Another call to action?

After almost a week off I'm back and fully charged.

The call to action that I am referring to here to is an article in last Friday's Calgary Herald. The article states that the junior oil and gas producers and royalty trusts are having difficulty making money. Peter Knapp of Iradesso Communications states "Everybody thought it was going to be easy to make a lot of money and that just isn't the case". With natural gas prices down almost 50%, they are also finding their costs are high. They also clearly and unanimously feel that the gas price will rise after June.

So how is this a call to action? I have suggested a solution to this problem is to innovate and move with the science. Not that this hasn't or isn't being done, it is just that we have hit a critical period in which the sciences are changing quickly. The capital being generated from higher prices is a reallocation of the resources to fuel innovation. A profitable firm in the future will be able to collaborate with a greater population of all resources to determine the most effective ways and means of exploration and production.

This is the role and responsibility of the joint operating committee. And for the "business" end of the oil and gas business to continue to ignore the joint operating committee in its organizational structure and systems, the industry I suggest, will continue to fail in making money. A further failure will occur in that the industry will be unable to deliver the appropriate amount of oil and gas to the market.

By my count that's 10 calls to action.

Technorati Tags: Genesys, Call-to-action, Innovation, Energy

Military command, part II, why project management isn't the solution.

Project management fares poorly in comparison to the global scope of accomplishment of military command and control. In "Organization, the key" I noted the use of military command and control type structures as the replacement to the bureaucratic hierarchy. This military analogy and metaphor needs to be implemented within oil and gas in order to facilitate a method and a means of getting things accomplished. Since, as we have discussed, software defines the organizational constructs, this command styled implementation is an element of this Genesys systems, and specifically the technology will be built to superimpose the military command and control style organizational structure.

The implementation here is not dissimilar to the military metaphor, with "orders" being simply replaced in the "work order" system of Genesys. All tasks, equipment, human and other resources are managed through the system to provide a means for things to be accomplished.

This system will also be responsible to maintain the encryption, authentication and authority of each transaction. Since we are talking about the commercial elements of an oil and gas concern then "role" and "rank" also need to be implemented to provide a seamless manner that work should be accomplished in. I will write about role and rank in this series many times.

Project management is limited in its application as a means of operating a going concern. It therefore fundamentally violates its basic premise, that is it's temporary. Other problems in attempting to retrofit a project management structure to manage oil and gas assets include, diversity, depth and scope of communications.

Project Management teams may not have the diversity of resources necessary to effectively manage the assets. Consider for a moment how many people it takes to drill a well. From the point of view that if you include all the individuals who would be paid for their skills in drilling that well. I am talking about the billing clerk at the water trucking company to the chairman of the joint operating committee. Project management can not facilitate the scope and diversity of the 100's and possibly thousands of people that are involved in getting something done.

Another area where Project management falls apart is in its depth of resources. In oil and gas it is generally considered, as it is with anything complex, that the quality of the well drilled will be as good as the least experienced individual on the platform. Mistakes happen and the reduction of mistakes takes on a greater role then risk management. The active participation in activities can also broaden the scope of the problem solving capability. It is my fundamental belief that the more eyeballs that review the situation the better. The virtual environment can marshal more resources in this fashion then the physical world can.

The last deficiency of project management that I will point out today is that it is generally limited to human resources. We have discussed on this blog the types of communication being asynchronous and synchronous. We have also discussed the four methods of those communications being person to person, person to process, process to person and process to process. We can not limit the scope of the organizational construct of the joint operating committee to just human resources. The physical assets and capabilities of vendors, suppliers, or anyone and anything involved in oil and gas must be managed with the utmost efficiency. If we preclude certain resources at this point then we preclude the holistic solution this system will be. And if we preclude the methods and modes of communication (asynchronous vs. synchronous and Person to person etc.) then we will certainly have limited the potential for this new way of working.

Technorati Tags: Genesys, Military Command

Top 10 management excuses from Petro Canada.

