Service Provider User Budget Category Part I

We now look at the user budget category that will be the area which we will see the greatest level of change in the industry. Seeing how the service providers don’t exist as of today, and the majority of the people that will be working for the service providers are currently working for the oil and gas producers, that is a significant amount of change and we have barely started. Employing the decentralized production model is critical to the dynamic, innovative, proactive and profitable oil and gas producers economic health. Critical to the decentralized production model is the establishment of the service providers and their ability to charge service fees for their work to the individual Joint Operating Committees. It is in that way that the producer becomes flexible in their production options. In a world where there are 200 years of natural gas reserves, production discipline based on profitability is the only solution, and that is provided to the producers through People, Ideas & Objects decentralized production model.

The service providers will therefore have a User Budget Category allocation of 25% of the entire user budget. That totals $83 - 166 million or 250 to 500 man years of user effort. A significant undertaking in terms of budget, and a significant undertaking in terms of the scope and scale of the processes that are being moved from the producer firms to the service providers. In the Preliminary Specification many of the processes will originate and be managed in their entirety by the service providers. It will be the user community that determines which ones and how they should be structured. I would suggest that 90% of the accounting, 80% of the production, land and exploration administration processes will be moved to the service providers. With the prototypical producer being focused on their earth science and engineering capabilities, and land and asset bases as their competitive advantages. Having these service providers provide for the generic administration of these processes on a daily basis will be the most cost effective and profitable means of oil and gas operations. The more they rely on this structure, the more profitable they will be as the lower the overhead of the producer firm will be. I would see this as a means of competitive differentiation in how a producer operated their firm. The leaner that they could operate from an overhead point of view, the more attractive the producer would be to the investment community.

As we have indicated the user community will be the people that determine the processes that will be managed by the service providers. Taking all of the processes that are currently necessary within the industry and determining the appropriate manner in which they should be managed. Using a variety of different tools, but most particularly specialization and the division of labor, they will be able to identify the optimal solution to the way a process should be managed in the industry. From there they will work with our developers and develop the software on the basis of the processes that they have designed. They will also work to develop the service providers and the configuration of what that sub-industry will be comprised of. It will be the user community participants that will have the inside edge in terms of who establishes these service provider firms.

Let me point out once again that the revenue streams of the service providers will be the G&A expenditures that are currently being spent by the oil and gas producers today. These total in the range of $40 to 60 billion per year for the North American producer marketplace. The majority of these costs will be what are carved out and used to establish the service providers revenue base. The question becomes how does an individual position themselves to acquire the ability to manage a process in this new sub-industry?

To answer that question we go back to how the Intellectual Property for People, Ideas & Objects operates with respect to the user community. We use the IP of the Preliminary Specification to raise the funds from industry to develop the software. Included in that is the costs of the user community. These funds are to support the user community as this is not a volunteer effort, and secondly as a means in which we purchase the IP from each of the participants in the user community. You are paid for your IP contributions. Now, if someone, or a group of people were to have established a process that became the process that was managed within the People, Ideas & Objects Preliminary Specification. Then that individual or group would have been compensated for their efforts, and, they would have acquired specific skills and understanding regarding the management of that process. They would have value to People, Ideas & Objects in managing that process on behalf of industry. And we in turn would provide them with a service provider license that gives them monopoly rights to the management of that process in either Canada or the U.S. This would be provided through the exclusive access to that process in the People, Ideas & Objects software. There is no purpose in having multiple service providers focused on the same process. The service provider will be focused on providing the best service they can offer without the distraction of having their client base being attacked by new entrants to the marketplace. Whether someone would see that this is an investment opportunity or not is up to them. We are operating on the basis of our second year of a ten year plan. I think it is an interesting proposition in that those that invest heavily in the user community will be rewarded with a position in the service provider sub-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. And don't forget to join our network on Twitter @piobiz

Service Industry User Budget Category

Within the Preliminary Specification the oil and gas producer has an enhanced reliance on the service industry. It is this enhanced role that has led us to designate a $40 to $80 million user budget category for the user community. This works out to 120 to 240 man years of effort. These funds will be used in combination with the resources that are designated for the Resource Marketplace, Research & Capabilities, Knowledge & Learning and Security & Access Control modules that we discussed in the Joint Operating Committee user budget category earlier this month.

