SplitBlade is the first technology to be recognized by our Innovation Incentive Program. Thank you to our Innovation Incentive Champion, Chris Casad, and to everyone who has helped push the bar on its success. #Ulterra #ThinkingForwardChallengingLimitspic.twitter.com/eLFVAWT01Z

SplitBlade is the first technology to be recognized by our Innovation Incentive Program. Thank you to our Innovation Incentive Champion, Chris Casad, and to everyone who has helped push the bar on its success.

source https://twitter.com/UlterraBits/status/1032010571481268226
Source: https://ulterra.blogspot.com/2018/08/splitblade-is-first-technology-to-be.html

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In the LOOP: US crude exports to India reach record 261,000 b/d in June

In a signal that Indian refineries are increasing their efforts to find alternatives to Iranian barrels, a record 261,000 b/d of US crude was exported to India in June, according to the latest US Census Bureau data.

The amount of crude flowing from the US to India has spiked sharply this year from an average 29,000 b/d in January through April to 152,000 b/d in May and then 261,000 b/d in June.

There are indications that the increase in flows of US crude to India will continue into the fall as renewed US sanctions on Iran will put pressure on importers of Iranian crude.

Iran is the third biggest source of oil for India, importing some 160 million barrels each year. However, once US sanctions against Iran kick in on November 4, India may be forced to ramp up its efforts to seek alternatives.

State-owned Indian Oil Corp. signed a deal in July to buy 6 million barrels of US crude that will be shipped on three VLCCs — one each for delivery in November, December and January.

In another deal, the fifth VLCC to load at the LOOP terminal this year is expected to arrive in India in September, according to data supplied by S&P Global Platts’ cFlow trade flow software.

The 2 million-barrel crude cargo set sail from LOOP on August 13 is set to arrive in Kochi, which is an indication state-owned Bharat Petroleum Corp. may have bought it.

The 310,000 b/d Kochi refinery is located in the southern Indian state of Kerala and is one of BPCL’s two refineries.

In addition to the VLCC cargoes heading for India, US shipping sources say they also have seen increased interest in the fixing of US Gulf Coast to India cargoes on Suezmax vessels, which carry about 1 million barrels of crude.

A US crude trader said the smaller cargo sizes may indicate that new buyers are testing crude grades and have yet to commit to buying an entire VLCC.

Similar “tests” by South Korean buyers of US crude and condensates have recently been observed.

In addition to the uncertainty around US-Iran sanctions, there also have been trade tensions between the US and China. But other buyers have stepped in to purchase US crude after China halted imports.

US crude exports to China were virtually non-existent for the week that ended August 10, according to cFlow data, compared with 1.076 million barrels in the week that ended August 3.

The post In the LOOP: US crude exports to India reach record 261,000 b/d in June appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/21/loop-us-crude-exports-india-record/

Aluminum swings in the spotlight — largely a tale of scarcity concerns and tariffs

Aluminum, like steel, has grabbed headlines in 2018. The all-in price of this primary metal used in everything from transportation, to construction, to consumer goods has fluctuated since January — sometimes widely — in large part a response to US trade ‘war’ concerns and supply scarcity.

One effect of the 2018 tariffs and higher US aluminum prices: a scramble to ramp up domestic production. Century Aluminum, Alcoa and Magnitude 7 Metals are all working to restart three aluminum smelters idled for years.

While much has been made about higher prices, on August 16, 2018, the US all-in price for primary aluminum was 0.5% lower versus January.  This dip, however, is about 10% less than the drop seen in other global markets, such as the EU, where prices are down some 10.9% on the same basis — more or less exactly the difference represented by the tariffs.

Let’s examine how the US aluminum market trades and take a closer look at the price assessment methodology adopted by market participants across the aluminum value chain.

