Downstream Oil Theft: Global Modalities, Trends, and Remedies Uganda presents a good example of criminal actors being seen as public servants, filling a void in national fuel distribution. It also offers important insight into the shifting of illicit modalities when mitigation measures are implemented. Mozambique, on the other hand, highlights the “presource curse”—the preemptive economic devastation that can occur before hydrocarbons wealth even meets fruition. Thailand paints a picture of top-to-bottom involvement in illicit hydrocarbons activity and shows how much maritime routes can be exploited for criminal purposes—in a manner that contrasts with the piracy and armed robbery at sea off West Africa. Azerbaijan shows that the total control of governing forces over both the resources and finances of a country provides an intense disincentive against tolerating any downstream theft. And Turkey, while in flux, shows how difficult maintaining control over illicit activity can be when bordering states are in conflict. Finally, the European Union and the United Kingdom (UK) demonstrate that even the wealthiest, most developed states are susceptible to extensive and costly illicit hydrocarbons activity. ATLANTIC COUNCIL 5
Downstream Oil Theft: Global Modalities, Trends, and Remedies MEXICO Mexico is a country of just under two million square kilometers and just over 120 million inhabitants. It boasts an approximately $2.2 trillion economy, the fifteenth-largest in the world. Since the inception of the North American Free Trade Agreement in 1992, Mexico has risen to rank second among the United States’ export markets and third among its sources of imports; that trend is reflected in the Mexican economy’s increasing reliance on manufacturing. The government of current President Enrique Peña Nieto has begun to phase in economic and regulatory reforms, which have involved increasing privatization of major industries. Though a number of forces, including slow recovery from the 2008-2009 economic crisis, low global oil prices, and various domestic obstacles, have retarded the growth of Mexico’s economy, the country is an enthusiastic promoter of free trade, most recently entering into negotiations for the Trans-Pacific Partnership. These attempts to stimulate economic growth have not, however, overcome a striking disparity in wealth between an educated, cosmopolitan elite and large numbers of urban and rural Mexicans who live in or near poverty. Mexico has a strong democratic system; though the Institutional Revolutionary Party (PRI) has long been dominant, in many ways the country’s nuts-and-bolts electoral process is exemplary. In recent years, however, the country has been plagued by widespread crime and corruption, much of which involves organized criminal groups. These cartels and gangs are so powerful, and often so ruthless, that the rule of law is precarious throughout much of the country, especially in less developed areas. Domestic and international efforts to curb this criminal activity, which has often reached the international press through reporting on spectacularly violent crimes and criminal leaders whose notoriety merges with celebrity, have had only limited success. Mexico’s image, both as a place to do business and as a tourist destination, has suffered as a result, perhaps excessively. The Hydrocarbons Context With proven reserves of nearly ten billion barrels, Mexico is a significant oil producer, and hydrocarbons account for a third of the country’s budget. 1 Production 1 Tracy Wilkinson, “Mexico, Which Depends Largely on Oil Revenue, Cuts Public Spending,” LA Times, January 30, 2015, http://www.latimes.com/world/mexico-americas/la-fg-mexicobudget-20150130-story.html. in recent years has rated at just under 2.5 million barrels per day (bpd), with exports at about 1.2 million bpd and imports at approximately 10,000 bpd. It is, however, a net importer of refined petroleum. Though Mexico produces roughly forty-five million cubic meters of natural gas annually, it is also a net importer of this resource. 2 One state-owned company, Petróleos Méxicanos (Pemex), has held a monopoly on all of Mexico’s refining and fuel trading for the last eighty years. The close relationship between the PRI government and both Pemex executives and the leaders of the oil workers’ union means that the parastatal has been well-protected. While that has recently changed, Pemex is largely still the principal player in Mexican oil and gas. 3 As of March 2016, Pemex’s refining capacity stands at approximately 1,576 billion barrels per day, spread across six refineries: Salina Cruz (Salina Cruz, Oaxaca), Tula (Tula de Allende Hidalgo), Minatitlán (Minatitlán, Veracruz), Cadereyta (Cadereyta Jiménez, Nuevo León), Salamanca (Salamanca, Guanajuato), and Ciudad Madero (Ciudad Madero, Tamaulipas). 4 While all the refineries contribute to the overall output, three refineries—Minatitlán, Cadereyta, and Ciudad Madero— are capable of deep conversion of heavy crude into marketable products. As of April 2016, thanks to President Peña Nieto’s economic reforms, private companies have been allowed to distribute imported gasoline—previously the exclusive purview of Pemex. As part of those changes, Pemex’s complete monopoly on refining is also being released; starting in 2018, private enterprise will be allowed to refine, as well as sell, products at market price. Unfortunately, however, these reforms are not generating either the enthusiasm or the 2 The World Factbook: Mexico, United States Central Intelligence Agency, https://www.cia.gov/library/publications/the-worldfactbook/geos/mx.html. 3 Lincoln Brown, “Two New Gas Companies Break Pemex Monopoly in Mexico,” Oil Price, June 9, 2016, http://oilprice. com/Latest-Energy-News/World-News/Two-New-Gas- Companies-Break-Pemex-Monopoly-in-Mexico.html. 4 “How Many Oil Refineries Does Pemex Have?” Geo-Mexico, September 22, 2012, http://geo-mexico.com/?p=7797; Adriana Barrera, “Exclusive: Pemex Refineries to Boost Output in 2014, Maintenance Peaks in October, November,” Reuters, April 15, 2015, http://www.reuters.com/article/us-mexico-oil-refineriesidUSBREA3E1FS20140415. 6 ATLANTIC COUNCIL
Change language