U.S. case highlights Mexico's rampant oil theft

By Robert Campbell

MEXICO CITY (Reuters) - Mexico's state-run oil company Pemex has an endemic problem of fuel thefts from pipelines that was highlighted this week in a case involving stolen oil smuggled into the United States.

U.S. customs authorities handed over $2.4 million to the Mexican government on Tuesday that was uncovered in a joint investigation into oil stolen in Mexico and sold north of the border.

Tapping into state oil monopoly Pemex's PEMX.UL pipelines to steal gasoline, diesel and even jet fuel has generated hundreds of millions of dollars of profits for Mexican criminals for years.

The lost fuel is a significant cost for Mexico, which relies on imports for more than 40 percent of its gasoline despite being one of the world's largest oil producers and exporters.

Pipelines buried beneath farms and in other rural areas are frequently dug up by the thieves who attach valves to allow them to drive up tanker trucks to the line and siphon off the fuel.

For the most part, stolen fuel is sold to corrupt service station owners and companies that operate large fleets of vehicles in Mexico.

Pemex frequently finds the connections and seizes tanker trucks full of fuel but arrests are uncommon and convictions are even rarer, especially of the leaders of fuel theft rings.

The Texas case is no surprise to long-time watchers of Mexico's oil industry.

"It's just business as usual for Pemex except for the fact that it has come to light," said Mexico oil analyst George Baker.

"There is no corporate business unit responsible for pipelines. It's completely balkanized and the pipeline integrity people are infiltrated by the traffickers," Baker said.

Mexico's powerful drug gangs, who the government accuses of participating in the theft, are believed to fuel their aircraft with stolen jet fuel to cover up evidence of illicit flights.

But despite periodic crackdowns, the thieves have grown bolder, as evidenced by their expansion into stealing crude oil, which must be smuggled out of the country where it can be refined if it is to have any value.

U.S. oil trader Donald Schroeder pleaded guilty in May to buying stolen Mexican condensate, a raw hydrocarbon similar to crude oil, and arranging for it to be shipped to Texas on a barge.

Condensate, which like crude oil must be refined, is mainly processed in petrochemical plants to make plastic.

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