Monday, March 31, 2008

Topics of discussion.

One point that most users will be able to identify with is the recent focus of the industry. For the past year the focus has been on reserves, its land base, its production forecast, how difficult and expensive it is to produce oil and gas, and occasionally the retirement of the brain trust in the next 5 - 10 years. Any topics outside of the realm of these points of discussion is never raised. What about the systems, administration and management of the industry? Are these disciplines no longer considered a part of oil and gas? Is it through the neglect of these areas that is the motivating factor of the need for the People, Ideas & Objects application? Or is this just the natural evolution of the industry to focus on its key value added areas?

When you think about it, the topics of discussion of the industry are the most serious that they've faced. And the most demanding in their 140 year history. The magnitude of the problems and the seriousness of the issues requires 100% of their focus. Is it any wonder that many areas of traditional concern are falling off the table? I don't think so, and I would suggest the responsibility for action will fall on a different group to provide the systems, management and administration. And as we move forward the Users will become the leaders of this new service industry.

It is clear to me that the Users must be the lead in the development of this application. They're the only ones that collectively know how the industry operates. To preclude them from development would render this software quality down to that of SAP's and Oracle's. But there's more then just that. In the future what will the role of these users be in the oil and gas? What I'm getting at here is that People, Ideas & Objects application is the beginnings of a new User-driven technical support industry. Where the Users build their own software, manage and administer the day to day in oil and gas, and provide these critical resources as part of their service offering.

The current focus is not likely to change, and the earth scientists and engineers are off busy with their reserves, land, and production problems. They will need this new service industry to rely on, and will willingly pay for it. The number of people employed is very small for an industry that is in the ballpark of $4.5 trillion in revenue. Over the lifetime of the oil and gas business, the General & Administrative costs have been around 5% of the total. Is it reasonable to assume that this new industry we are talking about is a $225 billion in revenue? I think so, join me here.

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Tuesday, March 25, 2008

Thomas Davenport declares a revolution.

Documenting the differences between the old "Knowledge Management" and the current Enterprise 2.0 (E2.0) type of applications. (Which of course People, Ideas & Objects would be considered E2.0) You can access the article from here.

Hard to imagine that Thomas Davenport would say such things, but this is a must read article. His most important point is the reaction that is reflected in this quotation.

Certainly any form of “2.0” movement would require a distribution of power. I have no objections to other groups coming into power, but if I held any power I would not be ready to hand it over because of some new software becoming available. I suspect many senior executives will feel the same way. Most would probably like to get the best ideas of their employees, but they like their own ideas even better.

The powers that be in oil and gas, I can assure you, are reading from this script.

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Saturday, March 22, 2008

Draft - Partnership Accounting Module Specification

I am pleased to present the Draft – Partnership Accounting Module specification to the community. This is the third of eleven modules that will be published over the next few months. They can be downloaded from here.

The next module to be published will be the Accounting Voucher.

Partnership Accounting brings together many of the issues that will be faced by using the Joint Operating Committee (JOC) as the key organizational construct. The module’s key assumption is that producer’s will contribute disproportionately to what their commitment requires. Whether the contribution is in capital, land, intellectual property or technical assets, these contributions need to be valued for the purposes of determining the equalized contribution of each producer.

We need to do this in order to eliminate the wasteful and redundant technical and management capabilities being built into each and every silo’d company. The oil and gas industry is based on partnerships, represented by the Joint Operating Committee. It is therefore necessary to recognize the shortfall in human resources due to the dual issues of:
  • The planned retirements of the brain trust in the next 5 – 10 years.
  • The ever-increasing demands of earth science and engineering for each barrel of oil.
This module pools the resources of the producers represented in the JOC. This is to ensure that the required capabilities are sourced from the appropriate resource.

There is a large amount of this module that consists of extensive algorithms that will make this application difficult to get right. However, I think this module is also an area where the greatest creativity and innovation in how these requirements are implemented. This module is also where the largest numbers of users will have their influence. And will also be one of the major modules that provide the users with the ability to develop their commercial virtual worlds in which they will work from in the decades to come.

