US embassy cable - 04LAGOS2264

UNCLAS SECTION 01 OF 02 LAGOS 002264 
 
SIPDIS 
 
STATE PLEASE PASS FCC 
 
E.O. 12958: N/A 
TAGS: ECPS, ECON, EINV, NI 
SUBJECT: AVIATION FUEL SHORTAGES GROUND MANY DOMESTIC 
FLIGHTS 
 
REF:  Lagos 2195 
 
Summary 
-------- 
 
1. (U) An end appears in sight for the Nigerian jet 
fuel shortage, as a tanker is in the process of 
delivering 14,800 metric tons to Lagos.  Conoil 
Producing Limited, the downstream firm selected to 
supply aviation fuel to the country for this quarter, 
failed to make its October delivery.  As a result, over 
the last week, domestic airlines confronted serious 
shortages in aviation fuel. Numerous domestic flights 
were cancelled, consolidated, and/or delayed because of 
the supply problem.  According to the press, over 1,000 
passengers were stranded at Nnamdi Azikiwe airport in 
Abuja over the weekend.  Aviation fuel increased from 
N45 to N62 per liter in September and now is reportedly 
being sold for as high as N85. Some international air 
travel has been delayed by the shortage, and flights 
are landing in neighboring countries to obtain fuel. 
End summary. 
 
Conoil Defaults on Jet Fuel Delivery for Nigeria 
--------------------------------------------- ---- 
 
2.  (U)  Press reported on November 8 that Nigerian 
firm Conoil defaulted on delivery of aviation fuel for 
the month of October; an emergency tender granted to 
African Petroleum PLC also failed to resolve the 
shortage.  Due to the high cost of importing fuel, the 
five downstream fuel marketers (Oando Plc, African 
Petroleum Plc, Mobil Oil Nigeria, Texaco Nigeria Plc, 
and Total Nigeria Plc) conduct an auction to determine 
which firm will be responsible for importing jet fuel 
for the quarter.  Conoil had won the bid for October, 
but defaulted on the actual delivery of the cargo. The 
Nigerian National Petroleum Corporation (NNPC) has 
placed a one-year ban on Conoil importing jet fuel, as 
it failed to deliver a 30,000 metric ton consignment 
into the country. 
 
Jet Fuel Prices Climbing Since September 
----------------------------------------- 
 
3. (U) Aviation fuel prices jumped from N45 to N62 per 
liter in September.  Deregulation in the downstream 
fuel sector caused the September price increase, but 
was subsequently compounded by Conoil's October failure 
to meet commitments to deliver fuel to the country. 
Since then the price of the fuel, known as Jet A1, has 
been steadily inching up.  It is now selling for as 
high as N85 per liter.  Domestic airline operators have 
passed on these cost increases to the customer through 
an overall fare increase and hefty fuel surcharges. 
 
Fuel Surcharges and Rising Ticket Prices 
----------------------------------------- 
 
4.  (U)  On November 4, Chachangi Airlines warned its 
customers via radio announcements that it would have to 
reduce its flights if the fuel supply remained 
uncertain.  Edward Boyo, Overland Airlines official, 
confirmed that his company was struggling to cope with 
the fuel scarcity.  Boyo said the price hike in fuel 
was only a secondary concern for most operators.  He 
said that some of Overland's flights were being 
cancelled, while others were being consolidated to put 
larger numbers of passengers on one flight.  Press 
reported that over the weekend, more than 1,000 
passengers were stranded at the domestic wing of the 
Abuja airport.  Press quoted the managers of numerous 
airlines saying that instead of several flights per 
day, they had been reduced to flying only one or two. 
Exxon Mobil has been able to continue to fly its 
personnel around the country, but Brazilian oil major 
Petrobras could not return some personnel from an 
offshore rig on November 5 due to the shortage of fuel. 
 
Oando Demanding Surcharges for Fuel 
----------------------------------- 
 
5. (U) Boyo said Oando, the only marketer currently 
dispensing fuel to domestic airlines, is  "exploiting" 
the scarcity. He alleged that some staff members of the 
company are demanding "additional payments" from the 
desperate airline operators.  Boyo called on the GON to 
better regulate the sector. 
 
Int'l. Flights Diverted, Delayed, Due to Shortage 
--------------------------------------------- ----- 
 
6.  (U) International flights have been forced to land 
in neighboring countries, such as Ghana, to take on 
enough fuel to fly to Europe.  Energy sector contacts 
have confirmed that both Friday and Saturday British 
Airway flights to London were forced to land elsewhere 
to re-fuel, and were delayed for as much as six hours 
while the airlines attempted to locate fuel. 
 
Fuel Delivered and Resolution in Sight 
--------------------------------------- 
 
7.  (U)  An official from Shell Nigeria Oil Products, 
Shell's downstream division, confirmed that a tanker 
with 14,800 metric tons of Jet-A1 fuel is at berthed at 
the Apapa Port in Lagos, and is currently discharging 
fuel to marketers.  The Shell official expects that the 
supply of jet fuel will return to normal as of the 
evening of November 9. 
 
BROWNE