The all-in US price of primary aluminum, aka P1020 grade (99.7% pure), has two components: the global underlying price traded on the London Metal Exchange, reflecting the value of aluminum stored in an LME warehouse in over 30 locations around the world.  Plus a regional “premium,” or differential, reflecting the additional value of having aluminum delivered to where it is needed at locations across the US Midwest.

S&P Global Platts assesses what’s called the Midwest Transaction Premium, or “MWP,” using a consistently-applied and transparent methodology. The MWP is determined with prices obtained by surveying producers, consumers and traders of aluminum in the U.S.  It is one of many price references available to measure aluminum’s relative market value.

Many aluminum-consuming regions around the world also price using the LME price, plus premiums. While many regions negotiate premiums at key ports, the US price has always been a delivered price, as US aluminum-processing companies expect aluminum priced delivered to their factory doors, with specific terms.

Interest in the MWP has risen markedly in 2018. Why? It is a key go-to price for understanding the US aluminum environment.  It’s this US price that reflects the impact of the 2018-imposed US tariffs on aluminum imported into the United States; US sanctions on Russia’s Rusal, the world’s second-largest aluminum producer and key exporter to the US; and a host of other factors, such as the curtailed capacity of North America’s second-largest largest aluminum smelter, nationwide trucking issues and higher freight rates.

US ALUMINUM INDUSTRY SEEKS TO ISOLATE IMPACT OF TARIFFS

Producers and consumers of aluminum, seeking to understand how the US tariffs and sanctions are affecting prices and their businesses, asked price reporting agencies for help.  Even in late 2017, Platts heard anticipatory calls for tariff-free pricing data as the first rumblings of potential US tariffs surfaced.

After engaging the marketplace, Platts in February launched a duty-unpaid price reference for aluminum arriving CIF (including cost, insurance and freight) New Orleans, a busy port of entry.  This enabled the collection of transactional data prior to the payment of duty or other charges, at a key port, similar to European premiums which are basis Rotterdam or Japan premiums basis main Japanese ports.

But the North American market for nearly 35 years has been accustomed to a Midwest basis. An apples-to-apples comparison of Midwest value, with and without relevant duties, was desired.

So on August 1, Platts launched its new US Aluminum Midwest Transaction Premium (implied duty-unpaid) and US Aluminum Midwest Transaction Price (implied duty-unpaid).  These indicators use a calculated value of the daily duty level and deduct that from the US Midwest Transaction Premium and US Midwest Transaction Price.

DUTY-UNPAID PRICE REFERENCES ARE INFORMATIONAL IN NATURE, NOT TRANSACTIONAL

The duty-unpaid values have been welcomed as additional information for the market. But the US imports 90% of its primary aluminum, and any imported aluminum by law is now levied a 10% tariff — unless granted an exemption.

For imports, there is no such thing as an actual duty-unpaid, delivered aluminum marketplace.

The US aluminum industry predominantly trades on a delivered, duty-paid (DDP) basis. Per the International Chamber of Commerce, that means the seller bears the obligation to pay for any and all applicable duties and delivery costs. With the US so import-dependent, prices of domestic or stockpiled aluminum also rose to reflect the replacement cost of that imported aluminum. Evidently, a tariff is a key factor in price formation — if you need to buy imported aluminum, the tariff just made the market price 10% higher. In a rising market, domestic producers might—or might not—also decide to command higher prices. The Platts US MWP will continue to reflect that delivered price of primary aluminum—of all origins—however it is negotiated between sellers and buyers.

S&P GLOBAL PLATTS ALUMINUM TRANSACTION PREMIUM IS BASED ON BUYERS’ & SELLERS’ PRICES

Platts does not “set” prices. It reports all data points received from its all-day surveys of buyers and sellers in the spot physical markets. Reporting that data in real-time allows the marketplace to view and validate the price data. After the market’s close, a final end-of-day price assessment is published, along with a rationale, explaining the final value.

