Service Providers for Earth Science and Engineering

Just as there are service providers who are providing services in the administrative and accounting fields for oil and gas producers and Joint Operating Committees. It is anticipated and designed into the Preliminary Specification that similar requirements will be needed in the earth science and engineering disciplines. The critical nature of the resource shortfall in these professions dictate that a solution to these medium to long term shortfalls arise. People, Ideas & Objects have identified the issue and resolved it through the software in the following manner.

The source of the issue is the manner in which each producer is building their earth science and engineering capabilities. Just as in the administrative and accounting areas none of these resources are shareable between the producers. Each producer is building unique capabilities for just in time deployment for any of the properties they are responsible for. This generates unused and unusable earth science and engineering capabilities that are trapped within each producer firm. Looked at from an industry wide point of view these trapped resources are substantial.

The solution is to use specialization and the division of labor to free up the trapped unused and unusable resources in each producer firm. Instead of each firm generating the capabilities to meet the demands of all of their properties. They focus on key competitive specializations in the earth science and engineering areas. They also coordinate with working interest partners who are able to bring other specialized capabilities on an as needed basis. If any additional capabilities are required they can bring those in from the Resource Marketplace module.

It is there in the Resource Marketplace module that specialization and the division of labor have enabled a marketplace for the generic earth science and engineering tasks. A place where the majority of the day to day technical work can be completed on behalf of the producer or Joint Operating Committee. This enabling the specialization that the producer firm is able to undertake. This specialization and the sourcing of other specializations from working interest partners and the marketplace are how the Preliminary Specification eliminates the trapped resources within the producer firm. And how the unused and unusable resources are freed up on an industry wide basis to be used on a shared basis throughout the industry.

Providing the capabilities for all that is required of a producer within the domain of a producer will become increasingly more difficult as time passes. As the excessive demands of these professions continue, the need to specialize and divide the labor further, within the producer firm itself, will require the producer to have such a broad scope of earth science and engineering operations as to be uneconomic no matter how large the production base. This “hoarding” mentality, that it has to be done from within the organization, is quickly becoming unfeasible, if it already hasn’t. People, Ideas & Objects suggest it is the source of the shortfall in these resources today.

The solution in the Preliminary Specification, although controversial is the only reasonable approach to dealing with the problems of an industry that is accelerating in terms of its scientific basis. Specialization on key determinants will be the differentiators that earn the producer profits that they desire. Continuing to “hoard” these resources will only lead to further difficulties for all producers as the demand for the resource base escalates.

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.

Producing Shale Gas Profitably

The fact of the matter is only People, Ideas & Objects have a viable plan for the industry to produce the shale gas reserves profitably. The prolific, however high cost reserves provide an opportunity for the industry to fuel the North American continent for the foreseeable future. That is if it is a viable business. Today it is an activity that keeps bureaucrats gainfully engaged in what they do. We are in a transition period where the business is unable to sustain itself with profits, and indeed is cannibalizing itself with losses. Investors have had enough and are on strike, unwilling to participate with more capital to fuel the bureaucrats furnace. Even with the investors striking there is an imbalance in the supply and demand of natural gas. What needs to be done is producers need to reduce production. Everyone knows that, yet no one has done it in the three years that prices have been depressed.

The problem with reducing production in the high throughput production model that is employed today. Is that it only makes things look worse. Overheads look even more top heavy than they do at full capacity. Layoffs are one of the solutions to the poor optics but that only masks the problem. The problem is that each company must maintain certain capacities with respect to what they are capable of achieving as an organization. Cutting staff only reduces the capabilities in certain areas. What is needed is a different way in which the oil and gas producer achieves, accesses and develops those capabilities. In the Preliminary Specification those capabilities are developed on an industry wide basis, not an individual producer basis. This reduces the redundancies of each producer building the same capabilities within each firm and having no ability to share these resources.

By having the service providers staffed by the resources of the producer firms. These service providers can then reorganize themselves based on the specific processes that they specialize on. Using the entire industry wide data set as their client base they would be able to use specialization and the division of labor to provide efficiencies and effectiveness that was far greater than that of the largest producer today. The quality of their services would also be enhanced.

