Experts Offer Energy Executives Sobering Look At Cyber Security

January 2013, Vol. 240 No. 1

Jeff Share, Editor

Naples, FL–The annual meeting of the INGAA Foundation at the Ritz Carlton Naples Beach Resort Nov. 1-3 was attended by a record of more than 300 Foundation members and guests. Officials said at least 40 more would-be attendees had to cancel because of the damages caused by Hurricane Sandy earlier in the week.

One of the major topics at the conference concerned “Cyber Issues – Where the Good Phishin’ Holes Are!” The panel included Adam Meyers, Director of Intelligence, Crowd Strike, Dean Fox, Vice President, Cybersecurity, URS, and Keith Teague, Senior Vice President, Asset Group, Cheniere Energy, Inc.

Fox, who recently retired after 27 years in the U.S. Air Force, offered a sobering warning about foreign hackers who are constantly sending out “phishing” e-mails in hopes of duping a receiver into opening the message. And about 10% do so, he said. He ranked the culprits at 1) China; 2) North Korea and 3) Russia.

“Their aim is to accelerate their global and economic position,” he said. In describing the threat his audience faces, he explained that the phishers understand the world’s increased reliance on natural gas and by gaining any inside information they can, they are able to improve their country’s market position. This includes merger and acquisition activity; intellectual investment; trading information; infrastructure plans; pricing patterns; and detailed information about SCADA systems and industrial controls.

He said a typical team has 10 members including two hackers and seven or eight operational directors. “It is a very integrated and sophisticated team.” Their efforts can ultimately lead to terrorist threats as well as cause financial and economic intelligence harm.

Often they’ll begin by delving into the network of industry suppliers and exploit that trust in order to get into the larger operating companies, Fox said. China, which is actively looking to develop its shale gas program, is many years behind the U.S. in terms of the technology necessary to develop the resource. Meanwhile, Chinese companies are looking to invest in shale properties and production companies and are looking for any edge to learn more about best practices shared by vendors and operating companies.

Meyer described the hackers’ intrusion as an attempt at “reverse engineering.” He noted that the Chinese in particular are not so much interested in stealing technology for immediate use, but are looking ahead as much as 35-40 years so they will be able to successfully compete, if not control, the energy market.

The Chinese hackers typically employ a number of processes, Meyer said. First is a reconnaissance directed toward an operator’s partners or vendors. This is designed to provide information on strategic facilities, personnel, organizational charts, open networks and protocols, social network profiles and relationships.

Second on their agenda includes sending a weaponized document as an attachment with an e-mail suggesting a desire to buy that is targeted at unwary sales people. From this, they gain information on mail distribution and the e-mail chain. Often a malware virus is dropped on the machine.

Third, they establish a “backdoor” into their target’s network. By downloading a password number they will get all of a company’s user connections. Even if the malware has been detected, they will drop another one through a secondary channel, he said.

Then, once they have gained data on a company’s local tools and utilities, they will proceed to “mission execution,” meaning “they own your system.”

“They’re stealing your pipeline data, compress, encrypt and take it out and ship it off. They delete the override on stolen data and have created a path.”

Finally, they resort to clean-up and maintenance persistence, meaning that in three years’ time they will return, take control and see what new information they can glean from their victims, he said.

One problem in particular is that in China military leaders are also often big businessmen, so it would be uncommon for businesses and government not to share the information they have stolen, the experts said.

Jack Weixel, Director, Client Services, BENTEK Energy, offered a North American Energy Market Outlook and noted that natural gas consumption in the U.S. has risen from, 62.4 Bcf/d in 2010 to 63.7 Bcf/d in 2011 to 65.6 Bcf/d as of the date of the conference. He credited more power demand coming online despite the warmest winter on record with demand for power increasing 23% as compared to a 4.8% increase in natural gas demand overall.

Power generation demand will continue to drive the natural gas market and could require more infrastructure by 2017 as the industry runs into capacity limits. Industrial expansion fed by lower gas prices will only make a minor dent in supply with even a world-class gas to liquids plant only able to burn up to 1 Bcf/d.

LNG exports will take at several years to make a substantial impact, if Congress approves exports. By then, the industry will be competing with a number of huge Australian projects ready to come online as well as significant advances in Europe, which Weixel estimated is about seven to 10 years behind the U.S. regarding shale development and China which is lagging by 15 years.