When we talk about the service industry we are talking about the organizations that provide the field services to the oil and gas producers and Joint Operating Committees. Specifically we are concerned with how they do their accounting, their billing, their contact information (Federated Identity) and the interaction of that business information with the producers and Joint Operating Committees. We want to provide the oil and gas producers with the most profitable means of oil and gas operations and that requires that the administration of their operation be as efficient as is possible. In order to achieve that efficiency the service industry that services the producers in the field must interact with the producer at high levels of technical efficiency.

What I am suggesting here is not so much that we establish a technical framework in which the service industry will comply. Since we are a cloud computing environment. We provide the accounting and administrative software and service providers to the service industry in combination with the software and service providers that are provided to the oil and gas producers. It would be in that way that our software and service providers would handle the processes that saw high levels of oil and gas industry interaction with the service industry. That way the oil and gas industry would be able to account for its activity in the manner that it sees its interests best represented. The service industry would have their own accounting and administration systems which would then interface with the cloud computing services that we provide. And these would be reconciled by the service industry representatives.

Throughout the Preliminary Specification we have highlighted the areas where the service industry is represented and the interactions they will have with the producers and Joint Operating Committees. And it is a much more involved relationship. The current situation between the two industries is unsustainable and inconsistent with what is required for a dynamic, innovative, proactive and profitable oil and gas producer. In all areas, from the creation and securing of Intellectual Property, to the participation in the Security & Access Controls Military Command & Control Metaphor. The need for the producer to operate their field operations with military precision requires that the service industry has the type of systems that we are considering here. And our service providers being active in providing those systems to the service 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. And don't forget to join our network on Twitter @piobiz

Compliance (Tax, Royalty, SEC) User Budget

Lets move back to our discussion of the user budget and the allocation of its funds. The first section that we completed was the Joint Operating Committee user budget allocation. It used 22% of the $333 - 667 million user budget for development of the Preliminary Specification. These resources were allocated under the blog posts entitled Joint Operating Committee User Budget Category Part I - X posted earlier this month. The next allocation is the Compliance (Tax, Royalty, SEC) user budget category and we have allocated $40 - 80 million in total for this section of user community involvement. Or 120 to 240 man years of effort.

The objective of this section in terms of output is to ensure that the systems that we build are in compliance to the various regulations that the producers and Joint Operating Committees are required to comply with. Of particular concern are the various royalty regimes that are in place in the various jurisdictions the producers produce from. It is our competitive advantage that we provide the oil and gas producers with the most profitable means of oil and gas operations. With royalties being the largest cost component of an oil and gas operation it would be incumbent upon us that we ensure that the producers and Joint Operating Committees pay the lowest possible royalties. And that should be one of our objectives, to ensure that the royalties are calculated in the manner that provides the lowest possible royalty to the producer organization.

A large part of the costs incurred in this budget category will be for the royalty component. There will be many that feel that the various governments and administrations that collect the royalties should provide us some relief of those costs to help in dealing with these high development costs. To accept this money would be a betrayal of our interest to the producers we represent. We are financed by the producers and provide them with the most profitable means of oil and gas operations. If we accept money from the royalty regimes then we have compromised ourselves and cannot guarantee that we are working in the best interests of the producers. I would extend this conflict of interest to the user community and the service providers at large. We have a duty to the producers to maintain our competitive advantages and there are those situations that could potentially put us in a conflict of interest. Please be aware of this and avoid them at all costs, if you find yourself in one you should deal with it immediately.

