Management of IP (Intellectual Property) in oil and gas

I have a few thoughts on how IP is developed and used in oil and gas and why it needs to change, quickly. First, as I have documented in the Resource Marketplace™ Module. The competitive advantage that a producer has is contained within their land and production base. The application of the earth sciences and engineering knowledge, understanding, and capability to their land and production base are the means in which to build value. The IP (intellectual property) is how the market provides the commercial means of building the producers value.

And IP is the markets way of building value and key competitive advantages. The holding of IP within a producer company is redundant, of no value and an impediment to innovation. The market uses the tools of IP to prepare the state of art research and knowledge for its own monetary gain and competitive offerings. In the hands of a producer IP is useless.

What would holding a number of patents on drill bits provide a producer such as Exxon Mobil? Or in this case, the IP of using the JOC as the key organizational construct? Again in the hands of a single producer it makes the ideas unavailable and unusable. In the hands of an entrepreneur it can build value for the entire industry. Neither of these two examples provide the producer with any strategic competitive advantage. Nor does the producer have the economics of scale to make the innovation or research worthwhile. They are not in the drill bit or software businesses.

Until the producers realize the IP is not their competitive advantage, and accept the markets holding of these ideas, the market will not respond to the needs of the producers. If the markets efforts are in vein and the producer just hands over one vendors IP to the next, nothing will develop that is different from today's $138 / bbl marketplace.

Not recognizing the IP of others as a practice will need to change before the producers can begin to approach the market demand for energy. For the past number of years the management of IP by the industry has been catastrophic. Other then the large suppliers such as Schlumberger, BJ and Halliburton's ability to file for patents. Most of the IP has been ignored by the producers so that they do not have to grant the monopoly rights to the technology developer. Since the energy industry is a primary business and 100% of the resource value is received by them, does not mean they can strip, cherry pick, abuse or otherwise attempt to steal the IP of the market.

Over the past 5 years my personal experience in this area has given me first hand knowledge of the depths of stupidity the companies taken the concept of IP ownership. This must stop for the betterment of society. If we continue in the fashion that we have, we will never be able to meet the markets demand for energy.

Central planning is dead, long live the market.

Technorati Tags: People's, IP, Market, Research,

Draft Specification - Compliance & Governance™ Module

Compliance & Governance™ provides the methods that the firm deals with the investment community and its associated regulators. (SEC, Tax and Royalty). The unique attribute of how the People, Ideas & Objects™ application provides the compliance, is by using the advanced technologies available to automate as much of the processes as possible. Technologies that the industry inherits in this software development capability and the regulators embrace of technology through their published API's (Application Programming Interface) and Frameworks. The best example of which is the SEC's XBRL initiative.

In this module we are ensuring that the policies and procedures of the People, Ideas & Objects™ application and its users are in compliance with the various regulations and requirements of an organization. In essence, through building this application we are moving the compliance and governance framework of the firm to be in alignment with the four other frameworks of the Joint Operating Committee. Maintenance of the producer in compliance to the frameworks of the SEC, tax and royalty regimes is this applications compliance goals. The governance aspect of the application assigns the role and responsibilities of the People to their tasks based on the Military Command & Control Metaphor.

A key to the resolution of the industries ability to find and produce the energy the market demands is through the efficient application of capital. This point has been dealt with in the Financial Marketplace™ module and other modules in this specification. Raising money requires access to public funds. The size of the innovative oil and gas producer should not be an impediment or constraint of access to the markets of oil and gas activity, and, capital access. If a firm is a small partner in a few projects, their ability to raise capital will be dependent upon their level of compliance capability.

Copies of the specification with the other six module drafts can be downloaded from the old wiki .

• Compliance & Governance™
• Security & Access Control™
• Petroleum Lease Marketplace™
• Partnership Accounting™
• Accounting Voucher™
• Resource Marketplace™
• Financial Marketplace™

Technorati Tags: People's, Specification, User, Development,

Robert Metcalfe on MIT Video

As I've mentioned in this blog before, Robert Metcalfe is someone that I find to be great interest to this energy problem. The introduction of Metcalfe in the Video provides a good summary of his background, and I would note that even despite his accomplishments his attitude remains fresh, and challenging to the status quo. The energy industry needs to be shaken and Metcalfe does a bit of shaking in this video.

