Our Revenue Model Part IV

This post seeks to clarify People, Ideas & Objects revenue model and provide an understanding of the flow of funds within the associated communities. Needless to say all the funds flow from the Producers, however that is where the money is. I’ll break down the general flow to show how each of the different groups are sustained over the long term.

To start we need to clearly identify the three different groups that are supported directly by the producer firms. These groups include (1) People, Ideas & Objects, (2) the user communities and (3) the Community of Independent Service Providers (CISP). The need for this financial support is as follows.

1. People, Ideas & Objects assesses an annual rental on all producers for access to the software applications, cloud computing infrastructure and the communities involved in the development. These funds are assessed based on an annual rental for each barrel of oil equivalent of the producer. This rental has been set at $1.00 per barrel of oil equivalent for the 2010 calendar year. In addition, assessments are due and payable by March 31, of each year. Producers are subject to a 300% penalty for any late payments. All producers are required to pay the rental from 2010 forward. 
2. The second group that receives producer funds are the users themselves. These users are the producers employees or consultants that they hire to do the work within their organizations and Joint Operating Committees. These funds are incurred indirectly as a result of the individuals doing their jobs and are not necessarily a direct cash payout. These costs are incurred by the users on behalf of the producers in working with the Community of Independent Service Providers and the People, Ideas & Objects developers. The work the users are compensated for is in defining and designing the systems they and the producers want and need. 
3. The third group that receives direct funding from the producers is the Community of Independent Service Providers. This community is engaged by the producers to handle many of their specific systems related needs. Accounting integration and systems development are the two areas where the CISP will be used most often.

What happens to these funds is also important to note.

1. People, Ideas & Objects incurs the costs associated with the hosting of the infrastructure for running the application and software development environment. We also have the developers on staff who are working with the Community of Independent Service Providers and user groups to define and enhance the systems they need and want. Lastly we directly compensate the CISP for the work that is done concerning the applications development.
2. Users are direct recipients of the funds they earn in their positions with the producer firms. 
3. The Community of Independent Service Providers are independent in that they are not affiliated with one specific producer or Joint Operating Committee. They are service providers to the oil and gas industry. Their services to People, Ideas & Objects and subscribing producers are provided as independent organizations. 

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Our Revenue Model Part III

Continuing on with our discussion of People, Ideas & Objects revenue model. Today we discuss the impact of the revenue model, and the Draft Specification, has on the competitive advantages of the producer firm.

We start off with recognition that China is now the world’s number one consumer of energy. The demand for energy in the next several decades will be insatiable. The somewhat fixed number of earth scientists and engineers will have substantial business opportunities addressing this world demand. It is through a reorganization of these fixed human resources, by having People, Ideas & Objects software applications define and support enhanced divisions of labor and specialization, that this demand for energy will be satisfied.

Building systems that deal with the commercial interactions between the producer, society and the individuals that work in oil and gas, and the service industries, is beyond the direct concern of the producer. Yet, are a necessity of basic operations. If we agree that the competitive advantages of the producer firm are based on it’s unique composition of oil and gas leases, physical assets of the firm, and application of the firms earth science and engineering capabilities. The producer will remain involved and focused on the development of efficient software systems to identify and support those competitive advantages. Much in the same manner as society and individuals will work to develop those same systems to meet their needs.

Therefore, the producers decision to financially support these developments affect society and individuals. The producer firm receives 100% of the direct revenues from oil and gas sales. Allocation of a portion of these oil and gas revenues towards an initiative like People, Ideas & Objects can not be evaluated based on its competitive return at the producer level. Everyone is familiar with one or more software development or implementation projects that were terminated as the result of a lack of long term funding. These failures have little to do with the quality of the project or the people that were behind it. Over time the sense of urgency that the project may have put forward fades as does the financial support. Approaching a project with the scope of People, Ideas & Objects, without having an answer to a fading sense of urgency would be a failure.

The question therefore becomes, how does the revenue model of People, Ideas & Objects 1) sustain these communities throughout the development cycle and 2) provide these communities with the software tools they need to expand economic output? We provide this by way of the inherent promise or guarantee of this project. That being, this software development, and associated communities, provide the innovative oil and gas producer with the most profitable means of oil and gas operations. The profitable nature arising as a result of the expanded oil and gas output, based on the enhanced division of labor enabled with the People, Ideas & Objects application, and, the value proposition we have put forward.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Revenue-Model Community Development Value-Proposition

Our Revenue Model Part II

In this our second instalment that details our Revenue Model, we apply and extend Professor Jurgen Habermas’ 1960’s theory of different knowledge interests. Building on yesterdays discussion of People, Ideas & Objects value proposition, and targeting the oil and gas producers as the sole source of revenue, this post will delve into the difficult question regarding what we need these systems for.

