IAGC E-Commerce in Geophysics (January 2001)

Described as a ‘roadmap for the future,’ the International Geophysical Contractors Association’s conference on e-commerce in geophysics was well attended with over 200 delegates. But the climate has changed since we reported on the POSC e-business show last November. Reality, in the form of under-performing dot coms and evolving business models has replaced HypeML. The impact of this on the geophysical industry is far from clear.

The International Association of Geophysical Contractors (IAGC) and the International Petroleum Association of America (IPAA) co-hosted a one-day conference on e-commerce in geophysics in Houston this month. Some 200 delegates showed up to hear McKinsey’s Roger Roberts give a downbeat keynote speech, with warnings of serious underperformance in the world of e-commerce at large. As of March 2000, some six hundred B2C sites were funded. Today, only three are profitable. B2B is picking up slack with ‘tremendous enthusiasm’ to drive change across the industry.


But these also have had inflated revenue projections with 70-100% annual growth forecasts bringing in tens of billions of funding and talent. The real numbers have proved a fraction of the forecasts. In 1999, despite some $12 billion invested in B2B, a meager $300 million in revenues was actually generated. For Roberts, the near term story is ‘incoherent,’ many early ventures are ‘morphing’ their business models – to focus, for instance, on application function provision over the web. Others have moved into hosting private marketplaces for large players like Ford and BHP Steel. But ‘the graveyard is beginning to fill,’ with over 100 companies folding in the last few months, and ‘there are more to come!’ Roberts still believes that the blend of old economy values with the speed of the new can create significant business value. He concluded with a great quote from none other than Bill Gates – “The impact of new technologies is always overestimated in the first year and underestimated in the 10 years that it takes for them to take effect.”


IndigoPool president Dan Magyar was more enthusiastic. He believes that it is still early days, and that now “we are starting to see the value.” To support this he offered some numbers from a recent survey by Salomon Smith Barney. The acquisitions and disposals market place is estimated at $30-50 billion annually, Authorizations for Expenditure at $85 billion, and the MRO procurement marketplace is composed of $65 billion E&P-specific expenditure and another $20 billion generic. But some e-commerce companies have had a rough ride. From April-September 2000 ten companies have been 'removed' from the list of active traders - either by liquidation, or through lack of credibility.

Virtual Prospect

One success story, for Schlumberger, is a private marketplace developed for BP. Virtual Prospect (VP) provides electronic access to resources that allow third parties to evaluate some of BP’s undeveloped exploration opportunities. This allows BP to concentrate its limited resources on high value opportunities. A VP pilot has been running since November 2000. There will be more on Virtual Prospect in next month’s PDM. For Magyar, e-commerce is a great enabler, the business model is evolving and sharing of benefits is as yet unresolved. But the geophysical industry is poised to benefit from the new technologies and businesses. A question from the floor raised the issue of intellectual property rights. Magyar agreed that spec survey licensing was a critical issue which has a technological solution - data can be viewed without being retrieved and stolen! [Comment - so there is no seismic Napster... yet!]

Trade Ranger

Trade Ranger (TR), according to CEO Allen May, is developing e-catalogues and standards for upstream transactions. While it is still early days and “no one is making any money,” standards are emerging from companies like i2, Requisite technologies, Intermart. ExxonMobil is “very pro-active.” May advocates inter-hub standards “We need to get agreement between TR, OFS Portal and PetroCosm.”

Cap Gemini

Randy Alexander described how Cap Gemini Ernst & Young has re-organized a major geophysical company’s business. E-procurement was introduced and claimed to be highly successful and with major long-term impact on the company’s business. 10-20% discounts were obtained from suppliers through better control of the buying process. A word of warning though, in general “less than 20% of implementations bring the hoped-for gains.” Do not expect a reduction in head count as a result of e-procurement, which involves reengineering the buying process. Alexander offered an insightful analysis of purchasing categories. These can be organized into a matrix of high and low cost against high and low operational value. Low cost items are all amenable for e-procurement. High cost low value items will likely merit a change of purchasing strategy, while high costs high value items will probably always need a ‘non-e’ treatment.

