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Mexico's new refinery draws criminal
groups to infiltrated labor in project

Reuters

Mexico's new dos Bocas refinery quest draws criminal attention

By Argus

MEXICO CITY
Petroleumworld 08 04 2020

Mexico is planting its flagship 340,000 b/d Dos Bocas refinery project in the president's home turf of Tabasco but also where it could face the same security challenges as other energy interests there.

"There are known links between labor unions and local criminal groups, who often collaborate in extortion schemes targeting small-to-medium-sized oil and gas operations, especially in Paraiso where Dos Bocas is located," Francisco Garcia, analyst at Control Risks told Argus . "Members of criminal groups are known to infiltrate these projects to facilitate theft or fraud within companies."

The $8bn refinery is the centerpiece of President Andres Manuel Lopez Obrador's policy to reduce Mexico's dependence on refined product imports and to reactivate the energy sector in the southeast.

Work on the refinery started in June last year, with the creation of 8,019 direct jobs. But security experts working in the region said that local criminal groups have already infiltrated the labor unions working on the refinery project.

Crude and natural gas production has been in decline for over 14 years and the 2014 energy reform that opened the door to independent operators promised to reactivate the exploration and production (E&P) industry in Tabasco and Veracruz, attracting both Mexican and international independent operators.

State-owned Pemex operates 205 exploration and production blocks in the Tampico-Misantla, Veracruz and southeast basins that stretch across the Veracruz, Tabasco and Campeche states. Pemex also holds farm-out contracts in the region for the Ogarrio and Cardenas Mora fields operated by Wintershall Dea and Cheiron respectively.

Mexican independents including Grupo Carso and Pantera Exploracion y Produccion as well as Canadian, US and Argentine independents Renaissance Oil, Sun God Resources, Roma Energy and Vista Oil and Gas hold development rights for 20 onshore blocks across Veracruz and Tabasco.

But Pemex immediately abandoned blocks it stopped operating following the energy reform. Independents found ransacked well sites, with existing infrastructure stolen, when they first started work, sources said.

Unlike in Mexico's northern E&P regions, the collection of protection money by people purporting to be labor union representatives has been widespread across Tabasco and Veracruz for at least the past 10 years.

Companies seeking access to well sites are commonly charged fees depending on the number of vehicles and people working on site. Fees can range from Ps5,000 ($225) to Ps100,000/day and failure to pay can result in delayed work schedules, vandalism or violence, sources said.

"There are no reliable statistics on the subject, but anecdotal evidence points to it being one of the main types of extortion in the area, especially for small-to-medium operations in Veracruz state," Garcia told Argus .

Neither Pemex nor any of the independent operators contacted by Argus responded to requests for comment on the matter.

While other risks such as kidnapping and theft can be mitigated with robust security protocols including daylight-only working hours, the use of uniforms and continual employee security training, the payment of protection money is seen as a business cost for many companies working in the region, sources said.

Security spending varies depending on the size of the companies and the operations but many companies are investing millions of dollars each month to set up perimeters around well sites, employing around-the-clock guards, drones and cameras.

"What it comes down to is business continuity," a security expert said. "It is absolutely possible to operate in those states with the proper protocols but if the economic situation gets so bad because of the threats then that is where a company might draw a line."

No companies have requested extensions to minimum work programs because of security issues in the region, oil regulator CNH said, unlike in the northeast.

Veracruz and Tabasco are statistically safer locations for E&P workers compared with Mexico's northern Tamaulipas state but risks continue to increase as Lopez Obrador's "hugs not bullets" security policy has proven ineffectual in reducing the power and reach of criminal groups.

"There is also an increasing likelihood that the administration will remain focused on addressing the recent surge of violence in central Mexico related to fuel theft operations as opposed to long-term security concerns in states such as Tabasco and Veracruz," Control Risks analyst Adriana Thomas said.

By from Argus Media

argusmedia.com
07 31
2020

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