Royal Dutch/Shell Group (Shell) is hoping that a new jointventure with Commerce One, a leading provider of global e-commercesolutions, will help lower its procurement costs substantially. Thetwo companies announced a memorandum of understanding to form theyet-to-be-named company yesterday. The online marketplace isplanned to go live in the second quarter of the year, with stafffrom Shell, Commerce One and new recruits.

Under the agreement, Commerce One and Shell will create acompany that will provide an Internet-based marketplace wherebuyers will be linked with sellers of a broad range of goods andservices. The procurement marketplace will span the oil, gas andchemicals industry and be open to energy companies, their suppliersand their customers. It will not, however, encompass the trade ofcommodity.

“The main thrust behind this joint venture is to cut procurementcosts,” said Bruce Thompson, senior vice president of Coral Energy,a Shell subsidiary. “Everything from pencils to drilling equipmentwill be bought and sold through the Internet portals Commerce Onewill set up for Shell.

“The downstream transaction, however, is the focus ofCoralconnect.com, and there are no plans to trade commodities suchas gas or oil through the Commerce One project. That may changedown the road, but initially, no commodity will be traded.”

Coralconnect.com was launched last November (see Daily GPI, Nov. 18) by Coral Energy. It is ane-commerce web site where users can apply to perform transactions,check account information and monitor energy prices. Similarly, Enronlaunched a downstream gas trading web site, called EnronOnline.com,last year as well (see Daily GPI,Oct. 27).

As part of the transaction, it is anticipated that Commerce Onewill grant Shell warrants to receive 4,280,450 shares of CommerceOne common stock, in exchange for the right to receive shares inthe new company prior to its initial public offering. The exchangeof the Commerce One and joint venture options is contingent uponcertain events, including a listed initial public offering (IPO) bythe new company at a certain predetermined minimum value.

“While we know the e-commerce side of things, Shell will do theheavy lifting in terms of building the community. They have therelationships with the other companies to make this marketplacethrive,” said Kit Robinson, a spokesman for Commerce One.

Shell believes the venture will go a long way to positivelyeffect the company’s bottom line. Shell set a $4 billion costimprovement target last month. “This new exchange is intended as anopen gateway and we welcome other energy companies to join in,”said Harry Roels, group managing director of Royal Dutch/ShellGroup. “There are huge efficiencies to be gained by everyone andthe more members we get, the more successful it will be.”

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