Stolen oil fueling Mexico's drug war
Stolen oil fueling Mexico's drug war
Thefts used to launder cash, hike cartel profits
Chris Hawley - May. 30, 2010 12:00 AM
Republic Mexico City Bureau
ARROYO MORENO, Mexico - Mexico's violent drug cartels are getting into the oil business, tapping into underground pipelines and siphoning off tons of crude, gasoline and other fuels, some of which is ending up in the United States.
The stolen fuel has created a huge income stream, as much as $715 million a year, that gangs can use to buy weapons, bribe officials and bankroll their bloody battle against the Mexican government, experts warn.
Drug gangs steal oil in Mexico
They sell the fuel through their own gasoline stations; sell it to unscrupulous manufacturers or trucking firms in Mexico; use it to pump up profits at front companies owned by the cartels; or sell it to foreign refiners on the international black market.
Last year, thieves stole an average of 8,432 barrels of petroleum products each day, enough to fill 39 tanker trucks. The thieves are leaving a trail of environmental devastation, with broken pipelines poisoning farm fields and leaking into Mexican rivers.
The number of illegal pipeline taps has more than quadrupled since 2004, from 102 then to 462 last year, despite renewed anti-theft efforts by Petroleos Mexicanos, the state-owned oil monopoly better known as Pemex. In 2008 alone, authorities arrested 528 people and seized 517 vehicles, Pemex said. Losses that year were $715 million; it has not released an estimate for 2009.
"It's a big problem and a continual thorn in their side," said David Shields, editor of Energia a Debate, an oil-industry magazine. "And the states that have drug trafficking have more problems with their pipelines."
The thieves use powerful drills and sophisticated valves to prevent any drop in pipeline pressure that might be detected by Pemex. They use hoses to fill fuel trucks with the stolen liquids. Sometimes they even take a more direct approach: hijacking tanker trucks full of fuel.
Since October, five American businessmen have pleaded guilty to importing stolen petroleum condensate, a raw ingredient for fuels.
Scene of the crime
On the outskirts of Arroyo Moreno, a Pemex pumping station grinds day and night, moving tons of crude oil, diesel, gasoline and other fuels northward from Mexico's oil fields and refineries along the Gulf of Mexico.
On the night of Oct. 27, Isidora Sierra Guerrero was awakened by a sickening odor like the smell of burning tar.
She dashed to the bathroom, soaked towels in water and stuffed them under the doors.
"I smelled those fumes, and I thought we were all going to die," she said.
The smell was fresh crude oil. A mile from Sierra's house, thieves had botched an attempt to tap a high-pressure Pemex line, creating a 60-foot geyser of oil in the middle of a nearby sugarcane field. By the time Pemex crews stopped the leak, the oil had soaked 86 acres of farmland.
Veracruz, the Gulf Coast state where Arroyo Moreno is located, accounted for 122 of the 462 illegal taps detected in 2009, more than any other state, Pemex says.
The buried pipelines are easy to find: Yellow posts emblazoned with "PEMEX LINE - DO NOT EXCAVATE" dot the landscape for hundreds of miles across the Sierra Madre foothills.
Oil theft here is controlled by the Zetas, a band of hit men that broke off from the Gulf Drug Cartel two years ago, the Mexican Attorney General's Office says. The Zetas have quickly diversified, dabbling in everything from pirated DVDs to kidnappings for ransom.
The thieves prefer sites where they can tap more than one product. In Arroyo Moreno, there are five parallel pipes, including ones that carry gasoline and diesel fuel, said Sierra, who is the town treasurer.
Pemex sent bulldozers into the fields to scrape the topsoil into huge piles and build a berm of dirt to try to stop any further seepage. But the damage was done.
"Look at this," said farmer Cupertino Vazquez, dipping a stalk of sugarcane into a water well that he uses to irrigate crops near the village of Arroyo Moreno. The stalk came out dripping with black crude. "I can't water the crops now. These people are destroying our livelihoods." Nearby, a field of corn stood ragged and dry in the tropical sun because of the lack of water.
Complementary business
Oil theft is a perfect business for Mexico's drug cartels because many have acquired gasoline stations and liquefied-petroleum suppliers as a way of laundering drug money, said George Baker, a Houston-based consultant.
Drug cartels need ways of depositing huge amounts of cash into banks without raising suspicion. Gasoline stations offer perfect cover because most Mexican motorists pay in cash.
"It's a ticket to go to the bank without raising any questions," Baker said.
Selling stolen fuel allows the cartels to make even more profit from these side businesses, he said. Drug gangs may mix stolen fuel with legitimately purchased fuel for extra profit or sell it on the black market to other companies. All it requires is a truck, and in oil-rich areas like Veracruz state, the highways are full of private tanker trucks that can be easily rented.
Crossing the border
There are signs that stolen petroleum is increasingly ending up in the United States.
Executives from five Texas companies have confessed in a U.S. district court to knowingly buying million of dollars of natural-gas condensate stolen from Pemex. Condensate is a liquid distilled from natural gas that can be used, like oil, to make fuels, plastics and other products.
One oil-purchasing company, Continental Fuels of San Antonio, received 22 tanker trucks full of stolen condensate at its terminal in Brownsville, Texas, between late January and early March 2009, U.S. prosecutors say. It put the liquid on barges and sold it to manufacturing companies.
Tim Brink, Continental's president, was secretly recorded on a wiretap on Feb. 12, 2009, discussing price negotiations and acknowledging that the condensate was stolen.
According to a summary of the phone call submitted by U.S. prosecutors, "Mr. Brink . . . reiterated that the suppliers were paying nothing for the product."
Brink pleaded guilty to conspiracy to receive and sell stolen goods on May 14 and is helping investigators, court documents show.
Another man involved in the scheme, Arnoldo Maldonado of Mexican company Y Gas & Oil, admitted in court that he and a Continental Fuels employee had discussed paying bribes to Customs agents to let the tanker trucks through.
It's unclear whether he meant Mexican or U.S. Customs or whether the bribes had been paid. The U.S. Department of Justice declined to comment on the case.
Fighting thieves
The Mexican government says it has tightened security at its pumping stations and stepped up aerial patrols in an effort to stem the theft. It is also using an "instrumented pig," a device that moves through the pipelines, to map any leaks.
Mexico's Department of Energy has set up a telephone hotline for people to report theft. Posters outside Pemex sites warn: "They came looking for my neighbor - he ended up in prison for getting involved in fuel theft."
As a result, crews are detecting and closing off illegal taps faster, Pemex says. It notes that even though the number of illegal taps rose from 396 in 2008 to 462 in 2009, the volume of crude, gasoline and diesel lost declined 38 percent, from about 4.99 million barrels to 3.08 million barrels.
Even with the new detection equipment, it can take hours or days for authorities to track down leaks.
In a pasture near Tierra Blanca, Veracruz, ranch hand Lorenzo Pérez climbed atop another berm built by Pemex last year after thieves tapped into a pipe carrying unleaded gasoline. By the time Pemex had found the leak, thousands of gallons had soaked into the ground.
"These criminals don't care about the damage they do," Pérez said. "They take as much as they can, then they disappear."
Reach the reporter at chris.hawley@arizonarepublic.com.
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