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Lighthouse: Energy Security Thoughts & Snippets

The Federal Government’s Track Record on Cybersecurity and Critical Infrastructure

The Washington Post reports on a new report prepared for the Senate Homeland Security and Governmental Affairs Committee:


"The report draws on previous work by agency inspectors general and the Government Accountability Office to paint a broader picture of chronic dysfunction, citing repeated failures by federal officials to perform the unglamorous work of information security. That includes installing security patches, updating anti-virus software, communicating on secure networks and requiring strong passwords. A common password on federal systems, the report found, is “password.”....The report levels particularly tough criticism at the Department of Homeland Security, which helps oversee cybersecurity at other federal agencies. The report concluded that the department had failed even to update essential software — “the basic security measure just about any American with a computer has performed.”.....Higher up the chain of command, agency directors are rarely held accountable for security failures, experts said, because it is often unclear who is responsible. No penalties are mandated by law."

Some examples from the report relevant to the energy sector:

"The Nuclear Regulatory Commission stored sensitive cybersecurity details for nuclear plants on an unprotected shared drive, making them more vulnerable to hackers and cyberthieves."

"Last January, hackers gained access to U.S. Army Corps of Engineers computers and downloaded an entire non-public database of information about the nation’s 85,000 dams — including sensitive information about each dam’s condition, the potential for fatalities if breached, location and nearest city."

 

 

Europe links power markets

Bloomberg:  "Power markets across 15 European nations from the U.K. to Finland are linked from today in their biggest transformation since liberalization in the 1990s.  Network operators and energy exchanges for the first time held a single auction at noon Paris time to determine next-day power prices across countries that account for 75 percent of Europe’s electricity supply. The move is intended to smooth price differences between nations through better control of cross-border flows, the Agency for the Cooperation of Energy Regulators, or ACER, said Jan. 30.
The process, known as market coupling, is the biggest step in a push to integrate electricity markets by the end of this year across the 28-nation European Union, which forced utilities to open up their business to competitors in the 1990s. Linking supply and demand through trading may save consumers as much as 4 billion euros ($5.4 billion) a year by enabling electricity to flow efficiently to markets where it is most needed, according to the European Commission, the bloc’s regulator."

Grumbles in the Magic Kingdom

The Economist re Saudi Arabia:  "[the Saudi] kingdom has sold the rest of the world around $1 trillion-worth of oil in the past three years alone, accumulating a hoard of sovereign assets nearly as big as its GDP of $745 billion......“The government keeps people quiet with money, and in the rare cases where that doesn’t work, with threats,” says a diplomat in Riyadh. “But this is not a happy place.” For one thing, ordinary Saudis have no say in where the money is spent. All too often what they see, following the much-trumpeted princely opening of each new project, is vast empty buildings and unused facilities. What they hear is tales of which privileged courtier or business mogul has pocketed how much.....the kingdom’s leadership is adrift. King Abdullah, now at least 90, is seen as beholden to a small circle of advisers and sons, with rival courts surrounding the 83-year-old crown prince, Salman, and other contenders for the succession....
Saudi Arabia’s neighbours and allies, too, are increasingly wary. Their concern is not just about internal strains. In recent years Saudi foreign policy has grown both more assertive and more erratic."

The Economist: Polish Energy - Going Nuclear

Excerpt: "DONALD TUSK, the prime minister, and his cabinet finally adopted the Polish nuclear power programme on January 28th, giving the green light to construction of the country's first nuclear-power plant. A state-owned energy company, PGE, is managing the project, which will cost an estimated 40-60 billion zloty ($13-19 billion).....The government wants the first plant, capable of producing 3,000 megawatts of electricity per year, to be operational by 2024. The programme outlines plans to build a second plant by 2035.....Mr Tusk’s government first signalled its commitment to develop a nuclear energy programme in 2009, with the publication of a plan to diversify the country’s energy mix. It estimates that nuclear energy will supply 17% of the country’s electricity by 2030. Currently, hard coal and lignite are used to produce roughly 88% of the electrical grid. Dependence on Russian gas imports, and pressure from Brussels to reduce carbon emissions by 2020 beyond the 20% level previously already agreed, have pushed the government to look for alternatives." Source.

