for “no show.”

“I could not believe my eyes as I read the text message from the airline informing me of the flight cancellation minutes after the flight was supposed to be airborne. This shows how we are in this country and the long distance we have left to cover. I will speak to my counsel concerning this development in a few days,” a bitter Williams said.

Williams was not alone in this dilemma. Another passenger who identified himself as Eze, also vowed to extract his pound of flesh from the airline, irrespective of the reason he was left stranded in Uyo.

“I feel pained that in other parts of the world where one has travelled to, issues like this seldom crop up. Whenever they do, the passengers are always very well handled. Unfortunately, here the airlines think they are doing their passengers a favour. We’ll see who blinks first,” he fumed.

In the last one year or thereabouts, airline operators, both domestic and international have not had it rosy getting their required daily volume of aviation fuel to facilitate scheduled operations.

Aviation fuel, otherwise called Jet-A1, is a specialised type of fuel used to power aircrafts and ordinarily accounts for over 40 per cent of total operating cost of an airline.

Jet-A1 is 100 per cent imported, and the process is subject to fluctuations in the foreign exchange market.

In the last 12 months, it has steadily climbed from N104 to N240 per litre in Lagos, and as high as N270 in the northern parts of the country. The implication is that local airlines now have to spend more on fuel, or look elsewhere like their foreign counterparts are doing.

According to Regional Manager, North, West and Central Africa of South African Airways (SAA), Ohis Ehimiaghe, there has been no Jet A1 fuel in Nigeria in the last 12 months, and even the little available has completely dried up in the last two weeks.

SAA is one of the foreign airlines that pick passengers in Nigeria and flies to Kotoka International Airport, Accra, Ghana to refuel. But in the last one week, Ehimiaghe confirmed, supply is fast drying up in Ghana, due to heavy traffic.

The manager said that for long, airlines have been battling the scarcity even as its non-availability for several months now has done incalculable damage to their operations.

He added: “In the last two weeks, there has been total dryness of aviation fuel supply in the country. So, we have to go to neighbouring countries, especially Ghana to lift fuel. The commodity is also running dry in Ghana too. Even though there are times when we have fuel in abundance, but the times we don’t have it at all are more than the times we do.”

Finding an alternative airport to lift fuel constitutes an additional cost to airline operations, apart from the inconvenience that comes with it.

“We are fortunate that South Africa Airways has huge operations in Ghana, so it is easier to get our ground handling company and staff to service our operations quickly. Our Abuja flights have been flying by Libreville to lift fuel. This is an additional cost to our operations,” Ehimiaghe pointed out.

The effect of fuel scarcity appears to hurt domestic operators severly. Arik Air, for instance, operates the largest fleet in West Africa. With 28 aircrafts and about 100 flights per day, the airline’s operations have been worst hit nationwide.

Spokesman of the airline, Banji Ola, informed that with a daily fuel need of about 500, 000 litres, the outfit is the most affected by the scarcity.

“As a result of the worsening supply situation of the aviation fuel, Arik Air had announced further reduction in flights from Wednesday, November 16 to cope with the fresh scarcity, and reduce the unpleasant delays and cancellations, which passengers have experienced in recent times,” Ola said.

Industry sources have it that most airlines have scaled down their operations by 50 per cent due to scarcity.

Chairman of the Airline Operators of Nigeria (AON), Captain Nogie Meggison, said it was high time the Federal Government stepped into the matter, to forestall total collapse of the aviation sector.

Meggison said that the consistent non-availability of the commodity in the past weeks for airlines to conduct their operations has taken a debilitating toll on the industry.

According to him, “We have been forced to cry out about the perennial problem at this juncture because it continues to put us in a difficult situation of going the extra mile to fulfill our obligations to our esteemed customers, in spite of the inconveniences that go with it.

“However, we are at the mercy of oil marketers and many times our hands are tied such that we are left with no other option than to cancel flights,” Meggison said.

The chairman said despite the shortage of Jet A-1, the marketers have been increasing the price consistently to an unbearable point.

“Till April this year, I bought Jet A1 Fuel for N105 a litre. About a month ago, the price jumped to N145. Two weeks later it rose to about N200 per litre. Today, the price has skyrocketed above N200 a litre. This has greatly increased our operational cost.

