Our Competitive Advantages

This post is about the technological competitive advantages of People, Ideas & Objects. The unique advantages that technological developments bring to our approach to ERP systems development. It's important that users and producers understand how our advantages can deliver the systems as defined in the Draft Specification. If people are not sure if what we are doing is even technically possible. Then it is difficult for them to see how a start-up can take such an opportunity and deliver on it. In a nutshell, yes we can. The proof has been written about elsewhere and I will refer to these so the individual can do their own research. This is important, as I do not expect anyone to have to take a leap of faith that this risk is not being identified and addressed.

I want to also stress that the identification of yourselves to any producer as being affiliated with this project is not advisable. The management of the oil and gas companies are not constructively approaching the systems or organizational needs of the innovative oil and gas producer. Secondly, to suggest that the individual give up their current career for this opportunity would be too much to ask. I would only expect that people would be involved with this project on a part time basis to begin with.

Contrast the competitive advantages that are being developed in People, Ideas & Objects to the competition. Oracle has spent $39. billion to bring out their Oracle Fusion product. How has this product been built to deal with the issues of the innovative oil and gas producer? SAP has a checkered past in the industry and they too have what I would consider critical faults in their offerings.

The first thing is to define the priority of the development. In systems you can have any two of three priorities. Either 1) the speed of development, 2) the quality of the development or the accuracy of meeting the users requirements, or 3) effective cost control. Making this decision is academic when we consider the scope of the application, the financial resources of the oil and gas industry and our fundamental value proposition and business model. The speed and quality can be attained in a start-up, I'm not certain that it can be built into a large organization such as SAP or Oracle. Our speed and accuracy are something that have been available to SAP and Oracle in the past. Asking them to overcome the speed and focus I know is too much.

The key technological advancements that make People, Ideas & Objects the most competitive in the oil and gas marketplace are as follow.

Java

By for the most powerful of programming environments. And blah, blah, blah techno talk. Needless to say this is an easy and unanimous choice.

Frameworks

Employing the re-usability of Java. Rebuilding everything from scratch is just not necessary. So much infrastructure and capabilities have been built into open source and other frameworks. Providing infrastructure and capabilities at a level that enables flexibility without the constraints.

Open Source

In combination with Agile / Scrum, Frameworks and Java, Open Source brings so many of the qualities that it is hard to document them all. Realizing the value in software development is in the journey, not the destination.

Data Model

Maybe one of the more difficult decisions, but this is what we have so far. We will be using the Professional Petroleum Data Model (PPDM) data model. And in answer to the technical question are we relational or object relational, I'll need to be convinced that an object relational model would work in a complex application such as People, Ideas & Objects. Until then we are relational. Performance may not be as fast, however, accuracy will be predictable.

The PPDM data model has the combined efforts of the industry in defining a data model for use by members of the petroleum industry. Our use of this work, which is substantial, eliminates a difficult area of concern. PPDM increases the quality of the subsequent developments. At the same time I think PPDM's data model has not been rigorously tested in the marketplace. And therefore we will be looking critically at the data model to see if it can be enhanced through a more strict interpretation of Relational Theory. And if it can be optimized for the innovative oil and gas producer. 

Modular Specification

The Draft Specification is modular for a reason. Modularity is a key attribute of simplifying systems development. Interactions between modules are easily handled and the overall system design can be accommodated. In total we will be employing fifteen development teams in the agile / scrum development methodology.

Agile / Scrum

This is a method that has simplified development to its most efficient. Scrum increases the performance of a development team from two to ten times the standard. That's correct, a two to ten fold increase in productivity. This doesn't sound at all believable but I can assure you it is true. Although it is open and available to anyone that wants to strive to achieve these multiples of development efficiency, it is difficult to implement retroactively in teams that have been together for a long period of time. Many developers are unable to transition.

One of the key attributes of Agile Scrum teams is the focus and role of the user. It is critical and the methodology makes itself accountable to those users in quick, short, intense development periods. I'll talk more about this methodology in the future, one of its key advantages is that the team can be distributed as far, and as wide as is required. Enabling the best of the best developers to be recruited and involved in this development. The key mode of communication between users and developers is the User story.

User Driven

You can not expect the user to be satisfied with systems that do not involve them. Users can not expect worthwhile systems that they did not have a hand in. The difficult and time consuming aspect of building systems to the users specification is the development of the community. People have had time to be able to codify these ideas and think of new and innovative ways for the system to be built to deal with a nuance of their day to day activities in their jobs. This will be the real key competitive advantage of this community.