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Wednesday, March 19, 2008

Tanks half full.

I have written about Matthew Simmons before. He is the most vocal of all the peak oil theorists and the one that makes the most sense. He recently made a presentation talking about the future of the industry, and like me he sees a very rosy picture for those that work in the industry. (Rosy = lots of work to do.)

Stating "Winners Win Big!" p.23

  • Implementation of massive "efficiency plans"
  • The oil service and equipment industry
  • The world's engineering and construction companies
  • Companies that can adapt to high energy costs fast
  • All consumer goods who win market share in building prosperity among oil producing world
I have to agree with all these points. Imagine what someone who is actively employed in the oil and gas industry will be doing. Think of the software tools they will need to make this future a reality. A software application that meets their needs because they were one of the fundamental elements of the development, the user. Join me here.

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Monday, March 17, 2008

Change is everywhere.

Bear Stearns is gone. Doesn't it seem like the financial markets never seem to regain their footings. It appears that unfortunately Bear Stearns had scheduled their first quarter news conference for Monday March 17, 2008. That being today in which they would report large losses, the management chose instead to take $2.00 per share (Down $27 since Friday's close) instead and be taken over by JPMorgan. With over $380 billion in Bear Stearns liabilities, lets hope JPMorgan stays afloat!

Shell will be announcing their reserves tomorrow, and I suspect just as Chevron's were bad news we'll see the same problems form Shell. Last week Chevron announced that their reserves are now below the level they were before they purchased Union oil's assets. Recall that was a few years ago and was a moderately sized acquisition. As fast as these energy companies try to move they are constrained by the ability of the organization to change to the greater demands of the higher levels of science and engineering per barrel of oil. The bureaucracy can't keep up.

Professor Carlota Perez is someone that I have written about on this blog before. Perez is a long range economic theorist of the Schumpeter style of creative destruction. She has been stating the Information & Communication Technologies are going through the "turning" phase in which they will finally take the lead position in creating product value. She also states the financial structure of the economy has become irrelevant and is unable to provide the sustained value generation that is necessary for the future. Check out the 7 other blog posts I have written on Perez here.

The entire purpose of this blog is to provide a software development vehicle for the User to participate, design and develop the software they need. The software that establishes their role in the new organization of the energy industry, the Joint Operating Committee. As I suspect with Bear Stearns, the current bureaucracies will not have the organizational speed and innovativeness to stay ahead of the difficulties of this new market and its cold brutal realities. Join me here in what Professor Perez calls the future.

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Friday, March 14, 2008

Why this software development project needs to be done.

I am writing the draft specification of the Partnership Accounting Module and it strikes me how and why this software needs to be built. And this community is the only way in which it can be done. Compare the differences and advantages.

User defined software development

People need to have an influence in the development of their software. Influence in order to get things done in their day to day. And influence on how to improve them, how to change them and make their jobs easier and more productive. Who else can define, build and use an application like People, Ideas & Objects, as I note below, there is no one else.

There is an important time-lapse element in the process of this project. A user may find a change is needed to the software due to a bug, a change in regulations or a general enhancement. In this project the user is the key change driver, all they will need to do is ask. Which circumvents the long tedious and ultimately futile current bureaucratic process where really there is nothing that can be changed?

Who has the authority to make the necessary changes? When a contradiction arises between the vision and the implementation, who can orchestrate the necessary changes? How about the user? The user is the only group of people who have an understanding of the industry in its entirety.

Top down software development.

Let’s assume that some of the large producers attempted to satisfy their software needs by hiring a group of developers to build an application for them. Where does the passion and desire to make the application its best come from? IT departments have no interest in developing new applications; they’re busy keeping the old ones running and have no time, motivation or interest.

