User Community Business Opportunity Part I

Our user community preparation continues. We cannot begin development of the Preliminary Specification until we have the user community in place. Since the majority of the participants in the user community will be working part-time throughout our development. And will only commit full time to this project when the need for the service providers begin. Much can and needs to be done before we even get to any of those points. People, Ideas & Objects do not have their budget secured. Nor is the probability high at this point that we will have it secured. This project has a high risk of it forming. Nonetheless the organization of the user community can begin and involve nothing more than putting in place some of the pieces that will be needed when and if the time does come.

People, Ideas & Objects are relying on the user community to be the source of the quality of the software that we develop. We are looking for individual participation in the user community. Those people with the skills, experience, knowledge, ideas and understanding of the oil and gas industry from a hands on point of view. We will not be turning to the Accenture’s, KPMG or Deloitte & Touche’s of the business world to source our users. Our expertise must be derived from the people on the ground. This is a different approach to the way that applications have been developed in oil and gas before. We are building this community to include approximately 3,000 users in order to obtain the broad scope of the Preliminary Specification and achieve the diversity of understanding contained within the industry. Nothing of this size has been approached before.

The user holds a unique role in the ecosystem that will be developed for this software. Working with our developers to determine the wants and needs of the industry and then designing and implementing those within the application. We have budgeted one third of our overall costs to go to the user community. This community is a permanent fixture within the industry and will continue to develop new applications and prepare changes to the existing base. During any year we expect to incur approximately 600 man years of the user communities time in the development of applications. Therefore it would be reasonable to assume that this would average approximately one day each week in terms of time commitment during development from each user community participant.

The remainder of the time the user community participant is going to be active operating the service provider that they own. This will be closely tied to the area of expertise that they have within the People, Ideas & Objects application and the specific process that they have developed. They will provide the producers and Joint Operating Committees within the industry with the software from People, Ideas & Objects and the necessary services to support the process they specialize in. Each service provider will be responsible for a single process or subprocess in the application and will use the entire industry as their client base. This is a fundamentally different approach to the business of oil and gas. Since most of these processes will fall under the administrative and accounting domains, the people that are currently employed in the producers that are conducting those activities will be moved from the producers to being employed by the service providers. The payments made by the producers in terms of payroll and benefits to their former administrative and accounting personnel will now form the revenue base of the service providers.

The user community will be designing the Preliminary Specification processes on the basis of this industry configuration. The use of automation, specialization and the division of labor will be the competitive advantages of each of the service providers. Licenses for the service providers will not overlap from one process to another. Each firm will have the exclusive domain of the process they are licensed for. Some exceptions will apply particularly in the production, revenue and royalty accounting areas. It is this design that will be fundamentally different than what exists today. You may manage a simple process and the volumes of data that you deal with will be large. However that does not make the process management easier. I expect that the level of understanding and sophistication regarding each process will explode in terms of innovation and value add for the producers and Joint Operating Committees. And of course, we do all of this in order to make the decentralized production model the effective business model in the oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

500,000 Barrels of Oil Per Day

That’s one half of one million barrels of oil per day. The increase in production of the United States since the decline in oil prices began late last year. I have stated here many times that these bureaucrats can't, won't and will not ever change. And they only prove me right as time goes by. In terms of natural gas production it continues to increase even though prices collapsed five years ago. Shale gas production alone is up over 30 BCF per day since 2010 and the current U.S. production is 72 BCF per day in total. See any trends here? Shale is making oil and gas a business where there is an abundance of supply. However that supply is very expensive and very unprofitable. This new shale environment contrasts the manner in which the existing producers were developed. Then it was an era of low costs and scarcity of the resource. Have you ever seen a Leopard change their spots? Well you won't, and you certainly won't see a producer transform themselves from scarcity to an abundance business model with the current bureaucracy in place. You have to remove and replace them with a new business model that deals with the shale reservoirs. A business model like that of the decentralized production model of the Preliminary Specification.

A little off topic but relevant to the point of the bureaucracies. Does Fed Chairman Janet Yellen remind you of the 1984 analogy in the Apple Super Bowl ad. Droning on and never saying anything pertinent or of value. I have to ask, when is the women going to run into the theater and smash that screen with her hammer. As bad as her performance as Fed Chairman has been is the response of the business community in general. When did we hold a government employee as the key focus of our decisions. Somebody please smash the screen and break this mind numbing nothingness. Its difficult to see the producers lined up in rows in the theater watching Janet Yellen beak off about nothing. But how exactly did we start listening to economists again? It was September 2008 when they were saying the world economy was fine and all was well. That was the time they destroyed their credibility with me and I have ceased to listen to them. It is a dismal science.

If you think that bureaucrats will change and the business will become their focus again there is nothing I can do to convince you otherwise. There is more than enough evidence for everyone and anyone to determine that the oil and gas business is being fundamentally destroyed by the current bureaucrats. They have no plans, ideas or desire to fix what ails the industry. The only inspired activity they have shown in the last ten years is to engage me in battle. Other than that it is a self interested group who are doing nothing but ensuring that they are compensated well, their cabins continue developing, their pensions are vested and they have an escape plan for when it all does fall apart. In terms of the value generated for society little is being produced by the oil and gas industry outside of this and the value that the commodities provide the consumer.

It will be the individual actions of you the potential user community participant that breaks this monotony of destruction in the oil and gas industry. There has to be a group of people with the power and capabilities to make the changes in the industry to eliminate this 1984 scenario. The user community participant has the power to effect change in the industry. Using the tools of the Intellectual Property that is derived from the Preliminary Specification and the software development capabilities of People, Ideas & Objects. As well as your key role in the ownership and development of the service providers who will deliver the software and services to the producers and Joint Operating Committees. It is you the user who can make the industry dynamic, innovative and profitable again. Your participation is needed. If I haven't convinced you yet, pull up YouTube and search for Janet Yellen. Force yourself to watch a half hour of any of her speeches and then read this again. The only thing that I can guarantee you is that the bureaucrats won't, can't and will not change. And production will be up another 500,000 barrels by this time next year.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Not a Technologically Focused Solution

Its a difficult thing to state as the head of a software development firm. That we are not a technologically focused solution. There are many of those solutions in the marketplace and the bureaucrats are pleased to be working with those providers, and losing money doing so. We are living in exciting times from an Information Technology point of view. It is the beginning of the Information Technology revolution that we are experiencing in this day and age. There have been many attempts to implement these technologies into the marketplace of oil and gas producers. Most have failed due to a focus on the elements of some technological breakthrough that was going to solve the producers difficulties. All these other applications were attempting to make it so, however the technologies were too immature to undertake the load that they needed to carry. And technology is not part of the solution.

