pemexs

Mexico's oil industry now has an organized-crime problem

(Reuters)
Soldiers stand guard at a gas facility of Pemex in Reynosa September 18, 2012.

Mexican oil prices fell after a brief rally earlier this week, slipping to $24.47 a barrel on Tuesday and prolonging the slide of one of the country’s most lucrative exports.

In addition to the continuing downstream pain — or the brutally low prices oil is being sold for on the market — Mexico’s oil industry is dealing with a severe theft problem preventing an increasing amount of its production from ever getting to market.

Pipeline theft in Mexico rose 52% in 2015 according to an Associated Press report, a spike that comes after a 43.7% annual increase recorded in 2014.

The number of illegal taps has risen from 132 in 2001 to 3,348 in 2014.

“It is usually people from rural hamlets who live near the pipeline,” an official from the state-owned oil company, Pemex, told the AP.

(Reuters)
A policeman inspects barrels containing stolen diesel fuel, stored in a tyre repair shop, during an operation in the municipality of Apodaca, neighboring Monterrey July 4, 2011.

“They have broken through security perimeters on almost two dozen occasions in the last year, built dams to create diesel containment ponds and hauled up fuel by the bucketful to sell,” the AP added. 

Fuel theft is extremely dangerous, and dozens of civilians have been killed in related fires over the past year.

(Courtesy of Stratfor)

Drug cartels have also found fuel theft especially profitable.

In Tamaulipas state, which is close to Gulf of Mexico oil production, authorities “found that a cell of the deadly Zetas gang was organizing oil robbery and transporting the crude into Texas,” journalist Ioan Grillo reported in 2011.

Documents released by the Mexican government in early 2014 revealed that oil theft affected every Mexican state, with Los Zetas territory in Tamaulipas and Veracruz states experiencing the most rapid growth.

The powerful Sinaloa cartel has also been linked to oil theft, and in December 2015 a gang operating in Gulf cartel territory was apprehended with more than 40,000 gallons of fuel.

In 2014, Pemex lost $1.29 billion from pipeline tapping and other forms of theft. According to a 2014 report from Vice, the amount stolen is as much as 10,000 barrels a day.

(VICE News)
Workers patch up an illegal oil tap used by the cartel to steal oil from an underground pipeline in Mexico. The tap is just feet from another tap that occurred days earlier.

“They can [arrest] a few [of us], but there will always be others,” a member of Los Zetas cartel told Vice in 2014. “As long as they move gas through tubes, this is going to continue.”

While the Mexican government has recently increased jail terms for convicted oil thieves, observers have argued that harsher penalties are unlikely to deter thieves as long as they have little expectation of getting caught.

Moreover, fragmentation of Mexico’s powerful criminal groups has left behind many smaller groups that don’t have the wherewithal to pursue international drug trafficking. As a result, Insight Crime notes, those groups have turned to domestic activities, oil theft being one of the most lucrative.

Facing facts

In addition to fuel theft (and related environmental damage), Mexico’s energy sector is also dealing with the political and economic consequences of oil’s prolonged global price slump.

Market conditions have undermined Pemex’s ability to match the positive rhetoric used by President Enrique Peña Nieto to describe the landmark energy reforms he enacted in 2013, putting energy officials “in crisis mode,” writes Dwight Dyer, the energy editor at El Daily Post.

(REUTERS/Bernardo Montoya)
A supporter of Mexican leftist Andres Manuel Lopez Obrador holds posters in protest against energy reforms, Mexico City September 22, 2013. The poster on the left reads, “Thirsting for power. Mexico is not for sale,” and the one on the right says, “Oil, heart of Mexico.”

While the slump in oil prices and rampant theft does not seem to have turned off companies bidding on Mexico’s onshore oil fields, the Mexican government has had to make budget cuts due to a decrease in revenue.

This week, Mexican news site Animal Politico reported that the 2016 budget for Investment Projects and Programs (PPI) would be more than $5.6 billion less than apportioned in 2015.

This amount, a 20% “budgetary reengineering,” according to the Finance Ministry, will mean 751 infrastructure projects will be cut this year.