“U.S. shale is the cheapest place on earth to get access from. Technology is holding China back because a lot of it is inaccessible because the infrastructure is not all that available,” he said, adding “ so much of it is accessible in other places.”

Ramsey To Head INGAA Foundation
Joseph E. Ramsey, group vice president of project execution for Spectra Energy Transmission, was elected chairman of The INGAA Foundation Inc. at the Foundation’s annual meeting in Naples, FL on Nov. 3.

“Joe is extremely knowledgeable about what it takes to construct and expand a pipeline. His expertise and long-standing relationships with pipeline operators and pipeline contractors make him an excellent choice to lead the Foundation for the coming year,” said INGAA Foundation President and CEO Don Santa.

“Joe is passionate about the future of the natural gas pipeline industry. He is eager to lend his voice to help the public, elected officials and others understand how pipelines act as the crucial link in bringing new, low-cost, clean, domestic natural gas to markets. And, in turn, how pipelines help drive economic growth, while creating jobs and providing other economic benefits.”

Ramsey has been a member of the INGAA Foundation since 1994. He served on the INGAA Foundation’s executive committee since 2010 and as vice chairman of the board from November 2011 to November 2012.

Ramsey joined Spectra Energy in 2008 and now oversees Spectra Energy Transmission’s expansion program, which invests more than $1 billion annually in new pipeline, gas processing, storage and distribution projects. He previously served as managing director for Jacobs Consultancy, where he led the worldwide energy and utilities consulting group, and managing director for Stone & Webster Consultants, leading the gas and utility consulting group. Earlier in his career, he held senior executive positions with Tenneco Energy.

Ramsey earned a B.S. degree in industrial engineering from the University of Houston and an MBA from Harvard University.

INGAA Elects Harper
On Oct. 3 the board of directors of INGAA announced the election of C. Gregory Harper, as chairman of the board for 2013. Harper is senior vice president and group president of CenterPoint Energy’s Pipelines and Field Services businesses.

“Greg is a strong leader, with real understanding about the enormous opportunities for natural gas and the natural gas pipeline industry,” said Don Santa.

“Greg will be at the forefront of industry efforts to advance natural gas as a solution to the nation’s energy, environmental, economic and employment challenges. He also intends to continue our efforts educating lawmakers, regulators and the public on the role pipelines play as the critical link in bringing much-needed natural gas supply to market.”

Harper follows Spectra Energy President and CEO Gregory L. Ebel as INGAA chairman.

INGAA’s board also elected Gary L. Sypolt, CEO of Dominion Resources’ Dominion Energy operating segment, as first vice chairman, and David Devine, president of Kinder Morgan’s Natural Gas Pipe Line Company, as second vice chair.

Response To NTSB
One week after the INGAA Foundation meeting the National Transportation Safety Board announced its decision to include pipelines on its 2013 Most Wanted List of transportation safety issues.

In response, INGAA’s Santa released the following statement:

“The natural gas pipeline transmission industry is committed to safe and reliable operations, and takes that commitment seriously. In 2010, INGAA established a board-level pipeline safety task force to pursue ways to further improve the industry’s safety performance. In early 2011, INGAA established five guiding principles of pipeline safety, anchored with an overarching goal of zero pipeline accidents. Since then, we’ve followed through with commitments and concrete actions and are developing performance metrics to ensure that our pipeline safety goals are met.

“INGAA is engaging stakeholders continuously, including the NTSB, federal and state regulators, safety advocates, first responders and the public, to discuss our efforts and conduct a dialogue about the path forward. INGAA members have acted voluntarily, and are moving forward transparently. We understand that regulation often takes time but that pipeline safety is too important to delay.

“INGAA members are addressing all of the issues that the NTSB has outlined as concerns about the pipeline industry, and more. We are ensuring that all pipelines, regardless of their age, are fit for service. We are working to ensure that safety practices are top-notch by issuing guidelines for quality analysis and quality control, providing management system guidance, and implementing new control-room management procedures.

“We have improved maintenance procedures and have gone beyond existing regulation to voluntarily expand the integrity management program to areas outside highly populated areas and have established a roadmap to implement new inspection technologies.

“We are committed to reducing incident response time and are engaging first responders, fire chiefs and other emergency officials. “INGAA members have taken these steps voluntarily because they recognize that moving natural gas safely and reliably to American families and businesses is more than a job. It’s a commitment.”