Chevron-backed Net exchange shuts down

PetroCosm, an online marketplace for the petroleum industry, quietly shuts its doors after not being able to attract enough participants, a Chevron executive says.

2 min read
Online procurement portal PetroCosm, a joint venture between Ariba, Chevron and Texaco, has quietly shut its doors, another sign that public marketplaces may not be in for a bright future.

The online marketplace, which provided procurement tools and services for the petroleum industry, was unable to attract enough participants to make the marketplace viable and generate revenue, said Nancy Malinowski, a spokeswoman for Chevron, one of the initial backers of the marketplace.

Houston-based PetroCosm stopped doing business a week ago, Malinowski said, although its Web site was still online as of Friday afternoon PDT. The company has not made a formal announcement about the closure.

Executives of PetroCosm, which employed about 180 when it shut down, could not be reached for comment.

Malinowski said Chevron funded PetroCosm during a negotiation period during which Chevron and other PetroCosm members were discussing its ownership structure and a new direction for the marketplace. She said Chevron and the other members "could not come up with a satisfactory agreement," so the marketplace was shuttered.

Chevron will continue with its own online procurement and plans to develop its own e-business network within the company, Malinowski said, though she would not specify what shape the plan will take, or at what time it would be completed.

Electronic marketplaces, once hailed as a surefire way to alleviate paperwork and better connect buyers with suppliers, have struggled, according to a recent report. Only about 23 percent of survey respondents said they bought goods or services through online marketplaces, according to the report by The National Association of Purchasing Management and Forrester Research.

Analysts said PetroCosm had difficulties for some time.

"This was just an issue of building a buyer side B2B marketplace where only one buyer showed up, which was Texaco," said Leif Ericksen, an analyst at AMR research. "They were one of the earlier adopters of Ariba, going back to 1999. At the beginning of 2000, they decided to spin PetroCosm off as its own entity, under the assumption that others would sign on."

However, few oil and gas companies did. The biggest manufacturers in the oil and gas industry either built their own marketplaces--like Traderanger.com of Royal Dutch/Shell, BP Amoco, and Conoco--or held off jumping into the marketplace game like Exxon/Mobil.

The closure of the marketplace is another blow to business-to-business software maker Ariba, which has felt the sting of a slowing economy and an ongoing shakeout in the business-to-business market.

During the past few weeks, Chevron, which announced its merger with Texaco last year, was in talks to buy or take majority ownership of the marketplace, Malinowski said.

Ericksen said he thought Chevron and Texaco should have bought out the other investors to make it their own private exchange.