The oil and gas industry is waking up to an invisible threat – the risk of cyber-terrorist attacks and other information technology – according to Ernst and Young’s periodic survey of industry experts and executives.
For the first time, IT risks appear in the top 10 listing in the company’s Business Pulse Oil and Gas Report. IT issues are ranked ninth in the newest survey and are expected to remain in the top 10 through 2015, according to the report.
Previous surveys were released in 2011 and 2010. The survey included more than 100 executives from 90 companies in 21 countries.
“The increasing sophistication of control systems used by oil and gas companies across the world has delivered immense benefit to both the industry and the consumer,” the report read. “Yet ... the risks associated with having a physical network controlled digitally are significant.”
Infrastructure controls are a likely target for cyberattacks.
“At the same time, the amount of sensitive proprietary information circulating within and between oil and gas companies and their counterparties means that information security needs to remain watertight to prevent both industrial espionage and breaches by ‘hacktivists’ – those who hack into computer networks to promote a political or social ideology,” the report said.
One company told the advisory firm, “When we go to particular countries we go with clean cell phones and clean computers. We don’t store any information, we don’t transmit any information back home and we don’t go on any networks.”
Information risks can include intellectual property and commercial espionage – the untimely leaking of business information like bids and proposals, according to the report.
In past years, the biggest IT concern used to be the effectiveness of the system.
Changes in Attitudes
The industry’s top concern remains unchanged from past surveys – health, safety and environment.
It can be a dangerous business, and “any perceived negligence in this area (may be) penalized heavily by both regulators, who hand out enormous fines, and the wider public, whose perception of the organization responsible can be irreparably damaged,” the report stated.
While poor public perception can damage a company’s bottom line, the issue has a flip side, the survey indicated.
Listed at number nine on the “Opportunities” list is “additional corporate social responsibility and corporate sustainability measures and transparency.”
And number 6 on the positive side is “safety and risk management used as a partnership enabler.”
The report quoted the CFO of a
U.S.-based company: “When we look for partners we look at their safety record as well as their financial ability to handle an accident in case something happens, particularly if the partnership involves deepwater drilling. The oil spill in the Gulf of Mexico has changed how we evaluate partners.”
While failure to adhere to HSE regulation is the number one risk for oil and gas executives worldwide, this breeds compliance, which enhances partnership opportunities, the report stated.
Other top 10 risks in the industry include price volatility, access to reserves and markets, cost escalation, uncertain energy policy, worsening fiscal terms, human capital deficit (skills shortages, aging workforce, etc.), competition from new technologies and source like alternative fuels, and increasing project scale and complexity.
The report also noted changes in attitudes about the top opportunities.
Rising emerging market demand moved to the number 1 ranking from number 4 two years ago.
“Rapid-growth markets (i.e., developing countries and emerging economies) are thirsty for fossil fuels,” the report stated.
“The breadth and scale of the risks highlighted in this report paint a picture of the oil and gas industry as a perilous place in which to operate. Yet the strength of rapid-growth markets, even amid the backdrop of the recent global economic downturn, has provided ample reward for those able to thrive in this environment.”
Other top 10 opportunities in the report include investing in innovation and R&D; frontier acreage; focused recruitment, training and retention programs; new infrastructure to gain access to – or to connect to – resources and markets; new or expanded markets for natural gas; acquisitions or alliances to gain new capabilities or access to resources or markets; and strategic divestitures.