Assuming a custom development for a handful of producers was successful. What about the rest of the industry, will they have access to the system? This has been tried in Canada with the application being released and announced dead on arrival early in 2007. What was the problem? Was the user group compensated, where are the vision, passion and drive? Is the IT department the reason that this last application was unusable?

Having developers work in isolation provides you with some of the nicest code ever written. Without the users actively demanding and communicating to the developer exactly what it is they want and need, the developers will be coding in a cloud. Certainly these developments are not structured to compensate the user for their time, passion or vision. Usually the people are told to use the application after a few days training.

Legacy systems.

How many applications were initially developed in the 1980’s that are still in use today? My answer would be far too many. But these applications have been able to generate large percentage market shares because of a familiarity of the users in getting things done. Simply the users begin to understand how the application works and are able to devise work around’s to get their work done. Without large spreadsheets to help this process along, people would be working night and day trying to keep up. Nonetheless, no one is championing the cause to have these relics continuing towards the future.

The software vendors will do it.

Software vendors as I have mentioned are constrained by customers and particularly by their code base. They don’t want to change. Although there is strong demand for change, there are no financial resources available for them to do so. It’s a fundamentally flawed business model that the Open Source world sought to resolve and indeed ended. To begin the process of adopting user driven developments would increase their budget substantially. Since they have limited money for developers, it is reasonable to assume they have no money for users.

This would also apply to SAP and Oracle. Although for other reasons the industry has tried those applications and was disappointed. I doubt that another opportunity would be provided to them.

The problem.

Time is now passing by rather quickly. The producers were able to find more oil then they produced up until a few years ago. Now some are finding only 15% of their production with multi-billion dollar budgets. This is a road to oblivion that the producers management seems content with. Their pensions are safe and they have the situation in hand.

Producers are paralyzed by their own complexity. Incapable of responding to any and all change signals. Yet it is management that may be one group that responds to this opportunity. Holding two opposing views on a topic is apparently one of the things we humans do well. If their retirement is already planned, what about some post retirement consulting fees?

The solution.

New forms of organization, such as the Joint Operating Committee as the key organizational construct, work hand in hand with today’s Information Technologies. Imagine an application that covers the whole scope of the industry, where the development and user costs are shared over the entire industry. Where the entire industry has access and the application operates seamlessly like it was built by the people who use it.

These issues need to be addressed from the start. After the publication of the draft specification, what’s my role in this software development? I have two choices absolutely nothing, and absolutely everything. The scope of this application is well beyond one or even one thousand people’s capacity to understand. The more I would try to involve myself, the more damage that would be done. It’s the user’s software. Another thing I can do is build the necessary infrastructure for the developers, users and the application itself. More processing power, network bandwidth, and money for the users and developers for this work building the People, Ideas & Objects application. A user-driven software application that achieves a new level of organizational performance for the industry. One that enables the innovations in the science and engineering that are needed and beyond the reach of today’s hierarchy. Join me here.

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Tuesday, March 11, 2008

Energy, Development, and the Environment: An Appraisal Three Decades After the “Limits to Growth” Debate

Giovanni Dosi and Marco Grazzi

May 2006

This paper is part of the Laboratory of Economics and Management (LEM) working paper series. The cornerstone of the my thesis, that proved the Joint Operating Committee is the key organizational construct of the energy industry, used Professor Giovanni Dosi’s critical work “Sources, Procedures and Microeconomic Effects of Innovation” September 1988.

Professor Dosi is recognized as one, if not the premier, authority on innovation and his work is thorough and precise. Although he may be hard to read, that is a trait that is shared with most authors of great papers. So let’s dive in;

Dosi starts off by stating some assumptions that form the basis of his analysis. The most pertinent assumptions provide some insight to the current situation we are in.

Second, the higher the price for fossil fuels, the better it is in the long run for the world economy as for humankind in general. P.2


Third, even sky-rocketing prices of fossil fuels alone might not be enough to endogenously induce a sustainable pattern of consumption. P. 2

The long-term patterns of energy consumption and their sustainability.

This section sets out the problem that concerns me the most.