Since I have predicted that the second quarter of 2006 will not be a very good quarter. I thought I'd come up with some excuses for the management of Petro Canada to use for their poor performance.

• Number 10, My Porsche was delivered this past quarter.
• Number 9, It really is just about us.
• Number 8, Production was down, it's the oil business.
• Number 7, You won't believe the costs to do business these days.
• Number 6, Just be thankful oil isn't trading at $18.
• Number 5, Precisely, what do you expect?
• Number 4, Selling Syria may have been a mistake, the clerk responsible has been fired.
• Number 3, Employee costs were so high!
• Number 2, We were trying very hard to buy Canada Southern Petroleum so we could become an explorer.
• and the Number 1 reason we lost money this quarter,
  
• We got ours, too bad about yours.

Technorati Tags: Accountability, Bureaucracy, Leadership, Petro-Canada

A bad attitude towards locals.

Reading yesterday's Calgary Herald I see a trend that continues to shape the oil and gas industry in Canada, in a negative way. I mentioned in an earlier post the response I received regarding the research that was the basis of this blog's copyright. How I was promptly shown the street, informed that the industry only conducted research with large firms like Cambridge Energy Research Associates (CERA) and that CERA was ultimately hired to conduct the research based on my intellectual property. Thankfully I was able to publish the results of my research before Cambridge, and as a result, earned the full rights to the copyright and associated intellectual property.

Is it a lack of confidence or disbelief in our own capabilities that causes an industry to look outside for its own research and decision making. What I found disturbing is that it is not just the industry but also the Alberta Government. They hired a Texas based firm to review the prospects of building a super refinery in the province for around $10 billion. The results of the Texas based consulting firm was that Alberta did not have the capability to undertake such a task.

I find this rather insulting. That we have the industry "leadership" deferring to our competitors to determine the activities in this province is bad enough. To have the Alberta Government doing the same is regrettable. So forget about courage and leadership, just defer the decision to those that may have vested interests in building their own super refineries, and have them make the decision for you. At least you will have covered you ass.

This is the reason that this project is now a global operation. Little if anything can be expected from these "local business leaders". Which makes this whole situation kind of ironic, instead of working in developing things together, lets just defer to strangers why we shouldn't do anything.

Technorati Tags: Genesys, Petro-Canada, Innovation, Energy

Oh how the mighty have fallen.

Petro Canada that is. Seems they have attracted some other bidders in their hostile offer for Canada Southern Petroleum Ltd. Greg Noval of Canadian Superior Energy is making a competing bid and it will be interesting to see if Petro Canada has the gumption to make a revised offer.

Recall that this process was so that Petro Canada was able to call themselves an explorer, however, I am afraid they may soon be better known for the company they keep.

Technorati Tags: Genesys, Petro-Canada, Innovation, Energy

I have seen the future,

Google in general, and Google Spreadsheet in particular.

I was invited to Google Spreadsheets today, if you do not have a Google account, you need to get one and start using their services.

Brilliant implementation.

Technorati Tags: Google, Innovation

I found this quote on Good Morning Silicon Valley.

It speaks to the one identifiable risk I think exists in blogging.

"The problem I am concerned with here is not the Wikipedia in itself. It's been criticized quite a lot, especially in the last year, but the Wikipedia is just one experiment that still has room to change and grow. ... No, the problem is in the way the Wikipedia has come to be regarded and used; how it's been elevated to such importance so quickly. And that is part of the larger pattern of the appeal of a new online collectivism that is nothing less than a resurgence of the idea that the collective is all-wise, that it is desirable to have influence concentrated in a bottleneck that can channel the collective with the most verity and force. This is different from representative democracy, or meritocracy. This idea has had dreadful consequences when thrust upon us from the extreme Right or the extreme Left in various historical periods. The fact that it's now being re-introduced today by prominent technologists and futurists, people who in many cases I know and like, doesn't make it any less dangerous."

