Dr. Thomas Ogungbangbe is the Chief Executive Officer/Founder of CITA Aviation Fuelling Company Limited
Dr. Thomas Ogungbangbe is the Chief Executive Officer/Founder of CITA Aviation Fuelling Company Limited. An international Energy strategist, he was the General Manager Aviation Business at MRS Oil and Gas before he was seconded to Chevron Oil Nigeria Plc as Aviation Marketing Manager, West and Central Africa. The jet fuel airfield inspector of IATA certified rating has attended international trainings on jet fuel by EI, ASTM, API and IATA. He has equally led many high profile industry group projects, serving as a member of the Federal Government of Nigeria 6-Man Committee on Aviation Fuel Pricing and Product availability. In this interview with aviation journalists, the oil and gas magnate speaks on jet fuel marketing in Nigeria, challenges, prospects and way forward.
Briefly tell us about yourself
My name is Thomas Olalere Ogungbangbe. I am the CEO and founder of CITA Aviation Fuelling Company Limited, which is the largest aviation fueling installation in Nigeria. We own and operate in 16 airports, that is being distantly trailed by every other company. We are probably, either in five, four locations. In any airport you go, there is that certainty that you will probably meet a CITA there. We support the industry in no small measures. Even in some little airports, we still have fuel in some of them, so as to encourage airlines to go to those locations. Basically, I am a strategic partner of IATA, and I am also a Chartered fuel inspector of IATA rating too. I am also a member of American Society for Testing and Materials (ASTM).
As a major player, what is your assessment of the aviation industry, as it relates to the challenges of getting aviation fuel?
Over the decades, it has been myriads of challenges when it comes to the issue of aviation fuel because incidentally, we have never had a situation in Nigeria where we have a refinery that could make a litre of aviation fuel. So even when the three refineries were working, they were not configured to crack aviation fuel. So over the decades, we have always imported jet fuel and it got to a particular point of getting out the products every six weeks by the international economies who were holding sway then. It became a source of worry to government and incidentally when government way back then deregulated jet fuel, it also gave the opportunity for other independent companies to be able to come in. This also helped. There was a time, we had Ministerial Committee on Aviation fuel Pricing and Availability. But today, with the new introduction of Dangote Refinery, jet fuel is now available within our neighbourhood. I want to believe that the issue of unavailability which has faced us over the decades will be a thing of the past. As regards pricing, the products, just like you know that the entire of aviation industry is an elitist one and everything about aviation is supposed to be transparent and trustworthy. So aviation fuel is not a local product that the price is determined by Nigerian government or any government of the world. It is a global product which prices are announced on daily basis in the world market. The only thing that is wrong with the price is our own exchange rate, which is a bit on the high side for now. That is what is calibrating the price and it is not as if that the marketers sit somewhere and just fix prices to kill the airline operators. Even the International airlines, their decisions are not made in Nigeria. They are made in their country of origin. Everybody knows the benchmark which is indicated on the announcement of the global pricing modulation announced on daily basis by publications like Platts, Bloomberg and others. Anybody that is a subscriber can get access to it and that is how international airlines are able to use formular price. The formular pricing is to say okay, if you are a subscriber of Platts, which is a publication company. So any Platts publication plus tax of the country of origin like the Nigerian tax, plus the premium. The premium is just our own logistics and margin which is negotiated with them and we log it in for one year. What they do is because of the complexities of what they do, they use the report of Platts of months before because we are in one year contract. So for example, in the month of June, we are using the Platts of May. In July, we are using the Platts of June so that everybody is clear. Even before you enter the month, you already know the price you are going to pay. And it is from that international pricing that the local pricing conversion comes in. You find out, that even likes of Air Peace that is a local company also travel internationally and they buy products in Dubai, London and India. So they know what prices are and they know what conversion rate it is. So if Nigeria is overt, they will know. It isn’t the aviation fuel marketer that influence the price, I understand that the fuel cost may be about 40 per cent of what the airlines needs. If fuel costs 40 per cent of their revenue, that is a lot but it is not the making of the oil marketers to profit and I am sure in Nigeria today and when some of us were like trainees some decades back, there were just six companies but today, we are 40. That will tell you the hard headed agrression which people are bringing to table and of course, you find out that so many of the young companies are doing their marketing aggressively. One Naira difference can make an airline look your way. And if you are consuming five million liters and you have one Naira change, that is five million Naira, it will pay some salaries. Basically, I can say it with remarkable amount of accuracy that there is no oil marketing company that is suffocating the airlines or trying to kill them, it is just a benchmark of global pricing. If we have a reason or if we find out that the refinery gives us a price that is below global benchmark, we will also translate it because we are in competition. For the airlines, it is who gives them the best rate because we are not the producer. We are just the handler and once your handling is certified, they are ready to patronise you and that is why most of the 40 companies coming up are almost evergreen to almost all the airlines.
