Tag: stopfuelsmuggling

Technology Progression in Fuel Marking

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Stop Fuel Smuggling Series

By: Jeff Conroy, Chief Scientist, Authentix

Branded fuel suppliers began to use colorants in the 1950’s as a means to indicate fuel type, grade, or brand in the downstream petroleum industry, and this approach continues with wide-spread acceptance today. As fuel taxes and subsidies came into use around the globe, it was an easy extension to use this approach as an indication of taxes paid (or exempted).

The use of overt and covert dyes and field kits and devices to read them continue to be a backbone of many fuel marking programs. They are relatively inexpensive and allow non-technical personnel such as police and revenue inspectors to have some level of rapid field indication of illicit activity. This enforcement work is usually backed up by laboratory testing to confirm the identity and amount of marker present in the fuels in support of prosecution.

While visual colorants are low cost and easily implemented, as tax markers they have several disadvantages, including their ease of replication and removal from the fuels. In addition, because many fuels have some inherent color, visual determination is made difficult for many people, especially those with some degree of color misperception.

Making Tests More Reliable

Markers evolved to include more proprietary compounds, designed and developed for fuel marking. To overcome the shortcomings of a human visual assessment, machine readable features that are easy to use and give unambiguous results were developed. The application of portable devices for analysis of fuel markers also enabled a more rigorous quantitative analysis, making dilution detection in the field more reliable. Systems which utilize fluorescence (Forshee 2012) or absorbance (Banavali 2007) of invisible markers have been described. These devices are small, simple to use, and require very little maintenance.  Further enhancements of these types of devices have led to very sophisticated fuel analyzers, capable of analyzing multiple markers, in various fuel matrices, with little to no operator intervention to enable accurate measurement. Coupled with modern smart devices such as phones and tablets, these analyzers can give real-time GPS verified results and integrate with applications to manage workflows and data capture.

The Need for Quantitative Results

Because fuel integrity programs are often instituted to meet a wide range of objectives, each implementation is different.  For example, a country may choose to deploy a “national marker” program, indicating that all taxes have been fully paid on fuels.  In essence, the marker serves as a “chemical tax stamp” for all taxed fuels.  In this type of deployment, inspectors will be looking for the dilution of the fully taxed fuel due to the addition of a lower-taxed or diverted petroleum products, which do not contain a marker.  In this case, accuracy of a quantitative result is paramount.  To maintain program integrity, it is essential that the security of the marker is maintained with regular audits to maintain program integrity.

Another typical application is where a country needs to protect the use of subsidized petroleum products that can be used outside of their intended subsidized market.  In this case, the fuels would need to be treated with laundering resistant markers to prevent criminals from potentially removing the markers to prevent detection.  The simple presence of the marker in a non-subsidized fuel application could be enough to indicate illicit activity, reducing the need for quantitative results on the test.

Field versus Central Laboratory Testing

Some have advocated a “forensic test” in the field approach.  Such an approach requires “portable” instruments that require support (e.g. power, gases, and environmental control) from the vehicle in which they are mounted.  This approach can limit the number of testing systems deployed due to cost of the platform that includes a vehicle and the associated support.  In addition, the idea of deploying a forensic test into the field as opposed to performing the test under laboratory controlled conditions is yet to be defended in courts, where the approach may find considerable challenges.

In fact, two of the largest marker programs, the EU’s Euromarker and the United States Internal Revenue Service’s red dye marker have published reference methods (Linsinger, et al. 2004) (ASTM International 2009) and collection protocols required to support enforcement and prosecution.  The proper collection, chain of custody, and analysis of samples for support of litigation is well documented for many forensic activities such as drug enforcement, crime scene investigation, and environmental monitoring.  Following similar procedures for fuel sampling allows authorities to continue to deploy relatively cost effective field enforcement tests like covert machine readable features, while providing forensic evidence with a proven laboratory test protocol.

In the laboratory, GC-MS is used for analysis of fuel markers for over twenty years to provide unequivocal forensic level support of fuel marking program enforcement. Markers designed to exploit GC-MS offer definitive forensic evidence of the origin and condition of a fuel.  The markers are covert and robust, resistant to laundering agents, and compliant with the most stringent environmental regulations.  The analysis is very accurate, with limits of detection in the low parts per billion (or lower in some fuels) and very good accuracy and precision, as good as +/- 1% on the analytical method itself.

