Black Gold, Black Market: Theft and Smuggling in Mexico Is Nothing New. but Criminals Are Increasingly Targeting the Petroleum Industry to Fund Other Illicit Behaviors
Coffin, Bill, Risk Management
In early August, a joint U.S.-Mexican investigation into the widespread oil theft and trafficking industry in Mexico uncovered the illegal sale and smuggling of more than $2 million in petroleum from Mexico's state-owned oil monopoly Pemex to companies in the United States. The culprit, Donald Schroeder, president of Houston-based Trammo Petroleum, has been ordered to pay a $2 million fine to the U.S. government. A separate $2.4 million refund check from Trammo was turned over to Mexico by the U.S. government as partial compensation for the theft.
Schroeder will be sentenced in December, but he is just a single player in a vast and long-running criminal enterprise that bleeds the Mexican economy of billions of dollars every year and funds a host of violent drug cartels. Nonexistent physical security of Mexican oil pipelines, endemic corruption by officials within Pemex as well as among local law enforcement, also make the problem extremely difficult to tackle.
According to the U.S. Energy Information Administration, Mexico is the world's sixth largest oil exporter, creating some 3.5 million barrels per day. This is handled exclusively through Pemex, which brought in nearly $77 billion in revenue last year and whose taxes form a substantial portion of the Mexican government's annual treasury. Pemex, however, loses nearly $1 billion each year to theft of its products, mostly in the form of gasoline, diesel and even jet airplane fuel that is illegally tapped from its extensive and poorly secured pipeline network.
In many cases, sections of pipeline in rural areas are simply dug up and tapped by locals who then sell the products for immediate use. But the products are also aggregated and sold in bulk to smugglers who slowly fill tanker trucks and barges with stolen goods for eventual transport to the United States. There, it is sold to small petroleum importers who in turn sell it to larger operators.
With the theft and sale of crude oil, the method is much the same. The goods are slowly siphoned off from pipelines, collected and then either shipped across the border as legitimate product or smuggled across the border. After a few transactions, the stolen goods end up in the hands of a reputable refiner that has no record of where the petroleum originally came from. …