Wednesday, July 31, 2013

A Quick Review of Our Revenue Model Part V

This post seeks to clarify People, Ideas & Objects revenue model and provide an understanding of the flow of funds within the associated communities. Needless to say all the funds flow from the Producers / investors, however that is where the money is. I’ll break down the general flow to show how each of the different groups are sustained over the long term.

To start we need to clearly identify the three different groups that are supported by the producer firms. These groups include (1) People, Ideas & Objects, (2) the user communities and (3) the Community of Independent Service Providers (CISP). The need for this financial support is as follows.

People, Ideas & Objects assesses an annual rental on all producers / investors for access to the software applications, software development, cloud computing infrastructure and the user communities involved in the development. These funds are assessed based on an annual rental for each barrel of oil equivalent of the producer / investors. This rental has been set at $1.00 per barrel of oil equivalent for the 2010, 2011, 2012 and 2013 calendar years. Producers with 100,000 barrels per day of production would be assessed $100,000.00 for anyone of those years. In addition, assessments are due and payable by March 31, of each year. Producers / investors are subject to a 300% penalty for any late payments. All producers / investors are required to pay the rentals and penalties from 2010 forward.

Funds are distributed from People, Ideas & Objects to the users groups themselves for their participation in the development of the software. These users are the producers employees or consultants that define and design the systems they and the producers / investors want and need. People, Ideas & Objects are user based software developments.

The third group that receives direct funding from the producers / investors is the Community of Independent Service Providers. This community is engaged by the producers / investors to handle many of their specific systems related needs. Accounting systems integration and training are a few of the areas where the CISP will be used most often. These are also part of the larger group of service providers who handle the administrative and accounting functions of the producers. Funds for these groups are outside of the People, Ideas & Objects Revenue Model.

What happens to these funds is also important to note.

People, Ideas & Objects incurs the costs associated with the hosting of the infrastructure for running the application and software development environment. We also have the developers on staff who are working with the Community of Independent Service Providers and user groups to define and enhance the systems they need and want.

The Preliminary Specification provides the oil and gas producer with the most 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.

Tuesday, July 30, 2013

A Quick Review of Our Revenue Model Part IV

We start off with recognition that China is now the world’s number one consumer of energy. That the demand for energy in the next several decades will be insatiable. And the somewhat fixed number of earth scientists and engineers will have substantial business opportunities addressing this world demand. It will be through a reorganization of these fixed human resources, by having People, Ideas & Objects software applications define and support enhanced divisions of labor and specialization, that this demand for energy will be satisfied.

Building systems that deal with the commercial interactions between the producer, society and the individuals that work in oil and gas, and the service industries, is beyond the direct concern of the producer. Yet, are a necessity of basic operations. If we agree that the competitive advantages of the producer firm are based on it’s unique composition of oil and gas leases, physical assets of the firm, and application of the firms earth science and engineering capabilities. The producer will remain involved and focused on the development of efficient software systems to identify and support those competitive advantages. Much in the same manner as society and individuals will work to develop those same systems to meet their needs.

Therefore, the producers / investors decision to financially support these developments affect society and individuals. The producer firm receives 100% of the direct revenues from oil and gas sales. Allocation of a portion of these oil and gas revenues towards an initiative like People, Ideas & Objects can not be evaluated based on its competitive return at the producer level. Everyone is familiar with one or more software development or implementation projects that were terminated as the result of a lack of long term funding. These failures have little to do with the quality of the project or the people that were behind it. Over time the sense of urgency that the project may have put forward fades as does the financial support. Approaching a project with the scope of People, Ideas & Objects, without having an answer to a fading sense of urgency would be a failure.

The question therefore becomes, how does the revenue model of People, Ideas & Objects 1) sustain these communities throughout the development cycle and 2) provide these communities with the software tools they need to expand economic output? We provide this by way of the inherent promise or guarantee of this project. That being, this software development, and associated communities, provide the innovative oil and gas producer / investor with the most profitable means of oil and gas operations. The profitable nature arising as a result of the expanded oil and gas output, based on the enhanced division of labor enabled with the People, Ideas & Objects application, and, the value proposition we have put forward.

The specifics of how we provide our guarantee of the most profitable means of oil and gas operations is contained within the Preamble to the Preliminary Specification. The producer firm can specialize within their domain of the earth science and engineering aspects of what an innovative producer requires. The majority of the administrative and accounting functions will be provided through service providers who are focused on the process and are using the industry as their client base. This specialization and division of labor by the service providers and the producers provides the profitable means of operations for the oil and gas producer in comparison to today’s business model. It however also opens many opportunities for the producer to manage their operations in ways that address the issues and opportunities of the 21st century. These were quantified for North American operations at $94 billion in opportunity costs for 2012.

To achieve this specialization and division of labor between these organizations, individuals and within society will not occur spontaneously. If the oil and gas industry wants to achieve the next level of organizational efficiencies, such as what is defined in the Preliminary Specification. It must be defined and supported in the software that is used within the domain of the organizations, individuals and society that benefits from it. We have reached the limits of the gains that can be achieved by spontaneous order. It must be a deliberate act undertaken by the producers to move to the next level. Only then can the economic output of the industry expand for all concerned.

The Preliminary Specification provides the oil and gas producer with the most 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.

Monday, July 29, 2013

A Quick Review of Our Revenue Model Part III

We now apply and extend Professor Jurgen Habermas’ 1960’s theory of different knowledge interests. Building on our discussion of People, Ideas & Objects value proposition, and targeting the oil and gas producers / investors as the sole source of revenue, this post will delve into the difficult question regarding what we need these systems for.

Are we developing systems that manage the commercial operations of an oil and gas producer / investor? Of course we are, but that does not address the societal and individual needs of these systems. If we continue to look at just the needs of the producers and investors, then we are leaving many needs unaddressed. Society and individuals are critical elements of a successful oil and gas industry. For example society benefits by having producers and the service industries efficiently interact and develop profitable operations, and individuals create innovative solutions to the demand they see for their services. Overall organizations, individuals and society benefit by an increased and expanding division of labor and specialization. In today’s globalized, high technology workplace, an expanded division of labor and specialization can be more efficiently created through a software development capability like that described by People, Ideas & Objects in its Preliminary Specification.

When we concern ourselves with the economic output of the oil and gas industry. To expand that output requires that we organize based on greater levels of specialization and a further division of labor. The responsibility for increasing output does not fall to society, individuals or organizations in isolation but to all three. Therefore it is reasonable to state that what we need these systems to address society, individuals and organizations needs. I do not foresee the further development of the division of labor occurring without the active involvement of systems development. In a somewhat deliberate manner where all groups are represented.

If we look critically at the division of labor, and eliminate some of the constraints to expanding it further. Constraints like the limitations of working within one firm or one Joint Operating Committee (JOC). If an individual has the capacity to apply their skills to a task for a geographical region that includes 100 producers and 200 JOC’s, the efficiencies could be substantial. The ability to manage a task in this fashion doesn’t exist within our current organizational context.

