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The great global oil robbery: Johnian’s report reveals international scale of downstream oil theft

Oil pipeline in Alaska. Pipeline tapping, or “milking”, was found to be one of the most common techniques employed by criminal organisations and other perpetrators. Credit: Wikimedia Commons

A study led by a St John’s alumnus explains how refined oil theft is costing the global economy billions of dollars a year and helping to fund criminal and terrorist organisations.

The “relatively invisible” crime of downstream oil theft, which involves stealing oil once it has been refined, is costing the global economy billions of dollars while funding criminal and terrorist organisations, a study has found.

The report, produced by an independent research and consulting firm set up by a Johnian alumnus, Dr Ian Ralby, is the first ever systematic study into global downstream oil theft, how it occurs and who is responsible.

Ralby studied at St John’s from (2007 to 2012), initially for an MPhil in International Relations and then for a PhD in Politics and International Studies. He is a recognised expert on maritime security matters, the regulation, governance and oversight of private security companies, and oil theft and related energy crimes. In 2011, he founded IR Consilium, which provides research support, assistance and advice to both state and non-state organisations on aspects of international affairs.

He is the lead author of the new report, which was produced for the Atlantic Council. Unlike crude oil theft, which is a relatively well-known problem, it examines the question of stealing oil after it has passed through a refinery – a matter which has largely been ignored by governments, international organisations, and crime prevention agencies.

According to its findings, the scale of the problem is nonetheless huge, collectively depriving governments of billions of dollars in tax revenues every year. Amid pages of evidence the authors cite examples such as the fact that an estimated 660,000 cars in Morocco and Tunisia run all year long on fuel stolen from Algeria. In one particularly notable case, the study found that tapping, or “milking” a pipeline of refined oil in Mexico for just seven minutes earned a criminal cartel $90,000.

While much of the report focuses on countries in Africa, Asia and South America, it also stresses that Europe and the UK are far from immune. In 2012, for example, hydrocarbons fraud is estimated to have cost the European Union 4 billion Euros in lost revenues. Substantial sums have been accumulated by gangs working in both Britain and mainland Europe.

Prior to the study, no attempt had been made to produce a comprehensive picture of either the extent or the cost of downstream oil theft on an international level. To do this, Ralby and colleagues drew on locally-focused sources, such as government reports, more limited academic studies, and news articles. They also conducted extensive background research by interviewing sources closely connected with various aspects of the issue.

“One reason that refined oil theft has largely been ignored is because it is much harder to collect reliable information about these activities,” Ralby said. “This has led to the mistaken perception that downstream oil theft is not a significant issue. In reality, it is an international phenomenon, at the very heart of the global economy and world energy security, and it has received almost no serious treatment until now.”

The perpetrators “range from sophisticated international networks to well-meaning humanitarian service providers on limited budgets in poor and desperate communities,” the report’s authors write. Often, however, they found that downstream oil theft can be traced back to large scale, organised crime and terrorist organisations – such as the “Zetas”, who are leading players in the narcotics trade in Mexico, or the Nigerian militant organisation known as the Niger Delta Avengers.

Given the complex patchwork of perpetrators, methods and motivations involved, controlling and reducing downstream oil theft will require a high level of co-operation among nations, international bodies and private and public sector organisations, the report says. The authors also stress the need for certain types of legal reform; the need for new standards in the energy sector covering areas such as vetting, training and oversight requirements; and a set of enhanced intervention strategies including improvements to maritime security and a revised approach to prosecution.

“Countermeasures on the ground happen in some places, but they need to be linked with countermeasures at a strategic, legal, regulatory, policy and international level,” Ralby added. “Given the global reliance on fuel for so many aspects of life, virtually everyone has at least some stake in addressing the problem.”