On
the afternoon of March 8, a petroleum tanker named Torm Agnes entered
the Port of Ensenada on Mexico’s Pacific coast carrying almost 120,000
barrels of diesel.
Such
a vessel was a rare sight in that port, which mainly hosts cruise
liners, luxury yachts and container ships. Ensenada lacks the
infrastructure needed to unload cargos of flammable hydrocarbons safely –
making what happened later that day odder still.
Waves
of fuel-hauling trucks rolled up to the dock to cart away much of the
Torm Agnes’ load. Workers scurried about filling the vehicles’ cavernous
tanks, up to six at a time, using hoses springing from a larger
hosepipe affixed to the vessel. The operation, while risky, ran like
clockwork, according to an eyewitness and a photo and video from the
scene shared with Reuters.
“They
had a team, they were very thorough on what to do, and they were very
fast,” the person said. “They worked insane hours, like through the
night.”
The
audacious maneuver was the work of cartel-linked smugglers, according
to three Mexican security sources and three people familiar with the
operation – part of a wave of bootleggers upending Mexico’s fuel market
with a flood of cut-rate fuel procured mainly from the United States
that’s disguised in customs declarations as something else.
The
Mexican crooks didn’t act alone. A Houston company named Ikon Midstream
played a key role in the multi-million-dollar Ensenada operation,
Reuters has found. It purchased the diesel in Canada, claimed in
paperwork it was lubricants, and chartered the tanker to deliver it to a
customer that Mexican authorities allege is a front for one of the
country’s largest and most violent cartels.
Ikon
Midstream and its executive director, Rhett Kenagy, did not respond to
multiple requests for comment. Attorney Joseph O. Slovacek, who
represents the company and Kenagy, told Reuters in an October 18 email
to stop contacting his clients. “No one will speak to your reporter!”
Slovacek said.
The
Port of Ensenada did not respond to a request for comment.
Denmark-based Torm, which manages one of the world’s largest fleets of
tankers, including Torm Agnes, said it stopped doing business with Ikon
Midstream just weeks after the Ensenada incident.
Narcotics remain the principal money-maker for Mexico’s cartels. But illegal fuel and stolen crude oil have become the largest non-drug revenue source
for these criminals, the U.S. Treasury Department says. Narcos have
built this lucrative sideline by effectively embedding themselves inside
North America’s vast energy sector and mastering the logistics of
moving petroleum products by truck, rail and most recently tanker. Some
U.S. officials have taken to calling the tankers carrying illegal fuel a
new “dark fleet,” a term more often associated with illicit shipping of
Russian or Iranian crude oil designed to evade sanctions.
Fuel
smuggling has grown so fast that bootleg imports now account for as
much as one third of Mexico’s diesel and gasoline market, swiping
profits from some of the biggest names in the oil industry, five current
and former Mexican government sources told Reuters. Illegal fuel
entering the country is now valued at more than $20 billion a year,
according to one of the people who helped Mexico’s treasury calculate
the size of the illicit trade.
Law enforcement agencies on both sides of the border are alarmed. The U.S. government is offering rewards of up to $10 million
for information on cartel fuel crimes. In Mexico, tanker smuggling has
sparked a corruption scandal now rocking the country’s navy, which runs
the ports and has long been considered one of the most trusted
institutions in the country. In a September 7 press conference, the head
of Mexico’s Navy, Raymundo Morales, said the institution had launched
an internal investigation and “will not tolerate corruption under any
circumstances."
To
uncover the inner workings of fuel smuggling into Mexico, Reuters spoke
to more than 50 people with knowledge of the racket. They include five
people who have had dealings in illicit cargos, Mexican and U.S. law
enforcement officials, current and former oil industry executives in
both countries, as well as energy traders and compliance specialists.
Many of these people spoke on condition of anonymity out of fear for
their safety.
Reuters
is the first to publish a full account of Torm Agnes’ journey, from
loading in Canada to discharging at Ensenada and at another Mexican port
from which it beat a hasty retreat. The account is based on information
from seven people, all of whom were either involved in the logistics of
moving the cargo or are investigating the journey’s fallout, as well as
tanker-tracking data and satellite images, internal shipping documents,
customs data and port records.