It is assumed in the Preliminary Specification that the oil and gas producers competitive advantage is their asset base and their earth science and engineering capabilities. Not their administrative and accounting functions. Taking the administration and accounting processes of the entire industry and setting them with the service providers would provide each producer with the appropriate administration of their assets. Any oil and gas producer that is competing based on their more efficient administrative capabilities should have their head examined. These are generic aspects of the business that all producers need to have taken care of. They are not critical to the business.

Each service provider, and there would be hundreds of service providers, but only one for each process. Would become highly specialized in their domain of knowledge and capabilities. Providing services to producers of all sizes. Bringing to the industry the state of art in terms of what is possible for that process. In addition they would be backed up by the People, Ideas & Objects software development capability that would enable them to make the changes to further their specialization on a constant basis. Competition between the service providers would be at a high level. It just wouldn't be at the direct level of competing for the business of the process. Each service provider would in essence have an industry wide monopoly on the process that they managed. It would be in that they way that they could achieve the most from specialization and the division of labor.

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 Prayer for Natural Gas Prices

If we could now all bow our heads. But seriously, that is the extent of the planning and management that is currently ongoing in the natural gas business regarding the prices. The bureaucracy have completely given up any pretense of concern or regard for the business in which they operate. They couldn't care less about the losses that are being incurred as a result of the low natural gas prices. And its not that the summer saw any marked depletion in the shale gas reserves. These reserves will be around for a while longer. I am surprised that the bureaucracy have gotten away with such blatant disregard for so long. Bureaucracies are leaderless. I guess expecting some leadership from them is the foolish thing.

How the oil and gas industry continues in the 21st century has to be as a dynamic and innovative industry. What it is today is the furthest thing from that. And it is paying a large price for that lack of leadership. We have calculated the opportunity costs for 2012 at $94 billion when we compare the status quo to what is possible with the Preliminary Specification. Making the investment in People, Ideas & Objects one of the highest return investments that the industry could make. This is the power of software and why the industry has to begin to respect the capabilities of the technologies when combined with innovative business models.

The Preliminary Specification solves the natural gas pricing problem by removing the marginal production from the marketplace. 15% of the production in the 2012 scenario that provides for the opportunity costs. Producers are able to remove the marginal production from the market without the associated losses on other operations, or the losses on the shut-in properties. And they are able to keep the shut-in reserves for a time when the prices return to the point where they can be produced at a profit. Additionally the production that is removed from the marketplace helps to reduce the downside in natural gas prices and normalize the marketplace in terms of supply and demand.

It does this with two fundamental mechanisms that are unique to the Preliminary Specification. One is the manner in which the overhead or the resources of the industry are organized. And secondly on how the costs of the resources are allocated when the production is shut-in. The first element is how the resources are organized in the industry. The oil and gas producer is a stripped down version of itself that consists of the c class executives, the earth science and engineering resources with some legal and admin support staff. The remainder of the resources of the producer are reorganized into service providers who are focused on a process or sub-process that uses the entire industry as their client base. Then they can use the tools of specialization and the division of labor to provide the most efficient and effective service in terms of lease rental payment, production, revenue and royalty accounting, etc. When the service provider provides their service they then bill the Joint Operating Committee a fee for their service.

If the property has been determined to be marginal at the current prices it is shut-in until prices rise. The associated costs of production and overhead are all stopped. There will be no charges from any of the service providers to the Joint Operating Committees for the months where there is no production for production, revenue and royalty accounting, etc. Thus enabling the property to be subject only to the cost of capital during times of shut-in production. The cost control for the production, revenue and royalty accounting is with the service providers and they can budget on an annual basis that they will experience an approximate 10 - 15% production decline at anytime. Therefore the ability of the producers to remove any amount of excess production from the marketplace at any time would exist without the associated losses in operations. This would alleviate the downswing in pricing that is currently being experienced and allow the shale gas reserves to be produced at a profit.

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.

Leadership Within the User Community

In addition to having the power, the user community will provide the leadership for the industry in terms of its direction and implementation of the solutions it determines. With participation being as broad and as diverse as the industry itself, representation will include all areas of an oil and gas producers domain. Additional representation will be made from the service industry and the service providers. Anyone dissatisfied with the decisions that were made within the user community would have to blame their lack of participation as the cause of those decisions being made. With the role of leadership comes the responsibility to lead.