-- Jaron Lanier sees hazards in the hive mind

I have felt that in the collaborative environment the drive for consensus can overcome all obstacles, even the truth. And although I am guilty of applying this in my criticisms of Petro Canada I am basing my attacks on the theories of Dr. Thomas C. Schelling's works and most specifically "The Strategy of Conflict" for which he received the Nobel Prize for in 2005.

I can assure you as the copyright owner I am aware of the danger that the Mr. Lanier speaks of. I can also ensure those involved in these developments that I will exorcise this from of discipline in this blog and software development project if the problem should develop.

Technorati Tags: Accountability, Conflict, Energy, Genesys, Intelectual-Property, Petro-Canada, Thesis

Java, the fourth component of the Genesys' technical vision.

Over the past couple of weeks I've identified elements of the Genesys' technical vision, initially commented on here. The technical vision provides a paradigm for the manner and type of application that operates in the Web 2.0 environment, and specifically in the oil and gas industry. Today, I am going to talk about Java, the fourth component of the Genesys technical vision, and then later in the next few weeks I will tie in why I believe the technical vision is so important in oil and gas.

Highlighting some of these features with a number of separate postings. I am attempting to show the different elements and there designed purpose in the Genesys application. I'll briefly note the three other components of the vision IPv6, Wireless and Asynchronous Process Management, and then focus on the fourth, Java. To aggregate stories I have written around this technical vision, just select the tag "technical vision" noted in the Technorati tags.

Some quick notes about the other three.Asynchronous Process Management (APM), or, how life rarely goes as planned. Asynchronous communication are designed to accomodate out of sequence events and deal with them as they occur. Processes that deviate from the norm can therefore be handled particularly well with Java's exception handling capabilities.

IPv6 eliminates the client server paradigm. With static addressing that enables anything and everything to be controllable, monitorable and any other ...able that you can think of.

Wireless and the ability to have a network in an instant. Where speed and "last mile" issues are eliminated through the use of the wireless Internet.

Java, number four on the technical vision list. Where to begin. As I indicated earlier, registration for the Java Introductory course is encouraged. Everyone needs to understand the concepts that have developed within the language. The ability to understand and to appreciate many of the future technologies and capabilities is dependent on these fundamental Java principles. Writting code is always fun as well.

Essentially what the technical vision points to is the elimination of the client server model. A model that is the foundation of the Internet today. Replacing this with the ability to manage and control any and all electronic devices. So what the fourth element of the Genesys technical vision, Java, provides is a "programming language" to deal with this new prospective world. And when we think of Java it is best to frame it in the context of a "programming environment".

Several of the critical components of Java are well known. The ability to write once and deploy anywhere is largely in place. What may not be fully appreciated is Java's strict typing, polymorphism, inheritance and object implemenation. Each of these links are to Dick Baldwin's online tutorials on how these components can be used to make such a difference. I highly recommend reviewing his site. Dick Baldwin is one of the better websites providing quality Java development education.

At this point in time the introduction of these four elements of Java are all that need to be introduced. What I want to achieve in this entry is to bring together why Java, wireless, IPv6 and Asynchronous Process Management are so very important in the very near future.

You can imagine a world where everything electronic is reporting, being monitored and controlled, and in a wireless environment how things don't need to get confused. Sudden system failure due to unseen events are a common theme in Hollywood and systems in general. This problem is what Java set out to solve by typing the language so strongly. I see Java as providing the ability to make this environment where any and all devices are operating, predictable. There is no area for ambiguity in many of these systems. How do you know you used the correct encryption algorithm to decode the production volume, from the right well? Java typing can differentiate anything and everything and that is why it is included in this technical vision. No other language is as strict in its interpretation of typing as Java.

Lastly I will note the value of inheritance in Java. Inheritance is where the ability to build off many other excellent frameworks and works of others. An excellent example of this is the GlassFish server Genesys is using as its base, or Java Enterprise server (v. 5.0). Testing and development was done from many different perspectives, and although it has little to do with oil and gas or accounting, it covers off many of the basic services that must be provided first. Once we write to a specification and achieve certification, then the evolution of the application will be managed without any glitches.

