Chevron's Reserves

CNN reports that Chevron Texaco's 2007 reserve replacement ratio was only 15% of production. This in spite of $12.2 billion in capital expenditures. Profits of $18.7 billion were attributed to higher prices.

I published my thesis in May 2004. It was based on the hypothesis that "The corporate hierarchical organizational structure is an impediment to progress and most particularly, innovation." and to "Determine if the Industry Standard Joint Operating Committee, modified with today’s information technologies, provides an oil and gas concern with the opportunity for advanced innovative-ness.” Based on the Chevron, BP, Shell and Exxon 2007 annual reports, I believe this hypothesis has now been proven correct. And the industry business model is fundamentally flawed and terminal.

For the past two years I have been writing about these theories and asking "what if" the industry did move toward using the Joint Operating Committee as the key organizational construct? And "how" would these changes affect the industry. From this analysis I have been able to publish the modular breakdown of the People's, Ideas & Objects application, and what is necessary to make this application function for the oil and gas industry.

Amongst the most important needs is the financial resources of the industry to support the users and developers of this application. If now is not the time, when? I would like to think that the work that I did over the past 4 years provides some value for the industry. Particularly from the point of view of giving them a head start on solving their reserve replacement ratios.

Technorati Tags: People's, Call-to-Action, Firm, Failure

I'm not getting this...

BP reports a decline in earnings, and the result is a 5% reduction of their workforce? We saw Shell announce smaller layoffs, but is this how the remnants of the seven sisters will deal with the current energy problems? What will happen next year?

Technorati Tags: People's, Failure, Peak-Oil

Succeeding at open-source innovation.

An interview with Mozilla Chairman Mitchell Baker.

McKinsey remains very topical with the work that is being done here. In this interview, Mitchell Baker reflects on the successful innovation she has experienced at Mozilla. A Lawyer by training she has been involved with Netscape / AOL / Mozilla for over 10 years.

The interview begins with the focus on Mozilla's participation model. With a staff of 120 and an army of volunteers, each group contributes to the code base, Ms. Baker credits both elements as critical and key to Mozilla's success.

McKinsey asks, "How do you motivate people to contribute to Mozilla, especially after ten years?" Ms. Baker notes the evolution of the browser, its dark side of pop-ups, spam and spyware and the greater conflict that Microsoft brought to the browser arena. And the elimination of gate-keepers in accessing the Internet. If not for Mozilla, Microsoft may have intimidated browser vendors to the point of extinction. These are the reasons that many have joined the Mozilla community and contributed. And;

Second, our product makes a giant difference in the lives of our volunteers, and they take ownership of it. I don't know if you could build this degree of motivation for something that really didn't change people's lives, something that they weren't emotionally committed to. But the number of people who feel that Firefox is partly theirs is very high.

I know this emotional commitment exists within the oil and gas User community.

I want to highlight these comments of Ms. Baker's and draw a parallel to the community that is being built here. No one individual knows all there is about oil and gas. To build a comprehensive system as I have described here needs the diverse and robust community to define it and build the software. I can't think how that can be done without the Users of the software emotionally involved in the manner that Ms. Baker speaks about her volunteers. And as I have stated before, this community has to be financially supported by the oil and gas industry. Both developers and Users need to be, and will be, compensated for their time and efforts.

In answering the McKinsey question "What has been the biggest surprise in the time you've been working at Mozilla? "Ms. Baker states;

That we had exactly what was needed at exactly the right moment. You often see this in start-ups that burst onto the scene and grow dramatically. There's a lot of hard work and smarts, but also some piece of timing is right. Those things, you can't control; you need to be ready.

I hope that I would not be considered presumptuous in stating that I think we are ready. Join me here.

Technorati Tags: People's, McKinsey, Open-Source, Governance

It's important to remember.

We have happened upon a time where there is much to be concerned about. Whether it is China, Britain, Australia or South Africa; Oil, Natural Gas, Coal or Gold, many problems are arising that are swiftly affecting the way of life that we have come accustomed to. James Slessinger was the first Energy Secretary in the US and is prescient in his statement that there are only two modes in energy, complacency and fear. As we move from one mode to the other we need to remember a few important points that I have commented on here before.

First as Albert Einstein famously said, "We can't solve problems by using the same kind of thinking we used when we created them." Or, we need to use new and innovative thinking in order to approach a solution to today's problems. That is what I've attempted to do here in this blog and software developments.

