An Overal Industry Capability

Yesterday we discussed how the service providers would use specialization and the division of labor to focus on the administrative and accounting processes of the producer firms and Joint Operating Committees. Today I want to discuss how that specialization will be used to provide a capability that is much higher than what is attainable under the current corporate business model.

We have seen regulations and the complexity of business processes increase in the past decade. Business, for a variety of reasons, has become more difficult and this trend is certainly not new or something that will abate. The difficulties will most certainly continue to grow and our capacity to deal with them must also change. Education is part of the ability to deal with this complexity. Another aspect of how we deal with it is the methods that we use to organize ourselves. Capturing everything within one siloed corporation, no matter its size, is maybe something that we look to as part of the problem.

Capturing the capability within the overall industry and providing it through service providers is how the Preliminary Specification deals with the ever increasing complexity. This has the added benefit of increasing the overall capability of the resources that are available within the industry. First by eliminating the redundancies that are built up within each producer firm. And secondly, through the specialization that is available to each of the service providers in terms of the specific process they manage.

This is how the industry will acquire the capabilities necessary to meet the needs of these regulations and complex business processes. The ability to specialize to the level that these processes dictate, within the current corporate environment, is too much of a demand on the resources of the producer firm. Extending the resources of each of the producers in the oil and gas industry to meet the ever increasing demands of regulation and complex processes will most certainly be too costly to the producer. This, I think, is also part of the concern that is being expressed by the investors.

Whereas the abilities and capabilities to deal with these difficulties when the overall industry acquires these capabilities is within the sphere of what is possible. Whether you are a startup oil and gas producer or Exxonmobil you each share in the concern of the costs associated with administering in the oil and gas industry. The small producer currently has to bring on substantial overhead just to “open” the doors. Something that they could do by hiring the capability through service providers by using the Preliminary Specification. Exxonmobil would be able to meet its very specialized requirements due to the costs of that specialization being amortized over many producers, not just their own activity.

I would also argue that the level of specialization that Exxonmobil would realize would be an order of magnitude higher than what they currently are experiencing. The level of specialization attained by the overall industry would be particularly high in each of the service providers instance and that would be a significant part of the value added process that they provide. A specialization that would be even greater than what was attainable within the confines of Exxonmobil. And available to all within the industry.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Competition Between Service Providers

As a result of implementing the Preliminary Specification. The capability for administrative and accounting functions will reside within the industry as a whole. This will reduce the redundancy of each producer having to build that capability within their own organizations. This will reduce the overall costs of the administration and overhead in terms of the unused and unusable redundant capabilities that are currently built within the industry at each producer firm. What it will also provide is a flexibility in terms of dealing with how the producer chooses to produce. Marginal production can be removed from the marketplace without the penalty of losses on operations.

There is a larger picture here. And certainly we have touched on some of the details with the $94 billion in opportunity costs, and the focus of the investors. The oil and gas industry which has traditionally been required to build the capabilities to focus on the SEC requirements, the tax and royalty requirements, the production and exploration administration, the land administration and accounting demands of the corporate organization. Will instead rely on the capabilities provided to them by a marketplace of service providers that focus on providing these capabilities by managing the processes on behalf of the industry.

And there will be two elements, or two types of organizations that the service providers will be focused on providing these services to. There will be the corporate concerns of the producer firm. And there will be the operational concerns of the Joint Operating Committees. Each entity will be dynamic and independent in their use of the service providers.

That is not to say that there will be a marketplace for eligible capital for gas cost allowance service providers. In almost all instances there will only be one service provider for each process within the industry. And the detail and the precise nature of the process that they will manage will require them to be very specialized. Their focus will be on making their service offering more efficient and effective in terms of its competitive offering. Providing a better service to its customers will be where it focuses its competitive energy. The effectiveness of having other service providers involved in the same process only detracts from the efficiency they can attain in their offering.

The competitive differentiation also arises between the service providers themselves. Although not specifically in the same process the competitive pressures will arise from other service providers efficiencies. There are also the demands of the producers and Joint Operating Committees that will ensure that the prices charged by the service providers are reasonable and in line with the services provided.

