January 20, 2011 / 6:22 PM / 9 years ago

Mexico oil thieves get sophisticated amid crackdown

* Pemex losing less fuel and crude but illegal taps grow

* Crude oil pipelines targeted more than ever

* Risk of accidents rising with more illegal taps

By Robert Campbell

MEXICO CITY, Jan 20 (Reuters) - Mexico’s crackdown on fuel theft has more than halved the amount of oil being stolen but is leading thieves to switch to more sophisticated and sometimes riskier strategies, government officials say.

Gangs are still believed to earn hundreds of millions of dollars a year tapping Mexico’s vast, but largely unprotected, pipeline network, even though state oil monopoly Pemex says it has curtailed the thefts with the help of the army.

But the growing involvement of Mexico’s drug cartels in the trade and a pipeline blast last month that killed 30 people has focused authorities’ attention on the endemic problem in the world’s No. 7 crude producer. [ID:nN19172322]

Pemex [PEMX.UL] has beefed up security and added sensors to its pipelines to detect illegal connections, which helped cut the amount of fuel stolen last year to 1.7 million barrels, compared to nearly 5 million barrels in 2008.

“We’re seeing changes. They are tapping into (propane) pipelines. We’ve also found some double taps that the criminals use to inject water into the pipes to stop the detection of a loss of pressure,” Pemex Chief Executive Juan Jose Suarez said during testimony before a congressional panel last week.

CARTEL EXPERTISE

Fuel thieves traditionally focused on stealing gasoline and diesel for sale on the local black market, but gangs increasingly have set their sights on crude oil.

Pemex found 712 connections to its network last year, nearly double the number found the year before and five times the amount detected in 2005.

Two crude pipelines were the most tapped nationwide last year with 191 illegal connections, up from only five in 2005.

Pemex believes thieves siphoned off about 10,000 barrels of crude worth more than $700,000 every day last year.

Officials say the crude most likely ends up with brickmakers and other industrial customers who use it as a substitute for boiler fuel. Privately they admit criminals may be smuggling the oil out of Mexico, given the relatively small size of the domestic market for industrial boiler fuel.

Drug cartels, which extort protection money from fuel theft gangs who are often made up of current and former oil industry workers, are believed to provide the expertise to smuggle siphoned oil into the United States.

Court papers indicate that Mexican and U.S. authorities believe the Zetas cartel helped one gang move up to $300 million in condensate — a liquid byproduct of natural gas used to make plastics — into Texas by bribing customs officials, using false transit documents and hiring middlemen to sell it to some of the world’s largest chemical companies.

A similar scheme with crude would be easy to replicate and hard to detect due to the huge size of the oil market. Pemex officials say the origin of the smuggled crude can be easily concealed by blending it with legitimately-obtained oil.

Pemex has vowed to continue investing in technology to detect and close off illegal taps and is pushing the government to toughen the penalties for possession of fuel theft.

But stepped-up security measures have led to a spike in the number of illegal taps as criminals try to evade army patrols by making one-off raids in a variety of sites rather than repeatedly milking established taps, Pemex officials say.

Reporting by Robert Campbell; Editing by Paul Simao

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