Inanimate sources of work exceeded animal work in the U.S. for the first time in 1870. p. 3

Not since 1870 has the physical labor of man been the primary driver of economic growth. In the last 138 years we have become so dependent on energy, and its associated efficiency, that there is difficulty understanding how the basic globalized economy would continue to function without energy. For example you have the opportunity to do a days work with a 200 horsepower forklift. If that 200 horsepower forklift suddenly is unusable due to fuel shortages, the alternative is to house, feed and incur the associated costs of 300 men. Without energy we would be reduced to the productivity that was attained in 1870.

Freeman and collaborators at the Science Policy Research Unit at Sussex – argued that growth could continue, provided that the two following conditions were to be met: (a) a combination of institutional changes that led to different paths of world development (with more emphasis on sustainability) and (b) a re-orientation of world R&D so that environmental objectives could be given higher priority (see Freeman [1992]). P. 4

We live in difficult times with problems that have many challenges. As difficult as it is to accept the two conditions that Dosi has listed above, I am unable to argue that there are alternatives. Dosi et al however notes the following optimistic point;

In fact, in our view the Club of Rome warnings massively underestimated the powers of technological progress with respect to the access to / exploitation of natural resources. P. 4

I have written before about the ability of the oil and gas industry to surprise on the upside with their performance. Oil and gas exists in the minds of oil and gas people. And I believe that given the right set of circumstances producers will surprise on the upside once again. However, I think that the structured hierarchy is the impediment to the global economy realizing the potential of these oil and gas people. Using the hierarchy is difficult to achieve “more,” and I just don't see how they can do it. It is applying last centuries thinking to this century’s problems.

The view that greater economic activity inevitably hurts the environment is based on static assumptions about technology, tastes and environment investment (IBRD [1992], p. 38). P. 6

This point is clearly evident in most people’s lives. If we were to continue on with the engine types that were built in the 1960’s and 1970’s we probably would have perished by now. But we didn’t and that fact is evidence of Dosi’s point here that the technology that is available today can solve many of these problems. As one can tell, I happen to think the current Information Technologies have only begun to provide for the world in this sense. And based on what Dosi says we’re in luck…

First, one tends to observe positive income elasticities for environmental quality; second, structural change in production and consumption toward “good” environmental friendly directions tend to be associated with higher per capita income; third, information on environmental consequences of economic activities increases with income levels. pp. 6 – 7

Does this assert that the U.S. and China will create less waste from more resources as their economies expand? I think it does and that seems to be consistent with Dosi’s thinking. I think the U.S. uses a lot of energy, but is the most efficient user of energy on the basis of GNP per unit of energy. Review of graph 8 and 5 are provided after Dosi’s point.

The bottom line is that technical progress – possibly together with structural change – has barely succeeded in stabilizing and even marginally decreasing energy consumption per capita, in high income countries: see figure 8 and 5 for the U.S. evidence. However demography heavily plays against any stabilization, let alone reduction of total energy consumption and of emissions in the environment. p. 11

Some – including the so-called IPAT model (standing for “Impact Population Affluence per capita Technology: cf. Ehrlich and Holdren [1971]) and other (see Shi [2003], Cole and Neumayer [2004], Dietz and Rosa [1997]) – do indeed account explicitly for demographics effects. The estimates – it turns out – yield elasticites which are in the neighborhood of one. Hence, other things being equal, even neglecting the effects on both energy consumption and emissions of growing per capita incomes, one should expect at least their doubling over the next three decades as a sheer effect of population growth. p. 12

Point well taken, the damage is cumulative.

What can technical progress do? And where does it come from?