The Right Solution for the Right Outcome

Fuel marking technologies have evolved from the use of colorants and dyes to covert markers and machine readable features.  Field portable analyzers have greatly increased the accuracy of enforcement, and reduced the burden on personnel by making test results definitive and quantitative.  Markers have become more robust and resistant to laundering and meet the most stringent environmental, health and safety regulations.  Finally, the development of powerful laboratory controlled forensic molecular marker sets based on GC and GC-MS have strengthened the legal standing of these programs, enabling government agencies to enforce laws that protect subsidies and taxes on petroleum products.

Click here to learn more about how Authentix’s Vigilant® offering is helping governments prevent fuel fraud. You can also learn more about Assure™, our brand protection fuel marking program for oil marketing companies.

 

References:

ASTM International. 2009. “Standard Test Method for Determination of Solvent Red 164 Dye Concentration in Diesel Fuels.” ASTM Standard D6258 . West Conshohocken, PA: ASTM International.

Banavali, Rajiv M. & Ho, Kim Sang. 2007. Pyrazinoporphyrazines as markers for liquid hydrocarbons. United States. Patent 7,157,611. Published January 2 2007.

Forshee, Philip, & Kottenstette, Peter. 2012. Tagged petroleum products and methods of detecting same. United States Patent 8,129,190. Published March 6 2012.

Linsinger, T., G. Koomen, H. Emteborg, G. Roebben, G. Kramer, and A. and Lamberty. 2004. “Validation of the European Union’s Reference Method for the Determination of Solvent Yellow 124 in Gas Oil and Kerosene.” Energy & Fuels 18: 1851-1854.

How to Create a Secure, High-Quality Fuel Supply

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Introduction to Stop Fuel Fraud Blog Series

Every country around the globe is dependent on the use of petroleum products to move people and goods around, generate power and generally keep their economies growing. Because of this ubiquity in the economy, most governments have developed fuel taxation systems to fund essential services for the benefit of their citizens and at times, provide subsidies to lower prices for certain essential fuels.

The differential in price between taxed, high-cost fuels and subsidized, low-cost fuels creates an incentive for criminally-minded people to perpetrate fuel fraud. The money generated by this illicit activity has been used to fund drug cartels and other organized crime[1] as well as terrorists[2].

Fuel fraud happens in a variety of ways. One form is smuggling in fuel from a neighboring country where prices are low. A striking example is Guyana, a small country in South America that shares a border with Venezuela, where the price of diesel is subsidized down to US$ 0.01 per liter. Guyana follows the prevailing market price for diesel, selling it at about US$ 0.70 per liter, so the incentive to bring fuel via ship or overland from Venezuela is quite strong.

Fuel fraud also occurs when high-priced, taxed product is diluted with cheaper or low-tax fuel products. An example of this is when diesel fuel intended for use in agriculture or mining carries a no- or low-tax rate and is diverted into the high-tax road diesel fuel supply.

Adulteration is a common type of fuel fraud that occurs when other types of hydrocarbons are introduced in the fuel supply. These are typically low- or no-value inferior products such as solvents or waste oils, which then adulterate the fuels meant for vehicles. These adulterants are both a source of additional air pollutants and can cause malfunctions, component failure and safety problems for engines that combust these compounds.

Fuel fraud is a rampant problem in the world, siphoning off needed tax revenues, harming air quality and damaging vehicle engines. This is the first in a series of articles about the ramifications of fuel fraud and a detailed review of the many ways it can occur. Stay tuned through the end of the series to learn how a well-designed, comprehensive fuel marking program – the introduction of environmentally-safe chemical markers into the fuel supply chain – can pay for itself in recapturing lost tax revenue while providing timely, actionable insights that allow government enforcement personnel to combat illicit fuel trade in their countries.

A secure, high quality fuel supply strengthens confidence in the government, provides a level playing field for the companies that sell and distribute fuel in the country and keeps vital funds out of the hands of the bad guys.

 

By: Gail Moser, Director of Marketing, Authentix

 

[1] https://www.nytimes.com/2017/04/26/world/americas/mexico-fuel-theft-crisis.html?_r=0

[2] https://www.usnews.com/news/the-report/articles/2015/11/23/financing-terror-where-does-the-islamic-state-group-get-its-money

Europol Confirms Link Between Organized Crime and Fuel Fraud.