To deal with the tax, royalty and SEC requirements in the North American marketplace will require more than the resources that have been allocated here. And there have been. In almost all cases the royalty regimes have established high levels of technical frameworks and regulations that can be implemented quite easily. The hard work in many instances has already been done. In terms of the SEC and tax the same situation applies. The XBRL syntax is used by the SEC for its reporting purposes and it has been adopted throughout the Oracle Fusion Applications that are a base of our application. What we need to do as developers, users and service providers is the work that is unique to oil and gas, and unique to People, Ideas & Objects Preliminary Specification.

Specifically that involves integrating these technology frameworks within the DNA of the application. So that they are an inherent part of the application, not an add on that is used later. The service providers will be providing the services of the actual process management on behalf of the industry. It will be you who will be actually using the applications and we need to define what it is to ensure that your management of the process is the most efficient and effective for the producer firms that are your clients. If you are managing the eligible capital costs for gas cost allowance for the Texas Railroad Commission. What is it that you want and need in order to manage that process on behalf of all of the Texas based producers. Or if you're managing a duplicate payment verification process for the entire North American based producer population, what is it that you need and want?

As we indicated during the Joint Operating Committee user budget category discussion there would be synergies between the budgets allocated here and elsewhere. The Joint Operating Committee user budget category for the Compliance & Governance module has an allocation of its own budget dollars. There is a separate budget allocation to the Accounting Firms totalling 17% of the user budgets. These are to provide for the Accounting Firms to sign off on the compliance and governance elements of the People, Ideas & Objects applications integrity on behalf of their industry. And there are significant resources in the Oracle section of the budget to determine what it is they have done in this category of their applications. Therefore with these resources I feel these tasks can be undertaken by the user community and service providers and provide the producers with the most profitable means of oil and gas operations.

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. And don't forget to join our network on Twitter @piobiz

A Word About Implementations or Integrations

With the decentralized production model the service providers acquire the industry wide administrative and accounting capabilities. Therefore the producer, irrespective of its size, accesses these capabilities from the service providers as needed on a service fee basis. The process management, such as one of the many royalty processes, will be dependent on some data generation or activity that triggers the process. How these processes are implemented and / or integrated into the producer firm or Joint Operating Committee is something that has not been discussed before. And once again we turn to the service providers to do the analysis and preparation of the producer or Joint Operating committees records into the People, Ideas & Objects software.

There will be many processes and the coordination of those processes with the software and the appropriate service provider will be a key part of the integration. As it is today. The fact that there are so many processes under management is not an issue. Additions and amendments to the processes can be made as time goes by. This applies to those start up firms and ExxonMobil equally. It is a necessary act to have the producer or Joint Operating Committees processes loaded on to the software and the service providers actively managing them. Once these are completed the producer will have little if anything to do with the software or service providers other than from a high level reporting point of view.

Note that there will be no training of the producers staff in terms of the specific attributes of the People, Ideas & Objects software. The process management is completed by the service providers and they are operating the processes across the industry with a “state of the art” level of capabilities. Adding additional producers to their client base will be a daily occurrence that they will do with precision and accuracy. With the administrative and accounting capabilities held within the industry, the need to train each individual producer on the nuances of the People, Ideas & Objects software will not be required. The industry wide administrative and accounting capabilities will have those integration skills as part of their capabilities and no additional training of a producer will be required for an integration.

When we commercialize the software we most certainly will have hundreds and possibly thousands of unique oil and gas processes under management by the software. Each with its own unique service provider managing the process on behalf of the industries producer and Joint Operating Committee population. Coordination of this mass of details is the job of the integration. Ensuring that we are managing all of the industries processes is the job of the user community during the developments. Identifying, optimizing and applying the toolset of specialization and the division of labor to more effectively deal with the workload of the industry from an administrative and accounting point of view. This reflects on the importance of the network of people that will be needed to make this work. And why our budgets are the size that they are.