If we turn now to document the progress of the North American automobile, which is the one area that can achieve benefits. We see the 10 mpg 1960's pony car replaced by its high teens mpg current version. We have reduced the amount of pollution produced in a substantial way. Yet, as I understand it the automobile still only uses 20% of its energy consumed on forward motion. Most is lost through heat. If we were to capture

60% of the energy that we used we could conceptually reduce our consumption by two thirds and reduce our environmental impact. It is obvious the 20% figure is substantially more then the vehicles of the 1960's. I believe this is the most promising area of where we can achieve the benefits we desire. Maybe the innovation will come as a refinery discovery, or simple retro-fit of some device in each vehicle, or maybe I am out to lunch here. Something needs to be done. And I would expect half of the energy savings to come from consumers and one half from producers.

Can technological advances reduce energy use and emissions in such a way to compensate the effect of both per capita income growth and demographics? p. 12

Dosi is not as optimistic as I.

We have already seen that energy-saving changes in production techniques appeared to have significantly contributed to the fall of energy intensity of GDP – at least at relatively high levels of development. Could the rate of technological progress be

increased to the extent of providing a full compensation for growth and demography? The answer we suggest is largely negative. p. 13

Still under the “inducement” rubric, public regulations have turned out to be a rather effective means of influencing the patterns of energy use and of emissions. In a curious paradox in the literature and in a good deal of policy debate one has both underestimated the environmental impact of the negative externalities stemming from production and locomotion and correspondingly overestimated the cost of regulation. p. 14

I would not recommend any changes to regulations. Although they are believed here to be more effective, I think the market will find its way through use of the market prices. Dosi lives in Italy where regulation may be more effective, by his estimation, and more acceptable. Here in gas guzzling North America we consider regulation is a bad word.

There is a general lesson here: imported price shocks might exert an important influence on the energy intensity of particular energy sources but dramatic changes in their use can only be made possible by the emergence and diffusion of new technological paradigms: in the case of electricity generation these are plausibly nuclear power and, eventually, photovoltaic and nuclear fusion; and, in the domain of locomotion, hydrogen-based means of transportation. p. 14

The higher energy prices are sending information to producers and consumers that invoke billions of decisions each day. This is the most effective way to deal with the energy concerns. Recall that without energy we are reduced to a lifestyle consistent with the year 1870. Price shocks have only begun in this process.

Indeed, technological advancement has reduced, for a given level of consumption of energy, the need for manufactured capital. Nevertheless, this trend has been counterbalanced by a corresponding trend in mechanization, which has substituted capital to work of manpower or animals. p. 15

Some Policy Suggestion by way of a Conclusion

The following policy suggestions I think stand on their own. Much of this thinking is new, to me at least, and should garner your serious consideration.

What is certain in our view is that the cumulative effect of such big and small evolutionary changes will not take care of itself as the most optimistic proponents of “Environmental Kuznets Curve” appear to suggest. Most likely an explosive demography let running until a new “steady state” forecasted somewhere between 12 and 20 billion inhabitants would be sufficient to lead beyond a disaster threshold which in fact some analysts believe that we have already passed (cf. Ehrlich and Ehrlich [1990]). pp. 15 – 16

Hence, sustainability is looming not for reasons of scarcity as it was claimed three decades ago but in a sense for lack of scarcity – at least with respect to energy availability and consumption. p. 16

As Nelson and Winter [1982] put it:

“The processes of change are continually tossing up new “externalities” (remember double clicking any word on this website will provide the entry for that word) that must be dealt with in some manner or other. In a regime in which technical advance is occurring and organizational structure is evolving in response to changing patterns of demand and supply, new non-market interactions that are not contained adequately by prevailing laws and policies are almost certain to appear, and old ones may disappear. Long-lasting chemical insecticides were not a problem eighty years ago. Horse manure polluted the cities buy automotive emissions did not. The canonical “externalities” problem of evolutionary theory is the generation by new technologies of benefits and costs that old institutional structure ignore.” (Nelson and Winter {[1982, p.368.) p.16

Second one should consider high prices of fossil fuels as a blessing rather than a curse. Of course there is, associated with it, a serious distributive problem which is not possible to discuss here. However, one should worry even more if some fossil fuels – as especially the most polluting one, coal – remains relatively cheap. p. 16