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Last week, Europol released its European Union (EU) Serious and Organised Crime Threat Assessment 2017 (SOCTA 2017)1. The SOCTA is “Europol’s flagship product providing information to Europe’s law enforcement community and decision makers. It serves as the cornerstone of the EU Policy Cycle for Serious and Organised Crime.” The report serves to inform member states on key priorities that Europol feels require inter-state cooperation to effectively combat. The 2017 report identifies about 5,000 international organised crime groups currently being investigated in the EU. That number is up from 3,600 groups in 2013.

But the 2107 report is interesting for another reason. For the first time, it calls out fuel fraud as a growing phenomenon amongst these organised crime groups. The linkage between organized crime and fuel fraud is not a surprise to Authentix. We have been a quiet partner to over a dozen foreign governments in the last twenty-years, helping them shut off the supply of illegal fuel to fund organized crime.

The illicit trading of fuel has many names: fuel fraud, fuel piracy, and fuel smuggling just to name a few. Most people, especially in the developed world, may never have heard these terms or realized that fuel fraud is such an important problem to solve. The illicit trade of refined fuels is estimated to be valued at $100B2, and fuel is the #1 most smuggled natural resource in the world.

If you happen to be reading this in the United States, you may be interested to know that the IRS estimates that 10% of our $23B downstream fuel market illegally crosses state lines to take advantage of lower taxes and higher selling prices in neighboring states. The United Kingdom knows all too well the correlation between fuel smuggling and organised crime as it has marked fuel traveling between Ireland and England for over 15 years to crack down on illegal funding of the IRA. The European Union estimates it loses $4B euros a year in excise tax revenue on fuel smuggling. Thus, fuel fraud is not just a challenge in emerging economies but very much a problem in developed economies.

What is fuel fraud? Fuel fraud involves the dilution, adulteration, or smuggling of fuels to exploit price arbitrage conditions in a market. When taxes and/or subsidies create a large difference in prices between fuel products, unscrupulous parties can take advantage of this price arbitrage by perpetrating various fuel frauds to funnel huge profits into their coffers. The schemes typically fall into two categories: tax evasion and subsidy abuse. In tax evasion, higher-priced taxed fuels are diluted by lower-priced fuels. The resulting mixture is sold as authentic high value fuel. When this scheme is carried out in countries that have both a subsidized and taxed fuel, it can result in government revenues being stolen twice. The government loses the taxes on the higher-priced fuels and pays for the volume of subsidized fuels used for the dilution. In addition, lower-priced subsidized fuels can be transported across national borders into countries without subsidization programs, and possibly even high taxes on the smuggled product.

While counterfeit drugs and designer goods gain large headlines, the billions of dollars of public funds being misappropriated by fuel fraud goes largely unreported. Stopping this activity, whether it is subsidy abuse or tax evasion, results in immediate positive financial impact on a governments budget without reducing a subsidy or increasing the tax burden of its citizens. When a government employs a successful strategy to curb fuel fraud, the benefits are not limited to fiscal policies. A large source of funding of organised crime and terrorist groups is cut off. It also stems the negative impact that fuel fraud has on the environment by ensuring the fuel supply in the country is unadulterated, leading to cleaner burning and better running engines in the country.

Authentix has been working with national governments and Oil Marketing Companies around the globe and has covertly marked over 1.5 trillion liters of fuel. In our experience, the cost of deploying and enforcing a covert fuel marking program returns value orders of magnitude on the investment. It is not uncommon for Vigilant fuel marking program to return USD $100s of millions in lost revenue in a year.
To start combatting the illicit trade of fuel visit http://authentix.com/offerings/vigilant/.


1. https://www.europol.europa.eu/newsroom/news/crime-in-age-of-technology-%E2%80%93-europol%E2%80%99s-serious-and-organised-crime-threat-assessment-2017

2. “How Chemistry is Helping Defeat Fuel Fraud,” Alex Scott, Chemical & Engineering News, Vol. 94, Issue 5, pp. 20 – 21.

3. https://www.bloomberg.com/news/articles/2013-08-26/fuel-smugglers-costing-europe-more-than-4-billion-in-lost-taxes

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