Mexico's oil industry on a collision course with drug cartels

Illegal gasoline siphon // Source: Mexican Army

Monday was a historic day in Mexico where congress passed a second round of legislation to open the nation's oil industry to foreign investment.

Supporters say both investment and technology are sorely needed to improve Mexico's national oil company PEMEX and their aging infrastructure.

Opponents are worried about corruption and Mexico getting short-changed on a highly-prized natural resource.

But with the lands with the most oil and natural gas reserves terrorized by drug cartels, experts believe energy reform is on a collision course with organized crime.

Cartel Lands

Ranging from Gulf of Mexico in Tamaulipas the foothills of Coahuila, the Burgos Basin contains untold amounts of oil and natural gas.

Foreign investment, hydraulic fracturing technology and water infrastructure improvements are needed on land while deep water oil platforms are needed in the gulf.

But northern Mexico remains divided up by the Zetas drug cartel and rival members of the Gulf Cartel.

In addition to fighting with each other and soldiers, the two groups have been linked to the theft of oil and gasoline as well as kidnapping and extortion of businessmen.

UTB Professor Guadalupe Correa-Cabrera is an expert on Mexican drug cartels.

Although there have been no confirmed direct attacks on oil companies or their workers, some foreign workers have reportedly been caught in the cartel cross-fire.

There have also been rumors of foreign oil workers kidnapped in Tamaulipas, none of those reports have been confirmed.

"It's a very big risk for those companies to come," Correa-Cabrera said.

Oil Theft

The theft of oil, gasoline and other petroleum products has been documented in dozens of cases in the State of Tamaulipas and neighboring Nuevo Leon over the past four years.

Drug cartel operatives have placed illegal siphons directly on pipelines with stolen gasoline being sold openly at discount prices in the streets of Mexican border cities.

Professor Correa-Cabrera said stolen oil and gasoline is a multi-million dollar business for drug cartels and they aren't likely to give it up any time soon.

The professor said foreign companies and their drilling operations could be an equally tempting targets for drug cartels.

"They are not going to disappear just because legislation is passed," Correa-Cabrera said.

Private Security

But Correa-Cabrera said that the energy reform legislation does not answer one important question: will foreign oil companies be able to hire armed private security?

She said the legislation passed on Monday does not include language about the issue.

Correa-Cabrera said it's understandable that foreign companies would want to protect their investment, but Mexico's strict gun laws do not allow bodyguards to legally carry guns or high-powered weapons.

With foreign companies set to begin full-scale drilling next year and foreign companies to open gas stations in 2016, the professor said the private security issue may have to be addressed by Mexican lawmakers if the security situation does not improve.

"It's possible if the situation in Mexico is not controlled," Correa-Cabrera said.