Oil and Gas

1
Oil and Gas

• Joshua Feira, Robin Groce
• Donald Hoag, Yimin Jiang,
• Eungsang Kim

2
End to End Suppliers and Intermediaries

• End to End Suppliers
• BP
• Exxon
• Shell
• Sunoco
• Texaco

• Intermediaries
• B2BNow
• Energyprism
• Freemarkets
• OilAndGasOnline

3
Illustration of Contrast

• End to End Suppliers
• We're in all aspects of the energy business -
  from exploration and production to distribution,
  refining and marketing. (Texaco)
• Intermediaries
• We conduct online auctions for industrial parts,
  raw materials, commodities and services.
  (FreeMarkets)

4
Contrasting Screenshots
Instance of Variable Price Sale by
Intermediary (FreeMarkets)
Instance of Fixed Price Sale by End to End
Supplier (Texaco)
5
Defining The Market

• Oil and Gas industry projected to employ 255,000
  by 2008 (Bureau of Labor Statistics)
• Oil and Gas extraction was 90.1 billion industry
  in 1997 (Department of Commerce)
• Sunoco produces 730,000 barrels of crude oil per
  day
• We operate in 100 countries, on six continents,
  and serving 10 million customers every day. (BP
  Amoco)
• We auctioned nearly 1 billion worth of purchase
  orders in 1998. (Freemarkets)

6
Basics

• Visitor browses product catalog
• Texaco has around 600 products on-line
• Freemarkets has over 3000 suppliers
• Visitor purchases items
• End to end suppliers are fixed price
• Intermediaries tend to be auctions
• At intermediaries, visitor can sell items
• Freemarkets has no charge to register or list
  items
• At intermediaries visitor provided more
  informational services
• Consulting, industry news, updated pricing

7
Who Are the Customers?

• Aviation community
• Texaco has subsite devoted to aviation customers
• Driving fleet managers
• Franchisees hoping to open gas station
• Texaco details Star Mart opportunities
• Shareholders and investors
• Process management consultants
• OilAndGasOnline has Consulting Services product
  center
• Oil exploration companies
• EnergyPrism offers Exploration Center

8
Attracting Customers

• Net events
• Ricky Rudd chat at Texacos site
• Sponsoring sporting events
• US Olympic Team
• Texaco/Havoline Racing Team
• Establish grants and foundations
• Texaco Foundation awarded 500,000 to music
  education
• Energy Industry Career Center (EnergyPrism)
• Post resumes and browse opportunities
• Few consumer incentives
• No gasoline coupons or discounts

9
Network Externalities

• Value of intermediaries increases as number of
  suppliers and buyers increases
• Especially valuable to small to mid sized buyers
  and sellers
• Lack the brand name recognition of largest
  companies
• Achieve inexpensive distribution channel

10
Value Proposition

• Value proposition of end to end supplier web site
  is to educate customer about products
• Texaco offers Kern River environmental case study
• Value proposition of intermediary is to unite
  buyers and suppliers
• FreeMarkets saved buyers an estimated 2 to 25
  in 1999
• Intermediaries give suppliers a global reach

11
Value Added

• Case studies on environmental issues
• Soothe consumer fears of oil gas companies
  destroying environment
• News stories relevant to target customers
• Texaco offers NASCAR results and standings
• Relevant industry information
• Advice on acquiring industry consulting
  (EnergyPrism)
• Real time market pricing information
• Environmental news
• Suppliers directory

12
Customer Retention

• Loyalty programs
• Texaco Star Faire Program gives aviation
  community Star Cheques for every 50 gallons of
  fuel purchased
• Privileges for customers
• Texaco Prop and Goggles newsletter for aviation
  customers
• Sunoco Direct web pages for registered customers
• Credit cards for driving fleets
• Personalization of web pages
• EnergyPrism offers Eprism company homepages

13
Sample of Site Privileges
Members only site adds online value to being
Sunoco customer
14
Future Directions

• Decrease startup costs
• FreeMarkets has large customization process
• Offer less customized interface that customer can
  immediately use
• End to end suppliers transition to web based
  systems
• Challenge is switching from legacy EDI systems
• Sites must reduce complexity of interfaces