Specialization and the division of labor is the toolset that is being deployed here to generate the value for the industry. In order to attain that value the ability to focus on the process is the key to attaining that value. We therefore need to expect that competitive forces will arise as a result of other influences as opposed to the direct competition that we would be most familiar with. Therefore the service provider will enjoy a monopoly in terms of competitive advantage over the domain of the process they manage. This will enable them to pursue specialization and the division of labor over the long term, which is a long term value added process, as opposed to be consumed by the day to day of competing with like competitors. It is these types of differences that we need to implement in the oil and gas industry for the 21st century. Changes that are incorporated in the Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Investor Concerns About Overhead Costs

The allocation of resources within the industry are possibly one of the largest issues that the investors in the industry are dealing with. They have consistently raised the point that the administrative costs involved in oil and gas are high and need to be addressed. The finer point of their argument is that the ability of the producer to reduce their production does not affect their overhead costs and should. This has become a particularly difficult point with low natural gas prices.

One could argue with a quick review of most annual reports that the amount of administrative costs carried by a producer, that the point is moot. In a capital intensive industry they would have a point. And they do have a point, the payroll burden in oil and gas is not large. And we have shown through our Revenue Per Employee analysis that the majority of the producers employees are carrying their weight in a substantial way. These are all valid points and I don’t think that that is the point that is being argued by the investors. I think they are seeing the redundancy of building similar organizations within each producer firm and there is no sharing of skills or capabilities between the producers. I think this is their frustration. I think that, like me, they see the majority of the people involved in these jobs doing a fantastic job that could maybe be organized better.

It is not the cost of these resources that is at issue. It is the implication of not being able to deal with the costs that is. If the opportunity costs for 2012 are $94 billion it would be agreed by everyone that we should address these. And none of these opportunity costs are to do with reductions in overhead. They are all as a result of increases in the price of natural gas. But they only arise as a result of the ability to deal with the marginal production of any facility. Something we can do as a result of not incurring any of the operating or overhead costs on shut-in production through the Preliminary Specification. This flexibility is what the investors are after.

To have the capabilities to conduct the administrative and accounting functions inherent within the industry. And to have that capability as a result of service providers who are specialized and organized based on a sophisticated division of labor. Would provide a capability that is much higher than any organization that exists today. And that capability would be available to any producer firm or Joint Operating Committee for the cost of a service fee. That is how the industry needs to be organized for the next century.

In terms of how this affects the people who work in the administrative and accounting fields of oil and gas. The impact would be significant. They would in turn cease to work for one producer and begin to work for many. They would specialize on specific capabilities and become very detailed in their work. Working with large volumes of data and sophisticated systems they would be able to build value for their clients, the producers and Joint Operating Committees who employ them. They may find that at any time their population of data might be reduced by 10% due to the need of the producers to shut-in production due to low commodity prices. This reduction affecting their revenue streams, however, something that they budgeted for.

The investors are asking is there a better way? There has been no response from the industry for years. Now we can point to the Preliminary Specification which I think answers the question for all concerned.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

How the Preliminary Specification Deals With Overhead

Within the Preliminary Specification we provide the oil and gas producer with the means to deal with low natural gas prices. This is through the reallocation of the resources of the industry into service providers that are focused on the individual processes and subprocesses. Charges for these services are made directly to the Joint Operating Committee. This enables the producer to shut-in their marginal production, and as a result, the administrative and accounting charges from these service providers would not be incurred. Enabling the producer to shut-in production without incurring the losses on operations that they would incur today on shut-in production. And limiting the downside in terms of the natural gas pricing.

This is the solution for the natural gas pricing difficulties being currently experienced in the oil and gas industry. These overhead type of costs however are part of a much larger issue to the investors of the oil and gas industry. The issue is with the high administrative costs associated with oil and gas exploration and production. The Preliminary Specification deals with this issue as well as the natural gas pricing issue. The issue arises as a result of the current use of the high throughput production model that is in use today. The Preliminary Specification uses the decentralized production model as its method of organization.

The differences in these two models is best described in Professor Richard Langlois definition.

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. p. 58

The current oil and gas producer is tasked with developing administrative and accounting capabilities that are state of the art. That is each individual company, there is no shared resource, each company in isolation must achieve these capabilities in order to attain the necessary requirements in the marketplace. With the level of compliance and governance requirements, the needs of the earth science and engineering requirements of the firm this places a significant burden on each producer no matter their size. This is the high throughput production model and any interruption in production leaves no opportunity to diminish the producers administrative or accounting capabilities.

