Fueled by large sums of drug money, large cartels took control of large swathes of Mexico and, for more than a decade, challenged the rule of law and the state. Systemic theft of crude oil and related products, including the theft of gasoline, has long plagued the Mexican oil and gas industry. It is estimated that organized crime groups earn up to $ 400 million a year from the theft of petroleum and refined products. The scale of the problem has been highlighted by the Mexican national oil company Pemex, estimating in early 2018 that the theft of oil was costing him dearly more … than $ 1.6 billion per year. The theft of oil, including refined products, in this violence-ravaged Latin American country is typically carried out using illegal pipeline valves. The decline in oil production and heavy debt as well as widespread fuel theft severely affected the performance of the national oil company. In 2018, the problem was so severe that in that year alone it was estimated that a registration number 14,910 illegal taps have been identified on its 10,563-mile-long pipeline system. Mexico’s national oil company estimated that in 2018 it was losing around 74,000 barrels of crude oil per day to oil thieves, known locally as huachicoleros. The situation was so serious that police intervention was insufficient and the Mexican army was called upon to confront thieves equipped with military-grade automatic weapons in light armored vehicles. Such a large volume of oil thefts has had a huge impact on the Mexican economy, where more than 2% of gross domestic product and about 6% of export revenue is generated by the oil industry.
The problem was so serious and had such an impact on Pemex’s revenue and ultimately government revenue that by securing Mexico’s top job in December 2018, President Andrés Manuel López Obrador launched a major repression on the theft of oil. This would have seen the volume of crude oil lost by Pemex to the theft plunge to around 5,600 barrels per day by the end of 2020, less than a tenth of what it was two years earlier. The notable reduction in oil theft saw President Obrador declare victory over oil theft in early 2019. Despite significant progress in eradicating oil theft, there are signs that it is increasing. again and the authorities’ declaration of victory was premature.
The COVID-19 pandemic has had a marked impact on Latin America’s second-largest economy, leading to a decline in its gross domestic product contract by 8.2% in 2020 with a sharp increase in poverty and unemployment. This, coupled with a resurgence in organized criminal activity, has triggered a marked increase in oil thefts in Mexico. The data shows that illegal valves (Spanish) on Pemex pipelines for the period January to April 2021 increased by a worrying 9.5% compared to the same period a year earlier. This is compared to the 11,022 illegal taps identified on Pemex’s pipeline network for the year 2020 and 13,137 for 2019. The states of Hidalgo, Puebla and the State of Mexico are the focal points for the theft of oil, and where the most stolen refined products are recovered by Mexican authorities. These figures not only indicate that President Obrador’s declaration of victory was premature, but that oil theft is on the rise as authorities struggle to prevent it from happening.
The sharp increase in oil thefts is also illustrated by the seizure by the authorities of an ever-increasing volume of stolen fuel and other petroleum products. The states of Hidalgo, Puebla and the state of Mexico saw the largest increase. In the first two months of 2021, authorities made 794 convulsions (Spanish) of oil stolen from Hidalgo, which has long been a hotspot for oil theft, up from 581 recoveries in 2020. The worrying 37% increase indicates that the theft of refined petroleum products has increased since the start of 2021 as the economic fallout triggered by the pandemic continues to hit Mexico hard. Oil thieves in Latin America’s second-largest oil producer are becoming increasingly resourceful and brazen in their attempts to avoid detection while stealing ever-increasing amounts of oil and its products. This saw the huachicoleros resort to using underground tunnels (Spanish) to avoid detection and siphon fuel from illicit taps on pipelines to hidden warehouses. This marked increase in oil thefts since the start of 2021 will impact Pemex’s operations, government revenues and, ultimately, the economy.
As the days of the use of illegal valves and open siphoning of petroleum products from Mexican pipelines are over, oil theft remains a pressing problem plaguing the economically crucial oil industry. This is why President Obrador must continue to devote considerable resources to the fight against oil theft in Latin America’s second-largest economy.
By Matthew Smith for Oil Octobers
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