Drug gangs are said be pleased as they assess the windfall President Enrique Peña Nieto has handed them by opening Mexico’s 75-year-old state oil company, Pemex, to foreign investors, putting up for grabs this country’s portion of the rich Eagle Ford Shale deposits.
With characteristic blind self-admiration the cheering of the country’s political and economic elites drowned out the reportedly more widespread, less publicized rejoicing of Mexico’s ruthless cartelistas.
For knowledgeable observers it seems that the “elite cheering” comes from people sporting symptoms of, perhaps, A.D.H.D. – attention deficit hyperactivity disorder. They don’t seem to sense exactly what’s going on around them. They fail to comprehend what a map of Mexico displays. The oil deposits are in the north. What else is in the north? The blood-drenched playgrounds of drug cartels of various merciless instincts: The Sinaloa Cartel’s ever resourceful reach, also that of the Gulf Cartel, plus the presence the torture-prone Zetas. Will newcomers from foreign oil and gas companies be cartel wise? Doubtful. For it’s clear that targeted local Mexican officials who should be wise to cartel habits are too frequently murdered as they travel some highway they’re sure is “safe,” confidently dine at a “secure” restaurants.
“Criminal activity in northern Mexico threatens to undermine ongoing effort to open (Mexico) to foreign oil and gas producers,” a new report from Rice University’s Baker Institute warns. But, argues one of the authors of the Institute’s report, “These companies, they’re smart people, they’ll ask questions and they’ll make their calculations.” At the same time the report’s author joined others in noting that the Peña Nieto administration “hasn’t been candid about the risks as it seeks to drum up investment from companies based in the United States and elsewhere.” Such companies should know that the members of the cartels are looking forward to a new crop of overconfident “newbies,” unexperienced in the ways – both brazen and sly – of Mexico’s organized crime gangs, nor their penchant for merciless butchery.Many foreign executives, say some journalists, are not fully aware of breadth of another challenge: Widespread and soaring theft of oil and gas from Mexico’s pipelines, which is a multi-million dollar underground industry. A long-standing habit that implies corruption. Pemex discovered 2,614 illegal siphons along its pipelines last year. These were leaching away gasoline, diesel, crude oil, natural gas and petro-chemicals. Just 155 were discovered in 2000 – “meaning an astonishing 1,548 percent increase,” reported the Mexico City daily, El Universal, following numerous requests for information and finally filing a freedom of information request with the recalcitrant Peña Nieto administration. Government figures, the paper found, showed that a new siphon is placed on a Pemex pipeline at the rate of one every 14 hours. Assuming all Pemex’s pipelines were checked, which some doubt.
The border state of Tamaulipas, across from Texas, showed an increase from eight siphons in 2000 to 539 last year, and the number obviously is growing. The rate of siphon emplacement is increasing in the region which is the hub of the Gulf Cartel. Jalsico siphons jumped from seven to 230, and the number is growing. Peña Nieto’s home State of Mexico went from 10 to 200. Nuevo Leon climbed dramatically from just one to 140, Guanajuato from 13 to 165.
With the government unwilling to be candid about this phenomenon, independent investigators extrapolate from the continuing increase in the number pipe “taps.” This increase was 52 percent a year in 2011 according to Pemex. The overall rate of increase in this activity has soared recently, say independent investigators.
In 2007 a New York Times investigation reported that a billion dollars worth of oil was being siphoned from Pemex annually by fraud, theft and furtive tomas (takes), drilled into company pipelines. Investigators found that 1,000s of gallons of jet fuel was said to have ended up in the tanks of cartel planes bringing Colombian cocaine to Mexico for transshipment to the United States.
That was seven years ago. Pemex reports of current alarming spikes in oil piracy, coupled with government secrecy prompts sources such as Stratfor – the Austin, Texas, Strategic Forecasting company – and other Latin American-focused intelligence organizations to conduct independent investigations. And those investigations at the moment are somber regarding Pemex’s – or anyone else’s – ability to protect the pipeline, or to overcome the company’s well-known negligent maintenance, which includes its eccentric bookkeeping methods that tend not to reflect reality.
Some investigators’ doubt remains that an accurate official summation of the company’s present difficulties exists. Some question the statistics of the toll oil piracy is taking and they also have doubts about Pemex’s aglity in repairing the thousands of tomas spiked into the vast pipeline. Part of this doubt arises from the fact that oil piracy has been termed “simplicity itself.” Chupadores – duct suckers – are attached to perforated pipelines and the oil pumped into awaiting tanker pipas (trucks), many of which bear the Pemex logo. Drivers of these pipas have little to fear from police or military patrols or roadblocks for they’ve traditionally carried documentation from SEMARNAT (Secretariat of Environment and Natural Resources), certifying that liquid petroleum waste is being transported. This ruse has been good enough to fool U.S. customs inspectors.
This stolen crude is processed by clandestine refineries into gasoline to be sold in both the United States and Mexico. Gasoline stations in the middle of Mexico have been eager purchasers. Recently, Mexico’s National Organization of Petroleum Retailers (Onexpo) has reported that criminal “groups” forced gasoline venders to buy stolen fuel, highlighting today’s increased easy availability of gas.
Simultaneously, Rice University’s Baker Institute warns that the cartels may target industry personnel for theft, extortion or kidnapping “since the government hasn’t been able to neutralize the gangs’ activities.” Cartels thus far don’t go after foreigners. Thus, the largest target is obviously oil field services companies performing the hands-on rough nuts-and-bolts work of oil and gas production. “Even if you’re a big company, you may not be able to prevent pressure placed on companies you’re working with,” reported Karen Hooper, director of analysis for Latin America at Stratfor intelligence organization.
The list of brutal threats posed by Mexican drug cartels could account for some cold feet among energy investors regarding northern Mexico where the Peña Nieto administration has painted tantalizing opportunities for investors using the prospect of access to the southern reaches of the Eagle Ford Shale, which has brought such riches to South Texas, and the Burgos Basin, one of Mexico’s “most important” gas reserves ... and the home of the brutal Zeta cartel. But Hooper said that threats from criminal enterprises haven’t deterred attractive contracts for other foreign investors in north Mexico. Many such companies are accustomed to troubled regions. She cited foreign activities in unstable nations such as Nigeria, Algeria, Iraq and Libya.
Members of the northern cartels seem prepared to welcome this challenge as the the Peña Nieto administration announced it would put into play a “new phase” of increased security forces in the northern state of Tamaulipas. Last week, Mexican intelligence chief Salvador Haro Munoz was killed in Ciudad Victoria, the capital of Tamaulipas. His car was ambushed by armed men.
Mexican officials have said they’ll open bidding to foreign oil companies in June, 2015.