User Interface

I don't use Windows systems. Two hours with one of those machines and I get frustrated either at the slow pace of my work or the fact they seem to break every time I push them. Using Mac's as machines and Unix / Linux are the only ways in order to deal with computers.

I have a wonderful ability with computers. When I started in oil and gas in 1977 I was introduced to them and they have been my friends since. In fact all my best friends are computers. The way we interact with them is critical to the productivity of the user. To ignore the user interface is to miss out on much of the computers value.

Users need to see the approach we are taking is going to be successful. Committing to a losing cause is in no one's best interest. How their involvement in the quality of systems is clear. What is not clear is how an application of such scope and functionality can be approached and built. The performance of technology, its reliability and maturity are providing productivity gains that are surprising to everyone. I'm seeing a distinct move away from the Oracle and SAP style of application offering. The need for fast, innovative firms is being demanded throughout the world. This can only be provided by a software development capability dedicated to the innovative firms. Please join me here.

Technorati Tags: People's Development User Capabilities Community
 

Nouriel Roubini on the carry trade.

A big part of this software development project is a lesson in how change is adopted in business. For People, Ideas & Objects to succeed requires the status-quo be replaced by the new. People need to realize the way things are done are no longer working. Our current economy provides the understanding that the current bureaucratic firms are consistently being faced with difficult situations. It appears to me that the efforts in trying to keep these dinosaurs operational is far in excess of what is needed to start over.

Our economic problems seem more and more to be a product of not accepting that the status-quo should be replaced. In the past ten years it seem we have lost the capital discipline necessary to carry out the further development of the economy. Housing is not an investment. Investments provide returns, not happy family moments. Climate change and alternative energy do not provide returns. They are man made cost centers that will be funded by taxes or the consumer.

Investments need a return and are productive in nature. They should not rely on luck but skill, and they should be based on cold and unbiased financial criteria. I don't want to come off preaching but these lessons seem to have been lost, particularly in the U.S. Professor Nouriel Roubini is well known for his precise calling of the economic crisis that started last fall. Today in the Financial Times he is calling for the "Mother of all carry trades faces an inevitable bust."

To suggest the economies have recovered is a bit of stretch for me. Stuffing $12 trillion into the global economy, keeping interest rates as low as possible, only shows how bad things are. At some point these factors will change and I suspect the U.S. will be no longer permitted to abuse their number one asset, the U.S. dollar as reserve currency. It is easy to forget the stimulus that has been injected provides a strong cushion to the effects of the economic damage. It is clear there is damage and that damage will need to be repaired by time, policies and capital discipline.

Arnold Kling states

In spite of all the sophisticated rhetoric about "quantitative easing" and "new tools for monetary policy," the only way that I can understand what the Fed was doing is to say that the goal was to stimulate bank profits, not the economy. If your goal were to stimulate the economy, you would inject enough reserves to do that and not pay interest on reserves. That might require buying some long-term bonds or mortgage securities, but not the hundreds of billions that the Fed actually bought.

Everything the Fed has been doing over the past fifteen months makes sense if you think of their goal as transferring wealth from taxpayers to banks. If you try to explain it as an attempt to implement an expansionary monetary policy, you won't even get past my high school students.

Reading Nouriel's article in the Financial Times makes it clear speculators are using the U.S. dollar as the funding currency in the carry trade. Enabling them to speculate on any type of asset they can access with the excessive liquidity in the market. This isn't gambling, it's gambling with the game fixed in their favor.

The point of this blog post is that the hard work we face is necessary. These efforts to support the economy will fail and take the status-quo management with them. Someone has to pick up the pieces, and for oil and gas, that is People, Ideas & Objects. Please join me here.

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Forbes says no to big software!

I have to say I'm impressed. We haven't covered any Forbes articles up until our first one yesterday. And today they knock another one out of the park. Maybe they are focusing on the business value of technology, and if so it would be a welcome change. The author of this article has a strong background in IT as noted here.

Roger Burkhardt is the president and CEO of Ingres and serves on the board of directors. Prior to Ingres, Roger served for six years as the CTO of the New York Stock Exchange. He and his team were responsible for the transformation of the NYSE to a fully electronic model, and conducted much of their IT work using open source.

