Aviation fuel supply: opportunities arising from the crisis

Conjunctural events and the tightness between demand and supply of aviation fuel have shown that the distribution of this energy source in Colombia is extremely congested and requires immediate actions from the Government and the sector. The ability to respond to these challenges is key to ensuring energy security in air transport.

By: Andrés Bitar, Vice President of Strategy and Regulatory Affairs, ACP

The public service of liquid fuel distribution, such as aviation fuel, is essential to guarantee the rights of Colombians. Mobility, commercial activity, and even national security are ensured with a continuous and secure supply of these resources.

Liquid fuels in Colombia mainly come from the oil refining activity carried out by Ecopetrol in its two refineries: Reficar and Barrancabermeja. Therefore, for the energy security that the country needs regarding liquid fuels, the exploration and production of hydrocarbons is fundamental to ensure the availability of this essential input.

In terms of capacity, Ecopetrol refines 420,000 barrels of oil daily (206 KBD at Reficar and 214 KBD at Barrancabermeja), of which 37,000 barrels correspond to Jet A-1 aviation fuel (13 KBD at Reficar and 24 KBD at Barrancabermeja). However, the growing demand for aviation fuel, which has increased by 61% in the last year due to the tourism boom, poses significant challenges to maintain the balance between supply and demand.

The challenge of distribution

Each of the agents in the liquid fuel distribution chain performs a specific task, which has centralized planning coordinated by the Ministry of Mines and Energy as the guarantor of supply. On the supply side, Ecopetrol ensures compliance with its contractual or import commitments if required.

Subsequently, the fuel is transported from Reficar or Barrancabermeja to the storage of wholesale distributors located throughout the country. This transport can be by pipeline, managed by Cenit, or by land, managed by the wholesale distributors. Due to the high concentration of demand in the interior of the country (which today cannot be met by the Barrancabermeja Refinery), the latter are forced to go to Reficar to then take the product to the interior. Finally, prior to delivering the fuel at the airports, the wholesale distributors must conduct quality inspections and technical specifications, which can take between 24 to 48 hours.

This account of the functioning of the distribution chain shows that each of the activities involves logistical times and risks, which implies that if one link in the chain experiences failures or critical events, the rest of the activities are affected. Therefore, if the conjunctural event due to failure or critical events is compounded by the tightness between supply and demand, it generates what could be classified as a ‘structural crisis’ in fuel supply.

A recent example occurred on August 16, 2024, after a technical failure at Reficar. This conjunctural event demonstrated to the country that the fuel distribution system is highly congested and that, in the face of conjunctural contingencies, it is necessary to resort to imports and adopt measures to prevent future crises. This leads us to the responsibility, as a sector, to evaluate and implement different alternatives for public policy, planning, and regulation that address critical situations and transform them into opportunities to strengthen the supply and energy security of Colombians.

If a situational event due to failure or critical events is added to the tightness between supply and demand, what could be classified as a ‘structural crisis’ is generated.

Some of the proposals include permanently enabling Jet-A as a supply alternative, improving conditions for agents other than the refiner to carry out imports, creating strategic storage for emergencies, and formalizing the supply committee led by the Ministry of Mines and Energy. These actions are necessary to ensure structured and continuous planning of liquid fuel supply in the country.

The Ministry of Mines and Energy temporarily enabled Jet-A as a supply alternative due to the difficulty of obtaining Jet A-1 in the market between July 2022 and January 2024. Since the latter is a fuel used only in flights with low temperatures, its availability in the market is lower, increasing logistical times and, therefore, costs compared to Jet-A. This technical regulation has been expired since January of this year, and it is urgent to issue a definitive one.

Regarding the need to enable other agents different from the refiner to carry out imports, Law 1450 of 2011 indicates that the refiner is the only agent that can transfer costs to the end user when imports are made. This restriction limits other agents who could provide efficient import solutions.

The formalization of the supply committee, led by the Ministry of Mines and Energy, is key to centralizing information and seeking structural solutions, with constant planning and monitoring of supply.

In relation to strategic storage, the country currently does not have strategic storage for contingencies. The Mining-Energy Planning Unit (UPME) developed the Indicative Plan for Liquid Fuel Supply (PIACL), identifying this need for scarcity events. A decree from the Ministry of Mines and Energy is required, the inclusion of storage in the PIACL, and the definition of charges by CREG.

And finally, the formalization of the supply committee, led by the Ministry of Mines and Energy, is key to centralizing information and seeking structural solutions, with constant planning and monitoring of supply.

To conclude, it is key to remember that the ‘Colombian-style’ energy transition must be based on the principle of complementarity, which implies that all energy sources are equally important and leverage each other. Our economic report ‘Liquid Fuel Market in Colombia: Evolution 2023 and Perspectives 2024 – 2033’ indicates that the demand for gasoline, diesel, and jet will increase by 1.8% in the next decade, so it is necessary to continue working hand in hand between the Government and the private sector to ensure an adequate and reliable supply of liquid fuels to all Colombians.