Oil industry moves toward next phase of e-business development

After a virtual onslaught of business-to-business electronic-commerce site launchings, the oil and gas industry has entered a period of evaluation and consolidation. Industry trends�such as the movement toward the creation and use of industry hubs, whether for e-commerce or information exchange�are likely to continue. Also, initial public offerings of internet companies will probably become a more-scarce occurrence, while consolidations among existing entities are expected to increase.


Steven Poruban
Oil & Gas Journal

OFFSHORE TECHNOLOGY CONFERENCE, HOUSTON�After a virtual onslaught of business-to-business (B2B) electronic-commerce site launchings, the oil and gas industry has entered a period of evaluation and consolidation. Industry trends�such as the movement toward the creation and use of industry hubs, whether for e-commerce or information exchange�are likely to continue. Also, initial public offerings of internet companies will probably become a more-scarce occurrence, while consolidations among existing entities are expected to increase.

These were some of the major trends discussed by an e-commerce panel at the Offshore Technology Conference in Houston Monday.

Emerging trends
What is occurring in the e-commerce environment goes beyond just a change in processes and the creation of new business models, said Stuard Detmer, industry consultant with Proxicom, a B2B e-commerce consulting firm. What has occurred is a major cultural shift.

�It�s changing the whole mindset away from the linear, supply-chain kind of thinking to a more network-based kind of model, where the customer is at the center, and all the players in the economic model are connected,� he said.

Detmer would expect to see an increase in consolidations as time goes on, because he views mass as a sign of strength in the rapidly changing e-commerce world. These consolidations will occur within the oil and gas sector through the amalgamation of many of the newly announced procurement hubs, Detmer predicts. �One of the salient factors of these kinds of markets is that the value of the market increases�exponentially with the number of players in the network, so you have to have critical mass in order to make things like this work.

�There�s a big cultural thing to overcome [through these consolidations],� he says, �because, in many cases, those players are just not used to cooperating on that kind of level.�

E-commerce stages
The oil and gas industry will continue to move through the evolutionary stages of e-commerce, says Thierry Pilenko, president of Schlumberger's GeoQuest division.

The first phase, e-procurement, is focused on reducing transactional costs. The next level, the services level, is more complex, he said. Once this level is reached, the key to success lies in understanding the process of how the service will be applied, sayd Pilenko. Within this level, the focus is on operations, access to best practices, issues related to remote access, and management of work flow.

A third level, which Pilenko refers to as "collaborative commerce," or c-commerce, is based on a collaborative design model that focuses on engineering and knowledge-sharing. When this level is reached, the boundaries between companies become more blurred and �everything you do is absolutely global,� he said.

Pilenko forecasts that companies� revenues from e-commerce will grow 71%/year over the next 5 years.

Next step
Bob Peebler, CEO and Pres. of Landmark Graphics Corp., a subsidiary of Halliburton Co., believes the oil and gas industry is entering into the last phases of the information age.

�This whole e-thing is just the next logical step in the information age. We�ve spent about two thirds of the information age era building infrastructure. In fact, we�re still completing the last big step in this infrastructure-creation phase through the process of increasing bandwidth capabilities,� he said.

What is vital when viewing the new economy being formed, said Peebler, is looking at it through two completely different sets of lenses and not confusing the views. The first lens�the �investment� lens�is what one looks through to view how to make money, even in the short term. The other lens is the �running the company� lens, through which a more closer look is taken at creating value and making gains over a longer period.

�I would like to raise a flag of caution that I hear a lot of people talking about that we have to spend $125 billion [and saying] we�re going to have two thirds of that spending going through these e-commerce sites over the next year or so. And I just don�t think that�s going to happen,� Peebler said. �I think that it�s much more complex than that. In fact, I think we have to be careful about the expectations that we set.

"One thing that�s interesting about expectations in this e-world [is that] you can almost predict two things: number one, that it�s not going to happen as fast as we think; and number two, when it does happen, it�s going to feel a lot bigger than anyone had imagined. And that�s a very dangerous thing.�

Future
Through the use of e-commerce and the internet, oil and gas firms are preserving capital, says Pat Herbert, CEO of GeoNetservices.com Inc., an independent upstream and downstream technical application service provider. Industry firms also will use the internet to look for leverage in e-commerce.

�E-commerce has some tremendous applications in the global environment, so [in] a global industry like the oil and gas industry, it�s a natural fit.�

Herbert stressed that there is room in the e-community for everyone, large and small. �Once all the pandemonium calms down, that there will be a selective process. The internet is here to stay, the oil and gas industry can adopt new technology�it always has, always will�it�s all a matter of how we can work harder to use the leverage of the internet.�

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