IBP1482_19

PIPELINE CRUDE OIL AND

PETROLEUM PRODUCTS THEFT IN BRAZIL
Leonardo M. Caldas1, Marisa M. de Barros2,
Cláudio A. Ishihara3, Edie A. Junior4, Ronny J. Peixoto5

Copyright 2019, Brazilian Petroleum, Gas and Biofuels Institute - IBP

This Technical Paper was prepared for presentation at the Rio Pipeline Conference and Exhibition 2019, held
between 03 and 05 of September, in Rio de Janeiro. This Technical Paper was selected for presentation by the
Technical Committee of the event according to the information contained in the final paper submitted by the
author(s). The organizers are not supposed to translate or correct the submitted papers. The material as it is
presented, does not necessarily represent Brazilian Petroleum, Gas and Biofuels Institute’ opinion, or that of its
Members or Representatives. Authors consent to the publication of this Technical Paper in the Rio Pipeline
Conference and Exhibition 2019.

Abstract

The pipeline crude oil and petroleum products theft is a major concern to the global oil and gas
industry and the Government. This is an increasing concern in Brazil. The illegal tapping
activity by cutting into pipelines in Brazil is made by criminal organizations supported by
people who know how the industry operates. The illegal tapping can cause leaking, explosions,
damage to environment, death and destruction of properties. In addition, it impairs competition
because the stolen product is sold to the illicit fuel market without taxing and quality assurance.
Thus, this contributes to tax evasion and fuel adulteration. This problem has been expanding in
Brazil as it is highly profitable, and the Brazilian laws do not typify this illegal activity as a
criminal conduct. Pipeline operators and authorities are working together to combat it. This
paper examines the effect of measures and actions to combat the illegal pipeline tapping by
incidents reduction. The Colombian legal framework for pipeline fuels thefts provides evidence
that a criminal law can be an efficient instrument to discourage this illegal activity. Measures
and actions more extensive and enduring as Colombian legal reform, among others, can allow
Brazil to mitigate the pipeline crude oil and petroleum products theft.

Keywords: Pipeline theft. Illegal tapping.

1. Introduction

The pipeline is an efficient way to transport crude oil, petroleum products and biofuels
for long distances and volumes, and due to reliability and lower operational costs, when
compared to other modes such as the railroad and the road, despite the high initial investment
for the implementation (BOWERSOX et al., 2014; FONTES, 2008).
Products are transported through pipelines by pressure or gravity, from origin to
destination, practically without interruptions. The pipeline transportation reduces the number
of trucks in the roads, diesel consumption and CO2 emissions (ROITMAN; SILVA, 2018).
Taking São Paulo State, for example, pipelines have an operation about 200 million cubic
______________________________
1
Graduating, Energy Engineering, Internship - Ministry of Mines and Energy - Brazil
2
Ph.D., Chemical Engineer, Coordinator - Ministry of Mines and Energy - Brazil
3
Master, Mechanical Engineer, Director - Ministry of Mines and Energy - Brazil
4
Master, Civil Engineer, Advisor - Ministry of Mines and Energy - Brazil
5
Civil Engineer, Infrastructure Analyst - Ministry of Mines and Energy - Brazil
 Rio Pipeline Conference and Exhibition 2019

meters of petroleum products per year, so it is estimated there were 7 million less tank trucks
trips in the roads (TRANSPETRO, 2012).
Last year, according to Transpetro, there were 261 records of pipeline crude oil and
petroleum products thefts, 228 occurrences in 2017 and 72 incidents in 2016 (TRANSPETRO,
2019a). The theft is done by illegal pipeline tapping. Criminals make holes with
interconnections by cutting into pipelines and diverting products.
This high and fast expansion indicates it is necessary to adopt some measures and
actions to reduce this illegal activity and avoid accidents as well as a collapse in the pipeline
network, and damages to fuel supply. The oil and gas industry represents a significant and
strategic sector to the economy (FGV, 2018).
The aim of this paper is to examine the effect of measures and actions to combat the
illegal pipeline tapping on the reduction of incidents. This paper starts presenting the Brazilian
pipeline network and its importance for the transportation sector. Then, this summarizes the
increasing number of pipeline products thefts in Brazil. This paper also shows international
experiences to combat this illegal activity. Finally, this paper concludes that measures and
actions can allow Brazil to mitigate the pipeline crude oil and petroleum products theft.

