Greater Science and Innovation With the Work Order

I am thinking that our focus has been on the user community development and the decentralized production model. And these are two worthy topics to be discussing at this time. However, there are many more attributes of the Preliminary Specification that we have not discussed for some time. I thought that from now on I would bring up a feature in the Preliminary Specification to remind people that there are many more attributes of the system. I'll do this from time to time and for no other reason than to broaden the conversation. Today I want to discuss the Work Order system.

The Work Order system seeks to resolve how the industry, and each producer can be more innovative. Collaboration on the sciences is a key to the establishment of new innovations as we learned from Professor Giovanni Dosi. The point is that new science leads to new innovations which leads to new science and so on. So how do we initiate more science and innovations in the industry and the producer firm. Collaboration and knowledge are two commodities that are low cost and effect a trajectory change in a dynamic and innovative industry. These are the things that we learned in our research of Professor Giovanni Dosi.

It used to be, and is not the case as much today. And needs to be the case tomorrow, on a wholesale basis, that working groups between producers were established to study, research, collaborate and experiment in the earth science and engineering disciplines. These study groups are founded by like minded producers who are interested in determining knowledge of a certain type and are willing to pay to learn of it. The costs of these working groups are small, usually in the tens of thousands or small hundreds of thousands of dollars. And shared across the groups of producers who are participating. Participation provides access to the knowledge when it is completed. As was indicated, for the oil and gas industry to become an innovative industry these working groups will have to become several orders of magnitude in terms of volume of what they are today. Participation between like minded producers is what makes them valuable. Both in lowering the costs, and increasing the diversity and quality of the population of participants.

One of the difficulties, and what People, Ideas & Objects asserts is the primary reason that these working groups current lack of use is. The bureaucratic difficulty in accounting and recording of costs for these working groups. Participation is not always straight forward as all participants are not always equal. Some can earn their way through contribution of some Intellectual Property, others through staff and resources and others through straight cash contributions. These working or study groups can take many months in which to complete so the accounting for them is conducted over a long period of time. Usually the direct participants are hounded by accounting more than they are participating in the working group. This constant barrage of questioning and administrative detail doesn't stop. And eventually affects the motivation of the participant in wanting to participate again in any other working groups. They may cherry pick a group here and there, but the needs of an innovative industry and producer requires that the number be an order of magnitude higher. We can all assume how that would be in terms of the accounting and administrative difficulties.

There has to be a better way. And that is what the People, Ideas & Objects Work Order provides. An interface that enables the participants to capture the structure of the deal within the interface as it is being agreed to. Then, with all the detail programmed into the Work Order the administrative details will operate within the People, Ideas & Objects Work Order as they should, without the bureaucratic nightmare they have in the past. As long as the detail of the deal has been captured properly, there should be no difference between planning and execution of the working groups administration. Accounting will be satisfied with the methods that are consistent with the plan and the earth science and engineering resources of the firm will be able to participate at the level necessary to move the industry and the producer forward.

Review of the Work Order in the Background section of the Preliminary Specification is here. And its part of the Partnership Accounting module if you would like to review that entire module.

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 anyone can contact me at 403-200-2302 or email here.

Plans, Hopes and Prayers

What we have seen in the past few weeks is the absolute failure of the bureaucracies strategy of “hoping and praying for a cold winter.” We all know this has been their key point to building value in the industry for the past two years. And when we had the cold winter it certainly seemed like the need for the Preliminary Specification tanked with the temperature. Why would you need the Preliminary Specification when the natural gas prices had returned to the point where producers could earn a profit? Well you wouldn't necessarily, other than for the many other reasons it provides. But in terms of the decentralized production model the value of that model would be diminished in an environment where higher natural gas prices existed.

In January and February of 2014, all was well as the temperature of the continent was icy cold and forecast to continue. What the bureaucracy didn’t understand is that the prices are also determined by supply and a large part of the supply is from shale gas. And there is no end to the shale gas reserves. Certainly one winter is not going to affect the supply of shale gas reserves in the North American marketplace.

Now prices have reached a point where they were for the last five years on average. That’s surprising! So what has really happened here is that the bureaucracies strategy of hoping and praying for a cold winter is nothing but a pile of you know what. It is, and always was, bubble gum for the masses. They never really had a plan for how they are going to run the industry. They're just hoping and praying for things to get better. They haven't a clue.