Secondly, Professor Carlota Perez has shown us the direction we are heading is towards a much better place. Her long wave economic theories have been written about extensively in this blog. I think her ideas provide sound comfort to the systemic unwinding of these energy market failures.

If we only focus on the problem, and the problem of energy supply shortages is possibly the biggest problem we have ever faced, we will be caught up in an emotional and viscous downward spiral. That is the last thing we need. Please join me here.

Technorati Tags: People's, Energy, Development

President Bush in Saudi Arabia

The President's trip to the Middle East gave him the opportunity to ask the Saudi King if he would consider increasing their oil production. The Presidents response was honest and candid and reflected the seriousness of the times that we now find ourselves in. In an exclusive ABC News interview he stated;

"If they don't have a lot of additional oil to put on the market, it is hard to ask somebody to do something they may not be able to do."

In a related story an official of BP Energy was quoted as saying that oil demand would peak before supply. If that is what passes for intelligent discussion at BP. The world is in much more dire of a situation than I thought. BP should be absolutely ashamed of itself.

Anyone, in my opinion, with 10 or more years of oil and gas experience will know intuitively the peak oil situation. Companies like BP appear to choose to lie about it. When this problem becomes "real" and the world in turn asks you what you did about it, you can turn and say you helped to build the systems solution that is documented in this blog. Join me here.

Technorati Tags: Peak-Oil, People's

MySQL it is.

Sun Microsystems today announced the acquisition of MySQL database. Therefore this project will move to that database platform. The reasons are fairly straight forward and include;

• MySQL has the Open Source community fully engaged in its development.
• MySQL has a feature rich offering proven in both the critical web and enterprise marketplaces.
• Sun is committed to Open Source. Java with MySQL offers opportunities for further integration.

I also am in receipt of a recommendation from one of the readers regarding the GlassFish Server. Apparently there is a version of GlassFish that is designed for light weight deployments. Named the HK2 (Hundred KiloByte Kernel) it was suggested that this could provide some significant opportunities for the developers to use HK2 on the client side with embedded MySQL.

I have revised the Draft Security & Access Control Module Specification to reflect these changes. The revised specification includes these changes reflected in blue text, and the V2 of the specification is downloadable on the wiki.

Technorati Tags: People's, Sun, Security, Development

A test of Hayek's theory of spontaneous order.

I have referenced Professor Russell Roberts on this blog before. He is an economics Professor at George Mason University, and a Fellow at Stanford's Hoover Institute. His best work is available freely through his blog Cafe Hayek, and podcast EconTalk. I highly recommend subscribing to both feeds.

One of the concepts that Hayek developed was "Spontaneous Order". In the last month this blog has morphed from somewhat of an academic exercise of extending the thinking of my thesis, to a project that is actively searching for funds, Users and Developers. Over the past year the number of people who subscribed to this blog grew slowly into a handsome audience.

Since I published the call for action in December, it is clear this community was waiting for me to exercise this change. That I may have been limiting the response is obvious to me now. The numbers of people who share an interest in these writings continues to increase. And I can now see that Hayek's concept of spontaneous order is possible. Professor Roberts provides clarity on the interaction of "spontaneous order."

When we talk about spontaneous order, the adjective is trying to capture the fact that no one is in charge, controlling the economic system - the order we see around us is spontaneous, organic, emergent, rather than controlled, directed or managed.

and

But I've been thinking lately about a different sense of the word spontaneous. It's the ability of the modern economy to deal with our spontaneity as economic actors, or, it's how order re-emerges in the face of our spontaneity as economic actors.

and

What happens when there's an unanticipated, essentially spontaneous change of behavior?

What should spontaneous order mean to Users and Developers? Action! Action not only in proceeding with the development of this software, but also learning what could be done. Action on behalf of the producers to sponsor this development, action on behalf of the Developers to get involved and action for the User groups to form and move forward.

Technorati Tags: People's, Hayek, User

McKinsey on Business Technology Trends.

As we embark on the development of these software modules. The technologies that we are using bring new dimensions and new opportunities to those that use them. Pursuing technology for technologies sake has proven to be a path of disappointment. This doesn't mean they are to be ignored, and I think if they are ignored, then these dimensions, opportunities and possibilities can and will be missed. Each of us should take the time to understand the technologies and apply them in this development in the most creative and value adding way. This is an opportunity for each of us to make this industry as profitable as possible for all concerned. The market, the producers, and the people who will earn their living in applying these software offerings to their day to day businesses.

