November 2015

Executive viewpoint

Increased eCommerce adoption yields benefits
Chris Welsh / OFS Portal

The upstream oil and gas industry has, historically, been at the forefront of technology and product development, when it comes to downhole technology, 3D seismic, and almost any technology having to do with oil and gas recovery. However, we, the industry, arrived late to the party of eCommerce. When we joined the growing movement in the mid-to-late 1990s, we did so only in the procurement process, while dot-com start-ups already had made millionaires, and the crest of the wave was close to breaking on the shoreline.

The OFS Portal members include some of the biggest names among oilfield service providers.
The OFS Portal members include some of the biggest names among oilfield service providers.

Two industries that have embraced eCommerce successfully are automotive and aerospace. It stands to reason therefore, that the oil and gas industry can succeed beyond simply converting its catalogue of supplier books to “click and buy.” Why not purchase a logging service or drilling mud online? At the time (late 1990s), the underlying oil and gas eCommerce technology was immature, and the proponents of the technology were inexperienced. Early adoption was poor.

One of the biggest challenges, as we embarked on this eCommerce endeavor, was the oil and gas industry’s attitude. While internet shopping may suffice for standard parts and supplies, there is no such thing as a standard well, experts criticized. Others expressed concern in eliminating human contact while purchasing major equipment or services.

Nevertheless, the world was moving toward eCommerce. Our biggest challenge was the size and global reach of the upstream oil and gas sector. The industry also lacked a shared vocabulary and business processes structure. As for technology, varying standards, data ownership and security concerns also hindered progress toward eCommerce.

Fortunately, eCommerce technology has matured, and in many cases, we now let the required business processes demand that the technologies fit the purpose. At the same time, we have all become more experienced, understanding the importance of data protection, and data ownership, as well as use of open standards, such as PIDX.

It has become clear that standardization of formats will facilitate harmonization across the industry. A common model is needed for both buyers and suppliers, so that the global upstream oil and gas industry transacts in the same way for each type of material or service.

As an industry, oil and gas companies and service firms know how to handle large masses of data; however, common coding is vital to a successful eCommerce adoption. Data taxonomy ensures that a shared language is being spoken by engineers, geoscientists, operations, supervisors and the C-suite. Our most recent problem is that we have not made a collective decision as to which standard to follow.

To realize the value of eCommerce, we all need to accelerate adoption and deployment. Granted, national oil companies, which are state-owned, may be slow in championing eCommerce, as they often cannot make their own decisions. It is the governments that need to buy into the move toward standardization, but that is not the case for most operators and service companies. If the C-suites champion and buy into the move toward standardization of eCommerce, we will succeed. Success means cost reductions in the millions for both buyers and suppliers.

We have been slowly moving toward a standard eCommerce solution, and now is the time to accelerate that move and set an eCommerce standard. This will allow us to catch up to the rest of the industrial world, and start reaping those significant cost benefits.

Being able to pay invoices on time through better integration of data, more accurate invoice matching and less manual intervention in accounts payable, all of which are benefits derived from eCommerce, means the industry will be able to net savings upwards of $100 million/year.

Despite the current depressed oil prices, global demand for crude will increase. Today, we consume about 89 MMbopd. By 2025, that number is expected to reach 105 MMbopd, with the transportation sector as the main catalyst.

To meet the growing demand, the industry needs to leverage eCommerce. Not only will it save millions of dollars today, but when the activity levels return, the industry will continue to realize significant savings, and manage the increased oilfield activity in a far more scalable way. wo-box_blue.gif

About the Authors
Chris Welsh
OFS Portal
Chris Welsh has over 30 years of information technology, eCommerce and consulting experience, and has been a key player in oil and gas eCommerce since 1995. He has managed numerous global projects for operators, services companies and eCommerce networks across the globe, being both employed by, and consulting to, numerous Fortune 500 companies. Mr. Welsh was a founding member of ACT Global Consulting Ltd. He has been providing strategic advice and technology architecture solutions to the industry since 2000. In March 2015, he became CEO of OFS Portal LLC, a global member-based group of upstream oil and gas suppliers, and service providers, at the forefront of oilfield eCommerce. Mr. Welsh is a member of the board of PIDX Europe, and he holds a masters degree in computing.
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