INDUSTRY HAS CHOICE OF PRICE REFERENCES FOR VARYING PURPOSES

While a variety of price reporting agencies publish aluminum price references, Platts has a wide-ranging suite of price assessments from which to choose. Each can be used solo or in concert with others, depending on need. Examples:  The decades-established, benchmark US MWP, with its liquid derivatives market enabling hedging; the historic US Aluminum Market price based on all-in price data; the CIF New Orleans Premium, valued at an active aluminum importation port; the new duty-unpaid implied Midwest Premium; and/or other pricing values along the supply chain, such as alumina (a feedstock for aluminum), scrap used beverage cans (UBCs), secondary aluminum and billet.

The post Aluminum swings in the spotlight — largely a tale of scarcity concerns and tariffs appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/21/aluminum-scarcity-tariffs/

Insight: US-China trade war raises concern LNG exports may feel the chill

The ongoing US-China trade war has raised concerns about a key driver of LNG shipping demand – the trade flow between the US and China – but it is also expected to further the commoditization of LNG as it creates more trading opportunities and the need for shipping optionality.

China in early August threatened to impose a 25% tariff on US LNG imports, in retaliation for another round of US tariffs on $200 billion worth of Chinese products. LNG market participants have indicated that China’s proposed tariffs on US LNG, and the subsequent readjustment of trade flows, is probably the biggest disruption the industry has faced since Japan’s Fukushima earthquake in 2011, and bigger than the trade embargo on Qatar in 2017.

The biggest market tapped by US LNG so far has been China, where government anti-pollution policies are pushing end-users to switch from coal to gas. Average LNG shipping distances have increased the most for LNG originating from the US in the past five years, to 9,268 nautical miles/voyage in 2018, from 3,771 nautical miles/voyage in 2014, according to S&P Global Platts Analytics.

US LNG exports to China

Beijing did not give an implementation date for the tariff, but the uncertainty left Chinese buyers scrambling for substitutes and approaching independent trading houses and oil majors for options to divert their US spot cargoes, and swap them for non-US LNG ones.

If implemented, the tariff will take between one and two months to kick-in, which leaves a narrow window for buyers, sellers and traders to readjust their business accordingly.

The market now calls for a greater role to be played by intermediaries like LNG traders, and for shipping optionality to absorb the impact of trade flow disruptions. This would support the growth of both the spot LNG and shipping markets, and they are interlinked. Historical trade flows also suggest that disruptions can actually increase ton mile demand, as substitutes are imported over longer distances, such as Asian demand pulling in gas supplies from the northern hemisphere.

Demand factors like China’s coal-to-gas switching, peak winter and natural disasters have previously pushed S&P Global Platts JKM prices high enough for Asia to attract LNG from as far as Statoil’s Hammerfest LNG terminal in Norway and Russia’s Yamal LNG project in the Arctic. “This year Chinese spot buying has been on average just under five cargoes/month – however, in January that was the equivalent of 23 cargoes,” said S&P Global Platts Analytics, highlighting the scale of China’s winter demand.

Shipping demand risks

The US-China trade war has raised some concerns about a contraction in shipping demand as Chinese buyers realign their purchases of spot US LNG cargoes, and replace them with LNG from the Middle East, Nigeria, Southeast Asia or Australia, which are closer to Chinese ports. The risks were exacerbated by US commitments to make it easier for European countries to buy American LNG by reducing trade barriers, in recent announcements from Washington. US-Europe shipping distances are shorter and the NATO alliance has a vested interest in reducing Russia’s grip on Europe’s gas supply.

But the fact that China will remain a growing demand center will have knock-on effects on LNG pricing, including LNG shipping rates, according to S&P Global Platts Analytics.

“While China is trying to manage its procurement in the light of potential US tariffs, the fact remains that if they start buying spot volumes, prices will move. While we don’t expressly forecast shipping rates, our current expectations for LNG demand in Northeast Asia suggests shipping rates in the Pacific to reach $82,000/day [this winter],” according to S&P Global Platts Analytics.