If we are not a technology focused software company then what exactly are we doing in business. People, Ideas & Objects have always focused on the producer firm and most particularly the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. If you read the Preliminary Specification we have included some discussion of the specific Oracle applications we will use to support our modules. This is to give the reader a better understanding of the overall technological architecture of our product. But the Preliminary Specification deals specifically with the issues and opportunities of the Joint Operating Committee and producer. It details the “what if” we did use the Joint Operating Committee as the key organizational construct of the producer. “How” and “What” would the producer, Joint Operating Committee and industry operate? This question is answered in the Preliminary Specification. It is about the ways and means of how people will work in the business and in the industry. It is not about technology.

The second aspect that proves our claim that we are not a technologically focused solution is that our primary focus is, and always will be on the user, or as we call them the user community participant. They are the ones that we have endowed with the power and control over the Intellectual Property that makes up the Preliminary Specification. Anyone who wants or needs to make a change in the software that runs the industry, there is only one group in which they need to see, the user community. Our developers will respond to the user community only. We are deaf, dumb and blind to all others. This commitment to being user community focused runs throughout People, Ideas & Objects. Review of our Revenue Model will show you that the ability and capability of this focus will continue. Our capital structure will not be compromised or redirected away from the user community focus. A difficult requirement which affects our development budget and the manner in which we are structured. This renders the shares of People, Ideas & Objects of little value as they will not be sold. And therefore my compensation comes about as a result of the Intellectual Property royalties that I earn. It is in our genetic code that the capital structure will not circumvent or reprioritize our direction away from the user community focus.

We provide the oil and gas producer with the most profitable means of oil and gas operations. That is the guiding principle of People, Ideas & Objects, our user community participant and the service providers who are involved in the community. This is what we sharpen our pencils for. The industry has to become dynamic, innovative and profitable. In order to do that it must be able to change the organizational methods it operates under. That requires that the industry acquire a software development capability consistent with what People, Ideas & Objects are providing. Our user community and service providers are a big part of that technological offering. However, they are also the other half of the equation. They are the service oriented part of the necessary solution to the success of our software. Technology is not going to resolve these problems. Its going to be the people who have the Information Technologies that are made available to them. And that is what I have done with People, Ideas & Objects. I have secured the Intellectual Property necessary for this ecosystem to operate. I have endowed the user community with the power and control of that Intellectual Property. We are now developing the user community, and as soon as our budget is secured, we will develop the software development capabilities to fulfill our value proposition to the oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Commodity Prices

It’s been a bad week for oil and gas prices. It would seem to me that the bureaucrats who used the recent strength in these commodity prices, when in March they moved from $50 to $60 in May. While at the same time they were trying to convince their shareholders that all would be well “next year” at their annual general meetings. Selling this impossible scenario as the theme to cover for their poor performance of 2014. We have also recently learned that those “earnings” that were sold to the investors in the 2014 annual reports, were supported handsomely by $90 hedges. Now not only are the prices going down, again, and substantially, but the producers hedges have been expiring and they are fully exposed. There must be something about chronic overproduction of commodities that prices just fail to appreciate.

Its not that I feel any great enjoyment at the misery that is being experienced in the oil and gas marketplace today. People are getting laid off in the producers, service industry and elsewhere. Investors are losing significant money, and as we have documented in this blog, they are losing far more than what the producers are reporting. It didn’t have to be this way but bureaucrats will be bureaucrats. Natural gas prices have been declining for over five years. Plenty of time for the Preliminary Specification to have been developed. Its just that for that niggling fact that the Preliminary Specification does eliminate the calcified bureaucracy as the only reason that it hasn’t been developed.

The fact is though that low commodity prices are the greatest gift that I could ever ask for. I can now say that I got lucky. It provides the justification to go through the changes to make the Preliminary Specification the manner in which the industry operates. Our value proposition is the reason why and secondly, these bureaucrats will never change. They can't and won’t. We have seen a level of disintermediation in other industries such as the makers of cellular phones. This past week Microsoft says for all intents and purposes they are out of the smartphone business. Nokia, which they bought were the dominant brand less than ten years ago. Its not just these industries that have been disintermediated. Look at all the industries that are now being lined up to have the process undertaken by some upstart. Uber, AirBnb and Lyft are what are now called Unicorns. Private companies that are able to raise money on the basis of billion dollar valuations. Something that has never been seen before. And there are now over 100 of these beasts.

Oil and gas is being disintermediated by People, Ideas & Objects Preliminary Specification. We are developing the software, the user community and service providers that will remove and replace the bureaucracy from its comfortable position in oil and gas today. We will be changing the organizational structure of the industry to one in which the producer firm can compete based on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. We are using the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. It is the legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the industry. When we align the seven frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. We achieve a speed, accountability, innovativeness and profitability in our producer organizations. We also enable the decentralized production model that provides the individual producer with the price maker strategy needed in today’s shale enabled oil and gas business.

Key to this transition is the user community that we are in development of. It is these people who will be the critical resource that makes the Preliminary Specification the software that it can be. Software that isn't defined, designed and developed by the user is useless. And that is why we have endowed our user community with the power to effect the changes necessary in the oil and gas industry.

We can continue on in the losing ways of today's oil and gas industry. I’m sure we can all assume what will be said by the bureaucrats next annual report season, or even the next ten after that. They are on record that the business was going to improve and they had it under control. Well it doesn't look so to me. To learn what is really happening map the last five years of natural gas prices as being what the future holds for oil prices. That’s what is going to happen until People, Ideas & Objects budget is funded and we are able to bring this solution to the marketplace. With our value proposition creating upwards of $45.7 trillion in incremental value over the next 25 years, I would think that it's time.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why Not the Government's?

