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Gas theft in Mexico: from illegal activity to national problem

As if it were another artery running through the body of the nation, this illicit activity has festered long enough to become entrenched in the social, economic, industrial and even political tissue of Mexico.


Luis Manuel Arce


The figures given by the president of Mexico, Andrés Manuel López Obrador, who is waging an uncompromising war on this illegal activity – the results of which he said were included in government accounts as losses – indicate that presidents from Vicente Fox to Enrique Peña Nieto were undoubtedly aware of the issue.

The figures are frightening: the six pipelines covering more than 1,600 kilometres in length with 37 operational points including delivery stations and storage tanks had clandestine taps inserted and each day hundreds of thousands of litres were syphoned off into individual deposits. With the result that more than 60 billion pesos (three billion dollars) per year were taken out of State control.

Preventing the theft without pre-emptively shutting off the pipeline supply proved virtually impossible because of the way the robbery was organised, involving the departments in Pemex’s headquarters responsible for monitoring pressure so as to detect leaks and shut off valves to contain them.

Probably as a result of taking th   is decision and replacing pipelines with tanker trucks, serious disruption to the supply of public petrol stations was not sufficiently calculated and soon a bottleneck was noticed in almost all states since this type of provision is very slow, and supply far from meets demand.

Many institutions complain of financial losses due to the lack of gasoline and the attendant transportation problems, while distribution costs have risen substantially because supply by tanker truck is 14 times more expensive than by pipeline, not to mention the disruption caused by the delay.

But the major cost does not lie here. It lies in the huge mobilization of forces involved in battling this theft, starting with the deployment of some 12,000 soldiers to the areas where the gas pipelines are located and other military contingents that have occupied the refineries, storage facilities, substations and other distribution facilities, not to mention aerial surveillance of the entire system.

In the view of the government, the battle against theft, with its costs, complexities and inconveniences for the public, is a consequence of a worse problem that is very acute and really is the source of the corruption (though not just confined to this) that undermines the foundations of the country and has involved various administrations during the previous century and this.

Over a relatively short time Mexico has been losing its status as a net exporter of oil without doing anything for many years to stop the fall in levels of extraction and the stagnation of its refineries.

A really surprising development, given it was a privileged country as regards the cost-benefit ratio of its oil industry: it is among those for whom the cost of extraction ($7 a barrel), from shallow waters and on the mainland, is cheapest and for a long time it was selling it at an average of $100 a barrel.

However, according to the company’s own figures, its profits were poor at around 200 million dollars at a time when it was turning over 125 billion dollars a year, which was evidence of huge inefficiency compared with its foreign counterparts, all of which was exacerbated by the taxes imposed on it by the Ministry of Finance.

The truth is that total oil reserves fell from 53.0 billion barrels in 2001 to 37.0 billion in 2015, while the extraction of crude plummeted from 1.234 billion barrels per year in 2004 to 827,465 million in 2015; however, long before this, it had already become a net importer of gasoline and even crude oil.

Daily crude production in 2005 was 3.42 million barrels with exports of 831,000 barrels to its customers in America, Europe and the Far East.

But from then on production began to fall significantly, and by 2012 it had fallen to 75% of this figure (at 929, 988 barrels), to 74% in 2013, to 72% in 2014, and finally in 2015 to 67% at just 827,455 barrels. By that time, the so-called energy reform implemented by President Peña Nieto was underway: a reform that not only failed to produce any results but opened the way up for private investment. When he launched the reforms, the idea was to return to the levels of extraction and refinement prior to 2004.

Both declined and private capital, especially from US multinationals, did not lead to the hoped-for revival of the sector. On the contrary, Mexico began to buy light oil from the United States and other countries so it could process it with technologies established in refineries that do not work with heavy oil.

Faced with a lack of fuel production, particular the various types of gasoline used in the country, light oil purchases increased and currently Mexico imports 600,000 litres per day of the 800,000 it consumes, and its refineries only process 200,000 litres of oil, which is basically American, not its own.

This poses serious problems for the new energy plan implemented on 9 December 2018 by President López Obrador, which includes the construction of the Dos Bocas refinery in Tabasco, and reactivation of the six existing refineries, all with the aim of achieving gasoline self-sufficiency in the fourth year of his government.

At the same time, the plan includes a strong drive towards extracting crude oil both in shallow waters and on land, for which the Pemex budget, which has already been approved, will be increased.

According to López Obrador himself, the plan has a series of core ideas which must be complied with in order to achieve the aims of self-sufficiency (that has been lost) , and among them the Dos Bocas refinery is essential because with it in service the country will increase its production of gasolines, processing 1.54 million barrels of oil a day.

López Obrador is optimistic about plans to sign international contracts with companies from the United States and other countries, but local experts have their reservations because they doubt that Pemex will be able to reverse its decline in crude production and actually achieve the 2.4 million barrels per day by 2024 which the president is aiming for.

The reasons are, in fact, more technical than anything else, as some experts consider that the fields where the boost in oil production is planned are tricky, as with Ixachi, whose reserves are two thirds gas and where the company will need to drill at depths of seven thousand metres to reach crude.

The construction of the Dos Bocas refinery is also giving rise to discontent because it will require additional support from the federal government, on top of the injection of 1.2 billion dollars already provided for in the 2019 federal budget, despite the fact that the refinery will receive a further three billion dollars for the stolen gasoline. (PL)

(Translated by Nigel Conibear) – Photos: Wikipedia & Pixabay

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