(12.2.

624)
Aviation refueling business: A goldmine of opportunities
A.K. Gandotra, P.B. Mhatre & B.V. Bhadran & R.K. Tyagi
(Oil & Natural Gas Corporation Ltd, Mumbai Region, Air Logistics, Juhu Helibase)

Abstract
It does not appear to be possible to decrease the fuel consumption of airplanes. ONGC, Indias
largest oil & gas Exploration & Production Company is playing a vital and important role in meeting
the energy requirement of the country particularly in the field of hydrocarbon sector. Recently it has
received approval from the Union Government to get into aviation refueling business. The company
initially plans to produce and sell 20,000 kilolitres of ATF from its Hazira unit in Gujarat and obtained
the permission on 06.06.2006 from Director General of Civil Aviation for production, storage and
delivery of ATF. ONGCs first aviation fueling station (AFS) is planned and coming up at JuhuHelibase and ATF produced at Hazira Plant shall initially be used for its captive consumption. In
order to assess business potential in ATF refueling business, an attempt has been made to study all
the aspects of present and future aviation technology, the Indian and global scenarios of aviation
industry especially after liberalization of economy, emergence of no frills air lines, categorization of
the Indian aviation sector, etc.

Introduction
As long as there is a need for people to get to places quickly, there will be a need for aviation. It
does not appear to be possible to decrease the fuel consumption of airplanes as much as that of
cars or of space heating. ONGC, Indias largest oil & gas Exploration & Production Company is
playing a vital and important role in meeting the energy requirement of the country particularly in the
field of hydrocarbon sector. Recently it has received approval from the Union Government to get into
aviation refueling business. The Government nod, which came only in 2005, will permit ONGC to
market aviation turbine fuel1. The company initially plans to produce and sell 20,000 kilolitres of ATF
from its Hazira unit in Gujarat and has obtained the permission of the Director General of Civil
Aviation for production, storage and delivery of ATF on 06.06.2006. The aviation refueling business
is likely to be launched under a new sub brand Oval Air Fuel. The company has also got
permission for its plan to set up aviation refueling stations in airports across the country. ONGC is
scheduled to start operations in both these areas in 06-07and has planned to set up its first AFS at
Juhu Helibase which would be operational soon.
ONGCs entry into the fast growing aviation
refueling segment will stir up a business so far
been dominated by oil marketing companies,
Indian Oil Corporation (IOC) with market
share of 65%, Bharat Petroleum Corporation
(BP) with market share of 21%, Hindustan
Petroleum Corporation (HP) with market
share of 14%. The timing of ONGCs entry in
ATF business is crucial. The domestic
aviation industry is poised for a take off with a
number of new budget airlines taking to the
skies in recent months
Out of total indigenous production of 3.88 MMT in 04-05, the PSU-OMCs produced 2.691 MMT and
consumed in domestic market. Balance production from MRPL was: 0.661 MMT and RIL: 0.528
MMT respectively was apparently surplus and exported.

Table 1 DEMAND SUPPLY SCENARIO

Year
2003
-04
2004
-05
2005
-06
2006
-07
2007
-08
2008
-09

Producti
on MMT

Consumptio
n MMT

Surplus
MMT

3.726

2.507

1.219

3.883

2.58

1.303

4.256

2.684

1.572

4.652

2.774

1.878

5.165

2.870

2.294

5.332

2.989

2.344

For new entrants, retailing jet fuel to airlines would mean putting up tankages and refueling facilities
at airports. Besides land being scarce at already cramped airports, putting up such facilities would
involve an array of environmental and safety clearances from a number of authorities. To avoid the
cumbersome process, Reliance another player in aviation business proposed that it would transport
jet fuel from its Jamnagar refinery in Gujarat to the airport through tankers or existing pipeline
infrastructure and use state-run oil companies facilities at airports for storage and sales. Other
players are of opinion that If Reliance wants it can build infrastructure at some distance from
airports and use mouser tankers for refueling aircrafts,. Further, Reliances application for pooling
existing storage and sale infrastructure among all the refiners according to their producing capacity
was opposed by state-run Indian Oil, Bharat Petroleum, Hindustan Petroleum and IBP Co. Ltd.
In order to understand the business potential in ATF retailing business, lets take a quick review of
aviation industry.

