In a world in which a barrel of oil is running at $40 to $50, the petroleum industry is always looking for ways to make E&P operations easier and cheaper. One way is through its increasing use of IT. Oil and gas companies are embracing the Internet of Things, looking to digitize and using cloud technologies and mobile devices to cut costs while still turning a profit in the downturn.
While the business-to-business (B2B) wave of e-commerce technology might not be generating as much buzz as the use of the aforementioned technology darlings of the oil field, there is a substantial argument as to why its use is as much or possibly of more value.
According to estimates by market research firm Forrester, B2B e-commerce will reach $1.2 trillion and account for 13.1% of all B2B sales in the U.S. by 2021. Forrester expects e-commerce to reach $889 billion and represent 11% of total B2B sales in the U.S. by the end of the year.
The oil and gas industry has long been at the forefront of technology and product development whether that be downhole sensor technology, 3-D seismic or hydraulic fracturing, but it arrived late to the party of e-commerce. From buying drillbits online to negotiating for engineering services such as logging or seismic data acquisition, e-commerce can help companies reduce risk, lower capital requirements and move more quickly than their competitors.
Challenges, benefits
There are many different factors causing the industry’s slow adoption of e-commerce technology. One of the biggest challenges to its use has been the oil and gas industry’s traditional culture. Older professionals in the workforce have relied heavily on field sales representatives who are able to drive results by engaging directly with their customers. E-commerce might eliminate this comfort with human contact or feel too impersonal to maintain close business relationships, even though the incoming millennial generation has mastered it.
Most oil and gas companies are waiting for competitors to take the first step toward the adoption of technologies to streamline their workflows and improve their data collection. No one wants to be first to fail. In this industry everyone wants to look like a winner.
Another factor that can reduce traction for e-commerce platforms is the trust factor—can the customer trust the unknown party on the other side of the transaction? After all, there is a big difference between buying books on Amazon vs. buying several truckloads of pipe or casing online. While internet shopping may work for standard parts and supplies, e-commerce skeptics stress that no oil well is alike. Therefore, the equipment and materials required to drill and produce it will not be standard and cannot be found online.
But the oil and gas industry is starting to experience the benefits of using e-commerce to buy, sell and rent used and surplus equipment and materials. The realized benefits could far surpass any advantages the industry might have imagined to achieve from online procurement. E-commerce and its use through mobile tablets and smartphones has radically changed the process, thereby increasing the speed of transactions, lowering costs, reducing project time lines and even improving the planet’s carbon footprint.
However, many oil companies continue to depend upon the comfort of using equipment and materials auctions facilitated by a third party to manage their transactions. While the practice of using e-commerce has long been a foreign concept to this industry, oil companies should consider adopting its use for numerous reasons.
One-stop shop
E-commerce platforms have the power to link operators and suppliers right from the comfort of their home or office. No more chasing and bidding for equipment in 37 C (100 F) heat. Operators can request the equipment and materials they’re looking for, and suppliers can post their complete suite of available products online, extending their offerings to operators immediately and consistently.
Speed of delivery
This is an obvious benefit and can be expressed in multiple ways as it pertains to e-commerce use by the industry. Using e-commerce offers project managers the ability to offload or shop for and purchase equipment and materials online in a matter of minutes vs. weeks or even months. Orders can be quickly transacted, shipped and tracked in real time on their way to a location. Managers are also freed up to focus more on operations while awaiting or shipping their goods as most transportation logistics are managed by online distributors. They can even leverage the power of e-commerce technology to immediately update and modify the delivery logistics of their order if a change is required.
Additionally, e-commerce use quickly helps meet rapidly changing customer demands, allowing for a quick and nimble response. This is vital to ensure customers achieve bottom line results and also slash time off of project deadlines, getting to completion quicker and more efficiently.
Cost containment
The surplus and used equipment market is incredibly fragmented and complicated, with multiple pathways and intermediaries between buyers and sellers. With so many participants in the marketplace, value to the customer has been replaced by margin proliferation. The use of e-commerce solutions offers these customers a different option to buy, sell and rent online, eliminating the need for a middleman and allowing increased cost savings and containment. It also enables accounts payable to pay invoices more efficiently and on time through secure web-based environments, accurately match invoices and deal with less manual intervention.
Asset management
In an e-commerce environment where suppliers can gain insight into operators’ needs, assets can be managed more strategically. E-commerce platforms offer the ability to foresee where the greatest opportunities are, and suppliers can concentrate equipment and resources where they are needed and reduce costs associated with stagnant assets and unused inventories.