Profit From This Overlooked but Essential Oil Industry Service

Technology is becoming increasingly important in the world of oil and gas exploration and production.

May 19, 2014 at 11:50AM

When someone mentions the oil and gas industry, images of oil rigs, tankers, and dirty, heavy industrial equipment  are the first things that come to mind. The last thing that comes to mind? Hackers.

The threat of cyber-attacks is now a very real prospect in the world of oil and gas, and this highlights how much the industry has changed over the past few years.

Indeed, the industry now faces a high level of risk from brute force and malware attacks on networks due to the highly confidential and proprietary information these systems possess.

Growing threat
In the last year alone, malware and botnet infiltration attacks affected 61% of energy companies and many believe that this threat is only going to grow.

The threat of cyber-attacks and need for cyber security have now grown so large that on June 16, a two-day event will take place in Houston devoted to cyber security for the oil and gas industry. Presenters include cyber security leaders Fortinet Inc (NASDAQ:FTNT) and Level 3 Communications, Inc.(NYSE:LVLT).

Although the company will not be at the conference, BAE Systems PLC (NASDAQOTH:BAESY) also has its own division devoted to cyber risk and security within the oil and gas industry.

There is no doubt that the business of protecting the digital secrets of oil and gas majors is already big business, and lucrative as well, but it would seem as if this business is only going to get bigger and more lucrative as the search for oil and gas goes further than ever before.

Digital oil field
The digital oil field is a revolution in the world of oil and gas. The digital field, as it's known, allows oil and gas majors to collect and collate huge amounts of survey data from projects all around the world. Data and analysis allow these companies to achieve the best returns from their investments, develop the most effective wells, and centralize their operations.

Oil exploration companies use data to analyze the Earth's crust thousands of feet below the surface as they build digital maps of likely oil reserves. Additionally, they can then use data to model flow rates, pressures, processing, and storage solutions once they complete the wells. Thousands of scenarios can be played out to achieve the best results, and data sharing and modeling are key to this process.

However, it's not just well development that benefits from big data. Major oil companies have hundreds of refineries and processing facilities around the world. To reduce the risk of human error, the companies have automated them to some extent and the risks to these systems from hackers as well as malware are huge. So it all has to be protected.

You only need to look at the size of these projects to realize how much money there is in this business.

When big oil and gas projects go wrong, they cost billions to put right. Thus, big oil is willing to spend spend spend to get the best data and secure systems to avoid even bigger financial penalties.

Data-security companies like Fortinet, Level 3 Communications, and BAE Systems PLC will play ever-increasing roles in protecting the industry from this threat.

Level 3 recently announced an agreement with Axion energy, one of the major energy companies in Argentina, to supply Axion with data-communications capabilities to connect the company's headquarters to subsidiaries, distribution centers, production refineries, and data centers in Argentina, Uruguay, and Paraguay.

As a perfect example of how essential these services are, Axion commented:

Due to its extensive market operations, Axion energy requires the ability to unify its communications systems and applications across more than 23 diverse regional locations...

More importantly, however, Axion needs to do this securely.

Foolish summary
Data security and processing are now becoming essential parts of the oil and gas industry. This trend is only likely to grow over the next few years and decades as technology becomes essential in extending the lives and recovery rates of oil fields around the world.

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Rupert Hargreaves owns shares of Chevron. The Motley Fool recommends Chevron. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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