5 questions about fuel theft in Mexico answered

The Mexican fuel market is a white attraction for criminal gangs. In size, it is the sixth largest in the world, according to data from the Secretary of Energy (Sener), reporting a total daily demand of almost 1.18 million barrels of gasoline and diesel.

With a demand of 1.18 million barrels per day, the Mexican market is the 6th largest in the world.
With a demand of 1.18 million barrels per day, the Mexican market is the 6th largest in the world.

Hence the appetite of organized groups for drilling along the main oil pipelines of Petróleos Mexicanos (Pemex), an illegal practice colloquially known as "huachicoleo".

1. How did the theft of fuel originate?

Fuel theft has been a problem in Mexico for decades but has been on the rise in recent years.

The fight against drug trafficking has caused the cartels to turn to other forms of theft and that the pipeline network of the nation turned out to be a business of interest.

The robberies intensified in recent years as a result of the energy reform by former President Enrique Peña Nieto, who opened the industry to foreign investment.

Also, with the liberalization of the gasoline market, retail prices went up, which gave criminal gangs the opportunity for a higher profit margin through sales of gasoline on the black market.

The thieves connect to the pipelines and currently divert the equivalent of about a fifth of the total national consumption of gasoline, about 150,000 bpd, according to Reuters calculations based on official data.

Subsequently, the bands resell to third parties, including gas stations legally established, according to official reports.

Pemex accounted for more than 12,500 illegal takeovers in its fuel pipeline network from January to October 2018, more than in the previous year.

The widespread theft costs Pemex more than 3,000 million dollars (mdd) annually, according to official figures.

2. Who is responsible?

In addition to denouncing the participation of organized crime gangs, López Obrador has said that more than 80% of the theft is organized by Pemex employees, although he has not provided proof.

The president has also reported that the Petroleum Workers Union of the Mexican Republic (STPRM) has restricted access to parts of the company's operations.

Central and western states, which include Querétaro, Guanajuato, Hidalgo, Michoacán and Jalisco, are the most affected by the theft of pipelines, as well as the Salamanca refinery, which has been particularly affected by organized crime and violent riots.

3. How efficient is Mexico in gasoline production?

For years, the six Pemex oil refineries have operated below capacity, due to lack of investment and maintenance as well as frequent accidents, including deadly explosions that have caused costly stoppages.

Last year, refineries operated at about one-third of their crude processing capacity of 1.63 million bpd, compared to 2013, when they processed close to 1.4 million bpd.

4. How does Mexico meet its fuel needs?

In recent years, Mexico has become increasingly dependent on fuel imports and overseas purchases of gasoline, spirits and liquefied petroleum gas accounted for about two-thirds of total demand in 2018.

In 2016, imports and domestic production accounted for approximately half each. Mexico has 16 maritime terminals capable of receiving imported fuel, plus 74 storage terminals and more than 8,800 kilometers of pipelines.

Imports mainly flow through terminals Pajaritos, Tuxpan and Veracruz, on the Mexican coast of the Gulf of Mexico, which have recently become bottlenecks for imports.

Mexico is a fundamental export market for US refineries and commercial companies and is the largest purchaser of gasoline and diesel in the United States.

In October, the United States exported 621,000 bpd of gasoline to Mexico, which represents approximately 60% of the 1.03 million bpd exported that month, according to the Energy Information Administration (EIA) of that country.

5. How does the government face the situation?

The Government of López Obrador began with the closing of the main fuel lines on December 27.

Production at the Madero and Minatitlán refineries on the Gulf coast of Pemex has also been partially or totally halted, contributing to the need for imported fuels as a replacement.

López Obrador expects that some 5,000 tank cars will be able to distribute supplies to more than 11,000 gas stations throughout the country.

Although the vast majority of the stations are Pemex franchises, a growing number belong to new private participants, among them the giant ExxonMobil and the commercial company Glencore, which in some cases import their own fuel.

The cost of transporting gasoline and diesel in tanker trucks is almost 14 times more expensive than through pipelines, according to a study by the Federal Economic Competition Commission of Mexico (Cofece).

Both Pemex and López Obrador have sought to convince increasingly restless citizens that there is enough gasoline and that 4,000 soldiers supervise refineries and other key facilities.

Both actors have also begged for patience from the citizens while the new distribution system is being standardized.

López Obrador's team has yet to explain how it will finance the distribution costs that are higher.

via: Manufactura