Fuel theft, violence siphoning $215 million from Ecuador oil industry

By Alexandra Valencia

ESMERALDAS/SANTO DOMINGO, Ecuador (Reuters) – Organized crime groups in Ecuador are increasingly stealing fuel from state-run oil company Petroecuador to support drug trafficking operations, resulting in hundreds of millions in lost income for the country’s top industry, the company and officials said.

Criminals steal gasoline, diesel and other fuel by tapping state-owned fuel pipelines for use in making cocaine and transporting drugs. They are mounting more violent attacks on oil fields, making off with copper cabling and extorting and beating up workers, the company and its union say.

Petroecuador told Reuters that fuel theft led to $215.1 million in cumulative losses during 2022, 2023 and through October 2024 and that illegal taps have grown from 32 in 2022 to 773 through October.

While the theft represents a fraction of the $7.5 billion in national income provided by Petroecuador, equivalent to nearly a quarter of the budget, officials are concerned by the boost to drug trafficking offered by the fuel and the impact on beleaguered public coffers.

Ecuadorean authorities have not given an overall estimate for drug trafficking earnings for crime groups in the country.

The country has 1,655 kilometers (1,030 miles) of state-controlled fuel pipelines, which snake along its Pacific coast and through remote Amazon (NASDAQ:AMZN) areas, where communities have protested the industry.

Reuters witnesses saw at least nine illegal taps within a 25-meter section of the Esmeraldas-Santo Domingo fuel pipeline, one of eleven such pipelines which move fuel in the Andean country, during a late November visit.

At least 136 taps – homemade valves fashioned by criminals – have been discovered on the pipeline this year through October, totaling losses of some $17 million from this 166-kilometer (103-mile) section of pipeline alone.

Finding and removing the valves is a time-consuming and expensive process, and the valves also risk fuel spills.

PATROLS, DRONES DEPLOYED

Murders, drug trafficking, gun smuggling and other crimes blamed by the government on local gangs connected to Mexican cartels, the Albanian mafia and others, have soared over the past five years in previously-peaceful Ecuador.

The violence has been illustrated most dramatically by the assassination of a presidential candidate and the on-air invasion of a television studio by an armed gang.

The attacks on the energy sector underline the challenges facing President Daniel Noboa, who promised security improvements during his 2023 election campaign and is up for re-election in February 2025.

His administration, which did not respond to Reuters questions about fuel theft, has said it has increased military protection of oil installations, including night patrols, and authorized the use of drones to monitor fuel pipelines, which are separate from the country’s two crude pipelines.

Petroecuador confirmed the government’s deployment of the patrols and the drones to Reuters. It is looking for new technology to detect taps more quickly, and at the possibility of a joint command center with police and other entities to speed response.

ANATOMY OF A FUEL HEIST

Police, citing their intelligence work, allege some of the stolen fuel is used by local criminals to make precursor chemicals they sell to gangs producing cocaine in neighboring Colombia. The gasoline is also used in high-speed boats which move drugs north to Mexico and Central America via the Pacific, they said.

For the increase in patrols and other measures to be successful, there must be judicial changes, said Lieutenant Colonel Hugo Amores, the head of the police hydrocarbon crimes unit.

“Legal reforms are necessary because if we don’t have forceful laws, the work of the police and the armed forces is a joke,” Amores said. “It’s like a revolving door where we take in detainees and they go out the other side.”

Fuel crimes can lead to sentences of between 2 months and five years, while organized crime charges can garner 10 years and murder sentences of up to 26 years.

More than 90% of fuel pipelines are underground, so criminals dig around a meter down to buried tubing, tapping and connecting it to pressure hoses, which carry fuel to illicit tanker trucks or storage pools hidden on private property.

Petroecuador technicians often have to improvise when it comes to repairs, the company told Reuters during its visit. Removing the homemade taps can cause spills or require pumping to be halted, so instead technicians encase the taps in a metal cylinder, preventing the valves from being reconnected to hoses, a process that takes up to five hours.

If taps have caused a spill, pumping is halted and clean-up and repair efforts can take up to 12 hours, technicians said.

Sometimes up to five taps are reported per day across various pipelines. Pumping on the Santo Domingo-Pascuales jet fuel pipeline is currently halted because it was overrun with taps.

The police have seized 18 storage pools used for storing stolen gasoline and diesel this year so far, mostly in the Amazon.

“Fuel theft has a systemic value…it’s fundamental to the profitability of criminal organizations in Ecuador,” Ecuadorean Organized Crime Observatory Director Renato Rivera said.

Fuel pipelines in the provinces of Guayas, Santa Elena, Manabi and Esmeraldas, also major hubs for drug transport to the U.S., suffer the most from taps, according to Amores’ hydrocarbons crimes unit.

About 30,000 gallons of stolen fuel – equivalent to three tanker trucks – are moved clandestinely around the country each day, he said.

ROBBERY ROUTES

The volume of stolen fuel confiscated by police increased more than 77% over the past year and in November the army reported it had seized an illegal refinery in Amazonian province Sucumbios which had capacity to produce 10,000 gallons of gasoline per week for use in cocaine production.

“There are more controls,” Amores said, referring to the increase in military presence at oil installations, “but there is also more crime.”

“The whole (judicial) system in relation to hydrocarbons trafficking is concentrated on immediacy, on people caught in the act and not on the networks of criminal groups that are behind the crime,” said security analyst Rivera. “That’s why the results are so marginal.”

The hydrocarbons crimes unit has identified at least four fuel smuggling routes along the border with Colombia and Peru.

Theft of copper wiring from oil facilities is not connected to drug production, but has caused $4 million in losses this year and a dip of 1% in output over nine months, Petroecuador said.

Petroecuador workers and contractors in some provinces are being extorted – receiving demands for money and threats if they refuse to pay – said union head Jipson Martinez. 

   In Esmeraldas province, home to Ecuador’s largest refinery, an estimated 25% to 30% of 700 workers have been extorted, said Martinez, who himself was forced to leave the province after refusing to pay extortion, leading criminals to try to bomb his house in late 2022.

“We are defenseless,” Martinez said.