We need to ask ourselves what we need these systems for. Are we developing systems that manage the commercial operations of an oil and gas producer? Of course we are, but that does not address the societal and individual needs of these systems. If we continue to look at just the needs of the producers, then we are leaving many needs unaddressed. Society and individuals are critical elements of a successful oil and gas industry. For example society benefits by having producers and the service industries efficiently interact and develop profitable operations, and individuals create innovative solutions to the demand they see for their services. Overall organizations, individuals and society benefit by an increased and expanding division of labor and specialization.  In today’s globalized, high technology workplace, an expanded division of labor and specialization can be more efficiently created through a software development capability like that described by People, Ideas & Objects in its Draft Specification.

When we concern ourselves with the economic output of the oil and gas industry. To expand that output requires that we organize based on greater levels of specialization and a further division of labor. The responsibility for increasing output does not fall to society, individuals or organizations in isolation but to all three. Therefore it is reasonable to state that what we need these systems to address society, individuals and organizations needs. I do not foresee the further development of the division of labor occurring without the active involvement of systems development. In a somewhat deliberate manner where all groups are represented.

If we look critically at the division of labor, and eliminate some of the constraints to expanding it further. Constraints like the limitations of working within one firm or one Joint Operating Committee (JOC). If an individual has the capacity to apply their skills to a task for a geographical region that includes 100 producers and 200 JOC’s, the efficiencies could be substantial. The ability to manage a task in this fashion doesn’t exist within our current organizational context. Maybe it should.

Following on the logic of the previous post, where the producer firms are the sole source of the revenue for People, Ideas & Objects and associated communities. Sharing the input of these systems development across society, individuals and the organizations might appear to be inconsistent with the reality that 100% of the funds are coming from the producers.

That’s why the People, Ideas & Objects revenue model shares the one time development costs across the subscribing producers. Just because the producer firms receive 100% of the proceeds of oil and gas sales, doesn't mean that they earn 100% of the revenues of the oil and gas sales. Individuals and society have a role and responsibility in these systems and therefore, these need to be considered irrespective of the desires of the producer firms. We’re not going to develop systems that address the needs of society, individuals and organizations when producers have a disproportionate influence due to their control of the revenue stream.

To sustain this software development requires that we cease being subjected to the individual decisions of one or more producers. A company that chooses not to proceed with the development or implementation of these technologies can not hold up the greater benefit of all concerned. Essentially I am stating that the decision to support these communities needs to be made where appropriate representation considers the needs of all concerned. Looking at the cost benefit analysis of supporting this software from the point of view of only one producer misses the benefits to society and individuals.

Habermas theories deal with the issues of power, influence and most importantly emancipation.

But when it comes to using science or computers to change the relations of power in our society, when emancipation is put forth as a knowledge or development interest, then the question of values becomes more controversial. Who is to be emancipated, and from whom? Who is to loose power, and who is to gain? And how can it be the business of scientists or computer professionals to take part in a political struggle for power?

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Revenue-Model Development Organization Orlikowski Value-Proposition

Hofmeister on BP's plans

Former Shell Oil Company president has the following comments on Bloomberg today.

It's very important for BP to turn the page so to speak, although they still have the well to put out, and hopefully that will go according to plans over the next couple of weeks. But they have to turn their attention to the future. And part of that future in addition to the asset sales is getting on with what I call the boring bits of business, and that is, under John Browne they did a great job of expanding the portfolio and growing the company. But I don't think they ever integrated the company and turned it into a high performing institution, that takes a lot of time and Tony Hayward saw this and started the process but didn't get far enough. Now I think its time to really get into the structures, processes, systems the procedures so that the whole company operates the same way all over the world. 

Makes at least two people that think the boring bits of business are needed.

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Our Revenue Model Part I

When looking for the revenues for People, Ideas & Objects and its associated user communities, all paths lead to the oil and gas producers. This is the logical choice as they are also the primary benefactor from the use of the applications and communities development. In latter posts we will document that society and individuals also derive benefits. However, oil and gas is a primary industry that generates over $3 trillion in annual revenues. It is the source of value generation for itself and a variety of industries that provide it with products and services. It is therefore logical and appropriate that we focus on producers to generate the revenues for these communities. So how is it that People, Ideas & Objects and these communities raise the funds for these software products and associated services. The answer to this and other questions is what will be defined as our “Revenue Model” in this and subsequent blog posts.  

