MEXICO UNDER SIEGE

DRUG CARTELS CRIPPLE OIL OPERATIONS

The Kidnappings of 35 Terrorize the State Firm Pemex, Stopping Work
in Areas of One Major Petroleum Basin

The meandering network of pipes, wells and tankers belonging to the
gigantic state oil company Pemex have long been an easy target of
crooks and drug traffickers who siphon off natural gas, gasoline and
even crude, robbing the Mexican treasury of hundreds of millions of
dollars annually.

Now the cartels have taken sabotage to a new level: They've hobbled
key operations in parts of the Burgos Basin, home to Mexico's biggest
natural gas fields.

Forced to defer production and curtail drilling and maintenance in a
region that spreads through some of Mexico's most dangerous badlands,
the world's seventh-largest oil producer has become another casualty
of the drug war.

In May, gunmen wearing camouflage and tennis shoes kidnapped five
Pemex workers as they rode to the front gate of the Gigante No. 1
natural gas plant in the Burgos Basin. One man was a mechanic,
another specialized in pumps. All were dressed in their crisp khaki
uniforms with the Pemex logo, ready for long shifts. They have not
been heard from since.

The kidnappings, plus the reported disappearance of at least 30 other
employees of subcontractors in the same region, have terrorized a
community where jobs on the oil rigs and at the gas wells are handed
down, father to son, for generations.

"The traffickers are establishing it clearly," said Sen. Graco
Ramirez, a member of the congressional energy committee. "You
collaborate, or you die."

The capacity of the traffickers to exert influence over a company as
mighty as Pemex only solidifies the widely held perception that the
cartels are growing in size and strength despite the government's crackdown.

"How is it," asked a relative of a kidnapped worker, "that Pemex,
supposedly the backbone of the nation, can be made to bow down like this?"

The Burgos Basin stretches across the northern border state of
Tamaulipas, where the Gigante No. 1 plant is located, and spills into
the states of Nuevo Leon and Coahuila. The three states are awash in
violence, theater of a ferocious battle between the once-dominant
Gulf cartel and its brutal former henchmen, the Zeta paramilitaries.

Pemex, which is Mexico's largest income earner, pulling in nearly a
third of the national budget, once staked great hopes on the area and
its prospects for yielding gas, abundant thanks to the sandy soil and
porous rock that make for ideal production and exploration conditions.

After dedicating nearly half a century to testing and exploration in
the basin, Pemex in 2002 took the unusual step of opening it up to
foreign investment, in contrast to Mexico's historic protectionist
attitude toward natural resources. Pemex officials anticipated an
injection upward of $8 billion.

Employees of Pemex and a handful of foreign-owned firms were earning
well in the basin, living good lives and working in relative safety.

Then convoys of mysterious gunmen started plying the roadways,
followed by shows of force, intimidation, beatings and, finally, the
abductions. Pleas for help and better protection, union leaders and
workers say, went unheeded. The exact motives behind the May
kidnappings remain unclear.

Ramirez, the senator, said the cartel responsible, probably the
Zetas, may be after technical information to elude the measures Pemex
is taking to guard against the rampant thefts of gas and oil.

Whatever the motive, the effect has been to cripple operations in
some areas of the basin.

"In the Burgos project, there are areas we cannot access," Carlos
Morales Gil, director of exploration and production for Pemex, said
during a news conference in the Tabasco city of Villahermosa in July.
It was a startling admission.

"We are not going to enter any area where security is at risk," he
added, calling for increased army and navy protection for oil and gas
installations.

Pemex would not comment to The Times or make an official available
for this story.

However, a confidential report submitted to Congress in July and made
available to The Times acknowledged that stolen natural gas and
delayed gas production have cost the company nearly $50 million in
just the first five months of this year.

One of the U.S. firms working in Burgos, Halliburton, has spoken
publicly of a deteriorating security situation that is slowing its
work. But Halliburton said it had no plans to pull any of its 600 workers.

After the May Pemex kidnappings, families of the disappeared workers
are too terrified to speak publicly to a reporter. Vague threats have
come their way.

Instead, they live in fear, many of them here in the Tamaulipas city
of Reynosa. They sit literally by their telephones waiting for word,
a ransom demand, a call from the coroner's office. Anything would be
better than not knowing.

"No one has called us," one desperate relative said. "We know
nothing. If they wanted to send a message to Pemex, wouldn't they
have killed them and left the bodies there?"

Those are the kinds of calculations, in what passes for reason, made
in families who have lost their sons, husbands and brothers to a
violent unknown.

Pemex has also sought to repress information on the kidnappings,
possibly for the men's safety. Company general director Juan Jose
Suarez Coppel acknowledged the abductions only in questioning from a
congressional committee.

Details of the kidnappings come from a witness, another worker at
Gigante No. 1 whose name The Times is withholding for security
reasons. He was waiting at the gate because one of the arriving men
was supposed to relieve him. When he saw the gunmen, he ducked into a
guard shack, watching but staying out of view. He saw the gunmen
stuff the five workers face-first onto the floors of their vehicles
and then speed away.

His observations are contained in an investigation opened by state
authorities, portions of which were made available to The Times.

The investigation was opened only at the insistence of the parents of
one of the missing men.

The missing workers include Saul Garcia, 47, a short man with a
salt-and-pepper mustache who called his wife, away visiting
relatives, as he headed off to his shift and said he'd see her soon.
And Christopher Cadena Garcia, at 22 the youngest, a beefy man well
over 6 feet tall, who was planning to marry and who was doing the job
his dad had done and his dad's dad before him.

Kidnappings represent just one twist in broad security problems
haunting Pemex. Engineers detect hundreds of clandestine siphons
every year that steal enormous quantities of petroleum, much of which
is then smuggled to the U.S. and sold at market price. To find the
illegal taps, Pemex recently started aerial inspections with
helicopters and small aircraft - but they cannot fly very low lest
they get shot at.

Pemex, for the first time, sued five U.S. companies this year in an
attempt to recover damages for stolen petroleum products that the
Mexicans said were worth more than $250 million. Pemex alleges the
firms knowingly bought stolen fuel.

Alejandro Gertz, now a congressman and rector of the University of
the Americas, conducted an investigation of security problems at
Pemex in his capacity as national public security chief in 2004. He
said the biggest problem was corruption and collusion between Pemex
employees and the thieves. Simply by adding a system of more frequent
and often-random inspections, he said, the company was able to
recover millions of dollars' worth of petroleum products in just three months.

But he knew he had touched a nerve; he was soon out of a job and the
inspections were halted.

The injection of violent drug cartels into the mix in the Burgos
Basin area, he said, expands the problem exponentially.

"These are territories where the organized crime infrastructure,
inside and outside of the police forces, has established power - a
parallel power, a parallel government," Gertz said. "That territory
is in the hands of a parallel power that has penetrated the
government at all levels."