Many people have suggested that the various governments in North America. That are in oil and gas regions have a net benefit as a result of People, Ideas & Objects value proposition. Which is correct in terms of both royalties and taxes. There would be much to be gained in terms of these government's getting behind People, Ideas & Objects and funding some of our budget. It would be reasonable to assume that at least one third of the value that we generate would be redirected by producers to the various governments in the form of additional royalties. And the taxes that would be paid by the producers, based on the most profitable means of oil and gas operations, we can only assume it would be significant as well.

The problem with the idea of taking money from the government in order to fund our developments is that I will never accept it. There is nothing wrong with the money per se, other than the fact that we provide oil and gas producers with the most profitable means of oil and gas operations. And we are serious about that. Royalties and taxes are two of the highest individual costs that a producer incurs. The ability and the capability to reduce these costs to the lowest possible level at all times will be People, Ideas & Objects, the user community and service providers focus. We therefore can’t be conflicted by the fact that governments were, and are potentially continuing to fund our development needs. I feel it would be a conflict of interest for us to take their money.

I have mentioned a number of times that I had an audit firm before I started down this software development avenue in 1991. It was good work. Most importantly, I guess, I was good at it. My key client was the Alberta Government and I conducted audits on the natural gas producers in the province of Alberta. Confirming their royalty submissions to ensure that they were consistent with the regulations. I was assigned to work on Amoco and Imperial Oil (Exxon's) submissions which were the two biggest producers at the time. We all know Imperial’s love for meetings and their point of view about their bottom line. It was during this time I learned that there was many different ways of looking at the situation. I say that jokingly in that I learned the methodology of looking at things from the Imperial point of view.

Now there are regulations, acts and bureaucrats who offer opinions on what is what and that is how the world turns. And if you accept that as fixed then you are not doing your job. On behalf of the oil and gas industry I do not accept that the regulations, acts and bureaucrats opinions are fixed in terms of royalties and taxes. There can never be a point where they are fixed. The creative process of exploration and production demands that this posture be taken in terms of how these costs, the highest costs of the producer, are handled.

Based on my experience the differences are significant. I am no longer subject to any confidentiality agreements regarding any of the producers that I audited so I am able to state anything and everything at this time. I don’t need to go into details but Imperial did not spend much on natural gas royalties. Sure they were the largest producer, and it seemed to me that they made sure they employed and deployed each molecule of natural gas within their operation four to five times before they sold it or ultimately consumed it. Figure that one out. Attaching the royalty only on the net, net, net, net sales of the firm. Receiving massive royalty deductions for their natural gas used in their heavy oil operations by deeming the source of the fuel from their own natural gas production. The point of this is that it makes a substantial difference. And one that we could not guarantee that we were undertaking on behalf of the producers if we were also receiving some of our funding from the governments that took those royalty dollars from the producers.

We will implement a capability that will replicate the “Imperial way” within the People, Ideas & Objects software development team, user community and service providers. One where our service providers who are managing a royalty or production related process can apply the regulations and acts in the best interests of the producers. But also look at the business from the point of view as to what the producer is doing and why the governments should be supportive of these activities. Negotiating and communicating with them to initiate better policies and procedures to ensure that the oil and gas industry develops in the appropriate manner and that we provide the oil and gas producers with the most profitable means of oil and gas operations.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The User Community Participant and Service Provider Business Opportunity

We discussed the ability of the U.S. to become the swing producer in both oil and natural gas. How this is the appropriate strategic position for the country to take and how that would operate with the decentralized production model and price maker strategy of the Preliminary Specification. These changes require a new and substantially different organizational structure. Key to this structure is the ability to turn all of the costs of the producer, including their overhead, into variable costs. This is done through the use of the user community and service providers. Today I want to discuss in more detail what that situation would look like and how people would interact with producers when they operate in the user community and as a service provider.

It is the user community participant who will have worked with our developers to design and determine the needs of the oil and gas producers and Joint Operating Committees in terms of their data and process management needs. Going through the lengthy process of considering what those needs are and creatively developing and designing the specific solutions. This community has been estimated and budgeted at almost 3,000 part time participants with 600 full time resources per year being utilized by our developers. It is these user community participants who will be the principals who have organized the service providers. These service providers will then take the area that they have specialized in their software development with us and begin the task of creating the service that supports People, Ideas & Objects and provide the software and services to the Joint Operating Committees and the oil and gas producers. It is in these service providers that the current administrative and accounting resources of the industry will be reallocated to. There they will work for the user community participant who will also continue to work part time on an ongoing basis with the People, Ideas & Objects developers to continuously improve the applications and services that they provide.

The reallocation of the current administrative and accounting resources will also bring across the revenue stream to the service providers. The estimated value of that revenue stream is a large portion of the current G&A costs of the North American based producers. And I have estimated that the service provider's revenue stream would be in the range of $40 to $60 billion annually. Our budget for user community participation in the initial development stage is $667 million. This is over the multi year effort. There are significant revenues that the users and the service providers are able to generate. We support our user community participants with the budgeted $190 / hour fees. We however expect that our user community participants will make the necessary commitments and investments necessary in establishing the service provider organizations. It is also anticipated that there will be many processes under management by the People, Ideas & Objects application modules. However, we expect to see many of the user's partner with one another in order to establish stronger and more viable service providers.

User community participation in the development of the People, Ideas & Objects software is of critical importance to us. As you can see they hold a specific role within the industry in terms of how the applications are created, developed, implemented and managed. Most importantly they hold the keys to implementing the necessary changes by being the ones who are in control of the Intellectual Property. This is facilitated through the license that they will have with People, Ideas & Objects. It is important to review the user community vision that we have and understand the power that this group holds within the industry and how it is exercised. They are omnipotent. And that is how we will make spectacular software. The first thing we have to do is to secure the intellectual property. And that has been done. The next thing is to enable a community of users to use that Intellectual Property in the manner that provides the oil and gas producers with the most profitable means of oil and gas operations. And as you can see we are doing just that.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The U.S. as Swing Producer

There has been some discussion that the United States has taken the role of swing producer away from Saudi Arabia. I happen to agree with this point of view and it is exactly this role that the U.S. should be taking in the world markets for oil and also the continental markets for natural gas. Shale has changed the dynamic of the business. It once used to be an industry based on the scarcity of the oil and gas resources. Now these resources, thanks completely to the shale formations, have changed the game to one in which there is an abundance of oil and gas. What should be clear to most within the industry is that oil and natural gas markets are being oversupplied by the producing shale reservoirs. What hasn't changed is the business model in which the industry and producers operate. The bureaucrats, who have a vested interest in the status quo will not, can not and won't change their business model to accommodate these realities.