Another aspect that Metcalfe was involved in was in participating in the MIT's founding of the Massachusetts Enertech Cluster. I held out high hopes that this was the necessary direction of the academic community, only to find soon after its forming it was hi-jacked by the climate and alternative fuels red herrings. I expressed my disappointment of this in this blog post here. Metcalfe is single handedly criticizing the Massachusetts Enertech Cluster in this one hour talk and returning the hope that I expressed of the MEC. Early on in the presentation @ approximately 9 minutes he states a few interesting points:

"Here are these trillion dollar markets (energy) that are poorly served."
"The people who have been doing energy investing for 50 years are annoyed with people like me, Internet people, invading the energy space." Stating, "look you guys have had your chance, and haven't solved it, move aside, here come the Internet people." (Here, here)

"In energy there are some particularly nasty people out there that are not going to welcome your technological developments."

Stating the goal should be that we pursue "clean" and "cheap" energy, Metcalfe summarily attacks the founding premises and objectives of the Massachusetts Enertech Cluster (MEC). Stating that;

• Climate change is a "motivational bubble" that may be solved quickly.
• Conservation should not be an objective of this project (MEC), we need abundant energy not conservation. Our economies need to grow, not be stifled by energy conservation.
• No Nukes (MEC), which meets the clean and cheap energy objective. Technology can and will mitigate the effects of nuclear energy production.
• Corn ethanol is a fraud.
• The government needs to adopt a Manhattan styled project for energy. The government will have no solutions outside of taxes.
• Only scale projects are needed, which of course is very foolhardy. Innovation will come from everywhere.
• And lastly there are no silver bullets. Metcalfe suggests we spend more time finding the silver bullets instead of opposing their development.

Which leads me to this project. How is it that the energy industry can ignore the People, Ideas & Objects application as a solution?

Technorati Tags: People's, Massachusetts-Enertech-Cluster, Energy, Metcalfe, Science,

Constrained Organizations

In a follow up post to the "Unconstrained Prices", I thought it might be a good time to reiterate the reasons that I see for the ever escalating oil and gas prices. Energy production is driven by the earth science and engineering disciplines. As one would expect, over a given period of time the science and engineering will be subject to new discoveries and findings, leading to further enhancements of the underlying sciences. Innovation plays a key role here in that the new sciences bring about new innovative uses, and in turn, lead to new science. This is the key area of long term value add in the oil and gas industry. A producer that is able to apply the science and ideas to the problem at hand will, over time, increase their production and reserves. I'd like to call this the "Capabilities Approach" to the oil and gas industry.

If we reduce the competitive nature of the industry down to this Capabilities Approach. We see the interactions and understanding of the industry as it developed over the past 100 years. Someone figures out how to drill deeper, then the subsequent wells expose more oil bearing formations and hence more opportunities for increased oil or gas production. As time has passed the more lucrative and "big" ideas have been applied in broader areas, and for longer periods of time.

As we have learned from Stanford Professor Paul Romer's new growth theory, "more" ideas are needed to progress forward from the current base of understanding. The supply / demand for these ideas is not linear, but logarithmic, and occur at a much faster pace through their life cycle. Enter the classic bureaucracy and realize its efficiencies are based on expansion of the underlying activity (growth) and continuous process improvement. Change, and particularly scientific and engineering change, are the hierarchy's deficiency. What we need is a new form of organizational structure that will support and enable the industry to compete in this dynamically changing and high demand marketplace. Until such time as we can change the performance dynamics of the organizational form for the oil and gas industry, prices of commodities will continue to rise.

It is these comments and ideas that I have asserted in this blog for the past few years. They are a direct result of my thesis that provides evidence that the Joint Operating Committee is the method of organization of the innovative energy producer. We need to start building the software that I have specified in the 11 module People, Ideas & Objects application and unleash the potential of the sciences for the betterment of society. I find these ideas are consistent with many of the industries leadership. The International Energy Agency recently made some comments that reflect these concerns.

The IEA states that by 2015 there will be a shortfall of 12.5 million boe / day.

"Future crude supplies could be far tighter than previously thought."

"Reflects an increasing fear within the IEA and elsewhere that oil producing regions aren't on track to meet future needs."

"The oil investments required may be much much higher than what people assume."

My personal favorite;

"This is a dangerous situation."

"We are optimistic in terms of resource availability, but wary about whether the investments get made in the right places and at a pace that will bring on supply to meet demand."

