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Face up to fuel fraud: supply chain security

How secure is the fuel supply chain in the face of fuel fraud?

In practice, there are many places where criminals can access and compromise the petroleum supply chain and any fuel – whether gasoline, lubricants, industrial fuels or heating oils – is a target. From the oil refinery to terminal and then onwards via road or sea, each stage in the journey has potential vulnerabilities: For example, it remains at risk from organised crime. And while oil companies are deploying new technologies to combat fuel fraud and theft, such as inspection drones and pressure sensors, none are infallible. Pipeline fuel fraud is difficult to disrupt in real time before the product leaves the legitimate supply chain and enters the black market.

Moving fuel via road or sea should be secure, though there is often the threat of hijack and piracy. Here, the potential loss of fuel could run into millions of litres as well as smaller amounts siphoned from vessels and vehicles. Fleet management can also present a weak link in the chain: while oil company-owned transport is more secure, using contractors to transport the fuel can lead to theft or fuel swapping and adulteration. Ideally, when a vehicle begins its delivery journey, it should be sealed and the vehicle travel directly to one location to avoid infiltration. Also, live GPS tracking devices will build a picture of a route and indicate places of potential threat. This equally reveals if a driver is diverting from an agreed or usual route. In addition, trackable seals on tankers show when and where a tank is opened.

Fuel adulteration is also a risk at the gas station, where some owners may extend higher value fuel held in tanks by adding a lower quality product but continuing to retail at full price.

Taking these steps will also help to maintain fuel integrity in countries with large remote areas where it is easier to commit fraud.

Keeping the supply chain secure

What measures can oil companies take to increase the integrity of the supply chain and protect their reputation rather than waiting for Governments to take legislative action?Employing a marker in the fuel, plus a programme of testing, protects the integrity of the product throughout its supply chain journey. Marking at source – at a company’s branded refinery – significantly increases the likelihood that the product is legitimate when the motorist buys it at the gas station. Fuel marking at terminals is a “must-do” along with testing at gas stations. In a real-life example, one oil company used this approach and reduced fuel theft by 95% over a five-year marking programme. In the case of imported fuel, which by-passes the local refinery and is distributed to various oil companies, fuel markers added when the final application of the fuel is defined – but before leaving in the delivery tanker – will ensure the correct tax is paid on the fuel.

Measuring the impact of marking

Oil companies aware they are losing money in the supply chain through fraud are keen to understand the source of the problem and find a solution.

Investing in a marker programme, which costs up to 5% of revenue gained, presents a strong business case. And recognising the level of technology now available and its benefit to their business enables oil companies to protect the value that would otherwise be lost through fraud – and at a fraction of the cost.

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