Transcript No Slide Title

Making Money from Petroleum in
Cyberspace: Who Will and What Does
It Take? An Upstream Example
Franz Ehrhardt
CASCA Consulting, L.L.C.
Oil and Money Conference
July 17, 2015
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved
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Overview
I.
Business Fundamentals
II.
Size of the Pie: Upstream Example
III. Energy Internet Landscape
IV. Consolidations and Failures
V. Success Strategies
VI. Use Case: Wellogix, Inc.
VII. Where Is The Money in Cyberspace?
VIII.What Does The Future Hold?
July 17, 2015
Copyright© 2005 CASCA Consulting, L.L.C. All rights reserved
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Business Fundamentals
 Basic aspects of industry remain unchanged
 Coming changes will stem from improvements in
computing power, software, and Internet
infrastructure
Same fundamentals
July 17, 2015
New medium
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Size of the Pie:
Upstream Example
Horizontal
OPEX/MRO - $85 Billion
Generic MRO - $25 Bln
Office
Equipment
Computers
Oilfield-Specific MRO - $60 Bln
Telephone
Equipment
MRO
Oilfield Supplies
(Grease, Valves, etc.)
SOAP
V
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CAPEX/AFE/LOE
$85 Billion
Equipment
(25%)
•
•
•
•
Pumps
Pipe
Tanks
Etc.
Services
(75%)
• Stimulation
• Perforating
• Drill Ships
• Formation
Evaluation
• Etc.
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V
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Size of the Pie:
Upstream Example (cont’d)
Top 200 Public and State-Owned
Oil & Gas Companies*:
 $1 Trillion Revenues
 $170 Billion spent Upstream
 Plus $50 Billion spent on property
acquisition
*Source: Center For Advanced Purchasing Studies 1998
July 17, 2015
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How Services Fit In
Value Creation
Minimum
Level of Value Creation
Cost Savings
Catalog
Purchasing
Strategic contracts and services
15%
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Bulk Purchases
85%
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Size of the (Savings) Pie
– “Bubba 2 Bubba” – Oil Patch e-Commerce
SalomonSmithBarney 4.7.00
 If domestic oil company Maintenance,
Repair and Operations procurement costs are
reduced by just 5% the industry would save
$4.3 billion.
 If just one-quarter of services and one-third of
equipment are traded online, with the same
5% cost reduction, the industry would save an
additional $1.2 billion.
July 17, 2015
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Energy Internet Landscape
PROCUREMENT FOCUS
NYMEX
Altra
Enron Online
Oil & Gas Online
Trade-Ranger
Houston Street
Petrocosm
Energy Prism
Upstreaminfo
Network Oil
OFS Portal
Energy Portal
Iwilson.com
Natoil.com
Oil Exchange
RigZone
RigMatch
COMMERCE
CONTENT
Petroleum
Place
Indigopool
Novistar
Wellogix
eLink Commerce
Oildex/TransZap
GeoNet Energy
PROCESS FOCUS
July 17, 2015
PetroWeb
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Source: SalomonSmithBarney
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Consolidation Will Continue
• One or two industry-sponsored exchanges will
likely survive
• One or two service company alliances will evolve
to support them.
• Five to ten solutions providers will consolidate
and provide Internet infrastructure to the major
players
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(Some) Reasons for Failure
 Attempting to apply consumer models to business,
particularly the complex energy business, instead of
tailoring solutions to the energy industry’s needs
 Attempting to create cure-all panaceas, instead of
addressing specific niches
 Focusing on extensive promotions and marketing
campaigns, instead of creating real solutions (promises
over substance)
 Failing to secure adequate financing
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(Select) Critical Success Factors
• Combine energy and advanced software
expertise to achieve solutions that mirror
industry needs
• Focus on pragmatic solutions that provide
significant added value
• Identify unique niche opportunities within the
industry for business growth
• Provide leading-edge solutions
• Partner, partner, partner
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Creating A Sustainable Competitive Advantage
High
Where
We Need
to Be
Perceived
Value
Majority of
Present
Programs
Low
July 17, 2015
Actual Cost/Efforts
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High
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Use Case: Wellogix, Inc.
 History: Formed in August 2000 through merger of WellBid and
eNersection, the company has started generating revenues
following a period of free availability.
 Focus: Initial focus on well design, rapidly growing emphasis on
Internet collaboration, workflow improvement and back-office
integration.
 Use Case: Members of 10 major oil companies, including British
Petroleum, are using the service, in addition to members of more
than 300 independent oil and gas companies.
 Plans: Based on highly successful drilling application, targeted
expansion into high-value adding workflow solutions for operators
and their service providers.
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Where is the Money in Cyberspace?
Examples:
 Reduce time for project development (from inception to
production)
 Reduce cost of material in segments of transit (working
capital)
 Simplify and expedite design, engineering and planning
processes
 Reduce costs of failure through optimization of useful
knowledge (effective knowledge management)
 Maximize expense productivity (cost-efficiency through
online availability of latest, lowest-cost options)
 Reduce service and material costs through effective, highspeed online bidding
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What Does the Future Hold?
 Wireless access – Instant and anywhere
 Full integration – End-to-end, online workflow
solutions
 Instant data communication and visibility across
entire projects and companies
 Ubiquity – Work from anywhere, anytime
 Virtuality – Online operation simulation of
drilling, wells, platforms, etc.
July 17, 2015
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