"Build it like your going to operate it forever."
That is the expectation of the CEO of BlackPearl Resources Ltd. John Festival, who sold BlackRock Ventures Inc to Shell Canada in 2006 for $2.6 billion. As I mentioned in a recent post companies are being formed with the intent to sell them within a five to ten year window. These people are able to put together a firm and sell it for substantial gains.
Nonetheless the expectation is to "build it like your going to operate it forever". The oil and gas assets of the producer are the value that is being built. Why would anyone approach the building of those assets with anything but the long term perspective. The dichotomy is that you are building the company for a quick sale. A team can put together a valuable producer in a short 5 to 10 year period that can then be sold for multiples of the cost to build the firms.
I see in the BlackRock team the prototypical 21st Century oil and gas producer. The ability to find and develop the resources, build the assets and then sell them to start all over again. It is happening consistently on this grand of scale, it is also happening on a smaller scale where less "proven" teams are building their capabilities up with each successive start up and subsequent sale.
It is these teams that I have in mind as being the ideal candidates for both the People, Ideas & Objects
Draft Specification and the associated
Community of Independent Service Providers (CISP). My logic is as follows; why does a firm that is focused on developing a firm's assets, based on a team of capable leaders need to burden themselves with the overhead associated with systems, procedures or even the staff to manage the day to day. What if they could access the systems and people necessary to manage their assets development? What if they were to find their most profitable operations were best managed by the CISP and People, Ideas & Objects application modules.
From an outsourcing point of view people will have preconceived ideas of what works and what doesn't. To think of this as just outsourcing limits the opportunity for the producer and the industry as a whole. Adam Smith proved that the division of labor and specialization were the keys to organizational efficiency. Since these concepts were proven they have been the driving force behind all economic growth. Greater specialization and division of labor are what organizations have been able to do to improve their performance since the late 1700's. The
Draft Specification considers this as a critical aspect of the systems means of providing the producer with increased speed, innovation and performance.
One of the key aspects of the
Accounting Voucher Module is to provide the means to design transactions. A transaction for the purpose of this example is the drilling of a well. The work that will be undertaken by whom and when is defined in the Accounting Voucher as the value adding process. This process is not too much different today as it will be in the future. However, the number of people that would be involved in that transaction may total one thousand people when we consider the producers CEO all the partners staff and on up to the invoice clerk at the water hauling firm. Clearly the division of labor has already been used to good effect.
Now to enhance the capabilities of the producer and particularly the industry, will require a greater division of labor. Lets assume that this transaction in the future may involve triple the numbers of people to successfully complete the transaction. Already the Joint Operating Committee employs only a handful of these people. How many will need to be directly employed by the JOC in this future scenario? Will it be more or less? I think it will require sizable more individuals reporting directly to the Joint Operating Committee.
Many more individuals spending substantially less time then they do today, over a shorter period of time. How will this be handled by the JOC? The ability of having this larger number of people spending less time on a transaction will be one of the direct results and benefits of the Information & Communication Technologies. The ICT can handle this type of activity, and what I am suggesting here is that irrespective of the size of the producer, only the key team of CEO, COO and CFO would need to be in the office at all times. The thousands of people available when and where they are required, managed by the People, Ideas & Objects application modules and the Community of Independent Service Providers.
In this future scenario BlackPearl Resources needs to coordinate and manage the efforts of thousands of individuals who have a significant influence on their success or failure. Some of the key attributes of this is that the "transaction" must be flexible enough to have the influence of the decision makers involved intimately with the aspects of the transactions that they can influence the success of the transactions outcome. For the industry to increase the overall productivity of the people imputes the speed of these transactions will turn over much quicker. If the performance criteria is to drill X wells today, then tomorrow may require X
3 wells drilled. Or it may be stated better by saying the engineering, geological and overall work required for each barrel of oil triples.
This is the only method I can see of how the fixed number of people working in the industry can become three times as productive. The market for energy is rewarding these firms with the pricing of the commodity which values all aspects of the producers operation. China, India and the rest of the world is joining the "Western World" and the demand for energy will only increase.
They key to the worlds energy demands being satisfied lies with these teams of people, as represented here by BlackPearl. The ability to do what they do is an intangible that lies in the minds of oilmen. This talent is very rare and very difficult. I don't think that without the motivation of the potential of a billion dollar payday, these teams would form. Which brings me to the point that I mentioned here a few weeks ago. Clearly International Oil Companies are buying most of these producers. National Oil Companies are yet to realize their value in developing their countries resources. What if Pemex were to use these teams to help maintain their production volumes? As I mentioned in that post the idea that these producers are closed behind some communist or dictatorial mindset has receded over the past few decades. The only thing that needs to be done is the IOC's, NOC's and teams fund the development of this software to make this real. And as a key component of the
Community of Independent Service Providers, all you need to do is join me
here.
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