War with Iraq, threat of terrorist attacks, and anti-American sentiments coupled with a weak US dollar have prompted US oil and gas management teams to reconsider the costs and risks of world travel for employees.
For years, the industry has found new ways to accomplish its chores via remote control. This practice allows companies to conduct business as normal despite various obstacles, including security concerns.
Remotely operated vehicles and other robotics are common. Smart wells allow operators to monitor and control real-time flow via downhole tools and sensors.
SCADA (supervisory control and data acquisition) systems provide automated operating procedures for oil field production, pipelines, gas gathering systems, refineries, and the electric power industry.
Web-based tools are the backbone for operational centers from which companies can monitor and control remote exploration and production activity. Consortium partners in separate, far-flung offices also use electronic hubs for collaborative planning and data analysis.
During the last few years, the industry has started moving toward using internet-based auctions and virtual data rooms for property acquisitions and divestitures. People no longer must travel to buy or sell prospects or producing properties.
Online data rooms
For instance, Petroleos Mexicanos is using electronic data rooms to draw operators from outside Mexico to exploration and development opportunities in the Burgos basin under emerging multiple service contracts (OGJ Online, Mar. 18, 2003).
IndigoPool, a Schlumberger Ltd. company, is hosting the electronic data rooms for Pemex. The practice is expected to become more common in the future.
"So many governments struggle with how to bring in foreign interests. I would hope that more governments see this as a powerful means to drive interest in their licensing rounds," said Jeremy Walker, IndigoPool president.
Devon Energy Corp., Oklahoma City, used an online data room to divest its Indonesian holdings in East Java, North Sumatra, and Western Papua. PetroChina Ltd. bought the properties after viewing the data remotely (OGJ, Apr. 29, 2002, p. 37).
"The Chinese never visited Jakarta until it was time to sign the deal," Walker said. "In effect, having the data room online helped all players. It allowed the buyers to screen against their own criteria. For the seller, it encouraged buyers to be as informed as possible early in the process."
Due diligence
"The internet has expedited the due diligence process," said William W. Britain, president and CEO of the Amarillo, Tex.-based EnergyNet, which offers more than 95,000 online pages of due diligence material on properties it is selling or has sold.
A property marketplace for US properties and prospects, EnergyNet had completed $36 million in sales involving 4,295 properties as of Jan. 1, 2003, compared with $4.7 million in sales involving 685 properties as of January 2001.
"People don't want to travel, and transaction costs can be drastically reduced this way. Companies apply their savings in travel and lost productivity to actually purchasing properties," said Britain. "Plus, the seller doesn't have to lug around all that material."
Changing work styles
Reality has set in following the meltdown of the electronic-commerce and technology craze from about 3 years ago, said Bill Marko, chief operating officer of Oil & Gas Journal Exchange-Madison Advisors.
"There is a three-part test that we apply to the internet: Does it save time? Does it save expenses? Does it create value?
"Will you get more value from something by doing it over the internet rather than physically? I think we have found that we pick and choose our applications of it," Marko said.
He noted that traditional physical data rooms still remain the most popular venue for negotiated sales of US producing properties.
"The internet just doesn't have the interaction that oil and gas people like. People still enjoy relationships," Marko said. For instance, the US Mineral Management Service lease sales in New Orleans are popular as both business opportunities and networking occasions.
Yet, the internet still "has some great applications," Marko said. For instance, Oil & Gas Journal Exchange-Madison Advisors conducted an online royalty sale in California worth more than $10 million.
Meanwhile, the way the industry does its A&D business within the US is evolving. As veteran executives and A&D professionals retire, they are being replaced by a younger generation more accustomed to using the internet for daily chores.
Currently, Marko sees the biggest A&D uses of the internet reserved for selling prospects and for international property transactions.
"These days, it helps to not have people traveling because everybody has pulled in their horns for security reasons," Marko said.