Home' Trinidad and Tobago Guardian : October 2nd 2014 Contents BG8 ENERGY
BUSINESS GUARDIAN www.guardian.co.tt OCTOBER 2014 • WEEK ONE
Mexico's Pemex has
made the right decision
by halting construction
of its planned US$11.6
billion Bicentenario re-
finery in central Hidalgo
state, and should in-
stead look to purchase a
refinery in the US, ac-
cording to analysts cited
by local media.
Work on the refinery,
which had been in the
pipeline since 2008 and
was to be built alongside
an existing facility in
Tula, had only reached a
prior study stage, for
which the oil firm had
been authorised a 2.56
Mexico's agency for
the transparency of in-
formation (Ifai) con-
firmed to local press this
week that work on the
refinery has been halted.
Analysts have since
praised Pemex's decision
as the most cost-effec-
Acquiring an existing
refinery in the US would
enable Mexico to take
advantage of the US's
much lower supply
costs, El Financiero
newspaper quoted Vin-
cent G. Piazza, an ana-
lyst at Bloomberg
Intelligence, as saying.
"The US refinery in-
dustry is much more
low-cost and natural gas
prices offer an advan-
tage to refineries in the
US compared with other
regions," Piazza said.
The increased capacity
of new refineries has
lowered oil firms' oper-
ating costs, against
which Mexico will have
to compete in the future.
"Mexico will enter into
the global market, where
there are new refineries
with huge capacities of
600,000b/d in China,
India and Saudi Arabia,"
the newspaper quoted
Santiago García, director
for Latin America at
Macquarie, as saying.
Pemex CEO Emilio Lo-
zoya Austin said in Au-
gust that the firm would
invest US$15bn in up-
grading its existing re-
fineries, but that it had
no plans to build new
ones, and would instead
focus on the more prof-
itable exploration and
Mexico overcame 75 years of
nationalist pride to reform its
flagging, state-owned oil indus-
try. But as it prepares to develop
rich shale fields along the Gulf
Coast, and attract foreign
investors, another challenge awaits: taming the brutal
drug cartels that rule the region and are stealing billions
of dollars worth of oil from pipelines.
Figures released by Petroleos Mexicanos last week
show the gangs are becoming more prolific and sophis-
ticated. So far this year, thieves across Mexico have
drilled 2,481 illegal taps into state-owned pipelines,
up more than one-third from the same period of 2013.
Pemex estimates it s lost some 7.5 million barrels worth
Pemex director Emilio Lozoya called the trend "wor-
More than a fifth of the illegal taps occurred in
Tamaulipas, the Gulf state neighbouring Texas that is
a cornerstone for Mexico s future oil plans. It has Mex-
ico s largest fields of recoverable shale gas, the natural
gas extracted by fracturing rock layers, or fracking.
Mexico, overall, is believed to have the world s sixth-
largest reserves of shale gas---equivalent to 60 billion
barrels of crude oil. That s more than twice the total
amount of oil that Mexico has produced by conventional
means over the last century.
The energy reform passed in December loosened
Mexico s protectionist policies, opening the way for
Pemex to seek foreign investors and expertise to help
it exploit its shale fields. It hopes to draw US$10 billion
to US$15 billion in private investment each year.
The attractiveness of the venture may hinge on
bringing Tamaulipas under control.
"The energy reform won t be viable if we aren t
successful ... in solving the problem of crime and
impunity," said Senator David Penchyna, who heads
the Senate Energy Commission. "The biggest challenge
we Mexicans have, and I say it without shame, is
One foreign oil company that had a brush with vio-
lence appears undeterred.
In early April, gunmen opened fire at a hotel in Ciu-
dad Mier, in Tamaulipas rough Rio Grande Valley,
where eight employees of Weatherford International
Ltd, a Swiss-based oil services company, were stay-
They were not injured, and Weatherford said in an
e-mail message that "Mexico continues to be a focused
market for us with growing potential in 2014 and
But other potential bidders may be put off by such
Energy analyst David Goldwyn said the Mexico gov-
ernment is going to have to be a lot clearer about its
security plan for most shale exploration and production
companies, which don t have experience working in
"What s the government going to do, what kind of
protection, what is it going to allow the operators to
do inside their fence line?" he said in a recent conference
call with reporters.
Two rival gangs, the Zetas and the Gulf cartel, long
have used Tamaulipas as a route to ferry drugs and
migrants to the United States and, in recent years,
diversified their business: stealing gas and crude and
selling it to refineries in Texas or to gas stations on
either side of the border.
At least twice a day, the gangs pull up to one of the
hundreds of pipelines that crisscross the state. Workers
quickly shovel down a couple of yards (metres) to
uncover a pipeline and siphon their booty into a stolen
tanker truck, said army Colonel Juan Carlos Guzman,
whose troops have raided a number of such illegal
A dirt farm road led down to one site outside Ciudad
Victoria, 180 miles southwest of McAllen, Texas. About
a half-mile from a nearby highway, thieves had dug
out a pit and inserted a large needle-like device into
the pipeline. By the time soldiers arrived, the gang
members had fled, and only the driver of the half-
loaded gasoline truck was arrested.
The knowledge needed to tap into the pressurised
pipelines leads authorities to suspect the gangs have
infiltrated Pemex or co-opted company workers.
"It is impossible to do this without information on
the timing and level of flows," said Marco Antonio
Bernal, a federal congressman from Tamaulipas who
is drafting legislation to toughen punishment for
The suspicions were reinforced earlier this month
when detectives nabbed a Gulf cartel leader who was
found carrying a fake Pemex employee credential,
complete with his photo and a false name.
Pemex is installing more automated pipeline shut-
off valves operated remotely from a control room in
Mexico City. Such controls allow them to not only
stop spills often caused by illegal taps but to avoid
having to send workers out to unpopulated, dangerous
areas to turn off valves manually.
With thousands of miles of pipeline stretching over
far-flung regions of Tamaulipas, stopping oil theft is
proving hard to do. Mexico has taken steps to rein in
the cartels, putting military leaders in charge of the
state s security and sending in soldiers, marines and
federal police to patrol key cities.
Arrests and violence have taken out so many key
Zetas leaders that the cartel s members have taken to
camping out in the bush, dragooning Central American
migrants into their ranks. They live off the land and
change campsites constantly to avoid detection.
"They don t have structures. They sleep under the
trees, near rivers to get water," said General Mario
Lopez Miguez, who commands nearly 600 soldiers
at a base in the once cartel-dominated town of Ciudad
The Gulf cartel, for its part, remains in control of
Tamaulipas largest city, Reynosa, which sits across
from McAllen, although the military has increased its
patrols, making some residents feel safer.
"The situation has gotten a lot better," said Nora
Gonzalez, who runs a secondhand furniture shop near
downtown Reynosa. Still, just a few blocks away,
Reynosa remains dangerous. A reporter asking residents
about the crime situation was quickly approached by
a young man driving a battered car with no license
"Where are you from? What are you doing here?
Identify yourself," said the young man, using language
similar to that of drug cartel lookouts, known as "hal-
cones," or falcons.
"How much money are you carrying? Pull over,"
the man demanded, as the reporter opted to drive
away. (Yahoo News)
Mexican cartels steal
billions from oil industry
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