Already competing for capital with the "dot-com and e-everything" internet companies that are the new darlings of Wall Street, energy companies soon may be vying for customers against new competitors with little or no experience in the energy industry, experts predicted.
"The energy industry is behind the e-business learning curve, which makes you a target," warned Richard H. Brown, chairman and CEO of EDS Corp., in the opening speech at Cambridge Energy Research Associates' CERAWeek conference in Houston last month.
The internet is empowering customers by "putting $1 trillion of network technology in the hands of anyone with a personal computer and a phone line," Brown said. "If they don't like what you have to offer at a price that they want to pay, they're gone in a minute."
The internet provides more value creation at greater speed than ever before, says Pat Herbert, chairman and CEO of Geonet Energy Services. That means the energy industry players of tomorrow may look more like the giant retailers of other industries today, such as WalMart and CocaCola, he said.
Computerized access to customers is the "new prize" for the energy industry, said CERA officials in an analysis unveiled at the conference.
"It is access to the customer that will increasingly dominate across all industries. For energy companies, this shift in focus from commodity to customer will require them to create new service and technology-oriented organizations," said Joseph Stanislaw, CERA president.
"The flow of energy is already becoming more seamless, with new e-business distribution channels that will accelerate the trend away from a business that delivers products into one that provides a service," Stanislaw said. "Energy companies that fail to recognize this shift, as well as the implications of globality or the drive for sustainable development, will be left on the sidelines permanently, or out of business completely, as other industries step in to meet customer needs in new ways."
Still, the attitude of many in the industry was summarized by Paul M. Anderson, managing director and CEO of Broken Hill Pty. Co. Ltd., who said in one session: "We don't have an e-strategy any more than we had a fax strategy when the fax machine first came out. We use it as a tool. We haven't defined our strategy around the tool."
Oil companies react
Oil and gas producers of any size face increased competition for capital as investors scramble for immediate returns from "fast-buck dot-com" companies, said Robert J. Allison, chairman and CEO of Anadarko Petroleum Corp. But the emergence of supermajors will leave a lot of smaller plays for independents, he says.
Oil companies need to substitute computer "clicks" for asset "bricks"-shifting to the "soft assets" of a knowledgeable work force from the previous "hard assets" of process units, pipe- lines, and other infrastructure, said Archie W. Dunham, chairman and CEO of Conoco Inc.
Euan Baird, chairman and CEO of Schlumberger Ltd., said the new information technology could reestablish credibility among investors for a high-risk energy industry buffeted by large price swings. More-accurate estimates of oil production and consumption may dampen those price swings, he says, as computerized reservoir simulators become decision-making tools rather than mere scorekeepers.
In the future, more refining capacity will be owned by "merchant refiners" and state oil companies looking to secure markets, said Paul D. Skinner, a managing director of Royal Dutch/ Shell. Marketers must offer more than commodities-they must provide differentiated products and services to both retail and commercial customers, Skinner says.
