New Cartel Threat: US Energy Supply

 

New Cartel Threat: U.S. Energy Supply

 Posted 09/08/2010 07:03 PM EThttp://www.investors.com/NewsAndAnalysis/Article/546443/201009081903/New-Cartel-Threat-US-Energy-Supply.htm

Energy: Mexico's state oil firm, our second-largest foreign supplier, is under attack from drug cartels. But that's not stopping the U.S. from investing more in its operations while American rigs lie idle in the Gulf.

The volatile Middle East is often seen as the nexus of risk to U.S. energy supplies. But the biggest threat may be next door, in Mexico. It's bad enough that oil production there is declining due to underinvestment. But now the state oil monopoly, Pemex, is encountering a threat no one foresaw a few years ago: attacks from the country's notorious criminal cartels.

The Los Angeles Times this week reported that the violent "Los Zetas" cartel has "crippled" production in the Burgos basin in Tamaulipas state, home of Mexico's biggest natural gas fields.

Thirty oil workers and contractors have been kidnapped, including five who were snatched in May and haven't been heard from since. The cartels force workers to collaborate with them to steal energy, which is then sold for cash.

The gunmen also shake information out of workers on security systems and the delicate workings of gas transport so they can hijack production. Natural gas, with its visible pipelines, is particularly vulnerable, but the cartels have begun moving on oil too.

Pemex won't send its inspectors to some of the areas where the cartels have gotten a foothold, and the Times reported the company doesn't want to talk about it.

These acts, from the same people who smuggle drugs and illegal immigrants into the U.S., amount to an attack on the Mexican state. One-third of the national budget comes from energy earnings. A cartel controlling Mexico's substitute for tax revenue effectively can take over the government.

"How is it that Pemex, supposedly the backbone of the nation, can be made to bow down like this?" a relative of a kidnapped oil worker asked the Times.

But this creeping takeover also threatens the U.S. America is committed to Mexican oil, given that it isn't permitted to produce sufficient quantities of energy at home, even with vast resources. About 1.2 million barrels of Mexican crude come to the U.S. each day along with significant gas supplies.

The U.S. has been pitifully dependent on Mexico for its energy supplies for some time, and energy analysts worry about the state of underinvestment in Mexico's state fields. An explosion Tuesday at the country's third-largest refinery did nothing to allay those concerns.

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