I suspect that the natural gas marketplace is going to figure this out pretty soon. And when it does the floor on pricing is going to drop out from under our good friends the bureaucrats and leave them with a price that is truly jaw dropping. That’s what markets do to the unprepared. They punish them. Continued overproduction is a systemic problem that is in the bureaucrats DNA. They can not do anything about it. If they could, would they be hoping and praying for a cold winter?

Expect to see some grand strategy being formulated by the powers that be that will address the business model coming out of central command. Some industry wide initiative that is systems oriented to deal with the problem. And yes it will violate our copyright in some form. But its the only chance they have to baffle the brains of anyone who might still happen to be listening to them.

The fact of the matter is that natural gas prices are destined to stay well below their marginal costs until the industry puts in place a business model that can address the needs of shale gas. The Preliminary Specification with the decentralized production model does that. The other attribute of the model is that it eliminates the bureaucracy in the oil and gas industry. Which at this point is not just a good thing, its a great thing. This past season has shown they don't have a plan for how they'll manage the industry. Its now they don't even have a hope and a prayer.

Winston Churchill once said that you can always count on the Americans to do the right thing. That is after they had exhausted all the other possibilities. Now that they have no plans, hopes or prayers. Maybe they will do the right thing and build 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. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Putting the Cart Before the Horse

Its a difficult question to answer, why do we need to develop the user community before the industry will fund these developments? If there is so much value generated by the Preliminary Specification, why doesn't the industry just fund it? I understand the point of these questions and the logic is obvious. It seems that I am putting the cart before the horse in trying to have the user community developed before the industry funds the developments. I have to say its a bit of a Mexican standoff right now in that everyone sees the value, and everyone is expecting someone else to act. However with the scope of the undertaking, who decides?

And there’s the bureaucracy. If you read the Preliminary Specification the bureaucracy has been effectively dispatched to the trash heap of history. It wasn't a deliberate thing it just happened as a result of using the Joint Operating Committee and the effects of the Internet. They're just gone. No need for them. Yet they still effectively control the industry and are not stepping aside for anyone no matter what. And they don't care that they're losing money with their current business model. What is anybody going to do about it, they will state. And they have a point, there is nothing that anyone can do to challenge the bureaucracy, their control and their position in the oil and gas industry is secure.

We therefore have to organize ourselves to put ourselves in the position to offer the investors in the industry with a choice as to how they want to operate the oil and gas industry. The bureaucracy and its business model, or this user community and the Preliminary Specification. And then, when we can show that we have a solution that is committed to providing the oil and gas producer with the most profitable means of oil and gas operations, the bureaucracy will be swept aside and we will proceed with our solution. I don't see an alternative. This is the ultimatum that the bureaucracy has put forward to the investors in the industry. They have had plenty of opportunity to do the right thing and have chosen not to do it.

Even with so much value at stake they choose to do nothing. Natural gas prices were looking promising a month ago, and now it is evident that waiting for a cold winter as a strategy is a failure too. That won't matter. They'll continue on without doing anything. They may pick up some nonsense strategy to make themselves look good, and make it look like they're doing something but the real strategy will be to push a “bullshit baffles brains” strategy.

I know its a fair bit of work in order to organize ourselves for the ability to provide industry with an alternative means of organization. But this will have to be how it is done. In the traditional business world it doesn't maybe make a lot of sense. However, we are not dealing with a rational group when we are talking about the self interested bureaucracy.

The alternative is that we wait. And for what I don't know. The bureaucracy would like that. I have been fighting them on this for ten years now and they will not proceed with these developments on their own initiative. They will have to be physically removed. And that is in a nutshell what we are doing here by developing the user community now. Building an alternative means of organization for the oil and gas industry. We have the technological infrastructure in Oracle Fusion Applications. We have the overall vision in the Preliminary Specification. Now we need the third critical component, the user community to make this a viable alternative to the bureaucracy.

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 anyone can contact me at 403-200-2302 or email here.