“For instance, considering that the cost of fuel accounts for about 40 per cent of the operational cost of most airlines, the colossal rise in the price of the product by over 100 per cent has equally increased the operational cost astronomically. In the light of this, our feasibility studies and financial projections are greatly threatened, thereby putting the airlines in a dangerous and difficult financial position,” Meggison lamented.

While some of the airlines blame the marketers for the scarcity, the marketers say the scarcity of foreign exchange should be held responsible.

Executive Secretary of the Major Oil Marketers Association of Nigeria (MOMAN), Obafemi Olawole, attributed the shortage of aviation fuel to difficulty in sourcing dollars, stressing that the foreign currency is often not available to importers on fairly affordable interbank market rate.

Olawole said that his members were doing their best to make the product available in the country, but for inadequate support from the key government agencies.

General Manager and Chief Operating Officer at CITA Aviation Fueling Company Limited, Olasimbo Betiku, added that besides the forex scarcity, the sector is facing the consequence of years of negligence of basic infrastructural development and getting the refineries functional.

He, however, expressed optimism that with current efforts of stakeholders and plans to revive Kaduna and Port-Harcourt refineries to refine Jet-A1, the sector may soon be out of the woods.

CEO/Founder Investors King Ltd, a foreign exchange research analyst, contributing author on New York-based Talk Markets and, with over a decade experience in the global financial markets.

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Africa Renewable Energy Fund II Secures €125 Million First Close With SEFA and CTF Investments



Solar energy - Investors King

The Africa Renewable Energy Fund II has achieved its first close at €125 million, following a joint investment of €17.5 million from The Sustainable Energy Fund for Africa and the Climate Technology Fund through the African Development Bank.

AREF II, a successor to the original Fund, is a 10-year closed-ended renewable energy Private Equity Fund with a $300 million target capitalization. The Africa Renewable Energy Fund II, managed by Berkeley Energy, invests in early-stage renewable energy projects, thereby not only de-risking the most uncertain phase of power projects, but also promoting increased green baseload in Africa’s generation mix.

The Sustainable Energy Fund for Africa and the Climate Technology Fund will each contribute roughly €8.7 million to mobilize private-sector investment into Africa’s renewable energy sector. The Sustainable Energy Fund for Africa will also contribute financing to the AREF II Project Support Facility, which funds technical assistance and early-stage project support to improve bankability.

Other investors include the U.K’s CDC Group, Italy’s CDP, the Netherlands Development Finance Company (FMO) and SwedFund.

“We are proud to be associated with Berkeley Energy and other like-minded investors, and look forward to AREF’s continued success and leadership in promoting sustainable power development on the continent,” said Dr. Kevin Kariuki, the African Development Bank’s Vice President for Power, Energy, Climate and Green Growth.

In 2012, the African Development Bank selected Berkeley Energy, a seasoned fund manager of clean energy projects in global emerging markets to set up AREF. AREF II has a sharper strategic focus than its predecessor on “green baseload” projects that will deliver firm and dispatchable power to African power systems through hydro, solar, wind and battery storage technologies.

Luka Buljan, Berkeley Energy’s Managing Director, said: “We are very excited to have reached this milestone with strong support from our backers. The catalytic tranche from the Sustainable Energy Fund for Africa and the Climate Technology Fund will assist in mobilising private institutional investors up to full fund size of €300 million. We now look forward to concluding the fundraising and delivering projects that will provide clean, reliable and affordable energy across African markets.”

“AREF is intertwined with the Sustainable Energy Fund for Africa’s history and success, and we have worked closely over the last decade to create precedents in difficult markets and challenging technologies. We look forward to continued collaboration to accelerate the energy transition in Africa,” said Joao Duarte Cunha, Manager for Renewable Energy Initiatives at the African Development Bank and Coordinator of the Sustainable Energy Fund for Africa.

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Crude Oil

FG Earned $34.22B From Crude Oil and Gas in 2019 – NEITI



Crude oil - Investors King

The Nigeria Extractive Industries Transparency Initiative (NEITI) on Thursday released its 2019 oil and gas industry audit report, which shows that Nigeria earned N34.22 billion from the oil and gas industry in 2019.