Just as I have stated here many times before, People, Ideas & Objects is a ground floor opportunity. One that has offered a compelling vision for people to rally around and build the solution in the Open Source, higher quality and lower cost environment. Saying so long to the Oracle and SAP big bang style of application integration.

The recession has cast a bright light on the tactics used by Big Software companies to lock in their customers through multi-year license agreements. In these agreements, annual fees go up, but can almost never be reduced--even if the customer's business has downsized.

Which brings up an interesting point, one that I had not noted before. The services provided by the Community of Independent Service Providers are under the control of the producer. If the producer needs to scale back, then that can be arranged with the contracts they have with the individual service providers. With the rental of the software based on a per barrel of oil equivalent per year basis. If a firm makes an acquisition or divests a property these are reflected in the rental rates in the current year. Nothing unexpected, nothing constraining, just a cost plus allocation over the entire industry.

According to Sims, open-source software is not only as good as proprietary vendor software, but in many cases, he claims it's even better. In addition, he says he has saved his company over 50% in IT costs annually since he replaced proprietary software from Oracle, Microsoft and Hewlett-Packard with open-source solutions.

You don't have to take it from me, but he has a point. Please join me here.

Technorati Tags: People's CISP Value-Proposition Development Change
 

Some uses of Google Wave

I am one of those that became enchanted with Google Wave after I saw its initial demonstration. Few technologies have the potential to be game changers. Applications like email and the browser were in the same class of announcement as Google Wave. That we can implement the application in the People, Ideas & Objects - Draft Specification modules. And use it as a means of collaboration during development, make the application a critical part of our developments. I highly recommend that you view this video.



Several groups have been granted early access to Google Wave. It has been received particularly well by the people who have had access to the application. In a Forbes article, author Dan Woods notes the recent response to the application and the implications to ERP software vendors.

But the flexible collaboration of Google Wave is out of reach for the current generation of enterprise software. In addition, the flexibility and configuration of the data structures offered by Google Wave would make modern SaaS software seem restrictive. This freedom will require governance and a new way of thinking, but that is a topic for another day.

If we look at the Draft Specification, it has the "freedom will require governance" problem. The Joint Operating Committee by definition is represented by many different producers. All of the modules have this fact as a critical aspect of how this application will be able to deal with the unique aspects of the oil and gas industry. The JOC is the cultural means of the industry. The Draft Specification is the only application capable of recognizing and building on these attributes.

The combination of the Security & Access Control Module, Governance & Compliance Module and the Military Command & Control Metaphor are how People, Ideas & Objects provide this "freedom will require governance" model. This is a key point. Unless these attributes are built into the application at the start, then the ability to retrofit a ground breaking application with these attributes doesn't exist, in my opinion. I noted this essential attribute and noted the risk that the industry would face as a result of technologies advancement, without explicit management support, would lead to the leakage of control over the firm. Leakage over the day-to-day and strategic attributes of the firm. As technologies become easier and simpler to introduce, the role of management can be circumvented AND hence their responsibility to make sure this does not happen. As I mentioned in Technologies Darker Side in the Preliminary Research Report, companies were advised of this risk, and I reiterate the risk here and now. If the management of firms remain negligent to this risk, there will be consequences to the investors of the firm.

Please join me here.

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Who has the money.

It should be no surprise to any one that the money that supports these developments and the Community of Independent Service Providers (CISP) comes from the oil and gas producers. I have spent a significant amount of time doing the research that supports the Draft Specification. The distribution of the ideas contained within that document has been heard far and wide. Time now to put this project into a commercial venture. This post sets out to detail how the money that supports the software developments and the community of people that will use the software in their future day to day operations.

Let me state clearly that the Users, People, or Community of Independent Service Providers (CISP's) are all one in the same. And the key focus of the quality and value of the software that is being made. I would hope that the involvement of the user has been clearly expressed in my writing over the past few years. User involvement is the critical and difficult component of how this business will succeed. Clearly, to my way of thinking the sustained commitment and enthusiasm of the user base has to be supported by a strong financial motivation. This post is how the user can make a lucrative and long term career and profession around this "ground floor" opportunity.

CISP's or users have two sources of revenue. One is from the producers they work with for the services they provide, and the second is for the work with the developers from People, Ideas & Objects. Making the application operate in the manner that the User needs in order to be effective in providing their services to the producer. The User being the critical hub of all activity in this community. All of this is high value added work and I can not think of many positions that would be more involved and interesting. Whether the individual who joins this community desires to be a sole proprietor or expand to a substantial firm, these options should be considered open and available.