Yet nothing is done by these bureaucracies. They know what the problem is, there is just no motivation for them to make the necessary changes. Record profits at Exxon Mobil mask the 10% production declines. We need to consider who's responsibility this problem is, as the companies are unwilling to do so. After all it is not they who will be suffering with energy shortages but society in general.

On the other hand, and what I truly do not understand is that the $135 prices are rewarding those that find and produce the energy. This is an entirely new dynamic for the industry, when will we see the companies that are able to outperform the current crop of producers? The answer to that question unfortunately is not soon. Until this software is built to organize the efforts of the industry, our choices are limited to the status quo or manual systems. Join me here.

Technorati Tags: People's, Call-to-Action, Energy, Engineering, Science,

Draft Specification - Financial Marketplace Module

I am pleased to submit to the community the draft specification of the Financial Marketplace Module. This is the sixth of eleven modules, and last of the three marketplace modules in the specification.

What may not be obvious at first glance of this specification is the Marketplace makeup of the module. Financial resources are critical to the energy industry because of the intense capital nature of the business. This marketplace therefore provides a number of means for the innovative producer to manage the cash resources of the firm and apply the budget discipline at a finer level of focus, the Joint Operating Committee.

One thing that is very obvious about this module is the radical nature of how the nuance of committing capital amoungst the partnership is handled. Offering a multitude of options for the innovative oil and gas producer and eliminating many of the issues associated with raising money.

I have purposely provided a very light sketch of the Financial Marketplace Module. This is not my area of expertise, and many of the users in this community will better understand the open opportunity the module provides. I think the seventh module to be published will be the Compliance & Governance Module.

• Security & Access Control Module
• Petroleum Lease Marketplace Module
• Partnership Accounting Module
• Accounting Voucher Module
• Resource Marketplace Module
• Financial Marketplace Module

Technorati Tags: People's, Specification, Market, Change,

Unconstrained prices.

We have seen the price of energy increase by rather large amounts over the past 6 years. One would have to think that the upper limit of what is reasonable has to be near.

Oil and gas is unique in that it is the only resource that has a finite value. There are only so many volumes of oil and gas that ever existed. Like wood, wheat or rice it is not renewable, and like gold, silver and platinum not reusable. Once oil and gas is used its irretrievably lost. These attributes are what make them unique to other commodities.

The other aspect is that they are expensive, but more importantly difficult to find and develop. Conceptually the energy industry is the most difficult from a science and engineering point of view. As we have progressed through the cheap energy era, we now find ourselves in the era of difficult energy.

The pace at which the consuming public has learned the dynamics involved in the industry and its pricing has increased. The point that I want to make in this entry is that oil and gas prices are no longer constrained by the idea that there are easier to produce alternatives. The market has always generally believed that corn, wind and solar would replace the "dirty" oil used to power the SUV. That the future of the world's energy sources would now suddenly be clean, cheap and environmentally friendly.

The lesson that has been difficult to learn is that we can't use our food for fuel. Rice, wheat and corn are being disrupted and it is the food supplies of developing nations that suffer. Secondly the volumes of energy consumed in the alternative energy manufacturing process are higher then what is produced. And finally solar and wind, as they stand today, are prepared to take on less then 1% of the total supply of energy

So where may we see the price of energy go? If my suspicions are correct, we may ultimately see the price of oil reach $650.00. Within the next three months we may see $175.00 / bbl and we should consider that cheap. Cheap because it will only lead to temporary shortages.

Technorati Tags: People's, Peak-Oil, Energy, Market,

Draft Specification - Resource Marketplace Module

“For every serious challenge facing the world. There is someone with a big idea. That big idea needs to be nurtured. It needs to be explored and analyzed in order to bring it to life.

And design is at the core of that innovation. There isn’t a problem in the world that a great designer can’t solve.” Quotation from an Autodesk commercial.

The Resource Marketplace module is the second of three marketplace modules in the People, Ideas & Objects specification and the fifth of eleven. The key focus of this module is on providing a forum for electronic commerce. The Resource Marketplace works with the Accounting Voucher Module to optimize the contract, division of labor and mitigation of transaction costs.

A summary list of the published modules.

Draft Specification - Security & Access Control Module

Draft Specification - Petroleum Lease Marketplace Module

Draft Specification - Partnership Accounting Module

Draft Specification - Accounting Voucher Module

Draft Specification - Resource Marketplace Module.