Some will argue that the movement of the leadership of the industry to the user community is unnecessary and should not happen. I would suggest that they reread the Preliminary Specification. It is within the domain of the software to take the leadership role within the industry. For the industry to acquire the capability to suspend marginal production can only happen if the Preliminary Specification is operational within the industry. I say “only” on the basis that the bureaucracy has shown no capacity to do so yet. It is within the software that the leadership is exercised and the software is driven by the user community. Therefore the user community will be the ones that provide the leadership to the oil and gas industry in terms of its strategic and tactical business direction. The alternative is that it continues to lose money in the natural gas business for as long as the shale gas reserves exist.

What I am arguing is that participation is the means in which the leadership is exercised. Its a different mode of operations is what is occurring. Instead of being an opaque unknown, it will be a transparent and visible process that is seen throughout the user community. This is the nature of business in the 21st century. Software and by extension user communities are a necessary ingredient in the capabilities of the industry. That they haven’t been up to this point reflects poorly on the implementation of the technologies. It is necessary to have these capabilities tightly integrated within the DNA of the industry, the service industry and the service providers. That is what the Preliminary Specification does. And it allows for those capabilities to be used in a manner that will provide for the most profitable means of oil and gas operations.

Arguments to the validity of these points will continue for some time. Software doesn’t command that much respect in the oil and gas industry. Certainly not to the point that is discussed here. There will have to be an education process undertaken to provide an understanding of how these changes are implemented in the software and user community. The point about profitability resonates with the investors however. And that is our focus in sourcing the funds, or the direction of the funds to complete the first phase of these developments. Developments that will be solely the result of the user community.

There are times when “things” change. And there are times when those that accept those changes and move forward in the new ways as a result. This is one of those times and one of those places. Oil and gas is being disintermediated by People, Ideas & Objects Preliminary Specification. New leadership will find the user communities ways and means of making the changes they want in the industry. Those who are unable to accept these ways will be left behind and will have to accept a different future for themselves. That is the way that change is implemented and growth occurs.

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 Power Within the User Community

A decade has passed since we began writing about developing software for the Joint Operating Committee. And it has been one year that we have actually had a product, the Preliminary Specification. I am a fan, let me restate that, I was a fan of research. After nine years of it I have had enough. If I never see another paper I will be fine with it. What gets me out of bed in the morning is checking my stats. Its a simpler life, but just as satisfying. Discussion of the product will keep me going for a few more years. I hate to admit it, but I started developing oil and gas ERP systems in my first company in 1991.

The Preliminary Specification provides an overall vision of how the industry could operate in the 21st century. An ambitious plan. However, one that is needed for the times that we live in. People who work within the industry who can see this vision can align themselves to it and begin the process of orienting themselves and their commercial lives around it. This is how the changes will take place. Individuals acting in their own best interests. Joined together through the user community. A place where they have the means to effectively provide for the most profitable means of oil and gas operations.

Its up to the user community now to take the Preliminary Specification and make it theirs. To mold it into the systems that they can use on a day to day basis. One in which they can address the issues and opportunities that arise in the oil and gas industry, the service industry and the service providers. The service providers potentially being a part of their own commercial operation. Where their dual revenue streams are split between user community contributions and service provider fees.

The impact that the user community has on the oil and gas industry will be significant. We can see already in the Preliminary Specification how it solves the operational concerns of the industry today. How will it solve the issues of tomorrow. This will be the role of the user community. We’re not talking about a committee of people who are endlessly publishing technical requirements that no one will look at. We are talking about the people who are responsible for the systems that will be built. Any change by the user community will see an immediate change to the software by the People, Ideas & Objects software developers. That’s the point. Instead of producing reams of paper that no one will look at. They will have the power to effect change. And the power to effect change on a grand scale. As we can see the changes that are made in the Preliminary Specification impact the industry significantly.

That is why this user community is different. It has a role to play in the development of the industry. And it has the power to affect the changes to develop the industry. Participation has to be as broad and diverse as possible to ensure that all points of view are represented and that changes are in line with the industry needs. One thing we can be certain of in the future. And particularly with the dynamic and innovative oil and gas industry. Change will be the constant that requires the user community to be creative, dynamic and innovative in its ability to provide direction and solve the issues of the industry in the future.

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.

In the beginning...