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. And don't forget to join our network on Twitter @piobiz

A Distinct Competitive Advantage

The user community, service providers and People, Ideas & Objects provide the innovative and profitable oil and gas producers with a distinct competitive advantage. And that is we provide the most profitable means of oil and gas operations. One way in which we do this is through the decentralized production model which is one of the elements of the Preliminary Specification. It enables the producer firm to reduce their footprint to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder have been established into service providers who are now focused on a specific process or subprocess and have the entire oil and gas industry as their client base. This enables them to use the tools of specialization and the division of labor to better service their clients needs and provide efficient services.

The real value of the decentralized production model comes about when the producer, who may be faced with low commodity prices and a property generating a loss situation. Choses to shut-in production to save those reserves for a time when commodity prices are higher and can earn a profit. The service providers for that property will not have any activity for that property and as a result will not generate a billing for their service for that month. Whether that is for production, revenue or royalty accounting or any of the other administrative, accounting or overhead charges that are normally incurred by the producer. The property will therefore report a null operation, no profit and no loss. Only the costs of capital will be left uncovered during times of shut-in production. Achieving the goals of saving the reserves, removing the excess commodity from the marketplace, and increasing the financial performance of the producer firm.

The user community and service providers have this competitive advantage as a key element of their offering. This is what they should be leading the discussion with the industry about. How they are able to offer the $76 billion in 2013 opportunity costs and $170 billion in opportunity costs for the last two calendar years. These opportunity costs are what the decentralized production model could have brought the industry in those two years. And it could only have happened with the configuration of the user community and service providers that are discussed here. As a member of the user community or a service provider you have a sizeable competitive advantage that you can offer the industry. You need to be actively selling these attributes to the oil and gas industry at large. This is what is meant by getting the word out.

Some of us are busy with the 2013 financial information that will be published in the next few months. I don’t expect this to be much better financial information than what has been experienced in the past few years. If not for oil the industry would be bankrupt. And that is an unnecessary situation when the bureaucracy can leave the playing field and we can implement the decentralized production model. And that is the point that we should be trying to make this annual report season. That there is a better way and a group of interested individuals that are concerned about the health of the industry and the manner in which it is managed. A group of individuals with a better way to run the industry for the long term and deal with the kinds of issues that the industry faces and will face in the 21st century.

The bureaucracy has done nothing about the situation in the natural gas business. The decentralized production model deals with low commodity prices. With over 200 years of natural gas reserves as a result of the shale gas situation, selling at a loss in perpetuity is the bureaucracies answer to the marketplace. It doesn’t have to be that way. What is necessary is the decentralized production model that restricts production based on profitability. And we have this solution. So lets get the word out.

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. And don’t forget to join our network on Twitter @piobiz

Our Communications Network

Wikipedia states that Metcalfes law relates to telecommunication networks and states that its “value is proportional to the square of the number of connected users of the system (n2).” Now that was how the law was written at the time that Robert Metcalfe wrote it in the early 1970’s. As the inventor of Ethernet and founder of 3Com Robert Metcalfe was focused on telecommunications at the time. If you follow his writings and thinking at this time, his definition of a network would include anything that involves people connected through the Internet. Therefore the value of the People, Ideas & Objects user community will be more valuable the more members of the user community join our network. First we need a network.

What our network will need to do will be for people to join in and participate in the conversations that are taking place here at People, Ideas & Objects. A place where people can communicate with one another with direct messages and find one another. A place where people can keep up with what is going on in the community around People, Ideas & Objects. FaceBook is used by everyone for their personal social networks. To add this community to FaceBook would be adding a component that is inconsistent with the makeup of what the users use FaceBook for. Twitter on the other hand is something that is used more by business related networks and less as social networks. In most cases people within our community will have not used Twitter before and therefore will have an expressed purpose to use it that will not interfere with anything else that they are doing. So we have chosen Twitter to be the network that we use to enable the communications and development of the user community of People, Ideas & Objects.

