Mexico’s Drug Cartels Siphon Liquid Gold

Drug traffickers employing high-tech drills, miles of rubber hose and a fleet of stolen tanker trucks have siphoned more than $1 billion worth of oil from Mexico’s pipelines over the past two years, in a vast and audacious conspiracy that is bleeding the national treasury, according to U.S. and Mexican law enforcement officials and the state-run oil company.

Using sophisticated smuggling networks, the traffickers have transported a portion of the pilfered petroleum across the border to sell to U.S. companies, some of which knew that it was stolen, according to court documents and interviews with American officials involved in an expanding investigation of oil services firms in Texas.

The widespread theft of Mexico’s most vital national resource by criminal organizations represents a costly new front in President Felipe Calderón’s war against the drug cartels, and it shows how the traffickers are rapidly evolving from traditional narcotics smuggling to activities as diverse as oil theft, transport and sales.

Oil theft has been a persistent problem for the state-run Petroleos Mexicanos, or Pemex, but the robbery increased sharply after Calderón launched his war against the cartels shortly after taking office in December 2006. The drug war has claimed more than 16,000 lives and has led the cartels, which rely on drug trafficking for most of their revenue, to branch out into other illegal activities.

Authorities said they have traced much of the oil rustling to the Zetas, a criminal organization founded by former military commandos. Although the Zetas initially served as a protection arm of the powerful Gulf cartel, they now call their own shots and dominate criminal enterprise in the oil-rich states of Veracruz and Tamaulipas.

“The Zetas are a parallel government,” said Eduardo Mendoza Arellano, a federal lawmaker who heads a national committee on energy. “They practically own vast stretches of the pipelines, from the highway to the very door of the oil companies.”

The Zetas earn millions of dollars by “taxing” the oil pipelines–organizing the theft themselves or taking a cut from anyone who does the stealing, according to Mexican authorities. The U.S. Treasury Department this summer designated two Zeta commanders as narcotics “kingpins,” which allows authorities to seize assets.

The Zetas often work with former Pemex employees, according to Ramón Pequeño García, chief of anti-drug operations at Mexico’s Public Security Ministry. The former employees “are highly skilled people who have the technical knowledge to extract oil from the pipelines. They are now under the control of the Zetas,” Pequeño said.

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A sophisticated operation

Pemex reported losing $715 million worth of oil to theft last year. The company said it discovered 396 clandestine taps. This year, Pemex projects it will lose at least $350 million to oil pilfering. Nearly half of the thefts occur in the rugged hills around Veracruz, a largely rural state situated in a region with 2,136 miles of pipeline running from the Gulf of Mexico to refineries in other parts of the country.

To steal the oil, Mexican authorities said, thieves sometimes use safe houses from where they build extensive tunnel networks leading to the pipelines. They fabricate powerful drills that enable them to puncture the highly pressurized steel pipes and extract the oil without causing spills or suspicious drops in pressure. Pemex officials said they have found clandestine taps with as many as five spigots.

In Maltrata, in central Veracruz, Pemex officials showed a reporter a four-foot-deep, six-foot-wide trench ringed by yellow police tape that they said had been dug by thieves to reach an underground pipeline in a clearing near a federal highway last month.

After perforating the exposed two-foot pipeline using a hand-tooled drill and connecting valves to regulate the pressure, the officials said, the traffickers ran a 300-yard hose through the brush to a tanker and filled it with about 200 barrels of crude oil.

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Pemex lost 140,141 barrels of oil to theft last month in the Veracruz region alone, the company reported. At $75 a barrel, the current market price for Mexican oil, the loss comes to $10 million. The company reports that oil rustlers are stealing from the pipelines in all 31 Mexican states.

Defending the pipelines

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The theft is both a symbolic and financial blow to the Mexican government. Taxes paid by Pemex account for 40 percent of the federal budget. Pemex still owns and operates almost every gas station in Mexico. Juan José Suárez, Pemex’s chief executive officer, said in an interview at the company’s headquarters in Mexico City that the oil theft is a crime against all Mexican citizens: “This is not taking from Pemex; it’s taking from the owners of Pemex. This is the net worth of everybody.”

Mexico has launched an all-out campaign to defend the pipelines, drawing in the army, the attorney general’s office, the Interior Ministry and the customs service. During the past two years, the government has conducted helicopter overflights, installed electronic detection devices inside the pipelines and beefed up Pemex’s private security force.

Suárez estimates that Pemex will spend hundreds of millions of dollars over the next three years defending its pipelines. With the company’s maintenance staff overwhelmed, Pemex assembled 20-man teams this year to repair breaches caused by theft.

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