Following on the logic of the previous section, where the producer / investor firms are the sole source of the revenue for People, Ideas & Objects and associated communities. Sharing the input of these systems development across society, individuals and the organizations might appear to be inconsistent with the reality that 100% of the funds are coming from the producers.

That’s why the People, Ideas & Objects revenue model shares the one time development costs across the subscribing producers / investors. Just because the producer firms receive 100% of the proceeds of oil and gas sales, doesn't mean that they earn 100% of the revenues of the oil and gas sales. Individuals and society have a role and responsibility in these systems and therefore, these need to be considered irrespective of the desires of the producer firms. We’re not going to develop systems that address the needs of society, individuals and organizations when producers have a disproportionate influence due to their control of the revenue stream.

To sustain this software development requires that we cease being subjected to the individual decisions of one or more producers. A company that chooses not to proceed with the development or implementation of these technologies can not hold up the greater benefit of all concerned. Essentially I am stating that the decision to support these communities needs to be made where appropriate representation considers the needs of all concerned. Looking at the cost benefit analysis of supporting this software from the point of view of only one producer, misses the benefits to society and individuals. For example the 2012 opportunity costs of $94 billion requires production discipline be imposed throughout the industry.

Habermas theories deal with the issues of power, influence and most importantly emancipation. But when it comes to using science or computers to change the relations of power in our society, when emancipation is put forth as a knowledge or development interest, then the question of values becomes more controversial. Who is to be emancipated, and from whom? Who is to lose power, and who is to gain? And how can it be the business of scientists or computer professionals to take part in a political struggle for power?

The Preliminary Specification provides the oil and gas producer with the most 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.

Friday, July 26, 2013

A Quick Review of Our Revenue Model Part II

In the first part of our review of our Revenue Model we established that no one was going to build an ERP system on behalf of the industry. That the only resources that would be available to fund the software developments would be those that are derived from the oil and gas industry itself. Whether that came as a result of the direction of the investors in oil and gas or the C class executives is not determined at this time. The fact of the matter is that the market is too small for anyone to build systems for the industry based on speculation that a market will be there. In today’s post we need to discuss what the motivation will be for these producers to fund these developments. What will compel them to make the efforts to build the systems defined in the Preliminary Specification?

People, Ideas & Objects value proposition is that we provide oil and gas producers with the most profitable means of oil and gas operations. We do this through providing, supporting and defining within the ERP software a business model that enables the producer to be more profitable than any other business model that is available. In comparison to the current corporate business model that is used by the oil and gas producers. We have calculated the opportunity costs for the 2012 calendar year at $94 billion for the North American marketplace. These differences are documented in the Preamble to the Preliminary Specification.

These opportunity costs are the motivation that the oil and gas producers need to fund the development of the Preliminary Specification. The opportunity costs are not available to them in their current corporate business model. To obtain them they must build and operate under the Preliminary Specification. The majority of the gains are as a result of the ability to raise the market prices for natural gas. This is done by the ability to remove the marginal production from the marketplace without the associated losses on operations. A feature of the Preliminary Specification and something that the bureaucracy have proven an inability to deal with.

This value proposition is consistent with the ability of Information Technologies to disintermediate industries. People, Ideas & Objects business model provides a radical ways and means in which to operate the oil and gas industry. Focused on the industry standard Joint Operating Committee it provides the ability to address the issues and opportunities that oil and gas producers face in the 21st century. The Preliminary Specification has been designed to provide the producers with a dynamic, innovative and accountable organization that is also quick. It also removes the bureaucracy from their comfortable position within the industry.

It won’t be by chance that our organizations are able to achieve the attributes described in the Preliminary Specification. Organizations are defined and supported by the software that they use. To achieve a dynamic, innovative and accountable organization will need to be defined in the software first. That is one of the facts that we need to learn. People, Ideas & Objects also provides a software development capability that will enable our subscribing producer firms to take the Preliminary Specification and build on those attributes within their organizations.

Thursday, July 25, 2013

A Quick Review of Our Revenue Model Part I

One of the aspects of People, Ideas & Objects that we have not recently discussed on this blog is our Revenue Model. We always refer to it and people have referenced it and reviewed it to see the policies that we have implemented regarding how we fund our developments. I think we should take a couple of days to review the Revenue Model and gain an understanding of the “what” and “how” of these policies.

In terms of a market size the oil and gas producers do not provide a large marketplace for the ERP systems provider. The numbers of oil and gas producers just don’t make up a market of any size in terms of providing the software developer with any pricing or investment leverage. This is contrary to what the producers believe as they think that they are paying high prices for something that is not critical for their operations, but necessary for their corporate needs. And because it has more to do with the firms corporate needs it has to come out of their administrative budgets. Where the prices asked by the software developers appear to be beyond what is reasonable for the producers needs.

This disconnect between the producers and software developers has been going on for as long as there has been software. Many attempts have been made to overcome the difficulties and as we know there are few successes. There are however a significant number of investors who believed that the marketplace for oil and gas ERP systems would be one which provided a good return. Note that I mentioned believed. The belief is legend and the stories are well within the current investment communities memory of why not to invest in the oil and gas ERP marketspace.

What have we seen lately. The fact of the matter is there has been little in terms of innovation in the past twenty or thirty years and there is nothing in terms of ERP software that is coming to market. There is also no support for anything in the marketplace from the producers themselves. The violent response that People, Ideas & Objects has received by the oil and gas bureaucracy reflects that ERP systems are poorly understood. It also shows that this area is not perceived as providing any value to the oil and gas industry.

To the larger point the software investment community is not going to participate in any funding that is not supported by the industry itself. If the industry marketplace is so small when the product is built that they can then treat the software vendor to the fact that they only have the oil and gas industry to sell too. This also has the software investment community running in the other direction. Therefore the funding for any developments has to come as a result of the oil and gas industries own financial resources. There are no free lunches, anymore.

And we have seen with the treatment of People, Ideas & Objects that the bureaucracy is well entrenched. And they are happy with the status quo. And the only threat to their franchise is to have someone establish an alternative to their capabilities with the formation of some software that competes with their ways and means. And they have effectively dealt with that.

Not everyone is so enamoured with the ways and means of the bureaucracy. And that is why I keep moving on with this project. The oil and gas investor community has a vested interest in making sure that the funding of this project goes forward and a competitive system is built. They are the ones that are the most affected by this, and they are the ones that will benefit the most. And that is why we need to have the resources of the industry provided to fund these developments. Its in their best interest and no one elses.

The Preliminary Specification provides the oil and gas producer with the most 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.

Wednesday, July 24, 2013

An Overal Industry Capability

Yesterday we discussed how the service providers would use specialization and the division of labor to focus on the administrative and accounting processes of the producer firms and Joint Operating Committees. Today I want to discuss how that specialization will be used to provide a capability that is much higher than what is attainable under the current corporate business model.

We have seen regulations and the complexity of business processes increase in the past decade. Business, for a variety of reasons, has become more difficult and this trend is certainly not new or something that will abate. The difficulties will most certainly continue to grow and our capacity to deal with them must also change. Education is part of the ability to deal with this complexity. Another aspect of how we deal with it is the methods that we use to organize ourselves. Capturing everything within one siloed corporation, no matter its size, is maybe something that we look to as part of the problem.