2. Brazilian pipeline network

Brazilian pipeline network is present in 16 federated units and is concentrated in São

Paulo State (TRANSPETRO, 2019b). Pipelines can be marine and terrestrial. This last one can
be underground or not. This paper will focus on terrestrial pipeline thefts. Nowadays, only two
companies operate crude oil, petroleum products and biofuels pipelines in Brazil: Petrobras
Transporte S.A. (Transpetro) and Logum Logística S.A. (Logum).
Transpetro operates over 14,000 kilometers of crude oil, petroleum products and
biofuels pipelines branched throughout the country, ensuring the transport of products between
oil producing regions, refineries, and distribution bases (TRANSPETRO, 2019a). On the other
hand, Logum operates about 350 kilometers of ethanol pipelines, from Ureraba, Minas Gerais
State, to Paulínia, São Paulo State, connecting production centers to consumer markets
(LOGUM, 2019). Logum's facilities are interconnected with Transpetro's, allowing ethanol
transportation from Paulínia to Duque de Caxias, Rio de Janeiro State.
Pipeline range is a wide strip of land where the underground pipeline is buried, crossing
different places as forests, waterbodies, rural areas, industrial areas, urban areas, and roads. The
entire pipeline range is signalized to avoid improper utilization, such as excavations,
constructions, fires, garbage and vehicles traffic on the range (TRANSPETRO, 2019c).
Pipelines projects are based on engineering and environmental constraints to avoid
densely populated areas. However, residences were built over the years on the ranges, due to
the growing population. This situation increases the concern with population safety due to the
risk of accident caused by illegal tapping. Most accidents occur due to prohibited activities in
the ranges (TRANSPETRO, 2012). Figure 1 compares a pipeline range in Garulhos, São Paulo
State, in 1979 and nowadays, after the growing population.

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1979 Nowadays
Figure 1. Pipeline range in Guarulhos, São Paulo State, 1979 and nowadays.
Source: Transpetro (2019).

3. Illegal pipeline tapping in Brazil

The illegal pipeline tapping to steal crude oil and petroleum products is an increasing
concern in Brazil (TRANSPETRO, 2019c). The products transported by pipelines have a high
level of toxicity and are easy inflammable, whose leaks may cause environmental
contamination and explosions.
Illegal pipeline tapping is a profitable and low risks business. The low risk is in the high
qualified work of those who execute the job using irregular skills and equipment, but highly
effective, risking the local population and the environment (LOCK, 2017). In many cases
organized crime steal fuels from pipelines as observed in other countries (RALBY, 2017;
TRANSPETRO, 2019c). The Brazilian laws do not typify this illegal activity as a criminal
conduct. The stolen fuel is sold illegally through established fuel distributor and gas stations
(BORGES, 2017; BRASIL, 2018; VELASCO, 2017). Thus, this contributes to tax evasion and
fuel adulteration (PLURAL, 2019).
According to Transpetro (2019a), fuel thieves in Brazil drilled 261 illegal taps into
owned pipelines in 2018. Illegal taps rose over 200 percent in 2017. In 2016 there was 72. Brazil
is reaching 2006 Mexico’s levels, deserving a careful attention by the Government and the
companies as well (TRANSPETRO, 2019c). Figure 2 shows the illegal pipeline tapping has
been increasing in Brazil since 2011.

Figure 2. Illegal pipeline tapping in Brazil: 2011-2018.

Source: Transpetro (2019c).

