A visit to the tarsands.

U.S. Energy Secretary Samuel Bodman was in Calgary over the weekend. After a quick tour of the heavy oil facilities in Fort McMurray Secretary Bodman stated that;

"The U.S. is ready to work with Canada to remove roadblocks facing Alberta's oilsands sector."

and

"Suppliers of oil in the world have really lost control of the market."

Recall MIT highlighted a video of Secretary Bodman that I reviewed here. The question that seems to be answered by Secretary Bodman's visit is that yes the oil sands are a critical part of the U.S. energy security. Declaring the oil sands a "world resource" certainly puts the energy issues into context, and puts their development on a higher priority.

If it was only so easy. The problem comes in the area of infrastructure. There is not the basic necessities to support the current $100 billion in investment being made in Fort McMurray. The mayor of Fort McMurray has stated that the ability to sustain the current pace of development is in jeopardy. There are not enough people, 75,000 in Fort McMurray, to assess as a tax base to begin to even address the current issues, let alone the future oil sands developments. A pretty serious situation for any city to handle.

What we need Secretary Bodman is help with our problems here. There were indications that the kind of help that may be provided from the U.S. was the U.S. based refineries and pipelines be upgraded to handle the oilsands output. First that is not the problem, and secondly Alberta, irrespective of our leaders opinions of the situation, is not a hewer of wood and drawer of water. A few weeks ago I wrote how our leaders had hired a Texas based consultant to review why Alberta was unable to support the development of a $10 billion super refinery. Now is not the time for our leaders to suggest that foreign groups develop the infrastructure necessary for heavy oil development. Invest here in Alberta where the problems exist. Don't move the raw material into the final market, essentially ignoring Alberta as a second class citizen.

The areas that we need help is in the development of the appropriate civic infrastructure in Fort McMurray. What we need is engineering and knowledge on how to build the super refineries, pipelines and associated infrastructure for full development. Lets work together to solve the energy needs of the continent. That is what is possible and that is what we are ready to do with our very good friends, the U.S.

technorati tags: Call-to-Action, Secretary-Bodman, Heavy-Oil, Genesys

"SAP misses forecasts"

In a "surprise" announcement SAP's second quarter results were not as projected. Growth in revenues were down to 8% as opposed to the usual 15 - 17%. Market share was lost to Oracle.

All and all bad news from the number one business software maker. I would point out that they were scheduled to release their results next week, yet chose to slide them in under the door on Friday.

SAP was off in all analysts estimates. This indicating to me that something happened that was unexpectedly. I would like to think that something was companies beginning to turn away from the large software packages towards more natural forms of organization, and much more focused software.

technorati tags: Genesys, SAP, Quarterly

Idiots, a.k.a. Petro Canada shareholders.

What our favorite company is up to is a mystery even to themselves. As a shareholder I will be rabid when on July 27th this company issues its quarterly report. I thought that Petro Canada may surprise the market with an early release yesterday. An early release who's impact would be lessened by the lack of attention over the weekend. This is a particular vile and spineless tactic that only cowards would do. Maybe there is some hope for them yet?

On the topic of a July 27th release date. Does this late of date postpone the bad news to the absolute latest available date? After the full volume of the second quarter reports has died down, then we will hear the extent of the losses of Petro Canada.

When the noise of all the surprise announcements from all the other industries is in full song, Petro Canada will sneak a loosing quarterly under the door. This also on a day before the August long weekend. There is no hope what-so-ever for this firm.

technorati tags: Petro-Canada, Cowards, Genesys, Quarterly

This is where it starts.

Ever wonder how the revolution that I frequently speak of happens? How the people who diligently work in oil and gas begin to turn against their long term employer? How hard working diligent employees begin to percieve things with a jaded eye regarding their commitments to their employers? How they begin to take the opportunities, and apply them for themselves before they even consider their company?

Intel today announced it will layoff 1,000 managers or about 1 percent of its workforce, across the entire company as part of an effort to reduce bureaucracy and costs. Add 1,000 former soldiers against the revolution, now fighting for the revolution. The numbers of people that see and realize that Intel, being a prosperous company, maybe their comfortable days as the bureaucracy are numbered, and they need to do something about it. At least hedge their bets.