What impact will Dangote Refinery have on the price of Aviation fuel?
The refinery on its own may not have any impact, in terms of pricing because Refinery is not an NGO. They also buy crude using the global benchmark and they also need to make profit. So we do not anticipate that they are going to be selling at some discounts because there is a world benchmark. Even if they sell way below what it is, which means you are probably promoting the kind of practice that we have gone beyond, where people buy products at a cheap price and they take it out again to other countries to go and sell because it is criminally attractive. We are not going to go to that area again. I do not see a major whatever in price but where the pricing advantage will come from based on Dangote Refinery is that if I take a vessel of product from Togo because we don’t have the facility in Nigeria where we can have our big ship to tack and lighten and do some ship to ship transfer. We do all of that in Togo and between Togo and here, just for a vessel, you will spend like one million Dollars. And of course as entrepreneurs, you need to recoup your money. So if you take that off, it a lot. It’s not only in petroleum products. It is applicable to even other items. If we are able to restore security back to Nigerian waters, even if it it is outbound Lagos, it will go a long way to reducing the unit cost of items. In fact, it may affect aviation fuel by almost N20 a litre.
What is the current price of Aviation fuel per litre?
It should be hovering about a Dollar per litre. It ranges from 1250 to 1500. It depends on the location and distance. This is because you cannot sell in Lagos where you receive from the coast and you can’t sell same where you used N65 to take it to Calabar or N70 to take it to Sokoto. So you have to recoup your costs. It varies but I am sure based on competition, it is the same from 1250 to 1500 depending on location.
If we can’t have home advantage with Dangote Refinery, can it be said that the global aviation fuel market is operated by a cartel?
No. It is not like that. I will not use cartel. Like I said. We are going to have a situation where I mentioned to us that Dangote Refinery has solved the issue of availability because we already have it available. In terms of pricing, it will just be a marginal one. And that marginal one is based on logistics because for example, if you are investing ten million Dollars to buy a product and you are investing another one million Dollars to bring the product even from Togo here to this place. One million is a lot. By the time you divide it by the volume of product you are bringing in, it will go to the unit cost, that aspect can be shelved off but it is not the kind of magical crash that we are expecting. They even also buy crude, not only from the Nigerian market but from the world market. The ways things are, it is just like any commodity, it is a function of demand and supply and it is a global thing. What those publication companies do is to report what has happened in the global market on daily basis. Not that they are the ones pushing it. They are not the ones but the oil companies are the ones doing it on their own. You are selling and I want to buy. I also want to sell to the airlines. We negotiate and I take investment decisions. It is also competition at all the stages. For example, if I will buy from a trading firm in Geneva, if I know that I am going to land cheaper, than what Dangote will offer me, it is an investment decision. Because Dangote knows that I am going to incure logistics costs, he will also give me a price that will discourage me patronising outsiders. So everybody is taking the best decision for the customers at the end of the day because I need to make myself look well packaged, to be acceptable by my customers because I have competetors. I need to locate that area of comparative advantage and competitive edge such as good handling, quality control, safety and pricing. .
There was a time, the issue of modular refinery was mooted to be operated by certain category of stakeholders in order to curb the issue of scarcity. Has the operators taken advantage of such initiative?