Through
those documents and sources, Reuters pieced together in previously
unreported detail how the alleged scheme works and how it exploits
loopholes in the vast and complex U.S. energy sector, touching a host of
entities including oil majors, shipping companies and government
agencies.
Aiding
the cartels are U.S. players who help procure and transport the
products, some unwittingly, others actively participating, authorities
say. Texas State Senator Juan Hinojosa said his oil-producing state has
become a hotbed for shady operators.
“The cartels have infiltrated many legitimate businesses along the border and further north,” said Hinojosa, a Democrat who sponsored legislation
in March that aims to crack down on unlicensed motor fuel depots near
the border, toughen regulations on fuel transporters and boost
punishment for scofflaws. The bill is stalled in the Texas senate but
could be revived in the future.
The fuel smuggling scheme largely boils down to a lucrative tax dodge.
Mexico slaps a levy known as IEPS on a wide variety of goods, including
imported diesel and gasoline. Mexico is a major crude oil producer, but
it imports these fuels because its aging refineries can’t meet local
demand. Crooks evade the tax, charged by the liter and often costing
upwards of 50% of the cargo’s value, by declaring the foreign fuel to be
some other type of petroleum product that’s exempt from the duty.
The cartels have infiltrated many legitimate businesses along the border and further north.
Texas State Senator Juan Hinojosa
U.S.
and Mexican officials say smugglers typically utilize shell companies
and falsified cargo documents to cover their tracks, and they pay bribes
to corrupt port and customs officials to get their shipments through.
They
also unload in a hurry in dicey locations, bypassing Mexico’s nearly
two dozen marine terminals set up for safe discharge of fuels,
authorities and industry experts say. This allows smugglers to get the
illicit cargo to their customers quickly, with minimal oversight and
regulations.
Bootleg
diesel is then sold at a discount in the Mexican market to thousands of
unlicensed diesel stations, factories and mines. The smuggled gasoline
goes mainly to unbranded filling stations. Cartels also steal fuel and
crude oil outright from Pemex and sell some of it in the United States,
helped by crooked importers that are undercutting American producers,
the U.S. Treasury Department says.
Pemex did not respond to a request for comment about losses linked to fuel theft and smuggling.
Other
oil companies are feeling the pain, too. In May, British multinational
Shell disclosed the sale of its retail fuel business in Mexico. That
exit was due in part to the difficulties of competing with cheaper narco
fuel, five Shell sources told Reuters. Gas stations buy smuggled fuel
at a discount of 5% to 10% below the price of legitimate imports,
according to two sources familiar with the trade.
Shell declined to comment on its reasons for the sale.
Torm
Agnes was transporting diesel it had picked up in Canada when it
started its journey to Mexico, seven sources familiar with the deal told
Reuters. By the time the vessel reached Ensenada, its cargo had
transformed – at least on paper – into a petrochemical used to make
industrial lubricants, according to cargo documents and port records
reviewed by the news agency.
If
that diesel, worth some $12 million, had been declared to customs
authorities it would have been subject to nearly $7 million in tax when
entering Mexico, according to a Reuters calculation based on the volume
of diesel and the tax rate at the time. The petrochemical, however, was
exempt from the levy.
Denmark-flagged
Torm Agnes was one of several tankers in recent years that carried fuel
but declared its cargo as lubricants to avoid taxes and customs
controls, according to an undated summary of the alleged smuggling
scheme from government security forces seen by Reuters. The document's
authenticity was confirmed by two security sources.
Mexico’s
government has not said how much fuel smuggling has cost the country in
lost IEPS revenue, but the source who used to help the treasury
calculate the size of the illicit trade said it was nearly $4 billion in
2024. The opposition PAN party has put the number higher still – at
around $10 billion – calling it “the largest corruption scheme in the
history of Mexico.”
Neither Mexico’s tax authority nor its customs agency responded to requests for comment.
THE AMERICAN CONNECTION
At
the center of that deal was a U.S. company: Ikon Midstream, a
Houston-based fuel trader. The company bought the Canadian diesel and
chartered Torm Agnes to deliver it to Mexico, according to four of the
people and internal Ikon Midstream documents seen by Reuters.
