Energy companies in the Middle East, the most vulnerable region to cyber-attacks, are underspending on cyber security even after the Arabian Gulf took a $1 billion hit last year from incidents against the sector, according to a new report.
The region’s oil and gas companies are spending just a third of their cyber security budget on securing operational technology (OT) and are unprepared to deal with the risk, according to a study by Germany's Siemens and the Ponemon Institute released on Tuesday. OT refers to hardware and software deployed across the value chain of industries that have become increasingly digitalised in the oil and gas sector. Three in four of these companies were hit with at least one security attack that either disrupted operations or led to the loss of confidential information in the last 12 months.
"The reality is that the sector in general is not keeping up with the threat," Leo Simonovich, vice president and global head of industrial cyber at Siemens, told The National. "While there's awareness, there's a gap between risk, readiness and the strategy to close the gap."
The Middle east suffers the most from cyber-attacks globally, with half of these directed at its critical oil and gas industry, according to a 2016 PwC study. The region, which accounts for 35 per cent of global oil production, has seen widespread cyber security breaches and many are frequently undetected. One of the most prominent cases was the Shamoon virus attack on Saudi Aramco systems in 2012, which wiped hard drives clean at some 30,000 computers. Last June, a $20 billion petrochemical project joint venture between the world's top oil producer Aramco and Dow Chemicals of the US experienced a spate of hacking attacks.
The financial fallout from cyber-attacks in the Arabian Gulf last year is estimated at more than $1 billion, the report showed. Among the companies surveyed, 11 per cent reported experiencing more than 10 cyber breaches in their OT in the last 12 months, a rate nearly three times the global average.
The study surveyed 176 professionals including heads of industrial control systems, process engineering heads, OT security leaders and IT security heads in the Mideast’s oil and gas industry.
Given the region’s dominance in the energy sector, cyber attacks on upstream and downstream facilities could have wide-ranging implications on global energy markets. In the particular case of Saudi Arabia, whose biggest petrochemicals firm Sabic is also the largest listed firm in the Middle East, there are also possible implications for regional stock markets.
“There’s a real under-investment in industries compared to the risk,” Mr Simonovich told reporters in Dubai. “Industrial cyber is the new risk frontier.”
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The Middle East energy companies’ spending on OT security is at par or slightly below the global average spend of 25 to 30 per cent of the cyber security budget, Mr Simonovich said. The study found that 30 per cent of the region’s attacks are targeting OT.
Ideally companies should spend at least half their cyber security expenditure on OT systems, an area where there's more work to be done compared to the mature field of IT, Eitan Goldstein, Siemen's director of industrial cyber and digital security, told The National.
The Gulf’s energy industry has weathered rough years following the oil price slump, which slowed investment across the hydrocarbons value chain globally. Cyber analysts say that investments in safer solutions do not have to break the bank.
The spate of cyber attacks on critical energy infrastructure in the region has "raised the focus and attention on issues related to cyber security and has made it more real," Husain Al Bustan, team leader of information technology at state downstream operator Kuwait National Petroleum Company, said during a panel on cybersecurity in Dubai on Tuesday.
Regulatory bodies in the Gulf are "working hard" to establish controls to maintain cyber safety measures on power grids, without which company licenses will not be renewed, Mir Dawar Ali, IT director for Saudi Arabia's Acwa Power, said at the panel.
Mercer, the investment consulting arm of US services company Marsh & McLennan, expects its wealth division to at least double its assets under management (AUM) in the Middle East as wealth in the region continues to grow despite economic headwinds, a company official said.
Mercer Wealth, which globally has $160 billion in AUM, plans to boost its AUM in the region to $2-$3bn in the next 2-3 years from the present $1bn, said Yasir AbuShaban, a Dubai-based principal with Mercer Wealth.
“Within the next two to three years, we are looking at reaching $2 to $3 billion as a conservative estimate and we do see an opportunity to do so,” said Mr AbuShaban.
Mercer does not directly make investments, but allocates clients’ money they have discretion to, to professional asset managers. They also provide advice to clients.
“We have buying power. We can negotiate on their (client’s) behalf with asset managers to provide them lower fees than they otherwise would have to get on their own,” he added.
Mercer Wealth’s clients include sovereign wealth funds, family offices, and insurance companies among others.
From its office in Dubai, Mercer also looks after Africa, India and Turkey, where they also see opportunity for growth.
Wealth creation in Middle East and Africa (MEA) grew 8.5 per cent to $8.1 trillion last year from $7.5tn in 2015, higher than last year’s global average of 6 per cent and the second-highest growth in a region after Asia-Pacific which grew 9.9 per cent, according to consultancy Boston Consulting Group (BCG). In the region, where wealth grew just 1.9 per cent in 2015 compared with 2014, a pickup in oil prices has helped in wealth generation.
BCG is forecasting MEA wealth will rise to $12tn by 2021, growing at an annual average of 8 per cent.
Drivers of wealth generation in the region will be split evenly between new wealth creation and growth of performance of existing assets, according to BCG.
Another general trend in the region is clients’ looking for a comprehensive approach to investing, according to Mr AbuShaban.
“Institutional investors or some of the families are seeing a slowdown in the available capital they have to invest and in that sense they are looking at optimizing the way they manage their portfolios and making sure they are not investing haphazardly and different parts of their investment are working together,” said Mr AbuShaban.
Some clients also have a higher appetite for risk, given the low interest-rate environment that does not provide enough yield for some institutional investors. These clients are keen to invest in illiquid assets, such as private equity and infrastructure.
“What we have seen is a desire for higher returns in what has been a low-return environment specifically in various fixed income or bonds,” he said.
“In this environment, we have seen a de facto increase in the risk that clients are taking in things like illiquid investments, private equity investments, infrastructure and private debt, those kind of investments were higher illiquidity results in incrementally higher returns.”
The Abu Dhabi Investment Authority, one of the largest sovereign wealth funds, said in its 2016 report that has gradually increased its exposure in direct private equity and private credit transactions, mainly in Asian markets and especially in China and India. The authority’s private equity department focused on structured equities owing to “their defensive characteristics.”
The specs: 2018 Harley-Davidson Fat Boy
Price, base / as tested Dh97,600
Engine 1,745cc Milwaukee-Eight v-twin engine
Transmission Six-speed gearbox
Power 78hp @ 5,250rpm
Torque 145Nm @ 3,000rpm
Fuel economy, combined 5.0L / 100km (estimate)
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Herbie Kane
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Luis Longstaff
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Yasser Larouci
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The White Lotus: Season three
Creator: Mike White
Starring: Walton Goggins, Jason Isaacs, Natasha Rothwell
Rating: 4.5/5
LIGUE 1 FIXTURES
All times UAE ( 4 GMT)
Friday
Nice v Angers (9pm)
Lille v Monaco (10.45pm)
Saturday
Montpellier v Paris Saint-Germain (7pm)
Bordeaux v Guingamp (10pm)
Caen v Amiens (10pm)
Lyon v Dijon (10pm)
Metz v Troyes (10pm)
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Saint-Etienne v Rennes (5pm)
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