Embed Size (px)
Citation preview
Crude Oil TradingeCommerce solutions
Team One
Project Overview
Traditional value chain
Case study of four approaches to e-facilitated value chain
Findings and conclusions
Petroleum Value Chain
Firm Infrastructure
Human Resource Management
Technology Development
Procurement
Pro
perty
Access /T
radin
g
Su
bsu
rfaceD
evelop
men
t
Pro
du
ction
Man
agem
ent
Raw
Pro
du
ction
T
ransp
ortatio
n
Raw
Pro
du
ct T
radin
g
Refin
ery &
Ch
em O
peratio
ns
Refin
ed p
rod
ucts
Tran
spo
rtation
Refin
ed p
rod
uct
Trad
ing
Marketin
g
Margin
Mar
gin
Raw Products Trading Value Chain
Do
mes
tic ph
ysic
al trad
ing
Intern
atio
na
l ph
ys
ica
l trad
ing
Ris
k man
ag
eme
nt / h
ed
gin
g
Sc
he
du
ling
(pip
elin
e &
marin
e w
ithin
US
)
Ch
arte
ring
(intern
atio
na
l)
De
mu
rrage
& S
toc
k L
os
s
Co
ntra
ct ad
min
istration
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Margin
Mar
gin
The marketPetroleum products trading
Second largest consumable commodity
Roughly $1.8 trillion in gross trade revenues*
$0.8 trillion in physical trading of crude oil$1.0 trillion in physical trading of refined productsThis estimate is conservative – could
underestimate trading velocity.The paper, or financial market, is more than five
times larger than the physical market.
* Banc of America Securities
Seller Buyer
Crude Oil Trading Today
Four case studies
Integrated Oil Company
Markets 1.5 Million BPD of Crude OilProduced from 25 Countries
Refinery Capacity of 1.0 Million BPD
Global Crude Trading Staff of 109
Launched Crude Oil Marketing Website in December, 2000
General overview
Where does Chevron add value?
Do
mes
tic ph
ysic
al trad
ing
Intern
atio
na
l ph
ys
ica
l trad
ing
Ris
k man
ag
eme
nt / h
ed
gin
g
Sc
he
du
ling
(pip
elin
e &
marin
e w
ithin
US
)
Ch
arte
ring
(intern
atio
na
l)
De
mu
rrage
& S
toc
k L
os
s
Co
ntra
ct ad
min
istration
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Margin
Mar
gin
Inte
rnatio
nal p
hysic
al tra
din
g
Con
tract a
dm
inistra
tion
Ch
arte
ring
(inte
rnatio
nal)
Ris
k M
an
ag
em
en
t / Hed
gin
g
Sc
he
du
ling
(pip
elin
e &
ma
rine
w
ithin
US
)
De
mu
rrage
& S
toc
k L
os
s
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Dom
estic
Ph
ysic
al T
rad
ing
www.chevron.com/
crudemarketing/
Buyers
Sellers
Competitors
Anyone
Brochure Site
Crude Oil Details
Office Locations
Contact Data/E-mail Capability
Internet Business Model
Target Market
Refiners Producers
GovernmentsGeneral Public
Competitors
InformationCrude Oil Information
InteractionSearch EngineE-mail to Crude Oil Trading TeamsDownload Assay Data
Value Added
Distinctive Competence
•Industry Expertise
•New Crude Introduction Process
•High Acid Crude Marketing
Competitive Advantage
•Terminal Operator
•Worldwide Coverage
•Joint Ventures in Key Markets (Far East)
•Headquarters in SF Bay Area
Technological Innovation
Good start on brochure siteInconsistent level of detailLimited use
Team Evaluation
“It’s too early for Chevron to partner with a provider as only the best will win. I see us building our own site initially at fairly low
cost without all the bells and whistles and then moving to a third party site once it becomes well established.”
Chevron Trader
General OverviewFounded January 2000
Based in Miami, FloridaOffices in New York, Houston, and London
International market
Larger sales (cargos vs. barrels)
Privately owned; independentArthur D. Little owns 10%
Do
mes
tic ph
ysic
al trad
ing
Intern
atio
na
l ph
ys
ica
l trad
ing
Ris
k man
ag
eme
nt / h
ed
gin
g
Sc
he
du
ling
(pip
elin
e &
marin
e w
ithin
US
)
Ch
arte
ring
(intern
atio
na
l)
De
mu
rrage
& S
toc
k L
os
s
Co
ntra
ct ad
min
istration
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Margin
Mar
gin
Inte
rnatio
nal p
hysic
al tra
din
g
Con
tract a
dm
inistra
tion
Ch
arte
ring
(inte
rnatio
nal)
Where does PEPEX add value?
www.pepex.net
Buyer 1
Buyer 1
Buyer 3
Buyer n
Seller 1
Seller 1
Seller 3
Seller n
Sealed bidding
Focuses on physical trades
Strategic alliances with related service providers
Nominal transaction fee paid by bidder (1 cent per barrel)
Internet business model
Target marketLarge international producers and consumers of crude oil and refined petroleum products
National oil companies
Governments
Major oil corporatio
ns
Utilities
Airlines
Trucking service
companies
Energy marketing companies
Distinctive Competence
•Industry expertise
•International experience
•Combo cargos
Competitive Advantage
•First mover
•Neutral ownership
•Exception request processing
Technological Innovation
•Crosslinks platform
•Multiple round and double-blind bidding options **
•Search engine **
** Patent pending
Can they get enough critical mass quick enough?