People wishing to join the network need to follow me @piobiz its that simple. From there you can see who else follows @piobiz and who we follow. You will also see the tweets that are sent out from myself and any of those that are sent out from people within the network who include @piobiz within the text of the tweet itself. You can put some information in your profile including an url to a website of yours for further information. There is a mechanism for which you can send private messages between members of the community. Other advantages of using Twitter include that it is deployable immediately and its cost is nothing. It will be here that we can begin to build the community that generates the momentum to move the industry.

As we start off the numbers may be small but we need to start somewhere. We will build this brick by brick, and stick by stick over the term of the remaining time in our ten year plan. That is how we will see this become real. That is how the opportunities for everyone will materialize. Our goal for 2014 is to get the word out. And that is how we can change the oil and gas industry into the dynamic, innovative, proactive and profitable industry that we need it to be.

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. And don’t forget to join our network on Twitter @piobiz

Plotting a Coup

That’s right a coup. Viva la revolution. The bureaucracy have shown that they are not interested in dealing constructively with People, Ideas & Objects therefore we need to throw the bums out of power. I have frequently mentioned that people should not openly discuss People, Ideas & Objects or the Preliminary Specification due to the consequences that may have to their careers. The bureaucracy sees us as a threat and they will overreact and the consequences to you would have been unnecessary and unfortunate. That warning is now being lifted and I would encourage everyone to openly engage in discussion of this project. Our second year objective is to get the word out and with a number of people openly discussing the initiative there will be a strength that the bureaucracy can’t act against. Besides you could always challenge the bureaucracy with the fact that you provide the oil and gas producers with the most profitable means of oil and gas operations. I would be interested in their response to that, seeing their current track record.

We are not working on the basis of someone's approval. We are authorized by our own self interest. People should be taking a long term perspective of how we can change the industry to the dynamic, innovative, proactive and profitable industry we desire. Engaging the bureaucracy at key times when they appear at their weakest will show them to be unable to compete with the community that is being generated here around People, Ideas & Objects and the Preliminary Specification. A like minded group of independent business people who are focused on bringing the oil and gas industry into the 21st century, despite the bureaucracy. That is our mission, and our posture should be aggressive and in your face in a polite and courteous, confident manner.

Due to the nature of our posture and our facts we may find that when we engage the bureaucracy there may be more conversions than there are confrontations. The long term perspective leaves something for everyone, even the bureaucrats. Remember in terms of annual G&A dollars spent in oil and gas today. The gross amount is in the $40 to 60 billion per year range for the North American producers. A large portion of that G&A will be reallocated to the service providers as revenues in the businesses that you will be developing in the next few years. Even bureaucrats have calculators these days. There is a substantial opportunity waiting for those that have the capabilities to provide the oil and gas producers with the most profitable means of oil and gas operations in this community.

We are about making this happen. We are not about knocking on doors asking for approval. The money will begin to flow when we have the situation under our control. It is within our power to seek and obtain the power to control the industry. For that is what we are after. To make the industry a dynamic, innovative, proactive and profitable oil and gas industry. This is a coup. It starts here in our second year with getting the word out about the Preliminary Specification. Organizing ourselves for the long run. Thinking about how the producer can achieve the most profitable means of oil and gas operations and maybe enjoying our work at the same time.

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. And don’t forget to join our network on Twitter @piobiz

The Goal of Our Ten Year Plan

We have very briefly talked about our ten year plan and the fact that 2014 will be our second year of that plan. But what is that plan and what are the goals of that plan. The plan is very simple and one that provides all of the stakeholders with the ability to plan their own needs around what will happen here at People, Ideas & Objects.

The first year of our plan, 2013 in which we defined the product is now over. What we are striving for is that in 2022 we will close out the year with our first full year of operation of the systems defined in the Preliminary Specification, in the North American marketplace. This seems like a long ways away however it really isn’t. First it means that the system is operational January 1, 2022 which is only eight years from now. And as we know a lot will need to happen to make the system operational in that eight short years.