Third, it is unfair and unpractical to demand that emerging economies pay the full cost of “greener” patterns of production: only a mix of (i) mechanisms of preferential treatment of “greener” commodities and (ii) international transfer of less polluting technologies is likely to lower the peaks of whatever EKCs, if they exist at all. p. 16

Fourth, we have mentioned above that massive reductions in the levels of net emissions – to repeat, as such a necessary condition for long-term environmental sustainability – are likely to come only with the development of new technological paradigms. p. 17

On the grounds of what we know now the photovoltaic appear to be the most promising one, with, maybe, fusion, in a future further away. The emergence of new paradigms, however, generally demands major advances in basic and applied research sponsored to a good extent by public agencies. Massive “mission-oriented” projects in this area by the ensemble of developed countries are an urgent must. p. 17 Finally, possibly the most difficult issue: introduce measure aimed at the fast stabilization of population level well before the “natural asymptotic levels” from current forecasts. p. 17

The alternative is probably the “evolution towards collapse” brilliantly described by Diamond [2005] in several occurrences of “suicidal civilization” form the past. p. 17

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Sunday, March 09, 2008

Google IPv6 2008 Conference

IPv6 is a cornerstone of the People, Ideas & Objects technical vision, and a critical component of the Draft Security & Access Control Module specification, and for that matter the entire People, Ideas & Objects application. Google held a 2008 IPv6 Conference and have posted several videos of it on YouTube. (Here, here and here.) The last video of the series provides a question and answer forum that is moderated by Google Vice-President Vint Cerf. Vint Cerf is the individual at arpanet that decided on the 32 bit addressing space in IPv4. Additional representation from Google and Cisco and many other vendors discuss some of the issues, opportunities and desires of this future technology.

An interesting comment about the Apple product line was made by one of the commenter's. Noting that Apple was implementing an inside / outside type of thinking that is inconsistent with the IPv6 protocol's. All Apple hardware and software are IPv6 capable until the user turns it off. As a result you are able to use the technology, for yourself, with the full advantages of IPv6. IPv6 is about peer to peer networking and the elimination of the client-server mindset. Apple's products provide a work around where you can view the screen on your home computer at your work, or anywhere you may be in the world. This is done through making a gateway out of their wireless, and hence making the commenter's point temporarily valid.

The second video has the Cisco Technology Product Manager Patrick Grossetete stating "There is no reason to make an application that doesn't use both IPv4 and IPv6 today." It is my opinion that most of the applications operating within the oil and gas industry are not IPv6, and I can say this as most of the applications currently in oil and gas are unaware that their is a network outside of the Intranet in which the operate.

Why is IPv6 a cornerstone of the People, Ideas & Objects technical vision? IPv6 enables 2 to the power of 128 addressing, enabling every device made and ever to be made to have its own static IP address. Enabling the device to be monitored and controlled. Innovation of earth sciences and engineering disciplines are sciences that deal with time, pressure and temperature. Things that can therefore be controlled and monitored. What better way for an industry to have to make this change then through a dedicated software development capability, such as People, Ideas & Objects is offering.

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Thursday, March 06, 2008

The Draft Petroleum Lease Marketplace Module.

Its out and can be downloaded from the old wiki site, or email me for a copy. I'll be moving on to the Accounting Voucher Module and Partnership Accounting Module draft specifications.

Two areas I thought would be interesting to see get built are a capital budgeting component for each Joint Operating Committee (JOC). Where I draw the analogy to the new Google Health system. A system where individual privacy concerns are upheld. Yet there is some real value in the aggregated data. Particularly from a research point of view. I suggested that if each JOC can agree to a 3 - 5 year capital budget / plan. Then when the information is aggregated across the entire industry. And that information is presented to the vendors, through a Google Earth type of interface. Then we would see the innovative ways that the vendor marketplace could begin to provide those products and services to the producers.

