CYBER RISK
U.S. ENERGY SECTOR VULNERABLE OVER LACK OF SECURITY SPENDING, INCREASE IN HACKS.
How much is cybersecurity worth to the U.S. energy industry? Not a whole lot apparently.
Two prominent security consultant firms estimate that energy companies, ranging from drillers to pipeline operators to utilities, invest less than 0.2 per cent of their revenue in cybersecurity. For context, that’s at least a third less than the corresponding figure for banks and other financial institutions, according to the consultants, Precision Analytics LLC and the CAP Group.
What makes the lack of investment even more worrisome is that the number of hacker groups targeting the energy sector is soaring. Symantec Corp. says it’s tracking at least 140 groups today, up from 87 in 2015, some with links to foreign countries. And it’s just one of many security firms working with the industry.
“It’s scary,” said Brian Walker, a former head of Marathon Oil Corp.’s global IT and now an independent consultant. Executives making funding decisions “aren’t necessarily millennials who intuitively understand” how cyberthreats reach seemingly disconnected units, he said.
“It’s guys my age that are the problem,” according to Walker, who said he’s in his early 50s. “We’ve been 30-years trained in a world that doesn’t work this way anymore.”
These risks were on full display four weeks ago when at least seven pipeline operators from Energy Transfer Partners LP to TransCanada Corp. said their third-party electronic communications systems were shut down. Five of them ultimately confirmed the service disruptions were caused by hacking.
Though the attack didn’t disrupt supply, it served to underscore an ongoing vulnerability to electronic sabotage. It showed how even a minor attack can jump between systems with ripple effects, forcing utilities to warn of billing delays and making it more difficult for analysts and traders to predict a key government report on gas stockpiles.
This “cyber blind spot is a real challenge,” Walker said. “Our fear is that we will play an ostrich and put our head in the sand until something blows up and people get killed or until the lights go out for a month.”
The threat isn’t new, but it is escalating.
In 2012, Saudi Aramco production was locked down during the disk-wiping Shamoon incursion, and the company was hit again by the same group in November 2016, said Bill Wright, director of government affairs and policy counsel for Symantec in Washington. In 2015 and 2016, Ukraine was hit with blackouts by state sponsored groups, a blow to the economy as well the healthy and safety of its citizens.
In the U.S., Symantec has been following another group, nicknamed Dragonfly, that’s been around since at least 2011. Last year, the group became “a lot more aggressive,” with the goal of soliciting information on how energy companies work and figuring out how to maintain stealth access on their systems, according to Wright.
The Federal Bureau of Investigation and the Department of Homeland Security issued a joint technical analysis about a month ago, tying Dragonfly to the Russian government and describing its ability to conduct sabotage, Wright said.
The industry needs to be more involved in defending itself moving forward, according to Michael Hayden, a retired four-star general and now a principal at The Chertoff Group in Washington. The reason: the government is hindered by constitutional issues, as well as “political culture, concern about privacy, speed and agility,” he said.
The low levels of spending by the industry comes as it rushed to adapt new ways to produce more product at a lower cost amid and following a historic, three-year rout in oil prices.
Over the last few years, the industry has been quickly adding electronic sensors and other monitoring capabilities to track data from 900,000 oil and gas wells, and 300,000 miles of pipelines. Complex computer algorithms at every level of the industry are constantly adjusting the flows of everything from oil and natural gas to electrical power, with automatic valves in place that can shut down flow at a moment’s notice in the case of an accident with no human action needed.
And all of it is hackable, according to Walker and other experts.
“This equipment is fairly wide open from a security perspective,” said Matthew Stegall, director of IT assessments at Precision who performs such assessments for Deloitte & Touche LLP and KPMG LLP. “Companies are starting to more and more look at this. But they are still very much in the infancy stage.”
Many of these operations run on separate networks, offering an “air gap” that energy companies often cite as a shield against wider ranging intrusions. But that’s also created a false sense of protection, according to Gent Welsh, commander of the 194th Wing of the Washington Air National Guard who’s long been involved in developing cybersecurity capabilities.
Making the leap from attacking corporate systems to those involving operations “is not hard at all” for experienced hackers, Welsh said.
Companies are aware of the need to protect raw data, but they’re often less sophisticated about the need to protect recently computerized systems for operational assets, according to Stegall. “When you get to a discussion on locking down the operations issues, they kind of look like deer caught in the headlight,” he said.