Capturing the capability within the overall industry and providing it through service providers is how the Preliminary Specification deals with the ever increasing complexity. This has the added benefit of increasing the overall capability of the resources that are available within the industry. First by eliminating the redundancies that are built up within each producer firm. And secondly, through the specialization that is available to each of the service providers in terms of the specific process they manage.

This is how the industry will acquire the capabilities necessary to meet the needs of these regulations and complex business processes. The ability to specialize to the level that these processes dictate, within the current corporate environment, is too much of a demand on the resources of the producer firm. Extending the resources of each of the producers in the oil and gas industry to meet the ever increasing demands of regulation and complex processes will most certainly be too costly to the producer. This, I think, is also part of the concern that is being expressed by the investors.

Whereas the abilities and capabilities to deal with these difficulties when the overall industry acquires these capabilities is within the sphere of what is possible. Whether you are a startup oil and gas producer or Exxonmobil you each share in the concern of the costs associated with administering in the oil and gas industry. The small producer currently has to bring on substantial overhead just to “open” the doors. Something that they could do by hiring the capability through service providers by using the Preliminary Specification. Exxonmobil would be able to meet its very specialized requirements due to the costs of that specialization being amortized over many producers, not just their own activity.

I would also argue that the level of specialization that Exxonmobil would realize would be an order of magnitude higher than what they currently are experiencing. The level of specialization attained by the overall industry would be particularly high in each of the service providers instance and that would be a significant part of the value added process that they provide. A specialization that would be even greater than what was attainable within the confines of Exxonmobil. And available to all within the industry.

The Preliminary Specification provides the oil and gas producer with the most 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.

Tuesday, July 23, 2013

Competition Between Service Providers

As a result of implementing the Preliminary Specification. The capability for administrative and accounting functions will reside within the industry as a whole. This will reduce the redundancy of each producer having to build that capability within their own organizations. This will reduce the overall costs of the administration and overhead in terms of the unused and unusable redundant capabilities that are currently built within the industry at each producer firm. What it will also provide is a flexibility in terms of dealing with how the producer chooses to produce. Marginal production can be removed from the marketplace without the penalty of losses on operations.

There is a larger picture here. And certainly we have touched on some of the details with the $94 billion in opportunity costs, and the focus of the investors. The oil and gas industry which has traditionally been required to build the capabilities to focus on the SEC requirements, the tax and royalty requirements, the production and exploration administration, the land administration and accounting demands of the corporate organization. Will instead rely on the capabilities provided to them by a marketplace of service providers that focus on providing these capabilities by managing the processes on behalf of the industry.

And there will be two elements, or two types of organizations that the service providers will be focused on providing these services to. There will be the corporate concerns of the producer firm. And there will be the operational concerns of the Joint Operating Committees. Each entity will be dynamic and independent in their use of the service providers.

That is not to say that there will be a marketplace for eligible capital for gas cost allowance service providers. In almost all instances there will only be one service provider for each process within the industry. And the detail and the precise nature of the process that they will manage will require them to be very specialized. Their focus will be on making their service offering more efficient and effective in terms of its competitive offering. Providing a better service to its customers will be where it focuses its competitive energy. The effectiveness of having other service providers involved in the same process only detracts from the efficiency they can attain in their offering.

The competitive differentiation also arises between the service providers themselves. Although not specifically in the same process the competitive pressures will arise from other service providers efficiencies. There are also the demands of the producers and Joint Operating Committees that will ensure that the prices charged by the service providers are reasonable and in line with the services provided.

Specialization and the division of labor is the toolset that is being deployed here to generate the value for the industry. In order to attain that value the ability to focus on the process is the key to attaining that value. We therefore need to expect that competitive forces will arise as a result of other influences as opposed to the direct competition that we would be most familiar with. Therefore the service provider will enjoy a monopoly in terms of competitive advantage over the domain of the process they manage. This will enable them to pursue specialization and the division of labor over the long term, which is a long term value added process, as opposed to be consumed by the day to day of competing with like competitors. It is these types of differences that we need to implement in the oil and gas industry for the 21st century. Changes that are incorporated in the Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most 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.

Monday, July 22, 2013

Investor Concerns About Overhead Costs

The allocation of resources within the industry are possibly one of the largest issues that the investors in the industry are dealing with. They have consistently raised the point that the administrative costs involved in oil and gas are high and need to be addressed. The finer point of their argument is that the ability of the producer to reduce their production does not affect their overhead costs and should. This has become a particularly difficult point with low natural gas prices.

One could argue with a quick review of most annual reports that the amount of administrative costs carried by a producer, that the point is moot. In a capital intensive industry they would have a point. And they do have a point, the payroll burden in oil and gas is not large. And we have shown through our Revenue Per Employee analysis that the majority of the producers employees are carrying their weight in a substantial way. These are all valid points and I don’t think that that is the point that is being argued by the investors. I think they are seeing the redundancy of building similar organizations within each producer firm and there is no sharing of skills or capabilities between the producers. I think this is their frustration. I think that, like me, they see the majority of the people involved in these jobs doing a fantastic job that could maybe be organized better.

It is not the cost of these resources that is at issue. It is the implication of not being able to deal with the costs that is. If the opportunity costs for 2012 are $94 billion it would be agreed by everyone that we should address these. And none of these opportunity costs are to do with reductions in overhead. They are all as a result of increases in the price of natural gas. But they only arise as a result of the ability to deal with the marginal production of any facility. Something we can do as a result of not incurring any of the operating or overhead costs on shut-in production through the Preliminary Specification. This flexibility is what the investors are after.

To have the capabilities to conduct the administrative and accounting functions inherent within the industry. And to have that capability as a result of service providers who are specialized and organized based on a sophisticated division of labor. Would provide a capability that is much higher than any organization that exists today. And that capability would be available to any producer firm or Joint Operating Committee for the cost of a service fee. That is how the industry needs to be organized for the next century.

In terms of how this affects the people who work in the administrative and accounting fields of oil and gas. The impact would be significant. They would in turn cease to work for one producer and begin to work for many. They would specialize on specific capabilities and become very detailed in their work. Working with large volumes of data and sophisticated systems they would be able to build value for their clients, the producers and Joint Operating Committees who employ them. They may find that at any time their population of data might be reduced by 10% due to the need of the producers to shut-in production due to low commodity prices. This reduction affecting their revenue streams, however, something that they budgeted for.

The investors are asking is there a better way? There has been no response from the industry for years. Now we can point to the Preliminary Specification which I think answers the question for all concerned.

The Preliminary Specification provides the oil and gas producer with the most 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.

Friday, July 19, 2013

How the Preliminary Specification Deals With Overhead

Within the Preliminary Specification we provide the oil and gas producer with the means to deal with low natural gas prices. This is through the reallocation of the resources of the industry into service providers that are focused on the individual processes and subprocesses. Charges for these services are made directly to the Joint Operating Committee. This enables the producer to shut-in their marginal production, and as a result, the administrative and accounting charges from these service providers would not be incurred. Enabling the producer to shut-in production without incurring the losses on operations that they would incur today on shut-in production. And limiting the downside in terms of the natural gas pricing.

