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Order Now Inc? A Smokestack Industry Faces the E-Future

Fortnightly Magazine - April 15 2000
  1. cheaper, but also reinvent themselves using e-commerce technology.

What e-commerce strategies are available?

Procurement is the kind of no-brainer for e-business. Business-to-business transactions such as procurement of supplies, equipment, and managing inventory are just a few examples.

We are starting to see vertical marketplaces pop up such as Shell, [which] has all these suppliers and they are trying to exploit those relationships by managing that vertical marketplace. [Shell has partnered with Commerce One, which helps companies establish Internet portals, to host portals for others, and to develop comprehensive e-procurement plans.]

Chevron and Ariba [whose software helps companies track and manage supply purchases over the Internet and corporate Intranets] unveiled a Web site, Petrocosm Marketplace for energy-related goods. [The Petrocosm Marketplace procurement Web site will enable companies to buy and sell products and services in the oil and gas industry, ranging from pipes and valves to engineering and construction services.]

[Moreover],, an online Web-based service, will allow E&P oil and gas companies to purchase a wide range of products on the Internet.

What are the most promising e-commerce strategies?

There are probably some quick wins with e-procurement because efficiency gains in the procurement process are quickly realized. In general, it reduces the friction in the supply chain.

If you look at the vertical marketplaces, there is an opportunity there. I haven't seen anyone go after that market yet in energy as in other businesses. It hasn't really materialized. I think on the wholesale side, most of that is being done through intermediaries. They are basically running commodity markets for LDCs, utilities, and marketers.

Customer relationship management can be successful. That gets into the sophisticated portal idea for retail customers.

How can e-commerce help the gas industry be responsive to increased demand levels that may grow to 30 trillion cubic feet? Could e-commerce facilitate an hourly market for natural gas?

While revolutions are occurring in most industries, the energy industry has been slower to respond. A number of factors contribute to this, and for the Internet to really begin transforming the natural gas industry, many fundamental changes would need to occur. [Such] options assume a great deal of infrastructure change, the likes of which the industry continually resists.

Hourly scheduling assumes a seamless grid of nominations and confirmations have been accomplished, that can be transacted and scheduled in a few minutes every hour on a 24/7 basis. Hourly also assumes that transportation of gas, and the gas itself, has been nearly commoditized.

Let's address these [matters] backwards, since accomplishing the second one would force the existence of the first one.

The Internet is especially good at commoditizing things that might not be traded efficiently currently. Transportation capacity and the gas itself are good examples. While there are underlying physical and operational limitations against how completely similar you could consider all natural gas or transport capacity to be, you could still move these markets into a commodity model and substantially get away with it.

Using typical Internet exchange forum initiatives, you could develop a site where all the producers sought out all the end-users,