From The Wall Street Journal
Mexico’s government is notching some successes in its battle against the country’s fuel thieves, dealing a blow to organized crime and restoring lost revenues to financially troubled state-run oil company Petróleos Mexicanos.
During the first three weeks in April, fuel theft fell to just 4,000 barrels a day, compared with an average of 56,000 barrels a day in 2018, according to Pemex, as the state company is known. Since late December, when the newly installed government of President Andrés Manuel López Obrador launched the crackdown, fuel theft has averaged 11,200 barrels a day, Pemex says.
Fuel theft skyrocketed in the last decade, becoming a national-security issue by providing a huge new source of money to gangs, including some of the country’s most powerful drug cartels. Last year, fuel thieves cost Pemex between $2.6 billion and $3.7 billion in lost sales, the company estimates, on total sales of $85 billion. Violence from gang disputes over fuel theft have claimed thousands of lives.
During this year’s first quarter, in contrast, Pemex said its losses from stolen fuel were about $79 million, down from $573 million in the previous quarter and around $368 million in the first quarter of 2018. The oil giant hopes to get additional revenues of some $1.6 billion this year as a result of the plan against illegal tapping.
“We think these are spectacular results for the company,” Alberto Velázquez, Pemex’s chief financial officer, said in a conference call last week with analysts.
Security analysts say while the administration is tackling a problem its predecessors largely ignored, sustained success will be a challenge. Criminal organizations have long shown they adapt quickly to challenges, and violence from fuel theft remains high.
The government attributes its initial success partly to a swift response in shutting down pipelines when Pemex detects a drop in pressure, suggesting an illegal tap draining gasoline. With military and law-enforcement officials providing security, Pemex has also placed concrete coverings over stretches of a key pipeline to make it far harder to access.
“We are constantly opening and shutting pipelines,” said Jesús Ramírez, Mr. López Obrador’s spokesman. He said coordination has improved with Pemex crews on the ground, assisted by the Mexican army, in shutting off pipelines that have been breached.
The approach initially caused fuel shortages across Mexico but that problem has largely been solved. Pemex has boosted inventories at fuel storage terminals, secured backup distribution capacity with hundreds of new tanker trucks, and improved its ability to unload fuel from ships directly to trucks.
On April 23, Pemex Chief Executive Octavio Romero said only three service stations in the country were reporting problems with gasoline supplies, compared with 736 in the last week of February and more than 2,000 in January.
Gas-station owners say they are seeing higher sales with the reappearance of clients who used to buy fuel more cheaply on the black market.
“We have noticed that some big clients, mainly freight-transport companies that were probably supplied by the informal market, have recently returned to gasoline stations,” said Roberto Díaz, the head of gasoline retailers’ association Onexpo. “Our operating figures indicate that this is something real, and effective.”
Sebastián Figueroa, the head of retailer Fullgas, said sales at his 90 service stations have increased about 5% since the start of the year, a shift he attributes mostly to the government’s fight against the illegal market.
“We’re seeing a change of mentality. Months ago, the illegal market was seen as normal by many clients. Now, they are afraid of being involved,” he said.
Under Mr. López Obrador’s predecessor, President Enrique Peña Nieto, the number of pipeline breaches jumped to nearly 15,000 in 2018 from 1,635 in 2012, the year he took office, Pemex data show. In 2006, there were just 213 pipeline breaches.
The actual number of illegal taps has increased in recent months, Pemex data show, making some people in Mexico doubt government claims that fuel theft is way down. But the continual closing of pipelines could explain how thieves make off with less fuel despite more illegal taps, said Rosanety Barrios, an energy expert and former official in Mexico’s energy ministry.
Mr. López Obrador’s administration has said a network of corrupt officials operated much of the theft. In January, the government said it uncovered a nearly 2-mile-long hose running from a Pemex refinery to a thieves’ deposit outside.
The intelligence unit at Mexico’s finance ministry has filed 37 criminal complaints with the federal prosecutor’s office involving five former government officials for alleged links to fuel theft, a senior government official said.
Pemex invested some $350 million between 2014 and 2017 in a real-time control system to detect drops in pipeline pressure, a top former company official said. But the oil company refrained from shutting down pipelines regularly, worried about fuel shortages and possible social unrest from communities where fuel theft is big business.
“The priority of former governments was to avoid shortages and social unrest, and the fight against fuel theft was not an obsession for the president himself, as it is now,” said a former senior official of Mexico’s energy ministry.
The new strategy comes with downsides. Using trucks to move gasoline is more than 10 times as expensive as using pipelines, according to some estimates. But Pemex officials say the overall savings from reduced fuel theft dwarfs the higher trucking costs.
In the longer term, the government will need to go after fuel-theft gangs, analysts say. Pipeline taps aren’t the only source of illegal fuel, which also is stolen from Pemex distribution centers, trucks and elsewhere, said Scott Stewart, an analyst for Stratfor, a security consulting firm. He also said more needs to be done to curb demand for stolen fuel.
“They’ve clamped down on the supply side. But…they need to clamp down on the demand side too,” Mr. Stewart said.
Violence associated with fuel theft is another unresolved problem. Guanajuato state, which is home to a major Pemex oil refinery and is crisscrossed by a network of key pipelines, recorded 3,290 murders in 2018, more than any other Mexican state. The state’s murder rate has grown to five times that of 2011, mainly the result of turf wars between fuel-theft gangs, law-enforcement officials say.
The reduction in fuel theft hasn’t yet led to a drop in violent deaths, though. In the first three months of this year, Guanajuato recorded 947 murders, an increase of 27% over the same period a year earlier.
Still, many observers see a positive trend. “With all of these changes and new security measures, hopefully we’ll soon see calm returning,” said Patricia Villasana Ramos, president of the U.S.-Mexico Chamber of Commerce’s central Mexico region, based in Guanajuato, the state’s capital.