Smogagedon in China

Many of us have nostalgic memories of waking up on winter mornings to welcome news of a snow day, allowing us to skip school or stay under the blanket for a few more precious hours. As temperatures drop in the Chinese mainland, schoolchildren there have become acquainted with their own version of a snow day: The smog day, which occurs when schools and workplaces shut down due to hazardous levels of pollution and heavy haze. But you can't make smog angels. Indeed, citizen discontent at China's off-the-charts environmental degradation is quickly growing into a potential menace to the ruling Communist regime. Issues like unmet demand for political rights are no longer the party's only existential threat -  See more here.

Korin on OPEC

Turkey Adds to Complex 'Tapestry' of Oil Risks'

CNBC reports:

An escalation in Turkey's most violent anti-government protests in years may complicate an already tense backdrop for energy security in the Middle East, possibly adding to the risk premium in benchmark oil prices, strategists told CNBC this week. 

Although Turkey produces only negligible quantities of oil and natural gas, the country represents an "energy crossroad" – Russian energy exports from the Black Sea port of Novorossiysk flow though the strategic Turkish Straits to markets in Europe and the U.S. Turkey is also an important conduit for oil transported via pipeline from northern Iraq.

Approximately three million barrels a day of crude oil and refined fuels flow though the Bosporus and the Dardanelles Straits "so any disruption of traffic would mean losing the equivalent of Nigeria or Venezuela," said Gal Luft, co-director at the Institute for the Analysis of Global Security (IAGS) [which is publisher of the Journal of Energy Security].

"The market will surely keep a close eye on the developments in Istanbul, which sits on the Bosporus, and the Kirkuk-Ceyhan pipeline which carries 330,000 barrels a day of Iraqi oil from Kurdistan to the Mediterranean," he added.

For more complete coverage of this developing story, including Luft's comments, go to CNBC.    

 

 

To Drill or Not to Drill: How Will Saudi Arabia Respond to the American Oil Boom?

"The coming American oil boom is bad news for Saudi Arabia. How the kingdom responds could very well determine if it survives. Current trends in the global energy market don't look good for Saudi Arabia. First, the International Energy Agency projected in November 2012 that the United States will surpass the Gulf petrogiant as the world's top energy producer by 2020. Then, last week, it revealed that North America, buoyed by the rapid development of its unconventional oil industry, is set to dominate global oil production over the next five years. These unforeseen developments not only represent a blow to Saudi Arabia's prestige but also a potential threat to the country's long term economic well-being -- particularly in the post-Arab Spring era of elevated per-capita government spending. Saudi Arabia's response, to drill or not to drill, will also have major repercussions for a world economy which remains tied to the oil drum. 

"But if the kingdom's outlook is decidedly bleak, its official response has been muddled. In an April 25 speech at Harvard University, Prince Turki al-Faisal, a former head of Saudi Arabia's top intelligence agency and the current chairman of the King Faisal Center for Research and Islamic Studies, announced that the kingdom is set to increase its total production capacity from 12.5 million barrels per day (mbd) today to 15 mbd by 2020, an amount that would easily make it the world's top oil producer once again. But five days later, in a speech at the Center for Strategic and International Studies in Washington, DC, Saudi Arabian Minister of Petroleum and Mineral Resources Ali al-Naimi conveyed an entirely different message, rejecting Turki's statement out of hand. "We don't see anything like that, even by 2030 or 2040," he said. "We really don't need to even think about 15 million.""

So what are we to make of this 2.5 mbd discrepancy?  To find out read the rest of Dr. Gal Luft's article in Foreign Policy

The Break Even Price of Oil

The Break Even Price of Oil

The importance of what we term OPEC's "break even price of oil" was a key message in our recent book, Petropoly: the Collapse of America's Energy Security Paradigm.  The break even price is the price of oil required to balance the budget of Saudi Arabia and other OPEC countries.

