Motivating the User Community

It is the user community that will have a significant role in the oil and gas industry. Not only will it be a key element in providing the oil and gas producer with the most profitable means of oil and gas operations. They will be the manner in which the industry operates and moves forward. With its control of the business model, its ability to affect the changes necessary in the software that supports and defines the administrative and accounting processes in the industry, and a budget that supports their operation. They will have the wherewithal to exercise the power needed to remove and replace the bureaucracy when the time comes. Adding to this user community vision is our recent discussion of the service providers and how they are derivative of the user community. And you begin to see the role and responsibility that the user community takes on in the oil and gas industry.

I am looking for those 28 individuals who will be interested in making the investment of their time and effort in the user community to prepare an alternative means of organization to the oil and gas industry. These people will make up the leadership team for both the user community as an organization, and the positions as Product Owners for the modules of the Preliminary Specification. Having the organizational and product leadership team working to build the organization necessary to provide an alternative means of organization to the oil and gas industry is the task that we need to conduct and to invest in. We don’t know how this transition will be done at this time. We'll figure it out as we go.

What is clear is the bureaucracy will not work with us. They have had every opportunity to do so and the only actions that they have taken is to attempt to steal our Intellectual Property. They are not managing the industry for the best interests of the investors, they are managing it in the best interests of themselves. And they could care less whether the industry earns or loses money. Natural gas prices have been depressed for years and there is no plan, no argument, and no discussion in which to deal with the problem. For them there is no problem. The only issue they see is us, in offering an alternative to their franchise.

Does anyone see the bureaucracy operational in the year 2020? How about 2025 or further down the road? Is it a viable, long lasting organizational method that meets our needs today or in the future? How is it that we can change to a new model of administration? Do we ask politely and smile? Is that the solution? I think they have to be physically removed. I think we have to give the investors in the industry a choice as to which form of administration they want to have administer their assets. The bureaucracy, or People, Ideas & Objects with the Preliminary Specification as its product vision, the Oracle Fusion Middleware and Applications as our technological base and this user community c/w the service providers. I think we can win this decision if we are able to structure ourselves in a way that shows we are a viable option to the investors. And again, how we structure that viable option to the investors is unknown and unknowable at this time.

With the opportunity costs at $705 billion for the investors to help them to select us. With the user community having a budget of $333 to $667 million for the software development work. And the 75 - 80% of the industries $40 - 60 billion in annual G&A costs. There is more than enough motivation for everyone concerned to make this transition happen. And besides, I think it would be rather interesting and challenging work that would be very rewarding. Making the oil and gas industry the most profitable that it could 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 anyone can contact me at 403-200-2302 or email here. 

A Different Tactical Approach

We see in the natural gas storage volumes a rebound forming from last winters significant drawdown. Due to much prayed for cold winter. Natural gas storage volumes were drawn down substantially and were the primary reason for the increases in the natural gas prices. Prices remain higher than they were last year as the storage volumes remain below their five year average. However their trajectory appear to be putting the North American storage volumes on target to breach above their five year averages sometime this summer or fall. A complete reversal of the situation. This is as a result of the enhanced prices that are still being realized, the production that has come on stream as a result of the higher prices and the prolific nature of the shale gas reserves.

I would propose an alternative tactical approach be taken by the oil and gas producers. If the Preliminary Specification and decentralized production model were the business models that were operational in the industry. This drawdown in the natural gas storage facilities would be the opportune time in which the producers could establish control of the natural gas prices and become the price makers that the decentralized production model enables them to be. By removing the unprofitable production from the marketplace at this time the buildup in the natural gas storage would lead to higher prices at a much more rapid pace. Now would be the time to implement the decentralized production model and establish the price maker strategy that the producers would have under the business models available with the Preliminary Specification.

What we have learned however is that bureaucracies don't change. They certainly won’t come within a million miles of People, Ideas & Objects or its Preliminary Specification. We have also documented the accounting and logistical difficulties that the bureaucracy would have in trying to conduct a reduction in G&A costs. And that volunteering for any work is counter to the best interests of the atypical bureaucrat. So instead they will continue to produce at capacity until the natural gas prices collapses some time in August or September and in the mean time practice that deer in the headlights look in the mirror.

Being profitable is for fools anyways. The oil and gas industry has cash flow. The practice is you report the cash coming in and don't say anything about the commitments or the flows going out. And it seems that everyone buys it. The only thing you have to do is be able to stand up during annual report season and have a “plan” that sounds reasonable for the next year. And you're good. Party on till next year. This is how its done in the oil and gas industry. So instead of thinking about a different way to deal with the natural gas storage volumes, forget about it. Thinking hurts don't you know. Just go with the flow and don’t say anything that upsets the show.

And another year of shale gas reserves are wasted in a long procession of wasted shale gas reserves. It is the investors money, and there are a lot of them remember. So we should not worry about it. The inertia that is behind this continuous waste of resources is quite surprising. With $705 billion in opportunity costs for the decade of not using the decentralized production model. You would think that there would be adequate motivation for the bureaucracy to do something about it. But after almost four years of expressing the value of this model, the only interest generated by the bureaucracy is to take the Intellectual Property. And we know that the taking of the IP was not to develop the idea it was only so that it could be proven to be unworkable.

One day we will have put together our user community and presented it to the investors as a viable solution to the issues that we are discussing here today. And the investors can choose which form of administration they want, the bureaucracy or People, Ideas & Objects with its Preliminary Specification, the user community and the service providers that offer a better way to administer the oil and gas industry. And we can be done with these foolish ways of losing money.

