BajaNomad - Cartels steal oil from Mexico & sell in USA

Cartels steal oil from Mexico & sell in USA

BajaNews - 8-12-2009 at 02:16 AM

http://www3.signonsandiego.com/stories/2009/aug/10/lt-drug-w...

By MARTHA MENDOZA, The Associated Press
August 10, 2009

MEXICO CITY — U.S. refineries bought millions of dollars worth of oil stolen from Mexican government pipelines and smuggled across the border, the U.S. Justice Department told The Associated Press – illegal operations now led by Mexican drug cartels expanding their reach.

Criminals – mostly drug gangs – tap remote pipelines, sometimes building pipelines of their own, to siphon off hundreds of millions of dollars worth of oil each year, the Mexican oil monopoly said. At least one U.S. oil executive has pleaded guilty to conspiracy in such a deal.

On Tuesday, the U.S. Homeland Security department is scheduled to return $2.4 million to Mexico's tax administration, the first batch of money seized during a binational investigation into smuggled oil that authorities expect to lead to more arrests and seizures.

"The United States is working with the Mexican government on the theft of oil," said Nancy Herrera, spokeswoman for the U.S. Attorney's office in Houston. "It's an ongoing investigation, with one indictment so far."

In that case, Donald Schroeder, president of Houston-based Trammo Petroleum, is scheduled to be sentenced in December after pleading guilty in May.

In a $2 million scheme, Herrera said, Schroeder purchased stolen Mexican oil that had been brought across the border in trucks and barges and sold it to various U.S. refineries, which she did not identify. Trammo's tiny firm profited about $150,000 in the scheme, she said.

Schroeder's attorneys said in an e-mail that neither they nor their client would respond to AP's requests for comment.

Bill Holbrook, spokesman for the National Petrochemical & Refiners Association, said a single indictment against a small company should not be used to smear the reputation of the entire U.S. oil industry, "and is not indicative of how domestic refiners operate."

But in Mexico, federal police commissioner Rodrigo Esparza said the Zetas, a fierce drug gang aligned with the Gulf cartel, used false import documents to smuggle at least $46 million worth of oil in tankers to unnamed U.S. refineries.

Mexico froze 149 bank accounts this year in connection with that crime, which continues at a record rate, according to Mexico's state oil monopoly Petroleos Mexicanos, or Pemex.

In a surprising public acknowledgment, Mexican President Felipe Calderon said last week that drug cartels have extended their operations into the theft of oil, Mexico's leading source of foreign income which finances about 40 percent of the national budget.

"These are Mexican resources, and we do not have to sit back or turn a blind eye," Calderon said. "This is our national heritage and we must defend it."

Highly sophisticated thieves using Pemex equipment "are basically working day and night, seeing how they can penetrate our infrastructure," said Pemex spokesman Carlos Ramirez. The thieves, operating in remote parts of the country, have even built tunnels and their own pipelines to siphon off the product, he said.

How much of the stolen oil is crossing into the U.S., and how much of the theft is at the hands of cartels? So far, nobody knows.

"These questions are really the center point of all of this," Ramirez said.

He said cartels in northern Mexico are responsible for most of the theft, though he said there may well be internal operatives at Pemex stealing as well. Last week, police raided Pemex offices looking for insider misconduct.

Trammo, the sole company named in court records so far, is dwarfed by any refiner most people have heard of. It sells some 2.1 million barrels a year.

Major refiners such as San Antonio-based Valero Energy can produce more than that in a single day, buying crude from tankers or pipelines, and none has been implicated in buying stolen oil.

"It is Exxon Mobil's policy to always obey relevant laws, rules and regulations everywhere we operate," said spokesman Kevin Allexon. Shell Oil Co. said it abides by all laws.

Various kinds of petroleum products, including gasoline, are being stolen and sold to gas stations and factories in Mexico, said Ramirez, adding that service stations in at least two states have been shut down recently for selling stolen gas.

The thefts are a devastating blow to Pemex, which saw production fall 7.5 percent in the first half of the year.

So far this year, Pemex is aware of 190 different thefts, almost half in the Gulf state of Veracruz. Ramirez said Pemex is using hidden cameras, extra guards and additional investigators to catch the thieves, but the problem is still spreading: So far this year, oil theft is up 10 percent, and have been confirmed in 19 states, up from 13 in 2008.