With these points in mind it is important to restate our value proposition. People, Ideas & Objects provides the oil and gas producer with a user focused software development capability. The costs incurred in developing and hosting the software application are charged to the industry once. Providing a value proposition that is substantially more competitive then any other ERP vendor. To cover the development and associated user community costs, use of the software by the producer requires payment of all of the fees retroactively to January 1, 2010. For 2010 these fees were determined to be $1 per barrel of oil equivalent production per day. Based on these factors, a producer that produces 50,000 barrels of oil per day ($1.4 billion in annual revenues.) would be assessed $50,000.00 for the 2010 calendar year. Motivation to participate in a timely fashion is provided by assessing 300% penalties for any payments that remain outstanding after March 31 of the billing year. All fees and penalties from 2010 forward are to be paid prior to the producers use of the software. These revenues will be used to offset the costs of developing the software. Users are not charged for their use of the software.

The $1.00 fee that is assessed on each barrel of oil equivalent could theoretically generate $120 million during 2010 for People, Ideas & Objects. Our motivation is to expand the volume of energy that the fee is assessed upon. Raising the rate assessed per barrel would also increase our revenue, however, increasing the volume of energy production represented in our assessment base provides a stronger value proposition for all concerned. It is critical to recall that the costs associated with the second copy of the software is zero. Therefore the costs of development are allocated over the entire subscribing producer base. The producer firm receives, just in the first year, a potentially $120 million software application for a small portion of the actual costs.  


At an average price of $77.00 per barrel of oil. The percentage costs of the People, Ideas & Objects fee for 2010 equals 1 / 28,105 = 0.0035%. Determination of the annual fee is based on the projected costs of the software development and communities plus an element of profit for People, Ideas & Objects. Inherent in this pricing is the belief that the applications are never considered static, but are in perpetual development, therefore the firm remains profitable and motivated to continuously improve the applications.


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, this reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Focusing on our Revenue Model

We will now begin our focus on this software development project and associated communities revenue model. (These posts will be aggregated under the new Revenue-Model label.) The purpose of these posts will be to fully explore the contradictions and conflicts inherent in developing the revenue to support People, Ideas & Objects software development and associated communities. We will be asking difficult questions that reveal these conflicts, questions like what are these systems developments for, and how do we sustain the financial support throughout the development life cycle. 

It is expected through the discussion of our revenue model, that producers will begin the process of financially supporting these developments and communities. Much of the discussion will bridge the surreal world in which this project currently resides, with a prospective future that promises to surprise. I guarantee an interesting discussion. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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The Marketplace Metaphor

The Draft Specification includes three modules that employ what we call the Marketplace Metaphor. The Petroleum Lease Marketplace, Resource Marketplace and the Financial Marketplace Modules. Each of these modules create an environment that is similar in many respects to a marketplace in the “real” world. A virtual representation, and means for people to interact in marketplaces. Definitions of a marketplace include;

market: the world of commercial activity where goods and services are bought and sold; "without competition there would be no market";

The Petroleum Lease Marketplace (PLM) is a virtual market where partners can interact with each other to post and bid on petroleum leases, negotiate and execute agreements, buy and sell properties to name just a few of the many activities that can be carried out in the PLM. The PLM is designed to facilitate and support these transactions and activities, and capture the data and information necessary to manage the assets for the producers involved. 


The PLM is in many ways the beginning or initiation of the JOC. Since the JOC is the communication framework of the industry, many of the partners communications will be held within the Petroleum Lease Marketplace module. Mail ballots, AFE’s and agreements are initiated by the user while using the PLM module. 

The Resource Marketplace module creates a virtual representation of vendors, suppliers and the people who work within the oil and gas and service industries. Working closely with the Knowledge & Learning and Research & Capabilities modules, the Resource Marketplace provides the producer or JOC with the ability to interact within the Resource Marketplace to engage with vendors for the products and services that producers and JOC’s need. These interactions will include the capacity to contract, seek bids, billing, accounts payable and e-commerce capabilities. 

Recall in a recent post we documented how the Draft Specification facilitated a greater level of specialization and division of labor. These two economic theories being the source of all economic growth. That post documents that the process of “gap-filling” is how the division of labor is expanded. This “gap-filling” is part of the Resource Marketplace where producers and suppliers find one another in an effort to expand the output of the industry. 

Finally the Financial Marketplace module provides a virtual representation of the financial marketplace. Using the perspective of the Joint Operating Committee presents a different view of the oil and gas assets. Traditionally each producer has maintained their own financing of their oil and gas assets. What the Financial Marketplace module does is change the perspective, of how oil and gas assets are financed, from the producer firm to the Joint Operating Committee.