All the work that will be commissioned by People, Ideas & Objects will be through a work order system. The Users participation will be very heavy at the beginning phases of development. Then when the specification is deemed by the Users to meet theirs and the producer's needs, the developers will begin the process of writing the system. It will be at that point the amount of time that the Users will be involved will decline slightly, limited to guiding the developers through the initial building process and defining and directing the future changes and enhancements they want in the system.

The users revenues from the producer will be for planning and implementing their system, training their staff, running their applications, monitoring and maintaining the firms use of the People, Ideas & Objects software. Anything and everything of an administrative, accounting, land, production, legal etc at the producer client. They will be well educated and senior enough to fully understand what the producer wants and needs. They are the people who know how to do the job, and they can detail these requirements to the developers to build the tools they need to do their job. Our collective objective is to ensure the producer is provided with the most profitable means of oil and gas operations.

The services to the producer are billed and managed by the users organization. People, Ideas & Objects does not foresee the need or desire to be involved in these operations. We are software developers.

So how does People, Ideas & Objects source their funding. The producers that use the software will be subject to a "rental" fee based on their production profile. And yes if a start up producer doesn't have any production then there is no software rental fee. And of course, for users that conduct work with People, Ideas & Objects developers, their clients lack of production does not preclude payment for their services in developing the software.

These rental fees are assessed on an annual basis and for 2010 the assessment will be $1.00 per barrel of oil equivalent per day. So a firm such as Exxon which has 3.921 million barrels of oil equivalent per day, their 2010 software rental assessment would be $3.921 million for the year. Conceptually when we include the National Oil Companies, International Oil Companies, Independents and start up operations. We could conceptually have a revenue stream of approximately $120 million. However that is probably far in excess of what will be realized. And that does not preclude us from increasing the $1.00 charge in subsequent years to a multiple of that.

These fees will be assessed on producers that have contracted with People, Ideas & Objects to participate in the further development of the Draft Specification. The obvious question is why would a producers do this? I think the development of this software under the direction of the user community. With the overall objective of providing the producer firm with the most profitable means of oil and gas exploration and production. The business model that charges the costs of development over the entire industry, once, is compelling and a significant reduction compared to the fees that are paid for SAP and Oracle. Simply there participation is a value adding process to their firm. Having the Users and developers working to most effectively run their firm.

Therefore any producer that wants to begin this process is welcome to join. I know that it is in the best interests of the Users not to identify themselves to a producer. I would caution anyone to do so until this process is moved further ahead. We are fighting the vested interests of management and they like nothing more then to attack any new and innovative way of doing their job. They have different ideas and they will use their budgets to exercise their desires. So please be careful. I will publish within this community a list of any producer that wishes to join this process and have paid their software rental. And to say that we may never see a producer step up is a real possibility. That is why I attempt to deal with the investors and stakeholders of the producer firms. They are the ones that must direct the management to fund these developments. If you know of someone who fits that description then please forward them this information. And please as always join me here.

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New Feed Address

Please change your "Innovation in oil and gas" feed from whatever you are using now, to this new feed address.

http://feeds.feedburner.com/blogspot/kuLF

Thanks

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Change at Conoco

The Houston Chronicle reports today that ConocoPhillips have revised their corporate strategy.

ConocoPhillips CEO James Mulva signaled a dramatic shift in course for the nation's third-largest oil company Wednesday, saying that after years of bulking up through acquisitions, it is now focused on being a smaller, leaner business that takes better care of its shareholders.

Everything that People, Ideas & Objects is about is represented in that statement. Going back to the Preliminary Research Report, the changing nature of the energy industry has been evident for a long time. Nothing has been done about this during the past 10 years. Why would anything be done when the high energy prices made managements look effective. Now that the writing is on the wall, expect to see many CEO's become enlightened. I am surprised though at the comment that ConocoPhillips would take better care of its shareholders. It is the shareholders of these producer firms that I expect will direct the financial support towards People, Ideas & Objects and the User community. Providing them better control over their oil and gas assets.