LNG vessel spot rates started 2018 at a high of $85,000/d, then eased to a year-low of $45,000/d in May 2018. By June 2018 rates had risen to $95,000/d in Europe again on summer demand, nearly 2.5 times more than the previous year, before slipping to $75,000/d in July-August. This compares to LNG vessel spot rates of over $120,000/d in 2012-2013 when ship supply had tightened.

Trade war impact

The real concern is the long-term impact of the trade war on Chinese LNG investments in US projects, and the competitiveness of US LNG in the context of new LNG projects in other countries. US-based LNG exporter Cheniere Energy said the tariff may affect talks with Chinese buyers about future contracts, but its existing long-term contract with PetroChina will not be impacted.

“The early contracts of PetroChina are heavily weighted towards the winter. We’re hopeful that the US and China can come to some resolution quickly,” Cheniere CEO Jack Fusco said in August during an investor earnings call, noting that in the long-run Chinese tariffs may slow down discussions with other Chinese investors. “From a high level, our business is a very long-term one, and it is well understood that China needs US LNG,” he added.

Separately, S&P Global Platts reported that another deal for state-run Sinopec to invest in the $43 billion Alaska LNG Project, appears to be on schedule for commercial agreements to be signed by the end of 2018, as officials expect the trade dispute to be resolved by the time the project is operational in 2024. Under the proposed deal, Sinopec would purchase 75% of Alaska LNG’s planned 20 million mt/year of production, and Alaska Gasline Development Corp will hold 25% of output, or 5 million mt/year, for other potential purchasers, primarily in Asia.

But market participants have their doubts. “Long-term market consequences are likely to be felt on new supply developments as it would restrict the target market for developers of new US LNG projects trying to find new long-term contracts,” consultancy Wood Mackenzie said. However, it added that plenty of appetite exists from other buyers in Asia and Europe for second wave US LNG projects.

This was evidenced by Cheniere Energy signing a new sales and purchase agreement in August with Taiwan’s incumbent LNG buyer CPC Corp for 2 million mt of LNG/year over 25 years from 2021. The SPA is expected to support Cheniere Energy’s export expansion plans in the US Gulf Coast.

 

The post Insight: US-China trade war raises concern LNG exports may feel the chill appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/20/insight-us-china-trade-war-lng/

Venezuela’s PDVSA fails to use US sanctions to own advantage in Delaware court

Venezuela’s beleaguered oil company PDVSA tried to use US sanctions to its own advantage recently — a bold move that ultimately failed.

This played out in a US legal dispute over a Canadian gold miner seeking to recoup assets seized by the Venezuelan government.

A US district court judge in Delaware ruled August 9 that PDVSA is essentially an “alter ego” of the Venezuelan government, allowing Canadian miner Crystallex to go after the oil company’s shares in profitable US refiner Citgo, even though PDVSA had nothing to do with nationalizing the gold mine.

The victory allows Crystallex to collect on a $1.2 billion judgment against Venezuela that it secured in an earlier US court case — although whether the miner will ever get anything from Citgo given the droves of other companies demanding repayment from Venezuela remains a huge question mark.

PDVSA’s argument about US sanctions came into play when the company argued that its shares of PDV Holding, the parent company of Citgo, are “effectively frozen” by an executive order signed by US President Donald Trump in August 2017 as part of broader sanctions meant to pressure Venezuelan President Nicolas Maduro’s regime.

“What the executive order says is you cannot purchase equity from Venezuela in the United States,” PDVSA argued in the Crystallex case. “There can’t be a buyer in the United States.”

Crystallex responded that “selling these shares so that a judgment of a United States court could be satisfied is not what these sanctions are trying to prevent.” The miner argued that neither Trump’s order nor language from the Treasury Department’s Office of Foreign Assets Control change the fact that PDV Holding remains a commercial enterprise and PDVSA continues to use its shares for commercial activity, including naming directors and approving contracts.

