Officially, HM Revenue and Customs would only confirm that an operation is ongoing in the Newry area.
However, BBC News NI has been told that the operation began on Wednesday and centred on a property just outside Newry.
It is believed the property was searched on a previous occasion without anything untoward being found.
This time, however, HMRC investigators brought with them specialist metal-detecting equipment.
It is understood that two underground pipes were discovered apparently leading under a field to what the authorities believe is an illegal laundering plant.
Some 18,000 litres of suspected illicit fuel are believed to have been recovered.
This is the second suspected plant to be discovered in days, with one having been recovered in Cullyhanna earlier this week.
Two men have been arrested during a large-scale operation against suspected fuel laundering in South Armagh.