In
addition to the shipment to Ensenada, Ikon Midstream arranged at least
four other maritime deliveries of diesel to Mexico this year, Reuters
learned. Between January 8 and March 4, the company used a different
tanker from the same fleet – Torm Louise – on four separate occasions to
carry cargo from Texas to the Port of Tampico on Mexico’s Gulf Coast,
according to tanker-tracking data and shipping company Torm, which
manages both the Torm Agnes and Torm Louise vessels.
Torm
told Reuters that both tankers were loaded with diesel. It added that
Torm Louise in three of its journeys also carried naphtha. In Mexico,
bootleggers frequently use that highly flammable hydrocarbon to make
low-quality gasoline.
In
declarations to Mexican customs, however, Ikon Midstream said all five
shipments were “additives for lubricants” not subject to IEPS, according
to Mexican port records obtained by Reuters through freedom of
information requests.
The
product that was declared on U.S. export bills of lading for two of the
Torm Louise shipments was likewise lubricants, according to Kpler, a
marine data provider based in Brussels. Reuters is the first to report
that Ikon Midstream labeled these diesel shipments as lubricants in U.S.
customs declarations.
Kpler said it was not able to share the source documents due to confidentiality agreements with its data providers.
U.S.
Customs and Border Protection (CBP), which holds copies of these
documents, initially declined a June freedom of information request from
Reuters seeking to obtain them. In October, CBP said the information
sought by Reuters was available in paper cargo manifests that would need
to be requested in person at each port of export, a process the agency
described as “time-consuming” and subject to further delays.
Torm
in an August 5 email said it was not responsible for nor involved in
completing customs paperwork for the shipments. All the documents it
received from Ikon Midstream, Torm said, consistently declared the
products being transported on its tankers to be “ULSD and/or naphtha.”
ULSD is an industry acronym for ultra-low sulfur diesel. Torm declined
to share with Reuters the documents it said it had received from Ikon
Midstream, citing contractual obligations.
“Based
on what has come to light, we have decided not to engage in further
business with Ikon Midstream,” Torm said without elaborating in an
August 27 email to Reuters. Torm broke off commercial relations with
Ikon Midstream at the start of April and canceled two future contracts
with the company, a Torm spokesperson said in a follow-up email to the
news agency on September 5.
As
part of Reuters’ efforts to seek comment from Ikon Midstream, a
reporter stopped by the company’s Houston headquarters in August but was
turned away by a person who said he worked for Ikon Midstream and gave
his name only as Daniel.
Kenagy,
like many executives involved in the trillion-dollar plus global oil
trade, projects an image of success. Earlier this year, he bought a
Houston mansion and grounds valued at more than $6 million, local
property records show. His Instagram feed is peppered with images of
sports cars, exotic motorcycles and private jets.
He
and his wife, Janelle Alexis Flatt, appeared in a 2022 episode of the
reality TV show Below Deck Sailing Yacht, which chronicles the lives of
crew members aboard a luxury vessel and their experiences with guests
who charter it.
Flatt did not respond to requests for comment.
Kenagy
is also a registered agent for at least a half-dozen businesses that no
longer are operational, including ventures in mining, construction and
entertainment, Texas business records show.
In
Mexico, a Monterrey-based company named Intanza was the recipient of
the Torm Agnes’ cargo, according to Mexican port records as well as an
invoice for the Torm Agnes shipment viewed by the news agency.
Mexican
authorities suspect Intanza is a front company for the Jalisco New
Generation Cartel, according to three Mexican security sources and a
second undated document from government security forces seen by Reuters
outlining cartel ties to fuel smuggling.
Intanza
has no website and no social media presence that Reuters could
identify. A letter sent by Reuters to the Monterrey address listed for
Intanza in the invoice could not be delivered because the courier
service could find no presence of the company there.
Intanza’s
name surfaced again after Mexican authorities apprehended another
tanker, Challenge Procyon, on March 21 at the Port of Tampico in
Tamaulipas state. Intanza on March 27 filed a claim in a Tamaulipas
court asking a judge to release that shipment, which it claimed was
lubricants and wrongfully seized; the judge rejected Intanza’s request.
