Mexico exemplifies growing global fuel theft

Mexico holds the unfortunate distinction of being a standard bearer in a growing global market of fuel theft, says one crime expert.

"Globally oil and fuel theft has become bigger over the last decade … more sinister and more organized," said consultant Ian Ralby at the Argus Mexican Refined Products Markets conference in Houston, Texas. "Mexico is one of the examples most cited where that is the case."

Ralby, a maritime crime expert, began studying Mexico's largely land-based theft issues as part of several reports on global oil theft for the Atlantic Council, where he is a nonresident senior fellow.

He said fuel theft now costs an estimated $133bn/year globally — with $1.6bn/yr of that in Mexico, state-owned Pemex has acknowledged.

Fuel theft has been growing rapidly in Mexico both as recent energy reforms removed fuel subsidies, and as government campaigns against Mexico's drug cartels since 2006 splinted the groups and led them to look for "a way to diversify their income stream" in increasingly violent ways.

Cartels make roughly $20bn/yr in Mexico, making fuel theft a significant portion of their revenue, Ralby said. Techniques continue to evolve, with cartels now taking a "Robin Hood" approach to the activity, especially in fuel stolen through illegal taps on pipelines.

The operation involves multiple "employees," from a skilled operator making $8,000/month to a look-out — possibly a child or teenager — making $500, Ralby said. Even after paying all involved, the profit for a tap that runs for 20 minutes is $20,000, he estimated.

Thieves also at times leave taps open on farmland, allowing the farmer to access that stolen supply plus get compensation from state-owned Pemex for the environmental impact.

Thieves are also expanding into LPG, despite theft of the fuel demanding a high level of technical skill. About $57mn worth of LPG has been stolen in the last year, and two trucks hijacked, Mexican LPG associations have said.

Ralby said there are few signs that the activity will abate soon, an opinion supported by statistics published yesterday from Pemex: there were 1,359 reported incidents of illegal pipeline taps in August, an 18pc increase from July, the highest monthly rise since March 2017. Year on year the jump was even higher, up by 46pc from 928 thefts in August 2017.

The state of Puebla saw an increased number of taps in August with 203, compared with 142 in July, making it the leader in illegal taps. In July, Puebla ranked fourth.

Hidalgo (201) and Guanajuato (172), which was the state with the highest occurrences in July, followed Puebla as the three states with the most fuel theft in August.

While illegal taps have gotten the most attention, white-collar theft using false or duplicate documentation is also a major issue, he said.

Fuel theft is growing not only in Mexico, but across the region, Ralby said. Ecuadorean fishermen smuggle the subsidized product into Colombia and Peru, where fuel is much more expensive; martial law has been declared at times in Montego Bay, Jamaica, to bust a fuel theft ring; and in Venezuela, fuel can be traded for baby supplies or food — supplying a different level of need, he said.

Stopping the flow of stolen fuel will involve multiple tactics — including better digital fuel-prevention tactics, addressing the human dimension of the problem and prosecuting fuel thieves, Ralby said.

For now, fuel exporters to Mexico, such as US-based Windstar, use fuel prevention measures such as employing their own tank trunks, shipping supply by rail into secured yards, and — by nature of where they are based closer to western Mexico — operating outside of some of the most-affected regions in central Mexico.

"We have not had any major events" of theft, Windstar's head of refined products Esteban Salas said at the Houston conference. "It is also important to be familiar with the region in which you operate."