Producers Battle Oilfield Theft

Criminals, armed with a laundry list of tools, are prowling the oilfields. They steal whatever is not tied down and a lot of stuff that is tied down. If they can get their hands on it, or latch a hook onto it, they will jerk it right off a well site.
From $100 tools and $10,000 tongs to stainless steel coiled tubing worth tens of thousands of dollars, thieves put their hands on a variety of expensive equipment in the oilfield. It adds up to be a big problem for energy independents.
In some counties, sheriff’s departments report hundreds of incidents amounting to millions of dollars in oilfield thefts. Nationally, it approaches $1 billion, although exact figures aren’t available. Like many crimes, much of the theft committed in the oilfield simply isn’t reported to law enforcement.
So, any figures the energy sector does have are likely just the tip of the iceberg.
The problem arose with the latest oil boom, said Ken Jordan, executive director of the Association of Energy Service Companies. As prices climbed, manufacturers failed to catch up with demand, pushing prices higher and leaving a parts gap — where drillers and producers were left scrambling for parts to keep their equipment running. With a lack of parts, a black market emerged. Thieves had a heyday stealing equipment, driving to a distant location, where no one was suspicious, and selling it.
“Manufactures were trying to gear up, trying to find replacement parts,” Jordan said. “There was long lead times, and the thefts started increasing.”
With the day rates rig companies charged, no one could stand to wait for a part.
“The unscrupulous ones went about replacing their parts in their own fashion,” Jordan said.
When thieves took a part off a rig, or took off with equipment, owners were told the property would not stay in the area, said Mike Stovall, owner of Tulsa-based Genie Well Service. Stovall knows firsthand — he’s been victimized by theft.

Fuzzy Rules Aided Crime
Thieves are experts at what they do, Stovall said.
“They would have a shopping list,” he said. “They know exactly what they want on a rig.”
Thieves are not only clever, but bold, often driving onto the property after dark, hooking up the equipment and driving off with it, Stovall said.
Thieves are also sophisticated, said Stovall said. They can spot a string of coiled tubing, which could be 12,000 feet long and worth anywhere from $3.50 to $5 a foot, and handle it in the dark.
Thieves can even arrange for a “theft” without ever touching the equipment, said Rep. Danny Morgan, D-Prague. Morgan and Rep. Lucky Lammons, D-Tulsa, co-authored the Oklahoma Anti-Oilfield Theft Bill in 2007.
“They would drive by a location, see a string of tubing lying on the road or ground,” Morgan said. “They would call an equipment dealer and say, ‘I need you to get that equipment in the next 24 hours because I have to get my location cleaned up.’”
The equipment dealer would send a truck to collect it and haul it to their facility. Then, not realizing the caller was a thief, the dealer would “buy” the equipment from the person who made the original call.
Thieves took advantage of law enforcement and the lack of a database. Stolen equipment from Pontotoc County in south-central Oklahoma might end up in Oklahoma County the next day — or Kansas, Texas or Mexico, Morgan said.
“The victim would not know where to look, so they rarely, if ever, found it,” he said.

Making a List
Until recently, there had not been a national database available for law enforcement, individuals or organizations to check equipment serial numbers against those reported stolen. But the exploration, production and well service sectors have been working for nearly three years to bolster laws and train law enforcement while simplifying the process to recover stolen equipment.
The Oklahoma Independent Petroleum Association has been at the forefront of developing a database that acts like a clearinghouse for this equipment, said Morgan, who, with Lammons, crafted the law to create a database. It allows law enforcement to track equipment easier.
“We tried to make it similar to a pawn shop,” Morgan said. “If the equipment dealer purchases a piece of equipment, they have to record the buyer, where the equipment came from, how it arrived.”
The law also requires dealers to record other information like trailer numbers and truck tag numbers.
“So, if there are any questions, they can go back to the shipper and learn who they contracted with to move the equipment from point A to point B,” Morgan said.
The AESC maintains its own Web site, www.stopoilfieldtheft.com, to help track stolen property.

Full-Time Crime Busting
Today, crude oil and pipe top the list of items filched, said Special Agent Terry Cronkite with the Oklahoma State Bureau of Investigation. Cronkite is part of the Oilfield Crimes Unit, made up of four agents and a supervisor.
“We are the only full-time state agency that has a full-time crimes unit,” he said.
They have seen oilfield thefts double in the last year, Cronkite said. In an ironic twist, with the decline in drilling activity, fly-by-night operators are filing false theft reports to collect on insurance.
He declined to talk about specific cases because the people involved remain under investigation for suspected thefts going back months, even years.
The unit has been effective, however, recovering more than $2 million in stolen equipment during 2007 and 2008, the latest period for which the agency has statistics.
The OSBI created its special unit in 2006 once the problem became widespread.
Cronkite has personally trained more then 400 law enforcement personnel in oilfield theft investigation techniques. Cronkite and other oilfield agents regularly conduct four hours of certified training in basic oilfield theft investigation and oilfield theft and intelligence — not only in Oklahoma, but in surrounding states. As a result, hundreds of local police, sheriff’s deputies and highway patrol troopers are able to spot and investigate equipment theft, crude oil and natural gas theft and investment fraud. The oilfield agents work closely assisting state and local law enforcement agencies, as well as district attorneys, federal authorities, petroleum industry officials, the Oklahoma Tax Commission and Oklahoma Corp. Commission when they request OSBI assistance with suspected oilfield crimes.
The law went into effect Jan. 1. The crimes unit made its first arrest Jan. 6.
One big breakthrough came earlier this year, when OSBI broke up a drilling bit theft ring in south-central Oklahoma.
Each conviction carries a maximum 10-year sentence and $50,000 fine.

Next Step
The next step in the evolution of the crime legislation will be to require a buyer and seller to show due diligence that they ran a check in the database, Morgan said.
“They will have to prove that they did check the equipment,” he said.
The industry, leading the charge to stop the loss from theft, welcomes the preventive measures, Cronkite said.
The legislature recognized the oil and gas industry is the largest tax producing sector for the state. Taxes on oil and natural gas production have produced up to $1 billion for state coffers.
“They put teeth in the bill,” Cronkite said. ?



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