What the Preliminary Specification does is relocates these administrative and accounting resources on the basis of specialization and the division of labor across the industry. A service provider would therefore have the entire industry as its client base and it would be responsible for the determination of eligible capital for gas cost allowance purposes. The industry as a whole therefore may hold the entire administrative and accounting capabilities that are needed at anyone time and by any one producer. The need for these capabilities will be available for a service fee at any time that the producer requires them. At any time that the producer does not need the services of any specific provider, then that service and its associated fee is not incurred.

What we have done here is we have specialized and divided the labor of the industry in terms of the capabilities of its administrative and accounting functions. These services will be far more capable than any organization that exists today and will be able to solve the most difficult of technical problems. What has also been done is we have removed the redundancy of having each producer building the unnecessary capabilities within each producer firm to accommodate the producers needs in terms of their administrative and accounting capabilities. This unnecessary duplication, like that which we have eliminated in the earth science and engineering resources, is unused and unusable as it stands today.

Freeing up these resources will allow them to pursue the higher level tasks that are necessary in an innovative and profitable oil and gas industry. We need to begin these developments to enable the industry to capture this value and free these resources for the challenging work ahead.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Participation has its Benefits

The advantage of using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. Is that it is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. By adopting this framework as the organizational construct in the Preliminary Specification we are able to approach the issues and opportunities that exist in the industry, such as the current natural gas pricing problems. And the future issues and opportunities that are just around the corner. Such is the nature of the alignment that we achieve between the systems represented in the Preliminary Specification and the organization, the Joint Operating Committee.

This alignment provides a fundamental competitive advantage to those producers who chose to use the Preliminary Specification. Having this alignment will enable them to address the issues of the day and to configure their organizations towards the opportunities they see. It should be noted that those producers that choose to participate in the developments of the Preliminary Specification will receive even greater benefits. They will attain the ability to have the software consider their particular circumstance and include within the definition those unique attributes. In addition they will be able to have those attributes within their organization reinforced through the development of the software. Participation should be considered a unique and one time opportunity for producers within the industry.

Additional benefits will accrue to those who participate when the time comes to be operational on the software. The transition to the software will be seamless and more natural as a result of being familiar and oriented to the changes that will be needed in the organization. Those producers who think they might be best served by sitting out the first iteration might find that those that participated in the first round will have gained the competitive advantages and are already moving the software in new directions that are derived from being operational on the Preliminary Specification. Taking a producer from the bureaucratic ways to the second iteration of the software, without the benefit of being involved in the initial development efforts, as there would also be no basis of organizational similarity, would be difficult. These iterations will be quick, and the organizational development will be approximately equivalent to the speed at which the industry changes.

There is participation and there is competitive oblivion in my opinion. If we can substantiate opportunity costs of $94 billion in one calendar year. This shows the power of Information Technology in its current form. The speed and effectiveness of the technology and organizational developments will only begin to accelerate. Participation in these software developments should be considered a necessary part of the producers core competitive advantage. Would anyone launch a producer firm with the stated purpose of not using calculators or computers. The use, deployment and development of these technologies needs to be part of the core producer firm.

Convincing the oil and gas producers that this is the case will be difficult. They think that drilling more wells will be the future of the industry. And they are hard to argue with. In reality they are not making any money and the day when they can raise money on the value they generate by drilling wells passed a few years ago. Investors are wise to their ways. What is needed is for the industry to get with the times and start looking at what is profitable. Start managing the business as a business and begin participating in the management of that business by getting involved in People, Ideas & Objects Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

A Sub-Industry

In terms of Information Technology infrastructure the People, Ideas & Objects Preliminary Specification fills the traditional role of an ERP (Enterprise Resource Planning) applications space. That is to say that it operates to manage the businesses day to day operations and administrative aspects of an oil and gas producer. But it also fills other key roles in the industry that are not currently handled by any software vendor. Those are the business operations and administrative aspects of the partnerships as represented by the Joint Operating Committee. And the infrastructure of the industry in terms of the interactions, identification and support of the activity between the service industry, service providers, oil and gas producers and Joint Operating Committees.