Cheap oil may also have broader consequences for Mexico’s oil sector.

According to Dyer, Mexico experienced its first deficit ever in hydrocarbon trading in 2015, a result of the country’s declining production and low prices.

Under these conditions, the Mexican government might soon have to make hard choices.

“Cheap oil is not where the country’s economic prospects lie,” Dyer wrote this week. “It is high time to face the facts and plan accordingly.”

NOW WATCH: This is how Mexican drug cartels make billions selling drugs



More From Business Insider
México evalúa una inyección de capital a Pemex

Por Alexandra Alper

MÉXICO DF (Reuters) - México evalúa inyectar capital a la petrolera estatal Pemex y está analizando casos específicos en que los impuestos que paga la compañía la limitan para hacer inversiones, dijo el miércoles el secretario de Hacienda, Luis Videgaray.

El responsable precisó que el apoyo financiero no es algo “inminente” sino que podría darse durante el año y que evaluarán distintas opciones para obtener los recursos.

Una inyección de capital aliviaría las finanzas de Pemex (PEMX.UL), que ha sido golpeada por una caída de más del 70 por ciento en los precios del crudo desde 2014.

“El Gobierno federal como accionista al 100 por ciento de Petróleos Mexicanos naturalmente no puede ser indiferente ante esta situación y estamos listos para respaldarla”, dijo.

Videgaray agregó que los montos y las características de la ayuda dependerán también de las condiciones del mercado y de los propios planes de inversión de Pemex.

La gigante estatal anunció en el tercer trimestre del 2015 pérdidas por 167.566 millones de pesos (unos 9,900 millones de dólares al cambio de la época), golpeada por el derrumbe de los precios internacionales del crudo, un menor nivel de producción y la fuerte depreciación del peso mexicano. [nL1N12S1KF]

El año pasado también se vio forzada a recortar su presupuesto en unos 62.000 millones de pesos, lo que afectó algunas inversiones previstas.

La estrechez financiera llevó a la firma a recortar unos 11.000 empleos en el 2015 y expertos creen que este año deberá adelgazar su nómina en al menos 10.000 personas. Pemex tiene una plantilla total de 150.000 trabajadores entre fijos y temporales, según datos oficiales.

Videgaray agregó que el Gobierno transfirió el mes pasado 50.000 millones de pesos a Pemex como parte del apoyo que le ofreció por modificar su sistema de pensiones y reducir así su enorme pasivo laboral de unos 91.000 millones de dólares. [nL1N1362KG]

Más temprano, el subsecretario de ingresos, Miguel Messmacher, dijo a la agencia Bloomberg que también se evalúa permitir que Pemex aumente su deuda más que lo previsto si es que presenta un plan para asegurar su sostenibilidad y rentabilidad a largo plazo. (http://bloom.bg/1nPB3Yg)

Pemex tiene que demostrar que puede reducir los costes, hacer mejores inversiones y acelerar alianzas con otras empresas, dijo Messmacher.

Sólo entonces podría el Gobierno allanar el camino a nuevos fondos, añadió el funcionario.

Messmacher no especificó un montante de la posible inyección de capital ni de deuda adicional.

Mexico's oil industry now has an organized-crime problem

(Reuters)
Soldiers stand guard at a gas facility of Pemex in Reynosa September 18, 2012.

Mexican oil prices fell after a brief rally earlier this week, slipping to $24.47 a barrel on Tuesday and prolonging the slide of one of the country’s most lucrative exports.

In addition to the continuing downstream pain — or the brutally low prices oil is being sold for on the market — Mexico’s oil industry is dealing with a severe theft problem preventing an increasing amount of its production from ever getting to market.

Pipeline theft in Mexico rose 52% in 2015 according to an Associated Press report, a spike that comes after a 43.7% annual increase recorded in 2014.

The number of illegal taps has risen from 132 in 2001 to 3,348 in 2014.

“It is usually people from rural hamlets who live near the pipeline,” an official from the state-owned oil company, Pemex, told the AP.

(Reuters)
A policeman inspects barrels containing stolen diesel fuel, stored in a tyre repair shop, during an operation in the municipality of Apodaca, neighboring Monterrey July 4, 2011.