“PDVSA can still pledge its PDVH shares to secure its own short-term debt (a commercial use),” Crystallex argued. “Moreover, Crystallex contends that the PDVH shares are equity securities, and OFAC has specifically allowed such dealings in equity, notwithstanding the executive order.”

Judge Stark agreed with Crystallex.

“This executive order, directed to dividend payments and purchases of securities, has no impact on PDVSA’s ability to carry on the commercial activities based on exercise of shareholder rights,” Stark said in his 75-page opinion.

Any Citgo assets sold off to pay the $1.2 billion judgment would not return to Venezuela, meaning the restrictions in the executive order would not apply.

Stark adds that nothing in his ruling is inconsistent with the “letter or spirit” of Trump’s May executive order, “which seems intended to deprive Venezuela of certain assets and opportunities, not to prevent legitimate judgment creditors in United States courts to be made whole by Venezuela.”

As Crystallex argued in the case: “The idea is that this was, put bluntly, to punish Venezuela, not to punish people who were owed money by Venezuela.”

Stark’s opinion digs up interesting history from Venezuela’s oil sector as he weighs Crystallex’s argument that PDVSA should not be considered a distinct entity from the Venezuelan government. Past oil ministers Nelson Martinez, Eulogio del Pino and Rafael Ramirez make cameos, as does PDVSA’s Twitter feed.

In building its successful case that PDVSA is not separate and distinct from the Venezuelan government, Crystallex argued that Venezuela:

* Deprives PDVSA of independence from close political control by appointing the board of directors, appointing the country’s oil minister as PDVSA’s president and director, having the oil ministry and PDVSA share office space
* Uses PDVSA property, “including aircraft and tanker trucks, for its own political purposes”
* Boasts that “PDVSA is Venezuela” for marketing purposes, including on Twitter
* Uses PDVSA to achieve its social and political goals domestically and abroad
* Forces PDVSA to provide oil to China, Russia and 17 Caribbean countries at a discount to support Venezuela’s foreign policy

PDVSA responded that the assertions by Crystallex “demonstrate nothing more than ordinary shareholder control and government regulation that cannot, as a matter of law, satisfy the required showing that the shareholder exercises complete domination and control over the corporation’s day-to-day operations.”

But the judge was not persuaded by PDVSA’s response, ruling that Crystallex had shown probable cause to overcome the presumption of PDVSA being separate and distinct from the government.

PDVSA is appealing to the 3rd Circuit.

While Crystallex’s court victory made a splash among oil industry watchers, the company might not ultimately get a piece of Citgo.

Francisco Monaldi, a Latin American energy policy fellow and lecturer at Rice University’s Baker Institute for Public Policy, said Crystallex might have to get in line behind a lot of bond holders and bank creditors with direct claims against Citgo or PDVSA.

“It is going to be a shark fest, and lawyers will make the most of it,” Monaldi said.

The post Venezuela’s PDVSA fails to use US sanctions to own advantage in Delaware court appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/17/venezuela-pdvsa-us-sanctions-delaware-court/

We have instituted a new Innovation Incentive Program to encourage and reward innovators for creating valuable solutions for our customers’ problems. This is part of our mission to empower our employees to advance the oilfield. Read more here >> https://bit.ly/2OFZyoa pic.twitter.com/1pHhIqoBCw

We have instituted a new Innovation Incentive Program to encourage and reward innovators for creating valuable solutions for our customers’ problems. This is part of our mission to empower our employees to advance the oilfield. Read more here >> https://bit.ly/2OFZyoa 

source https://twitter.com/UlterraBits/status/1030147535321657346
Source: https://ulterra.blogspot.com/2018/08/we-have-instituted-new-innovation.html

The true test of your safety commitment is how you behave when no one is watching. #SafetyTipTuesday #TrinidadDrilling #DrillingContractor #OilandGas #Oilfield #OilPatch #DrillingSafety #RigSafetypic.twitter.com/YRFHaQ8rIj

The true test of your safety commitment is how you behave when no one is watching.

source https://twitter.com/TrinidadTDG/status/1029412568048250881
Source: https://ulterra.blogspot.com/2018/08/the-true-test-of-your-safety-commitment.html

In the LOOP: Arab Light imports rebound slightly as Saudi Arabia reports cuts

Imports of Arab Light from Saudi Arabia into the Louisiana Offshore Oil Port are rebounding slowly, even as Saudi Arabia continues to report oil production cuts.