This infrastructure is derivative of the Intellectual Property that is inherent in the Preliminary Specification. The business model that captures the annual opportunity costs that are valued at $94 billion for the 2012 calendar year is part of that Intellectual Property and therefore will be provided by People, Ideas & Objects from a software point of view and licensed service providers in terms of the services. This is not just a business that is being started, but a sub-industry.

There is a need for this scope and scale in the oil and gas industry today. The oil and gas industry is poorly served by the technology firms. The technology firms are providing good products and services, however, have become so specialized in their offerings that they have little understanding of their clients business operations and needs. This gap between the oil and gas producers and the technology companies is as broad and deep as could possibly be. It is necessary that a new sub-industry form to fill the gap between the oil and gas producers and the technology companies. That is what People, Ideas & Objects and the service providers will be able to do. With our understanding of oil and gas, and technology, and the service providers understanding of their oil and gas clients we will be able to deal with the issues and opportunities that the producers face on a day to day basis and in the long term.

The basis of competitive advantage for this sub-industry is the Intellectual Property that is formed around the Preliminary Specification, this blog and elsewhere. Key to that IP is the use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. This form of organization is what everything else is derived from and to compete with People, Ideas & Objects someone will have to come up with an alternative form of organization.

This infrastructure will naturally be of the cloud configuration. Having ubiquitous access, anytime, anywhere and on any device will be necessary for any 21st century system. One can see the scope of the application and how the costs begin to escalate to the budgeted total that is defined in the Preliminary Specification. Having industry, the service industry and the new service providers working together on one infrastructure will require a budget of at least that size. I would again emphasize that there is significant value there for the producers.

And we are using that value to motivate the industry to complete this project. There is only one way in which we can earn those opportunity costs. And that is to complete the development of the Preliminary Specification. Organization of the industry in this fashion, and the development of the software will need this motivation in order to ensure that it is complete. With everyone pushing toward that goal. A clear, and well understood goal, that everyone can get behind and complete.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Constructive Change to Capture Value

People, Ideas & Objects Preliminary Specifications claim is that we provide the oil and gas producer with the most profitable means of oil and gas operations. This is through an innovative business model that is identified and supported through our ERP system as expressed here. Producers who choose to join the community of users of the Preliminary Specification will find that their competitive position will be enhanced in comparison to those producers who choose not to join People, Ideas & Objects. We have discussed these differences in a recent blog post.

The quantification of these changes from using the Preliminary Specification is the $94 billion in opportunity costs for the North American natural gas marketplace. These are the opportunity costs that would have been earned for the 2012 calendar year. They are in essence the losses that were incurred, and the profits that should have been earned, in the natural gas business, but were not because of the low natural gas prices. The Preliminary Specification provides the ability for all producers to deal with low natural gas prices by removing the marginal production from the marketplace. It does this by reducing the producer to the C class executives, earth science and engineering resources, some legal and support staff. The remainder of the resources of the traditional oil and gas firm are reallocated to service providers who focus on the industry wide process or subprocess. There they are able to apply the principles of specialization and the division of labor to their work and provide the Joint Operating Committees with the most efficient and effective means of administrative and accounting services. These services charge their fees directly to the Joint Operating Committee during the month that the service is incurred. This provides the producer with the flexibility that if they shut-in production for that month, none of the administrative or accounting overhead charges are incurred or billed to the Joint Operating Committee. Leaving only the costs of capital uncovered during periods when the production is shut-in.

This IT infrastructure provides significant competitive advantages to the oil and gas producer. During periods when production is shut-in the property does not incur a loss that has to be added to the reserves and recovered from further operations, making the economics of the property more difficult. And the marginal production is removed from the natural gas marketplace having an effect on the market supply of natural gas. Therefore having an effect on the natural gas prices and returning the prices to the point where profitable production will resume sooner. Companies that don’t participate with People, Ideas & Objects will continue to lose money on operations during production or when they are shut-in. What is needed is this fundamental reorganization of the industry infrastructure to accommodate what is called the decentralized production model, which is part of the Preliminary Specification, and leave the high throughput production model that the industry is currently using.

