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Oil Theft is Big Business for Mexican Gangs

Theft from Mexico's state oil company Pemex appears to have shifted from a small-scale criminal nuisance into big business, with actors such as the Zetas and Sinaloa Cartel increasingly getting involved.

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The oil company, which provides the Mexican government with roughly a third of its operating budget, has long been plagued by robberies. In the past, these were typically carried out by small-scale gangs or Pemex distributors, and would involve intentionally mislabeling gasoline products, or selling off gas siphoned from pipelines at below-market prices.

During the Calderon administration, however, both the type of robberies and the perpetrators have changed, as Proceso reports, based on an internal Pemex document. Today, crude oil is being stolen on a wide scale, and the groups behind the theft are not small-scale gangs or businessmen gaming the system, but rather criminal networks like the Zetas. Furthermore, instead of reselling the oil at Pemex stations, the criminal groups are exploiting their international reach to sell it on to US refineries.

The geography of illegal siphons discovered in recent years demonstrates the growing role of organized crime groups -- initially the Zetas, and increasingly, it would appear, the Sinaloa Cartel. According to Proceso, the two states where the largest number of illegal siphons were discovered in the first half of 2010 were Veracruz and Nuevo Leon, both of them notorious havens of Zeta activity. Sinaloa was third, followed by Puebla and then·Tamaulipas, which is also a Zeta stronghold.

But according to a recent report from Excelsior, Sinaloa became the state worst-hit by pipeline theft in 2011, leapfrogging the two Zetas-held states that were ahead of it in 2010.

The Zetas are known for their diverse revenue sources, involved in activities like extortion, pirate merchandise, kidnapping, car theft, and other rackets, in addition to oil theft. It is no surprise that Zetas-dominated states have seen a spike in stolen hydrocarbons.

In contrast, the Sinaloa Cartel has a reputation for sticking to drug trafficking. In 2010, for instance, a captured high-ranking member of the Sinaloa Cartel told authorities that the cartel boss Joaquin “El Chapo” Guzman had prohibited his subordinates from supplementing their wages by kidnapping. Other groups also operate in the Sinaloa state, such as the Beltran Leyva Organization, but the scale of the thefts suggests that the Sinaloa Cartel, as the foremost network in the region, is involved. If this is the case, it would seem to represent a significant shift in the group's modus operandi.

Pemex has discovered 5,000 illegal siphons since Calderon took office in late 2006, with more than 1,300 of those found last year. Some 3 million barrels of hydrocarbons were stolen in 2011, an increase of 52 percent from the previous year. This caused losses of roughly $475 million to the company, which had revenues in 2010 of nearly billion.

In response, Mexican authorities have ramped up investigations into the robberies; just 161 were opened in 2007, but more than 1,000 were opened last year. Most of those arrested for stealing oil have been linked to the Familia Michoacana and the Zetas, though the small-time operations have not entirely disappeared from the game.

In addition to the vast sums to be made, stealing oil and gas is an attractive business for a number of other reasons. Neither Pemex nor the Mexican government have the resources to patrol the thousands of miles of pipelines, meaning that the product can be stolen with relatively low risk. Furthermore, as InSight Crime has pointed out, the large bureaucracy in Pemex also generates a large number of targets for corruption. In many cases, people within the company have taken part in the robberies. And as Excelsior notes, while it may sound sophisticated, robbing oil or gas from a pipeline is a low-tech business.

As InSight Crime has reported, oil and gas theft are a serious issue for Latin American oil companies in countries including Colombia, Venezuela, and Bolivia. Hydrocarbon theft became a big source of funds for paramilitary group the United Self-Defense Forces of Colombia (AUC), with $10 million disappearing from 2001 to 2003 from AUC territory.

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