This is the solution for the natural gas pricing difficulties being currently experienced in the oil and gas industry. These overhead type of costs however are part of a much larger issue to the investors of the oil and gas industry. The issue is with the high administrative costs associated with oil and gas exploration and production. The Preliminary Specification deals with this issue as well as the natural gas pricing issue. The issue arises as a result of the current use of the high throughput production model that is in use today. The Preliminary Specification uses the decentralized production model as its method of organization.

The differences in these two models is best described in Professor Richard Langlois definition.

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. p. 58

The current oil and gas producer is tasked with developing administrative and accounting capabilities that are state of the art. That is each individual company, there is no shared resource, each company in isolation must achieve these capabilities in order to attain the necessary requirements in the marketplace. With the level of compliance and governance requirements, the needs of the earth science and engineering requirements of the firm this places a significant burden on each producer no matter their size. This is the high throughput production model and any interruption in production leaves no opportunity to diminish the producers administrative or accounting capabilities.

What the Preliminary Specification does is relocates these administrative and accounting resources on the basis of specialization and the division of labor across the industry. A service provider would therefore have the entire industry as its client base and it would be responsible for the determination of eligible capital for gas cost allowance purposes. The industry as a whole therefore may hold the entire administrative and accounting capabilities that are needed at anyone time and by any one producer. The need for these capabilities will be available for a service fee at any time that the producer requires them. At any time that the producer does not need the services of any specific provider, then that service and its associated fee is not incurred.

What we have done here is we have specialized and divided the labor of the industry in terms of the capabilities of its administrative and accounting functions. These services will be far more capable than any organization that exists today and will be able to solve the most difficult of technical problems. What has also been done is we have removed the redundancy of having each producer building the unnecessary capabilities within each producer firm to accommodate the producers needs in terms of their administrative and accounting capabilities. This unnecessary duplication, like that which we have eliminated in the earth science and engineering resources, is unused and unusable as it stands today.

Freeing up these resources will allow them to pursue the higher level tasks that are necessary in an innovative and profitable oil and gas industry. We need to begin these developments to enable the industry to capture this value and free these resources for the challenging work ahead.

The Preliminary Specification provides the oil and gas producer with the most 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.

Thursday, July 18, 2013

Participation has its Benefits

The advantage of using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. Is that it is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. By adopting this framework as the organizational construct in the Preliminary Specification we are able to approach the issues and opportunities that exist in the industry, such as the current natural gas pricing problems. And the future issues and opportunities that are just around the corner. Such is the nature of the alignment that we achieve between the systems represented in the Preliminary Specification and the organization, the Joint Operating Committee.

This alignment provides a fundamental competitive advantage to those producers who chose to use the Preliminary Specification. Having this alignment will enable them to address the issues of the day and to configure their organizations towards the opportunities they see. It should be noted that those producers that choose to participate in the developments of the Preliminary Specification will receive even greater benefits. They will attain the ability to have the software consider their particular circumstance and include within the definition those unique attributes. In addition they will be able to have those attributes within their organization reinforced through the development of the software. Participation should be considered a unique and one time opportunity for producers within the industry.

Additional benefits will accrue to those who participate when the time comes to be operational on the software. The transition to the software will be seamless and more natural as a result of being familiar and oriented to the changes that will be needed in the organization. Those producers who think they might be best served by sitting out the first iteration might find that those that participated in the first round will have gained the competitive advantages and are already moving the software in new directions that are derived from being operational on the Preliminary Specification. Taking a producer from the bureaucratic ways to the second iteration of the software, without the benefit of being involved in the initial development efforts, as there would also be no basis of organizational similarity, would be difficult. These iterations will be quick, and the organizational development will be approximately equivalent to the speed at which the industry changes.

There is participation and there is competitive oblivion in my opinion. If we can substantiate opportunity costs of $94 billion in one calendar year. This shows the power of Information Technology in its current form. The speed and effectiveness of the technology and organizational developments will only begin to accelerate. Participation in these software developments should be considered a necessary part of the producers core competitive advantage. Would anyone launch a producer firm with the stated purpose of not using calculators or computers. The use, deployment and development of these technologies needs to be part of the core producer firm.

Convincing the oil and gas producers that this is the case will be difficult. They think that drilling more wells will be the future of the industry. And they are hard to argue with. In reality they are not making any money and the day when they can raise money on the value they generate by drilling wells passed a few years ago. Investors are wise to their ways. What is needed is for the industry to get with the times and start looking at what is profitable. Start managing the business as a business and begin participating in the management of that business by getting involved in People, Ideas & Objects Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most 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.

Wednesday, July 17, 2013

A Sub-Industry

In terms of Information Technology infrastructure the People, Ideas & Objects Preliminary Specification fills the traditional role of an ERP (Enterprise Resource Planning) applications space. That is to say that it operates to manage the businesses day to day operations and administrative aspects of an oil and gas producer. But it also fills other key roles in the industry that are not currently handled by any software vendor. Those are the business operations and administrative aspects of the partnerships as represented by the Joint Operating Committee. And the infrastructure of the industry in terms of the interactions, identification and support of the activity between the service industry, service providers, oil and gas producers and Joint Operating Committees.

This infrastructure is derivative of the Intellectual Property that is inherent in the Preliminary Specification. The business model that captures the annual opportunity costs that are valued at $94 billion for the 2012 calendar year is part of that Intellectual Property and therefore will be provided by People, Ideas & Objects from a software point of view and licensed service providers in terms of the services. This is not just a business that is being started, but a sub-industry.

There is a need for this scope and scale in the oil and gas industry today. The oil and gas industry is poorly served by the technology firms. The technology firms are providing good products and services, however, have become so specialized in their offerings that they have little understanding of their clients business operations and needs. This gap between the oil and gas producers and the technology companies is as broad and deep as could possibly be. It is necessary that a new sub-industry form to fill the gap between the oil and gas producers and the technology companies. That is what People, Ideas & Objects and the service providers will be able to do. With our understanding of oil and gas, and technology, and the service providers understanding of their oil and gas clients we will be able to deal with the issues and opportunities that the producers face on a day to day basis and in the long term.

The basis of competitive advantage for this sub-industry is the Intellectual Property that is formed around the Preliminary Specification, this blog and elsewhere. Key to that IP is the use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. This form of organization is what everything else is derived from and to compete with People, Ideas & Objects someone will have to come up with an alternative form of organization.

This infrastructure will naturally be of the cloud configuration. Having ubiquitous access, anytime, anywhere and on any device will be necessary for any 21st century system. One can see the scope of the application and how the costs begin to escalate to the budgeted total that is defined in the Preliminary Specification. Having industry, the service industry and the new service providers working together on one infrastructure will require a budget of at least that size. I would again emphasize that there is significant value there for the producers.

And we are using that value to motivate the industry to complete this project. There is only one way in which we can earn those opportunity costs. And that is to complete the development of the Preliminary Specification. Organization of the industry in this fashion, and the development of the software will need this motivation in order to ensure that it is complete. With everyone pushing toward that goal. A clear, and well understood goal, that everyone can get behind and complete.

