Maritime oil crime is pervasive, requires more attention, forum told
Stopping crude oil and product thefts may not seem to be a high priority in fighting global maritime crime, but they need to be addressed more aggressively because they can finance narcotic smuggling, human trafficking, and other destructive criminal enterprises, speakers agreed during an Apr. 10 Atlantic Council discussion.
They said the problem extends beyond pirates boarding tankers and holding the cargo and crew for ransom. Local fishermen now sell food for stolen fuel, thieves move products bought under a government subsidy in one country into another for sale at market prices, and influential individuals fraudulently obtain offshore oil licenses for resale to producers at much higher prices.
“There are so many ways to get around law enforcement. Physical theft of actual property occurs where it’s least visible—on the world’s oceans and seas,” said Ian M. Ralby, founder and chief executive of global strategic consultancy I.R. Consilium LLC and a senior fellow at the AC’s Global Energy Center who co-wrote a new AC report: Oil on the Water: Illicit Hydrocarbon Activity in the Maritime Domain.
“Theft of oil from tankers used to be prevalent. Now, we’re seeing fuel smuggling alongside illegal fishing. Drug cartels in South America buy stolen gasoline as an ingredient to make cocaine. Libya has become a major fuel, as well as migrant, smuggling area,” Ralby said. “If we have enough maritime criminality, it will affect global commerce. Food security will decline. Criminal and terrorist groups will grow.”
The report’s other author, David Soud, I.R. Consilium’s research and analysis director, said, “Even before the wellhead, there’s fraud in lease allocations, often at the ministerial level. International oil companies can be pushed into what are known as forced marriages with local firms that sometimes are little more than post office boxes. They can be pressured to be brokers for bribing former and sometimes current government officials.”
Soud noted that once it leaves the wellhead, crude can be “financially laundered” by mixing it with crude stolen from elsewhere. “In one case, an offshore well was listed as shipping more crude than it actually produced because of this,” Soud said. “Falsified documentation is the most pervasive fraud. All this needs to be regarded amid the oil business’s general opacity.”
Starting to get attention
A third speaker, US Coast Guard Commdr. Kate Higgins-Bloom, who also is a federal executive fellow at the Brookings Institution’s Center for 21st Century Security and Intelligence, said oil and product theft is finally starting to get more attention.
“Agencies are starting to focus on it more as they recognize that it can be a major resource for criminals. Adequate money is always the biggest barrier,” Higgins-Bloom said. “But some criminals penetrate governments to a point that it’s necessary for transnational companies to step in and demand changes.”
US Navy Capt. Alisa Ambrose, who works on the service’s assessment division staff, said, “Criminality keeps spreading. But the vast majority of vessels are legitimate. Law enforcement is not part of our charter. We try to focus limited resources where they have the most effect. We work to improve relationships with partner nations. Piracy is down in the Malacca Straits, for example, because Singapore and Malaysia have worked hard to combat it.”
Royce Ferguson, oil and gas integrity management director at SICPA, a Springfield, Va., security advisor and supplier to governments, banks, and businesses, said, “Governments are interested in collecting more revenue. Solutions can sometimes be as simple as getting a port to use an electronic, instead of paper, bill of lading because they are harder to counterfeit.”
More governments need to recognize that smuggling provides funds for criminals and make combatting oil and product theft a higher priority, Ralby said. “The situation is changing. Criminals are aware of this, and are acting accordingly,” he said.
“As a younger officer, I didn’t realize that a barrel of oil actually can be a barrel of cash,” said Higgins-Bloom. “I recognize that now.”
Contact Nick Snow at [email protected].
Nick Snow
NICK SNOW covered oil and gas in Washington for more than 30 years. He worked in several capacities for The Oil Daily and was founding editor of Petroleum Finance Week before joining OGJ as its Washington correspondent in September 2005 and becoming its full-time Washington editor in October 2007. He retired from OGJ in January 2020.
