IT Implications Linger for Chevron/Texaco Merger

Last week's announced merger of oil giants Chevron Corp. and Texaco Inc. will create the world's fourth-largest energy company.

It also will mean the integration of several electronic-business initiatives now under way at both companies, which together will boast annual revenue of more than $US80 billion.

The combined ChevronTexaco Corp., to be headquartered in San Francisco, expects to cut costs by $US1.2 billion per year by combining operations, officials said. Plans also include the elimination of approximately 4,000 jobs, or 7% of workers across the two companies, where rumors of a merger have been swirling since May.

How hard information technology will be hit by the planned job reductions - if at all - remains unknown. Neither company could be reached for comment. But analysts said there will likely be some consolidation of the two firms' administrative and oil production and distribution operations.

"Both companies are similar in their structure in that they're both big, integrated oil companies. There's a lot of overlap, and they will eliminate that duplication of effort," said Brian Eisenbarth, an oil industry analyst at Collins & Co. in Larkspur, Calif.

A Common Challenge

Several other industry giants have been wrestling with similar issues after recent mergers that formed the world's three largest oil companies: Exxon Mobil Corp. in Irving, Texas (see related story, below); BP Amoco PLC in London; and Royal Dutch/Shell Group in The Hague, The Netherlands.

One analyst said it might not be the end of the merger activity. As a combined entity, Texaco still doesn't top $US100 billion, so the company may acquire another firm to compete with the other merged giants.

On the IT front, Chevron and Texaco officials said one of the key benefits of the merger will be a broader portfolio in advanced technologies, including e-commerce ventures.

Texaco is working with consultants from New York-based PricewaterhouseCoopers LLP to implement buy-side procurement software from Ariba Inc., a project it expects will be completed by the end of the year and that will cut current procurement costs substantially, said Greg Vesey, Texaco's vice president of e-business.

San Francisco-based Chevron is also using software from Mountain View, Calif.-based Ariba to develop PetroCosm Corp., an independent, online business-to-business marketplace for oil and gas companies that it created with White Plains, N.Y.-based Texaco.

Now, however, analysts said the Chevron/Texaco merger could raise questions among other industry players about Houston-based PetroCosm's status as an independent, neutral marketplace.

"On the plus side, the merger means both companies can place more focus on the exchange. But on the downside, it's no longer a consortium," said Randall Nottingham, an energy analyst at The Yankee Group in Boston. "I can see that PetroCosm may want to find other industry backers so they're not seen as a one-player exchange."

Other Ventures

Chevron's other key online marketplace venture is Concord, Calif.-based, an online exchange for convenience-store retailers and their suppliers that was spun off from Chevron earlier this month.

Earlier this year, Texaco created an internal $US20 million venture fund to finance e-commerce initiatives put forth by its various business units.

Texaco has also implemented an extensive intranet application, known as PeopleNet, which functions as a huge, worldwide knowledge base for its far-flung workers.

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