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Electronic Trading Field Will Consolidate

Electronic Trading Field Will Consolidate

The numerous energy transaction Internet sites are likely to consolidate leaving somewhere between one and six viable sites, executives of three of the leading sites told a GasMart/Power 2000 audience in Denver last week.

"There is an urgent need to respond quickly to capture early-mover advantages," Bruce Thompson, Coral Energy's senior vice president of financial products and services, said. His company is "completely committed" to Coralconnect, the Shell affiliate's bid for the electronic market.

"We agree on the inevitability of electronic exchanges," Thompson said, acknowledging earlier remarks by representatives of Altra Energy Technologies and Houstonstreet.com. Coral sees the "disintermediation" of the club of the phone-based wholesale energy trader is inevitable" because of the pressure on margins and costs that can be saved through electronic transactions.

From watching the technology takeover of financial markets, energy companies have learned how aggressive outsiders or "motivated attackers" can be, and most of Coral's counterparts either are considering or already developing online systems to continue to serve their customers. Thompson said market "incumbents" such as Coral have the advantage of already moving a large volume of gas, which provides ready-made liquidity on their systems.

Thompson, along with Frank Getman, president of Houstonstreet.com and David Hansen, vice president special projects for Altra, agreed that eventually the systems might be linked since some electronic platforms might provide more liquidity in different regional markets. Systems such as Coralconnect could provide their own customized services for their customers, including serving as a gateway to other exchanges.

Getman said Houstonstreet has an open technical architecture, which makes it easy to integrate to back office systems. The company announced Monday it was opening a natural gas trading platform.

Altra's Hansen pointed to studies that predict 90% of energy trading will eventually be done electronically. He credited EnronOnline with raising the electronic consciousness level, thereby benefiting all systems.

Ellen Beswick, Denver

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