Local airlines under the aegis of the Airlines Operators of Nigeria and local producers on the platform of the Manufacturers Association of Nigeria have begun plans aimed at getting Dangote Petrochemical Refinery to priotise diesel and JetA1 supplies to local carriers and manufacturers.

The move came about one week after indication emerged that the Dangote refinery’s diesel and aviation fuel would hit the market by January 2024. This was after about one million litres of crude oil was supplied to the facility.

Months earlier, the Dangote refinery had hinted that refined petroleum products would from the facility be sold in the international market.

But in a brief chat with one of our correspondents on Sunday, the Chairman of United Nigeria Airlines and spokesperson for AON, Prof. Obiorah Okonkwo, said local carriers had begun talks with the management of the refinery, expressing hope that the talks would be fruitful.

“We are talking with him and hope that it will be fruitful,” Okonkwo said while responding to an enquiry on whether local airlines had plans to begin talks on JetA1 supply with the Dangote refinery.

Also, MAN said its members were meeting with the aim of coming up with a position for possible presentation to the Dangote refinery management.

MAN President, Francis Meshioye, told one of our correspondents that the association was meeting to determine whether an arrangement would be made with Dangote Refinery on the supply of diesel to its members.

He said, “We are trying to get a proper position…maybe in two days we will meet and have a proper position on this.”

In its Half Yearly Economic Review, published recently, MAN said its members spent about N60.4bn on alternative energy sources in the first half of 2023.

Meanwhile, findings by The PUNCH reveal that expenditure by manufacturers on alternative energy sources (excluding power from distribution companies) jumped by 82 percent, from N25bn in 2014 to N144bn in 2022.

This is according to data collated from the annual and bi-annual reports of the Manufacturers Association of Nigeria.

According to the documents, manufacturers spent about N783bn during the period to self-generate power to augment the insufficient power supply from power distribution companies to power their factories

There has growing apprehension in the manufacturing and aviation sectors that the rising costs of diesel and aviation fuel will lead to the total collapse of more industries and airlines operating in the country.

Across the states, the MAN told The PUNCH recently many factories were closing down because of the rising cost of diesel.

The national body of the association warned that more factories would be shut if the diesel price increased to N1,500 from the current N1,000.

Between June and October this year, the prices of diesel and aviation fuel increased by over 50 per cent, heightening concerns among the operators.

Meshioye, in July, told The PUNCH members of the association spent between 35 percent to 40 percent of their total costs on energy needs.

In the aviation sector, experts have predicted a sharp rise in local airfare due to the surge in the price of aviation fuel, also known as Jet A1 and foreign exchange.

Speaking on behalf of the Airline Operators of Nigeria, Capt. Roland Iyayi, noted that Nigeria currently stands a better chance of driving an alternative fuel for the aviation sector through the exploration of palm oil.

The Chief Executive Officer, Belujane Konzult, and former spokesman for the defunct Nigerian Airways, Chris Aligbe, said Jet A1 was the highest single cost factor in airline operation, adding that it would have a terrible impact on airline operations.

He, however, stated that this would result in increased airfare as the burden would be shifted to the passengers.

Aligbe said, “Fuel is the highest single cost factor in airline operation, so, when we have such things skyrocketing, the airlines will be in a very terrible situation.

“They will take a beating and transfer the cost to the passengers, otherwise, they won’t survive. No one expects the local airlines to bear that burden without passing it on to their passengers. That’s the situation we find ourselves in.”

Dangote schedules supply

Meanwhile, the production of Automotive Gas Oil, popularly called diesel, and JetA1 or aviation fuel, from Dangote Petroleum Refinery in January 2024 is going to be supplied to domestic airlines and industries operating in Nigeria, it was gathered on Sunday.

Recall that The PUNCH exclusively reported last week Monday that the $20bn refinery would start producing diesel and Jet A1 in January 2024, while the production of Premium Motor Spirit, popularly called petrol, was being delayed by the supply of crude oil in installments.

Officials of the facility confirmed to one of our correspondents on Sunday that the two products that would be pumped from the refinery next month would be supplied domestically, as against speculations that the plant would export the commodities.

There had been concerns and speculations that the products from the Dangote refinery were basically meant for export, as the firm operates from an export-free zone in Lagos.

The Dangote Petroleum Refinery and Petrochemical Project, a subsidiary of Dangote Industries Limited, is a 650,000 barrels per day crude oil refinery, located in Dangote Industries Free Zone, Ibeju-Lekki, Lagos, Nigeria.

Dangote Petroleum Refinery with the capacity to refine 650,000 barrels of crude oil per day covers an area of approximately 2,635 hectares and is located in the Lekki Free Trade Zone in Lagos.

But officials of the firm denounced speculations that the products to be pumped by the refinery in January would be exported without serving the domestic market, a development that got the commendations of oil marketers.