Each day we are apprised of the difficulties that Uber or lyft, and AirBnb are faced with by the established taxi commissions and competitions for other innovative Information Technology products. When given a choice consumers use Uber, Lyft, AirBnb for the simplicity and convenience of the business model they employ. In Calgary for example Uber and Lyft are able to operate freely in the city. The only provision that city council has placed on them is that every ride must impose a minimum fee of $72.00. I am faced with similar, fill in your own expletive here, by the bureaucracy in the oil and gas industry. Our value proposition is valid and yet it doesn’t stimulate the types of movements in that calcified existence I call a bureaucracy.

So the U.S. is a swing producer. However the industry, run by the bureaucrats doesn’t operate it as a swing producer. A swing producer will remove production if the market is oversupplied. And will bring on new production if the market is in need of more supply. That is what a swing producer does. The bureaucrats only operate on the basis of the high throughput production model. Which is designed to operate at full capacity, at all times, in order to ensure that the high cost of the overhead are covered. Guess where the bureaucrats costs show up, in the overhead. So cutting production would force them to take a personal financial haircut in the manner that they are configured, and that is just not going to happen.

If the U.S. is going to successfully be deployed as the global swing producer it will need to be able to adjust its production volumes based on prices in the marketplace. The only manner in which to do this is to reorganize based on the Preliminary Specifications decentralized production model and price maker strategy. By doing so what will happen is that the prototypical producer will be reconfigured to contain the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remaining administrative and accounting resources are reallocated to service providers who are focused on one process or subprocess. They will have as their client base the entire oil and gas industry. Each month they will bill the individual Joint Operating Committees, not the producers themselves, for the work that they do within the Preliminary Specifications task and transfer network. If the property has no production for the month, nothing will be done by any of the service providers because nothing comes to them from the task and transfer network. Therefore no billing for any administrative or accounting overhead charges will be made to any property that is shut-in.

What we will therefore have achieved is to turn all of the producers costs into variable costs based on whether or not there was production that month. This will enable producers to focus on what properties they can produce at a profit based on the oil and gas prices that are available in the marketplace. This dynamic nature of the producers production profile, which is based purely on the decision to produce profitably, will also act as the U.S. swing producer status. Holding the rest of the world's oil production constant, the swing producer will increase or decrease their production based on whether the prices they can realize will produce profits. Its like its a business! Something that an oil and gas investor would be hard pressed to call the activities of the past few years. For if you look at it objectively, you are hard pressed to make out any logical reason for the activity of the North American based producers.

Technology is providing real value for industries of all types. People, Ideas & Objects Preliminary Specification enables the U.S. to become the swing producer. And that’s a good thing, but there is no way they are going to be able to exercise that market discipline with the current bureaucracy in place. People, Ideas & Objects needs our budget funded in order to undertake the development of the software, the development of the user community and the service providers in order to achieve this. It also won’t be an app that you can download to your smartphone. Understand that there is much work and difficulties for all concerned ahead and this will take time. So don't come to me and ask me what have I got. Oil and gas is a little more complex than operating a cab. What I have is the solution to the problem as described in the Preliminary Specification. And I own the copyright to that. No money, other than mine, has been put into this. So understand there is significant effort needed by all to make this happen.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Intellectual Property

There is nothing more important to the membership of the user community, People, Ideas & Objects, the service providers and of course myself than the topic of Intellectual Property. It is how we function and operate in the 21st century. Just as Jeff Immelt of General Electric states “that every industrial company will become a software company.” Every software company is an Intellectual Property company. Therefore we begin on the basis of that foundation as the key asset of People, Ideas & Objects. A license agreement between the firm and myself granting the firm certain rights and privileges in terms of the development of my Intellectual Property. I am the rightful owner of the copyright of the Preliminary Specification, this blog and many publications that came before it. Most particularly the May 2004 “Plurality should not be assumed without necessity” that determined the Joint Operating Committee is the key organizational construct of the dynamic, innovative and profitable oil and gas producer. It is these works that make up the Preliminary Specification and how the industry, producers, the user community, service providers and the service industry participants would operate in a dynamic, innovative and profitable manner.

It is through the strength of this Intellectual Property that I will be able to raise the budget for our software developments and the user community. These funds will then be used to build the derivative works of software and other information from the current Intellectual Property. This will be done by the software developers and user community participants who will be paid from our budget. It is their knowledge, information, skills and Intellectual Property that we are purchasing from them to form a unified and consistent base of Intellectual Property. This base will be used on an annual basis to raise the funds necessary to support the software development and user community on an ongoing basis.

Under the terms of the license that I have provided People, Ideas & Objects, all derivative works from the Intellectual Property, in terms of ownership flow back to me. People, Ideas & Objects only hold a commercial license. The user community and our software developers will be granted individual licenses from People, Ideas & Objects that enable them to prepare derivative works from the Intellectual Property. And they will release their ownership of those prepared works back, through the People, Ideas & Objects license, to me, where through all of the licenses they remain available to all of the members of the user community and our software developers to use and prepare derivative works from. If we did not do this we would end up with a situation where the Intellectual Property would be scattered across the industry and producers would be subject to numerous cross licensing requirements and multiple royalty payments to multiple owners of the Intellectual Property. By keeping the Intellectual Property together under ones ownership control these issues are rectified and we are able to build off the value generated by everyone. In the 21st century, I believe your work will require you to own some Intellectual Property, or to have a license to some Intellectual Property, or to be employed by someone who does in order to make a living. Without access to Intellectual Property you will not have the tools to earn a living in the future.

The service providers are comprised of the user community participants who are the principals who make up the service provider firm's that will be established to form this sub-industry. These service providers will also be licensed by People, Ideas & Objects in order to access the software they will use to provide the oil and gas producers with the services and software they will need to operate their businesses.

There have been many attempts by the bureaucrats to breach my Intellectual Property. On each occasion they were discovered and ultimately refuted. And each time that there was an attempt foiled it only made my Intellectual Property stronger. Now it stands alone and is the solution that is necessary for the oil and gas industry to get back on track to profitability. We will probably fool around and waste more time at the expense of the industry. But one thing I can assure the bureaucrats, I have only begun to fight to make this real.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

The False Narrative

I made the comment the other day that there has been a false narrative about the industry and its operations. That this narrative was being discussed in the press these past six months and I have noticed and been monitoring it. It may very well have been going on for much longer. These are some of the statements that I have noticed being made that seem to me to be self-serving and colorful.