What would we do without the Joint Operating Committee. It was in August of 2003 that I was preparing my proposal for my master’s thesis and it was on using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. I finished that work in April of 2004 and rewrote it for commercial publication in the May 2005 Preliminary Research Report. It has been a roller coaster ride since. What we were able to provide in the May 2005 Preliminary Research Report was that the Joint Operating Committee was the natural form of organization for oil and gas and that innovation can be reduced to a quantifiable and replicable process.

Since that time it has been an effort to undertake the research necessary to solve the following. If we moved the compliance and governance frameworks of the hierarchy to the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee what would it look like and how would it work? This research was extensive and began with this blog in late 2005 continuing on into the summer of 2012. It was in August of 2012 that we finally published the Preliminary Specification, the 175,000 word eleven module summary of what that system would look like in the oil and gas industry.

The implications of using the Joint Operating Committee are significant. I don't think any position within the oil and gas industry will remain unaffected by the changes from the software. By developing this software we move away from the current corporate model. Which is a contrived and makeshift organizational construct that is patchwork and make do. To one, the Joint Operating Committee, which is the unique and natural way in which the industry has used to deal with the partnerships that are systemically used in the industry. We are moving directly in line with the culture of the industry and the Preliminary Specification has a certain harmony as a result. Things are done with the understanding that that is the way they are done in the oil and gas industry.

There is also a focus on the business of the oil and gas business. When you analyse the current corporate model the focus and drive of much of the administrative and accounting needs are on the tax, SEC and royalty needs of various external stakeholders. With the Preliminary Specification the focus is on the business of the oil and gas business with the compliance and governance being as a result of the activities in that business. Not a driving force in the business.

It has been a year since the publication of the Preliminary Specification. And as I noted a few days ago the acceptance of the marketplace has been better than expected. It is our first year in a ten year plan to have the system operational in the oil and gas industry. And by all accounts we are on track. We are continuing on in our second year with the same activities as we were in the first. Getting the word out that the Preliminary Specification can solve the operational concerns of the oil and gas industry. And provide the most profitable means of oil and gas operations. With natural gas continuing to disappoint, and many producers seriously looking at what they can do about it, maybe they will begin to see some of the solutions that we have put forward here as the way forward for 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.

A Dynamic and Independent User Community

One thing we should note here is that we haven't discussed any of the technologies that are available in the marketplace. And we certainly will not start now. We are focused on the business issues of the oil and gas industry. And the associated needs of the service industries and service providers that are in support of the oil and gas industry. We are a software development firm and we will provide the technology that meets the business issues that the user community demands. That is our focus. Not on the technology.

We have discussed in previous posts how the user community will provide us with the direction in terms of what, why, where, when and how the software needs to be. That this user community will be dynamic and mirror the activities and thinking that is occurring in the industry itself. That is what I would like to see. The user community having the ability to know what the industry will want and need and to anticipate those needs, and have the software delivered to the producers and service providers just in time. This is what is possible today and I set this as an objective of the user community to achieve.

In a dynamic and innovative oil and gas industry, a dynamic user community with a software development capability as defined by People, Ideas & Objects is what will be required. The foundations of the oil and gas industry will include the user community and software development capabilities. They will be a critical part of the industries needs in the 21st century. We see today that with the ability to resolve the natural gas pricing issues, the Preliminary Specification provides a framework for the user community and the software development capability to address the needs of the industry in the future. And it all comes down to the Joint Operating Committee as the key organizational construct. Recognizing that has been the critical piece that has been missing in the software up until now.

Taking this infrastructure and putting it on its own financial footing is a key part of its ability to becoming dynamic and independent. As defined in our Revenue Model we can not be subjected to disruptions in our funding for either the user community or the software development capability. Disruptions in funding could divert our focus, or affect the capabilities of either group. It is in the best interests of the oil and gas producers to review the Revenue Model and understand how we address the funding of these groups and avoid these issues.

The fact of the matter is, is that software and the user community will be taking up a much larger role in our lives in the future. What has happened in the software development community for the past 50 years has been a great experiment. There have been advantages for certain but the real value is about to be realized. What we are beginning to realize is there is a maturing of the technologies. What was once potential is now doable. And the infrastructure is there to accommodate what is doable. So now we will see what was possible only a few years ago become the norm. And that will require that we have a stable and healthy user community and software development capability that we have been discussing here. For without these things, the industry will find that the issues and opportunities that seem to be at their fingertips, just can't otherwise be resolved or realized.