History of Aviation
Men always desired to fly like birds. Aviation came into existence mainly because of this. Mans
desire to fly probably dates to the first time prehistoric man observed birds, an observation illustrated
in the legendary story of Daedalus and Icarus2. Upon visiting China in the 13th Century, Marco Polo
brought back stories of human-carrying kites (which stay aloft via the wind's power but are
technically tethered to the ground) and flying tops. "Pao Phu Tau" was a 4th century Chinese book
containing some ideas related to rotary wing aircraft (helicopters).The first known human flight took
place in Paris in1783. Ballooning became a major "rage" in Europe in the late 18th century, providing
the first detailed understanding of the relationship between altitude and the atmosphere.
The Wright brothers made the first sustained, controlled and powered heavier-than-air flight at Kitty
Hawk, North Carolina on December17, 1903 and since then there is no looking back and aviation
industry saw tremendous advancements in the years which followed.

The Technology
The last quarter of the 20th century saw a slowing of the pace of advancement seen in the first three
quarters of the century. No longer was revolutionary progress made in flight speeds, distances and
technology. This part of the century also saw the steady improvement of flight avionics, and a few
minor milestones in flight progress.
Initial air crafts used piston engines. Jet propulsion developed around 1930, three centuries later
when Leonardo da Vince first dreamt of turbines and gained momentum during world wars. Fuel for
initial piston engines was gasoline however both engine design and gasoline quality has been
improved over the time. Aircrafts run with diesel have also been tried. Jet fuel is mixture of many
Hydrocarbons. These HC are members of paraffin, napthenes or aromatics. Two types of Jet fuel

are prevalent: i) Kerosene type (C8 to C16). ii) Wide-cut type (C5 to C15). Jet fuel is mixture of
many hydrocarbons. Wide cut Jet fuels which span the boiling range of gasoline and kerosene was
more prevalent during world war because of consideration of availability. Even today this fuel is used
in Canada because of favorable climatic reasons. Wide cut Jet fuels are also known as Jet B and are
widely used in Canada and Alaska. It has very low freezing point, low flash point but higher volatility.
Kerosene type Jet fuels Jet A & Jet A-1 are used in rest of the world. Out of this Jet A is used in USA
while Jet A -1 in rest of the world. Main difference is in freezing point -- Jet A has freezing point 40C and Jet A-1 has freezing point -47C. However lower freezing point comes at a cost. Other
variables being constant a refinery can produce a few more percent of Jet A than Jet A-1 from same
input. Fuel price and availability drives the use of Jet A in US. ONGC would be producing Jet A-1
from its Hazira unit. Some Important characteristics of ATF Jet A-1 are given in Table 2.
Table 2: Important characteristics of ATF Jet A-1 Fuel (IS No: 1571-2001)
S.NO.
i)

CHARACTERISTICS
Appearance

ii)

iii)

iv)

v)

Composition
a) Acidity, total mg KOH/g Max.
b) Aromatics, %by volume, Max
c) Olefins content, % by volume, Max.'
d) Sulphur, total % by mass, Max.
e) Suplhur, mercaptan, % by mass, max.
Volatility
a) Distillation
1) Initial boiling point, deg.cent
2) Fuel recovered :
10% by volume, Deg C, Max.
50% by volume, Deg C, Max.
90% by volume, Deg C, Max.
3) Final boiling point, deg.cent max.
4) Residue % by volume, Max
5) Loss, % by volume, Max.
b) Flash point (Abel), deg.cent. Min.
c) Density at 15 Deg C, Kg/m3
Fluidity
a) Freezing point, Deg C, Max.
b) Kinematic viscosity (mm2/s) at - 20 C,Max.
Combustion
a) Specific energy MJ/Kg, Min.
Product of API gravity and Aniline point,Min
b) Smoke point, mm, Min.
Naphthalenes, % by volume, Max.