A Plan to Deal With a Possible Scenario

We have to guard against a scenario that might play out like this. And then, just as everything starts to pull together and the user community is developing the software that they want and need. The producers decide that the business model inherent in the Preliminary Specification is, on second thought, not something that they really want at this time. How many times have we been at that point in a major project only to have the funding pulled and all the work and effort of the people turns out to be for a lost cause. These disappointments happen frequently in business. Things happen and priorities do change and there is risk involved in every project.

I would hope that no one would be subject to any career risk in participation in the user community. That however is the naive part of me that doesn’t recognize the politics of major change initiatives. The reality is that the work that we will be doing here in the user community will be unique and of interest to those that can handle the risks that they take to their careers. We are changing the industry significantly, and for the better. One look at the user community vision and you can see that the power and authority that the community has will make the work exciting and rewarding. Risk is a part of that.

What I can do is assure you that once we commence the developments of the project we will complete them. And that is because we provide the oil and gas producers with the most profitable means of oil and gas operations. They can not attain that profitability without the user community, People, Ideas & Objects, the service providers and cloud computing infrastructure, “the sub-industry” becoming operational. Therefore it is in their best interests to continue to push forward until the completion of the project.

If there were small increments of value being attained by the business model then we would be subject to greater risks than we are. With shale gas, and the prolific nature of the resource, a new business model must be brought into the industry. And that is what this sub-industry is doing. It’s a big problem, the unprofitable nature of the natural gas business. It can’t be sustained. We as a community have a solution to the specific problem of shale gas profitability. But also to a variety of other operational, administrative and accounting related problems that have been present in the industry for years. The Preliminary Specification addresses many of the current issues and is a framework for resolving future problems.

We will have our setbacks and there will be times when progress is interrupted unnecessarily. Those situations happen. We are however making wholesale structural changes to the way that the industry is configured. This level of change will invite a few hiccups. What we need to do is look beyond the bureaucrats to see the movers and shakers in the oil and gas industry. It is these people that I am certain that we will resonate with. And as far as their concerned we will be moving far too slowly for their liking. They'll be wanting to operate that stripped down version of an oil and gas producer that is focused exclusively on their earth science and engineering capabilities, and land and asset bases as their competitive advantages. The administrative and accounting work being done for them out “there.”

The other aspect that members of the user community can be assured of is that there will be revenues for the user community and service providers. People, Ideas & Objects have $667 million in user community funds budgeted in the initial developments. And the service providers will have the current producers G&A expenses diverted to them as revenues. Currently in North America the producers spend $40 to 60 billion on G&A. Therefore a large portion of these funds would become the revenue streams of the service providers. With risk there is also reward.

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 anyone can contact me at 403-200-2302 or email here.

A Sub-Industry

Our commitment to user community developments in our software is comprehensive. With the scope and scale of the Preliminary Specification it is necessary to have the user community define and design what it is they need and want in their oil and gas ERP systems. Not only do we provide the oil and gas producer with the most profitable means of oil and gas operations. We provide the user community with the software that they want and need. The only way to achieve that is to provide them with a sound vision of what a system could be. A vision such as what the Preliminary Specification provides, and let the users take it from there.

What People, Ideas & Objects provides the oil and gas industry and the user community with is the software development capabilities they need to achieve the objectives we have set out for them. Currently software development is an ad-hoc and cottage industry approach where either small software firms or employees of producers themselves stitch together applications of limited scope and scale. It is assumed that the employees of the producer firm will figure out the nuance of either integrating the applications with other applications, or shuttle data between the two applications in order to have the applications work together in the producer firm. This is how the bureaucracy likes to keep busy. Taking upwards of a dozen applications and making them all work as one.

Now many have criticized People, Ideas & Objects for having a scope and scale that is too large and will be impossible to manage. Of course many of these critics are the bureaucrats who are somehow stitching together the same scope and scale of application functionality out of dozens of applications with very limited budgets. Also under a cloud computing delivery infrastructure, which is what People, Ideas & Objects will be using, the centralization of all of the operations in one virtual location reduces the logistical difficulties of these tasks.

There is also the point that needs to be considered regarding the service providers and the software that they will be using. Much of the administration and accounting work of the producer firm will be done by these service providers on software provided by People, Ideas & Objects. These service providers will be derived from the user community and will work closely with them at all times. In fact service providers and the user community participants will for all intents and purposes be the same people. The software they use to process the oil and gas producers information will be purpose built by the user community to meet the needs of the service provider and the producer.

