We see continued resistance to this position in the industry. Bureaucrats do not believe that they have any impact on the prices of the commodities that they produce. Their actions are not part of the problem and therefore can’t be part of the solution. This is just a capitulation of responsibility and avoidance of the difficult task of implementing the Preliminary Specification. Bureaucrats know that they can’t fight the situation forever and they have no plans to do so. They’re involved in a limited engagement with People, Ideas & Objects to ensure that they maximize their personal revenues from the industry before they begin their mass migration out.
So whether it is the “jarring gong of self preservation” that everyone hears that precipitates the necessary actions to fix the industry. The bureaucrats migrate out. Or the investors express their frustration with their investments poor performance by acting to correct these issues. It will be one of these three scenarios that will be the manner in which the necessary changes are made in the industry. Oil and gas has carried on for far too long with its “muddle along” strategy. Things have changed fundamentally with the development of shale. The business model of the current producers is incapable of dealing with the abundance of the resources that are available through shale reservoirs. The commodity markets are overwhelmed by the volumes of reserves of oil and natural gas. They are overwhelmed by the volumes in inventory and the production that is presented each and every day. Producers don’t discuss these points, they just continue to overproduce and drill for more.
There is now mention in the markets that the Saudi’s will be changing their production strategy once they’ve completed the IPO of Saudi Aramco. Moving back to full production for the long term. This flooding of the markets is consistent with the thinking of BP’s Chief economist who said that only mid-east producers would be profitable in the abundant, oversupplied oil markets. And this would be the case until 2050. If North American producers were smart they would circumvent the Saudi’s motivation to do this while they still have the ability to materially impact prices in both oil and natural gas. If mid-east producers just flood the market until 2050, will there be any opportunity to implement the price maker strategy? Producers should ask their investors if they want to take that path with them. There will come a time when all solutions fail to solve this problem for the North American producer.
The bureaucrats will have moved on by then so you should be careful who you ask. Is it wise to have North America unprofitably produce oil and gas for the next generation? I don’t think so and that is why I think it’s very important that we implement the Preliminary Specification in the industry as soon as possible. The past generation produced oil and gas unprofitably and look at the disaster that is.
The Preliminary Specification, our user community and service providers provide the dynamic, innovative, accountable and profitable oil and gas producer with the most profitable means of oil and gas operations. Setting the foundation for North America’s energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.