Mexico’s Cartels are Ditching Drugs for Oil

Mexico’s Cartels are Ditching Drugs for Oil

Mexico’s energy reform that ended a state monopoly has so far fared fairly well in the upstream sector, with oil majors snatching up offshore oil blocks in auctions.

In the downstream, however, aging refineries built before 1980 have been bleeding cash for years and made Mexico import increasing volumes of refined products to meet growing demand.

Operational and investment troubles aside, refineries in Mexico are bleeding as drug cartels have been racketeering refinery workers to help them tap storage facilities, trucks, and pipelines in a lucrative side business for the local narcos — fuel theft — Reuters reporter Gabriel Stargardter wrote in an investigative article this week.  

Fuel theft deprives Mexico of more than $1 billion in state revenues every year. The security issues and rampant thefts scare off Mexico’s old and inefficient refineries even after the opening of the energy sector to private investment. Crackdowns on the drug cartels have prompted the narco lords to seek a less risky but lucrative source of revenue — fuels — as everyone buys gasoline, and not everyone buys drugs, said officials who spoke to Reuters’ Stargardter.

The drug cartels pose a threat to the refinery operations of state oil firm Pemex, which owns the nation’s six refineries. The number of illegal taps discovered along Mexico’s fuel lines increased fivefold between 2011 and 2016, while costs to repair them increased tenfold, to the equivalent of $95 million, according to a report from the country’s federal auditor, as quoted in Reuters.

The number of identified illegal taps of pipelines in Mexico jumped from around 710 in 2010 to some 6,260 in 2016, The Boston Consulting Group (BCG) said in an analysis in July 2017, citing figures by Pemex.

 

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