Shale costs have been coming down from innovations and improvements in drilling. 

This little nugget holds one falsehood and one truth. The truth is evident from the falsehood. Once you have expended the costs in drilling a shale well, and have paid for these expenses they are assets under the current methodology. How then would these costs come down? Unless you never recognize the asset costs in your calculations. Then the fact that it used to cost $90 to produce shale and now only costs $55 shows that they only include the costs of operations and royalties, not capital or overhead.

The innovation and dynamic nature of the industry has production being shut-in and resumed on a constant basis, based on price. 

Not quite. You need the decentralized production model in order to do that. What the producers have today is the high throughput production model which demands full production to cover the costs of overhead. Most specifically the bureaucrats paycheck. Nothing has ever been shut-in due to the price being low, anywhere. The natural gas marketplace is all the evidence that is necessary to prove this falsehood. Shale gas has gone from 10 BCF a day in 2010 to about 42 BCF per day today. Remember the high throughput production model. This is not a dynamic industry. The Preliminary Specification wants to make it a dynamic industry and the bureaucrats in their desire to make what they are doing look good next to the Preliminary Specification will say anything.

We can make money at $55.00.

In many ways this is the same argument as the first falsehood listed here. There is a culture that is so ingrained within the industry that capital assets are sunk costs and they are not considered in current calculations. And therefore they never are. You can’t play the shell game unless everyone follows the same rules. And for oil and gas the rule is, don't mention the costs of the assets. And why would you, they never show up on the income statement anyway.

We are now one or two quarters away from the longest decline in oil prices ever. 

a.k.a. hold on a little longer, all will be well soon. Those that don't follow history are bound to repeat it. This is inconsistent with the history that I personally recall the industry having to experience. It’s also inconsistent with the time that the industry has experienced in terms of natural gas pricing. It’s been five years since the big declines started and they don't seem to want to stop. If you want to know what the future of the oil price is, look at natural gas prices. The fact that the bureaucrats are over producing and using the industry for their own personal gain is a common theme that I have been suggesting here.

Crickets

Those being the solutions, and the discussions of any difficulties or problems that the industry is currently faced with. Nothing, not a word. I can't remember the last time things were so peachy. I think the bureaucrats should give themselves a mid year bonus for managing the industry so well.

Big Data

I’m on record as stating that anyone that tries to sell you a big data solution should have you sprinting in the opposite direction. They are selling you technology you don't need and have no idea what your business involves. If big data is the solution to the shale problem, which I have heard specifically, that only means they will have a real solution in a few decades.

Buy Oil Stocks

All the pain has been experienced in the oils so far. You need to buy these companies while they're still cheap. I don’t give stock advice, but this seems to be irrational.

Lift the export ban

This is what Harold Hamm Chairman and CEO of Continental Resources said in the Wall Street Journal.

If America’s interest is stability of supply, peace and prosperity, then our current policy doesn’t work. There isn't a more urgent issue affecting the future of our nation and the world than lifting the ban on U.S. oil exports.

Lifting the export ban may help in bringing the differential to Brent Crude prices down. However, refiners are free to export refined products. Trading refined products exports for crude exports seems like a bad business idea to me. Refiners generate value do they not? And it's just one big market is it not? If the crude is exported it still counts in the same 93 million barrels of oil produced every day.

The only discussion and solutions to the overproduction and unprofitability of the producers is what you'll read here in this blog. People need to focus on the primary areas of this industry before it’s too late to do anything about these issues.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.

Choice is a Good Thing

The choice that we provide the oil and gas industry could not be greater. On the one hand you have the status quo bureaucracy who are unable and unwilling to address any of the present or future issues within the industry. They are at the same time leaving any future business opportunities to whither on the vine. An industry where the overproduction and lack of profitability will lead to both future capacity and capability issues. With the Preliminary Specification you have the opposite. A prospective method and business model of how the industry could operate in the 21st century. A system, software development capability, user community and service providers who are focused on the dynamic, innovative and profitable oil and gas producer.

I suggested in my post before taking any time off that maybe the Preliminary Specification was too radical or too extensive of surgery to undertake by the industry. When you're tired and you need a rest you might say some things that you'll later regret. The Preliminary Specification is radical and extensive surgery for the industry to undertake. And it is the right treatment to cure what ails it. Nothing less is what the patient needs in order to heal and prosper in the 21st century. Does anyone believe that the bureaucracy has the legs to carry us much further?

The differences between this choice are significant. As a result of the differences, our value proposition is in the trillions of dollars. The present value of the incremental profits over the next 25 years are calculated to be $5.7 trillion. As a result of our ability to enable the producer price making strategy and the way that assets are capitalized. Capital is included in our pricing calculations. And as a result investors will see their capital returned to them over the next 25 years. So if the amount of capital is $20 or $40 trillion that needs to be spent to meet the consumer demands. It will be $20 or $40 trillion that will be returned to the investors with their profits. This is our value proposition. Depending on the amount being spent in capital expenditures in the next 25 years. We will provide incremental value of $25.7 to $45.7 trillion to the investors in this industry.

The primary way in which we do this is through the decentralized production model. Turning the oil and gas producer into a price maker and leaving the price taker strategy behind. By stripping down the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder of the firm's resources are reallocated to service providers who are focused on one administrative or accounting process, or subprocess and will use the entire industry as their client base. It will be the producers who focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. The service providers will focus on their key competitive advantages of specialization, the division of labor, automation and standardization. What is critical to this redesign is that each Joint Operating Committee, not the producer, will be charged for the administrative and accounting overhead charges from the service providers.

Then when the price of the commodity dips below what is necessary for that property to report a profit. A profit based on the revenues less royalties, operating costs, overhead and an allocation of capital. Note we have converted all of these costs into variable costs. Then that property would be shut-in in order for it to report a null operation. No profit and no loss either. That is because, while the property is shut-in, the service providers will have no activity in their systems to incur any of the service provider's processes for that month and there will be no billing for any administrative or accounting overhead. It is in this way that the marketplace has the marginal barrel of oil or natural gas removed from the market, the individual properties reserves are saved for the day when commodity prices are higher and can therefore earn a profit, and the producer reports the highest profits based on the commodity prices that are available. With the marginal production being removed from the marketplace, there will be shallower and shorter declines in the commodity markets prices.