This is how and where it begins for the legions of bureaucracies that are plying their trade for the large corporation. Come on in the waters fine.

Technorati Tags: Genesys, Revolution, Lay-offs, Energy

Metcalfe's Law, social networks and Geologists.

The wikipedia entry explaining the law and its origins is available by clicking on the title of this entry. I had also commented on an MIT video that featured Dr. Robert Metcalfe. I find him to be one of the most understated and brilliant individuals of our time. I am writing about Metcalfe's law due to the triggering of something that was said on Fred Stutzman's web log yesterday. I highly recommend reading his entry and the referenced research of Odlyzko and Tilly before continuing. Stutzman is questioning the value of social networks and imputing there is more then just Metcalfe's law in play. I want to take this idea and apply it specifically to a network that should employ the benefits of Metcalfe's law. That is the earth scientists and engineers that are actively employed in the oil and gas industry.

I want to frame the context of my comments in this entry to the scientific domain of an oil and gas earth scientist or engineer. There has been an aberration in the method of these sciences development. Due to the commercial nature of the oil and gas industry these sciences have taken an era of the comical "Top Secret" or "Spy vs. Spy" type of interactions. Much of this stupid behavior and thinking is limited to the policies and procedures that are developed within the firm. This science may have also been restricted in its application due to the types of basin's and zones the firm were operating within. In other words from a very practical point of view the scientists within the firm may have become myopic in their approach due to their veil of secrecy, regions being exploited and geotechnical applications.

I know of one geologist with a master's degree, who over a thirty year career had made some of the most significant discoveries in the entire western sedimentary basin. Commercial fields that may have produced upwards of $10 billion in gas sales. I find it ironic and sad that this individual, who was the president of the firms that made these discoveries, could only point to one mention of any of his scientific discoveries. And this was in the academic field as a result of his master's thesis. What the %&*# has happened to the geological, and geophysical sciences? Has it become a secret backroom corporate holly grail? Where only certain people are ever exposed to the knowledge that underlies the firm? (Monty Python coconuts seems somewhat appropriate here.) Why haven't we seen many of the papers and thinking that is the underlying value of the entire industry? Certainly the individuals who have been able to apply the science have been able to attain significant monetary success, but they are not credited with their theories and the developments and benefits that they brought to the sciences. And far worse these ideas remain secrets that are locked away where no one else can benefit from them! Applying Metcalfe's law this is a network of 1. Which derives the benefit of 1 to the power of 1. Sad ridiculous and maybe a crime. "What I know is what I know and I will not let anyone know what I know because then they will take it from me?" This is pathetic thinking for an individual that has been educated in the scientific disciplines. It is also pathetic that this is not being actively addressed and corrected today by some new thinking individual who publishes their thoughts in a blog. Publishing is the only manner of securing your intellectual property. Use technorati to document what you know and when you know it. And let the rest of the world benefit and build from the ideas.

Off the soap box now and talking again about the network effect of Metcalfe's law. Can the earth sciences and engineering disciplines benefit from some thinking that is logarithmically better in its speed and quality. What if workers in oil and gas openly published their earth science theories and thoughts. Could we then move the entire industry to a fundamentally new basis of value. Could these scientists have the benefit of knowing that their thoughts were unique and valuable to society, and reap the monetary benefits. To not publish is to deny what is yours to give.

Somebody somewhere has to start a social network for the earth scientists to start thinking together. (I can only assume that the oil and gas companies are going to be unhappy with me again.)

Technorati Tags: Copyright, Metcalfe's-Law, Innovation, Energy

A new security risk?

This is a warning to oil and gas companies regarding a new and significant security risk. Normally I don't concern myself with these, however, the following is the most prolific risk in technology today.

Pod slurping has been known to be a reasonable risk since the beginning of the iPod craze. Podslurping involves high speed copying of hard drives onto an iPod at an unauthorized location. The difficulty is having physical access to connect an iPod device to the network and then copy the disk images to the iPod for later review. With these iPod's being upwards of 60 gigabytes, significant volumes of data can be taken in less then 2 - 3 minutes. That is until now.

If as Microsoft has claimed, their new iPod killer will be wireless, then the physical access is not required. A visitor to your office may be able to access the data on hard drives wirelessly and maybe not even require physical access. I believe this may be a significant risk.

