Mexican Fuel Importers Weigh Risk After Thefts Trigger Bloodbath – Bloomberg
Foreign companies looking to supply gasoline to Mexico are taking a hard look at planned investments after a series of fuel thefts escalated into a bloodbath last week in the state of Puebla.
A gun battle May 3 between soldiers and huachicoleros, the local nickname for fuel thieves, left 11 people dead and many more injured and triggered protests in Puebla, where pipelines are often tapped to steal gasoline. Companies looking to import fuel into Mexico from the U.S. like Howard Energy Partners, and BioUrja Trading LLC, are concerned about the uptick of the problem.
“It’s part of a worrisome trend that investors will take a look at and price into the offers that they make and the amount of investment that they decide to put into Mexico,” John Padilla, managing director of energy-consulting firm IPD Latin America, said by phone from Bogota.
Mexican fuel thefts have escalated in the past year, as the government abolished subsidies. The policy known as “gasolinazo,” or fuel-price slam, pushed up pump prices by as much as 20 percent in early 2017 and led to riots and blockades at some fuel terminals. Petroleos Mexicanos has covered the cost associated with the thefts, but it’s unclear whether the state oil company will try to pass them on to private importers in the future.
“Fuel theft is a significant concern for many companies going into Mexico and we don’t know that the government is doing anything in order to help alleviate that risk,” Rajan Vig, BioUrja’s head of Originations for Mexico, said by phone from Houston. BioUrja is seeking to import fuel into Mexico and is in talks with the government and banks to address the fuel-theft issue, but “we need the government to be on our side,” he said.
Illegal taps surged last year, resulting in losses of 2.2 billion of liters, or approximately 581.2 million gallons of fuel, a 24 percent increase from 2015. Disabling fuel pipeline taps cost Pemex around $220 million in the past six years, an amount that has risen more than 10-fold over the period, Mexican newspaper Milenio reported Monday, citing Pemex data.
“It’s a very large concern of ours,” Mike Howard, chief executive officer of Howard Energy, which is building a refined-product pipeline complex in northern Mexico, said by phone from San Antonio. “We’ve looked at all kinds of security measures including drones, above-ground cameras, everything that you can imagine to protect the product.”
The company is also investing in advanced leak-detection technology and considering burying its pipelines deeper in some locations. Huachicoleros typically dig up Pemex pipelines with a shovel because they are buried close to the surface.
“It’s an ongoing conversation that we’re having with our customers and with stakeholders in Mexico,” Howard said.
One of the murkier issues for the burgeoning private-fuel-import sector is who will cover the cost of product stolen from pipelines or terminals leased by Pemex. Tesoro Corp., which operates seven refineries in the U.S., won the first auction for capacity on Pemex’s pipelines and storage facilities on May 2. Commodity traders such as Trafigura Beheer BV and Koch Supply & Trading LP have applied for fuel-import permits.
Gasoline robberies are “a loss that Pemex just seems to absorb, and you can’t really expect the private sector to do that,” Robert Campbell, head of oil products research at industry consultant Energy Aspects Ltd. said by phone from New York. “Mexico’s justice system does not exactly inspire confidence. These are the sort of issues that really need to be worked out.”
Pemex is reinforcing its efforts to combat fuel theft, including tracking down black markets where the fuel is sold and increasing surveillance on its pipelines, Jose Antonio Gonzalez Anaya, Pemex’s chief executive officer said in a May 4 interview with Bloomberg. Gonzalez Anaya went to Colombia last year to learn new approaches to fight the crime from Ecopetrol SA, Colombia’s state oil producer that has grappled with frequent guerrilla attacks on its pipeline system.
“We are working on different fronts,” Gonzalez Anaya said. “It involves a lot of people, a lot of agencies. There’s not a silver bullet for this problem.”
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