By 2016-17 UT Energy Journalism Fellow Lorne Matalon for NPR's Texas Standard & Marketplace
Refinery workers in Veracruz finish their shift. Mexican gov't statistics indicate mounting theft from pipelines that ferry refined gasoline from here to Mexico City. (photo: Lorne Matalon)
VERACRUZ, Mexico---American energy companies are looking to enter Mexico's oil, natural gas and electricity markets which have been open since 2014 to foreign participation for the first time since 1938. Major U.S. energy companies such as ExxonMobil and Chevron have entered the Mexican energy space. However smaller companies such as drillers, rig operators and seismic surveyors, the nuts-and-bolts of an industry that Mexico's politicians hope will lift the economy, are hedging their bets because of a serious security threat that the Mexican government has said is rising — the theft of oil and gasoline from Mexican pipelines.
Veracruz state in southern Mexico is a hub of refineries and pipelines. The pipeline the left in Coatzacoalcos ferries refined gasoline and petrochemicals to Mexico City. (photo: Lorne Matalon)
In recent years, at least 120 workers at the state-owned oil company Pemex have been arrested for sharing inside information about the location of pipelines, which often run through sparsely-populated rural regions. Pemex has published statistics illustrating the rise in the theft from its pipelines, including the most recent known case of collusion between organized crime and either Pemex employees or other public servants working with Pemex.
The loss of oil and gas from Pemex pipelines currently totals approximately $1.7 billion per year according to a recent report from Rice University in Houston. That statistic leaves some U.S. energy companies skittish about entering the market. The phenomenon of lax security and alleged collusion are major red flag for U.S. investors. Mexico's mantra is despite deep-rooted, headline-grabbing narco-violence, energy infrastructure is secure. Some Mexicans don't buy that.
"They sell stolen gas in hidden places," said taxi driver José Avina in Spanish while pointing to a side road. "But everyone knows where to find them," he said of the huachicoleros, the pipeline thieves.
These days, songs celebrate huachicoleros as modern-day Robin Hoods fighting higher prices at the pump. Prices began rising in a staggered roll-out across Mexico in January when government subsidies ended as part of Mexico's energy reform. The price rise triggered Mexico's gasolinazo, a series of riots as drivers rebelled against the new gasoline price structure. One demonstration in Tijuana was so intense that the U.S. temporarily closed the border linking Tijuana with San Diego.
There are examples of Mexican politicians and high-ranking state police officers charged with working in the illegal trade of stolen gas. In June, a mayor in the state of Puebla was arrested for buying what he allegedly knew to be stolen gasoline for a string of gas stations he owns. Previously the former head of the Puebla State Police and his chief of operations were removed from office after being caught while protecting traffickers as they took gasoline from a pipeline.
Mexico says some stolen gas is eventually sold at gas stations. (photo: Lorne Matalon)
"You and I cannot go out and start looking for a pipeline and tap that pipeline. You have to know where it is and the right place in which to do it," said Jorge Piñon of the alleged sharing by current and former Pemex employees of inside information. Piñon is the former head of Amoco Oil Latin America and currently the leader of the Latin America and Caribbean Energy Program at the University of Texas at Austin.
Deadly explosions, environmental damage and standoffs with the Mexican army are all consequences of the trade in stolen commodity.
"How can we reform our energy sector when shady actors on both sides of the law are involved?" asked Miguel Arturo Flores, a leader of the oil workers' union in southern Mexico.
For foreign investors, words like that suggest market uncertainty. "It's not just security, that is, the ability of companies to protect their pipelines or their trucks that deliver fuel and so on, but also to protect their personnel from kidnapping and from being robbed and assaulted," said Tony Payan who heads the Mexico Center at Rice University.
Major U.S companies such as Exxon Mobil plan to open branded gas stations in Mexico. However Payan said smaller companies like drillers and seismic surveyors are waiting before committing their capital.