The only remedy is to encrypt literally everything so that the information is useless in the wrong hands. This can be done by ensuring all;

• data is stored in encrypted form.
• network connections are on a virtual private network.
• wireless connections are encrypted, and not broadcast.

Trust Microsoft to introduce the device that brings the greatest risk to data integrity. Which brings up the other risk. The ability to load programs and other data on to a harddrive is also a concern. The ability to store something in non-encrypted form would still be a threat if it were a script or, other compromising data.

When a company of size considers how many hard drives are accessible in this fashion it gives one the willies. Each computer is essentially a potential entry point when one considers that a wireless USB port can be augmented with a 802.11 b/g or Bluetooth connection in less then 10 seconds. Permitting anyone to create a new wireless network for their own use. However, it would be fairly easy to see someone using a computer in an unauthorized fashion, the iPod could be actively downloading information during a regular meeting. The network computer and service oriented architectures have never been more justified.

Now based on Microsoft's release schedule, their iPod killer won't be out until 2015. However, Apple won't sit idly by and let Microsoft introduce any innovation that isn't on their platform first. If there is to be a wireless iPod it could be seen as early as this years Apple World Wide Developer Conference in August. The time frame therefore to encrypt one's data is now, with very little time to do it.

Technorati Tags: iPod, Security, Innovation, Energy

Accidental innovation.

Harvard Business School has published an interesting interview in their Working Knowledge for Business Leaders series. Click on the title of this entry for the article. There are a number of interesting comments in the article and I am going to highlight two here, and then discuss the accidental nature of how I came upon using the joint operating committee as the key organizational paradigm for innovation in oil and gas.

"We have to be careful of these stories, in part because they make such good stories. Some scholars are skeptical of them, but the sheer number of them is interesting. And many scientists, like Fleming, talk very explicitly about the role of accident in their work. Some even argue that the orderly way people sometimes describe processes of discovery and invention, of the progress of science, is nothing less than fraud."

and

"Q: Is there a way innovators can encourage good accidents? In other words, is there anything we can control to foster this process?"

"A: Great question. Artists think they develop a talent for causing good accidents. Equally or perhaps even more important, they believe they cultivate an ability to notice the value in interesting accidents. This is a non-trivial capability. Pasteur called it the "prepared mind." There's an interesting analogy to evolutionary models of creativity here. In 1960, a guy named [Donald] Campbell proposed that we think of creativity as "Random variation + Selective Retention." That is, we need two processes, one to generate things we can't think of in advance, and another to figure out which of the things we generate are valuable and are worth keeping and building upon. In science, the arts, and other creative activities, the ability to know what to throw away and what to keep seems to arise from experience, from study, from command of fundamentals, and interestingly from being a bit skeptical of preset intentions and plans that commit you too firmly to the endpoints you can envision in advance. Knowing too clearly where you are going, focusing too hard on a predefined objective, can cause you to miss value that might lie in a different direction."

"In business, there's a saying that goes "if you don't know where you're going, any map will do." You can almost always get managers to nod in agreement with this suggestion that you might as well not start something if you don't have its end objective well defined. Working without a clear definition of your objective is considered wasteful, inefficient. But if you are trying to get outside what you can anticipate and see in advance, if you are going after the truly new and valuable, this way of thinking can be a problem. This is one truth about innovation that artists seem to understand a lot better than managers."

"Actually, though, I would not really label this "accidental innovation." The innovation itself can't really be said to be "accidental," even though it involves accident. It takes a considerable capability to see the value in an accident, and to build upon it to create even more value."

It seems like forever since I have been pushing this concept of the joint operating committee. If this method of organization for oil and gas firms has the perceived effect of what I think it does, then I certainly am not wasting my time by pushing it. I recall the early part of this century as a time when I was extremely busy. I was working as a CFO for a small oil and gas firm, I was taking courses for my MBA and I was haunted by the devastation that this software company had exercised on me. They were the worst of times, they were the best of times.

One of the things that bothered me about the software business was that I was more or less forced out by a number of mistakes on my behalf. All the value that had been created was dying on the vine. I felt the competitive advantages that were built up were fading quickly as others caught up with better technology and / or thinking.