The audit, conducted by Adeshile Adedeji & Co. (Chartered Accountants), an indigenous accounting and auditing firm, reconciled payments from 98 entities. They include 88 oil and gas companies, nine government agencies and the Nigerian Liquefied Natural Gas (NLNG).

The 2019 figure is an increase of 4.88 percent over the $32.63billion revenue realised from the sector in 2018. A breakdown of the earnings showed that payments by companies accounted for $18.90billion, while flows from federation sales of crude oil and gas accounted for $15.32billion.

The report further showed that 10 years (2010-2019) aggregate financial flows from the oil and gas sector to government amounted to $418.544billion, with the highest revenue flow of $68.442 recorded in 2011, while the lowest revenue flow of $17.055 was recorded in 2016.

According to NEITI, the total crude oil production in 2019 was 735.244mmbbls, representing an increase of 4.87 percent over the 701.101mmbbls recorded in 2018. Production sharing contracts (PSCs) contributed the highest volumes of 312.042mmbbls followed by Joint Venture (JV) and Sole Risk (SR) which recorded 310,284mmbbls and 89.824mmbbls respectively. Others are Marginal Fields (MFs) and Service Contracts (SCs) which accounted for 21,762mmbbls and 1,330mmbbls respectively.

The report also showed that total crude oil lifted in 2019 was 735.661mmbbls, indicating a 4.93 percent increase to the 701.090 mmbbls recorded in 2018, with companies lifting 469.010mmbbls, while 266.650mmbbls was lifted by the Nigeria National Petroleum Corporation (NNPC) on behalf of the federation.

Analysis of crude oil lifted by NNPC showed that 159.411mmbbls was for export, while 107.239mmbbls was for domestic refining. 97 percent of the volumes for domestic refining (104.475mmbbls) was utilised for the Direct Sale Direct Purchase (DSDP) programme while the remaining 3 percent (2.764mmbbls) was delivered to the refineries.

NEITI reported that the value of the 2019 domestic crude oil earnings was N2.722 trillion. Of this figure, N518.074billion was deducted for Petroleum Motor Spirit (PMS) under-recovery by the NNPC.

This figure was N213.074billon above the approved sum of N305billion for under-recovery in 2019. Similarly, the sum of N126.664billion was incurred by the Corporation as costs for pipeline repairs and maintenances which showed a difference of N96.378billion from the approved sum of N30.287billion for that purpose.

The report also pointed out that N31.844billion was also deducted for crude and product losses due to theft.

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Crude Oil

Oil Prices Drop on Stronger U.S Dollar



Crude oil - Investors King

The strong U.S Dollar pressured global crude oil prices on Thursday despite the big drop in U.S crude oil inventories.

The Brent crude oil, against which Nigerian oil is priced, dropped by 74 cents or 1 percent to settle at $73.65 a barrel at 4.03 am Nigerian time on Thursday.

The U.S West Texas Intermediate crude oil depreciated by 69 cents or 1 percent to $71.46 a barrel after reaching its highest since October 2018 on Wednesday.

Energy markets became so fixated over a robust summer travel season and Iran nuclear deal talks that they somewhat got blindsided by the Fed’s hawkish surprise,” said Edward Moya, senior market analyst at OANDA.

The Fed was expected to be on hold and punt this meeting, but they sent a clear message they are ready to start talking about tapering and that means the dollar is ripe for a rebound which should be a headwind for all commodities.

The U.S. dollar boasted its strongest single day gain in 15 months after the Federal Reserve signaled it might raise interest rates at a much faster pace than assumed.

A firmer greenback makes oil priced in dollars more expensive in other currencies, potentially weighing on demand.

Still, oil price losses were limited as data from the Energy Information Administration showed that U.S. crude oil stockpiles dropped sharply last week as refineries boosted operations to their highest since January 2020, signaling continued improvement in demand.

Also boosting prices, refinery throughput in China, the world’s second largest oil consumer, rose 4.4% in May from the same month a year ago to a record high.

This pullback in oil prices should be temporary as the fundamentals on both the supply and demand side should easily be able to compensate for a rebounding dollar,” Moya said.


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