Mexican drug cartels steal billions from oil industry – Longview News-Journal: Business

CIUDAD MIER, Mexico — Mexico overcame 75 years of nationalist pride to reform its flagging, state-owned oil industry. But as it prepares to develop rich shale fields along the Gulf Coast and attract foreign investors, another challenge awaits: taming the brutal drug cartels that rule the region and are stealing billions of dollars’ worth of oil from pipelines.

Figures released by Petroleos Mexicanos show the gangs are becoming more prolific and sophisticated. So far this year, thieves across Mexico have drilled 2,481 illegal taps into state-owned pipelines, up more than one-third from the same period of 2013. Pemex estimates it’s lost some 7.5 million barrels worth $1.15 billion.

Pemex director Emilio Lozoya called the trend “worrisome.”

More than a fifth of the illegal taps occurred in Tamaulipas, the Gulf state neighboring Texas that is a cornerstone for Mexico’s future oil plans. It has Mexico’s largest fields of recoverable shale gas, the natural gas extracted by fracturing rock layers, or fracking.

Mexico, overall, is believed to have the world’s sixth-largest reserves of shale gas — equivalent to 60 billion barrels of crude oil. That’s more than twice the total amount of oil that Mexico has produced by conventional means over the last century.

Business in the balance

The energy reform passed in December loosened Mexico’s protectionist policies, opening the way for Pemex to seek foreign investors and expertise to help it exploit its shale fields. It hopes to draw $10 billion to $15 billion in private investment each year.

The attractiveness of the venture could hinge on bringing Tamaulipas under control.

“The energy reform won’t be viable if we aren’t successful … in solving the problem of crime and impunity,” said Sen. David Penchyna, who heads the Senate Energy Commission. “The biggest challenge we Mexicans have, and I say it without shame, is Tamaulipas.”

One foreign oil company that had a brush with violence appears undeterred.

In early April, gunmen opened fire at a hotel in Ciudad Mier, in Tamaulipas’ rough Rio Grande Valley, where eight employees of Weatherford International Ltd., a Swiss-based oil services company, were staying.

They were not injured, and Weatherford said in an email message that “Mexico continues to be a focused market for us with growing potential in 2014 and 2015.”

But other potential bidders may be put off by such incidents.

More clarity sought

Energy analyst David Goldwyn said the Mexico government is going to have to be a lot clearer about its security plan for most shale exploration and production companies, which don’t have experience working in risky areas.

“What’s the government going to do, what kind of protection, what is it going to allow the operators to do inside their fence line?” he said in a recent conference call with reporters.

Two rival gangs, the Zetas and the Gulf cartel, long have used Tamaulipas as a route to ferry drugs and migrants to the United States and, in recent years, diversified their business: stealing gas and crude and selling it to refineries in Texas or to gas stations on either side of the border.

At least twice a day, the gangs pull up to one of the hundreds of pipelines that crisscross the state. Workers quickly shovel down a couple of yards (meters) to uncover a pipeline and siphon their booty into a stolen tanker truck, said army Col. Juan Carlos Guzman, whose troops have raided a number of such illegal taps.

A dirt farm road led down to one site outside Ciudad Victoria, 180 miles southwest of McAllen.

About a half-mile from a nearby highway, thieves had dug out a pit and inserted a large needle-like device into the pipeline.

By the time soldiers arrived, the gang members had fled, and only the driver of the half-loaded gasoline truck was arrested.

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