The time horizon necessary to make these changes is the issue at hand. The vision as it is articulated in the Preliminary Specification is sound. Use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer is the necessary ingredient to make all of this happen. What is needed from People, Ideas & Objects point of view is the resources that are spelled out in the Preliminary Specification. In an industry with an annual turnover of $2.5 trillion and opportunity costs of $94 billion you would think that these costs would be incidental. And they are. The real impediment to making the industry profitable as described above and in the Preliminary Specification is the ability for the industry to change.

I have an optimistic point of view on that possibility. The mindless brutality that people are subjected to daily to make things work today would welcome something that makes sense. The Joint Operating Committee is the cultural way of the industry. People intuitively understand it. And the technologies are mature in comparison to what is used in the industry today. That is to say I think we are not taking any technical risk in developing the Preliminary Specification. Therefore my optimism is grounded in what is possible and probable and the industry needs to approach the difficulties that it faces today and in the future with a new structure, and that is the Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Economic Improvements

Since 2008 the financial markets have been providing no end to the difficulties in our economy. In a capital intensive industry such as oil and gas the global financial meltdown has had significant implications. Producers continue to experience difficulties in terms of raising capital from both the debt and equity markets. These financial recessions are usually long term cycles and can last five to ten years. Well its been five years now and we have no sign that there is any substantial pickup in the global economy. There are two things that I am seeing in the economy that will create difficulties for those that are unprepared in the coming few years.

The first is that markets appear to be beginning to roll over. That is interest rates are no longer dictated by central banks, but by the markets themselves, and they want a return. Or in other words interest rates are rising. If the oil and gas producer found it difficult to find capital in the past five years, it may be more difficult if they have to compete with market rates. This will also have adversarial effects if the producer is heavily indebted as the ability to service the debt will become more costly.

It has been an exceptionally long period of time that the Federal Reserve's Zero Interest Rate Policy has been in place. Wise individuals and companies should have taken the past five years to reduce their debt burden and build their balance sheets. This should have included the sale of assets and trimming of the organization to be able to handle the inevitable rise in interest rates. I say inevitable because it is inevitable. The Federal Reserve can only do so much for so long. And the market, which is so much larger and more powerful than the Federal Reserve, will eventually decide that they have had enough of zero interest rates.

We should look to this as the first step in a healing market. The fact that interest rates are rising is a sign that the animal spirits are starting to show themselves again. The fact that grandma and grandpa want more on their T-bills means their feeling secure again and want to stop eating dog food. For the unprepared producer, of which I see a fair number of, this will be painful. These animal spirits are the second aspect of the marketplace that I see rising.

There is however a conflict that needs to be worked out in the marketplace in the next year as a result of these two items. The rising interest rates will have a dramatic effect on all asset classes on a global basis. How will this affect the animal spirits, and will they be strong enough to offset the higher interest rates. I think they will as we are entering a new phase in which the economy is beginning to develop real value from new organizational methods.

It is my hypothesis that 2008 was a result of the fact that the bureaucracy as a form of organization has ceased to build value. Like the former Soviet Union and its collapse was a result of a defunct method of organization. The bureaucracy is going through the motions and not responding to the needs of society. This hypothesis can be debated. What is happening now is that the replacement to the bureaucracy is beginning to show itself. It is the Information and Communication Technologies that are able to replace that bureaucratic form of organization. And although they are not in place as of yet. They are seen to be the method to move industries forward and build value. Just like People, Ideas & Objects Preliminary Specification.

So is the Information and Communication Technology revolution really here? And can it lead to the animal spirits that will offset the increase in the market rates? I think we’ll find out fairly soon.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

An Improvement in our Quality of Work Life

With so much discussion of the elimination of the bureaucracy. And the installation of systems that will reduce the overhead burden of the oil and gas producer. Its not surprising that some people are concerned that People, Ideas & Objects Preliminary Specification spells the end for their long term employment and career prospects in the oil and gas industry. It does not take a lot of imagination to see the administrative efficiencies will require less people in the traditional roles that an oil and gas producer employs today. And I would agree with that. But I would also ask are those roles the ones that we really want to hang onto for the long run. Is there not some things that we could be doing better with our time?

There has always been a concern that computers would take away peoples jobs and leave us with nothing to do. And that is the concern that is being expressed today. And just as we don’t post to ledgers, or add up endless columns of numbers, today’s tasks will fade into the distance as well. Taken over by computers as we move to the higher quality work that is necessary for us to increase the productivity of the oil and gas industry with the same resources we have today. For that is the real constraint. We can’t rely on any greater volume of people in order to staff up for any increase in demand or higher level of activity. We must rely on higher levels of productivity from the same resource levels we have today.