This is why Java is so important as a future programming environment. This technical vision exists today and only needs to be implemented in order for it be operational. Since Genesys is implementing this vision, only IPv6 needs to be deployed in all markets, something that is scheduled to occur soon, and certainly much sooner then this application will be completed by. Now that I have completed the high level review I will move on to more oil and gas and accounting specific applications of the Genesys technical vision. I encourage any and all readers to comment on this important aspect of what we are doing here, I look forward to your comments.

Technorati Tags: Genesys, Glass-Fish, IPv6, Java, Sun, Technical, Technical Vision

Partnership Accounting Part V, production volumes.

Up to now we have discussed many aspects of the unique Partnership Accounting requirements of using the joint operating committee as the central organizational focus. The nature of the oil and gas business is unique in many ways and this Partnership Accounting discussion captures many of the issues that an oil and gas system needs to address.

• Daily and monthly volumes defining a period of time.
• Spec vs raw, products and by-products.
• Processing and gathering fees based on (non) ownership.
• Imperial vs. metric reporting standards.
• Nominations, comingling of gas.
• Working interest owners earning different production values.

I suggest that adding these requirements to an already elaborate Production Accounting algorithm is going to be a challenge for the entire information technology world. However, it is also something that can be done. The only impediment is money.

Some history of how the industry has developed, and the influence that these historic attributes play. Once an agreement has been in place by the partners, a general framework of understanding how the operation is then established. These frameworks are legal agreements that are explicitly supported by the norms and culture of the oil and gas industry, both locally and internationally. These organizations in Canada include the Canadian Association of Petroleum Landman (CAPL) and the Petroleum Accountants Society (PAS).

Once these agreements and frameworks are in place, this is the precise point in time that real life conspires to make things complicated. These frameworks have also placed a number of processes in the hands of the companies to deal with these real life anomalies. Mail ballots, Construction, Ownership and Operation (CO&O) agreements define in detail what exactly the operation is. Company A will use Company B's gathering facilities for $4.50 / 103M3 etc. Sales agreements are defined between each individual producer with nominations being a process of balancing the sales and production processes. These also create unique accounting requirement for the property in the long run.

The influence of management here is significant. Each company has differing strategies for the area and each are attempting to optimize their assets. In other words differing perspectives of the same data and information. The compromise and details of each partner in each issue creates the unique accounting requirements for each partner for each asset. This system is being built to accommodate these needs. What is unfortunate is that this is the point that SAP, our competitor, wants the producer to get closer to the customer! I have worked in oil and gas for almost 30 years and I am still unable to find a "customer" as SAP defines here, and after many search parties have been lost, I am giving up in the search for an oil and gas customer.

By way of an example, I as an operator in a major area have the desire to expand the throughput of my gas plant. By drilling in other regions and zones, gathering of additional gas that may now be commercial. The land is held by another firm that has no facilities around the area and are beginning the process of searching for partners. A few years later our new partnership has made a significant gas find. The production is a rich gas stream that also happens to be sour. One company has an invested infrastructure to deal with their production, the other partner has only his production. These two firms will realize substantially different metrics regarding their investments in these properties. The partnership accounting for the joint operating committee has to consider these issues and attributes in a never ending evolution of the accounting requirements. Can you say Java?

What this Genesys system will do is provide the richest environments for managing these issues. In discussions regarding the Accountability Framework with SEC Chairman Christopher Cox it is noted that he is using XML to create a metadata standard for managing the accountability of companies reporting for SEC regulations. In essence using the power of the computers today to enforce compliance as opposed to the human influenced methods today. Genesys is developing the W3C standard for oil and gas reporting. As our budget includes $9,000 for membership in W3C for this purpose, then nothing will happen in this area until these funds are secured.