And oil theft experts say that just like drugs, the crimes will be tough to stop as long as there's money to be made.

"U.S. refineries willing to buy stolen crude don't care where it comes from. Once the product is at their doorstep, the deal is done, and they can pay pennies on the dollar without taking the risk of getting it across the border," said Kent Chrisman, director for global security with Oklahoma City-based Devon Energy.

Chrisman, a former Secret Service agent, recently teamed up with Texas law enforcement agents to bust a ring of thieves in that state.

Oil theft in general is a relatively new problem, Chrisman said, "but we've seen a big spike in recent years because oil prices went up. Every year it seems to get worse and worse. It's a profitable business."

it must be mexico...

woody with a view - 8-12-2009 at 05:08 AM

so you can just wet-tap an oil pipeline? wouldn't there be a pressure drop due to the new length of pipe and less pressure in the system? pipelines in the u.s. can detect a LEAK down to the general area/county due to the resultant pressure loss....

[Edited on 8-12-2009 by woody in ob]

DrTom - 8-12-2009 at 06:58 AM

too bad the cartels arent interested in spay/neuter......the problem would be solved in a week.

BajaRae - 8-12-2009 at 07:03 AM

Dr. Tom, I love you, that was great :spingrin:

CaboRon - 8-12-2009 at 07:15 AM

Quote:

Originally posted by BajaRae
Dr. Tom, I love you, that was great :spingrin:

TMW - 8-12-2009 at 07:30 AM

Quote:

Originally posted by woody in ob
so you can just wet-tap an oil pipeline? wouldn't there be a pressure drop due to the new length of pipe and less pressure in the system? pipelines in the u.s. can detect a LEAK down to the general area/county due to the resultant pressure loss....

[Edited on 8-12-2009 by woody in ob]

Some one would have to be watching the gauges.

Taco de Baja - 8-12-2009 at 07:33 AM

Quote:

Exactly. They should easily be able to detect the pressure drop.

All pipelines will have valve stations to be able to shut down the line in the case of a rupture, like during a landslide. The tapped line would result in a loss of pressure that would mimic a leak.

There is more to this story that is not being said. I think Pemex might be trying to justify their ever dropping production by making it seem like oil that was never produced got "stolen". Maybe the cartels are taking it out very slowly, but I believe the pressure stations are very sensitive; at a couple bucks a gallon, even a small leak gets expensive and would be set up to be detected. Of course, there could also be people inside Pemex that look the other way as the pressure drops....

DENNIS - 8-12-2009 at 11:10 AM

All of this just adds to the mystery. For the life of me I can't see who's running the show for the cartels. It takes an army of MBAs to run a large corporation in the US and other places. We know where these armys of experts are.
What I can't understand is, where is the army of business experts that would certainly be required to operate the business interests of the cartels? They have their hands in everything, legal and illegal, and somebody has to be directing traffic. Where are these people? Who was the oil exec in the states dealing with when he purchased millions of dollars worth of oil? Surely not some thug in an SUV.
Business of this magnatude cannot run itself. Is the business world within Mexico one big entity?
Here I go, being naive again.

Von - 8-12-2009 at 12:17 PM

You know Ive seen some pipes from Pemex being tapped in the back

country in Rosarito! When Ive gone riding this happen a few yrs back they

did find the so called leaks. Pemex fixed the pipes, underground but didnt

put the dirt back in its weird next time i go to Rito ill take a pic and post it,

its real close to my place.

woody with a view - 8-12-2009 at 12:21 PM

but that would be refined product. not oil as the story said.... next time you go bring a couple of barrels with ya!!!!!!

CaboRon - 8-12-2009 at 06:21 PM

Quote:

Originally posted by Taco de Baja

Quote:

Exactly. They should easily be able to detect the pressure drop.

Of course, there could also be people inside Pemex that look the other way as the pressure drops....

These are the ones who are being bribed ......