The Preliminary Specification provides the oil and gas producer with the most 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.

Tuesday, July 16, 2013

Constructive Change to Capture Value

People, Ideas & Objects Preliminary Specifications claim is that we provide the oil and gas producer with the most profitable means of oil and gas operations. This is through an innovative business model that is identified and supported through our ERP system as expressed here. Producers who choose to join the community of users of the Preliminary Specification will find that their competitive position will be enhanced in comparison to those producers who choose not to join People, Ideas & Objects. We have discussed these differences in a recent blog post.

The quantification of these changes from using the Preliminary Specification is the $94 billion in opportunity costs for the North American natural gas marketplace. These are the opportunity costs that would have been earned for the 2012 calendar year. They are in essence the losses that were incurred, and the profits that should have been earned, in the natural gas business, but were not because of the low natural gas prices. The Preliminary Specification provides the ability for all producers to deal with low natural gas prices by removing the marginal production from the marketplace. It does this by reducing the producer to the C class executives, earth science and engineering resources, some legal and support staff. The remainder of the resources of the traditional oil and gas firm are reallocated to service providers who focus on the industry wide process or subprocess. There they are able to apply the principles of specialization and the division of labor to their work and provide the Joint Operating Committees with the most efficient and effective means of administrative and accounting services. These services charge their fees directly to the Joint Operating Committee during the month that the service is incurred. This provides the producer with the flexibility that if they shut-in production for that month, none of the administrative or accounting overhead charges are incurred or billed to the Joint Operating Committee. Leaving only the costs of capital uncovered during periods when the production is shut-in.

This IT infrastructure provides significant competitive advantages to the oil and gas producer. During periods when production is shut-in the property does not incur a loss that has to be added to the reserves and recovered from further operations, making the economics of the property more difficult. And the marginal production is removed from the natural gas marketplace having an effect on the market supply of natural gas. Therefore having an effect on the natural gas prices and returning the prices to the point where profitable production will resume sooner. Companies that don’t participate with People, Ideas & Objects will continue to lose money on operations during production or when they are shut-in. What is needed is this fundamental reorganization of the industry infrastructure to accommodate what is called the decentralized production model, which is part of the Preliminary Specification, and leave the high throughput production model that the industry is currently using.

The time horizon necessary to make these changes is the issue at hand. The vision as it is articulated in the Preliminary Specification is sound. Use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer is the necessary ingredient to make all of this happen. What is needed from People, Ideas & Objects point of view is the resources that are spelled out in the Preliminary Specification. In an industry with an annual turnover of $2.5 trillion and opportunity costs of $94 billion you would think that these costs would be incidental. And they are. The real impediment to making the industry profitable as described above and in the Preliminary Specification is the ability for the industry to change.

I have an optimistic point of view on that possibility. The mindless brutality that people are subjected to daily to make things work today would welcome something that makes sense. The Joint Operating Committee is the cultural way of the industry. People intuitively understand it. And the technologies are mature in comparison to what is used in the industry today. That is to say I think we are not taking any technical risk in developing the Preliminary Specification. Therefore my optimism is grounded in what is possible and probable and the industry needs to approach the difficulties that it faces today and in the future with a new structure, and that is the Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most 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.

Monday, July 15, 2013

Economic Improvements

Since 2008 the financial markets have been providing no end to the difficulties in our economy. In a capital intensive industry such as oil and gas the global financial meltdown has had significant implications. Producers continue to experience difficulties in terms of raising capital from both the debt and equity markets. These financial recessions are usually long term cycles and can last five to ten years. Well its been five years now and we have no sign that there is any substantial pickup in the global economy. There are two things that I am seeing in the economy that will create difficulties for those that are unprepared in the coming few years.

The first is that markets appear to be beginning to roll over. That is interest rates are no longer dictated by central banks, but by the markets themselves, and they want a return. Or in other words interest rates are rising. If the oil and gas producer found it difficult to find capital in the past five years, it may be more difficult if they have to compete with market rates. This will also have adversarial effects if the producer is heavily indebted as the ability to service the debt will become more costly.

It has been an exceptionally long period of time that the Federal Reserve's Zero Interest Rate Policy has been in place. Wise individuals and companies should have taken the past five years to reduce their debt burden and build their balance sheets. This should have included the sale of assets and trimming of the organization to be able to handle the inevitable rise in interest rates. I say inevitable because it is inevitable. The Federal Reserve can only do so much for so long. And the market, which is so much larger and more powerful than the Federal Reserve, will eventually decide that they have had enough of zero interest rates.

We should look to this as the first step in a healing market. The fact that interest rates are rising is a sign that the animal spirits are starting to show themselves again. The fact that grandma and grandpa want more on their T-bills means their feeling secure again and want to stop eating dog food. For the unprepared producer, of which I see a fair number of, this will be painful. These animal spirits are the second aspect of the marketplace that I see rising.

There is however a conflict that needs to be worked out in the marketplace in the next year as a result of these two items. The rising interest rates will have a dramatic effect on all asset classes on a global basis. How will this affect the animal spirits, and will they be strong enough to offset the higher interest rates. I think they will as we are entering a new phase in which the economy is beginning to develop real value from new organizational methods.

It is my hypothesis that 2008 was a result of the fact that the bureaucracy as a form of organization has ceased to build value. Like the former Soviet Union and its collapse was a result of a defunct method of organization. The bureaucracy is going through the motions and not responding to the needs of society. This hypothesis can be debated. What is happening now is that the replacement to the bureaucracy is beginning to show itself. It is the Information and Communication Technologies that are able to replace that bureaucratic form of organization. And although they are not in place as of yet. They are seen to be the method to move industries forward and build value. Just like People, Ideas & Objects Preliminary Specification.

So is the Information and Communication Technology revolution really here? And can it lead to the animal spirits that will offset the increase in the market rates? I think we’ll find out fairly soon.

The Preliminary Specification provides the oil and gas producer with the most 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.

Friday, July 12, 2013

An Improvement in our Quality of Work Life

With so much discussion of the elimination of the bureaucracy. And the installation of systems that will reduce the overhead burden of the oil and gas producer. Its not surprising that some people are concerned that People, Ideas & Objects Preliminary Specification spells the end for their long term employment and career prospects in the oil and gas industry. It does not take a lot of imagination to see the administrative efficiencies will require less people in the traditional roles that an oil and gas producer employs today. And I would agree with that. But I would also ask are those roles the ones that we really want to hang onto for the long run. Is there not some things that we could be doing better with our time?

There has always been a concern that computers would take away peoples jobs and leave us with nothing to do. And that is the concern that is being expressed today. And just as we don’t post to ledgers, or add up endless columns of numbers, today’s tasks will fade into the distance as well. Taken over by computers as we move to the higher quality work that is necessary for us to increase the productivity of the oil and gas industry with the same resources we have today. For that is the real constraint. We can’t rely on any greater volume of people in order to staff up for any increase in demand or higher level of activity. We must rely on higher levels of productivity from the same resource levels we have today.