The point that I want to make here is that the user community, the service providers, People, Ideas & Objects developers, and our cloud computing platform all make up a sub-industry that is new and dedicated to the profitability of the oil and gas producer. This sub-industry is being created between the oil and gas industry and the traditional technology providers as a “gap filling” measure. What we know about specialization and the division of labor is that when a “gap” forms where someone can fill it with a new job, that is how specialization expands. This sub-industry is being created to fill the gap that exists between the oil and gas industry and the traditional technology providers. On the one hand we have the oil and gas producers as our clients and on the other hand we have Oracle as our supplier. We as a sub-industry have a fundamental understanding of oil and gas. We are trained in the disciplines of business. And we have a strong aptitude towards technology.

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 anyone can contact me at 403-200-2302 or email here. 

Business Model Transitions

What we can all agree on is that sixty years of shale gas reserves is an opportunity that the North American society can build significantly upon. Its too bad that the bureaucracy has its interests in front of all those in the oil and gas industry. But lets be honest they do need their paychecks, their pensions, their bonuses and stock options. Without those perks they just wouldn't show up. And that’s the threat that they keep over the investors in the business. Without the bureaucrats, you have no alternatives.

And that is why we are building the user community here at People, Ideas & Objects. To offer the investor community with an alternative means of organization to the oil and gas industry. The problem is we have no funding, and we have no support because the bureaucracy sees us as a threat to their franchise. That’s because we are a threat. There is no bureaucracy in the Preliminary Specification, it has been eliminated. So we are reduced to building the user community brick by brick, and stick by stick, the long and hard way. We are planning on doing this for the next five years. The time it will take to incur those additional $325 billion in opportunity costs to 2019. And then we will be able to begin the software developments. Surely by then some sanity will have overcome the industry and the loss of $705 billion by 2019 will have frustrated someone to act. Or we might have to wait until it hits a trillion dollars or more.

Either way we'll be ready with the user community that is focused on providing the oil and gas producer with the most profitable means of oil and gas operations. A fundamentally different business model. One that is a business. Not one that is a charity, which is a charitable way to describe how the oil and gas industry is operated today. We understand how the business grew to become what it is today. And we know why the business operates the way it does. That doesn't mean that the business has to stay that way. New business models are brought into industries all the time. If the old business model fails to build value, then replace it with one that does. It is a simple process of change and renewal that should be supported by all that are in the business.

The one cautionary note we raise in the Preamble to the Preliminary Specification is that we do stand on the shoulders of giants and we need to fully appreciate and understand this. Making changes at this point without fully understanding the consequences of our actions could be highly detrimental to the industry. It requires planning and in this day and age the software necessary to support any changes. Nothing will last unless the software exists to support the changes that we want. And that is the role that People, Ideas & Objects is taking in this business model transition. We have laid out the vision of what the industry would look like. People can see how that will work and how they will interact with it. And now we have to build the infrastructure, the software, that will enable those interactions to occur.

As important as the software is today, the software must be user community defined and supported. Having a group of developers in a room by themselves is useless. Its like having an engine mounted on a table. Without the users defining and designing the needs and wants of the systems, the developers will not know what is needed. And that is why we are so focused on the user communities development. And if it takes us the long hard slogging of the next five years, that is what it will take. If industry decides to join us now then we can do it much quicker. But that seems to be such a big “if.”

What we can do today is promise the industry that we will provide them with the most profitable means of oil and gas operations. We can prove it in the Preliminary Specification, and if we can prove it there we can prove it when the user community is developed and the software is operational.

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 anyone can contact me at 403-200-2302 or email here.

#Shale Gas Dynamics

If we look at the nature of shale gas we understand why there is a need for a new business model in the oil and gas industry. One that moves the industry away from its role as a price taker to that of a price maker. Here is the U.S. Energy Information Administration's Natural Gas Weekly Update. There you can find a variety of information regarding the situation in natural gas. Of note are the natural gas inventories, and this winters drawdown was substantially greater than the five year average. In any market that would be a sign of significant changes in the marketplace. And a positive signal that suppliers should look forward to stronger pricing power. However in natural gas, it is necessary to look at the next graph which shows the shale gas production.