A point about communication. If you or someone you know works at ConocoPhillips, or any other producer. Please introduce them to the Draft Specification and encourage them to get involved here. For me to establish a direct communication with ConocoPhillips, or for that matter any producer, is counter productive in terms of the Community of Independent Service Providers. It is the Users who are the critical contact with the firms. They are the ones that will use the People, Ideas & Objects application modules and their services to make the producer the most profitable that it can. It is the User community that will direct the developers in the development of the applications they need. For me to communicate directly with the producers is counter to the interests of this user community.

But the change is necessary in light of the global recession and the difficulty of accessing new oil and gas reserves around the globe, coupled with the massive costs of extracting them, he said.

An honest assessment of the change to the oil and gas business. The position of the producer firm needs to be able to focus and support the innovative earth science and engineering talent in their firm. To do that requires the Joint Operating Committee to be the key organizational construct of the innovative oil and gas producer. It is one thing for ConocoPhillips to begin the process of becoming more focused on the sciences. In today's market the ability to change direction needs to have the changes recognized in the software first. SAP and an innovative science oriented Joint Operating Committee will not work. Bringing the CEO Mulva's comments into question as to their validity.

Mulva's comments underscore challenges facing major oil and gas companies and may even call into question the bigger-is-better, integrated business model that has prevailed in the oil industry for decades.

Asking these giants to make the change from the SAP induced bureaucratic firm to something more nimble is difficult for me to see without a change in the ERP systems they use.

Now, ConocoPhillips appears to be embracing a business model more akin to smaller, independent oil companies, which many investors prefer because they are more nimble and likely to deliver better returns, said Fadel Gheit, oil analyst with Oppenheimer & Co.

Who knows maybe they will be successful. Or the properties they sell off will continue to fuel new and more innovative firms.

When asked if he believes other oil companies will follow its downsizing lead, Mulva said not necessarily. But, he said, “I think longer term — I can't speak for the other companies — it's really changed from prior decades. It's going to take a somewhat different approach.”

That different approach is members of the User community joining me here.

Technorati Tags: People's Strategy Innovation Communication

McKinsey Interaction Costs Part II

This is the second post of McKinsey's review of Interaction Costs. The original McKinsey documents are located here and here. As in my first blog entry, the discussion is about the role that people will have in future organizations. How work is changing over time from transformational to transactional and on to tacit. McKinsey notes in its opening paragraph.

Like vinyl records and Volkswagen Beetles, sustainable competitive advantages are back in style - or will be as companies turn their attention to making their most talented, highly paid workers more productive. For the past 30 years, companies have boosted their labor productivity by re-engineering, automating, or outsourcing production and clerical jobs. But any advantage in costs or distinctiveness that companies gained in this way was usually short lived, for their rivals adopted similar technologies and process improvements and thus quickly match the leaders.

Durable competitive advantages, like in other industries, have been hard to develop in oil and gas. Much of the last 30 years has been a battle of survival from one crisis to the next. Most of these crisis were due to the high cost of capital, or low commodity prices. There have also been a variety of issues that are unique and local, such as the lack of take away pipeline capacity in Western Canada.

Today I see a different business that is driven by the earth science and engineering capabilities of the firm. Driven by these sciences ever increasing volume of work per barrel of oil equivalent. Application of the science and engineering knowledge to the asset base is the unique, durable competitive advantage of the producer firm. Sustainable competitive advantages are attainable in oil and gas to those that can build their capabilities in the earth sciences and engineering disciplines.

As we have mentioned here many times the key ingredient is the quality of the team that occupy senior management. Providing the resources and direction to reveal the long term value is the skill of these teams. The key is that oil and gas exists in the minds of oil and gas (wo)men.

New McKinsey research reveals that these high-value decision makers are growing in number and importance throughout many companies. As businesses come to have more problem solvers and fewer doers in their ranks, the way they organize for business changes. So does the economics of labor: workers who undertake complex, interactive jobs typically command higher salaries, and their actions have a disproportionate impact on the ability of companies to woo customers, to compete and to earn profits. Thus, the potential gains to be realized by making these employees more effective at what they do and by helping them to do it more cost effectively are huge - as is the downside of ignoring this trend.

What can I say. McKinsey have been able to provide advice such as this throughout the past decade. What is needed in oil and gas is the organization, its systems, the people that support the team and the team itself to operate at a higher level. A level that is focused on innovation in the earth sciences and engineering capabilities and the never ending increases in the demand for these talents for every barrel of oil equivalent.