In 2003 I can recall that I was thinking how could I strategically reclaim the higher ground and get back into the business on a full time basis. This was a raging thought throughout the three years I was studying. I then was required to pick a topic for my thesis. I thought that it would help me to combine my thesis and my intellectual property, together as one project to save time. The time pressures of my thesis came into play and I was desperately wanting to establish more intellectual property. This was based on my own realization that intellectual property was the only sustainable competitive advantage for any business, but particularly the software business.

I was therefore thinking through the entire process of the oil and gas industry and trying to analyze the key piece of data and information that the industry could be made to be more innovative. The ability to become innovative was more or less going to be a revision of the organizational structure, and I can remember vividly it was December and I was parking my car when it just hit me. The joint operating committee needs to be recognized as the key point of the organization. It is the point where most of the conflict and contradiction flowed from. The oil and gas hierarchies have been more or less in direct conflict with the committee for possibly 100 years. The efficiencies of the hierarchy in the large organization were diminishing, the technologies were moving to provide alternatives and the joint operating committee was sitting there as ripe fruit ready to be picked and put into play in the industry.

As soon as I thought of this it was like everything that I was doing was solved. I could build better software, I could increase the organizational capacity of oil and gas producer and I could finish my thesis with a killer topic. All my Christmas' had come at once.

Thinking the idea would sell I published the document to only realize afterwards that no one was going to support the idea. The bureaucracies I criticized and declared redundant, owned the budget process. And said bureaucracies were quick to show me how little they thought of the idea and the rest as they say is history. Being somewhat ostracized from the industry is somewhat refreshing I have to say. The time that I have been given has provided me with lots of opportunity to put more meat on these concepts and acquire more intellectual property through the publication of this blog. The pay is nothing, however, I can exist for as long as I need to finish off the concepts that I am researching and publishing. Besides I can't think of anything I like more then writing this blog. It is challenging and rewarding, the two things that I need the most.

Back to the Harvard article was this the result of a "prepared mind," yes most definitely. With 25 years experience in the industry, a masters level education, competitive stimulation, revolutionary technological opportunities were all factors. As the article also states, knowing that this was the point to push I think is also a key point. I could have easily justified letting this slip away under the basis that, it's too difficult, it would never sell or any other excuse. The last point that the article notes of interest to me is that I had a clear objective in mind, how to increase the innovative performance of an oil and gas producer. I was looking for some key attribute in this area and this remains the overall objective for now and for the long term.

But maybe most importantly, was I lucky? Yes, unquestionably. Serendipity is a good thing.

Technorati Tags: Genesys, Joint-Operating-Committee, Innovation, Energy

Petro Canada piles it on, again.

A press release from our favorite company notes that they have increased their offer for Canada Southern Petroleum Ltd. from $11.00 to $13.00. Recall that Petro Canada was more or less disgusted with the Canada Southern Petroleum Ltd. expectations when they were negotiating with them, I wonder how the management feel now. This whole episode could probably have been avoided if the pig headed management of Petro Canada just sat down with Canada Southern Petroleum. This latest offer bumps the original offer of $113 million a whopping 73% to a total of $195 million.

I'm sorry to be the one that explains that this whole situation is taking on an enhanced perception of panic on Petro Canada's behalf. With only 55,000 shares tendered to their $11.00 offer the message to Petro Canada is more. Will Petro Canada figure that this is a game that they are not able to play and fold, or will they pull out the heavy artillery and acquire more bank debt to acquire this tiny little firm.

To the management of Petro Canada, give your head a shake, at least until it hurts. Your acting like you haven't got a clue about what your doing. The message that this transaction is sending the market is that management is running around in "fire fighting" mode. Stop it and let this bad piece of history die quietly. Now that is my advice and it hasn't actually cost you anything has it.

You have a quarterly report that will be out soon. This report is going to show how bad things really are within the company. Regroup for that public relations nightmare and forget about this Canada Southern Petroleum fiasco, your out of your league.

Start the PR machine to mitigate the effects of your loss of operational control of your flagship Terra Nova property. And the inevitable financial losses of the firm. Canada Southern Petroleum is too small to provide any cover from a PR perspective.