The marketers also stated that once the Dangote refinery starts producing diesel and aviation fuel, and the Port Harcourt Refinery Company, under the management of the Nigerian National Petroleum Company Limited, begins operations in December/January, the cost of refined products would drop.

When contacted on Sunday and asked whether the Dangote refinery would start with a domestic supply of diesel and aviation fuel once it starts producing in January, or if it would start with the international market, the senior official at the firm replied, “With Domestic supply, of course.”

The official, who pleaded not to be named due to lack of authorisation to speak on the matter, noted that the company would definitely feed its international customers, but stressed that the firm would first supply aviation fuel to domestic airlines.

The source further noted that “diesel is going to be served to indigenous companies first before export.”

Price slash imminent

Reacting to this, the President, Petroleum Products Retail Outlets Owners Association of Nigeria, Billy Gillis-Harry, said the move to serve local consumers was commendable.

He also pointed out that this would lead to a reduction in the cost of the refined products in Nigeria,

“Certainly there is the chance of a reduction in the cost of refined petroleum products once Dangote refinery starts supplying the products. This is because we will no longer pay import charges and all other fees that we pay in dollars.

“So that should give some relief. But by how much, is what we cannot tell until the refinery starts producing. When it starts producing, that is when we can confidently tell how much it costs to produce one litre of crude oil,” he stated.

Gillis-Harry also expressed optimism that the Port Harcourt refinery would come onboard between the end of December and January 2024, stressing that “we should start receiving product from the refinery (Port Harcourt) by next month too.”

On his part, the National Secretary, Independent Petroleum Marketers Association of Nigeria, Chief John Kekeocha, stated that with the coming onstream of the Dangote refinery in January, as well as the Port Harcourt refinery, the cost of refined petroleum products would drop.

“If the refineries should start producing as they promised, then we should be hopeful of price reduction. However, did we not hear that the Dangote refinery should have started producing around the middle of this year?

“So if what they are saying now is going to come to reality, absolutely it is going to affect the prices of refined products downward. This is because the crude will be sourced here and it will be cheaper. Also the cost of importing refined products will be eliminated.

“Therefore if the Port Harcourt refinery and that of Dangote are going to start production, sincerely speaking, the cost of refined products are not going to be as costly as what we are buying today,” Kekeocha stated.

The National Public Relations Officer, IPMAN, Chief Ukadike Chinedu, said the move by the management of Dangote Refinery was commendable, but urged the Federal Government to also supply crude to modular refineries.

“We are optimistic to see the commencement of refined products from the facility and we are ready to party Dangote in ensuring the distribution of these refined products across the country,” he stated.

Ukadike said it was saddening to realise that modular refineries were being starved of crude oil, while the crude oil producers exported the commodity.

“What is stopping the government from giving modular refineries’ operators the required support to reduce our continued dependence on imported petroleum products? You cannot continue to starve our domestic refineries because you want dollars through crude oil export.

“The emergence of functional modular refineries in their numbers in Nigeria is long overdue. We cannot continue to import products when we can build or have modular refineries to help refine some of our crude oil. Now the subsidy on petrol has been reduced, let the modular refineries work,” he stated.

The PUNCH had reported last week that the Dangote refinery would require a minimum of six million barrels of crude oil to kick-start the full production of refined petroleum products including AGO, PMS, Jet A1 and Dual Purpose Kerosene, otherwise called kerosene.

But what the refinery got about two weeks ago was one million barrels of crude, while the remaining five million barrels would arrive at the $20bn facility in another five installments.

On November 2, 2023, The PUNCH reported that the failure to supply crude oil to domestic refineries, including the multi-billion dollar Dangote Refinery, stalled the production of refined petroleum products at the facilities.

The report also stated that the lack of crude oil supply came as the 650,000 barrels per day Dangote Refinery in Lagos missed the October production projection it had earlier set.

It pointed out that the October production target miss made it the second time in 2023 that Dangote Refinery would raise hopes in Africa, especially Nigeria, of a possible end to petrol importation.

Following The PUNCH’s report, the Nigerian National Petroleum Company Limited swiftly declared the next day being November 3, 2023, that it was set to provide six million barrels of crude oil to the Dangote Refinery. It, however, has yet to do so.

But two weeks ago, the management of Dangote Refinery confirmed the receipt of one million barrels of crude oil, adding that this would lead to the production of refined products at the facility.

“In a major step towards boosting Nigeria’s domestic refining capacity and attaining energy security (self-sufficiency), Dangote Petroleum Refinery and Petrochemicals plant has purchased one million barrels of Agbami crude grade from Shell International Trading and Shipping Company Limited, one of the largest trading companies in Nigeria as well as globally, trading over eight million barrels of crude oil per day,” the oil firm had stated. (The PUNCH)

Update news