It is in that vein that McKinsey has and is developing a competitive advantage. The application of technology is a cornerstone of their offering and much can be learned from their perspectives and research. This article, to me, reflects some of the opportunities that exist in today's marketplace. I hope that my readers see how they can capture some of McKinsey's ideas and incorporate them into these software components.

8 Business Technology Trends to watch.

McKinsey starts with noting;

"Technology alone is rarely the key to unlocking economic value: companies create real wealth when they combine technology with new ways of doing business."

Since we are calling for the industry to be re-organized in a manner that explicitly recognizes the Joint Operating Committee (JOC). Recognized as the key organizational construct of the marketplace. A place where the market and firms are well defined and have roles that are actively supported in the software we are building. McKinsey continues with eight trends that I think are very pertinent to the work that we are doing here.

Managing relationships.

1. Distributing Co-Creators

Again McKinsey hits a home run with their first sentence, reflecting the possibilities we have in this time and space.

The Internet and related technologies give companies radical new ways to harvest the talents of innovators working outside corporate boundaries. Technology now allows companies to delegate substantial control to outsider - co-creation - in essence by outsourcing innovation to business partners that work together in networks.

And hence, why we have begun development.

By distributing innovation through the value chain, companies may reduce their costs and usher new products to market faster by eliminating the bottlenecks that come with total control.

Software products that will make the oil and gas producer able to move faster and more innovatively.

2. Using Consumers as Innovators

Users are the consumers of the applications developed here. The Users are the ones who will use the applications to do their job in the most optimal fashion. The tacit knowledge of the industry resides in the people who make it work and get the job done. To exclude them from the development process makes no sense, and here McKinsey captures why.

Consumers also co-create with companies; the online encyclopedia Wikipedia, for instance, could be viewed as a service or product created by its distributed customers.

3. Tapping into a world of talent.

The Users as consumers hold the tacit knowledge and talent necessary to make it valuable. This combination, when aggregated by today's collaborative technologies, can solve any problem in the oil and gas industry. These tools and technologies have to be developed by the Users. And like the developers, compensated for their time and efforts in the development. The use and services of the People, Ideas & Object applications modules must be provided to them free of charge, and that begins here with these software developments. It is the producer who will fund these development costs.

As more and more sophisticated work takes place interactively online and new collaboration and communications tools emerge, companies can outsource increasingly specialized aspects of their work and still maintain organizational coherence. Much as technology permits them to decentralize innovation through networks or customers, it also allows them to parcel out more work to specialists, free agents, and talent networks.

4. Extracting more value from interactions.

And as McKinsey so eloquently states;

As companies improve the productivity of these workers, it will be necessary to couple investments in technologies with the right combination of incentives and organizational values to drive their adoption and use by employees. There is still substantial room for automating transactional activities, and the payoff can typically be realized much more quickly and measured much more clearly than the payoff from investments to make tacit work more effective. Creating the business case for investing will be challenging - but critical - for managers.

Managing Capital & Assets

5. Expanding the frontiers of automation.

The four cornerstones of People, Ideas & Objects technical vision consist of Wireless Networks, Java, Asynchronous Process Management and IPv6. These four technologies combine to provide and enable higher levels of automation in ideas, data and information.

Companies still have substantial head-room to automate many repetitive tasks that aren't yet mediated by computers - particularly in sectors and regions where IT marches at a slower pace - and to interlink "islands of automation" and so give managers and customers [Users] the ability to do new things. Automation is a good investment if it not only lowers costs but also helps users to get what they want more quickly and easily, though it may not be a good idea if it gives them unpleasant experiences. The trick is to strike the right balance between raising margins and making customers happy.

6. Unbundling production from delivery.

The examples cited in the McKinsey document don't necessarily apply to the situation in oil and gas. Unless I am missing some key point here, however, this certainly applies to the joint industry development model proposed in People, Ideas & Objects.

Unbundling is attractive from the supply side because it lets asset-intensive businesses - factories, warehouses, truck fleets, office buildings, data centers, networks, and so on - raise their utilization rates and therefore their returns on invested capital.

Leveraging information in new ways.

7. Putting more science into management.

Studies have shown consistently that the truth lies within the data. Using intuition and luck as the keys to a competitive advantage have been soundly defeated. Education and data analysis has proven superior in making decisions. With more data and information soon to be available, this trend will need to be met with more effective and efficient tools, and, knowledgeable Users who are well equipped with the software they need to do their jobs and make the right decisions.