So what kinds of work will we be doing when we release the tasks that we do today to the computers of tomorrow. I think the first and most difficult one is innovation. And this requires a structure within our organizations that enables the innovation to occur. And that is what People, Ideas & Objects has built within the Preliminary Specification. The necessary ingredients to enable, support and identify the key elements of innovation within the earth science and engineering disciplines. As these innovations lead to further expansion of the science they will lead to further innovations in a constantly changing and dynamic nature. This will put particular difficulties on all producers and that is where much of the resources need to focus on.

Collaboration within the organization and between the partnership representing the Joint Operating Committee. As the base of the sciences expand the scope and scale will become too broad for one firm to capture all that is necessary. Certainly too broad for them to capture in a commercial environment. The ability to partner with others is a fundamental aspect of the oil and gas business. The future will see a dependence on partners for elements of the earth science and engineering aspects that producers do not have housed within their organizations. This will also open the industry to the ability to organize the earth science and engineering resources on the basis of specialization and the division of labor. Easing the excessive demand for these critical resources.

Thinking carried out throughout the organization. It surprises me at times that the amount of thinking that goes on in the oil and gas industry right now is very limited. Its all about doing. We need to leave a lot of the administrative doing up to the computers and start thinking of better ways to do things. And lets not limit it to just that domain, thinking about the whole scope of the business. A little thought into what and how we are doing what we are doing will go a long way to making the industry more efficient and effective in the long run.

These are the types of things that we will be involved in the future with the Preliminary Specification operational. They are an improvement in our quality of work life. A move away from the redundant and repetitive nature of the work that we are involved with today. Concerns that we are going to lose a large portion of the resources of the oil and gas industry are some of the same concerns that were aired forty years ago when we were one quarter the size we are today. I think we can disregard these concerns and look forward to a far more interesting future as a result of the Preliminary Specification being a part of the oil and gas industry.

The Preliminary Specification provides the oil and gas producer with the most 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.

Thursday, July 11, 2013

The Revised Competitive Nature of the Oil and Gas Producer

One thing that producers should consider in terms of the developments of the Preliminary Specification. Is the differences between those that will willingly participate in the development of these systems and their deployment. And those that will choose to sit and wait until “more information” is available. With the opportunity costs at $94 billion in 2012 those that choose to wait are setting themselves at a significant competitive disadvantage compared to those that participate.

Lets be honest there will be some effort expended in the development and deployment of the Preliminary Specification. No one said it would be easy. From a producer point of view it will be difficult. It will however be more difficult to take the software to implement within an organization that did not participate in the development of the software. Participation in the developments will enable the producer to have their needs met and capture those needs in the software. It will also make the transition less abrupt and more of a day to day occurrence.

The real value will be when they are operational on the software and they are able to realize their share of those opportunity costs. Then they will have increased their profitability and have opportunities open to them that were unavailable to them before. Opportunities like the acquisition of laggard producers who choose not to participate in the development and deployment of these software developments. In these acquisitions they could acquire the further opportunity costs and other synergies from the takeover of other producers.

What will be established in the industry will be a division between those that are capable with the new Information Technologies provided by People, Ideas & Objects. And those that have chosen, or are unable to deal with the new technologies and business models that are provided. But it will have more competitive impact than just that at the corporate level.

In terms of operations those producers that use the Preliminary Specification will also have advantages. Recall we provide the oil and gas producer with the most profitable means of oil and gas operations. We do this by optimizing their revenues and reducing their costs. Therefore in the field producers using our systems will be able to have greater flexibility in their operations in terms of how they approach their business. For instance, in the acquisition of land they may be more competitive than what others might be able to bid.

The opportunity costs are material in scope and scale. The speed, innovativeness and accountability that is acquired when we move the compliance and governance frameworks to the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee are substantial. Eliminating the bureaucracy and replacing the administrative structure of the organization with the Information Technology management that is available today is the trend that is sweeping all industries across the globe.

There will be those that will choose not to make the changes in their organizations. There is little that we can do for them. However there are many things that can be done for the producers and Joint Operating Committees that know that there is a better way and the Preliminary Specification is that better way.

The Preliminary Specification provides the oil and gas producer with the most 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.

Wednesday, July 10, 2013

The Bureaucracy is Opting Out

Understanding that the probability that our prayers for a cold winter will more likely be answered this year. The bureaucracies plans for the natural gas business can ride through these summer months with the knowledge that this time its different. Their plan therefore will consist of soaking up some sun and enjoying the usual vacation. Don’t forget the usual career planning that includes the family budget and retirement planning. These are the things that occupy the bureaucracy in the natural gas business in these summer months. Don’t get me wrong, I don’t think these things are wrong, its just having a plan for the natural gas business would be something that might add some value.

Its reasonable to assume that in July of 2013 without any reasonable proposal to deal with the natural gas prices, we will continue on with unacceptably low prices for the foreseeable future. This situation will not correct itself with the prolific nature of the shale gas formations. And with more reserves and greater deliverability being brought on stream, the decline in natural gas prices will only become worse from a producer's point of view. Everyone knows what the problem is, they just don’t want to recognize the Preliminary Specification as the solution. That is the bureaucracy doesn’t want to recognize it as the solution.

The bureaucracy doesn’t want to recognize the Preliminary Specification because it kind of leaves them at the curb with their bags packed. There is nothing for them in the People, Ideas & Objects Preliminary Specification and its pretty obvious that their days are numbered. Like so many of the Information & Communication Technologies today, it will get the job done without the fanfare and noise. What has gone on before in terms of Information Technology systems development have been to identify and support the bureaucracy. Is it any wonder that they are not supporting this initiative?

That is why they will never support these developments and why we need to appeal directly to the investors and the owners in the oil and gas industry. It is also why these developments need to be driven by the user community. If the bureaucracy supports the Preliminary Specification then the bureaucracy will have their ways and means implemented within the software. And that is what we don’t want. So in a way they are doing us a big favor by self selecting.

Its as if the bureaucracy will muddle themselves out of existence. Given their lack of desire to address the big problems that they face on a day to day basis, and preference to just muddle along and let the big things just work themselves out. The natural gas prices will motivate the ownership to act to do something about the problem, and the thing that they will do is fund the development of the People, Ideas & Objects Preliminary Specification. Action will become the manner in which the industry addresses its big issues as opposed to inaction and passivity.

When an industry sits and prays for years on end for a cold winter. And does nothing to correct what is evident to all. The era of passivity will have passed. The time for a dynamic and innovative industry is what is necessary. We first however need to build the structure of that industry and define and support it with the systems that will enable that dynamism and innovativeness. That is People, Ideas & Objects Preliminary Specification. And the time is now.

The Preliminary Specification provides the oil and gas producer with the most 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.

Tuesday, July 09, 2013

The Transition Between Business Models

We have been discussing the transition between the current corporate model and the Preliminary Specification. How the differences between these two models do not allow for any compromise and the move to the Preliminary Specification is an all in type of proposition. Where the Preliminary Specification needs to address all of the issues of the industry in a comprehensive nature. Where the service providers are established and their services are able to replace the overhead operations of the oil and gas producers. These are the types of changes that are necessary in order to make the industry more efficient and effective. Oh, and there are those annual opportunity costs which for 2012 were calculated at $94 billion.

