The online property market, which began as a natural extension of the offline auction rooms, has concentrated on listing assets and the data needed to evaluate their worth. By the end of the 1990s, use of the available sites had shortened the discovery phase of the acquisition and divestiture (A&D) process considerably, and the industry is beginning to realize that web-based tools may also accelerate the evaluation phase (see related story, p. 18).
As the benefits of reduced costs and time become more evident, the whole A&D process is beginning to take significantly less time, with the evaluation phase, in particular, becoming shorter as companies focus on providing more efficient and effective online evaluation sites.
Online property sites can enhance such key oil-company procedures as managing assets, releasing the hidden value of proven reserves, and finding lost production.
The online property market is evolving from a fast, inexpensive tool for buying and selling assets to a resource for changing the way oil companies carry out their day-to-day business and manage their portfolios. BP provides a good example of one such company.
BP assets.com initiative
When BP initially looked into developing online capabilities in the A&D area in 2000, its focus was on creating a toolset that would significantly enhance the capabilities of the BP user community-building their competency fast and creating a place where A&D users could reach a broader market.
As a company, BP has a significant history in the use of electronic media to market upstream assets, having been involved for over 2 years with the UKLift program initiated by the UK Department of Trade and Industry.
Since then, BP has analyzed in some detail how it could best make use of internet-based tools to support its ongoing A&D activity. The result was "BP assets.com," which is powered by IndigoPool.
This initiative, while extending online A&D into the emerging territory of the private marketplace, provides an excellent example of the ongoing transition of upstream A&D.
Vision driven
BP's vision for BP assets.com is based upon three key development phases:
- In the short term, BP wanted to realize immediate efficiencies and drive transactions, releasing value from assets transacted over the site and from increased productivity in the A&D user groups.
- In the medium term, additional value accrued through developing a portfolio management capability around noncore assets in tandem with the VirtualProspect initiative, which is discussed later.
- In the long term, the big prize will be the integration of data management and portfolio management capabilities, giving the company the capacity to fully optimize its asset portfolio, acquiring and divesting assets where necessary, quickly and efficiently.
According to the project development team, Jeremy Huck, James Royal, and Bill House, BP aimed to be at the "front end of the adoption curve," calculating that this would give the company "a shot at capturing future value in the markets." Getting into the market and building a capability early would leave the company much better positioned to influence future developments and to become an astute user and acquirer of future technologies.
Analysis of current market trends and the capabilities of online marketplaces drove the short-term focus on immediate efficiencies, at least in part. BP's observation (through the UKLift initiative) of the tangible benefits to be gained was another driver.
BP's focus on shortening the discovery phase and elements of the evaluation phase within the A&D process model certainly falls within the first stage of Accenture's transition model.
In addition, the medium-term focus on developing a portfolio management capability around non-core assets is closely aligned to another initiative BP is undertaking with IndigoPool-VirtualProspect.
Identifying a portion of its asset portfolio as essentially dormant, BP searched for a way to release this legacy investment and value, which, due to the size and nature of the assets, BP itself was unable to do economically.
VirtualProspect allows BP to list its noncore assets and invite external interpretation teams to evaluate and develop them. Using noncore assets to test new and innovative solutions for releasing value from the evaluation phase of the process chain will most likely become a common practice for most industry majors.
The long-term focus on an integrated portfolio and data-management solution represents the "Holy Grail" for oil companies. BP's view required its solution partner to have both an existing offline and online network to create a high-end, high-complexity capability able to deal with the largest asset transactions.
In addition, the association with GeoQuest, Landmark, and other evaluation software providers gives BP the potential to integrate application service provider-based applications to extend the functionality at some point in the future.
Having BP assets.com enables BP to now market its properties in a number of ways:
- It can go to market in the traditional offline manner, using its network of industry contacts and preferred buyers.
- It can list a property internally on the website and thereby push, through IndigoPool, to a wider audience.
- It can use any of the other platforms in the market such as PetroleumPlace Inc., Denver.
The intent is to ensure that BP assets.com is the best competitive solution. As such, it has to be the right solution for the A&D users, demonstrated by demand from the business to use this platform in preference to any others.
The project team believes that success will be apparent by midyear, at which time the solution will have been put through the business units.