Modular refineries cannot make jet fuel because for you to make jet fuel, there are conditions precedent to cracking the crude. Any jet fuel that must be passed through the catalytic chamber of the refinery, if it is going for jets, any crude that would be used must have to go through the hydrogen chamber. So that hydrostatic process is a very expensive one. And that is what is even lacking in our our refineries in PH, Kaduna and Warri. That is why they couldn’t make any jet fuel not that they were not making kerosene. And we know that between the household kerosene and aviation turbine kerosene have basically the same chemistry. That is why their family name is DPK, that is Dual Purpose Kerosene because it can be used as Household Kerosene (HHK) or Aviation Turbine Kerosene (ATK) . Despite the fact that they share same chemistry, not one litre of the kerosene made in this refinery were used to fuel the aircraft because the crude oil was not passed through the hydrogen chamber which is called hydro-processing. The crude has to be hydro-processed and the hydro-processing chamber is even more expensive than everything put together as modular refinery. It is a very expensive process and because of that, modular refineries are incapable of doing jet fuel. They can do kerosene but not jet fuel unless they have that hydro processing chamber.
Before now, jet fuel used to be delivered through pipes running from depot. That has stopped for sometime. Don’t you think that there is a way such pipes can be revived, even though it entails some kind of private sector involvement in form of PPP, in case if the government is no longer interested?
You are correct. There is a 98km pipeline that was laid by Federal Government from Atlas home in the water, through Mossimi to Ejigbo depot and from there to this airport. If you go behind there, you see where the pipe came out from the ground to enter somewhere here. To the best of my knowledge, the pipeline usage was stopped in 1998 and that was when there was accident that involved the Federal Government aircraft in Kano which involved the son of late Head of State, General Sani Abacha. It was that accident, which journalists first reported that it was aviation fuel. That was the investigation that they were doing that stopped the pipeline. Ever since then, It was never revisited. If this is revisited, it will take not less than 1,000 trucks off the road of Lagos and Lagos State has a lot to benefit. CITA as a company has written even to Lagos State Ministry of Energy for them to take this up with the Federal Government. The Aviation Fuel Matketers Association of Nigeria (AFMAN), of which I am the outgoing chairman has also written to NNPC before to point in this direction. Although, the pipeline was used when the government was responsible for the supplying of jet fuel,which is not the situation now since it is being deregulated. I can also tell you that even as at then, whatever that was pumped from the waters was not the quantity we usually received. Maybe some litres developed wings in-between. However, it was easier to contain under Federal Government. I don’t know if they need to pick those lines and look at them, do the quality assurance to activate them. It will take government might to do that or maybe the refinery can take it up. It is also a good project for the new refineries to take up because it is a very contiguous one. It will make their jobs easier and help Lagos State to be able to clear their roads. The pipelines were not only in Lagos, we had them in Kano, PH, even from the tank farm in the airport to the wing of the aircraft. All you need is to go there and plug and you don’t need to go with any surface tank that is carrying product physically That of Lagos is still working. The ones in some part of Lagidi wing is still working, it is only that it is exclusive to those six pipe companies that came from the background of international oil companies.
How do you ensure that fuel given out is of high quality, in order to avoid the issue of contaminated fuel?