If we consider the needs of the largest producers, and we must because that is where the bulk of the financial resources will be coming from. They need these time frames in order to deal with their implementation issues. It is also logistically impossible for them, and hence for us, to do anything on a shorter time frame. Think of big tankers and their ability to execute a turn. If the CEO’s decided to make the changes to their organizations for 2022 in our third or fourth year then they would be able to participate in the user communities, the developments and implementations.

This brings me to the second years objective. And that is that we need to spread the word. The Preliminary Specification has been edited and updated and is ready to be reviewed by the greater population of the oil and gas community. We now need to get it out. The bureaucracy has been effective in shutting off any resources to People, Ideas & Objects so this must be a word of mouth operation. The product is here and I’ll be writing about how it is implemented and how that affects the people in the marketplace. The further we get the word out the better it will be for each of us.

These time frames also provide you with time to organize and prepare yourself for your involvement in this project over the next nine years. Whether that is as a user, a service provider, or an oil and gas producer. Think of the organizations that need to be developed to have that final year of the system operational. How will the producers be transitioned to the new software. How will their G&A be managed through the software. Who will own and operate these firms may very will be decided in the next few years. As someone with significant experience in oil and gas you would be of great value to the marketplace. Maybe now might be the time in which to take some courses to fill out your knowledge of the technologies that we are using to better understand the implementation. These are the opportunities and the issues that can be addressed at an individual level here in the second year of our plan.

If we look at the future of the oil and gas industry; will it be as it stands today with its bureaucratic ways and its standard operating procedure of muddling along? Or will we take control of the situation and adopt the vision of the Preliminary Specification and have the marketplace revolutionize the industry and allow the issues and opportunities that the industry face being addressed in a timely and effective manner. As its not just the administration issues that we resolve with the Preliminary Specification. It is the operational issues as well. Issues like the natural gas prices being handled by the decentralized production model. The Preliminary Specifications use of the Joint Operating Committee enables the industry to resolve any operational issue that might arise. No more muddling along. A dynamic, innovative industry that is proactive through the marketplaces that make up the industry. Marketplaces that include you. So lets start here and now with that vision and build that 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. And don’t forget to join our network on Twitter @piobiz

A Unique Implemention

The implementation of the technologies that makeup the People, Ideas & Objects Preliminary Specification have a unique and one of a kind characteristic. One that I don’t think has been evident in any technology implementation in oil and gas before. And that is that they are being implemented by people who are actively participating in markets. This one characteristic will make the implementation successful and have the effect of making the transition to the Preliminary Specification easier than would otherwise be envisioned. Normally an implementation is driven by a project manager with a list of tasks. Here in People, Ideas & Objects case there are markets driving the stakeholders.

Consider that we have four particular stakeholder groups that are motivated to have these changes occur as quickly as possible. The first is the producers themselves, the second the oil and gas investor, the third is the user community and the final being the service providers. In each case there is a financial reward involved in the implementation. From each of these groups perspectives, the following would be the case.

From the oil and gas producers point of view the scope of their operations would be reduced to a highly focused earth science and engineering capable producer. Able to deal with their two competitive advantages of their land and asset base, and their earth science and engineering capabilities. And forget about the demands of building royalty and compliance accounting infrastructure, or the need to acquire more floor space for administration. The ability to lean out in the administrative and accounting areas to focus on the sciences, and to focus on their chosen specialization would orient them to what it is that makes them commercially relevant in the marketplace. A simpler domain in a world where the oil and gas producer has become too complex and too multi disciplined to be able to be agile and compete in the fast changing energy marketplace.

The producers are motivated to offload as much of the administration and overhead to the service providers as quickly as they possibly can. We certainly have to take into account a few difficult battles with the bureaucracy along the way but the pace will be quick. Moving to a small footprint will become a business model that appeals to the “mindset” of the marketplace and become the “thing to do.” This can’t happen fast enough as far as the CEO’s and like minded people within the organization are concerned. And once it begins, there is no turning back.

