Will seismic services become part of the laundry list of items being handled by E-procurement?

Just within the past few weeks we've had a parade of upstart Internet providers visit the Hart Houston office touting E-commerce and E-procurement as the savior of the energy industry. Estimates indicate the energy industry spends billions of dollars each year on the administrative hassles associated with procuring goods and services, and by using the power of the Internet these companies hope to streamline that process and save everyone a ton of money.
This model will probably work quite well when it comes to ordering drillpipe or valves. It's possible it will work well when ordering a service such as a frac or cementing job. But what about a seismic survey?
"We have not decided specifically, item by item, service by service, what we're going to bid on the Internet," said Chris Miller, group adviser for strategic sourcing and overall implementation manager for E-procurement at Shell International. "But there is no reason at all why we would exclude something like seismic services."
Shell recently announced a joint venture with Commerce One to build a global Internet marketplace for the energy industry. The aim is to establish an electronic exchange to link buyers and sellers of goods and services across the energy industry worldwide.
Questions
Behind those lofty goals are a few unanswered questions, particularly when it comes to something as complex, technically challenging and labor-intensive as a proprietary seismic survey. Typically most seismic surveys are bid through a sealed-bid process. But bidding over the Internet would give Shell and others the option of making the process open, sort of a reverse of the e-Bay auction approach. Since the industry is already hamstringing itself by bidding jobs at less than cost just to keep crews busy, this isn't necessarily the most desirable scenario.
"If that's the way the market goes, there won't be any seismic industry left," one contractor predicted. "There will constantly be someone willing to lose money on a crew rather than get rid of it. That's a sad way for this industry to go."
On the other hand, an open bidding process might enable all contractors to know who the culprits are in this lowballing exercise. If contractors were willing to walk away from a job rather than bid it below cost, it could return a degree of integrity to the industry. While this would require across-the-board buy-in, the Internet's immediacy and transparency might help facilitate the required attitude change.
But other problems exist as well. Companies like Shell would need to be awfully comfortable with their security measures so as not to advertise to their competitors the fact that they're needing seismic data in a certain region. There's also the question of which products and services might offer the most benefit when procured this way. A seismic survey is one thing; data on the shelf is quite another. In certain regions the advantages of a tool like the Internet are useless. Unlike e-Bay, which broadcasts a product to an audience much larger than that offered by any other medium, an oil company needing data over a certain block is going to find precious few companies able to compete on price because only a couple of them actually own any data there.
Even with the surveys themselves, the question remains as to whether or not anyone will really benefit from this type of transaction. "We're not talking nuts and bolts where we have fixed costs," the contractor said. "We are an industry without fixed costs. If you put out a bid that's ever-changing and visible on the Internet, that won't work in an unfixed-cost environment.
"We've got people who buy drillpipe trying to suggest how to buy seismic, and it's not the same animal."
But companies like Shell are confident the bugs will be worked out. "The way the process is designed is that there are only so many players who can bid for seismic, and the process that we're going to use will allow us to have full and frank discussions with those companies before we actually get to the bid process," Miller said. "We see no reason at all why we shouldn't use bidding on the Internet for virtually everything."