Electronic trading exchanges, companies that host web sites bringing buyers and sellers together, are proliferating across all industries, including oil and gas. The mad dash will only accelerate, predict officials of Boston-based AMR Research Inc. "Currently, there are 600 funded trading exchanges. This probably will expand to almost 2,000 before it begins to contract," Bob Parker, AMR Research director for enabling technologies, told participants in a Petroleum Equipment Suppliers Association e-commerce workshop in Houston. Parker predicts that in each industry one trading exchange will emerge as the leader with a couple of close contenders, in a year or two. AMR is a market analysis firm that tracks more than 500 leading software and service providers. Leif Eriksen, AMR senior analyst for manufacturing strategies, called the trend "ExchangeMania.com." He said that oil and gas exchanges are in their early stages but they have aggressive growth plans. "The exchanges have not moved beyond the low-hanging fruit and addressed complex issues yet," Eriksen said. "Trading exchanges are only one part of e-commerce." Successful exchanges are leveraging existing relationships and working with existing players within their perspective target industry, he said. Some of the exchanges are independent businesses while others involve oil companies teaming up with e-commerce companies to create Internet marketplaces. Chevron Corp. and software company Ariba Inc. created a joint venture called Petrocosm, which is slated to launch in the second quarter of this year. Meanwhile, Royal Dutch/Shell and Commerce One have a joint venture as do Norway's Statoil and SAP AG, a German software manufacturer. "Everybody is still trying to define what these exchanges are, what they do and what value they add," Eriksen said. "Despite some of the hype, there isn't going to be one monolithic exchange that is going to do everything." Value can be created by reducing transaction costs, establishing improved supplier-customer relationships and providing better information, he indicated. But increasing value can lead to increased complexities, he added. For instance, business-to-business transactions differ from business-to-consumer transactions. Most energy-related e-commerce currently involves business-to-consumer deals because business-to-business transactions require integration of the supplier's and the buyer's backend systems, enabling the elimination of a middleman in many cases. "E-business is less inventory, more information and a more complex supply chain. It's not easy. It's not just about going out and building a web site. It's about defining your strategy," Eriksen said. -Paula Dittrick