For the energy investor they can look forward to greater profits as a result of the decentralized production model delivering these through higher natural gas prices. Producers will be able to impose production discipline and enable the pricing to find its equilibrium and remain profitable for the foreseeable future. Providing a healthy and secure environment for the investment community to invest in oil and gas will help the industry to grow and compete with other industries on basic financial criteria. This will add to the pressure on the producer to make the changes to the service providers as quickly as can be done. The expectation and reality of this change will require significant communications as there were $170 billion in opportunity costs for 2012 and 2013 alone.

Users have been discussed in terms of their importance to systems development before. And in some systems we see the user input in substantial ways. Systems such as Google and Apple are very much oriented based on the user. When it comes to ERP systems the user is a bit of an anomaly. Systems such as SAP know they exist but don’t accommodate them in their prepackaged world. That is changing in People, Ideas & Objects Preliminary Specification as we take an approach that is user driven in terms of how our systems are developed. First of all the user community is paid for their contributions. Our rate is $185 U.S. per hour and we do not employ any users on our payroll. They are all service providers, employees of producers, service industry representatives or those that have a need within the oil and gas industry for better systems. The point is you could make a living being a user and become specialized in the discipline. Or you could be very specialized in your area of expertise and relate that to the developers so that the systems captured that special knowledge and understanding. Either way People, Ideas & Objects are open to the contributions of the user community and we have budgeted $667 million in the development of the Preliminary Specification to capture those user community contributions. Fully 2,000 man years of contributions.

Lastly there are the service providers who might I think double as users in many cases. Their job is going to be the most interesting and the most difficult. They will have to be the movers and shakers that make this bit of magic work to everyone's satisfaction. They’ll be needing to catch the people and tasks that are being offloaded from the producer firms and working with the user community to define the software to manage the processes they specialize on, on behalf of the industry. Their ability to turn the producers administrative and accounting capabilities into an industry wide administrative and accounting capability in as short a time as possible will be the expectation. They will also need to use specialization and the division of labor in defining their processes to optimize the oil and gas industries processes. Billions of dollars depends on it being done quickly and efficiently. The key bottleneck is having the People, Ideas & Objects developers in place to develop the software necessary for these people. And that is why we are looking for the resources in the fashion that we are. The more the industry participates in this project the more successful it will be. There are not just billions of dollars on the line for these stakeholders, there are billions on the line for the service providers as well. The gross G&A that is spent in the oil and gas industry. And that would be subject to the administrative and accounting changes that we are talking about here. Would total in the tens of billions of dollars on a North American basis. So the task that these people undertake would be large, but the businesses they would be establishing, and most of them would be new businesses, would be substantial new businesses.

To start this game of musical chairs requires the $2 to 4 billion needed for the software developments. With so many people motivated in the success of this implementation I truly do feel sorry for the bureaucracy. But it’ll be time for them to go.

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. And don't forget to join our network on Twitter @piobiz

Our Stakeholders

We have a number of stakeholders that we concern ourselves with here at People, Ideas & Objects. Our primary concern is the user community and their needs in the software that we develop for them in their interaction with the innovative and profitable oil and gas producers and Joint Operating Committees. Our second concern is to the oil and gas investor and to ensure that they are provided with the profitable means of oil and gas operations. We also depend on the oil and gas investor to direct the producer firms to financially support People, Ideas & Objects. We have been discussing the allocation of the user budgets and I thought we would take a short break to focus on the needs of the second community, the investors, and discuss how we provide them with our guarantee of the most profitable means of oil and gas operations.