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In 2018, according to Transpetro (2019c), the leader product of thefts was crude oil
(46%), followed by gasoline (17%), diesel (16%), naphtha (13%) and others. It is estimated that
16,600 cubic meters of fuel are illegally extracted from the respective pipeline, about 60% in
São Paulo State, and 25% in Rio de Janeiro State, approximately. The company estimated that
the 2018 thefts cost Transpetro about 35 million dollars. Therefore, illegal tapping also worsens
the business environment, causing economic losses to companies.
Brazil has a great potential for expanding its pipeline network. According to
Confederação Nacional do Transporte (CNT) (National Confederation of Transport) (2019),
Brazil transported 4.2% of cargo by pipelines, and 61.1% by roads in tonne-kilometer (TKM).
This shows the country’s inefficiency the transportation infrastructure, although it is in the top
10 of the largest petroleum production. Brazilian reality, a country of continental dimension,
expects investments in the transportation infrastructure to lower the costs and distances to reach
its reasonable potential.
The truckers strike in 2018 also revealed that the productive sector, as well as the
country, economically depend on a road modal (ROITMAN; SILVA, 2018). The strike had less
impact in Brasilia than in other locations not supplied by pipelines. The products have arrived
through pipelines to the Federal District. This is only to exemplify how a trucker strike can
paralyze the country. Pipelines did not stop to operate. This emphasizes that government needs
to adopt measures and actions to reduce illegal tapping and, thus, provide a business
environment conducive to investments in pipelines.

4. Worldwide crude oil and petroleum products thefts

One of the first countries concerned about this problem was Colombia. In 2006, the Law
1028 of 2006 was sanctioned and included in the penal code and sentences from 8 to 15 years,
and fines from 1,300 to 12,000 minimum wages (COLOMBIA, 2016). Furthermore, the
government adopted specific actions to combat organized crime and invested in detection and
repair technologies of illegal tapping. The thefts reached up to 1,150 cubic meters of fuels in
2002, decreasing after this spike to 3,700 liters in 2012 (COLOMBIA, 2012).
In Mexico it is estimated there were about 15,000 perforations in pipelines last year,
which is a typical crime, and growing in recent years (TRANSPETRO, 2019c). According to
Semple (2019), last year alone tapping has caused about 3 billion dollars losses. Ralby (2017)
reveals in his work that illicit hydrocarbons activity is endemic in Mexico, modalities of
hydrocarbons crime as organized crime, and how the Government is dealing closely and more
carefully with the thefts.
The Mexican government has stiffened the relevant sentences. In 2015, the Mexican
legislature made oil theft a serious crime and increased its sentence, from 8 to 14 years, to 15
to 25 years (RALBY, 2017). In recent years, according to Ralby (2017), the Mexican
government has adapted anti-cartel approaches used in the past in Colombia, most notably the
strategy of pursuing high-profile cartel leaders. Despite the criminal violence exacerbation by
collapse in established hierarchies, one consequence of this approach is that Sinaloa State saw
a 59% decline in hydrocarbons theft from 2014 to 2015.
In 2018, the Mexican government deployed federal security forces to guard frequently
attacked Petróleos Mexicanos (Pemex) stretches of pipeline and installations. The
investigations and arrests had begun, and many taps were find, forcing the government to
interrupt the pipeline transportation. After four months of governmental and military
intervention to secure pipelines, the state corporation Pemex estimates that the stolen fuel
volume was of 3.4 million gallons and went to 168,000, saving around 600 million dollars
(SEMPLE, 2019).
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The challenges in Mexico will have to face the local support by the population who
accepted working and buying from them due to poverty and inequality conditions. The illegal
market is freely done in the highways, and mafia controls the vulnerable communities offering
benefits and services as health care. The reduction is temporary because the military force is
making the security of pipelines (SEMPLE, 2019).
Nigeria is another country with illegal tapping, but corruption is institutionalized among
the private sector, governments, police, and people, creating an organized criminal network and
generating big losses to the Nigerian National Petroleum Corporation (NNPC). The state
corporation NNPC made repairs to the pipelines which cost 2.3 billion dollars (RALBY, 2019).
Others countries has experienced pipelines fuels thefts as United Kingdom, Spain, Turkey,
Ghana, and Morocco with variable scale of theft, but all of them has costs that impact society
(RALBY, 2019).

