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Exxon, Shell Said to Have Been Hacked Via Chinese Servers

By Michael Riley – Feb 24, 2011 8:26 AM GMT

Computer hackers working through Internet servers in China broke into and stole proprietary information from the networks of six U.S. and European energy companies, including Exxon Mobil Corp., Royal Dutch Shell Plc and BP Plc, according to one of the companies and investigators who declined to be identified.

McAfee Inc., a cyber-security firm, reported Feb. 10 that such attacks had resulted in the loss of “project-financing information with regard to oil and gas field bids and operations.” In its report, Santa Clara, California-based McAfee, assisted by other cyber-security firms, didn’t identify the energy companies targeted. The attacks, which it dubbed “Night Dragon,” originated “primarily in China” and occurred during the past three years.

The list of companies hit, none of which disclosed the attacks in filings with regulators, also includes Marathon Oil Corp., ConocoPhillips and Baker Hughes Inc., according to the people who worked on or are familiar with the companies’ investigations and asked not to be identified because of the confidential nature of the matter.

Chinese hackers broke into the computer network of Baker Hughes, said Gary Flaharty, spokesman for the Houston-based provider of advanced drilling technology. Baker Hughes concluded the incident didn’t need to be disclosed because it wasn’t material to investors, he said, declining to comment further.

Undetected Access

In some of the cases, hackers had undetected access to company networks for more than a year, said Greg Hoglund, chief executive officer of Sacramento, California-based HBGary Inc., a cyber-security company that investigated some of the security breaches at oil companies. Hoglund, who was cited by McAfee as a contributor to its report, declined to identify his clients.

“Legal information, information on deals and financial information are all things that appear to be getting targeted,” Hoglund said, summing up conclusions his firm made from the types of documents and persons targeted by the hackers. “This is straight up industrial espionage.”

Hackers targeted computerized topographical maps worth “millions of dollars” that show locations of potential oil reserves, said Ed Skoudis, whose company, Washington-based InGuardians Inc., investigated two recent breaches of U.S. oil companies’ networks. He declined to name his clients or the origin of the hackers.

‘Unsophisticated’ Techniques

The McAfee report described the techniques used to get into the energy company computers as “unsophisticated” and commonly used by Chinese hackers. The attacks began in November 2009, McAfee said. Two cyber investigators familiar with the probes said the attacks began even earlier — in 2008 — and involved several well-financed groups. The investigators asked not to be identified because the company investigations are private.

McAfee based the report on information gathered from its own work on the breaches and from others who were directly involved in investigating them. The report, produced on the condition that the affected companies not be identified, was done to “educate the community,” said Ian Bain, a McAfee spokesman.

The thefts of oil company data like those in the McAfee report match the profile of industrial espionage operations that have the backing or consent of the Chinese government, said Joel Brenner, former head of U.S. counterintelligence during the Bush and Obama administrations and now a lawyer with Cooley LLP in Washington. In his former post, one of Brenner’s jobs was tracking spying efforts against U.S. companies from foreign countries.

‘On the Hunt’

“The Chinese are on the hunt for natural resources to fuel this massive economic leap forward,” Brenner said.

Ma Zhaoxu, spokesman for China’s Ministry of Foreign Affairs, said he had no information about the attacks on the oil companies when asked about the issue at a regular briefing today.

“The Chinese government opposes hacking activities,” Ma said. “China falls victim to hacking itself. We will step up efforts to crack down on hacking crimes.”

The thefts might trigger legal liability for companies that chose not to disclose them to investors, said Blair Nicholas, a San Diego-based partner at law firm Bernstein Litowitz Berger and Grossman.

“To the extent that there aren’t adequate procedures in place to protect the companies’ crown jewels and somebody gets the key to jewelry box, there is certainly potential for shareholder derivative liability,” Nicholas said.

Securities Laws

Investors might also argue they had a right under U.S. securities laws to be informed of the thefts, which a judge might construe as a “material” fact that should have been disclosed, Nicholas said.

John Roper, a spokesman for Houston-based ConocoPhillips; Lee Warren, a Marathon Oil spokeswoman at its Houston headquarters, and Alan Jeffers, a spokesman for Irving, Texas- based Exxon, said in e-mail messages that their companies don’t comment on security-related issues. David Nicholas, a spokesman for London-based BP, and Kim Blomley, a spokesman in London for Shell, which is based in The Hague, declined to comment.

Jenny Shearer, an FBI spokeswoman in Washington, said she couldn’t comment on whether the agency was investigating the attacks. Laura Sweeney, a Justice Department spokeswoman, said the department can’t comment on a possible investigation.

Hacker Activists

Some aspects of the attacks were disclosed in internal e- mails made public after a February security breach at HBGary. The e-mails were stolen from HBGary’s computer network by the group of hacker activists called Anonymous, which posted them on the Internet.

“I’ve been able to confirm that the same attackers are conducting coordinated IP thefts against Baker Hughes and Shell Oil, going after bid data and operational reporting, as well as projects/plans and related financial information,” according to an e-mail written on Jan. 13 by an independent security consultant working on the cases.

“I reached out to some friends at Conoco and Exxon and they also experienced similar breaches,” the consultant wrote in the e-mail. “This is of course client confidential,” he added under the subject line “coordinated Chinese attacks on oil companies.”

In a separate e-mail, an HBGary investigator discussed the analysis of malware designed to steal data in the computers of a drilling rig working on a ConocoPhillips project.

Marc Zwillinger, an attorney representing HBGary, declined to comment on the e-mails’ content.

‘Stolen E-Mails’

“Those are stolen e-mails and they contain confidential information relating to clients,” Zwillinger said.

The McAfee report, which cites several attacks connected to the Chinese hacking underground, doesn’t link the “Night Dragon” attack directly to the Chinese government.

Analysts who assessed the attacks on energy companies said the source of the breaches was easier to pinpoint than in previous hits by Chinese hackers, including an attack against Google Inc. that that company disclosed in January 2010.

The hackers used tools prevalent in China’s underground hacking forums, the McAfee report said, and they appeared to work from 9 a.m. to 5 p.m., Beijing time. McAfee traced the hackers’ command-and-control operations to servers operated by a company in China’s Heze City in Shandong province.

The owner of the company, Song Zhiyue, said he wasn’t aware of any hacking taking place from his servers and that he always seeks to verify the activities of customers who rent server space from him.

“There are so many servers in the world,” Song said. “This has nothing to do with me. This is very unfair.”

To contact the reporter on this story: Michael Riley in Washington at [email protected]

To contact the editor responsible for this story: John Pickering at [email protected]

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