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.

Intellectual Property in the Preliminary Specification Part II

One of the areas that Intellectual Property (IP) will affect the industry will be the way in which everyone who works within the industry is connected to the IP. As IP becomes more important in the day to day of each and every individual in the industry. Their access and use of it will make up their relationship with their employer or customer. That is to say the relationship will be defined by a license for copyright and patent purposes. And contract law for brand management with respect to trademarks.

Users of the People, Ideas & Objects software will be subject to an End User License Agreement (EULA). And like many of the hundreds of EULA’s that you have agreed to in your life these will not form any significant part of your relationship with your employer or customer. The access to the software will of course be free to any user. The access to the producer and Joint Operating Committee data is as a result of having a relationship with them and they granting security access to you through the Security & Access Control module.

That brings us to the user community. People, Ideas & Objects are user based software developments. Our user community will be our competitive advantage in the marketplace. Key to that community is their use of the Intellectual Property that makes up the Preliminary Specification and its derivative works. This will be done through a specific license with each member of the user community and People, Ideas & Objects. It will be this license that defines the relationship with the individual in the user community and their involvement in these developments. This, by their choice, could be a material commercial arrangement in which they establish a foothold in the user community and a service offering as one of the many service providers to the oil and gas producers.

Members of the user community are compensated for their time and efforts in the user community. This is not a volunteer situation where we expect people to contribute time and effort for the community spirit. People will be compensated commensurate with their education and experience on an hourly basis for their contributions. These costs are also part of why our costs are larger than any software development initiative before. No one has based their developments on the user community as we are on ours.

There is another reason that the user community must be paid for the work they do in these developments. It is to acquire the Intellectual Property that is derived from the Preliminary Specification and other areas. This IP must be acquired so that it centralized in one location from a legal point of view. All IP will become part of the copyright that is owned by me. There it will in turn be available to everyone within the user community and service providers through the above noted license that they have been granted. Without this we would have to deal with thousands of IP trolls who would have developed an idea for this or that and would obstruct each and every producer with a license agreement for their idea and an invoice. If you feel your ideas are too special to be handled in this manner then you should feel free to launch a competitor to People, Ideas & Objects. This is the way that we have chosen to deal with it here.

Building a service associated with the software that includes participation in the user community will provide a commercial opportunity that, I think, will be valuable. The oil and gas producers will have the best people providing them with the capabilities to work with the software and to change the software. An ideal situation. If you want to be part of that, that is what I am working towards.

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.

Intellectual Property in the Preliminary Specification Part I

One of the controversial areas, or maybe I should restate that. One of the more controversial areas in the Preliminary Specification is the manner that it deals with Intellectual Property. Intellectual Property is becoming a more important element of what and how an industry operates and that applies to oil and gas, the service and the service provider industries that are the targeted market of the Preliminary Specification. The manner that it deals with Intellectual Property is fully contrary to the manner that the oil and gas industry operates today. That is to say that it recognizes, promotes and markets the Intellectual Properties of others and respects them.

To compete in a technically diverse industry such as oil and gas. And to have that industry foster innovations from everywhere and at all times. Requires that the industry see that the IP that is generated within the industry respected by those that make up the marketplace. That has not always been the case in the oil and gas industry. There is an attitude that companies are better off not recognizing the IP and sponsoring competition based on the IP efforts of others. This strategy may have been successful at one time, however, I think it is questionable in today’s marketplace, and it will certainly be a failure in the future. It takes too much effort to develop on the behalf of the inventor to come up with anything new. That effort is not as easily replicable and cannot just be passed about its competitors. The industry, I think, is better off working with the inventor, developing their capabilities to achieve scale, and obtaining the benefits of the ideas in that manner.

By not recognizing the IP of the inventors in the industry for so long the oil and gas industry has created a larger problem for themselves. Companies and individuals with the ideas needed to move the industry forward see that their ideas won't be respected. That they will be just passed on to their competitors by their customers the oil and gas companies themselves. This has the effect of diminishing the number of startup and innovations within the industry. People know that they will not receive the benefits of their labor. And anyone who has gone through the efforts of developing some IP will tell you, it is amongst the most difficult business process to manage.