5. Government mitigation measures and actions and corporate responses

Specialized enforcement operations have been created in recent years for the sole
purpose of tackling hydrocarbons theft, mainly in Rio de Janeiro and São Paulo States. These
policies have had some success.
In 2017, Public Security and Energy and Mining Departments in São Paulo State created
a work group to prevent and combat pipelines products thefts (BRASIL, 2017a). Since 2017,
Civil Police and Public Prosecutor's Office of involved States has carried out several operations
against fuel theft in Bahia, Espírito Santo, Goiás, Minas Gerais, Rio de Janeiro and São Paulo
States (BORGES, 2017; BRASIL, 2018; VELASCO, 2017). Suspects were arrested and theft
locations were discovered. Distributors and gas stations that received and sold stolen products
were identified and closed.
The São Paulo State police discovered a fuel theft scheme in ducts. The product was
extracted through a tunnel and stored in a van adapted to a tank and subsequently sold for gas
stations (FERREIRA, 2019). The same department has closed a refinery which operated eight
tanks and three tank truckers in São Paulo. The fuel was altered and transported to a gas station,
and it is estimated that about 1 million liters of fuels could be stocked (SOUZA; CROQUER,
2019). Rio de Janeiro State police has arrested theft suspects occurred the last April
(NASCIMENTO, 2019).
Transpetro, aiming to aware awareness neighboring pipeline ranges stakeholders on
issues concerning health, safety and environment to avoid accidents and to prevent lives,
disseminates information about pipeline transportation and encourages responsible coexistence
between the communities and pipelines activities (TRANSPETRO, 2019b).
In addition, Petróleo Brasileiro S.A. (Petrobras), Transpetro’s parent company,
launched an integrated pipeline protection program, this June, to strengthen its fighting actions
against illegal tapping. The program aims at looking for partnerships with public sector and
investing in intelligence and development of technologies to minimize the associated risks in
its operations (PETROBRAS, 2019).
Abastece Brasil is a Brazilian government initiative recently created by the Ministry of
Mines and Energy, seeking to encourage private investment in the fuel supply sector. This
program is be able to search and provides debates between the public and private sectors to
increase competitiveness. One of its main goals is combating illicit practices of fuel taxing
evasion and adulteration. Abastece Brasil is a pillar of Conselho Nacional de Política Energética
(CNPE) (Brazil’s national energy policy council) for the construction of strategic guidelines
aimed at the fuel market development and supply guarantee.

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Thus, CNPE, through Resolution No. 12/2019, approved this June set new guidelines
for the distribution and retail sectors to promote the competition and to attract investments in
these segments. The Resolution’s fourth article recommends that the Ministry of Mines and
Energy promote the permanent articulation with other institutions with a view to combat the
taxing evasion and fuel adulteration, among other activities that could impair the competition
(BRASIL, 2019).
Therefore, there is a law project in the National Congress about the classification of
crimes of receiving, storage, trading, using, and subtracting from pipelines making the criminal
procedure more severe (BRASIL, 2017b).

6. Conclusion

One can conclude, the Brazilian pipeline network is important to transport crude oil and
petroleum products. There is a real concern as described, and the thefts growth proves to be
exponential, reaching the Mexican level, with economic losses to the companies, due to the
expenditure on pipelines repairs, and the population, who pays a high price.
Thefts are more often, and it is a big criminal activity in the world. There is a hope that
measures shall be taken to combat, prevent, and monitor, so that a favorable environment is
created to attract investments and increase the pipeline network and the competitiveness in the
sector. The Brazilian transport sector based on road, although inefficient for the transport of
large volumes over long distances, has the potential to expand its pipeline network.
Other countries that had through this same problem show examples of how we can deal
with pipeline thefts.
Brazilian Government can create a specific law, typifying this conduct, such as the case
of Colombia, and stop insecurity and impunity.
The police’s operations were successful in dismantling gangs in Brazil. It is necessary
to improve integration between governmental and private activities to improve results. The
Government can coordinate actions to stop criminals and avoid reaching Mexican levels. More
integration between the executive, legislative, and judicial branches, police and companies are
necessary to make the difference.

7. References

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G1 ES, 7 mar. 2018. Available at: https://g1.globo.com/es/espirito-santo/noticia/operacao-
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noticia/visualizar/54808?p_p_state=maximized. Accessed on: 16 April, 2019.

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__________. Projeto de Lei nº 8.455/2017, de 31 ago. 2017b. Altera a Lei nº 8.176, de 8 de

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