SAP is the bureaucracy. Started in the 1970's to deal with the various tiers of manufacturers in the auto industry, SAP has branched out into all the industries on the planet. SAP is the most popular choice of senior producers and holds the number one position of ERP systems in oil and gas. I have seen installations that use the budget system to calculate the gross and net expenditures on a Statement of Expenditures or Statement of Operations. To suggest that they recognize the Joint Operating Committee is beyond the scope of what is possible. With the numbers of companies, and the volume of installed code, there is not enough energy in the universe for SAP to make the changes to support the innovative oil and gas producer.

Much can be said about Oracle Fusion as well. Oracle recently showed some of the aspects of their new system. They should be credited with the energy to at least rewrite the software code. That only took them $39 billion. So one can see the scope of how difficult it is for these applications to change their stripes. Now Oracle has to embark on the other aspect of moving the universe by changing their paying customers to the newer far more expensive software. Exactly, what was Oracle's CEO Larry Ellison thinking.

Neither of these two software vendors have listed the energy industry as a primary focus. They have ceased to be a viable alternative in the oil and gas marketplace for their inability to understand or deal with the unique attributes of the producer. That is they do not know of the Joint Operating Committee's existence. Neither of these two applications have any vision of what the oil and gas firm can understand or appreciate.

Neither of these two software vendors have a business model that meets the needs of the producers. Or a business model that provides the value of the software to the benefit of the software user. Theirs are more interested in corporate survival, due to their $39 billion in investments. It is however, reasonable to assume that both these two software vendors will be able to deploy vast armies of marketing people to impress the "old school" management with another version of their software.

This will be a test of the "old school's" managements survival from the pre-crisis economy. McKinsey sees this reality just as I do here at People, Ideas & Objects.

As more 21st-century companies come to specialize in core activities and outsource the rest, they have greater need for workers who can interact with other companies, their customers, and their suppliers. (Enabled in People, Ideas & Objects by the Resource Marketplace Module)

Thus the traditional organization, where a few top managers coordinate the pyramid below them, is being upended.

Raising the productivity of employees whose jobs can't be automated is the next great performance challenge -- and the stakes are high.

Companies that get it right will build complex talent-based competitive advantages that competitors won't be able to duplicate easily -- if at all.

I think that I am on record as stating that "best practice" is one of the worst acts that management conceived. For oil and gas producers to maintain their competitive advantage is to focus on their asset base, which includes their land lease and productive assets augmented with their earth science and engineering capabilities.

The good news concerns competitive advantage. As companies figure out how to raise the performance of their most valuable employees in a range of business activities, they will build distinctive capabilities based on a mix of talent and technology. Reducing these capabilities to a checklist of producers and IT systems (which rivals would be able to copy) isn't going to be easy. Best practice thus won't become everyday practice quite as quickly as it has in recent years.

Much of the McKinsey article focuses on the changes in the types of work that is being undertaken at firms today. Documenting how jobs, and particularly new jobs, are focused on tacit interactions. How over time jobs have transcended transformational to transaction oriented and now "tacit" work.

As I indicated in Part I of this review, the reductions in transaction costs is a focus of the Draft Specification. This second McKinsey article is on the role that people will fill in the future of work. Please join me here.

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Paul Romer on BBC

We have covered former Stanford Professor Paul Romer in this blog before. In fact People, Ideas & Objects is the name that I derived from Romer's new growth theory. New growth theory suggests that future economic growth will be developed from People, Ideas & Things. I simply changed "Things" for "Objects" as we are object based software developers.

Romer is on the short list for a Nobel prize because of his new growth theory. In a related BBC commentary, an excellent summary of his thinking of what "Ideas" are about.

Physical objects are often scarce; economic growth is often limited by that scarcity. Conventional economics is the so-called dismal science, dominated by the law of diminishing returns where businesses compete with each other into their ultimate extinction, capitalism making the rope to hang itself.

Paul Romer disagrees, profoundly. Ideas are what makes the difference, and turn economics into the optimistic science. And in the networked world, in software, in new research-heavy disciplines such as biotechnology, ideas are shared across frontiers at lightening speed and then breed much faster than rabbits.

Needless to say Romer is blogging and providing more substance to his ideas here. His recent post on how certain countries were able to deal with the housing of its citizens is fascinating. Are we destined to learn these same lessons from the beginning again? We would be foolish not to review what works, and where it works, based on the experiences we have to date. That is what Charter Cities is about and I think the lesson is directly applicable to the work we are doing in People, Ideas & Objects software developments for oil and gas.