REQUIREMENT
Clear bright and visually free from
solid matter and undissolved water at
normal ambient temperature
0.015
25
5.0
0.3
0.003

Report
205
Report
Report
300
1.5
1.5
38
775 to 840
-47
8
42.8
25
19
3.0

Technology - post 1991

In the beginning of the 21st century, subsonic aviation focused on eliminating the pilot in favour of
remotely operated or completely autonomous vehicles. Several Unmanned Aerial Vehicles or UAVs
have been developed. In April 2001 the unmanned aircraft Global Hawk flew from Edwards AFB in
the US to Australia non-stop and unrefuelled. This is the longest point-to point flight ever undertaken
by an unmanned aircraft, and took 23 hours and 23 minutes. In October 2003, the first totally
autonomous flight across the Atlantic by a computer-controlled model aircraft occurred.

In commercial aviation, the early 21st century saw an end of an era with the retirement of the
Concorde. Supersonic flight was not very commercially viable, as the planes were required to fly
over the oceans if they wanted to break the sound barrier. The Concorde also was fuel hungry and
could carry a limited amount of passengers due to its highly streamlined design. Despite this
setback, and the general slowing of progress, it is generally agreed that the 21st century will be a
bright one for aviation.

The Global & Indian scenes

Over most of the last three decades, the civil aviation sector world-wide, has substantially moved
away from government control and ownership towards deregulation and private ownership. The
origins of this trend can be traced back to the deregulation of the United States' airline industry in the
late 1970s, which led to lower fares and higher improved productivity of assets and capital.
This transformation also subsumed another trend of privatization of government owned airlines
designated by a country's government to operate international air services to and from that country
as evidenced in Australia (Qantas Airways), the United Kingdom (British Airways), Germany
(Lufthansa) and Japan (Japan Airlines).
The Indian aviation sector was also characterized by a high degree of government control prior to
1990. The Government of India nationalized the airline industry in 1953 through the enactment of the
Air Corporations Act. Pursuant to this Act, there were only two players left in the Indian aviation
sector, both of which were owned and controlled by the Indian government.
Indian Airlines was earmarked to primarily serve the domestic sector alongside operations to a few
select international destinations while Air India served the international sectors.
The liberalisation of the Indian aviation sector commenced in 1990 with private sector players being
allowed to operate as air taxi operators. However, they were not permitted to operate scheduled
services. A number of private players commenced domestic operations as air taxi operators
including Jet Airways, Air Sahara, Modiluft, Damania Airways, NEPC Airlines and East West Airlines.
In 1994, following the repeal of the Air Corporations Act, private carriers were permitted to operate
scheduled services and granted scheduled carrier status upon fulfillment of certain applicable
criteria.
However, many of these operators could not sustain their businesses and closed operations by
1997. Among the many private airlines which started operations with the deregulation of the Indian
civil aviation sector, only two continue to have operations in the country -- Jet Airways and Air
Sahara.

Emergence of 'no-frills' airlines

Following the emergence of no-frills airlines in the United States and Europe and the resultant
revolution witnessed therein in the aviation sector, the concept of no frills airlines started generating
interest in Asia and a number of no-frills airlines have emerged in the Asian continent. India's first nofrills airline, Air Deccan, commenced operations in August 2003. As recently as May 2005, Kingfisher
Air too commenced operations followed by Spice Jet and Go Air thus taking the total number of
private carriers providing scheduled services to six. In addition to Indian Airlines and these six
players, Air India also carries domestic passengers on domestic legs of its international flights,
offering both, full and discounted fares.
Given the feeling that there is vast untapped potential in the Indian aviation segment, there is no
dearth of players who are contemplating entering the Indian domestic aviation market.

