Energy companies launch global internet exchange

A group of 14 leading energy and petrochemical companies whose collective annual spending exceeds $125bn have teamed up to launch an independent e-procurement exchange.

The e-trading exchange will be based on Commerce One’s MarketSite platform. Scheduled for launch in the third quarter of 2000, the exchange will handle procurement activities from exploration and production to refining and retail sectors.

BP Amoco’s group chief executive Sir John Browne, who has already committed to put 95% of all catalogue buying through e-procurement by the end of the year, welcomed the new exchange. `The industry’s leading players have come together to improve performance, productivity and capital efficiency,’ Browne said. `Internet exchanges will drive efficiency and innovation across the supply chain.’

The move follows initiatives in the automotive and aerospace sectors to create global, vertical, industry trading exchanges. GM, Ford and DaimlerChrysler have overturned decades of competition to set up an e-commerce trading exchange to handle orders worth about $240bn a year. In the aerospace sector, BAE Systems, Lockheed, Airbus and others are creating a similar operation.

A number of energy and petrochemical companies’ e-procurement schemes are likely to be abandoned in favour of the new exchange. Statoil originally planned to slash $4bn from procurement costs using a system based on

Nigel Ford, SAP e-commerce marketing manager, said: `Most of the partners in the new exchange use SAP R3 products in their back-office, so there will still be opportunities for them to tie in with market sites.’

The scope and scale of the new exchange raises the question of whether other companies will be forced to participate, if only to keep in touch with a new and transparent market. Previously, many contract negotiations for supplies and services have been jealously guarded secrets.

Oil giant Exxon Mobil, meanwhile, has yet to reveal its plans.

Morgan Stanley Dean Witter is advising on the formation of the exchange and the start-up partners will all have equity in the new company.

Partners in the exchange include Royal Dutch Shell; BP Amoco; Conoco; Dow Chemical; Occidental Petroleum; Phillips Petroleum; Repsol YPF; Statoil; Tosco; TotalFinaElf; Unocal; Equilon; Mitsubishi and Motiva Enterprises.