Mexico theft makes fuel truck insurance costly

Private fuel and LPG distributors in Mexico say they cannot afford to insure the product they carry via truck against theft, as insurers are raising premiums because of rampant highway cargo robbery.

Mexican fuel and LPG truck distributors told Argus that their insurance prices have increased recently by up to 60pc, leaving many without any coverage for theft.

"We are greatly preoccupied by rising insurance rates, which have increased disproportionately in Mexico," said Gerardo Cantu, a fuel distributor working for state-run Pemex in northern Mexico. Some insurers have also entirely stopped offering theft coverage on cargoes carried by trucks.

Mexico's association of insurance companies (AMIS) did not respond with a comment to an Argus inquiry.

Pemex distributes fuel to retailers up to 100km (62mi) away from its fuel distribution and storage terminals across the country, sometimes hiring private trucking companies. Fuel retailers located further than that must arrange their own transport, although Pemex covers the cost.

Distributors said there has been an uptick in recent years of robberies of truck cargo of all types — from milk to meat to beer — although official statistics are not available.

The rising theft of fuel from pipelines has also become a matter of national attention, since the Mexican president Enrique Pena Nieto called for a more aggressive fight against illegal tapping in May, perhaps contributing to the difficulties encountered by distributors to insure fuel.

LPG and fuel distributors typically carry insurance for public liability and environmental damage. But the product itself is not included in this coverage.

The problem, transporters said, is that the price of such insurance is too high.

"We would need to be robbed three or four times a year to make it worthwhile," said Victor Figueroa, president of Adigas, an LPG distributors association that represents 67 Mexican companies.

And while there are no official statistics on how many LPG and fuel trucks are stolen each year, Adigas told Argus it ranged between one and two trucks per company per year.

"They [insurance companies] are overprotecting themselves, they are not giving us a real price," Figueroa said.

Gabriel Bravo, head of a local fuel retailers association in the state of Veracruz, confirms the trend. In his state, he estimates that 90pc of the trucks do not insure the actual product.

He also says that with fuel prices still capped in Veracruz by the energy regulatory commission (CRE), the industry cannot pass on the cost of expensive insurance to the consumer. Mexico is gradually liberalizing fuel prices, starting with the northwest portion of the country.

"With the prices imposed by the CRE, it is not viable," Bravo told Argus, adding that in nearly 30 years of business, he has never insured the fuel he transports.

Mexico is in the process of implementing a sweeping energy reform that has opened its fuel after decades of state monopoly. Market-drive prices are gradually introduced as part of the liberalization of the country's fuel market.

Rising fuel theft is a problem for Mexico, which is hoping to attract domestic and foreign downstream investment. According to Pemex officials, fuel theft, which primarily targets pipelines, costs about $1.2bn a year.

Distributors say instead they take more preventative measures to avoid robberies.

Bravo said last year two of his trucks were stolen in Coatzacoalcos, Veracruz — which is Mexico's third major oil hub and home to a Pemex fuel distribution and storage terminal.

"Now if [Pemex] tells us to go to this terminal to get our fuel, we do not go. We prefer to not go and not have product for a day than to be robbed," he said. "This is the best insurance."

Distributors also fear that the recent increase in pipeline security, driven by a rapid and uncontrollable increase in fuel theft in Mexico, might end up in an uptick in truck robberies.

"Our biggest fear now is that they start stealing trucks," said Ramon Loredo Gonzalez, a Oaxaca representative of Mexico's national fuel distributors association (Onexpo).