Mexican Drug Gangs Deversify Into Oil

[jimmy olsen]

Man, it's crazy how powerful these gangs are getting.

http://www.forbes.com/2009/08/11/mexico-oil-theft-business-energy-drugs.html

Mexican Drug Gangs Diversify Into Oil
Jesse Bogan, 08.11.09, 08:30 PM EDT
Rise in petroleum theft bedeviling state oil monopoly Pemex.

HOUSTON -- Smuggling billions of dollars worth of narcotics across the Rio Grande apparently isn't enough for Mexican cartels. In recent years, they have expanded their activities in kidnapping, extortion, people smuggling and, of all things, petroleum siphoning.

The Mexican state-owned oil monopoly Petróleos Mexicanos, or Pemex, estimates some $720 million worth of oil products were stolen from it in 2008, slightly higher than 2007. The robberies have sapped the oil behemoth--the second-largest exporter to the U.S.--for years. But the number of discovered clandestine taps into national pipelines has steadily climbed in recent years, adding to frustrations over falling production at its prize field Cantarell.

"We suspect that some of this could be involved with narcotics," Mexico City-based Pemex spokesman Carlos Ramirez says of the thefts. Police also recently raided Pemex's central offices looking for information involving in-house ties to the black-market trading.

President Felipe Calderón has been trying to crack down on organized crime since he took office in December 2006. His national housecleaning efforts have led drug gangs to hedge risks to their bread-and-butter business by going into other lucrative markets like oil products, says Stephen Meiners, Latin America analyst for Stratfor, a global intelligence firm in Austin, Texas.

"They can't make as much money as they used to make solely on drug trafficking, and it's not like these organizations are going away any time soon," Meiners says. "So in the meantime, they are going to take advantage of a lot of other opportunities that come up. They are really diversifying their business model right now."

In April, arrests in Mexico broke up a gang that allegedly stole some $46 million worth of oil products over two years. Authorities said the group was linked to Los Zetas, a drug gang that became notorious as the enforcement arm of the powerful Gulf Cartel, which historically has controlled shipping routes into South Texas. Pemex says added vigilance and investigations on both sides of the border have put a dent in robberies of natural gas condensate, particularly from the Burgos Basin in northeast Mexico.

Arrests have included a former Mexican state political leader and Donald Schroeder, the former president of Trammo Petroleum, a small firm based in Houston. Authorities say Trammo is one of several companies being investigated in connection with the thefts.

Schroeder, the first American to be publicly tied to the illegal trade in recent years, pled guilty in May to conspiracy for receiving stolen natural gas condensate from Mexico and reselling it. (U.S. court records affiliated with his case say Mexico prohibited the exportation of its natural gas condensate in 2006.) According to the indictment, "various companies" imported stolen condensate from Mexico. Seizure documents in the investigation turned up by the San Antonio Express-News newspaper name Valley Fuels Ltd. of San Antonio and Continental Fuels Inc. of Houston. Attempts to contact the two companies after business hours were unsuccessful.

In one incident named in the indictment, Schroeder and "others" arranged in February for a barge to be loaded with stolen condensate in Brownsville, at the southern tip of Texas, and transported for resale. Officials have said it was piloted to the Houston area, the nation's energy capital, but would not disclose to what companies. Officials say details in court hearings revealed that the barge shipment was worth $2 million and apparently brought Trammo $150,000 in profit.

Though Schroeder agreed in his arraignment that he received stolen goods, it's unclear if organized criminals were involved with the shipment. If that was the case, Meiners, of Stratfor, says, "It's very possible that he wasn't aware of it." He says the Zetas are believed to be involved in the theft of petroleum products that were sold to legitimate or fraudulent businesses in Mexico. "It's those businesses that would have shipped the oil [products] north of the border," he says. But it's also likely that drug gangs, which fight to the death to maintain a grip on illicit smuggling through international ports, would protect any illegal loads.

Regardless, at a press conference in San Antonio, Texas, on Tuesday, U.S. authorities touted the return of $2.4 million to the Mexican government from a joint investigation between both countries involving the Trammo case. Schroeder, out on bond, is supposed to be sentenced in December. His attorney did not respond to a call seeking comment.

Schroeder started working for Trammo in 2003, became president in 2006 and was fired during the investigation, says Fred Lowenfels, spokesmen for Trammo's parent company, Transammonia, in New York. "We have taken steps to prevent any recurrence of this type of behavior," Lowenfels says. "We also agreed to provide restitution of $2.4 million to the Mexican company Pemex."