Where There Is Risk, There Is Opportunity


A Recap of the Energy Security Council’s Annual Conference

The recent 2014 Energy Security Council (ESC) Conference focused on fracking and related challenges to the industry. This could be one of the last events where all of the “usual suspects,” in terms of security challenges to the oil & gas industry such as Activism, Cyber, Active Shooter or more mundane things like CFATS compliance and the regulatory environment, are what keeps CSO’s awake at night.   Make no mistake about it, all of the above-mentioned headaches are absolutely valid. For now, these issues certainly have primacy for the U.S. Oil & Gas sector.   A year or two from now, however, CSO’s are very likely to have a host of new security challenges on their plate.

Conference attendees received insights on the security challenges just over the horizon. The undercurrent throughout the conference pointed in one direction: Mexico. Eagle Ford Shale, which lies astride the Zeta Cartel’s lucrative drug and smuggling route into the U.S., received more attention at this conference than any previous gathering. There was also a cautionary presentation on the security risks of doing business in Mexico. Oil & Gas security professionals will have significant issues to keep them awake at night in the months and years ahead as their employers weigh the risks and, as oil & gas companies inevitably do, see the potential profits as they charge ahead into “Indian country”.

At Butchko, we have explored these risks and security challenges in an in-depth analysis of the recent end to Petróleos Mexicanos’ (PEMEX) 75-year old government monopoly on the energy sector inside of Mexico, and what this means for security. You can read more about it by visiting ourLibrary page.

The Good News: the untapped wealth of black gold beneath Mexico’s badlands in the North, and beneath the Bay of Campeche offshore, are now available to private foreign companies. Company boardrooms and businesses in Houston, the Oil & Gas capitol of the western hemisphere, are buzzing with excitement.

The Bad News: In between that untapped wealth are significant security risks that must be weighed and mitigated before mobilizing company assets and people into Mexico. First and foremost on the list of risks is the impact the Mexican drug cartels may have on operations. They have had their tentacles into PEMEX for years, and the way they see it, if you’re coming to Mexico to make money, they will want a piece of you…or else. In Mexico, it’s a simple code: plata ó plomo, meaning gold or the bullet. CSOs in the energy industry must expect to deal with this issue.

Corruption is a huge problem in Mexico, and most definitely in PEMEX. Since the time conquistadores established Spanish rule in Mexico and were expected to extract money from local sources to support themselves, corruption has been embedded in all facets of business in Mexico. All security issues inside Mexico stem from this source: Corruption or Extortion. Whether it is kidnapping, illegal pipeline taps, “contrived” oil spills, rigged contract negotiations, sabotage, or intimidation, each has indelible roots in one of these two themes. CSOs in the oil & gas industry will face these significant challenges as Mexico gains prominence in their company’s operations and profit objectives.

Further insights and solution approaches for operating successfully in Mexico are available in our detailed analysis report entitled: Security Challenges to the Oil & Gas Industry in Mexico.