Categorization of the Indian aviation sector

The Indian aviation sector can be broadly divided into following four main categories:

1. Domestic airlines, which provide scheduled flights within India and to select international
destinations;
2. International airlines, which operate scheduled international air services to and from India;
3. Non-scheduled operators, which include charter operators and air taxi operators; and
4. Air cargo services, which includes air transportation of cargo and mail.

Flying away
The Indian government changed the aviation policy on December29, 2004 and permitted Indian
scheduled carriers with a minimum of five years of continuous operations and with a minimum of 20
aircraft in its fleet, to operate scheduled services to other international destinations. On January11,
2005, it designated four scheduled Indian carriers (Air India, Indian Airlines, Jet Airways and Air
Sahara) to operate international services to and from Singapore, Malaysia, Thailand, Hong Kong, the
United Kingdom and the United States of America. It thus becomes evident that with the opening up
of the Indian aviation sector, there are opportunities for the taking.
India's civil aviation industry will need to purchase 490 aircraft over the next 20 years, according to
vice-president for sales at Boeing3. According to estimates from the aircraft manufacturer, falling
ticket prices and an increase in passenger traffic will cause an increase in the demand for aircraft.
The Indian authorities have reportedly said that the domestic and international air traffic will increase
by about 20% annually, due to investments from the government and private sector. The
investments have been estimated at US $20 billion over the next five years and the increase of
aircraft numbers is expected to double the number of civilian passenger aircraft in India to 400.
Further helicopters could also play an increasingly large role in intercity air transportation in the near
future 4.The Airport Authority of India (AAI) is also upgrading 35 non-metro airports at an estimated
cost of Rs 8,000 crores which will facilitate operation of bigger aircraft. Further a new airport is
coming up at Navi Mumbai which is expected to absorb future growth in population, business and
commercial activity in the region.The special economic zone, the Jawaharlal Nehru Port Trust,
Thane-Belapur and Taloja industrial areas and the huge catchment area ranging from Pune to South
Mumbai are expected to assure a steady growth rate in traffic at the new airport thus assuring steady
increase in consumption of ATF.

Summation
As seen in the foregoing discussion that the air traffic is going to increase in India and with the
opening up of the Indian aviation sector, there are opportunities for taking. Newer air lines are
purchasing aircrafts which ultimately require aviation fuel for operation.
ONGC as such operates around 21 helicopters providing logistics support for its onshore and
offshore operations. Air logistics support services are provided to offshore rigs, platform installations,
MSVs, Oil tankers etc for movements of men and materials, crew change, inter-platform
movements, attendance to un-manned platforms and to meet any operational emergencies and
natural calamities in offshore as well as onshore operations. Today, we have a mix of owned and
charted helicopters, which include 20 Nos. of charter helicopters (PHHL: 12, Global Vectra: 06,
UHPL: 02) for the Mumbai Region, being supported by 02 Nos. of helicopters for Vizag in the
Eastern coast of ONGC fields. One Dhruv helicopter has been purchased recently from M/S HAL
and another two Dhruv helicopters are to arrive at the end of this year. A part of ATF produced at
Hazira would be consumed for refueling helicopters at Juhu-Helibase as well as at offshore
platforms. The prevailing market price of twenty thousand kilolitres of ATF works out to be around
Rs. 88 crores and with each passing month ATF prices are increasing as oil prices in international
market are going up. Further on augmentation of production capacity of ATF, there shall be an
additional surge in the revenue of ONGC. This way ONGC would use its own ATF for operating its
Heli-operations, develop expertise in ATF refueling business and also save substantially.

Acknowledgements
Authors are thankful to Sh. Yogesh Bhatnagar, GGM - Head, Offshore Logistics, Mumbai for his
guidance and encouragement. Thanks are also due to colleagues and friends working at JuhuHelibase for fruitful discussions.

References:
1.
2.
3.
4.

Govt. of Indias Authorization No: P-11013/18/2004-Dist dated 2nd August2005

Encyclopedia, Columbia University Press, 2005.
Aviation in India, International Business Strategies, August 2005.
More helicopters in our future business, The Futurist, September / October 1991.