Our aspiration as aviation fuel marketers is to give to our airline customers good quality dry fuel. And how do we ensure this quality dry fuel; number one is to ensure that hyper filtration approach is observed. At the litorial region of the marine terminals where we receive them from the vessels, we get the product filtered into tank and out of tank. We use dedicated upload vehicles that should not carry any other product except jet fuel. Not even to carry household kerosene. Most of all these tanks must be aluminum or stainless steel. If it is a carbon steel, then it has to be epicoated with epoxy paint to cause seperation between the product and the metal, so as to be able to retain the quality. Those are the kind of things that go into it. When they now come in travelling by the roads, we lock them up in a watertight and airtight situation. They are sealed up and down locked. When they come in here, the sealed number is already provided incognito. So if the sealed number is not the seal that you see there, then they don’t discharge. If it has been tampered, they don’t discharge. Despite that, that is done, the next thing is to measure the quality and quantity. So they first do the quality test before they release the product to be discharged. When it is discharged, they first come to contact with something that is called the filter water seperator. We have the air eliminator that will remove air, so that whatever that is counted by the meter is what is there. Air is removed, debris is removed, water is removed, so all you have inside the tank is good quality jet fuel. When they are in the tank, you allow them to settle because for the reasons that we may also have dissolved water in the product, which is allowed. So this dissolved water will be inside tank, so and some quantity might coalesce. We also have the harzadous in the chemistry of the operating environment. For example, if you go to extreme temperature like in Sokoto where you can even have up to plus 45 degrees. You have situations where maybe you have tank and you have air space, you will see that the wall is with water and these water would drop inside the fuel but because the water is heavier than the fuel, for instance an average jet fuel, one litre is just about 75 per cent of the weight of equal volume of water. Because water is heavier, it will drop under. That is the more reason why most of our tanks are combis, they drop to the base. That combis is linked to somewhere outside, from there, if there is water inside that tank it will show you. That is why we do the draining day and night. And once it rains because we have ventilators and vents in the tanks which enable the tanks to breath. When it rains, there is also the possibility that rain may go in through there. When that happens, we drain several times like four, five times, to be sure that whatever we pass out is good quality dry fuel. We also do other things. When you see a jet fuel tank, what you see inside is more than what you see outside. For example, we ensure that just as the way the thing is going in through the bottom it doesn’t go out through the bottom. It goes out on top, so that at any one point, it is the quality one that you are having. There is what we call a floating suction which is like what you have in WC toilet. What is does, it goes on top of some fittings, to draw fuel straight to the outlet. When it is coming from there, again, the next thing it will do is to pass through another filter water separator. As it goes out from that filter water seperator, it goes to the meter to be counted straight to the fueler bowser. As it is entering the fueler bowser, it enters another filter water seperator. When it reaches to the wing aircraft, it is filtered out by the fueler again. Those three filtration processes at the marine terminal, at the storage and also at the wing of the aircraft is carried out. Then there is another quality control measure that is taken by the airlines themselves to measure few of the parameters. So once you open up the fuel, they take samples, they look at it, whether the density, colour are same and whether it is clear and bright and exactly the same with what is written. They will also make sure there is no water. To ensure it is water free, they use something that is called water detector. It is yellow like a tablet, if you drop it inside the fuel like a syring and immediately you draw it, if there is water in it, the colour will change from its yellow colour. If it doesn’t have any water, it will retain its colour. All these things are done within five minutes at the wing of the aircraft. These are measures we take and even the aircraft has its own sensoring system. Constantly we battle to ensure that we remove water from the body of jet fuel and all debris so that at every point we serve the airlines good quality dry fuel. I must also commend the Nigerian Midstream and Downstream Petroleum Regulatory Authority (NMDPRA) because they are doing a lot of jobs to do an oversight based on the proliferation to ensure that only depots that are lisenced by them are the ones that are able to operate at the airports and I am sure there is a lot of cooperation from the NCAA and FAAN in this regard. So many companies have been stopped, so many unholy practices have been stopped. For some of us who are the stakeholders, when we hear anything that is inimical to safety of the public, we show the red flag and tell the authorities to look that way because at the end of the day, you don’t know whose family would be in that aircraft. There is no parking space in the skies. If you allow water to enter into fuel, at the altitude of 33,000 feet, all the water will come together and form iceblock at a certain temperature and block the passage of fuel. We don’t want that to happen. That is what we do persistently. We also encourage the airlines to also check for water based on the situation but some of them don’t want water removed simply because we have situation where people use the opportunity of removing water to siphone the product. Like the situation we had sometime ago, it was based on the fact that, they were not removing water overtime. And you will see probes like go-no-go if it gets to a particular level, the system shuts down.
With all this you have said, why do they still have contaminated fuel?
I am not aware of any contamination but the one that I knew probably that I have seen in the past few years was basically due to water that was not removed. So a go-no-go probe only activated itself. If there is accumulation, to a point, it will stop. There is no way any oil marketing company would have a body that will be able to take that amount of water to any aircraft. It is impossible.
Sometimes ago, it was rumored that due to scarcity marketers were compelled to start converting kerosene to aviation fuel. I want you to clarify that.
