Colonial Pipeline outage highlights need for energy systems to be more cyber resilient: IEA

The outage of a critical US oil pipeline from a cyberattack underscores the need for energy infrastructure to become "more cyber resilient," with digitalization and automation of energy systems increasing the scope for such attacks, the International Energy Agency said May 11.

The Colonial Pipeline, which has been shut since May 7, is expected to be fully back online by the end of the week, with a phased-in restart process taking place.

Colonial had halted all pipeline operations May 7 because of a ransomware attack. The halt restricted flows of gasoline and other refined products for much of the US South and East Coast, preventing the pipeline from delivering more than 100 million gallons a day of fuel and heating oil.

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IEA oil analyst Kristine Petrosyan said this incident highlights the "growing range of risks to energy supply," and said this closure could potentially be "more significant" to the oil market than the one-week Suez Canal shutdown that took place in March after a large container vessel ran aground.

"The [Colonial] pipeline supplies 40-45% of the fuel consumed in the eastern United States, a region with little oil production of its own, a small and declining refining sector, and gasoline inventories covering just 20 days of demand," she said.

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The IEA urged policymakers, regulators, and industry to address these potential hazards, which are set to grow as the shift to cleaner energy will be accompanied by an expansion of connected devices and digitalized smart networks.

Petrosyan said the world's energy systems have to become more cyber resilient "to withstand, adapt to, and rapidly recover from incidents and attacks while preserving the continuity of critical infrastructure operations."

The IEA had previously said that electricity grids, given their lack of storage, were the most vulnerable to intentional disruptions, but this incident underscores the broader scope of these threats, it added.

S&P Global Platts Analytics said the closure will have a ripple effect on gasoline, diesel, and clean tanker freight rates despite this being a potentially short-term event.

"European gasoline is a winner. More imports to New York in a relative[ly] short-haul trip. Clean freight gets bid," Platts Analytics said in a note. "Depending on the duration of the outage, we think there's [a] risk of some containment of product in the US Gulf Coast for gasoline and diesel."

The key refined products artery stretches more than 5,500 miles from the Houston refining hub to New York Harbor, supplying about 45% of all the gasoline and diesel fuel consumed on the East Coast.