The other area that is of interest is the live nature of the agreements paragraphs. As each agreement is negotiated certain terms and conditions are captured in the document, and, provide the underlying system with the data and algorithms that will be used in administering the agreement. An important point should also be made that these are just broad strokes of what the systems will need and want. The community now begins to add their input and the real innovation will be seen.

There are now two draft specifications that have been submitted to the community. The remaining 9 will be completed over the next year. Putting deadlines on the community, as it is just forming seems unreasonable so we will discuss these deadlines as things move along.

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Tuesday, March 04, 2008

Open Source is democratic.

Users and Developers need to think of this system as theirs. For that is what it is. A place where Developers and Users can come together and solve the energy industries problems, through new and innovative software. These development are the beginning of how people will sign-on to the system to do their work. Where the daily commute is replaced by the daily access. Where people are engaged by producers to conduct their administrative, management and business activities on-line, irrespective of their location.

Not everybody has an idea to contribute and not every contribution is an idea. It will take all different kinds of people to make the application that is needed to do the job. Maybe someone will find through the process of this development they have an effective means of communicating with Developers. And maybe that person will find the freedom and compensation in doing that work more satisfying then their current activities.

The first thing a User or Developer should do is to process the information necessary to join this community. When enough people have joined then the community should begin the process of nominating people to the Executive Committee and each modules Expert Group. Establish the roles and responsibilities of these groups and establish a time frame in which each will sit. Once these nominations are set, the voting for each position can begin.

This process isn’t written in stone, it is only my idea of how the development “might” work. If the User community wants a different process then they should adopt it. This is your system. My vision of how this “could” operate is what I have written in the innovation blog and draft specifications. My role now and in the future is to support the community with what it needs to get the job done and be successful. This primarily focuses on sourcing the financial resources from the producers to pay the Users and Developers.

What I foresee some Users and Developers doing in this community is making the system a cornerstone of their own business operation. Where they may have, or will develop, a firm that integrates the land and accounting information of a producer into these systems modules. Or you may have a business that you conduct an element of the production accounting for a variety of JOC’s. Or possibly a business that provides technical support for a number of producers and / or JOC’s. Some will be one-person operations, and others will have a large staff base. The common denominator of all these businesses is the producers’ needs and the software systems that are being built here by its Users.

A further clarification of where the beginning and end of these businesses start and stop is that I only have an interest in the software. The software is supported indirectly through these businesses, and it is the business of those independent businesses that makes it stand on its own. The final clarification is that I pay for the User and Developer involvement of defining and building the software, and therefore may be considered by some of these businesses to be a paying customer.

But what about the producer, how do they fit into and benefit from this eco-system? Simply they pay to have their systems development done on a cost basis amortized over the entire industry. Unlike SAP and Oracle that repeatedly charge for the software to each company, each company in this system is only paying for their proportionate share of the software development and infrastructure costs. A proportionate share that is being determined as a function of $x.xx per barrel of oil equivalent per year. Whereas if the cost per boe per year is determined to be $1.00 in the first year of development. Then a company such as Encana, which produces 700,000 bbls per day, would pay $700,000 for one year’s access to the system. Each year would be a different value based on the software development needs of the community.

The point of this is that the total cost of the community is shared over the entire producer base. For Encana to pay $700,000 for these services would be a single digit fraction of what they are paying now. Lets hope they begin to see the value of this methodology and start their participation, which is desperately needed, and provide the funding for this community.

The methodology being proposed here, where the producers pay the annual cost of software development mitigates the two impediments to innovation. The two impediments are code and customers. As a software company gets more of each, it begins to take on a Herculean task to re-write and update the code. The software vendor then becomes sensitive to the desires of the community and begins to reject changes on the basis that the costs are not supported in their revenue model.

The producers knowing the software developers potential market is small further aggravate this situation. By limiting the financial resources the producer starves the software developer of the financial resources they need to grow and prosper. A desperate software developer must eat and will do things that are against its best business interest and capitulate to the marketplace.

