Oil products thefts require attention, Atlantic Council report says

Thefts of refined oil products require more attention because they help bankroll criminal activity and encourage government corruption while threatening motorists’ health since ingredients used to dilute the fuel and increase volumes can be unusually toxic, a new Atlantic Council report said.

Pollution also can increase because illicitly installed fuel taps can leak and not be fixed immediately, according to the report’s author, Ian M. Ralby, a nonresident senior fellow at the Council’s Global Energy Center who also is an adjunct professor of maritime law and security at the US Department of Defense's Africa Center for Strategic Studies.

“It’s an easy enterprise in which to engage and one that can be had to shut down. Regulators sometimes become criminals,” he observed during an Apr. 10 discussion at the Council’s Washington headquarters.

Refined products theft occurs in industrialized nations as well as developing countries, Ralby said. When crude oil prices were at their peak, tapping a Mexican products pipeline could earn a criminal cartel $90,000 in 7 min. Morocco receives about $2 billion/year of Algerian-subsidized fuel smuggled across its borders by mule-back. Forty-five percent of Poland’s retail fuel outlets are unregulated.

“Countermeasures are available,” said Ralby. “Fuel dyes in Europe have not been effective. Molecular marking has been more successful. Tracking of tanker trucks and oceangoing vessels also has helped, as has metering since many oil facilities still don’t have them. But these measure won’t be effective if they aren’t accompanied by government reforms. For instance, regulators have been found to take more fuel than needed out for samples and sell the surplus.”

Retired US Ambassador Richard L. Morningstar, who moderated a discussion with Ralby and two other panelists, said that while thefts of crude oil have been researched for some time, little has been known about those of refined products before the Council issued Ralby’s earlier report, “Downstream Oil Theft: Implications and Next Steps,” in March. “This is a little-known, but significant, factor in many national economies,” said Morningstar, who chairs the Council’s Global Energy Center.

Not a top intelligence item

“This is more than a worthwhile project. It’s foundational,” said a second speaker, John C. Gannon, an adjunct professor at Georgetown University’s Center for Security Studies who formerly chaired the US National Intelligence Council. “But in terms of what attracts national intelligence officials’ attention, thefts of refined oil products are far down their lists of concerns if they are there at all.”

Gannon said refined products thefts are basically a regional problem that requires efforts by more than one country to combat. “What resonates is that they contribute to corruption, which matters a lot in developing countries. In Asia, a middle class is emerging where none is appearing in Africa because of government corruption,” Gannon noted. “It also is becoming an international problem which will affect global oil markets eventually.”

Officials need a better sense of how refined products flow into both legal and illicit channels and focus on how this can contribute to organized crime, he said. “Finally, we need to include producing countries like Saudi Arabia and the UAE in coalitions of cooperation to get a better idea of how extensive this problem actually is. I also would like to see meetings with major oil companies because they have such extensive operations and very well-qualified people.”

A third speaker, Terzah Tippin Poe, said, “Companies which already work with governments need to work more extensively with them and other stakeholders. Poe is an environmental science and policy lecturer at Harvard University who led sustainability programs at TransCanada Corp. and Royal Dutch Shell PLC for more than 10 years.

“In Nigeria, nearly 300,000 b/d goes missing every day. It’s sold mainly to communities which see all this crude passing them by which produces benefits that don’t reach their people,” she said. “Companies and communities can work together to create opportunities that are alternatives to theft.”

Major oil companies also need to work harder to educate local consumers about illicit fuels’ damages, Poe suggested. Shell sent chemists to retail outlets in one country to test fuels that were being sold to make sure they were safe in what was a very popular community relations move, she said.

Contact Nick Snow at [email protected].