If you've read Petropoly you were thus not surprised by recent reporting that the price of oil Saudi Arabia needs to balance its national budget is $94 per barrel, while Iran requires $125, nor by comments by Ali Aissaoui of the Arab Petroleum Investments Corp that "OPEC will definitely need to cut production to shore up prices as they can't produce at prices close to their break-even level."

As we explain in Petropoly, when non-OPEC countries drill more, if the slack isn't taken up by developing world growth in consumption, OPEC drills less in order to tighten the supply/demand relationship and send prices back up, and for the same reason when we use less, OPEC also drills less. 

Connecting the Caucasus with the World: Railways & Pipelines

The Energy-Security Paradox

America is facing an energy-security paradox. Our domestic oil production is on the rise; the cars that roll onto our roads are more efficient than ever, and net oil imports are at their lowest level since the days when President George Herbert Walker Bush lived in the White House. Yet none of this has reined in the price of gasoline. This runs counter to U.S. conventional wisdom over the past forty years, touted by every president since Richard Nixon. Read more of Gal Luft's article on the energy security paradox.

Read more...

Industrial Cyberwarfare Affects Internet

From BBC

Spamhaus, a nonprofit spam filtering organization, has been targeted by a cyber attack.

Steve Linford, chief executive for Spamhaus, told the BBC the scale of the attack was unprecedented. "We've been under this cyber-attack for well over a week.

"But we're up - they haven't been able to knock us down. Our engineers are doing an immense job in keeping it up - this sort of attack would take down pretty much anything else."

Mr Linford told the BBC that the attack was being investigated by five different national cyber-police-forces around the world.

He claimed he was unable to disclose more details because the forces were concerned that they too may suffer attacks on their own infrastructure.

The attackers have used a tactic known as Distributed Denial of Service (DDoS), which floods the intended target with large amounts of traffic in an attempt to render it unreachable.

Al Qaeda Document Targets Energy Infrastructure On Land and Underwater

From the Telegraph

The document, written by al-Qaeda planner Younis al-Mauretani, suggests planting recruits in jobs which could later be useful in attacks, such as oil or gas transportation, and directing supporters to study chemistry and physics. [...]

 Al-Mauretani identifies the massive petrochemical facility at Abqaiq in Saudi Arabia as a potential target for aerial attack.

The 17-page document includes a suggestion that al-Qaeda should use submarines to explore the layout of underwater gas pipelines, in order to mine them. This idea is given serious consideration in the document which notes that the pipelines have safety valves every 6 miles that need to be taken into account when planting mines. 

 

Chavez, Venezuela, and the oil market

CNBC:

Gal Luft, co-director at the Institute for the Analysis of Global Security and a senior adviser to the U.S. Energy Security Council said that though a Chavez departure may already be well factored into prices, it won't "translate into market calmness before it is clear what the nature of the new leadership is."

Clarity over who will be running state-oil producer PDVSA will be equally important, Luft said. "The company has been battered by terribly ineffective personnel changes and removal of competent leadership which has been replaced by political appointees," he said. "Once we begin to see changes in the company's leadership, reflecting professionalism and competence, that could mean the company is making a U-turn, becoming attractive for investors."

Meanwhile, a former executive at PDVSA told CNBC that Venezuela has lost its ability to influence global oil markets because years of under investment in the OPEC (Organization of Petroleum Exporting Countries) member's petroleum industry has constrained production.

"Venezuela is a weak OPEC hawk, as it has no sufficient production to influence prices," said Gustavo Coronel, a founding member of the board of state-oil firm Petroleos de Venezuela. "Venezuela is no longer a factor that can really upset the markets as it was the case 20 years ago."

Gustavo Coronel outlined in the July 2012 JES what it will take for PDVSA to recover

Energy frontiers in North America

Energy frontiers in North America

Bomb disables Iraq fuel oil pipeline

From Reuters, via the Lebanese Daily Star

Once again, terrorists have targeted the vulnerable energy sector. 

Attackers bombed and disabled a pipeline carrying fuel oil from Iraq's largest refinery to a province north of Baghdad, the oil ministry said on Sunday.