And its not that the service providers are being asked to shoulder the bulk of the opportunity costs. The majority of these opportunity costs come in the form of higher natural gas prices as a result of the producers ability to remove the marginal production from the marketplace. Raising natural gas prices to where producers are profitable. The transition to the Preliminary Specification is stark in its contrast between the business models because it has to be. There needs to be a radical remake of the industry for it to begin to deal with the issues that it faces in its future and the issues that is deals with today.

But how much of this transition is going to be foreign to the ways and means of the industry. That is the question we should be asking ourselves and trying to determine the results based on what the structure is as proposed in the Preliminary Specification. The first thing we should consider is the move to the Joint Operating Committee. This is cultural norm of the industry. Everything is based on partnerships and these partnerships all have Joint Operating Committees. They are the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. By moving the compliance and governance frameworks into alignment with the seven frameworks of the Joint Operating Committee we are achieving a speed, innovativeness and accountability in our organizations. This would be consistent with the way the industry partnerships are structured and having the Preliminary Specification aligning, defining and supporting the Joint Operating Committee would be a first in terms of ERP systems.

Innovation is a necessity for the oil and gas industry. That is a fact and it must become systemic throughout the industry. Innovation is also an engineering discipline that can be enabled or disabled by the organizational structures and systems that a producer or Joint Operating Committee uses. The Preliminary Specification is built around the necessary organizational and systems elements to identify and support innovation within the producer firm and Joint Operating Committee. That does not guarantee innovation within the oil and gas producer firm or Joint Operating Committee, it just won’t hinder it. If the resources are within the organization to fuel innovation, then they will have the organization and systems that enable that innovation to occur.

Stripping the producer firm down to the earth science and engineering focused organization that the Preliminary Specification does. And moving the accounting and administration of the producer firm and Joint Operating Committee to service providers that are focused on the process that is industry wide in scope and scale. Enables the producers and Joint Operating Committees to focus on innovation and the science. And leaves the service providers to focus on their specialization and division of labor of their tasks.

These are changes that are necessary for the industry to compete in the 21st century. They can make the choice to build the Preliminary Specification and proactively deal with their future. Or they can continue on in the manner that they are today and be fully disintermediated. Either way I don’t care as I see the Preliminary Specification being the solution for the industry which ever road they choose to take.

The Preliminary Specification provides the oil and gas producer with the most 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.

Monday, July 08, 2013

Cost Control by the Service Providers

In addition to not taking any shortcuts in terms of the approach to the development of the software for the Preliminary Specification. There are the changes that are needed for the service providers to form and begin delivering their services to the oil and gas producers and Joint Operating Committees. These service providers do not exist today. Entrepreneurs need to establish them and begin the process of building them. These businesses will be a significant opportunity for those that have the ability and capability to form these firms. These firms will need to be in place for the oil and gas producers and Joint Operating Committees to be fully functional with the Preliminary Specification. Again there are no shortcuts from our current structure to the one in which the industry needs to move to.

It is within the service providers that we have discussed the fact that the cost control for the overhead costs of the oil and gas producers is shifting to. They will be undertaking the burden of the costs of overhead that was previously the domain of the oil and gas producers. And with the producers having the opportunity to shut-in production and reduce their costs, the reduction in costs is realized by the service providers. These costs being realized by the service providers appears unfair and unreasonable at first until one realizes that they, the service providers, have full control of the costs and have within their domain the ability to deal with these costs. Understanding that the industry may not be operating at 100% capacity at any month will become the new normal and the means to manage the day to day of the service providers activity levels. They have their budgets and they have other tools in which to shift their costs and deal with the potential declines in any of the producers production volumes.

Consider the effectiveness of a service provider that is dealing with a portion of the Texas Railroad Commissions royalty calculation. Their base of data is the entire state of Texas in terms of the number of producers who are their clients. This is due to the specialized nature of their service. With only 10% of the states natural gas volumes shut-in for marginal pricing concerns, and this being considered the new normal. This does not materially disrupt the service providers revenue stream. If the service provider budgeted for these situations then the situation would be a normal part of their business and they would have considered these in these in their staffing levels and other areas. The service provider having full control of their costs throughout the year.

Contrast this situation with today’s producer and their ability to control their costs. Without the ability to specialize and use the division of labor in such a way as the service providers. The producer has had to build a capability within their organization that has the ability to deal with all of the accounting and administration needs of the producer. A decline of 10% in the production volume does not affect the fact that the producer still requires the full accounting and administrative capabilities that were present at 100% capacity. Therefore the producer firm has no capabilities whatsoever to deal with the costs that are associated with the accounting and administration of their firm.

This is the difference between the two business models. One provides the ability to deal with the costs associated with oil and gas production and operations. The other, the corporate model does not. The current structure is old and tired and needs to be retired. We need to develop the Preliminary Specification and begin the creation of the service providers that will provide these services to the oil and gas producers and the Joint Operating Committees.

The Preliminary Specification provides the oil and gas producer with the most 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.

Friday, July 05, 2013

There are no Short Cuts

Let’s assume for a moment that the support from the industry for the Preliminary Specification existed and we were proceeding with its development. The pressure would be on the user community to focus on the areas that provide the oil and gas producers with the greatest value generation. And we have been noting here that that is in the area where we can raise the natural gas prices above the marginal costs. The problem is that the Preliminary Specification is a comprehensive solution that affects all aspects of an oil and gas producer, the service industry, the service providers and most of all the Joint Operating Committees. It is also a solution that addresses more than just the natural gas pricing issues, and although these other areas may not be as materially pressing at this time, they need to be addressed in a timely matter as well.

Taking shortcuts and focusing on only the issues that are present in the current mindset are two of the dangers that we need to address in the developments of the Preliminary Specification. If we look at the scope and scale of the application we can see that taking the approach of addressing only one issue will be highly counter productive and lead to failure in the long run. Much of the Preliminary Specifications ability to solve the issues of the industry is due to its comprehensive nature and the ability to provide the key elements to the issue. These key elements can’t be cherry picked and brought about for one issue, or alternatively bring forward just the key elements necessary for one issue to be resolved. It just can’t be done that way.

The move to the Joint Operating Committee is comprehensive in its nature. Moving the compliance and governance frameworks of the hierarchy to the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee is a complete change in the oil and gas producers makeup. It is a disassociation of the corporate model and an adoption of the business model that is inherent in the Preliminary Specification. There can be no shortcuts between the business models for the purposes of acquiring the value that is available from the business model in the Preliminary Specification.

Just as other industries are being disintermediated by technologies and innovative business models. There are no shortcuts and there are no compromising choices. It is one or other. You either win with the new one, or atrophy and die with the old. That is the only choice that you have. And I would suggest that that is the choice that the oil and gas producers will be faced with in terms of dealing with People, Ideas & Objects. You're either with us or you're not.