So far in August, Morgan City, Louisiana, the delivery point for LOOP, has taken three cargoes, totaling 1.95 million barrels, of Arab Light, according to the latest S&P Global Platts Analytics and US Customs data. That is compared with no cargoes of Arab Light received at LOOP in July and 1.4 million barrels in June.

June 6 marked the first LOOP import of Saudi crude of the year — ending a six-month dry spell. Even as LOOP imports of Saudi crude have seen a slight uptick, bringing the total so far this year to more than 3 million barrels, it is a stark contrast to previous years.

By comparison, during the same time frame in 2017, more than 39 million barrels of Saudi Arabian crude, including Arab Extra Light, Arab Light, Arab Medium and Arab Heavy, was brought into LOOP.

The US Gulf Coast has experienced a similar pattern — with 14.8 million barrels in Saudi crude imports in June, 12.8 million barrels in July and about 5 million barrels so far in August.

The lack of Saudi crude coming into LOOP — and the US Gulf Coast more broadly — is a stark contrast to previous years, when Saudi Arabia was a major supplier of crude.

However, Saudi Arabia has curtailed production as part of OPEC and non-OPEC cuts.

OPEC and 10 non-OPEC partners agreed on June 23 to boost output by 1 million b/d by reducing overcompliance with cuts that had been in place since January 2017. The move was intended to alleviate any shortages caused by US sanctions on Iran and continued production problems in Venezuela. OPEC produced 32.32 million b/d in July, up 40,000 b/d from June.

Saudi Arabia, OPEC’s largest producer, has declared it would take on the bulk of the increase, but instead cut production by 50,000 b/d from June to 10.39 million b/d. The country self-reported Monday an even larger drop of 200,000 b/d to 10.29 million b/d.

Growing US demand for crude this summer may be driving the increase. Since the start of March, refinery run rates in the US Gulf Coast have increased 666,000 b/d to 9.053 million b/d, according to data from the US Energy Information Administration. However, refinery runs may slow slightly as summer driving season draws to an end and US refinery maintenance season begins.

The post In the LOOP: Arab Light imports rebound slightly as Saudi Arabia reports cuts appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/14/loop-arab-light-imports-rebound/

Insight: Kaspersky Lab contest reveals ease of hacking an oil refinery

This is the second in a series of two special features on cybersecurity in the oil and gas sector

In October, four South Korean hackers in Shanghai spent seven hours attempting to infiltrate an oil refinery’s corporate network to gain access to its control systems and shut the facility down.

Another 15 minutes or so, and they likely would have succeeded.

Fortunately for the industry, the attack was not real. It was performed in a live-televised cybersecurity competition put on by Internet security firm Kaspersky Lab. The competition pitted teams from around the world in a race to breach a model of a real oil refinery that is one of the company’s clients.

None of the three teams in the final managed to bring the refinery down; the South Korean team came closest and won the contest. But as the organizers note, real-world hackers do not operate under such tight time restrictions.

“The contest demonstrated once again that, by exploiting weaknesses in the corporate network’s protection and network configuration faults, a remote threat actor can gain unauthorized access to the industrial segment of the network,” Kaspersky’s industrial control system vulnerability research group manager, Vladimir Dashchenko, said.

This was the third annual cybersecurity competition that Kaspersky has held. The 2016 contest invited hackers to penetrate the network of a model power plant.