Each of these marketplace modules employ the People, Ideas & Objects user vision. The point of this post is to reinforce the use of the marketplace metaphor in the development of these systems. When we adopt the Joint Operating Committee as the key organizational construct of the innovative producer, we gain the ability to create this kind of software and methods of interaction within real and virtual marketplaces. 

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Asynchronous Process Management Success

One of the cornerstones of the People, Ideas & Objects “Technical Vision” is Asynchronous Process Management (APM). I have described this type of functionality as it relates to communications, as a phone call is synchronous, and a letter would be asynchronous. The letter provides the communicator time to interact more deeply and to contemplate the response more thoroughly. Applying this communications metaphor to Process Management is directly applicable.

In a recent post we discussed the scenario around the timing of the voting and implementation of a plan to increase natural gas production. Where the participants within a Joint Operating Committee were asked to vote on a prescribed course of action. The description in that post imputed the implementation of the plan would be immediate, during the virtual meeting. In the real world, there would need to be time for each participant to consider their decision. The ability for participants to take the time to think what their next action will be, and based on those actions, implement and complete the appropriate management of the earlier initiated process.

Technology has expanded significantly in the past ten years. Particularly with respect to having multiple threads and multiple cores of application processing. Simply defining when an applications process can be broken down into multiple steps is easily handled by the developer and today’s advanced compilers. The problem with this processing is that the timing of each operation is unpredictable and therefore the sequence of when the program will be completed is random. In the oil and gas situation where partners were voting on a proposal for further operations, those operations would not be able to be commenced until the voting was completed, or adequate votes in the affirmative were received.

Today, the software developer has tools that provide the ability to control the timing of dependent processing in the software. This opens the world of systems development to higher levels of performance, processing tasks in parallel shortens the processing time required, and allows for advanced Asynchronous Process Management such as the People, Ideas & Objects technical vision.

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Asynchronous Capabilities Development Process Software

More on our Business Model

The business model and value proposition of People, Ideas & Objects are fundamentally different then any other software provider. Based on a number of assumptions that involve the use of the Joint Operating Committee (JOC) and the cloud computing delivery model, this post details some of those elements of this software development project.

Using the Joint Operating Committee presents some interesting opportunities and difficulties. Providing producers with a software development capability, and software applications that support start-ups, Independents, International Oil Companies and National Oil Companies is necessary as the partners within a JOC could and will be formed from any and all of these types of producers. Partners within a JOC need to have the same systems in order to optimize the interactions between themselves. Having only one producer working off advanced collaborative systems like that proposed in the Draft Specification, severely limits the value realized by each and every one of the producers. 


Take for example the situation that deals with the decision making authority of the JOC. Participants are asked to approve a course of action to increase natural gas production. AFE’s and a proposed team to undertake the program are voted on by the members of the JOC. Seventy six percent of the working interest ownership agrees with the program, surpassing the 75% necessary for a decision to pass. Since all members of the JOC are using the same software, the AFE’s become active within the system, and the individuals calendars and tasks are updated with the approved program. The speed in which the program is approved and implemented is facilitated by the collaborative elements of the People, Ideas & Objects systems. 


Each member of a JOC will be able to participate virtually through their mobile / desktop device. These systems will be recording the key decisions and initiating the actions that are decided upon in these virtual meetings. In the future, the oil and gas industry participants will need to be able to decide and implement plans of action on a much faster basis then today. The speed and volume of the decisions that will be needed within the innovative oil and gas producer, I expect will grow in the near future. It is my opinion that the speed of the decisions being made today are the reason for the poor performance of the oil and gas companies. Poor performance in terms of reserve replacement and production increases. This is because the decisions that are being made are not at the Joint Operating Committee level, the JOC has the authority, but these processes are obstructed by the internal decisions being made within each producer (management). 


When each of the participants are supported by the same systems and software development capability, each are able to collaborate and implement the decisions based on the outcome of the voting. Accessing this type of operational efficiency is one of the inherent values that People, Ideas & Objects provides the producer firms. When we discuss the value proposition of People, Ideas & Objects, this type of value is one of the benefits that producers earn from using the Draft Specification. 


Additional value is generated when we realize the costs to the producer, to have this software application available to them, is allocated over the entire population of oil and gas production profile. The industry as a whole is being assessed the costs to develop the software, once. Compare this to the current model of purchasing software from a vendor who’s key asset, the software application, is sold to each producer. People, Ideas & Objects competitive offering is based on a software development capability, not on the software code itself. A competitive offering that is not constrained to one static piece of software code, a competitive offering that mirrors the incremental changes in the innovative oil and gas producers.