The opportunity costs of $94 billion for the calendar year of 2012 are probably something that will remain with us for the time that the corporate business model remains in place. The bureaucracy does not have a solution for the natural gas business. They do not recognize it as an issue as it doesn’t affect their salary or pension benefits. The profitability of the industry is maintained as long as the oil prices remain high enough to offset the losses in the natural gas business and that should be satisfactory for the investors. That is the bureaucracies attitude and mode of operations and that will continue from now on. Therefore it is reasonable to assume that we will see these opportunity costs on an annual basis for the foreseeable future.

The choice is to begin the developments of the Preliminary Specification and all that entails. Understand that there are no shortcuts and that we must address all the issues of the industry within the application modules. That way we can deal with the future of the industry in the appropriate manner and identify and support the innovative and profitable oil and gas producer and Joint Operating Committee.

The Preliminary Specification provides the oil and gas producer with the most 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.

Wednesday, July 03, 2013

Three Marketplace Modules

There are many other elements in the Preliminary Specification. In addition to recognizing the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. The Preliminary Specification has three marketplace modules. The Petroleum Lease, Resource and Financial Marketplace modules. Each dealing with one critical component of the producers needs of petroleum leases, resources and capital. These marketplaces seek to replicate the marketplace that exist and provide interfaces to the producer to interact and participate in these dynamic marketplaces.

When we are replicating the physical oil and gas marketplace, the Petroleum Lease is the source document that is the common denominator of all activity and ownership within the industry. Any physical oil and gas assets will be attached to some lease, agreement, rights or concession granting the holders the rights and privileges of ownership, lease or rental. These are the things that are contained within a marketplace. They are what are purchased and sold, bargained and traded for. They are the things that people are recruited to provide services for. Generally a marketplace is a dynamic and evolving commercially oriented hub of activity. That is what we are replicating in the Petroleum Lease Marketplace.

The types of documents that are generated within the Petroleum Lease Marketplace are somewhat self-evident. (Recall we are including Land, Legal, Production Admin, Exploration Admin, Accounting and Others in the classifications.) Most of them are created in collaboration with the participants of the Joint Operating Committee and include: Authority for Expenditures (AFE"s), Capital Budgeting (Firm and JOC), Construction Ownership and Operating Agreements, Mail Ballots, Daily Drilling Reports, Lease Bonus, Lease Rental, Lease Taxes, Areas of Mutual Interest are some of the forms, processes and attributes of the Petroleum Lease Marketplace Module. A more detailed specification will be the result of the communities contribution and commitments.

The Resource Marketplace module is a marketplace to support contracting from A to Z. To deal effectively with the Resource Marketplace the producer will need tools to effectively engage with the suppliers for the resources they need. The Resource Marketplace Module provides a window on the “Resource Marketplace” for Joint Operating Committees (JOC) and producers. Anything of value that is contracted between “actors” in the oil and gas, service, software and user community generated businesses will be found, contracted, managed and developed through this module. It's simply a virtual representation of the marketplace. Therefore the negotiation, determination of available resources, determination of transaction costs, contract execution and effective software tools to monitor and verify compliance to the contract are all part of the Resource Marketplace module and its interfaces to other modules of the Preliminary Specification.

Similar interfaces will be provided to the service industries. After all transactions have two parties, the efficiencies of the producers would inherently include the efficiencies to the service provider. If we have an accounting system, then certainly offering these services to the suppliers would only make sense. It is not just producers in the Resource Marketplace. Key to the efficiencies in the Resource Marketplace are the mitigation of transaction cost friction. Friction on both sides of the transaction, because transaction costs in the Resource Marketplace are costs that will ultimately be borne by the producer.

The primary point that the Financial Marketplace module is making is that there are competing interests and motivations in the industry in attempting to get things done. With different strategies being deployed by different partners within a Joint Operating Committee, is it any wonder that the financing of a project can ever fall into place. What the Financial Marketplace module proposes is that instead of the property being funded by several different company bankers, each taking a working interest share claim against the firm. The Financial Marketplace module would see one bank fund the property in its entirety on behalf of the partners represented in the property. Aligning of the bank financing to the innovative oil and gas producers and Joint Operating Committees legal, financial, operational decision making, cultural, communication, strategic, innovation, compliance and governance frameworks.

Today that may or may not be an objective or opportunity worth pursuing. However, I think that the freedom of having the attributes of the Financial Marketplace module still reside within the oil and gas market, and possibly even more as a result of the financial meltdown of 2008. Why? The demand for capital will continue to be strong, and the supply will continue to be tight. What we seek to prove in this module, is that through its use we can provide the innovative oil and gas producer and the Joint Operating Committee with the ability to ensure that their capital structures are more efficient than what can be attained in any other system.

The Preliminary Specification provides the oil and gas producer with the most 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.

Tuesday, July 02, 2013

Competing on the Business Model

There has been some discussion in the marketplace regarding the impact that Information Technologies are having on the greater global economy. These are some of the effects that People, Ideas & Objects Preliminary Specification are bringing to the oil and gas industry. We however are not focused on the technologies themselves as the change agent or as the elements that are providing the value to the oil and gas user, producer or Joint Operating Committee. We are depending on a competitive business model that competes on the basis of a fundamental value proposition that is business focused and creates value for people, organizations and society.

These are interesting times when new and innovative business models can be identified and supported by today’s Information Technologies. We have seen many industries disintermediated in the last decade as a result of the changes in technology, but most importantly the value generated by new business models. I don’t think that any industry is immune from the power of these technologies and business model innovations. And that would include the oil and gas industry.

If People, Ideas & Objects claim that the Preliminary Specification can provide $94 billion in opportunity costs for the 2012 calendar year. We are either delusional or have a business model that fits the disintermediation mold. I think it is the latter. As natural gas prices continue to look weak and head into the slow summer season, time will tell if the bureaucracy have fixed their business model. Or we can change to one, the Preliminary Specification, that enables the producer to deal with the natural gas prices and begin to manage the oil and gas business appropriately.

I feel it is inevitable that the changes from the Preliminary Specification will be made to the business of the oil and gas business. Does anyone foresee the bureaucracy dominating the industry in the year 2020, or how about 2030. As it stands now that will be the case as they are unchallenged in their control of the industry. Unless and until the investors can have the Preliminary Specification funded and built, the bureaucracy will maintain their control over the industry until those time horizons arrive. There is nothing stopping them.

It would be constructive to proceed with the development of the Preliminary Specification as an industry despite the consequences to those that are affected. However those that are affected have opposed these ideas, have known of them for almost a decade, and have forwarded no resources towards these initiatives. On the contrary many initiatives have been sponsored by the bureaucracy to obstruct and derail this initiative in the past decade. They have chosen to fight these ideas not to constructively work towards solutions.

Now is the time that the industry must make a choice. The bureaucracy has a history of how it has managed the industry. It also has a plan on how it will continue to operate the industry. We have proposed an alternative business model with a compelling value proposition. The future awaits the bold and the brave. There is much work to be done and we need to begin these efforts to make the oil and gas industry innovative and profitable.

The Preliminary Specification provides the oil and gas producer with the most 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.