Anywhere in the world in most part of the civilised world , no refinery goes out to make household kerosene again. It is only when jet fuel goes wrong that they downgrade it and sell it as kerosene. The pricing that you are witnessing in household kerosene is as a result of demand and supply. We basically deal with jet fuel. If you say they are converting household kerosene to jet fuel, will you convert a more expensive thing to a less expensive thing? If today, you are selling household kerosene at N2, 000 per litre, and jet fuel is at N1, 250, why would anybody convert from N2, 000 to N1, 250, to make loss? Maybe what they were just trying to say was that jet fuel and household kerosene belong to the same homologous series. They are family of the same hydrocarbon with similar chemical properties. The same number of carbon chains. And that is the reason why you can use aviation turbine kerosene for household but you cannot use household kerosene for aviation turbine kero. It was basically rumours I think what happened was that the government was subsidising kerosene but the kerosene they were bringing in were jet fuel. People who knew the story may have decided to invest that day once it is done well. You can also wonder how come we only hear about pipeline vandalisation when NNPC is moving fuel. Whereas when there is no fuel to pump, there is no vandalisation.
The airline operators have complained that jet fuel is taking about 70 to 75 percent of their running costs. What impact is such situation having on air travels and the aviation industry including the economy?
Like I mentioned earlier, our margin in cents per gallon or Naira per litre is the same that what we made when fuel was N200. And when it is N1250 or N1300 today. What is changing is not like maybe some marketers come together to say this is the price fixture. No. there is competition and government has deregulated the product and it is open for anybody to bring in from anywhere and sell at a competitive rate, that is just a capitalist approach. So that is what is being observed. For people to be able to afford it or not is a function of the economy. I know that between 30 to 40 percent of the airlines revenue go into jet fuel but that is not the only a Nigerian thing, it is a global business. The only thing is that when the economy is improved many more people will be able to be recruited from the roads to the flying orbit. The figure we have for the flying public is still very low. Am sure maybe we have below 25 million travelers and how many times am i represented in that 25 million. If you look at the absolute number of people that are travelling, you may not have more than 10 million or 15 million. At the end of the day, for a population as robust as 250 million, there is no reason why Nigeria should not use that as a calibration measurement or a trajectory to say by year 2030, we should get up to 250 million travellers. That will also how tick the economy is. So it is not the function of the oil marketers to determine the prices they buy or sell. It is global benchmark and not a Nigerian thing. That is the reason I said that for any reason if the refinery in Nigeria is able to give us rebate, we don’t even go home with the rebate because we are in competition. Before you know it, somebody will say please buy more from me, I will give you this and that. That is how the business is configured globally. Before now, the reason why we never felt it was because government was subsidising before the deregulation and even in recent past, we had interventions. That brought the price to a more bearable situation which impacted more on the local businesses because whatever we get, we still use it to compete. You have situations whereby, for about five or six months in a year, you might have the prices against you, such that you are selling at a lost. So even when you have good numbers, you will not rejoice because you know that the global market price may come against you anyhow. It is like walking on a tight rope.
How is the operating environment. Hope it is not so strangulating?
The NMDPRA as the regulator of the product is doing their utmost best. Just like I know that NCAA is also doing their best. I just feel that FAAN needs to tighten the noose small to control the practitioners. But they have done their own and I think it is the airlines that need to help the economy in that regard. We have situations where NMDPRA has come to say, that if your depot is not licensed by them, you cannot practice. But if I say I am CITA, then I have ABCDE using my license to sell to the airlines. They will only use my name to enter through FAAN. When they meet the airline, they will identify their real names. If for any reason, you do not have the airlines buying from the authorised dealers and they know quite well but it is because the overhead of those people is lower. So the cost layout is different from me that is paying land rent and marketers that are doing rent sticker. God forbid, if there is any accident, the rent sticker will only remove sticker and be off. That is the risk that is being run. We are doing a lot and that is the reason we also formed our associations. Before now, it is only the Major Oil Marketers Association of Nigeria (MOMAN) that were doing the business but some of us who are instrumental to bringing independence, we also formed Aviation Fuel Marketers Association of Nigeria (AFMAN), open to MOMAN members and non-MOMAN members where we use the umbrella to do a lot of operations. For example, in July, we are going to do All Stakeholders Industry training for like four days. In fact, CITA was doing every three quarter before Covid-19 for the industry free of charge. We call the regulatory authorities, all stakeholders, all competitors and we come together and learn. Many a time, CITA had invited the OEMs of most of the things we deal with from abroad to come and hobnob with us. These are all certificated trainings that we give to them. But post Covid-19, what we have done is to have situation where we encourage seminars and have been together. We also coperate on our operations. The only thing we don’t coperate on because of anti competition is pricing. We don’t discuss pricing on customers but we coperate with one another in terms of operations. For this year training, we are having the best IATA fuel quality inspector in Africa coming from Kenya to come and do train the trainer programme, so that they know what is expected on the global benchmark.
