Downstream Oil Theft: Global Modalities, Trends, and Remedies

Écrit par © Filactu le . Rubrique: Publications

Couv-Downstream-Oil-TheftThis is the first major study of refined oil theft around the globe.

At peak prices, tapping a Mexican pipeline of refined oil for only seven minutes could earn a cartel $90,000. In 2012 alone, hydrocarbons fraud cost the European Union €4 billion in lost revenues. In Nigeria, 30 percent of all hydrocarbons products are smuggled into neighboring states. An estimated 660,000 cars in Morocco and Tunisia run all year long on fuel smuggled from Algeria.

In its first year, a fuel marking and vehicle tracking program in Uganda reduced the amount of adulterated fuel from 29 percent to as little as 1 percent. But at the same time, the regulators who test the state’s fuel marking program routinely steal 22 liters per truckload, amounting to 1.2 million liters per year at one border crossing alone.

Theft, fraud, smuggling, laundering, corruption. Hydrocarbons crime, in all its forms, has become a significant threat not only to local and regional prosperity but also to global stability and security. Combating this pervasive criminal activity is made only more difficult by the reality that many of those in a position to curb hydrocarbons crime are the ones benefiting from it.

This is the first major study of refined oil theft around the globe, and while Part I provides only a limited snapshot of the problem, it offers useful insight into the modalities of theft, the culprits responsible, the stakeholders who su er, and the approaches that could change the illicit dynamics. Part I examines the contours of illicit hydrocarbons activity in ten case studies: Mexico, Nigeria, Ghana, Morocco, Uganda, Mozambique, Thailand, Azerbaijan, Turkey, and the European Union (including the United Kingdom).

The modalities of theft across these geographically and contextually disparate cases range from low-level tapping, siphoning, adulteration, and smuggling to extremely sophisticated maritime operations involving extensive networks of actors to brazenly corrupt dynamics in which states lose billions of dollars per year while their officials profit from those losses.

Illicit activity is highest in states where oil is refined, but the most common determinant of oil theft is a significant price discrepancy between one state and its neighbor. Other factors in neighboring states— instability, currency imbalances, and lack of border controls—also impact the extent to which a state experiences downstream illicit activity. Areas where there are few fuel distribution centers are particularly ripe for organized criminal groups to fill the void. At the same time, security forces, regulatory authorities, company insiders, terminal workers, and officials at every level are all potential participants in illicit hydrocarbons schemes that rob governments of revenue and enrich the individuals involved.

Some mitigation efforts—most notably fuel marking and vehicle tracking—have proved extremely useful in efforts to stem illicit activity and regain lost tax revenue. But others, including closing borders, have had little, if any, effect.

A three parts report

The first focuses on the culprits, modalities, and amounts of downstream illicit hydrocarbons activity. It details each of the case studies and examines the forms of hydrocarbons crime, highlighting who benefits, who suffers, and, to the extent possible, how much is being lost by governments in the process.

Part II draws on the details of the case studies to analyze trends in the global illicit market. Part III then focuses on the various stakeholders and their reasons and opportunities for mitigation, and provides concrete recommendations about what might be done.

Fuel is vital to human life, and everyone wants a discount. Across the globe, people are willing to break the law in order to pursue that discount.
The global scourge of illicit downstream hydrocarbons activity remains relatively invisible. This study, in shining a light on it, constitutes the first step toward effectively addressing this pervasive, yet unrecognized threat to global security, stability, and prosperity.

Dr. Ian M. Ralby

Download the report « Downstream Oil Theft: Global Modalities, Trends, and Remedies »  - january 2017