Mexico’s state oil company Pemex has announced it will cease transporting fully refined gasoline and diesel fuel through its pipelines, a novel approach intended to combat pervasive oil theft, but nevertheless raises the question of its long-term effectiveness.

Pemex said it will begin sending “unfinished” fuel through its more than 14,000 km of Mexican pipeline. The fuel will require a final mixing before being suitable for use in motor vehicles and industrial processes, reported El Universal.

With the move, Pemex hopes to reduce fuel theft by criminal groups and deter customers from buying stolen gasoline.

According to CBC News, Pemex documented 3,674 illegal taps in its pipelines in 2014 -- a 70 percent increase over 2013. In just the first nine months of 2014, the company said it lost an estimated $1.15 billion to oil theft.

Eight of every 10 liters of gasoline transported in Mexico is moved via pipeline – a value of over $28.5 billion, reported El Universal.

Final mixing will now take place in the company’s 77 storage and distribution terminals located throughout the country, before fuel is sent out for final sale and consumption.

The company did not specify what steps of the refining process would be left unfinished, but advised customers to ensure they buy fuel from authorized gas stations and dealers to avoid potentially damaging their vehicle engines, reported CBC News. 

The change will take effect nationwide in two months.

InSight Crime Analysis

With this decision, Pemex demonstrates that it is thinking creatively about how to mitigate its losses to oil theft -- an activity that has become a massive source of revenue for Mexican organized crime and is a major threat to the country’s oil industry.

In theory, this move will make it more difficult for criminals to benefit from tapping Pemex pipelines. But it's also possible that criminal organizations will move into the business of refining the fuel themselves. Groups like the Zetas have already proven themselves capable of creating sophisticated distribution networks for stolen oil. 

It's also possible that criminal groups may simply begin targeting the storage centers where final refining will now take place, either by corrupting employees at these facilities or by forecfully interdicitng shipments of fully refined fuel.  

Overall, Pemex’s decision is a striking example of a company having to significantly adapt its practices due to criminal activity. The long-term benefits of this manuever, however, remain in doubt.

Investigations

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