There are many other ways in which we provide value to the dynamic, innovative and profitable oil and gas producer. The bureaucracy can't and won't, do this. It is physically impossible for them to make this level and scope of change. It has to come from the outside like People, Ideas & Objects, our user community and the service providers are providing. Only in that way can these changes be implemented.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why the Focus on Profits?

It is our focus, our claim, our desire and everything that we do at People, Ideas & Objects, the user community and service providers to provide the oil and gas producer with the most profitable means of oil and gas operations. Is this appropriate? Should we be focused on other goals and objectives other than that dirty word profits. It would seem inconsistent in this day and age that we should be focused on profits. The world seems otherwise occupied on other pursuits like fairness and equity, and the oil and gas industry should follow those. I disagree, focusing on profits is the appropriate and only thing that we need to be doing in oil and gas. And that is why we will continue on this path, always.

To whose benefit does the development of an industry that focuses on profits provide. Simply everyones. And by that you can include everyone. The consumer, the investor, the employee of the producer, members of the service industry, governments, society and anyone who doesn't clearly fall within any of those groups. When producers earn profits they provide for the employees of the producer and those of the service providers that they use. This gives these people jobs and resources that enable them to fulfill their lives. They also pay a lot in taxes to their local, state and federal governments. Additionally new employees are hired to provide further growth and benefits to the overall economy.

Producers can take the profits that they earn, pay taxes, pay off debts, pay dividends to their shareholders and investors, and further invest in the business. Banks are then able to loan money to other borrowers and investors can invest in other businesses. Government, state and freehold royalties are paid to those leaseholders who are entitled to those payments. Producers can also invest in more innovative and productive areas of the production process making the total cost of the exploration and production process less costly. Society benefits by having a competitive producer environment, a healthy economy, and balanced government budgets.

In contrast today, what we have is a sink hole. Where money goes in and nothing comes out. Unless you count the benefits accruing to the bureaucratic class as a benefit to anyone other than a bureaucrat. Investors have been “building the business” in oil and gas for the past number of decades waiting for the day in which “things” will turn around and be prosperous. It sure doesn’t look to me like they can expect anything positive to come from this industry in the next decade.

Employees are told to deal with the situation as it is today or lose their job. Service industry providers are told to cut their prices drastically or have no business at all. Investors are told maybe next year. Governments are told that they need to continue to support the business because it is so important to them. In essence everyone is threatened and told to do with what you have and don’t mention anything about the overproduction.

We can turn this around. Where the oil and gas producer is provided with the most profitable means of oil and gas operations by developing and implementing the Preliminary Specification, creating the user community and the service providers. That way trillions of dollars will be added to the bottom line of the producers and then achieve the type of industry that is self sustaining and provides the consumer with the reliable and affordable energy that they deserve. Let's dump these bureaucrats and replace them by funding our budget.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

An Alternative Asset Capitalization Policy

I have been critical of the method of asset capitalization used in oil and gas. Arguing that the balance sheets of the producers are bloated with assets that are never recognized as costs in the production process. I have also never offered an alternative to the current methods and one that would be more in line with what the investment communities needs and what they would prefer to see from the producers. My point of view is there is no redeeming quality in a producer who capitalizes everything under the sun. And that is what the current SEC inspired full cost and successful efforts methods permit as the accounting treatment for recording of assets. What these methodologies do is enable the amount of the assets of the producers to expand to the limit of the reserve base times the current commodity price. Or, the probable entire future revenue of the producer. A significant value that represents the producers capitalized overhead and every and all field activity.

The alternative that I would suggest is simply that any controllable equipment be capitalized based on its vintage. This would better reflect what the assets of the producers are. The assets that are controllable are those that can be physically identified, separable and reused. Well heads, tubing, downhold pumps, pump jacks etc. What wouldn’t be capitalized in this is the intangible work that is done. The drilling, cementing, casing, fracing etc. These costs would be expensed as they are unrecoverable.

Now most people will bring in the argument that the property is worth so much more than its uncontrollable equipment. I say lets hope so. The fact that the property is worth more is a reflection of the market, and we are talking about the book value of the assets of the firm. When we are talking about the book value of the firm we are also determining the method of the profits and other attributes of the producers. Lets not confuse book value with market value like the SEC and public accounting firms have.

By letting the costs of the intangibles flow to the income statement in the current period, as our methodology would do. The producer will be profitable / unprofitable based on their level of activity. They are going to need higher levels of revenue in order to participate in the exploration and development process when it has an immediate hit to earnings. And with the decentralized production model enabling the price maker strategy, higher prices and higher revenues is what producers will have. Astute readers will realize that the producer will have few assets and probable losses and invoke the going concern questions from the public accountants. Certainly those that are unable to produce any value through development of their drilling and completion activities. These producers who can not generate value will be subject to immediate harsh criticism. This will be in sharp contrast to the party just beginning under the current methodology. Those that can’t build value will have difficulty with this methodology. I also think the motivation to overproduce in oil and natural gas will also be rectified.

The question is therefore what is the purpose of the current methodology of bloated balance sheets? Building up the costs of the assets on the books based on every conceivable cost within the producer. Allocating all of those costs to the reserves that are established. And then, only recognizing the asset costs of the reserves that are produced in the current year. It hides a lot of fudge. No costs are being recognized so everyone is making big profits. Allegedly. Yet they also have no cash. Perpetually having to beg, borrow and steal to keep afloat. Show me another industry where the book value is so consistent with or exceeds the market value of the firm. There is none. Companies like Apple have $750 billion market caps and $20 billion in assets. The difference has been expensed to offset the revenues and earnings. That’s what a mature business does. Recognizes its costs and gets rid of them. In oil and gas they collect their costs like they're ancient artifacts, only to be relinquished in the next millennia.

