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Challenges in kerosene value chain identified

25 November 2013, 10:53

Abuja - The Executive Secretary of the Petroleum Products Pricing Regulatory Agency  (PPPRA), Reginald Stanley, said on Sunday in Abuja that a range of factors were responsible for the high cost of kerosene at the retail end in the country.

He named the factors as long chain of handling, smuggling because of huge arbitrage in price and use of kerosene in diesel blending.

Stanley identified other factors as using kerosene to fuel aircraft as well as blending cut-backs to produce emulsion used in road construction.

Speaking with Energy Correspondents on "The Complexity of the Kerosene Value Chain’’, Stanley stated that "kerosene unfortunately has one of the longest chains in handling and at any point it changes hand, it is at a premium, hence the high cost at the retail end."
According to him, there are two grades of Kerosene, Aviation Turbine Kerosene (ATK) and House Hold Kerosene (HHK).

"ATK is used in fuelling aircraft while HHK is used in domestic cooking and lighting homes,'' the News Agency of Nigeria (NAN) quotes him as saying.

The executive secretary said it was a current global trend for refineries to produce mainly ATK for the aviation market.

Stanley noted that due to the inability of Nigeria’s refineries to produce enough kerosene to meet increasing demand, it became necessary to import the ATK grades of kerosene, commonly referred to as Dual Purpose Kerosene (DPK).

He described DPK as superior diesel that could blend perfectly well with diesel, noting that just blending one litre of Kerosene would give the marketer N100 per litre extra profit.

He identified this development as the beginning of the kerosene challenge, saying that imported kerosene often went into many uses.

 “Part of it finding its way into the aviation market while a substantial quantity finds its way into the blending of cut-backs to produce emulsion used in road construction.”

The executive secretary explained that ``a typical Kerosene transaction starts from the discharge into marketer’s tanker on the shore.

“The marketer in turn sells the product in trucks and the big truck transfers into peddling trucks that are 10 000 litres capacity.

“These peddling trucks move the product to road side-tanks and from the road side tanks the product is sold to jerry can retailers and ultimately to bottle retailers.”

According to him, a combination of the limited supply after the leakages into other areas of utilisation and the long handling chain is responsible for the high retail price at the bottle.

Stanley observed that with global climate change issues and advocacy for the use of cleaner fuels, especially for domestic purposes it was important to encourage the substitution of kerosene with Liquefied Petroleum Gas (LPG) in domestic

-   NAN


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