So what kinds of work will we be doing when we release the tasks that we do today to the computers of tomorrow. I think the first and most difficult one is innovation. And this requires a structure within our organizations that enables the innovation to occur. And that is what People, Ideas & Objects has built within the Preliminary Specification. The necessary ingredients to enable, support and identify the key elements of innovation within the earth science and engineering disciplines. As these innovations lead to further expansion of the science they will lead to further innovations in a constantly changing and dynamic nature. This will put particular difficulties on all producers and that is where much of the resources need to focus on.

Collaboration within the organization and between the partnership representing the Joint Operating Committee. As the base of the sciences expand the scope and scale will become too broad for one firm to capture all that is necessary. Certainly too broad for them to capture in a commercial environment. The ability to partner with others is a fundamental aspect of the oil and gas business. The future will see a dependence on partners for elements of the earth science and engineering aspects that producers do not have housed within their organizations. This will also open the industry to the ability to organize the earth science and engineering resources on the basis of specialization and the division of labor. Easing the excessive demand for these critical resources.

Thinking carried out throughout the organization. It surprises me at times that the amount of thinking that goes on in the oil and gas industry right now is very limited. Its all about doing. We need to leave a lot of the administrative doing up to the computers and start thinking of better ways to do things. And lets not limit it to just that domain, thinking about the whole scope of the business. A little thought into what and how we are doing what we are doing will go a long way to making the industry more efficient and effective in the long run.

These are the types of things that we will be involved in the future with the Preliminary Specification operational. They are an improvement in our quality of work life. A move away from the redundant and repetitive nature of the work that we are involved with today. Concerns that we are going to lose a large portion of the resources of the oil and gas industry are some of the same concerns that were aired forty years ago when we were one quarter the size we are today. I think we can disregard these concerns and look forward to a far more interesting future as a result of the Preliminary Specification being a part of the oil and gas industry.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

The Revised Competitive Nature of the Oil and Gas Producer

One thing that producers should consider in terms of the developments of the Preliminary Specification. Is the differences between those that will willingly participate in the development of these systems and their deployment. And those that will choose to sit and wait until “more information” is available. With the opportunity costs at $94 billion in 2012 those that choose to wait are setting themselves at a significant competitive disadvantage compared to those that participate.

Lets be honest there will be some effort expended in the development and deployment of the Preliminary Specification. No one said it would be easy. From a producer point of view it will be difficult. It will however be more difficult to take the software to implement within an organization that did not participate in the development of the software. Participation in the developments will enable the producer to have their needs met and capture those needs in the software. It will also make the transition less abrupt and more of a day to day occurrence.

The real value will be when they are operational on the software and they are able to realize their share of those opportunity costs. Then they will have increased their profitability and have opportunities open to them that were unavailable to them before. Opportunities like the acquisition of laggard producers who choose not to participate in the development and deployment of these software developments. In these acquisitions they could acquire the further opportunity costs and other synergies from the takeover of other producers.

What will be established in the industry will be a division between those that are capable with the new Information Technologies provided by People, Ideas & Objects. And those that have chosen, or are unable to deal with the new technologies and business models that are provided. But it will have more competitive impact than just that at the corporate level.

In terms of operations those producers that use the Preliminary Specification will also have advantages. Recall we provide the oil and gas producer with the most profitable means of oil and gas operations. We do this by optimizing their revenues and reducing their costs. Therefore in the field producers using our systems will be able to have greater flexibility in their operations in terms of how they approach their business. For instance, in the acquisition of land they may be more competitive than what others might be able to bid.

The opportunity costs are material in scope and scale. The speed, innovativeness and accountability that is acquired when we move the compliance and governance frameworks to the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee are substantial. Eliminating the bureaucracy and replacing the administrative structure of the organization with the Information Technology management that is available today is the trend that is sweeping all industries across the globe.

There will be those that will choose not to make the changes in their organizations. There is little that we can do for them. However there are many things that can be done for the producers and Joint Operating Committees that know that there is a better way and the Preliminary Specification is that better way.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.