“They have broken through security perimeters on almost two dozen occasions in the last year, built dams to create diesel containment ponds and hauled up fuel by the bucketful to sell,” the AP added. 

Fuel theft is extremely dangerous, and dozens of civilians have been killed in related fires over the past year.

(Courtesy of Stratfor)

Drug cartels have also found fuel theft especially profitable.

In Tamaulipas state, which is close to Gulf of Mexico oil production, authorities “found that a cell of the deadly Zetas gang was organizing oil robbery and transporting the crude into Texas,” journalist Ioan Grillo reported in 2011.

Documents released by the Mexican government in early 2014 revealed that oil theft affected every Mexican state, with Los Zetas territory in Tamaulipas and Veracruz states experiencing the most rapid growth.

The powerful Sinaloa cartel has also been linked to oil theft, and in December 2015 a gang operating in Gulf cartel territory was apprehended with more than 40,000 gallons of fuel.

In 2014, Pemex lost $1.29 billion from pipeline tapping and other forms of theft. According to a 2014 report from Vice, the amount stolen is as much as 10,000 barrels a day.

(VICE News)
Workers patch up an illegal oil tap used by the cartel to steal oil from an underground pipeline in Mexico. The tap is just feet from another tap that occurred days earlier.

“They can [arrest] a few [of us], but there will always be others,” a member of Los Zetas cartel told Vice in 2014. “As long as they move gas through tubes, this is going to continue.”

While the Mexican government has recently increased jail terms for convicted oil thieves, observers have argued that harsher penalties are unlikely to deter thieves as long as they have little expectation of getting caught.

Moreover, fragmentation of Mexico’s powerful criminal groups has left behind many smaller groups that don’t have the wherewithal to pursue international drug trafficking. As a result, Insight Crime notes, those groups have turned to domestic activities, oil theft being one of the most lucrative.

Facing facts

In addition to fuel theft (and related environmental damage), Mexico’s energy sector is also dealing with the political and economic consequences of oil’s prolonged global price slump.

Market conditions have undermined Pemex’s ability to match the positive rhetoric used by President Enrique Peña Nieto to describe the landmark energy reforms he enacted in 2013, putting energy officials “in crisis mode,” writes Dwight Dyer, the energy editor at El Daily Post.

(REUTERS/Bernardo Montoya)
A supporter of Mexican leftist Andres Manuel Lopez Obrador holds posters in protest against energy reforms, Mexico City September 22, 2013. The poster on the left reads, “Thirsting for power. Mexico is not for sale,” and the one on the right says, “Oil, heart of Mexico.”

While the slump in oil prices and rampant theft does not seem to have turned off companies bidding on Mexico’s onshore oil fields, the Mexican government has had to make budget cuts due to a decrease in revenue.

This week, Mexican news site Animal Politico reported that the 2016 budget for Investment Projects and Programs (PPI) would be more than $5.6 billion less than apportioned in 2015.

This amount, a 20% “budgetary reengineering,” according to the Finance Ministry, will mean 751 infrastructure projects will be cut this year.

Cheap oil may also have broader consequences for Mexico’s oil sector.

According to Dyer, Mexico experienced its first deficit ever in hydrocarbon trading in 2015, a result of the country’s declining production and low prices.

Under these conditions, the Mexican government might soon have to make hard choices.

“Cheap oil is not where the country’s economic prospects lie,” Dyer wrote this week. “It is high time to face the facts and plan accordingly.”

NOW WATCH: This is how Mexican drug cartels make billions selling drugs



More From Business Insider
Mexico's oil industry now has an organized-crime problem

(Reuters)
Soldiers stand guard at a gas facility of Pemex in Reynosa September 18, 2012.

Mexican oil prices fell after a brief rally earlier this week, slipping to $24.47 a barrel on Tuesday and prolonging the slide of one of the country’s most lucrative exports.

In addition to the continuing downstream pain — or the brutally low prices oil is being sold for on the market — Mexico’s oil industry is dealing with a severe theft problem preventing an increasing amount of its production from ever getting to market.