Since 2009 when shale gas production appears to be in the neighbourhood of 8 billion cubic feet (BCF) per day. It has grown to 32.5 BCF / day today. An increase of almost 25 BCF / day in a 5 year period. Total production for the U.S. is around 72 BCF per day. So that shale gas in a period of 5 years has grown to almost 45% of natural gas production. Remarkable. And that has been during a time period where the average price was $3.77. I would hate to think what producers could do if they were motivated.

At $3.77 no one made any money on this natural gas. We don't need a graph to tell us that. With the prolific nature of the resource, both in terms of the size of the reserves discovered and the deliverability, these natural gas reserves are exposed to the natural gas marketplace immediately. Causing the natural gas price to collapse, and as we noted recently, the pricing structure fundamentally changed from a 10:1 factor to a 23:1 factor in comparison to oil.

Producers are their own worst enemies. They drill wells and throw the production on the market with little thought to the consequences of their actions. Its not the bureaucrats fault that the price declines, “we are only a small part of the marketplace” they will state. And there it will stay producing irrespective of the financial losses that it incurs. Because it has too. They have all these people employed at the company and they need the cash to pay them. Otherwise they would be out of business.

They say that shale will be around for 60 years. This certainly looks like an interesting business to invest in. With the breakdown in the pricing model to 23:1, its obvious the marketplace believes the producers will never be able to regain control of the pricing situation to the point where they can reassert the old markets 10:1 dynamics. And the bureaucrats are providing evidence of that each and every day. Therefore shale will lose money every one of those sixty years.

What is needed is a business model that enables the producers to allocate production based on the profitability of the property. If the property can produce a profit at the current price it produces. And if it can't produce a profit then it doesn't produce, but should not create a financial loss on operations, saves those reserves for a day when they can be produced profitably and removes the excess production from the natural gas marketplace. And also reduces the overhead and administration costs incurred by that producer in line with the declines in revenue. People, Ideas & Objects does this with the decentralized production model. A business model based on the Joint Operating Committee that provides the oil and gas producer with the most profitable means of oil and gas operations.

By reducing the footprint size of an oil and gas producer to the C class executives, the earth science and engineering resources, land and legal, with some support staff. The producer is focused on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. The remainder of the resources of the producer are allocated to service providers who are focused on a process or subprocess and use the entire industry as their client base. Then these service providers are able to use their competitive advantages of specialization and the division of labor and provide their clients, the producers, with the services they need to be the most profitable oil and gas operations.

The charges for the service providers services will be charged directly to the Joint Operating Committee where the services are provided. Then if the property is shut-in due to the commodity price being too low to produce a profit, the events, activities or production does not trigger the service provider to conduct any of their services on the property for that month, and as a result no charges for any of the services will be charged to the Joint Operating Committee. Creating a null operation, no profit and no loss on the property. The reserves are held for a time when they can produce a profit, and the commodity marketplace has the higher cost production removed from the marketplace, placing a floor on the commodities price.

We have lost $380 billion in opportunity costs since 2009 as a result of not using the decentralized production model. The time when shale gas production began in significant volumes. We are potentially losing another $325 billion in the period up to 2019 by not using it now. The only people that are happy in the industry are the bureaucrats. And they are the ones that are holding People, Ideas & Objects software developments up. I say that an industry that can operate $705 billion more efficiently is something worth pursuing. But then I am biased.

I am biased because the industry can’t make this transition without having the software in place before any of the other changes are undertaken. We have to plan this next step with care and diligence and that is the role of the user community and the People, Ideas & Objects software development capabilities.

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 anyone can contact me at 403-200-2302 or email here. 

And We Could Have More Cold Winters

One third of a trillion dollars is a lot of money to waste. I’m sure everyone in their right mind would take steps to mitigate the loss of these kinds of resources. And with the People, Ideas & Objects decentralized production model the oil and gas industry has that capability within its grasp. Not so fast says the bureaucracy. They will still have nothing to do with People, Ideas & Objects, and never will. It is completely against their better interests to have anything to do with us. And that goes for the user community as well. And that is why we will build this user community brick by brick, and stick by stick. Without the resources of the industry, we are forced to do it the long, hard way.