The reality of the situation in Calgary is, I think, further aggravated by the lack of investment capital for software development. Who after all wants to invest in the scenario that I mentioned above? And secondly, banking for intellectual property just doesn’t exist.

These situations are real and manifest themselves in the fact the software stagnates for 30 years with a 70% market share.

When the financial rewards of exploration and production are as prosperous as the $100 price of oil. Then I think we need to start doing things differently. What I am proposing eliminates these problems and provides a competent software development capability that serves its community. Join me here.

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Sunday, March 02, 2008

Google Sites announced.

A few weeks ago I promised an update on the activities of this project. The most recent news is the announcement of the new application “Google Sites” for Google Apps. I have been waiting for two key technologies from Google, Google Sites and the elusive G: Drive. Seems we will have to wait a little longer for the G: Drive. The reason I have wanted these technologies is to provide the complete environment I think our Users need. With 25GB of email storage for each User and Developer, and now a 10GB Sites database we have everything we need to start expanding on the eleven-module technical specifications and prepare to start developing these applications. Google Sites has a clean interface that provides the complex tools that our users will need.

What Sites will provide is a forum for the Users and Developers to collaborate on the “what” and “how” of what they need from this application. It will be the Users & Developers who will move the thinking forward, and steer the direction of this project on a day-to-day basis. People wanting to join this project should do the following:

  • Review the archives of the innovation in oil and gas blog.
  • Gain an understanding of how the system will be different and the impact of using the Joint Operating Committee as the key organizational construct. Focus on the various research areas that have been reviewed to date. How the boundaries of the firm lend themselves to the clear definition of the JOC being the market, and the role the firm takes in this new definition.
  • Review and sign the license governing your contributions to the project. (Email me for a copy of the license.)
  • Post a summary of your experience and what you can, and would like to, contribute to the project. These will be put in a Sites database where like-minded Users and Developers will be able to search and discover one another. (Up to 2,500 words.)
It will be at this point you will receive access to the community and collaborative environment. Issuance of your email and Sites account will give you access to all these tools.

The Draft Petroleum Lease Marketplace Module Specification is nearly done. A few more weeks and I should be able to post it. It is becoming clear to me that the Draft Partnership Accounting Module and Draft Accounting Voucher will be the third and fourth specifications to be published. It is very important to remember that these specifications are draft and only represent the “what” and “how” the overall vision of this application and its module operate. These are guideposts for the Users and Developers to work with to expand them where necessary and make them work for them in doing their jobs.

Recall the overall objective is to ensure that this application provides the energy producer with the most efficient basis in which to operate its oil and gas assets. And that will include the Users who are involved in this project reselling their time and energy to the producers that use the application.

The energy industry is very much a global business. Rarely do you have a producer that has contained all of its operations in one reporting jurisdiction. The Joint Operating Committee is the global - financial, legal, operational decision-making and cultural means of the industry. Recognizing the JOC as the key organizational construct denotes that the People, Ideas & Objects application and modules will have a global scope of operations. Limiting the geographical scope of the application makes little sense.

Financial resources from the producers continue to disappoint. However we cannot wait for the inevitable day that they realize they need to be involved in this development project. I will continue to solicit producers for financial assistance and participation. Recall most of the money will be used to compensate the Users and Developers for their time during development.
I have added three new module specifications to the application. The three modules are:
  • Accounting Voucher Module
  • Analytics & Statistics Module
  • Performance Evaluation Module
The Accounting Voucher Module is simply recognition that the Accounting Voucher as conceived in this system is a module onto itself.

The Analytics & Statistics Module provides an interface to the application that enables the User to set criteria and establish ad-hoc reporting of items they are interested in. It will enable the deep analytical view of the data and information that they have access to. It's perspective will be from the firm where management can analyze one or many JOC's they participate in.

The Performance Evaluation Module provides the JOC a tool that will enable the participating producers with a means to evaluate the property for a variety of generic criteria. Key to the tools use will be the ability to create differing scenario's and the impact they would have on the property.

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