 "A bomb attack led to an explosion in the 16-inch pipeline transporting fuel oil from Baji refinery to Nineveh province," said ministry spokesman Asim Jihad.

US Administration’s Strategy to Mitigate the Theft of U.S. Trade Secrets

From the White House 

Victoria Espinel, the U.S. Intellectual Property Enforcement Coordinator, announced the launch of a new strategy to protect intellectual property. She cited President Obama's State of the Union Address in which he said,  “we cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.”

The Strategy that we are releasing today coordinates and improves U.S. Government efforts to protect the innovation that drives the American economy and supports jobs in the United States. As the Strategy lays out, we are taking a whole of government approach to stop the theft of trade secrets by foreign competitors or foreign governments by any means – cyber or otherwise.

President Obama's Cybersecurity Executive Order

From the White House

In his 2013 State of the Union address, President Barack Obama emphasized the importance of securing our energy systems from cyber attacks. 

America must also face the rapidly growing threat from cyber-attacks. Now, we know hackers steal people’s identities and infiltrate private emails. We know foreign countries and companies swipe our corporate secrets. Now our enemies are also seeking the ability to sabotage our power grid, our financial institutions, our air traffic control systems. We cannot look back years from now and wonder why we did nothing in the face of real threats to our security and our economy.

And that’s why, earlier today, I signed a new executive order that will strengthen our cyber defenses by increasing information sharing, and developing standards to protect our national security, our jobs, and our privacy.

But now Congress must act as well, by passing legislation to give our government a greater capacity to secure our networks and deter attacks. This is something we should be able to get done on a bipartisan basis.

The full text of the Executive Order

 

 

Securing Afghan Energy Supplies from Attack

From the US Army
 
Frank Kendall, undersecretary of defense for acquisitions, technology and logistics, and Gary J. Motsek, deputy assistant secretary of defense (Program Support) were in Afghanistan last week, reviewing operational energy security strategies. 
 
The Persistent Threat Detection System, or PTDS, is fielded by Program Executive Office Intelligence Electronic Warfare & Sensors, and personnel manning the systems fall under the 401st. 

"PTDS is a large aerostat tethered to a mooring platform, which is accompanied by a Ground Control Station," Lt. Col. Michael Parodi, product manager for Meteorological and Target Identification Capabilities, was quoted as saying in an article published Jul. 2, 2012. "The system is equipped with both visual and audio surveillance technology and acts as a force multiplier for commanders on the ground."

Parodi added that PTDS can be utilized to scan large areas for potential insurgent activity while interacting with various sensors to provide a complete picture of potential threats.

White House to issue cybersecurity order Wednesday

From The Hill

With the State of the Union approaching this evening at 9pm, Cybersecurity is sure to play a role. The Hill reports anticipation that the President will follow up the SOTU with an announcement on cybersecurity.

The White House is poised to release an executive order aimed at thwarting cyberattacks against critical infrastructure on Wednesday, two people familiar with the matter told The Hill.

The highly anticipated directive from President Obama is expected to be released at a briefing Wednesday morning at the U.S. Department of Commerce, where senior administration officials will provide an update about cybersecurity policy.

The executive order would establish a voluntary program in which companies operating critical infrastructure would elect to meet cybersecurity best practices and standards crafted, in part, by the government. 

Observers are expecting the president to briefly mention the need for the country to improve its defenses against cyberattacks during his State of the Union address on Tuesday. 

According to The Hill, White House Cybersecurity Coordinator Michael Daniel, Commerce Department Deputy Secretary Rebecca Blank, Department of Homeland Security Deputy Secretary Jane Holl Lute and National Security Agency Director Gen. Keith Alexander may participate in Wednesday’s briefing.   

Pirates Seize Oil Tanker in Ivory Coast

From Voice of America:

Armed men have hijacked a tanker carrying 5,000 tons of oil from a port in Ivory Coast. [...]

A total of five incidents were reported off Ivory Coast in 2012, up from one the previous year. In October, suspected Nigerian pirates seized a tanker carrying more than 30,000 tons of gasoline off the coast of Abidjan, the first reported hijacking in the country.

 

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