After all what are the competitive advantages of the innovative and profitable oil and gas producer. They are their oil and gas asset base, and their earth science and engineering capabilities. Contained within those capabilities are the abilities of their resources to use the abilities of the service industry to conduct field operations. They have to have the capabilities of others to do this work. That is significantly different than having the Intellectual Property necessary to do this work. For example, having the IP for the best drill bits will not provide the oil and gas producer with any competitive advantage over any other producer. However having the capability of knowing who has the best drill bits, where to get them and how to get them delivered provides great value. The oil and gas producer by sponsoring competing firms to “wash” the Intellectual Property of individuals and companies from one firm to another is a useless, time wasting activity with negative long term repercussions.

The Preliminary Specification recognizes and encourages the efforts of the inventors and those within the oil and gas industry with marketplaces for their ideas. A place where ideas can begin and find a market quickly. And a place where oil and gas producers can find new ideas that will help them to be more innovative.

Dealing with IP in the manner that the industry is today is counter to the way that society is moving. IP is becoming stronger and industry needs to deal with this fact. These changes implemented in the Preliminary Specification are therefore necessary for the innovative and profitable oil and gas producer to compete and prosper in the 21st century.

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.

Shale Gas Reserves

Wikipedia lists Canada and the United States as holding 1,238 trillion cubic feet of estimated recoverable shale gas reserves. That is a fantastic number that is beyond recognition of anything that we are dealing with before. The volume of proven natural gas reserves is 386 trillion cubic feet. Current consumption of natural gas is 29.9 trillion cubic feet per year. Therefore there are approximately 41 years of reserves of natural gas at current production rates. Without shale gas, there would be 13 years of reserves at current production rates. One can certainly see why the natural gas prices are so low, however, the economics of supply and demand are not in line with the business needs. What this abundance requires is a new business model. One that considers how the industry will produce these reserves profitably.

It would be reasonable to assume that the shale revolution is not finished. As innovation occurs more reserves will be moved into the estimated recoverable and proven categories. Another area that sees an abundance of reserves in the United States is coal. The U.S. has the greatest coal reserves in the world. This is important as they offer a competitive alternative to natural gas in the $3.00 to $4.00 range. Natural gas has many other competitive advantages and should command a premium in the marketplace, making the industry realize its recommended price of $6.70 / mmbtu as a minimum.

$6.70 is a world away from the prices that are being realized by the producers today. And they are not something that companies are going to experience in the near future either. There are no plans or ideas in which to deal with the issues of the natural gas marketplace. More shale gas production is coming on stream everyday. Making the problem even more difficult.

Producers are structured to maintain their capabilities in terms of the administrative and accounting requirements of the firm. And those costs need to be covered by cash flow and that requires production. Otherwise the performance of the company looks top heavy with staff. Laying off staff only diminishes the capabilities that are otherwise necessary for the company to maintain irrespective of the production profile. Therefore companies within the industry continue to produce at capacity.

The alternative in the Preliminary Specification sees a few changes in the way that the industry operates. Instead of each company building individual silos of capabilities for administrative and accounting capabilities. The industry as a whole builds the capabilities for administration and accounting. This is done by moving the resources of the producer, outside of the C class executives, the earth science and engineering resources, some legal and support staff into service providers. These service providers are focused on individual processes and subprocesses that enable the service provider to use specialization and the division of labor to bring efficiencies and effectiveness to their customers, the Joint Operating Committees. By charging the Joint Operating Committees for the costs of these administrative tasks, the producer is enabled to shut-in production if commodity prices drop below the marginal cost. When production reaches the point where it becomes marginal and is shut-in. All of the administrative and accounting charges from the service providers cease for the period that the production is shut-in. Leaving only the costs of capital uncovered. This also removes the marginal production from the marketplace, putting an effective floor on the natural gas prices in the future.

Proceeding further into the 41 year life of the shale gas reserves. Without the ability to deal with the marginal production as prescribed in the Preliminary Specification is foolhardy. Producing gas is not an activity that we undertake as if we were in daycare. Its a business. And we need to approach this new era with a business model that will enables the industry to make the types of profits that recognize the risks associated with it.

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.