Oil thefts, oil security booming in Permian

oil thefts

One law enforcement officer says the recent spate of oil thefts are well organized and may be related. State Impact Texas photo by Mose Buchele.

2017 Texas oil thefts could amount to between $450 million to $1.5 billion

In Midland Texas, an FBI task force has dedicated its efforts to investigating oil thefts that could possible cost producers over one billion dollars in the Permian Basin this year alone.

With the shale oil boom that has rejuvenated the Permian comes the byproduct of oil theft.  The Energy Security Council estimates that in 2017, Texas companies will lose between 10 to 30 million barrels of oil to theft.

That is a revenue loss of $450 million to nearly $1.5 billion at today’s prices.

Copper vandalism has always been an issue in the Permian since the FBI task force began operations in 2008, but more recently, a spate of oil thefts has become a bigger issue for law enforcement.

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According to FBI Special Agent Andrea Simmons, disappearing oil is harder to track than materials or equipment.  She adds that during boom times, its more difficult for oil companies to even notice an oil theft has occurred.

“There’s so much going on, so much inventory going in and and out, that they don’t always observe the losses as quickly as they do in a downturn,” she says.

According to a report by Inside Energy News, during the one month this spring, companies in Midland and Reeves counties reported over 3,200 barrels of oil stolen.  The stolen oil is valued at approximately $160,000, based on $50/barrel prices.

Last year, there were no reports of oil theft filed with the FBI task force.

Fred Weiss, owner of Cho-taw Inc., sells new and used oilfield equipment ranging from electric drilling rigs to parts out of his Odessa, Texas shop.  Weiss was robbed in early June.

“You can see what’s left of the generators that they took the copper out of,” he told Inside Energy News. “Hope we catch ‘em.”

He says after the theft he’s been getting a lot of cold calls from oilfield security companies trying to sell him software and cameras.

Copper wire connected to a generator was stolen from a building on Weiss’s storage yard.  Now, the facility is lined in caution tape and inside there’s an engine and tangled cables hanging from the ceiling.

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According to Midland County Sergeant John Henry, one of three local deputies on the FBI task force, a drilling lease located in an area he regularly patrols has been hit by thieves in the past.

Henry says the recent rash of oil thefts was the most significant he’s seen since joining the task force over four years ago.  He believes the thefts are related and well organized and notes they have been very difficult to prove.

According to Inside Energy, the heists begin when an oil truck driver attaches a load line to the tank battery and removes nearly 200 barrels of oil.  The driver then transfers that oil to an intermediate site to store the crude.

The thief is partnered with the owner of another well that isn’t producing very much.  The owner of the poorly producing well then puts the oil back into the pipeline system and registers with Texas oil regulators at the Railroad Commission, making the oil legitimate.

Another scam involves saltwater disposal plants where wastewater from oil production is processed.  It is against the law for wastewater operators to sell the excess oil that is skimmed off the top of the wastewater, but operators that steal oil will mix stolen oil into the skim for a bigger profit.

Currently, the task force has 10 open investigations underway, but have not had a successful prosecution in the area since 2015.

“Law enforcement can’t be everywhere,” said Henry. “They can’t put cameras everywhere. It’s such a wide area. Midland is about 960 square miles and a lot of that is oilfield.”

Another roadblock for police is witnesses not wanting to come forward.  Henry says getting suspects involved in one of the schemes is key to a successful investigation.

Texas lawmakers passed a bill during this legislative session to increase penalties.  Law enforcement is hoping the higher risk of felony charges will encourage more plea deals and cooperation from insiders.

Oilfield thefts are common.  Major oil companies will suffer much less than small operators who will notice every penny of stolen oil, copper or equipment.

Fred Weiss says “You never get used to it, no”.  He adds “And it does hurt.”

 

Posted in: Texas

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