Mexico’s Security Minister Omar García Harfuch in a March 31 social media post said that 10 million liters (about 63,000 barrels) of diesel had been found aboard Challenge Procyon.
Last
month, García Harfuch declared that seizure to be “one of the largest
in history” as he announced the arrest of 14 people, including business
executives, former customs officials, and active and retired naval
officials as part of investigations into Challenge Procyon and other
alleged fuel smuggling. The government identified those apprehended only
by their first names, as is customary in Mexico.
Mexico’s
Navy and the Attorney General’s office said they could not comment on
ongoing investigations and pointed Reuters to public statements on the
issue. The security ministry did not respond to a request for comment.
Ramiro
Rocha, listed as Intanza’s legal representative in Mexico’s official
companies registry, said he has no involvement with the company and may
have been a victim of identity theft.
A CARTEL SETS SAIL
Small-time
thieves for decades have filched gasoline, diesel and crude oil from
Pemex. Over time, as the trade grew in scale and profitability, it
attracted the involvement of Mexico’s cartels. But the Jalisco New
Generation Cartel has taken the scheme to a new level and is the
unquestioned leader in fuel and crude oil smuggling, according to
Mexican and U.S. security sources.
The
cartel, whose home territory is the central-western state of Jalisco,
has expanded across Mexico. Authorities say it has built a formidable
smuggling operation in the northern state of Tamaulipas just across the
Texas border. From there, they say, it sends stolen Mexican crude oil to
the United States and brings U.S. refined products to Mexico by truck,
rail and tanker. They said CJNG, as it’s known by its Spanish initials,
is the only cartel currently employing tankers.
Authorities
first detected smuggling by tanker around 2020, according to a 2021
Mexican government document viewed by Reuters outlining initial
investigations into the scheme, which at the time did not attribute this
development to a specific cartel.
The
jump to tankers from trucks and trains reflects a degree of business
savvy and investment power that's in a different league than what has
come before, said Marisol Ochoa, an expert on organized crime at
Mexico’s Ibero-American University.
“You have to have a high level of sophistication and extensive networks and connections in operational logistics,” she said.
Since
September 2024, the U.S. Department of the Treasury’s Office of Foreign
Assets Control (OFAC) has issued two rounds of sanctions against a
dozen Mexican nationals and nearly 30 Mexican companies allegedly linked
to CJNG and its fuel theft and smuggling operations.
Greg
Gatjanis, a former top OFAC official, said he was “stunned at the array
of companies” connected to the alleged scheme. The enterprises include
gas stations, transport firms, a 3D printing company and a baguette
bakery, according to OFAC.
The
Trump administration in February designated several Mexican cartels,
including CJNG, as foreign terrorist organizations. That mobilized more
personnel and resources for the anti-cartel fight and made it easier for
U.S. prosecutors to go after individuals and companies doing business
with these groups.
In
May, a father and son from Utah – James Lael Jensen and Maxwell
Sterling Jensen – were charged with conspiracy to commit money
laundering and provide material support to a designated foreign
terrorist organization. Authorities allege the Jensens worked with CJNG to smuggle crude oil into the U.S.
Lawyers
for James Jensen did not respond to a request for comment. Robert
Guerra, a lawyer representing Maxwell Jensen, declined to comment.
You have to have a high level of sophistication and extensive networks and connections in operational logistics.
Marisol Ochoa, organized crime expert at Mexico’s Ibero-American University, on fuel smuggling by tanker
U.S.
officials also met with refiners in the Houston area this year to
explain the involvement of Mexican organized crime in the fuel business
and to stress the importance of knowing their suppliers and customers,
three industry sources and a U.S. official said. That official told
Reuters that violators of U.S. sanctions up and down the supply chain
could face civil and criminal penalties.
That
presents “an enormous business risk” for U.S. players given the success
of cartels in using front companies and intermediaries to do their
dirty work, said Gatjanis, the former OFAC official.
In
Mexico, the scale and increasing sophistication of fuel smuggling have
spawned allegations that senior politicians are involved.
