Colonial restarts after cyber attack but fuel shortages to linger

New York

THE largest petrol pipeline in the US is returning to service following a cyber attack that took the fuel artery offline for five days, offering hope that fuel shortages in several states will soon come to an end.

Colonial Pipeline Co, operator of a conduit that handles more fuel than Germany consumes, said it began to resume shipments around 5 pm Eastern time on Wednesday. In a further effort to provide relief, the Biden administration temporarily waived century-old shipping restrictions to allow one company's foreign tankers to take fuel to areas with shortages.

US Energy Secretary Jennifer Granholm said on Tuesday that it would take days to fully restore supplies after the pipeline's restart, while Colonial indicated that it will get its physical operations up and running ahead of its business systems. Using foreign-flagged tankers may help in the relief effort, but the sailing time alone for a ship to take fuel from Houston to New York would take six or seven days.

"Resumption of flows is the start, but the race to logistically replenish retail petrol stations is the next step," said Michael Tran, an analyst at RBC Capital Markets. "The restarting of the Colonial pipeline is the beginning of the end of the crisis, not the end."

The developments came as petrol stations were running dry from Florida to Virginia after Colonial was forced to take systems offline on May 7. In parts of the US South, three in every four petrol stations had no fuel as of Wednesday, while in Washington, DC, cars were lining up for blocks as they waited to fill up.

Optimism that the situation will start returning to normal sent benchmark petrol futures down as much as 1.6 per cent, after pump prices soared above US$3 a gallon for the first time in six years.

The White House said Colonial's announcement "means there's an end in sight for the supply disruptions". President Joe Biden is also urging Americans "to just purchase what they need, and not hoard fuel, as supply is restored", press secretary Jen Psaki said in a statement Thursday.

The administration temporarily issued a waiver to the 101-year-old Jones Act for one unidentified company. The act stipulates that goods transported between US ports be carried on ships built in the US and crewed by American workers. Waiving the requirements could allow foreign-flagged tankers to help fill the supply gap left by the interruption to the pipeline.

Earlier this week, the White House announced several other measures to blunt the crisis, including waiving some petrol requirements and empowering 10 states to allow heavier-than-normal truck loads of fuels.

Despite the improved outlook, the disruption underscores just how vulnerable America's fuel supply system has become in the wake of increased attacks on energy infrastructure by hackers over the past few years. Colonial is only the latest example of critical infrastructure being targeted by ransomware. Hackers are increasingly trying to infiltrate essential services such as electric grids and hospitals.

The attack on Colonial also came just as the nation's energy industry is preparing for summer travel and as fuel demand rebounds from pandemic-related lockdowns. It was reminiscent of a 2018 cyber attack that brought down a third-party communications system used by several natural gas pipeline operators across the US.

Colonial normally ships about 2.5 million barrels each day, an amount that exceeds the entire oil consumption of Germany. It warned that the line may go down again from time to time during the restart process.

In a separate bulletin to its shippers, it said the company was physically starting operations before its business systems - which process nominations for space on the pipeline and schedule them - are back up and running. As a result, Colonial will be using schedules that were set five days ago until its systems are back in service, the notice shows.

As the pipeline resumes, the states suffering from the most acute shortages may start to feel relief this weekend.

In North Carolina, some fuel supply should appear right away, said Gary Harris, executive director of the North Carolina Petroleum & Convenience Marketers, a trade association.

Major branded stations will get fuel first as they are under contract with suppliers, said Mr Harris. Fuel may still be scarce for independent stations that are not under contract.

Royal Dutch Shell said it was pursuing alternative supply points, where possible, and working in close coordination with wholesalers to address supply and logistical challenges.

In Virginia, consumers should be able to see a difference by Monday, said Michael O'Connor, president of the Virginia Petroleum & Convenience Marketers Association.

This isn't the first time Colonial has been forced to shut down. In 2016, an explosion kept the system offline for days, raising petrol prices and forcing the New York Harbor market to become more dependent on imports of fuel from overseas.

The Federal Bureau of Investigation attributed the attack on Colonial to ransomware created by a group called DarkSide. Some evidence emerged linking DarkSide to Russia or elsewhere in Eastern Europe. BLOOMBERG

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