8. Making businesses from information.

This last point makes it clear how I see many of the Users and Developers of this system will launch new and innovative businesses within the oil and gas market. They will be able to create an ecosystem and environment in which to earn a living from this development and software application. How their relationship with producers may change and where they will find the demand for their skills.

Accumulated pools of data captured in a number of systems within large organizations or pulled together from many points of origin on the Web are the raw material for new information-based business opportunities.

What is possible at this time and age is reflected well in this McKinsey article. It begins the process of discovering what can be done to make oil and gas producers more innovative, and faster at what they do. There are also economic principles that originate with Adam Smith in the 1700's. Economic growth is accelerated by defining ever-greater divisions of labor and organizational models. Join me here.

Technorati Tags: People's, Collaboration, McKinsey, Organization

Draft - Security & Access Control Module

I am pleased to present to this community the draft of the Security & Access Control Module. This is the first of eight modules that will be developed for People Ideas & Objects. This critical first module will provide the collaborative, security and access enabled components for the remaining seven modules development. This allows people to become familiar with the tools, processes, the means and methods of developing open source software. I am providing copies of the specification in .pdf format. Please download it from the wiki or email me to get a copy.

The process will follow this schedule:

- Open for Community submissions and nominations to Expert Group and Executive Committee until May 30, 2008.

- Final Draft approval by the Expert Group, August 31, 2008.

- Executive Committee Approval, September 30, 2008.

- Commence development October 1, 2008.

Further time-lines and deliver-ables will be specified by the Expert Group.

To participate please review the first section of the Specification entitled "Innovation in oil and gas" and review the Developer and User tasks. The community should then nominate candidates to fill the Security & Access Control Module Expert Group and the Developments Executive Committee. Review of the time-lines and commence development. I will be spending my time securing the financial resources necessary to pay for these developments. Writing the specification for the Petroleum Lease Marketplace Module. Assistance in these would be greatly appreciated.

The purpose of this process is to get as much input as possible. Please do not hesitate to ask questions of myself and the other people who will be joining. Thank you.

Technorati Tags: People's, Security, Access, Software, Development

A picture, and a thousand words.

Unsustainable! That is the only conclusion one can draw from this EIA Chart. Comparing the volumes of BOE (Barrels of Oil Equivalent) discovered to the capital expenditures expended by FRS (Financial Reporting System) companies. No one would want to extend this charts trend out further. Why have oil and gas exploration and development become unsustainable? I believe it is as a result of the engineering and earth sciences underlying the industry have become so complex, and the remaining reserves are skinny and difficult. That an annual acceleration of the amount of engineering and earth science effort needed per barrel of oil is increasing.

I don't believe the increase in the effort of these tasks can be conducted in the thick bureaucracies that have housed the engineering and earth sciences during the cheap energy era. What is required? The answer to that question is very easy and that is; more data, more eyeballs and most importantly exponentially more ideas. Implying a tidal wave of data and ideas will swamp the already constrained capacities of the bureaucratic energy industry. This projects vision of the future considers the increase in the volumes of data and ideas, and provides a solution that enables companies to employ the information and ideas in their optimal fashion.

Whether we call this changing marketplace peak oil, plateau's or valleys is not the point. It is a reality that faces those in the know within the industry. Where are tomorrow's barrels of production going to come from? I think from a lot of difficult and very hard work. My vision of how the industry faces these challenges is through the development of the software described in the archives of this blog. I will be publishing the Security & Access Module specification this week. People interested in this software development project will then be able to see how they can actively participate and make a difference in these systems developments.

There are no short-term solutions today. Just as there are no short-term solutions to climate change. People who need the oil and gas will just have to go without while the industry reorganizes and retools itself for the future. That process starts here with the People, Ideas & Objects software modules. I made the call for sponsorship of this project in mid-December. This call was followed by a similar call from ASPO-USA. Both of these organizations share a few similarities and differences. Both believe the time for their projects to be funded by the industry must begin. ASPO-USA has been a voluntary effort as have my efforts to date in this blog. This too is unsustainable and it is time for these projects to go forward, be funded, organized and built. Does anyone want to continue on with the trends reflected in EIA's chart?

I can't think of two more worthwhile projects for anyone in the energy industry to move forward with. Clearly since 2001 throwing more money at the problem hasn't provided, and never will be, a solution. The first thing we need to do is come up with better methods of organizing ourselves for these future challenges. Join me here in these tasks.

Technorati Tags: Genesys, Development, Software