Natural gas prices averaged $3.70 for the 2013 calendar year. That’s up a full $0.70 from the 2012 year and everyone’s prayers for a cold winter seem to have been answered. But is it enough? Far from it. The average prices needed for a healthy natural gas industry are estimated to be in the range of $6.70. A full $3.00 short of where it should be. If we take our same assumptions from last year. That it would require producers to shut-in 15% of their production to attain the $6.70 average price. And those shut-in production volumes were obtained by using our Preliminary Specifications decentralized production model. Then the opportunity costs in comparing our model to the bureaucracies current business model for 2013 was an additional $76 billion in incremental natural gas revenues. We add these to the 2012 opportunity costs for a running total of $170 billion in incremental revenue that the industry could of had and note that this might be one of the reasons the bureaucracy are not listed as a stakeholder of People, Ideas & Objects.

What we do know is that the bureaucracy is well aware of the value that they are destroying in not subscribing to the development of the Preliminary Specification. Their activities this past year in hiring Ernst & Young to conduct that study makes it obvious that they are aware of the value that they are destroying and chose to do something about it. What it is they chose to do about it is unknown however. I would suggest that they wanted to sit on it, or set up a committee to see if they could kill it. Such is the ways of these intellectually challenged and lazy behemoths we all know and love.

Nonetheless the word about the decentralized production model is getting out and the investor class will hear much more of it in the 2014 year. It is a logical, constructive and financially sound business model that the industry must move to for its survival. The North American natural gas producer has 200 years of natural gas reserves on hand. If they continue to provide all of those reserves to the marketplace at once the market prices will remain depressed. What is needed is production discipline that is focused around the profitability of the production. That is what the decentralized production model provides. Then and only then can the producer begin to think that the pricing of the commodity can return to some rational basis of heating value in comparison to oil.

What the decentralized production model does is strip the prototypical producer down to the C class executives, earth science and engineering resources, some land and legal, and support staff. The remainder of the resources are moved to service providers who are focused on a process, or part of a process, and use the entire industry as their client base. These service providers, such as production, revenue and royalty accountants will specialize on their tasks and divide their labor in more efficient ways. The production accountant may provide services to a number of gas plants that they are geographically located next too. The revenue accountant may focus on propane as a specialty. And the royalty accountant will focus on eligible capital for gas cost allowance purposes for the Texas Railroad Commission. Each of these service providers will conduct their tasks for the entire producer population and each month will send a bill for their services to the individual Joint Operating Committee.

It is here at this point when the property is not earning any profits that the Joint Operating Committee determines to shut it in until commodity prices return to a higher level. What happens as a result, under the decentralized production model, is that none of the administrative or accounting service providers are tasked with any work on the property for the months that the property is shut-in. As a result there are no billings for any of the administrative or overhead charges. The only charges that will be coming through for the property will be for the costs of capital. All of the operations, administration and overhead charges will have stopped.

The result of this is that the property records a null operation. No profit, however no loss either. The reserves are held for a time for when they can be produced profitably and the commodity is removed from the marketplace helping to place a floor under the price of the commodity. All that is needed is for all producers to adhere to this production discipline and the commodity prices will reach their appropriate equilibrium. That however requires that the decentralized production model be effective in the marketplace. Well it doesn’t require it, but the producers don’t seem to be able to do so without it.

The reason they don't shut-in production is that they are carrying too much overhead. Their overhead are fixed and there is nothing they can do about it. If they cut production their overheads look out of place and are forced to lay off staff in the long run. Hurting the firm in terms of its administrative and accounting capabilities. What the decentralized production model does is move the producer away from its reliance on its administrative and accounting capabilities and onto a reliance on the industries administrative and accounting capabilities.

In our scenario the service providers could be faced with at any time a decline of 15% of their service fees. And they can budget for that eventuality as a normal course of their business. The decentralized production model provides the producer and Joint Operating Committee variable administrative and overhead costs and the service provider the ability to actually control the G&A costs of the industry. A fundamentally different perspective on the way in which to operate the business in the environment where shale gas reserves exist.

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. And don’t forget to join our network on Twitter @piobiz