Are vision & distinctive competence aligned?
Are they anticipating market changes?
Will the market tolerate transaction fees…now?…future?
Future channel conflict/cannibalization?
Does ultimate value lie with back office service providers?
Team evaluation
Incorporated February 2000Located in Portsmouth, Houston, and LondonMinority interests owned by Equiva, ARAMCO, Williams, and ConocoTrades power, crude oil, and refined petroleum products in the US market
General Overview
Do
mes
tic ph
ysic
al trad
ing
Intern
atio
na
l ph
ys
ica
l trad
ing
Ris
k man
ag
eme
nt / h
ed
gin
g
Sc
he
du
ling
(pip
elin
e &
marin
e w
ithin
US
)
Ch
arte
ring
(intern
atio
na
l)
De
mu
rrage
& S
toc
k L
os
s
Co
ntra
ct ad
min
istration
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Margin
Mar
gin
Con
tract a
dm
inistra
tion
Where does HS add value?
Dom
estic
Ph
ysic
al T
rad
ing
www.HoustonStreet.com
Buyer 1
Buyer 2
Buyer 3
Buyer n
Equiva
Williams
Conoco
Seller n
Blind auction bidding
Focuses on physical trades
Strategic alliances with related service providers
Nominal fee paid by buyer
Internet Business Model
Target Markets
US Cru
de O
il
Trad
ers
US El
ectricity
Trad
ers
US Refi
ned
Prod
ucts
Trad
ers
Added ValueConnecting suppliers and consumers in an efficient manner. The value step in the value chain is small, therefore there is not a lot of incremental value to be gainedIntegrated producers do not benefit as much from e-trading sites, only getting rid of small imbalances in supply or demandFor power, generation and transmission are the bigger economic impact
Distinctive Competence
•Experience in running auction sites
Competitive Advantage
•Liquidity from producer investors
•Economies of scope
Technological Innovation
•State-of-the-art technology through Sapient alliance
HoustonStreetTeam Evaluation
Industry consolidation will happen, and may be starting nowHS has no offer of replacing the back room operations of the suppliersTherefore, major source of revenue is the partnersHS not viable long-term in the global market
Team Evaluation
Founded January 2000Based in Houston, TexasDomestic energy commodities
Raw Products; crude oil, natural gas and power
Refined products; jet ,gasoline,and heating oil
Neutral site
General Overview
Where does RedMeteor add value?
Do
mes
tic ph
ysic
al trad
ing
Intern
atio
na
l ph
ys
ica
l trad
ing
Ris
k man
ag
eme
nt / h
ed
gin
g
Sc
he
du
ling
(pip
elin
e &
marin
e w
ithin
US
)
Ch
arte
ring
(intern
atio
na
l)
De
mu
rrage
& S
toc
k L
os
s
Co
ntra
ct ad
min
istration
Ac
co
un
ting
/ tran
sa
ction
s
pro
ces
sin
g
Margin
Mar
gin
Con
tract a
dm
inistra
tion
Ris
k M
an
ag
em
en
t / hed
gin
g
Dom
estic
Ph
ysic
al T
rad
ing
Business Model
www.RedMeteor.com
Buyer 1
Buyer 2
Buyer 3
Buyer n
Seller 1
Seller 2
Seller 3
Seller n
A transactional databaseIntegration platform for other eMarketsIntegration platform for customer mid- to
back-office systems
Target Market
US Gas Traders
US Power Traders
US Crude
Oil Traders
US Refined Products Traders
Distinctive Competence
• Visionary leadership (morph to the market strategy)
•Multiple channel brokering (web-based products with traditional brokerage house)
Competitive Advantage
•First mover
•Neutral ownership
•Fast deal entry and striking
•Physical, financial and over-the –counter interaction
•Economies of scope
Technological Innovation
•Best of breed hardware and software: Oracle8i on Sun Solaris platform
• Easily modified Java presentation
First mover advantage
Conscious plan to evolve from current brokerage fee model to customer value-added services model (clearing, credit, and integration services)
Exchange engine designed to accommodate any commodity
Team Evaluation
Independent
Sealed bid
Targets buyers & sellers
International
Cargo only
Service alliances
First mover
Independent
Brochure
Targets large buyers
US, International
Product depth
Services breadth
They’re Chevron
Customer investors
Auction
Targets “everybody”
US
Product depth
Services breadth
Economies of scope
Independent
Auction
Targets “everybody”
US
Product depth
Services breadth
Morph strategy
Comparison
Waiting for the shake-
out
Buy a funeral
plan(need
cremation services?)
Making money
with power
now, but will it
last???
Where is it all headed?
Consolidation (providers and products)
Brokers and traders must adapt to eCommerce or face extinction (change or die)
Revenues will shift from transaction fees to pay-for-service
Questions & Comments
Team One
