The decentralized production model provides a solution to the lack of profitability in the natural gas business. It addresses specifically the issues that are present as a result of the abundance from the shale gas reserves. The decentralized production model reconfigures the prototypical producer to include the C class executives, the earth science and engineering resources, some land and legal, and some support staff. The administrative and accounting staff are reorganized into service providers who are focused on one process and service the entire industry with their unique and specialized capability. Costs for these service providers are billed directly to the Joint Operating Committee. This industry wide administrative and accounting capability vs. each producer having to develop their own administrative and accounting capability is the key to dealing with the unprofitable shale gas situation.
When a property is unable to attain profitable operations it is shut-in until it can return to profitable production through either higher prices or some new innovation. While the property is shut-in, there are no operating costs, royalties or overhead costs incurred by the property. The overhead costs consisting of the administrative and accounting costs that are charged by the service providers to the Joint Operating Committee, and only when there is activity in their task and transfer network. Without production there is no activity to generate any accounting or administrative work or subsequent billing. Therefore the property reports a null operation, no profit or loss. The reserves are kept for a time when the property is able to produce at a profit. And the commodity marketplaces supply is reduced by the marginal production. A significant improvement over the current practice of incurring losses, adding those losses to the reserves to be recovered by even higher prices in the future and flooding the commodity marketplace with unprofitable natural gas.
The People, Ideas & Objects decentralized business model provides the producer with the ability to scale their operation up and down their production profile. One day they could be producing 20,000 barrels / day and the next 100,000 based on the commodity prices and the performance of their properties. At no time should any property be unprofitable. The producer would be profitable at 20,000 barrels / day and if prices allowed they would be profitable at 100,000 barrels / day. The decentralized production model makes their overhead costs variable just like their operating costs and their royalties. It is the service providers who will know that at anytime they may be faced with production declines from the producers in the order of 10 to 15% and are therefore able to account for these in their annual budgets. Essentially providing a means in which the oil and gas producer can control their G&A costs.
It is the decentralized production model that provides the means in which the producers can profitably produce the shale gas reserves. It is the user community that has the power and control of the Preliminary Specification and in this instance the decentralized production model to effectively deliver the profits to the dynamic, innovative and profitable oil and gas producer. It is the user community who has the budget, the Intellectual Property, and the key point of contact for the industry to turn to. To make the decentralized production model effective and efficient in the oil and gas industry. If there are issues and opportunities in the decentralized production model that the oil and gas producers want to see, who do they turn to? The user community. It is also the user community that can make the changes proactively to enhance any new and desired benefits are made available to the producers. That is because we have only begun down this road. There are many opportunities when we begin using the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer, and the user community is enabled, empowered and in control of the business models and organizational structure of the dynamic, innovative and profitable oil and gas industry.
The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.