Pipeline theft in Mexico rose 52% in 2015 according to an Associated Press report, a spike that comes after a 43.7% annual increase recorded in 2014.

The number of illegal taps has risen from 132 in 2001 to 3,348 in 2014.

“It is usually people from rural hamlets who live near the pipeline,” an official from the state-owned oil company, Pemex, told the AP.

(Reuters)
A policeman inspects barrels containing stolen diesel fuel, stored in a tyre repair shop, during an operation in the municipality of Apodaca, neighboring Monterrey July 4, 2011.

“They have broken through security perimeters on almost two dozen occasions in the last year, built dams to create diesel containment ponds and hauled up fuel by the bucketful to sell,” the AP added. 

Fuel theft is extremely dangerous, and dozens of civilians have been killed in related fires over the past year.

(Courtesy of Stratfor)

Drug cartels have also found fuel theft especially profitable.

In Tamaulipas state, which is close to Gulf of Mexico oil production, authorities “found that a cell of the deadly Zetas gang was organizing oil robbery and transporting the crude into Texas,” journalist Ioan Grillo reported in 2011.

Documents released by the Mexican government in early 2014 revealed that oil theft affected every Mexican state, with Los Zetas territory in Tamaulipas and Veracruz states experiencing the most rapid growth.

The powerful Sinaloa cartel has also been linked to oil theft, and in December 2015 a gang operating in Gulf cartel territory was apprehended with more than 40,000 gallons of fuel.

In 2014, Pemex lost $1.29 billion from pipeline tapping and other forms of theft. According to a 2014 report from Vice, the amount stolen is as much as 10,000 barrels a day.

(VICE News)
Workers patch up an illegal oil tap used by the cartel to steal oil from an underground pipeline in Mexico. The tap is just feet from another tap that occurred days earlier.

“They can [arrest] a few [of us], but there will always be others,” a member of Los Zetas cartel told Vice in 2014. “As long as they move gas through tubes, this is going to continue.”

While the Mexican government has recently increased jail terms for convicted oil thieves, observers have argued that harsher penalties are unlikely to deter thieves as long as they have little expectation of getting caught.

Moreover, fragmentation of Mexico’s powerful criminal groups has left behind many smaller groups that don’t have the wherewithal to pursue international drug trafficking. As a result, Insight Crime notes, those groups have turned to domestic activities, oil theft being one of the most lucrative.

Facing facts

In addition to fuel theft (and related environmental damage), Mexico’s energy sector is also dealing with the political and economic consequences of oil’s prolonged global price slump.

Market conditions have undermined Pemex’s ability to match the positive rhetoric used by President Enrique Peña Nieto to describe the landmark energy reforms he enacted in 2013, putting energy officials “in crisis mode,” writes Dwight Dyer, the energy editor at El Daily Post.

(REUTERS/Bernardo Montoya)
A supporter of Mexican leftist Andres Manuel Lopez Obrador holds posters in protest against energy reforms, Mexico City September 22, 2013. The poster on the left reads, “Thirsting for power. Mexico is not for sale,” and the one on the right says, “Oil, heart of Mexico.”

While the slump in oil prices and rampant theft does not seem to have turned off companies bidding on Mexico’s onshore oil fields, the Mexican government has had to make budget cuts due to a decrease in revenue.

This week, Mexican news site Animal Politico reported that the 2016 budget for Investment Projects and Programs (PPI) would be more than $5.6 billion less than apportioned in 2015.

This amount, a 20% “budgetary reengineering,” according to the Finance Ministry, will mean 751 infrastructure projects will be cut this year.

Cheap oil may also have broader consequences for Mexico’s oil sector.

According to Dyer, Mexico experienced its first deficit ever in hydrocarbon trading in 2015, a result of the country’s declining production and low prices.

Under these conditions, the Mexican government might soon have to make hard choices.

“Cheap oil is not where the country’s economic prospects lie,” Dyer wrote this week. “It is high time to face the facts and plan accordingly.”

NOW WATCH: This is how Mexican drug cartels make billions selling drugs



More From Business Insider