Tamaulipas Turf War Creates No-Go Zone for Energy

"MX" for Borderland Beat; Argus Media

Note: This is the first in an Argus series on where energy companies and criminal cartels collide in Mexico, starting with the key motor fuels import routes and potentially shale-rich fields of the northeast. Details/opinions expressed in this report are not Borderland Beat's. 

Tamaulipas is home to the Burgos Basin, a rich oil and natural gas reserve

An increasingly violent turf war between criminal groups operating in Mexico's northern Tamaulipas state has forced energy companies to restrict work there over the past eight months, with the government's crackdown on fuel theft leaving state-owned Pemex workers particularly vulnerable to attack.

The region is home to the oil and natural gas rich Burgos basin, a refined fuels hub — including the 190,000 b/d Madero refinery and the 275,000 b/d Cadereyta plant in neighbouring Nuevo Leon state, connected by 103,000 b/d in pipelines. The state is also seeing a flurry of new wind and solar projects.

But Tamaulipas is also the site of a fierce battle between the Gulf, Northeast and Jalisco cartels for control over lucrative drug and arms trafficking routes to and from the US. The Northeast cartel's push into the Gulf cartel's traditional territory has escalated over the past eight months amid a renewed military push, with almost daily gun battles reported in contested territory.

Mexico is not the only oil-producing country plagued by such violence, as Colombia's decades-old unrest shows. But the conditions in Tamaulipas, which borders the US state of Texas, are especially grim.

"The oil zones are under fire," a security expert told Argus. "If companies send their workers out to oil fields in certain areas at the moment they will be returned dead or not at all."

Managing threats

State-owned Pemex operates 79 exploration and production blocks in the Burgos basin as well as the Mision block under a joint venture with Mexican conglomerate Grupo R and Argentina's TecPetrol. Meanwhile, Mexican independent operators hold development rights for 17 blocks across the state.

Companies operating in the state have acknowledged the security challenges, with Mexican independent Jaguar E&P confirming that it operates only during daylight hours. Pantera Exploracion y Produccion secured a deadline extension for one of its blocks in June because of delays caused by insecurity.

Personnel employed by private E&P companies are not usually the target of direct attacks but "incidental exposure is a constant risk," Francisco Garcia, security analyst at Control Risks told Argus.

Over the past seven months, security experts working with oil, gas and renewable energy companies in the region have documented 15 deaths from cross-fire, seven assaults by cartel members fleeing confrontation with a rival gang, 25 kidnappings to extract money or extort information about rival gangs or for fuel theft, as well as numerous cases of vehicle theft and telephone extortion. Despite the high level of criminal activity, charging companies a fee to operate in the state, known as derecho de piso, is not common practice in Tamaulipas as it is in other part of the country.

A handful of illegitimate oil services companies, suspected of being fronts for laundering the profits of fuel theft, are also thought to be responsible for widely documented theft of heavy machinery, valves and pipes from oil field sites.

"Tamaulipas has a very specific security dynamic circled around criminal lookouts," Garcia said. "The groups are not necessarily tracking the companies themselves but are trying to keep track of rival organizations."

Companies operating in the state employ a range of protocols to protect their staff and operations, including daylight-only working hours, maintaining a high industrial profile through the use of vehicles and uniforms clearly marked with company logos, kidnap training for personnel, the use of hotels and apartment complexes that commit to anti-kidnap protocols, and the sharing of real-time data on criminal incidents in order to plan daily personnel movements.

Fuel theft crackdown

Violence in the state has ebbed and flowed over the past fifteen years depending on the level of military presence, government policy and rivalry between cartels.

Between 2005 and 2010, the state was known as a center for kidnapping and murder of oil and gas workers, with at least 15 murders resulting from failure to pay ransoms. But since 2010, criminal groups in the state have largely focused on more lucrative drug trafficking activities.

The number of threats began to ramp up last year as the absence of military personnel amid federal budget cuts and the escalating turf war saw an average of 10 workers kidnapped each month, security experts told Argus.

Once the military stepped up efforts to contain the violence eight months ago, the number of criminal incidents has decreased in line with a reduction in fieldwork and the use of military escorts for essential work programs.

But the improving security conditions for E&P workers have come at a cost.

"With government policy focused on fuel theft, the risk for oil workers in private companies has reduced," a security expert told Argus. "But that is not the case for Pemex workers who are being killed if they do not provide information for fuel theft."

On average, two Pemex workers are killed each month in Tamaulipas in executions attributed to criminal gangs, he said.

Pemex declined to comment for this story.

A nationwide crackdown on fuel theft was one of President Andres Manuel Lopez Obrador's first major anti-corruption strategies when he took office in December 2018. Pemex shut down key pipelines that had been subject to repeated illegal taps and shifted delivery of refined products to tank trucks, while soldiers were deployed to protect key refined products pipelines.

While the government has claimed the strategy as a success, Pemex still discovered about 10,000 illegal pipeline taps in 2019, down from 13,000 in 2018. Tamaulipas ranks sixth in the country for illegal fuel taps despite being farther down in ranking by consumption. Nationwide Pemex still lost 4,500 b/d of refined products through 5,100 illegal taps so far this year, Pemex's security manager Manuel Garcia said recently.

Garcia said Pemex has identified the Gulf cartel as the main operator of these thefts in the northeast region.

No-go at any cost

Tank trucks are another target of fuel theft in Tamaulipas, with around two tank trucks stolen each month between Matamoros and Reynosa, alone, according to local theft tallies.

Some members of Mexico's national freight association chamber (Canacar) have said they avoid the state for now.

Grupo Unne has received offers to pay double its regular tariff to transport diesel and gasoline to Tamaulipas, but they continue to decline, chief commercial officer Edgar Martinez told Argus.

"We are constantly evaluating the situation there, and the commercial team and myself go up there from time to time ... but we return with the same decision: avoid all routes to Tamaulipas," he said.

For private-sector LPG distributors the situation is getting worse, Carlos Lozano, head of the LPG distributors association (Amexgas) said.

Lozano said that while the government's efforts have focused in gasoline and diesel, thieves have migrated to LPG and Tamaulipas is one of eight states that the association has marked in red as the most dangerous.

"What we have seen in some states as Tamaulipas is that the groups not only threaten us, and our drivers, but the clients," Serrano said.

None of the security experts consulted by Argus expect problems in the region to disappear as the army is outmanned and outgunned by the criminal groups. But this particularly bloody phase of the turf war could be close to turning a corner.

"These cycles, when things become really dangerous, typically only last between eight to five months," a security expert told Argus. "I have not seen this situation as a disincentive because the companies still come, they invest and they employ protocols that allow them to be productive."