There is very good news in changing this accounting methodology when the Preliminary Specification is implemented. The capital costs of the past number of years and decades. That are sitting on the balance sheets of the producers. Will be moved to the income statements based on the above noted procedure. This will enable the investors to capture these values in after tax dollars. Recall that this altered methodology works hand in hand with the decentralized production model. Ensuring that no production is produced unprofitably. Making the producers price makers. Therefore recognizing that these past costs will need to be factored into the prices needed to make the producers profitable. This change in methodology will also convert these bloated balance sheets into healthy bank balances in the producer firms.

I'm sure thats another trillion or two of value added to our value proposition in comparison to the status quo bureaucracy.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Bureaucrats Win!

...the battle that is, the war however rages on. I needed that break. It became clear that the bureaucrats were successful in pulling the wool over everyone’s eyes for another fiscal year and surviving the “accountability test” these past few months. No need to approach the development of new systems and organizational methods, all is well, the bureaucrats were put on record as stating. And that is exactly what they will be expected to show for this fiscal year as it progresses. I wish them the best of luck with that. The facts still remain that their business is in a tragic state and they are doing exactly nothing about it. Other than developing and implementing their personal plans to maximize their gains, expand the cabin and smooth their exit.

I’m willing to concede that we lost this battle, however the war still needs to be fought. The book value of the producers is so bloated by the asset costs of the properties that the producers don't recognize any of the real costs of capital in the calculations of profits. In a normal business their retained earnings would be as bloated as their assets were. In the case of oil and gas producers they don't have any retained earnings and their bloated assets are therefore offset by investor money and debt. As long as the bureaucrat has a source of capital to continue their escapades they will continue on building their elaborate cabins in the mountains. The problem they have is that they have been living off junk bonds as their source of capital and there isn't any readily apparent form of capital after that. The bureaucrats ability to win these battles is diminishing quickly. The time for them to exit may soon be upon them.

Much of what I read and heard in the business market about the situation in oil and gas this past half year was a well orchestrated discussion of how the business would be in the future. We'll talk more about these points on Wednesday of this week. Let's assume for the moment that what I am stating is true. That producers put a shine on the business that is not consistent with the facts. At the same time I was “selling my book,” that change was needed in order to deal with some serious issues. I don't think, that is to say, it should not be assumed by the bureaucrat that this sales job of theirs necessarily won over the powers that be. There are two opposing points of view on how to manage the industry. I think it is reasonable to state that People, Ideas & Objects Preliminary Specification and the bureaucrats “corporate model” are both being evaluated in the current market. One of the key differences between the two alternative models in the industry is that I can back my model up.

Recently OPEC met and resolved to continue with their status quo. If you dig down deep into their logic, for them to cut production requires them to determine which customers to tell to take a hike. Once a customer is forced to change their oil supplier it is nearly impossible for them to make the change back again. Why would that customer change? Therefore OPEC is doing what is in the best interests of their customers and ensuring that they keep those customers for as long as they can. Sounds like a pretty good strategy for OPEC to pursue. What is the shale producers strategy? We'll be discussing this more in the weeks and months to come. Other than deceiving their shareholders and bondholders, it is to lose money. Which is a pretty bad strategy. In oil you have 5 million barrels of shale production dictating the price of 93 million barrels of oil because you have some bureaucrats who are more interested in building out the cabin. In other words they just don't give a damn.

Let the evaluation of these alternative business models begin. Both methods have put their ideas and strategies on record. Just make sure that when you are evaluating these methods you are getting the truth from the protagonists. And be careful, there’s been a lot of fudge coming from one side.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Can We Afford Failure?

In most businesses or industries the results of the bureaucracies failures occur with little to no interest from the general public or other concerns. The demise of the record store, Nokia or Blockbuster Video is met with a shrug or a general lack of concern about a way of life that has past. In other industries such as banking, intervention by governments to ensure that the systems that maintain the daily economic requirements of our way of life are maintained is now commonplace. These banking interventions are into their seventh year and there doesn't seem to be any clear direction of a return to normal operations any time soon. Which category does the oil and gas industry fall under. Is it something that we can ignore and idly watch itself destroy its value and capabilities over time. To the point where it can no longer provide for the needs of its customers. Is that the point where wind and solar, tidal and nuclear energy will magically be capable of replacing “dirty” oil and gas? Can we rely on the radical environmentalists to show us the errors of our ways? Or is it something that we should be cautious of and ensure that the capabilities and capacities of the industry are maintained for the need of society? Altruistic questions, but maybe they should be asked.

In mid February I noted the effect of shale based reserves on the oil and gas production markets. These were reflected in the following two graphs. (Sources eia.gov and econbrowser.com)

Note the prolific nature and characteristics of the shale based reserves on deliverability. They have literal hockey stick implications to the continents productive capacity. Here is an updated version of the econbrowser.com graph for the month of February.

Notice any trend from the one that was published in November 2014? This productive capacity increase occurred during a time when the producers announced there would be an approximate one third drop in capital expenditures for the calendar year 2015. Although it might be too early to tell, the announcement itself certainly didn't have an effect on the increases in production. It remained on its upward trajectory. And I think it is reasonable to assume that the actual decline in capital spending will have the same effect. The current motivation for the producer, any producer, to achieve those increases in productive capacity will not cut those shale based capital programs. Why would they? The bureaucrats focus will be on reducing the costs associated with drilling, completion, equipping and operations. Also the overhead in the head office will have to be rationalized further in order to ensure that the producer becomes profitable. If that will ever be possible in this pricing environment.

That is the logic that is the state of affairs in the oil and gas industry. What the bureaucrats are being educated on today is the elasticity of supply and demand of the commodity markets. Their ability to reduce costs to produce a profit will never be achieved because of the effect of continued overproduction in the market. Now this isn't news to anyone is it. However, we see the industry stuck in a business model that it can’t, won’t, will never and does not change. Its demise and eventual destruction of its capabilities would therefore be a follow on process.

Bureaucracies don't change. People do however. And that is why we need to move to a new business model. The Preliminary Specification with its decentralized production model provides a solution to this overproduction by allocating production between producers based on profitability. If the property can be produced profitably based on the current commodity price then it will be produced. Otherwise it remains shut-in. But to do that we have to make some serious changes to the industry and they won’t be made by the bureaucrats. They fight change, like they fight People, Ideas & Objects Preliminary Specification, our user community and the service providers.