Goldman Sachs

Goldman Sachs director Eric Mullins described the future for oil and gas B2B players, as “as clear as mud.” There is potential for growth, but M&A (which Mullins defines as including bankruptcies!) will continue. Online divestiture process will increase as digital data management pervades the industry. Mullins’ seven rules for successful B2B e-commerce success are; be the first mover and shaker, have operational and financial ‘scale,’ be user-centric, grow organically, have multi-market applicability, go for profitability and finally, have “scalable” management teams. Remember – “If at first you don't succeed, you're outta here!”

BP Digital Business

Steve Peacock, BP’s head of digital business believes that geophysics will benefit from a connected e-world. Geophysics is global, data and information intensive and boasts a variety of business relationships. It is also already extensively interconnected and the ‘supply chain’ is ripe for integration. BP has integrated e-business and Information Technology into the new Digital Business unit. BP is an ‘aggressive’ experimenter and early adopter. Peacock entreats us to “Think big, start small, scale up quickly and re-invent business models and processes.” More e-ntreaties; go for ‘smart standardization,’ ‘show me the money’ and ‘burn the boats’ à la Cortez!

Killer e-biz

Killer applications of digital business will include live data coming back from facilities and seismic while drilling. 4D surveys may be generated quarterly from permanent oilfield sensors. BP is ‘thinking laterally’ and has become a service provider - offering excess bandwidth capacity in the North Sea to other operators and telephone operators in Norway and the UK. Another venture offers excess capacity on BP ’copter flights in the North Sea - using web-enabled logistics. Peacock believes that “If you are not doing digital business - soon you won't be ‘doing’ business.”


John Coghlan of Schlumberger Infosec provided some words of caution as to the security of the public internet. Coghlan advocates a Virtual Private Network (VPN) to assure secure access and authentication over the intranet from anywhere in the world. The solution is productized by Schlumberger as Smart Corp - employee badges and SmartCard for computer resource access control.


GeoNet Services’ Randy Premont offered a sideways look at bandwidth pricing and announced the (fictitious) First Annual “Bitster” Awards - for bandwidth in Houston. Awards were made in three categories: Houston metro area network, wireless broadband and international. Phonoscope took the metro area prize with its fiber optic network - a “work of art” according to Premont. Advanced Radio Telecom took the wireless prize, and Qwest the international award.


Typical costs today are $8,000 per month for 1Gbit bandwidth in Houston and $13,500 per month for 45 Mbit international (to Europe). Bandwidth is growing and 2.5 Gbit is ‘standard’ today with terabit links in the foreseeable future. Uses of such bandwidth include processing - where Tadpole is already selling CPU cycles over the net. A GeoNet survey shows take-up of e-business in the upstream to be slower than anticipated. One uncertainty is bandwidth ‘resonance’ whereby demand grows to choke supply - as on Houston's road system! But some companies are ‘doing it right,’ - like Global Crossing which has grown from nothing to a $4 billion revenue company, ‘as big as the whole geophysics industry,’ since it started out only three years ago.

Data Management

PDM editor Neil McNaughton believes that effective e-business is predicated on interoperable systems. But, despite the evolution of upstream information technologies from stand alone applications through a variety of federating technologies interoperability has proved illusive. Most of the industry initiatives aimed at providing ‘silver bullet’ solutions so far failed.


Today, the desire to have corporate wide access to information systems is bringing new lightweight interoperability paradigms. These should offer interesting e-business opportunities as components of geophysical workflow can be isolated and handled off-site. Such components include pre-stack depth migration, AVO and other processes implicating un-stacked or partially stacked data.


Using e-business, compute-intensive tasks can integrate the corporate workflow in an external service provision mode. Many other aspects of the workflow from data loading to inventory and document management are amenable to e-enabled solutions. Some of these need not deploy sophisticated technology. Email and FTP are just as efficient tools for e-business as the hubs and portals of e-commerce. E-business between a geophysical contractor and client should be easier to achieve, since agreement on systems and data standards needs only to be achieved between two parties. The hubs require many to many agreement on standards and work processes - a tougher nut to crack in the commercial world.

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