Just out of curiosity, I wonder when we do sit down to commence the developments in 2019 what the opportunity costs for the 2014 to 2018 time frame will have been. There may have been five, count them, five cold winters in that time. Raising the average price of natural gas as high as $4.00. The point I guess is that their will at that time, from the bureaucracies point of view, ten years less of shale gas reserves left. Out of the approximately sixty from the very beginning of the shale revolution. And that will have an impact on pricing, they will assert. Lets be conservative and say that the opportunity costs that are incurred, while we quietly build the user community, incurs another $325 billion more in wasted resources.

I can see the investors lining up to volunteer their capital now. Nothing like a losing cause to instill the community spirit. But what can you do. The bureaucracy has to have it their way and until we can generate the user community on a scale large enough to approach our development needs, there is nothing that we can do. That involves picking off like minded employees of the producer firms who will work for the “other” side (us) in a covert fashion. One at a time over the next five years. Then when we have the mass necessary, offer ourselves as a viable alternative to the losing ways of the bureaucracy.

I think its a good plan. Its the only one we have. Its the plan that we have based on the financial resources that have been provided to us by the oil and gas industry. Which is $0.00. Which I can add to the total revenues of People, Ideas & Objects since my breakthrough in using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer, of $0.00 for a total of $0.00. As I've said before the industry should be embarrassed that its problems are being solved by people who are not accepted by the mainstream “thinkers” in the business. Those that are outcast by the ones that are “running” the industry now.

Billions, trillions, at this point what difference does it make. Technology has had no effect on any industries business models. So why would it now have an effect on oil and gas. If we listen quietly to the hum of the bureaucracy going about their business then we can all just do as we are told and not think of any other opportunities or possibilities. Its time to get in line and accept that theirs is the better way. Now my addition could be incorrect on such large numbers but if we add the opportunity costs that have been lost, to the opportunity costs that could be captured, we come to a total of $705 billion. So maybe we should keep on going for one more day. And this user community could make a difference.

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 anyone can contact me at 403-200-2302 or email here. 

It Was a Cold Winter Wasn't It

Natural gas prices have been strong for the winter months of 2013 and 2014. Its been cold and the gas inventories have been drawn down significantly during the January and February time frame. And prices have responded. At the low end of $6 they eliminated much of the value of the decentralized production model would provide. If you recall we have used the industry supplied price of $6.70 as the factor where profitability begins, and therefore how we have calculated our opportunity costs. The last few days has seen the price fall precipitously back into the mid $4 range as the weather forecast is for the spring season.

I have stated repeatedly that the industry operates on the basis of the two human emotions of fear and greed. Fear of the bank manager calling the loan when gas prices are low. And greed when the gas prices show some strength as they had been. We will see which emotion is the operational mode when the fall in natural gas prices begins and the market has sorted out the cold winter of 2013 and 2014.

If we look at the past five years of pricing information we see a fundamental change in the pricing structure of natural gas. Gas has traditionally been priced in the range of approximately 10:1 to oil. This recognizing the differences on a heating value basis. As a result of shale, this range has ballooned to over 23:1 on average over the past five years. A fundamental breakdown in the manner of natural gas pricing. It is this breakdown in the pricing that will not be resolved in the term of one cold winter. It is this breakdown in natural gas pricing that requires producers to adopt a new business model to bring pricing back in line with the traditional heating value basis of the commodity.

The average price of natural gas for the past five years has been $3.77 / MBTU in the North American marketplace. If we were fair and reasonable about our claim as to the amount of opportunity costs that the Preliminary Specification provided to the oil and gas industry we should make that claim based on the past five years. Then we can factor in the positive effects of the cold winters and remove any negative bias in the number. We will continue to use the industry cost factor of $6.70 / MBTU as the threshold to profits. And in doing so we find that, on average, the total opportunity costs for the past five years would total $380 billion U.S. And I believe that is a fairer representation of the value of the Preliminary Specification and the decentralized production model.

If we are going to be as ridiculous as to think that one cold winter is going to solve the natural gas pricing problems. I am going to promote the decentralized production model as providing that value. Producers need to think what it is that they are doing. They are wasting good resources and capital while they dither. They have forgone ⅓ of a trillion dollars without even thinking whether it is a concern or not. This is why the bureaucracy has to be removed from the scene and sent down the river. Their way is too destructive to continue.