How does forex impact on your business and what would you like the government to do about it?
Like I said, the pricing that we get and the access to the product is forex based. Forex has been a major challenge in the far past and even in the present situation. Even from the local refinery being an export processing zone, jet fuel is still being sold in Dollars. The good thing which we have enjoyed under this government is that they have suceeded in closing the gap between the parallel market rate and the official rate. There is no point telling me that Dollar is N435 officially and that I cannot even access one Dollar. But some companies would get that N435 per Dollar or they have crude oil facility upstream where they can write that this money I am taking out, I can use it to buy products and come back which comes at N435. But I have to go to the open market and double the price. For now, at least, that has closed minimally. And even the declaration of CBN, saying you can source your Dollar anywhere because we don’t have. That has helped business and that is the reason I can tell you that we have done importation under this government more than even the past government, when we couldn’t compete. Those are areas people might not have seen and that have helped business to be able to move on. These are good aspects of these decisions but because there has been a lot of backlog and the backlog on its own can be overwhelming. The amount of damage that has been done. So I feel that if we cooperate with the present government even on forex, it is just reflecting who we are, not like forcing the situation. There maybe a lot of pain to start with but when we get to the new normal and we get used to it, we will begin to see the advantages of most of the decisions taken. So far, I see the forex decisions taken are just in line with actual without deceiving ourselves.
What do you think Nigerian airlines should do to sustain their businesses for a long time?
I did a 20-year study from 2000 to 2022. My study revealed that over a thousand airlines were registered in Nigeria but their average attrition rate was like five years, which has to do with business failure in the Nigerian airline market. I must tell you, just like Richard Branson mentioned that, the only way to make a billionaire a millionaire is to go to airline business. It comes with a lot of challenges. Unfortunately, what is causing the increased attrition rate in Nigeria is because, apart from the fact that, our environment is volatile, situation and policies are uncertain, operating environment is complex and even policy are ambiguous. Firstly, is the fact that Nigerian airlines need government backing. We need our government to show serious backing to our airlines that want to operate regionally or internationally. The airlines need to operate profitably to be in business. Secondly, there should be national passion. We need to leave the mentality of anything foreign is better than ours. We need to leave that mentality and patronise Nigerian made products. That is the only way we can reduce all these things. I can assure you that after the series of accidents that came one after the other, NCAA is probably over-regulating the airlines. They are doing their job and we need to patronise ourselves to be able to encourage the local airlines. Part of the things that can kill our airline is the dedication of even the staffers. Instead of you want to operate from economy to business, you want to pay into companies account, someone will tell you to bring this one and let you go. We need to have a sound corporate governance in place. The airlines themselves need to look through their systems and leverage on technology. The managers of airlines should exhibit sound executive judgements in whatever they need to do to take the best advantage of the market rather than just losing from here and there. There is the propensity that people will digress because don’t ever expect what you don’t inspect. How do want to make profit. Government should also ensure that the airlines have sound business plan. Not just because you want to join the airline business, you go in and fizzle out in less than five years. Even if it is going to be legislated that if you are not 100 percent the owner of your aircraft, you can’t operate. Let’s drop what make them culpable. Let the government be sincere in joining them to make money for themselves so that they can employ more people and the prosperity of Nigeria can also be restored. In addition, there should be a clearing house. It is in that clearing house that airlines and passengers carried should be sorted out. These are things I think government should do to make airlines profitable. When you look at the cost of fuel alone, you will discover there is no point running. If you look at most of the places abroad, even the local flights, everywhere is fully subscribed. Why operate, when you cannot get people to be onboard. How do you want to make profit. Government should also ensure that the airlines have sound business plans.
