Survey: E-Commerce is Top Priority for E&P Companies

In a survey of chief information officers (CIOs) at leading North American independent oil and gas producers, Zeus Development Corporation has learned that most rate e-commerce as their top priority for 2001.

"We learned that most mid-market independents (some 300 companies worldwide that have between $10 million and $14 billion in oil and gas reserves) are interested in Internet-based technology to help them expand offshore and overseas," said Bob Nimocks, president of Zeus Development Corporation, the sponsor of the survey and organizer of the E-Business for E&P: Examining Inside- and Outside-the-Firewall Solutions for Independents conference. "We conducted the survey to learn of the key topics these independents want to learn about. The feedback was eye opening."

Nimocks said CIOs at independent oil and gas companies are very interested in project management systems for more efficient drilling and completion, e-procurement, asset and inventory tracking, data and property acquisitions and improved communications. Much less important is customer-relationship management, trading platforms, e-retail or process-oriented decision-support systems.

"We focus on supply-chain issues, not demand-chain," said Hayward Walls, CIO at Alberta Energy Corporation (AEC), the sixth largest independent in North America. Walls intends to install an e-procurement system to interface with their J.D. Edwards enterprise resource planning (ERP) system. More generally speaking, he sees two types of operating environments where Internet-based information technology can help AEC: the first is in well-developed production regions, like Western Canada, where there is an abundance of knowledgeable service suppliers, laws, regulations and infrastructure. The key for producers in these regions is to drive down drilling and completion costs by managing the well site closely to minimize or eliminate downtime. The second type of environment Walls mentioned is a new production region, such as those found in Bangladesh, Gabon or Ecuador. "In this type of environment, we may need to manufacture our own road signs," he said only half jokingly. He sees the Internet as a means to identify and assemble qualified service suppliers who can develop a reserve from scratch.

"We have three priorities this year: e-commerce, global communications and knowledge sharing," reported another executive from an NYSE-traded independent that is expanding into North and West Africa, the Irish Sea and China. Most CIOs interviewed in the Zeus survey believe they can cut transaction costs in half while obtaining more competitive supply contracts.

But don't think these CIOs will simply accept the systems and solutions crafted for majors. Most see their businesses and online needs vastly different from the world's mega-integrated oil and gas companies, such as ExxonMobil, Shell, BP and Chevron Texaco. For starters, maintenance, repair and operations (MRO) products and services represent a smaller portion of an independent's spending.

Second, few independents use integrated ERP systems. Most use traditional financial and HR systems and many use homegrown revenue distribution and joint-interest billing applications.

Third, independents have thrived by developing technical or regional expertise that allows them to go after exploration and production often divested or overlooked by the majors. They are much less concerned about customer-relationship management and much more concerned about cost control and partner/vendor alliances.