Therefore to answer the bigger question of whether we should be concerned about the demise of the oil and gas industry. I suggest that we should. Like banking, oil and gas provides us with everything that makes up our modern lives. Without it we are reduced to prehistoric capabilities. Not a pleasant thought. Should we just wait and leave this up to the bureaucrats to determine the outcome. Or should we act and ensure that the industry continues on in a healthy and prosperous manner for all concerned. I know which side of the fence I’m on.

And just as it was evident that the U.S. housing market was not a place to put your money. The oil and gas industries difficulties are plain for everyone to see. The fact that the U.S. housing crisis stewed for decades probably shows how long we'll have to wait for someone to act in our oil and gas interests. However, we need to remember there is no “Fed” to flood the market with deliverability when things do fall apart.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why We Need All of our Budget

People, Ideas & Objects has a big job to do which provides significant value to everyone involved in the oil and gas industry. It is as a result of our value proposition that our expectations might seem a bit odd. And as a result they can be taken out of context quite easily. One of these expectations is in regards to our budget and the expectation that it will be fully funded before any work is undertaken. The reason for this is detailed in this post and is as with all things with People, Ideas & Objects, related to our users.

Clearly we have a powerful bureaucracy who are well aware of this project and have chosen not to support it. This can be assumed to continue and that steps will be taken against People, Ideas & Objects and those that willfully participate in either the user community or the future service providers. Protection for these people during the critical period in which they are exposed to the antics of the bureaucracy must be provided. That protection is the assurance that during the transition period that we are building the systems. The revenues they will need to make this software and establish their organizations for the future oil and gas industry. Will be there in the form of the user community fees paid by People, Ideas & Objects during development.

There is significant career risk to those individuals who chose to decide to join the user community and service providers. The bureaucrats will list these people on their “do not hire” list that is shared amongst the bureaucrats at their lair. This will be a permanent change in the users life, there will be no going back to the old ways. However, people who are making the commitment to the industry in the long run. Who are tired of the losing ways of the industry. And chose to join People, Ideas & Objects. Those that are committed to providing the most profitable means of oil and gas operations. Why are they required to take any financial risk in the transition of the industry in order to provide the industry with the $5.7 trillion value proposition?

They aren't being asked to do that and they won't be asked to do that. They will have the financial resources necessary to leave their place of employment in the industry and participate in the user community, and seek to establish a service provider firm for the future of the industry. This will be done on the basis of the work that they do for the user community, the People, Ideas & Objects developers, and will be well compensated for out of the budget of $667 million for user community participation.

If we think that the industry will fund the development of the People, Ideas & Objects Preliminary Specification, user community and service providers on an annual go forward basis. This would be a foolish approach to take with the likes of the bureaucracy lurking in the shadows waiting to poach responsibility for that annual payment. They would most certainly come up with some reason to terminate the funding, or cut the funding, or tie the funding up in some way. I could go on but I’m sure that it is understood that they would try to do something. It is therefore incumbent upon us to ensure that our users and service providers are protected, and the overall viability of this project meets its successful conclusion. Having all of the funds at the beginning of this process is what is required to deal with the personal risks of the user community participants and the inability of putting this project back to together again if there were a temporary disruption. We must begin, continue without disruption and successfully build without the disruptive influence of the bureaucracy. They have shown themselves to be untrustworthy and unreliable. And that is how this unreasonable and odd expectation of having our budget fully funded has been developed.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Oil and Gas Operations in the 21st Century

Last week we highlighted the ways in which People, Ideas & Objects would enable a successful oil and gas industry. One that was dynamic, innovative, profitable and successful. This is detailed in the Preliminary Specification and is what is required for the industry to move forward in the 21st century. Currently the bureaucracy provide no future other than the financial demise of the industry. Theirs is a form of operation that is consistent with how things were done in 1960 or 1935. The need for change is evident based on the earnings of the producers and the changes they have implemented to deal with their financial losses. And that is, they have done absolutely nothing. Sure they have cut their capital budgets, but as we are all learning that does little if nothing to deal with the issues at hand. It is 2015 and we offer a means in which to operate the industry up to 2040. That only seems to me to be a reasonable approach to the way we should be operating the industry.

Change of this scope, led by Information Technology, is occurring in every industry. In every industry the entrenched status quo is fighting to maintain their archaic ways of business. This is the situation in oil and gas. It won’t be the oil and gas producer, led by the bureaucracy, that stands up and says we need to adopt People, Ideas & Objects Preliminary Specification. They have fought long and hard to ensure that we don't see the light of day. What is needed is for those that will be the ultimate beneficiaries of the changes that are made when the system is implemented. And that is the oil and gas investor who are being abused by the bureaucracy as badly as we are. It might be wise to have the investor direct the producers to fund People, Ideas & Objects from their savings in the reductions of their capital budgets.

If we continue on in the manner that we have in the oil and gas business things are only going to get worse. And does it surprise anyone that there is no response from the bureaucrats? This summer its reasonable to assume that storage facilities for natural gas will reach capacity. What this will do to prices for the years to come is certain to be bad news. Recently I read that Canadian producers who were unhappy with the prices for their oil production were shifting to drilling natural gas targets. Bureaucracies are incapable of doing anything but meeting the prime directive. And that is, increase productive capacity and produce. After more than five years in the natural gas business their behavior should have changed. Clearly it hasn't, and it never will. Nor will it change on the oil production side of the business. Surely investors can see that the trend is there. In many ways the oil and gas industry is not a business. Its an engineering exercise.

Who can instill the business discipline that is necessary in the oil and gas business? Only those that are affected by it. There can be a strike by the investors and they can refuse to invest in the industry. This has essentially been happening since 2008, and still these problems exist. The bureaucrats found willing junk bond markets to fuel their needs. And now that that avenue is closed. The reduction in capital expenditures will enable them to continue on without less difficulty. However, you will see continued overproduction, and increases in production in both oil and gas in North America for at least ten more years. The only thing that will stop them is the end of the shale based reserves. Which in natural gas is 50 years. In oil its as little as 10. And that is the Saudi’s game plan. Let the shale based producers, their investors and junk bond holders suffer with losses and financial destruction for the 10 years that shale based oil exists in North America. And then they will have both market share and pricing power again.

Or maybe someone will come up with an idea that makes this nightmare go away. Provide the producers with commodity price making strategies like People, Ideas & Objects does. And we can skip the financial destruction that in my opinion is only really beginning.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here.