The competition highlights the vulnerabilities of critical infrastructure, including oil refineries, as the stakes of cyberwarfare grow. The environmental and human toll of a cyber-induced disaster could be significant, to say nothing of the disruption to oil and gas markets.

“Oil and gas is one of the industries that is essential to how societies and economies function,” Dashchenko said.

The Moscow-based company earlier this year said it discovered malware infecting a control system installed at more than 1,000 gasoline stations that would have allowed hackers to shut down fueling systems, change fuel prices and cause leakages, among other acts of sabotage.

Kaspersky itself has faced allegations of helping the Russian government spy on its customers, as the US has banned the use of its products on federal networks and reportedly is weighing sanctions against the company.

The company denies the charges and says it is “caught in the middle of a geopolitical fight” between the US and Russia.

Malware lurking

Most sophisticated cyberattacks on oil refineries and other critical infrastructure are multipronged.

Hackers will first try to infiltrate the facility’s distributed control system (DCS) or supervisory control and data acquisition system (SCADA) by installing malware that collects intelligence on its operations, security features and other sensitive information.

They will often also try to gain access to the plant’s independent safety control system, usually with the intention of being able to override automatic shutdowns.

The malware installed to gather this data can lurk on systems for years undetected.

Then, when assailants have gleaned enough information on the facility’s vulnerabilities and the time is right for an attack, they will unleash the targeted, sophisticated code they have developed to bring down the refinery – or worse, cause a catastrophe, such as an explosion that was narrowly averted at a Saudi petrochemical plant last year.

Investigators say that attack was foiled because of a glitch in the malware that had targeted the plant’s safety system.

“Most of the activity seen has been reconnaissance penetrating systems to try to understand these SCADA systems, such that when the attack is made, it’s effective,” said Daniel Quiggin, a fellow at Chatham House who studies energy systems.

To reduce the risk of being hacked, many facilities are “air gapped,” or isolated from public networks. But air gapping is not foolproof, as hackers can still use creative methods to exploit security holes and access secure internal networks. For example, they could steal personal information from an on-site vending machine that uses a wireless internet signal to transmit data and use it to breach the refinery’s secure operating and safety networks, or program a security camera’s infrared LEDs and sensors to transmit information.

“It’s good to have isolation, but there’s no such thing that could secure you with isolation,” said Beyza Unal, a senior research fellow with Chatham House’s International Security Department. “Now we are in an age where the legacy systems can’t cope with today’s needs. There are so many cases where we know air gapping wasn’t enough.”

Once the air gap is breached, facilities are as good as hacked. Companies are largely focused on protecting the perimeter of a plant from hacking, but have relatively few tools to detect or prevent an attack once the hacker is inside the system, experts say.

Capture the flag

In the Kaspersky contest, the teams had to solve several tasks to breach the perimeter of the model refinery’s corporate network. Once they had accomplished that, they would be required to figure out the internal industrial system’s communication protocols and command the refinery to shut down.

The South Korean team was at the final stage of the corporate network level, the most difficult part of the competition, when time expired.

Had they gotten past it, the rest of the job would have been “very easy compared to the previous tasks,” Dashchenko said. “Based on our estimation, they were just 15-20 minutes away from completing it.”

The event did not reveal any previously unknown security holes, known as zero-day vulnerabilities, as happened in Kaspersky’s previous two contests. But these exercises, known as “capture the flag” or CTF, are a crucial step for testing the security of computer systems, as the conditions closely model real-life scenarios.

“Everything that happens at a CTF site can also happen to real critical infrastructure and industrial systems,” Dashchenko said. “Cybersecurity risks [for oil refineries] are still high, and the industry should still take proper security measures for better infrastructure protection.”

The post Insight: Kaspersky Lab contest reveals ease of hacking an oil refinery appeared first on The Barrel Blog.

Source: http://blogs.platts.com/2018/08/14/insight-kaspersky-lab-contest-oil-refinery-hacking/