Fuel theft incident in Mexico leads to violence

On Wednesday evening, at least four soldiers and six civilians were killed during clashes related to an incident involving fuel theft in the Mexican state of Puebla.

Theft from a pipeline in Palmarito Tochapan was reported, prompting a heavy response from the state, which initially deployed around 600 soldiers. The alleged smugglers fired on police, prompting 400 more soldiers to join in the clashes.

Mexico has grappled with losses and damage to oil infrastructure for years as a result of illegal hot taps on pipelines. In 2016, 6,873 illegal taps were identified across the country.

Mexican state oil company subsidiary Pemex Logística, which is responsible for the storage and transportation of refined products, reported a total loss of 2.28 billion litres of fuel from theft last year. Fuel theft in 2016 represented a financial loss of MXN 30.8 billion (USD 1.49 billion).

Partially due to security matters, many potential entrants to Mexico’s newly liberalised oil and gas industry are weighing the risks associated with doing business in the country. The issue of which party should shoulder responsibility in cases of fuel theft from Pemex-owned pipelines and storage facilities contracted to winners of the open seasons has not yet been clarified.

Pemex Logística, in conjunction with the country’s Energy Regulatory Commission, completed the first open season auction of fuel transportation and storage capacity on Tuesday, with US company Tesoro announced as the winner.