If the facility needs to account for the literal chemical composition of its aggregate production, almost impossible in a large facility, then that could happen. Or alternatively the legal framework could override the requirements of the actual production, very common in large facilities and less so in small ones. Most likely, the joint operating committee (JOC) will need to select a hybrid solution from the Genesys system in order to deal with the unique strategies and production requirements of each producer represented at the JOC.

Another certainty in this is the dying hierarchies are more then satisfied with their SAP software. SAP explicitly supports and recognizes the management, therefore becoming the ultimate software tools for bureaucrats and self serving pigs, like Petro Canada.

Technorati Tags: Accountability, Christopher-Cox, Genesys, Java, Partnership-Accounting, Petro-Canada, SAP, Technical Vision

Petro Canada, the definition of incompetence.

Wanting to remain fair and reasonable in my criticisms of our marketing target, Petro Canada. I want to provide an early response to some of the perceived unfairness that I may have leveled at the firm.

The nature of my criticism may appear to lead to circular thinking. This circular thinking can therefore lead to a variety of contradictions. But as in all philosophical endeavors, the ability to analyze these contradictions leads to a variety of issue resolutions and / or at least clarity. So here is a summary of my criticisms to date and how they may appear at first to be inconsistent. Only upon analysis to show that the "management" of Petro Canada have become self serving pigs at a trough.

# 1 Petro Canada can't make money in a high priced commodity market.

Although my analysis of the company has revealed that they really are losing money, they have not admited it in any of their financial disclosures or guidance. I have predicted the second quarter of 2006 will be the first quarter the company announces that its loosing money. If the management doesn't disclose the extent of their difficulties, they may be bunking with Enron's Jeff Skilling and Ken Lay much earlier then they realize. With these commodity prices, you would think that making money would be easy, but please recall that we are talking about Petro Canada.

The second aspect of not making money is generally a reflection of the management itself. If the management pay's too much to acquire its assets, losses due to the high cost of capital will eventually sink the company. Due to its history of nationalized assets and unilateral takeovers, this at first blush is not a criticism of Petro Canada's management, but we'll get back to this point.

# 2 Can't buy assets at market value.

Contrary to the previous note, the inability to negotiate or bargain with other groups is a skill and an art. For IBM to have acquired Price WaterhouseCoopers for $3 billion, after HP had a negotiated agreement to acquire PwC for $19 billion, shows much of what an effective management can do. Petro Canada can't negotiate a deal, so it takes it hostile. Motivated by the need to be perceived as an "active explorer" in the Arctic region, Petro Canada will do everything to secure those assets. The trouble of course is that they are unable to have them nationalized, or acquired for cheap prices as the strong arm of a third world country.

Just as I suspected, analysis of these points reveals a lot.

• The one uppermost point is that this management can't make money on confiscated assets!
• Petro Canada can't play nice with others. This bid for Canada Southern Petroleum Ltd. is for $113 million, or less then one half of one percent of Petro Canada's market cap. Talk about rearranging the deck chairs on the Titanic!
• Even in a high commodity market with little or no capital invested, Petro Canada can not earn an income?

All of those interested parties in seeing that this scar on the integrity of the Canadian government disappear, this pathetic example of a bureaucracy that is unaccountable, uncontrollable and unprofitable be dealt with in a timely manner. Please join me in this chorus and have the management removed, the assets returned to their rightful owners and start anew with this blog and software development.

The management however has courage. How else could you describe the obscene compensation noted below. How dare this management grant themselves the following options.
Total stock options granted 21,823, 535 as of March 31, 2006.

Average option price. $31.

Closing stock price. $51. (converted at $0.895 Canadian / US)

In the money value of stock options = 21,823,535 x (51 - 31) = $436,470,700.

Does anyone wonder why Petro Canada has resisted these software developments?

Technorati Tags: Accountability, Bureaucracy, Compensation, Conflict, Genesys, Leadership, Petro-Canada