"There’s a little corner of economics where there still exists a sense of wonder about what is possible."

Please join me here.

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And there's more.

The energy industry does have a problem that is reflected well in today's $81 oil price. The purpose of this blog is to organize and develop the software modules in the Draft Specification. Why we are doing this is that the bureaucracy is constrained and is unable to meet the demands of the consumers in the 21st century. Without abundant energy the world economy will be in jeopardy, as will our way of life.

John B. Hess is the CEO of Hess Corporation, a second generation exploration and production oil and gas company. With a market value of $20 billion they have become one of the U.S.' great independent producers. It's reasonable then to assume that Hess knows what he is talking about. And he does.

In a major statement entitled "Oil and the Future", Hess has released a paper that discusses the energy industries looming supply side crisis. The problem is well defined in this paper. What we need to do is organize ourselves to face this challenge. Without the software that supports and defines the Joint Operating Committee (JOC) we will not be able to rise to this challenge.

Hess goes on to provide sound advice to deal with this problem. His recommendations are the three C's Communication, Courage and Collaboration. The following quotations capture the scope of the problem.

My remarks today will cover “Oil and the Future.” Today, our industry is at a crossroads. Oil has moved to a demand-led market where supply is struggling to keep pace. The financial crisis of the past year has reduced demand by 2 million barrels per day, creating excess inventories and lower prices. While this setback has brought us some welcome breathing room, I believe that it is only temporary. Once economic growth recovers, it is likely we will return to the market conditions of one year ago. The price of $140 per barrel oil was not an aberration; it was a warning.

A warning, indicating that there is time remaining. Our approach should be to get organized first. And for innovative oil and gas producers in the 21st century, getting organized means building the software to define and support the Joint Operating Committee.

Over the past several years, many people in our business have expressed confidence that we were up to meeting the challenges ahead. From the producer perspective, it has been suggested that the remaining global endowment of up to 3 trillion barrels of recoverable oil meant that we should not be concerned with a prospect of shortages. Higher prices, advancing technology and sound government policies would enable supply to keep up with demand. Consuming nations viewed these issues quite differently, criticizing producers for rising prices, blaming oil for climate change and implementing policies to develop alternatives to hydrocarbons. I would suggest there is a major disconnect between consumers and producers.

In this next quotation, Hess defines a break between what the producers see and what they act upon. It's a break that I find interesting in dealing with this problem. Each producer firm is only concerned with their production and do not necessarily see the broader picture. Looking at the horizon they see that such and such heavy oil project and these offshore resources will offset any declines experienced by any of the other producers. In other words the horizon is muddled by too much information.

The approaches of both consumers and producers are based on hope, but what we need is a sober reality. The reality is that an oil crisis is coming that could prove devastating to future economic growth. Given the long lead times of 5-to-10 years from oil discovery to production, we need to act now to avert this outcome. I would like to suggest a framework of three “C’s” to address this threat: communication, courage and collaboration.

All is not lost. Over the course of my career in the oil and gas industry, I have been shocked in terms of its performance. When called upon the industry has been able to deliver, and I would expect the same from this current call. Hess' message is to communicate the facts and eliminate the confusion around this issue.

Given these facts, we need to communicate the following message:

1. Hydrocarbons are here to stay.
2. Oil demand growth will be unrelenting, increasing 1 million barrels per day each year.
3. We are not running out of oil but growth of production capacity over the next several years will fall short of the incremental 5 million barrels per day each year that we will need to meet demand.
4. We will ultimately be at risk of supply rationing demand through skyrocketing prices that will threaten economic stability and prosperity. If we do not act now, we will have a devastating oil crisis in the next 5-to-10 years.

In reading the paper I came to the realization that this is an all interested persons must rise to this challenge. Consumers, International Oil Companies, National Oil Companies, Independent producers, OPEC, and consuming nations.

The stakes have never been higher. We must build a balanced and comprehensive approach to energy security and protection of the environment to ensure sustainable development. We must unite and work together as an industry, communicating one message, having the courage to act and collaborating for the global good. In this world, there will be a bright future, not only for oil, but for many generations to come.

We are a fair distance from resolving this. I have suggested that the ability to conduct appropriate exploration has been lost since the hey day's of the 1960's. Hess is quoted in this paper as stating "Resource additions from exploration last replaced annual production in 1987". We have a job to do, please join me here.

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