Possibly the largest impact of this module is the management, with the Research & Capabilities Module, of People's Intellectual Property (IP). If we are to succeed in finding larger volumes of energy to meet the worlds demands we are going to need to solve a variety of difficult problems. Whether those problems are in engineering, science or business the individuals that will ultimately prevail need to be motivated to do this difficult work. The motivation is the ability to earn the rights to the expression of the idea, the patent or trademark.

For more then 25 years the oil and gas industry has ceased to conduct any research. Making today's environment ripe for research and development opportunities and making it a use it or loose it proposition. Since they chose to do nothing they won't miss out on any opportunities. In this module specification I also suggest that companies have become too comfortable with using People's IP as if it was free like the oxygen that we breathe. The "Ideas" in People, Ideas & Objects is explained in fair detail in the specification. It is necessary to build a system where people can develop, secure, license, contract and manage their intellectual property. This application is the place where that will happen, have a look.

The next Module to be published will be the Financial Resource Marketplace.

Technorati Tags: People's, Specification, Development, IP, Modularity,

Google announces App Engine

We moved one step closer to the People, Ideas & Objects applications capabilities with the announcement of Google App Engine from Google. Information regarding what the App Engine is, is available here, here and here.

What this provides People, Ideas & Objects users is the ability to host applications on Google Application Hosting. As one can imagine, Google has a lot of hardware available that at times may be surplus to their needs. This service is being offered as part of the Google Apps for http://www.people-ideas-objects.com/ product. And therefore free to all the users and developers of the community.

Now they mention that the service will allow only the Python programming environment, but more will be added in the future. I have always considered using Sun Microsystems to run our main app, and that hasn't necessarily changed, but Google Apps Engine provides the users and others to build some of the applications that may be used by a user to provide a greater level of service to their oil and gas clients.

Technorati Tags: People's, Google, Capabilities, User,

Draft Specification - Accounting Voucher Module

I am pleased to present the fourth module of the People, Ideas & Objects module to the community. The Draft Accounting Voucher module specification is different then most other modules and applications. It brings an area of strong academic science that until now has been poorly published in other ERP applications. Have a look.

• Security & Access Control Module


• Petroleum Lease Marketplace Module


• Partnership Accounting Module


• Accounting Voucher Module.

The next two modules will be;

• The Resource Marketplace Module


• The Financial Marketplace Module
  

Technorati Tags: People's, Modularity, Specification, Organization,

Topics of discussion.

One point that most users will be able to identify with is the recent focus of the industry. For the past year the focus has been on reserves, its land base, its production forecast, how difficult and expensive it is to produce oil and gas, and occasionally the retirement of the brain trust in the next 5 - 10 years. Any topics outside of the realm of these points of discussion is never raised. What about the systems, administration and management of the industry? Are these disciplines no longer considered a part of oil and gas? Is it through the neglect of these areas that is the motivating factor of the need for the People, Ideas & Objects application? Or is this just the natural evolution of the industry to focus on its key value added areas?

When you think about it, the topics of discussion of the industry are the most serious that they've faced. And the most demanding in their 140 year history. The magnitude of the problems and the seriousness of the issues requires 100% of their focus. Is it any wonder that many areas of traditional concern are falling off the table? I don't think so, and I would suggest the responsibility for action will fall on a different group to provide the systems, management and administration. And as we move forward the Users will become the leaders of this new service industry.

It is clear to me that the Users must be the lead in the development of this application. They're the only ones that collectively know how the industry operates. To preclude them from development would render this software quality down to that of SAP's and Oracle's. But there's more then just that. In the future what will the role of these users be in the oil and gas? What I'm getting at here is that People, Ideas & Objects application is the beginnings of a new User-driven technical support industry. Where the Users build their own software, manage and administer the day to day in oil and gas, and provide these critical resources as part of their service offering.

The current focus is not likely to change, and the earth scientists and engineers are off busy with their reserves, land, and production problems. They will need this new service industry to rely on, and will willingly pay for it. The number of people employed is very small for an industry that is in the ballpark of $4.5 trillion in revenue. Over the lifetime of the oil and gas business, the General & Administrative costs have been around 5% of the total. Is it reasonable to assume that this new industry we are talking about is a $225 billion in revenue? I think so, join me here.

Technorati Tags: People's, User, Vision, Productivity,