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Mexico's Pemex Targets Cross-Border Condensate Theft

A lawsuit recently filed in U.S. District Court by Mexico's Pemex Exploracion Y Produccion (PEP) alleging widespread theft of natural gas condensate from the Burgos Field blames drug cartels and targets about a dozen U.S. entities for allegedly trafficking in the stolen commodity, knowingly or not.

The lawsuit, filed in the Southern District of Texas, said no Petroleos Mexicanos (Pemex) entity has sold PEP condensate since 2006. "Thus, any Mexican condensate which entered the United States after August 2006 was stolen and brought in without title or right. Any condensate sold prior to that date was legal only if it originated in a contract brokered by PMI [Trading Ltd., a nongovernmental affiliate of Pemex]."

Among those named as defendants in the lawsuit, which seeks a jury trial, are Plains All American Pipeline LP, SemCrude LP, TransMontaigne Partners LP and Western Refining Co. LP. The lawsuit alleges that some defendants knew they were trading in or transporting stolen condensate while "others were ignorant that they were purchasing stolen goods."

Those that knowingly trafficked in the stolen condensate face broader liability "for the entire scope of the U.S. conspiracy to market the stolen condensate, a market that reaches into the hundreds of millions of dollars," the lawsuit said. PEP claimed in the lawsuit that more than $300 million worth of commodity was stolen.

In a statement Western Refining said it does not comment on pending lawsuits and added "that it has no record of having purchased any products from a company named Continental Fuels as alleged in this recently filed lawsuit. Western Refining rejects any implications, from any source, that it is or has been involved in any unlawful activities in the United States or Mexico, or the encouragement of such activities."

SemCrude spokesperson Liz Barclay said the company is aware of the lawsuit "and that a response will be put forth in due course." Plains and TransMontaigne did not immediately respond to NGI's request for comment. Others named as defendants in the lawsuit, which was filed last week, are Big Star Gathering Ltd. LLP, F&M Transportation Inc., James Jensen, Joplin Energy LLC, Hutchison Hayes Energy LLC, Jeff Kirby, Saint James Oil Inc. and Superior Crude Gathering Inc.

The Burgos Field is in northeastern Mexico in the states of Tamaulipas, Nuevo Leon and Coahuila. Most of the condensate thefts have been from one or more of PEP's 52 transfer and delivery systems, which are spread throughout remote areas of the Burgos Field, the lawsuit said. "The cartels also hijacked at gunpoint PEP tankers transporting condensate from the transfer and delivery systems to PEP's central storage facility near Reynosa, Tamaulipas."

PEP said it and the Mexican government have been fighting the thefts with the use of private and military helicopters as well as electronic monitoring systems to detect drops in line pressures or other suspicious events in the field. However, because the Burgos is so large "many times it is impossible to get to the theft locations in time to stop the criminals," the law suit said.

On the legal front, the Mexican government has launched investigations of and criminal charges against about 140 individuals believed to be involved in the thefts, the lawsuit said. Two Mexican customs agents were said to have been jailed for allowing trucks carrying stolen condensate to enter the United States with fraudulent documents. "Dozens of tanker trucks involved in the scheme, some filled to capacity with stolen PEP condensate, were seized."

As described in the lawsuit, PEP and Mexico's battle against condensate theft sounds as intractable as the country's long-running war on illegal drug production and trafficking. Violence in Mexico is said by at least one analyst to be so bad that it has retarded development of the country's energy resources; companies that would invest are afraid to (see Daily GPI, April 4).

"The cartels are relentless and well-funded," the lawsuit said. "As long as there is a U.S. market for stolen Mexican condensate, the thievery will continue."

The stolen condensate winds up mainly in Texas, according to the lawsuit. "There is no market for stolen condensate within Mexico," it said. "Foreign markets farther away than Texas and its neighbors are generally too distant to economically transport the condensate, particularly since its illegal nature makes large-scale operations difficult. Thus, without a U.S. market...there would be no reason for the thefts and violence in Mexico."

Texas has been no stranger to domestic condensate theft itself. Two years ago a large-scale oilfield theft investigation covering 17 counties resulted in numerous arrests in East Texas (see Daily GPI, July 15, 2009).

The lawsuit alleges that a conspiracy was managed by some of the defendants. "The existence of a U.S. marketing scheme is well established," the lawsuit said. "United States law enforcement agencies, including the Immigration and Customs Enforcement Agency (ICE) of the Department of Homeland Security, have been investigating the transport and sale of stolen PEP condensate in the United States." Several criminal convictions have resulted from the investigation, the lawsuit said.

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