Chevron negotiating to buy oil industry exchange

Chevron is involved in negotiations to buy the PetroCosm online marketplace that it helped launch early last year along with other companies, an executive at the oil and gas industry exchange confirmed on Tuesday.

Alexandra Pruner, vice president of marketing at PetroCosm, wouldn't disclose any further details about the talks. A Chevron spokeswoman confirmed that the San Francisco-based company is negotiating with PetroCosm and fellow exchange participant Texaco Inc., but she also declined additional comment.

Chevron and White Plains, Texaco last fall announced a proposed US$100 billion merger that would create the world's fourth-largest energy company. The deal is still awaiting approval from the US Federal Trade Commission, and Chevron last month said its "best case" scenario would be to complete the acquisition in June.

PetroCosm was created 15 months ago by Chevron and business-to-business software vendor Ariba. Texaco quickly joined the exchange as a founding member. Other participants include National Oilwell, a maker of equipment used to drill for oil and gas, and Petrobras, a Brazilian oil company that agreed to set up an online marketplace in that country along with PetroCosm.

Financial backers include Crosspoint Venture Partners; Requisite Technology, is an equity partner.

PetroCosm, which currently bills itself as "the industry-owned oil and gas marketplace," claims to have processed more than 1,300 business-to-business transactions, such as catalog procurement purchases and dynamic sourcing acquisitions, since it opened for business last summer. The marketplace uses software developed by Ariba and Requisite Technology; KPMG Consulting LLC helped build its technical architecture and its Web site.

But the viability of public business-to-business marketplaces is increasingly being questioned because of Data integration complexities and the difficulty of getting competing participants to agree on operating procedures and business plans. In addition, Ariba and several other top business-to-business vendors last week warned that their sales have been below expectations.

Louis Gagliardi, an analyst at John S. Herold, a petroleum industry research and consulting firm said Chevron is "probably being a little bit opportunistic and acting in [its] own self-interest" by seeking to take full ownership of PetroCosm.

"Valuations have come down, and if they're going to take it over, now is probably as good a time as ever," Gagliardi said. "They can get it at a lower price. If it doesn't work out down the road, they can write it off."

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More about AribaChevron AustraliaCrosspoint Venture PartnersFederal Trade CommissionKPMGPetroCosmRequisite TechnologyUS Federal Trade Commission

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