Another assumption that is inherent in the value proposition of People, Ideas & Objects is the determination of what an innovative producers competitive advantage is. That is the oil and gas leases, the physical producing assets and the earth science and engineering capabilities applied to those assets. These are the attributes of the producers unique competitive offering. Having SAP or any other accounting system, including People, Ideas & Objects, is not the basis of competitiveness of the producer firm. What we can do, and is the competitive offering of the Community of Independent Service Providers, is provide the producer with the most profitable means of oil and gas operations. That is to say that the system will not make a silk purse out of a sows ear, only that the most efficient means of operations will be attained by using People, Ideas & Objects and the CISP. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's Collaboration Capabilities Innovation Value-Proposition

The China Syndrome

In a recent post we highlighted the EIA’s revised energy supply forecast. The chart from that post shows a 1 million barrel per day reduction in current production volumes. Econbrowser is now publishing anlysis of the EIA’s energy demand forecast, focusing on the impact that China will have in the marketplace. 

Providing the market with adequate energy supplies would be a difficult issue on its own. Adding the unprecedented demand expected from China, provides a real opportunity for the innovative oil and gas producer. The author of the econbrowser article, Stephen Kopits notes an interesting characteristic of energy demand.

Oil demand does not grow linearly with GDP. Rather, the bulk of oil demand growth occurs in the two decades during which societies typically acquire motor vehicles, after which per capita oil demand flattens. For example, per capita oil consumption in the United States is today lower than it was in 1979, even though per capita income has increased substantially since.

That is not to say that the U.S. demand for energy has dropped. The focus on motor vehicles alone, which is what Kopits reviews, would therefore limit the potential demand from China to just that form of consumption. If we are to gain an understanding of the volume of potential demand from China, motor vehicles will be a portion of that demand, but not the sole source of the demand increase. Now the scary part of the analysis. Comparing the per capita increases in energy use of Japan (1960 - 1973) and Korea (1976 - 1996) and using either of those trajectories in China’s situation shows...

In any event, without delving deeper, we might expect China's steady state demand for oil could prove not less than that of more advanced Asian nations. Based on the experience of Korea and Japan, China's current population would be expected to consume approximately 55 mbpd at steady state (when per capita consumption plateaus), or nearly 2/3 of current global oil production, were the supply available.

One might argue that this is an unreasonable amount of energy consumption. It imputes systemic gridlock throughout China, and therefore would define the upper limit of what is possible. Nonetheless the volume of energy demand will be substantial. In this next quotation Kopits argues that the EIA’s forecast demand is similarly too low.

By contrast, the EIA sees China's oil consumption at only 10 mbpd for 2015, a growth rate of approximately 2.7% from current levels, and at only 16 mbpd by 2030. Is this consistent with a country whose vehicle sales are up 56% in the first five months of the year? Where sales of Audi's are up 77% and those of BMW have doubled compared to the first five months of last year? Is China truly going to be satisfied, as the EIA would have it, with less than 1/5th of the per capita oil consumption of Korea in 2030, even though they should be similar by that time?

and

The differences in views about China's oil demand outlook have enormous policy implications. If the EIA is right, and China will forget how to grow, then pressures on the oil supply will be modest. On the other hand, if China is to develop like other countries in Asia, the pressure on the oil supply will be crushing, with oil shocks, recessions, and war all conceivable outcomes. The energy--as well as the economic and security--policy differences between the two scenarios are like night and day.

I don’t think it has to be that way. Call me an optimist but I think that whatever China, the U.S. and all others need in terms of energy, it is possible to supply them at prices that reflect that demand. The costs associated with the exploration and production will be substantially higher then what they are today. The easy stuff is gone, that is something that we can all agree on. The prices and volumes of production are unknown at this time, with demand growth from China, the oil and gas business has moved into a different era of operations. We know that a commodity like oil or gas is affected by the demand from China no matter where the source of production is. 


Today’s oil and gas firms, particularly the large Independents and International Oil Companies are having difficulty generating value. The cost structures have caught up to the commodities prices and the performance of these bureaucratic firms is diminishing rapidly. If we look forward to 2030 we can assume that the way these firms are managed today will be history. No one would establish a firm today to operate in the fashion of the bureaucracy in 2030. 


What we do know about 2030 is that the industry will be using advanced systems to manage their operations. It is also reasonable to assume that the Joint Operating Committee (JOC) will be the key organizational construct of the innovative producer. The use of both the technology and the JOC will be decided upon today. Approaching issues that are as broad in scope as the supply and demand of energy, that present this level of opportunity, can not be approached in the same old bureaucratic fashion. We need to pursue a definitive course of action, by developing the Draft Specification of People, Ideas & Objects. 


Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

Technorati Tags: People's China Economics Energy IEA Leadership Organization Vision