Mexico's Pemex curbing pipeline thieves with unusable gasoline

Slammed by a 70 per cent increase in illegal pipeline taps in one year, Mexico's state oil company announced Tuesday that it will no longer ship finished, usable gasoline or diesel through its network of ducts.

Analysts said it was a striking admission of Mexico's inability to stop the fuel thefts, in which thieves drill into pipelines operated by Petroleos Mexicanos more than 10 times each day, on average.

• Mexico gas pipeline leak drives 5,000 from their homes

"This is a big admission of the vulnerability of Pemex," said George Baker, publisher of the Houston-based newsletter Mexico Energy Intelligence.

Petroleos Mexicanos, known as Pemex, said the number of illegal taps rose to 3,674 in 2014, up 70 per cent from 2013 and 137 per cent over 2012 figures. The market for illegal gasoline and diesel, in which drug cartels have been implicated, has more than doubled in the last two years.

Pemex lost an estimated $1.15 billion in fuel thefts in the first nine months of 2014, according to the latest figure available.

Because the country is crisscrossed by tens of thousands of kilometres of pipelines, neither Pemex nor security forces can guard them all. Thieves, often highly organized gangs linked to drug cartels, pump the fuel from dangerous pipeline taps into tanker trucks, and sell it to industrial users or sometimes even seek to sell it through legitimate Pemex-franchised gas stations.

Pemex's move will make it risky to buy stolen fuel. While the company didn't specify what steps in the refining process will be left unfinished, it said fuels moved through its pipelines will not be "usable in vehicles and industrial plants."

"Customers should make sure that the fuel they buy has been delivered from Pemex terminals, and not buy gasoline or diesel from anyone other than gas stations or authorized dealers, given that ... it could damage motors," the company said.

Basic processing before shipping

It appears Pemex will do basic processing before shipping oil to tank farms and distributional terminals it operates. Employees there would then have to add additives that regulate the combustion process before the fuels could be used.

"The only thing you could do additionally to the gasoline is to put additives in it" at the tank farms, "but that is a very delicate process," said industry consultant Guillermo Suarez, a chemical engineer.

He predicted the change will lead to quality problems, because "the distribution or storage centres don't have the technological capacity to do this."

Some doubt the measure will stop the gangs.

"If you can just add an aspirin at the end of the process, the narcos can do that, too," Baker said.

The analysts noted that Pemex has acknowledged that some of its own workers are involved in the thefts.

"When the process of finishing the gasoline is transferred to the terminals, obviously the people who are doing this (stealing fuel) will find out, because they are inside," Suarez said. "So, very simply, they'll steal additives and make their own mixture."