E-commerce could revolutionize oil industry

The new business-to-business (B2B) wave of computerized electronic-commerce technology is probably generating equal amounts of "buzz and biz," but there is still substantial beef behind the hyperbole, said a panel of energy experts at a recent 2-day industry conference in Houston.

Some vendors view e-commerce as the 21st Century version of the partnership and alliance programs that producers previously used to push down prices of goods and services, said Neal McAtee, an industry analyst with Morgan Keegan Co.

Some in the oil field service segment will remain skeptical unless convinced that electronic B2B marketing can benefit them, too, he told industry representatives at the meeting, sponsored by Landmark Graphics Corp.

But in time, energy e-commerce may prove a key step in the eventual evolution of "E-fields," said Wolfgang Schollnberger, vice-president of reservoir technology at BP Amoco PLC. He envisions future oil and gas fields developed through "smart" wells, with downhole electronics that not only measure and react to geological conditions but also adjust to business situations through online connections to commodity markets.

The internet also may prove valuable in overcoming what Matthew R. Simmons, president of Simmons & Co. International, sees as the biggest problem facing the industry: its loss of skilled workers around the world. The industry can stretch its skilled workforce through a global internet network that allows experts in various areas to share their knowledge. Companies can even go outside the industry by posting programs or problems on the internet and soliciting input.

Energy companies could assign work to such outside consultants "on a task basis," said Harry Quarls, senior vice-president of global energy operations at Booz Allen & Hamilton Inc.

The personnel benefits could far surpass any advantages that the industry could achieve from online procurement, Simmons said.

Certainly, e-commerce will increase competition by lowering entry barriers to small entrepreneurs, the panel of experts agreed. But that also presents the problem of identifying the parties with whom one is dealing over the internet, to determine whether buyers or sellers are qualified to follow through as promised.

Meanwhile, there are other obstacles that B2B marketing systems must overcome.

"There is no such thing as a standard well," Simmons said. While internet shopping may suffice for minor rope, dope, and soap items, he said, many industry officials "will never be comfortable not having a human component at some point" in the purchase of major equipment items.

And on top of all that, panelists said, is the real possibility of the emergence of some yet-unknown factors that could disrupt present perceptions of the energy industry's future.

One such disruption may be the extra demand for electricity to operate the escalating number of computers used by energy and other industries, in a world that may already be hard-pressed to build-and fuel-enough new power generators to meet current energy projections. "If the gas industry can't meet that extra demand for fuel, that could limit the use of the internet," Simmons said.