In
last year’s presidential campaign, opposition candidate Xóchitl Gálvez
accused the ruling Morena party of receiving funds from Sergio Carmona, a
Tamaulipas businessman referred to by the Mexican press as the “The
King of Illegal Fuel.” Carmona was a major trafficker linked to the Gulf
Cartel and the Northeast Cartel, according to Mexican media reports. He
was shot dead in a barbershop in northern Mexico by unknown assailants
in 2021. No one has been arrested in his killing.
Carmona
allegedly helped fund Morena election campaigns, including that of
former President Andrés Manuel López Obrador who won Mexico's highest
office in 2018, according to the second undated document from government
security forces reviewed by Reuters.
Neither López Obrador nor Morena responded to requests for comment.
Mexican
President Claudia Sheinbaum, of the Morena party, has made combating
fuel smuggling and crude oil theft a security priority for her
administration.
“We
will not protect anyone,” Sheinbaum said in a July 8 press conference
when asked about the alleged involvement of politicians in the illicit
trade. Her office did not respond to a detailed list of questions for
this story.
Since
Sheinbaum took office in October 2024, authorities say they’ve seized
around 500,000 barrels of allegedly illegal fuel and crude oil – more
than the previous government nabbed over its whole six-year term. That’s
barely a trickle in the torrent of bootleg fuel entering the country.
Still, the fight is proving dangerous.
On
August 4, Ernesto Vázquez, federal prosecutor for the state of
Tamaulipas, was killed after his armored SUV was hit by an incendiary
grenade on a busy street in the city of Reynosa. Footage broadcast on
national television showed Vázquez escaped the burning vehicle, only to
be shot from a nearby car.
In
a statement the following day, the Attorney General’s office said the
killing likely was the work of organized crime after the government in
late July seized more than 1.8 million liters (about 11,300 barrels) of
illegal fuel, trucks, pumps and other equipment in Reynosa, just across
the border from McAllen, Texas.
A PAPER TRAIL OF TAX EVASION
Trading
crude oil and fuel often entails a complex chain of custody.
Transactions can involve multiple buyers, sellers and middlemen.
Import-export paperwork is often incomplete or outright faked by bad
actors, trade experts and law enforcement officials told Reuters.
Torm
Agnes began loading from the Vancouver Wharves marine terminal in
Canada on March 2, according to marine data provider Kpler. The tanker
took on about 120,000 barrels of cargo, Kpler calculated, based on data
transmitted by the tanker showing how low it sat in the water. Seven
sources familiar with the deal confirmed it loaded diesel.
That diesel came from Imperial Oil, a Canadian oil company that’s majority-owned by ExxonMobil, according to four of the people.
Imperial Oil did not respond to a request for comment. ExxonMobil declined to comment.
Shipping
documents viewed by Reuters told a different story about what was on
the vessel. A February 28 invoice, bearing Ikon Midstream’s logo and
Houston address, claimed the cargo was lubricants, not diesel, and that
it had been sold to Intanza. The stated value was $1.3 million, or about
one-tenth of the value of 120,000 barrels of diesel at the time. A
cargo manifest viewed by Reuters likewise showed the cargo was
lubricants loaded in Vancouver on Torm Agnes for delivery to Mexico,
with Ikon Midstream as the shipper and Intanza as the recipient.
Mexico
in recent years has seen erratic spikes in declared imports of
lubricants, a development the government has linked to smuggling. The
nation’s tax authority in a 2022 document said these products are “used
as a means of tax evasion” because they’re not subject to IEPS.
Demand
in Mexico for so-called base oil lubricants is a modest 1 million tons
per year, according to Michael Connolly, head of refining and base oils
analytics at commodities information provider ICIS. Yet official U.S.
trade data shows the country exported as much as 3.5 million tons to
Mexico last year, a figure Connolly says doesn’t add up.
“There’s just a significantly higher level of imports going in there than what we would expect,” he said.
Ikon
Midstream alone declared that it shipped lubricants from the U.S. to
Mexico 149 times between October 11, 2019, and May 4, 2025, with 67 of
those loads coming via tanker, according to trade data compiled for
Reuters by trade technology company Altana.
Intanza,
the Mexican customer for Torm Agnes’ cargo, has a slew of business
objectives, ranging from alcoholic beverage production to scientific
research, according to Mexico’s companies registry.
