In oil and gas the business cycle is more dependent on the reserve life of new reserves. With rapid three-year declines, especially in gas, the question becomes: is this a product of the cumulative innovative-ness in exploiting the technologies that have developed? Or, is the use and application of oil and gas technology yet to be tested against a more exploration style mindset consistent with the risk - reward of the current market pricing of the commodities. Asked another way, would there be longer lasting, more prolific reserves in the frontier regions of oil and gas? Natural gas is experiencing a unique situation with the prolific nature of the shale gas discoveries. And oil continues to experience high global demand with nominal supply growth.
Either way it appears that the exploration and exploitation of oil and gas reserves has and always will be a function of the technology based on the underlying sciences. This is undeniable, and may also be the cause of the shorter-term life cycle and diminished size of new reserves, which is agreed by most to be a trend that will continue. This reserve size and deliver-ability is paralleled in Professor Giovanni Dosi’s discussion of how innovations in industrial companies have been diluted by demand prediction and lower production volumes. Generic corporate strategies are therefore an impediment to the value realization of these short reserve life indexes. Even an innovative posture is going to bring about different strategies in terms of timing of the investments. Professor Dosi notes;
Finally, empirical studies often show the coexistence, within the same industry and for identical environmental incentives, of widely different strategies related to innovation, pricing, R & D, investment and so on. Specifically with regard to innovation one notices a range of strategies concerning whether or not to undertake R & D; being an inventor or an early imitator, or “wait and see”; the amount of investment in R & D; the choice between “incremental; and risky projects, and so on (see Charles Carter and Bruce Williams 1957; Freeman 1982 and the bibliography cited therein). Call these differences behavioral diversity. p. 1157
Changing the innovative behavior of one producer carries a scope of change that is as broad and as diverse as is contemplated in the business world. Change at this scale in many instances can not be managed within the organization but needs to be managed through the forces of creative destruction in the greater economy. A time of dynamic change driven by the organizational changes focused around the innovative Joint Operating Committee. How can a firm that has been developed in an era of cost control transform themselves into an innovative, dynamic, earth science and engineering capability focused producer. In many cases the will to do so might exist, however, with the speed and unforgiving nature of the business cycle, not much time will be provided to those that attempt the transformation. We see in this world the capital markets reflecting many interesting phenomenon since 2008. To suggest any trend or definitive result from these would be premature. Its just a different world in terms of being an oil and gas CEO then it was before 2008.
For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.
Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.