Technorati Tags: Incompetence, Petro-Canada, PR-Nightmare, Energy

Energy Secretary Samuel W. Bodman

This video is on MIT World and is accessible by clicking on the title of this blog entry. At almost 60 minutes it is time well spent. Recall that MIT has declared that energy is the great challenge of the next 50 years. Describing it in terms that are best summarized as a "perfect storm". MIT has arranged as part of their Energy Research Council, U.S. Energy Secretary Samuel W. Bodman to speak on "Our Energy Future: Why American Science and Technology Must Lead the way."

Many of the things that Dr. Bodman speaks of are directly pertinent to the topics and thoughts within this blog. Quoting liberally from his speech:

"Science and Engineering can and should be used to advance the public good. To solve complex problems and to help our society and economy to adapt in a complicated global environment."

and

"A time for breaking down the walls that could limit our future economic growth. And in many cases the tools that we use to do this will be found in breakthroughs in science and engineering."

and

"At a time of increasingly aggressive global competition America must do what we have always done best. We have to take risks, we have to lead, we must invent, we must innovate."

That last quotation is directly in line with the justification for using the joint operating committee, and direct support for these software developments. These are the same points to a large extent that I wrote in my plurality thesis. That science and technology are constrained by the organizational conflict, and bureaucratic interference that limit and kill speed and innovation.

Bodman notes that the majority of his funding for the scientific research and technology has been as a result of a reallocation of resources under the Presidents "American Competitive Initiative"(ACI). He goes on to state that the:

"scientific disciplines are increasingly being linked." And that the effort of the energy department and the ACI go to the "future economic well being and security of our country".

Also noting that he is expecting more then just the development of new knowledge from these government funded research programs.

Although the research that he mentions in his "Advanced Energy Initiative" is on ethanol, hybrids, fuel cell, solar, wind, nuclear and clean coal. It is fair to assume that he fully aware of the demand of the U.S. for gas and oil is and will remain high. His approach currently seems to be limited to establishing some of the alternatives as viable enhancements for the long run in the U.S. and he noted as such the expectations of the market makeup of energy sources.

"Science and Technology must lead the challenge to provide good, clean and abundant energy."

Some noted targets, facts and objectives.

• Ethanol = 5% of the current supply = 14% of the U.S. corn crop.
• The department of energy expect that Ethanol supply will grow to 5 million barrels / day in 20 years.

Needless to say based on these facts the expectation of the US is to continue to use fossil fuels as its primary source of energy. Bodman sees the parallel between these energy related difficulties as similar to those in the cold war inspired space race. Having the Secretary of Energy making these types of comments adds some real depth to the issues at hand.

Technorati Tags: Genesys, Call-to-Action, MIT, Innovation, Energy

Topics of the week.

Oil prices have reached record highs. This seems to be a bigger surprise to the producers than the consumers. I believe the prices will continue to rise due to the increased demand of China and India, duh. Other contributing factors are the general health of the global economy. More people are living better today than at any other point in time and these economies operate on energy. No energy, no economy. With the far larger number of participants in the global economy the more energy is and will be demanded.

The second topic of the day is the cost escalation at Fort McMurray based heavy oil plants specifically. And in general, the increased costs of the oil and gas companies regular operations. Shell and its partners are suggesting the costs of their heavy oil plant are escalating 50% to $11 billion. Which is not bad for a project that started out at $3.5 billion. Would these heavy oil plants benefit from using a system such as Genesys? Yes most definitely, so why has this not happened? I have no idea and would ask any readers that may have an opinion to share it through the comment facilities of this blog.

Many of the participants in heavy oil projects also have conventional oil and gas operations, and many of the plants they own have their own joint operating committees to manage the needs of the plant development and operation. Joint operating committee's are synonymous with good industry practices. This is systemic throughout the industry, the bureaucracies only get in the way.

The only question that remains is how much longer this Genesys software development project will sit on the shelf waiting for the day in which it begins full development. The market needs the producers to produce more and faster, and the community needs to rally around the various calls to action that I am noting here in this blog.

Whether it is the producers that finally say "enough" and finance the development. Or the community of users that says "enough" and finances the developments themselves, these developments need to be done. Who and when are the questions that I ask. With so much academic support such as Hagel & Brown, the various other blogs that provide further insight, the use of the joint operating committee makes so much logical sense that to not attempt to build these systems is foolhardy, I think in the extreme.

Technorati Tags: Genesys, Topical-Subject, Call-To-Action, Energy