It is a national custom :wow:

UPDATE

CaboRon - 8-15-2009 at 06:09 AM

Mexico nabs gas thieves; US refineries implicated
By MARTHA MENDOZA AND JOHN PORRETTO (AP) – 21 minutes ago

MEXICO CITY — They bleed the fuel lines just about anywhere, drug cartel members and other criminals, sucking millions of dollars of Mexican petroleum from makeshift taps hidden in sheds or on remote desert stretches, with thousands of gallons ending up in U.S. refineries.

Mexican police busted gas thieves twice this week, said Carlos Ramirez, spokesman at Mexico's state oil monopoly Petroleos Mexicanos, or Pemex.

In a colonial village a few hours west of the capital, police caught nine people Thursday who had siphoned more than 17,000 gallons (64,350 liters) of fuel from a pipeline into waiting tanker trucks. On Wednesday, just one hour south of the California border near the popular beaches of Rosarito, police plugged three different taps, including one that was operating inside a small, wooden shack.

But those busts will do little to plug a stream of stolen petroleum products, millions of dollars worth of which is smuggled across the border and sold to U.S. refineries, according to the U.S. Justice Department.

While Mexican authorities try to patch the leaks, U.S. officials are tracking proceeds from various Texas bank accounts and taking a close look at several Texas companies to quell the theft at their end. To date, the companies identified are small fuel distributors, not the major U.S. refiners.

Houston-based Trammo Petroleum president Donald Schroeder, the first to be convicted as part of a cross-border investigation, agreed to pay a $2 million fine to the U.S. government while he awaits a December sentencing. In addition, on Tuesday U.S. officials handed their Mexican counterparts a separate $2.4 million refund check from Trammo to partially compensate Pemex for its losses.

Schroeder pleaded guilty to buying and reselling stolen condensate, a liquid hydrocarbon that refiners can blend with crude oil as they produce fuel and other products.

Mexico's federal police commissioner, Rodrigo Esparza, has said the Zetas, a fierce drug gang aligned with the Gulf cartel, used false import documents to smuggle at least $46 million worth of oil in tankers to unidentified U.S. refineries. Mexico froze 149 bank accounts this year in connection with that crime.

U.S. federal officials say further arrests are expected, and U.S. Immigration and Customs Enforcement officers have served 10 federal search warrants on bank accounts in Texas.

In May, the U.S. government seized $102,525 from San Antonio-based Valley Fuels Ltd. saying, in court records, that ICE investigators had "confirmed that the gas condensate sold by Valley Fuels had been stolen from Mexico." Valley Fuels president Stephen Pechenik responded in court records, denying that the funds had anything to do with a conspiracy to buy or sell stolen oil.

In response to an inquiry from The Associated Press, Valley Fuels said in an e-mail this week that it has been deluged by news media calls for comment. "As much as we would like to tell our side for the world to hear, our attorneys have advised us to 'No Comment,'" the company said.

Its Web site says Valley Fuels' business is to buy, sell and move petroleum and petroleum products worldwide. The company says it also specializes in "structuring transactions that offer the best possible value to our suppliers while at the same time providing the lowest cost to our customers."

Court records show another $40,000 was seized from Continental Fuels Inc., whose Web site lists a Houston address. That seizure has not been contested. Continental Fuels, which also deals in the distribution of petroleum products, did not respond to phone and e-mail requests.

John Auers, senior vice president at Turner Mason & Co., a Dallas-based petroleum consultancy, said it's unlikely any major U.S. refiner knowingly bought stolen products.

One possible way stolen condensate could find its way to a refinery is if it was "laundered" through a smaller processing company and then shipped to one of the big refiners, Auers said.

A small plant that buys and distills condensate — and then sells to refiners — might not be as rigorous as a major refiner checking a shipment's origins.

"We're talking about very small volumes of material," Auers said. "In small volumes, that stuff can move through these (small processing plants). ... I don't think any of this stuff would have gotten into the finished petroleum product market without it somehow being laundered in between — sort of like laundering dirty money."

Auers noted that stolen gasoline would be even more difficult to sell because imports are heavily regulated.

"Any reputable refiner ... would have to first have detailed paperwork from the importer," he said. "I have a hard time believing any refiner in the U.S. would not be able to see through stolen gasoline or stolen diesel."

Porretto reported for this story from Houston.