Its
Monterrey address, according to the shipping invoice, is a unit in a
two-story residential apartment complex next to a daycare center. When a
Reuters reporter visited the address, they saw no signage for Intanza.
Rocha,
Intanza’s listed representative, lives in a working-class neighborhood
about 40 kilometers (25 miles) outside the city, according to his
address on file in the registry.
The
gray-haired Rocha became a minor online celebrity in recent years by
posting videos of himself falling asleep in random places. Fans
nicknamed the short, stocky Rocha “Don Pug.” His popularity surged anew
in February when on social media he denied press reports that he had
died of a heart attack during a lap dance at a Monterrey strip club.
Rocha
told Reuters he works as a security guard, has nothing to do with
Intanza, and that data listed for him in the registry, including his
address and three forms of identification, might have been stolen.
A SMOOTH OPERATION, THEN A SCRAMBLE
On
the afternoon of March 8, Torm Agnes entered the Port of Ensenada.
Within hours, the queue of fuel-hauling trucks stretched the length of
the dock and well outside the terminal, said the eyewitness to the
operation.
Some
of these vehicles bore the logo of a trucking company named Mefra
Fletes, according to the eyewitness and a photograph of the scene viewed
by Reuters.
Ikon
Midstream and Mefra Fletes have worked together on tanker-to-truck fuel
transfers in at least three different Mexican ports in recent years,
two sources familiar with the operations said. The employee at Ikon
Midstream’s Houston headquarters in August who identified himself as
Daniel told a Reuters reporter that he used to work with Mefra Fletes in
Mexico.
Mefra
Fletes was incorporated in 2015 in Guadalajara, the capital of Jalisco
state, and is focused on transporting petroleum products, according to
Mexico’s companies registry. There was no address or contact information
in the registry for the company or for Roberto Blanco, who is listed as
the majority owner. Reuters could find no website or social media
presence for Mefra Fletes.
Reuters
received no reply to a letter sent by courier with detailed questions
for Blanco to a Jalisco address for Mefra Fletes printed on one of its
trucks. Reporters were unable to locate the company’s legal
representative, Mario Castro.
Torm
Agnes unloaded much of its cargo, but not all of it, in Ensenada. From
there, the tanker headed to the Port of Guaymas in the Gulf of
California and again discharged straight into fuel trucks starting on
March 20, according to photographs and videos of the operation viewed by
Reuters. Some of those vehicles bore the Mefra Fletes insignia, the
images showed.
But
Torm Agnes managed to unload only about half of the cargo it had
planned to discharge there, according to internal port emails seen by
Reuters. Instead, it left Guaymas abruptly the following day, according
to tanker-tracking data and three people familiar with the situation.
Workers helping to offload the diesel quickly packed up their equipment,
and fuel trucks sped from the port, the people said.
The
exodus caused a stir locally. Photos and videos shared on social media
showed a dozen fuel tanks detached from the trucks that brought them and
abandoned in nearby parking lots and along the roadside.
Security
sources told Reuters they suspect Torm Agnes took off after word spread
at the Port of Guaymas that Mexican authorities were seizing another
tanker, Challenge Procyon, that same day, March 21, in the Port of
Tampico.
Torm
did not comment on the reason for Torm Agnes’ hasty departure. The Port
of Guaymas did not respond to a request for comment.
On
March 28, Mexican authorities in a press release announced they had
seized some 50,000 barrels of petroleum products stored haphazardly in
about 100 containers in a dusty lot in the town of El Sauzal, around 10
kilometers north of the Port of Ensenada. Security forces also seized
equipment and fuel trucks. Video footage from the raid broadcast by
Mexican media showed Mefra Fletes trucks.
The
seized petroleum products likely came from the Port of Ensenada and
arrived by tanker, according to an undated summary of the case by
Mexican security forces viewed by Reuters. The document did not
mention Torm Agnes, but two Mexican security sources confirmed that the
tanker’s activity in Ensenada is under investigation.
Anuar
González, a former legal representative for Mefra Fletes, was
apprehended in August. An arrest warrant has been issued for Blanco, the
company’s majority owner. Both are suspected of involvement in the
illegal fuel trade, according to one of the Mexican security sources and
press reports.
Reuters couldn’t determine whether González has a lawyer. Blanco remains at large.
