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Greater coordination would see results in fight against fuel theft in Mexico: analysts

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Greater coordination would see results in fight against fuel theft in Mexico: analysts

  • Author
  • Daniel Rodriguez
  • Editor
  • Keiron Greenhalgh
  • Commodity
  • Oil

Mexico City — Greater coordination between government levels and state-owned Mexican oil company Pemex could help to control rampant fuel theft in the country, analysts told S&P Global Platts.

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Pemex reported late Wednesday it found 1,152 illegal pipeline tappings across the country, 333 tappings less than the all-time record high the company saw in April.

Fuel theft has grown exponentially in Mexico. In 2017, Pemex's system saw a total of 10,363 illegal tappings, compared with less than 700 in 2010. In the first seven months of 2018, Pemex's pipeline network was illegally tapped over 8,700 times.

At an April press conference, Pemex CEO Carlos Trevino said the company lost Peso 30 billion ($1.6 billion) as a result of fuel theft.

At the heart of Mexico's fuel theft is the state of Puebla, where Pemex's system saw over 280 tappings alone in April. Multiple major pipelines cross the state, moving fuel from the 285,000 b/d Minatitlan refinery and the major marine terminals of Pajaritos and Veracruz to Mexico's central region.

The coordinated efforts between Pemex and the different levels of government allowed Pemex to cut the number of illegal tappings to 143 in July from 284 in April, Arturo Carranza, an energy analyst with the Mexican National Institute of Public Administration, told Platts on Thursday.

"The results in Puebla show that when there is coordination among the federal and state authorities, Pemex has better results fighting fuel theft," Carranza said.

In Mexico, fuel theft being a federal crime, combined with legal loopholes, has been used as an easy excuse for municipal and state government not to take responsibility in the issue, he added.

In April, Pemex and Puebla's state government -- led by Tony Galy -- strengthened their cooperation to fight fuel theft by sharing information and holding coordinated actions among municipal, state and federal governments.

Pemex has implemented multiple strategies like improving its pipeline supervisory control and data acquisition system (SCADA) to monitor pressure decreases and drone patrolling as well to fight fuel theft, Carranza said.

"The issue comes at the time of detecting crimes. Pemex's security officers can't arrive immediately to stop a tapping while municipal and state authorities are the ones who can react quickly to arrive and apprehend criminals," he added.

Luis Miguel Labardini, a partner with Mexican energy consultancy firm Marcos y Asociados, said the root issue with fighting fuel theft is not on the Pemex level, but Mexico's weak rule of law.

"Greater coordination among parties helps, but the problem has a judicial nature related to weak rule of law in Mexico," Labardini said. "The phenomena of organized crime casts a shadow over all the country's sectors, including the hydrocarbon industry. Organized crime is a nationwide problem."

Labardini said the federal government is making a significant effort to reduce fuel theft such as was seen in Puebla, but to solve the problem modifications to Mexico's legal framework are required.

Carranza agrees, adding that Pemex can work along with the army, the federal and state police, but these efforts are fruitless if thieves are not prosecuted in the courts.

Under the legal framework, it has been difficult to prosecute thieves captured in the act of tapping or transporting stolen fuel. Mexico must make it a more severe felony to participate in fuel theft to deter this illegal activity, Carranza said.

In July, president-elect Andres Manuel Lopez Obrador said that among his legislative priorities were making fuel theft a serious felony. -- Daniel Rodriguez, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com