User:OFSPORTAL/sandbox

Background

The movement of business documents between trading partners in the 1980s was predominantly by paper or fax, with a few larger companies utilising EDI. The costs involved in setting up EDI and the recurring costs to the necessary VAN precluded many medium and smaller companies adopting this technology. As the 1990s started and the internet became useful for the transmission of documents, other than by email, standards evolved based on eXtensible Machine Language, or XML. A few industry verticals were in the forefront of adoption and these developed a range of business documents to suit their specific needs. The Oil & Gas industry was not in the forefront of this adoption, but was encouraged to consider it by the large consulting companies who had created significant market places driven by Buyer requirements. These market places managed the procurement of significant volumes of simple catalogue products and appeared initially to operate with some success. By 1999 at the very peak of the dot com boom, a number of initiatives were seen in the Oil & Gas industry where Buyers, Oil & Gas Companies predominantly, helped fund and create buyer-centric market places and started requesting their supplier communities to supply their catalogues in a myriad of formats and with very variable conditions attached, so that in theory the Buyers could manage their procurement process more effectively. Unfortunately the market place applications and technology were immature and all trading partners were being advised to change business processes from those well established ones to fit the technology available.

The creation of OFS Portal LLC

The Suppliers tried to respond to these various requests as best they could, but recognised there was no consistency across the industry. Within any trading community there are strict laws related to stopping the potential for cartels to be created and exist. Within this environment Suppliers have stricter rules imposed on them than for Buyers. In mid 2000 a group of 12 Upstream Oilfield Service and Supply companies sat together with full Anti-Trust legal oversight to see how they could help the industry as a whole move into the internet age of business. It was recognised that the most effective way to talk to the industry on this topic would be with one voice, in which all the involved participants could have previously agreed with the messages. From this thought came the concept of a trade association of Suppliers. A few key principles were laid out from the start:

• It would need to be a not-for-profit concept organisation
• It would be for suppliers only and they would fund the organisation through a subscription basis
• To be manageable it would not have to try and grasp the whole industry, but focus on a certain part that covered the industry segment of the interested suppliers around the table. This was deemed to be “From the Reservoir to the Refinery Gate”
• The trade association would only offer actual practical services internally to its membership
• The key service the trade association offered to the industry was as an advocate for best practices around eCommerce in the Oil & Gas industry
• PIDX, then a committee of API which had developed extensive EDI standards specific to the industry was already identified as the natural home for XML standards and OFS Portal committed to putting its support directly into this committee as it started on the XML standards road

Before the end of 2000 the Supplier companies had presented the concept to their C level management and secured unanimous support for the concept and the required funding for the legal vehicle, its governance and all necessary bylaws and intercompany agreements to be created.

OFS Portal’s Mission, unchanged since inception has been - “OFS Portal has NO products or services. OFS Portal was formed by a group of diverse upstream suppliers, with a non-profit objective in order to provide standardized information to B2B trading partners and to guide trading partners in best practices of eCommerce.”

The Early Days

At the beginning of 2001 OFS Portal was in existence just as the dot com boom changed to a dot com bust. Significant amounts of funding in the internet market disappeared but the commitments had been made and both the Buyers and the Suppliers maintained their efforts to utilise the emerging internet technologies. Against this background it should be remembered that after a period of low oil prices (which drives lots of decisions in the industry) during the whole of the 1990s where the price of a barrel had languished in the $10-$22/bbl range, there followed an increase from $10 to $30/bbl from August 1999 to Aug 2000 followed by a sharp decrease to $20/bbl in the following 12 months to August 2001. This price movement coloured the atmosphere and many decisions made in the industry. It soon became apparent that the suppliers’ product catalogues that existed at the time were immature and could not be used as hoped for sourcing and procurement. OFS Portal created an internal toolset to be able to manage the price lists of its members such that they could be syndicated out to specific Buyer business units around the world. They could then take these price lists, each from a supplier member delivered to the buyer for a specific contract. The Buyer would then verify these prices and upload them into their ERP contracts modules to allow for rate validation. This service has continued from OFS Portal for its members to their Buyer community to the present time.

Legal Concerns

Many software applications seen on the internet require the user to click on an “ACCEPT” button to allow the user access to the functionalities of the program. The various Solution Providers offering Market Places / Hubs / Networks Transaction Routing Hubs ( generically known as Third Party Solution Providers - TPSP ) have the same “click licenses”. In the early days of the dot com boom across a number of industries some of the TPSP had onerous terms in the licences, regarding such critical topics as the ownership of the data being held or passed through their systems. Some also reserved the right to ‘mine the data’ to extrapolate trends and offer these results as a further business stream.

In almost all cases an Oil & Gas Company acting as Buyer will negotiate a contract / frame agreement with a Supplier covering the regular terms and conditions related to the commercial relationship. Very few ever address the concerns of the very valuable Intellectual Property for both parties passing between the two trading partners via a third party. As in 99% of all cases the TPSP is contracted by the Buyer, then holding the TPSP responsible for the handling of the data, falls solely on the Buyer. To address this issue for the benefit of both the trading partners, OFS Portal has created what is now an industry standard for the Upstream Oil & Gas industry, a model agreement that just addresses this topic for the benefit of the Buyer and OFS Portal’s members. In order for this document to work, it was necessary for all OFS Portal members to sign internal agreements with OFS Portal committing them to abide by its terms and conditions. These are enshrined in the internal bylaws of OFS Portal.

For the last 8-9 years OFS Portal has promoted this document to the industry and its growth of acceptance continues on a global basis, from the Major IOCs, medium and small independents to NOCs. At the latest count there are close to 140 Buyers who have signed legal documents with OFS Portal to help protect some of the industry’s IP when it is moving over the internet.

When the TPSPs recognized the benefit of such a document between the Buyer and Supplier, they requested if such a document could be created. OFS Portal modified the structure of the agreement to recognise the role of the TPSPs as the middle party in the electronic movement of data between the trading parties. This allowed them to demonstrate that they would also act professionally in the areas of data confidentiality and data ownership. OFS Portal presented this document to the TPSPs which has become close to a standard, and which has been accepted by the vast majority of all the TPSPs active in the Oil & Gas arena, currently ~ 23. This model document became accepted as the basis for a major project with the European Commissions’ project to develop an interoperability agreement for European TPSPs.

Other Support Activities undertaken by OFS Portal

• A long term broad supporter of all aspects of PIDX International, the global eBusiness standards body for the Oil & Gas industry
• Placement of an experienced OFS Portal advocate in Europe to manage the global reach and aspirations for OFS Portal
• Promotion of the principles of best practices in Oil & Gas eBusiness through
• The regular authoring of white papers related to the topics around eBusiness in Oil & Gas
• Presenting the white papers or related material at appropriate industry conferences and events around the world
• Sponsoring the OFS Portal name at various key industry events related to not just Oil & Gas, but with either an Upstream focus and / or eBusiness, in its broadest interpretation.
• Facilitation of cross industry meetings to address topics of concern between the Oil & Gas community and ERP suppliers as it relates to eBusiness requirements
• Volunteer resources to work with various international bodies such as the European Commission in the long term projects to develop broad eBusiness best practices and guidelines
• Act as a strategy planning facilitator with various NOCs in building best practices around eCommerce for the greater good of the industry and direct longer term benefit to its members.
• Organise a successful Annual Retreat for its members and their community of Upstream Oil & Gas trading partners to review leading industry analysts’ thoughts and share ideas and concerns around eBusiness. This is now in its 11th year.