Pemex Suing BASF Over Stolen Feedstock

Pemex, Mexico's state-owned oil and gas company, is suing BASF in a Houston Federal court for buying natural gas condensate stolen from natural gas fields in Mexico.

In its complaint, Pemex says that since 2006, it has had $300 million worth of natural gas condensate, a liquid hydrocarbon byproduct of natural gas production, stolen from its Burgos Field in northern Mexico. At times, Pemex says, thieves took in as much as 40% of the condensate production from the field, raiding 52 transfer and delivery systems spread through the area. They also hijacked condensate shipments at gunpoint.

From the field, the suit alleges, the condensate, which sometimes was misrepresented as naphtha to fool customs agents, was spirited over the border. It was sold through a chain of intermediaries in the U.S. Finally, Trammo Petroleum sold the condensate to BASF, which used it as a feedstock at its Port Arthur, Texas, ethylene cracker.

Donald P. Schroeder, Jr., president of Trammo Petroleum, was among five individuals who have pleaded guilty to Federal charges for their participation in the smuggling ring.

BASF and another company named in the suit, Murphy Energy, have not been charged with any crimes. "Their purchases, even if unwittingly, encourage more theft and violence to obtain the condensate to sell in the United States," says James S. Teater, an attorney for the law firm Jones Day, which is representing PEMEX in the case.

In a statement, David Stryker, senior vice-president and general counsel for BASF Corp., acknowledges that BASF unknowingly purchased stolen condensate. "BASF also stopped purchasing condensate from Trammo and other sources or locations on or near the Mexican border immediately upon learning of Trammo's conduct," he said.