The Preliminary Specification and the decentralized production model provide the oil and gas producer with the most profitable means of oil and gas operations. It does this through an innovative business model that uses the Joint Operating Committee as the key organizational construct. What we do is we strip down the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and some support staff. The remainder of the producers resources are reorganized into service providers that are focused on a process or subprocess and use specialization and the division of labor to provide their clients, the industry, with the administration and accounting capabilities.

When a producer determines that a property is not profitable, they will shut that property in until it can be produced profitably through some innovation or higher commodity prices. As a result none of the service providers in the industry will be charging the Joint Operating Committee for any of the administrative or accounting services for that property, as there was no activity generating any work for the service provider and hence no billing for services. As a result the property records a null operation, no profit but also no loss, the reserves are held for a time when they can be produced profitably and the commodity is held from the marketplace keeping a floor on the commodity prices.

This is a far more effective plan than going to Church on Sunday’s and praying for another cold winter. $380 billion is a reasonable amount to assign to the decentralized production model as that is how long the pricing structure has collapsed as a result of the shale gas effects. The only solution to the shale gas effects, in the long run, is a new business model that deals with overproduction. That is what People, Ideas & Objects decentralized production model does. It provides the industry with a means to allocate production based on profitability. And is the only reasonable method to use. Some might think the Preliminary Specifications key drawback is that it also eliminates the bureaucracy. And it does. However, I feel that is a feature.

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 anyone can contact me at 403-200-2302 or email here. 

The #User #Community #Vision Part VI

I was in a record store the other day. No scratch that. There are no records and there certainly are no stores. Technology has disintermediated that business. Apple did it with iTunes their iPods and iPhones. Steve Jobs disintermediated a few industries. What People, Ideas & Objects, the user community and the service providers is doing is disintermediating the oil and gas business. Ending the life of the archaic business model that no longer supports any of its users needs and ceases to build value for its stakeholders. Disintermediation is necessary, no industry will be immune, and timely. We are scheduled to commence software developments in 2019 which gives us five years of user community development. Enough time to be able to provide an alternative means of organization to the oil and gas industry. And we will finish developments for our first commercial release in 2021 and be operational on the software in 2022. That is our plan and we have much to do.

Just today deep down in the Oracle organization a developer, using D-Trace solved a bug that had been present in the code of the Solaris operating system for over 20 years. This was done with no fanfare, no recognition other than a few high fives with team mates. The technological infrastructure that we are using as the base for People, Ideas & Objects has matured, I would say about five years ago. Matured to the point where something like what we expect of the technology can be done. To do it five years ago would have required superhuman strength. Today it could be done much easier, however it would still require a hope and a few prayers. In five years time kids will be assembling this kind of technology out of gifts that they get from Santa Claus.

A bit of an exaggeration but you get my point. There are no large technical issues that need to be solved. Everything that we need to do can be done with today’s technological infrastructure. There is no technical risk in our business. If you look at the last two keynote addresses by Larry Ellison at his Oracle conferences they reflect his absolute brilliance. Although there are no large issues to resolve it hasn't stopped him from moving the technology forwards in significant ways that will make our job faster, better, smarter and higher in quality. Five more years of this and we will be able to do anything that we as a community can think of.

I mention this as this technological infrastructure is what is enabling the disintermediation of the industry. It will be a new oil and gas industry. One that is limited by the user communities imagination. One based on the Preliminary Specification and built from there. This is the opportunity that we have in front of us in the next five years. The user community has the power as was documented in this vision. No one is going to grant you approval to proceed. We will act in our own best interests and provide the oil and gas producer with the most profitable means of oil and gas operations. Those are our limits.

Now for the relational database geek in all of us I provide you with the videos of the last two keynote presentations of Larry Ellison. These are very technical. And if you don't understand what it is that he is talking about I suggest you take some time to learn what it is that he is discussing. Understanding relational databases will provide any participant in the user community with a better knowledge of how the system is put together. It should almost be mandatory understanding. And the best place to get that understanding is from C. J. Date, An Introduction to Database Systems

Here are Larry Ellison’s last two keynote addresses.


And the url to the keynote on Oracle's site.

http://medianetwork.oracle.com/video/player/2685494045001

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 anyone can contact me at 403-200-2302 or email here.