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.

Our Service Providers Role

An important element of the user community are the service providers who are derivative of the membership of the user community. The service providers are critical in the new oil and gas industries ability to be the most profitable means of oil and gas operations. They will be the ones that take over the administrative and accounting work of the producers and conduct it on behalf of the individual Joint Operating Committees. They will use the People, Ideas & Objects software to manage the processes that each of the service providers administer. And apply their skills across the industry as their client base. It is in this way that if a producer shuts-in production at a property, the associated administrative and accounting costs decline in line with revenues.

Members of the user community will have the opportunity to establish the service provider firms when the opportunities present themselves. It is they who are in the best position to structure the service providers to the needs of the producer firms. It is therefore appropriate that the business opportunity be given to them on an exclusive and priority basis. User community members will be intimately familiar with the needs of the producers from the work they perform during development of the software with People, Ideas & Objects. In application of the Preliminary Specification to the prototypical producer it will be the user community participants that are the ones who are making the decisions and providing the creative problem solving solutions. It is also the user community participants who are familiar with the software development process with the People, Ideas & Objects developers and can continue to apply those skills on an ongoing basis. It would therefore be wasteful to have these skills atrophy by not recognizing that the user community participants are of great value to People, Ideas & Objects and the producer firms. But are also the ideal candidate to fill the role of service provider in the ongoing management of the industry.

Under the decentralized production model we have the administrative and accounting resources of the industry moved away from the producer firm to the service providers. Changing from a reliance on the producers administrative and accounting capabilities to a reliance on the industries administrative and accounting capabilities. It is therefore the G&A costs of the producers that will be shifted from the producer firms to the service providers as their revenue streams. Currently on a North American continental basis the producers are spending $40 - 60 billion in annual G&A costs. A large percentage of these costs, I would suggest upwards of 75 -80%, would be reallocated to the service providers as their revenues. Quantifying the value of this business opportunity for the membership of the user community.

This is a fundamental shift in how the oil and gas industry is operated. The scope of the opportunity for the members of the user community reflect that shift. The need to conduct this shift is critical. These changes provide the producer firm with the capabilities to move from a price taker to a price maker. Particularly in the North American natural gas marketplace. A situation that is quantified here at $705 billion for the decade between 2009 and 2019. The other aspect of the changes is just as compelling. Currently the oil and gas producer is required to attain the capabilities in house to conduct the administrative and accounting skills for all of the requirements and regulations that exist in the oil and gas industry. These requirements are onerous and provide little opportunity for the producer to deal with the actual costs of these overhead items. Each producer is a silo of overhead capability without the ability to share their capabilities with other producers, even though they can't fully use their overhead capacity. Clearly the overhead burden of the oil and gas producer is one of the core reasons that they are not as profitable as they should be. By moving to a reliance on an industry based capability the oil and gas producer will be able to leverage the volumes of their activities in the service provider and realize the benefits of specialization and the division of labor.

By having the industries administrative and accounting capabilities organized in this fashion there will be a direct benefit in terms of becoming a price maker, and a long term benefit in having the capability to increase the efficiencies in their processes through specialization and the division of labor.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

My New Job

That’s right after all that talk about the history of what I have been doing the past 22 years and the next thing I do is go and accept another job! Yes but its a very good job and one that I think I can do very well. Its the new Chairman of the user community. I don't know if that is a board of governors or directors yet, as no one “owns” the user community as an organization so there are no shareholders. Maybe the shares of the user community are just held in trust with People, Ideas & Objects and the board of directors operates in the best interests of the user community. We'll figure it out.

A few days ago we discussed some of the leadership roles in the user community and for the product, the Preliminary Specification. My taking the Chairman’s position is an extension of that definition of the leadership roles and the beginning of establishing the leadership in the organization. I am making my appointment to the Chairman’s position a condition of the license that authorizes the user community to access my Intellectual Property. Other conditions include the right of the Chairman to hold two votes and that there be only six directors in total, including the Chairman. The Chairman also appoints two other directors.

As we proceed with the development of the user community the other leadership roles will be filled in. If you see yourself in one of the many roles that has been discussed here please contact me. We have much work to do in the user community. Building an alternative means of organization for the oil and gas industry is a large task. Putting together a leadership team is the first step in making that happen. In total there are approximately 28 positions in that leadership team.

Other than the directors roles, these roles are paid and all of them are full time, long term employment. That is when the financial resources are secured and the developments begin. Before that we have to prove that we are capable of providing the industry with an alternative means of organization to the current bureaucracy. And that needs to be done on the basis of an investment by each and every one of the members on the leadership team. What exactly that proof consists of, and how we go about providing it to the industry is unknown at this time. What we do have is the technological base in Oracle Fusion Middleware and Applications. The product vision in the Preliminary Specification. And now we need to build the means in which to provide the oil and gas producers with the most profitable means of oil and gas operations within this user community.

If not us then who. If not now, then when. And how will the bureaucracy be removed from the industry if not by force. Without an alternative being presented to the marketplace then there will never be an opportunity to select anything other than the bureaucracy. This is how we must choose to remove them from the landscape. They are not leaving, and they are not doing their jobs. It is therefore 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 anyone can contact me at 403-200-2302 or email here. 

Our Material Balance Report

It’s time once again to have a quick look at one element of the Preliminary Specification as a chance to keep it fresh in our minds. We began this series about a month ago with discussion of the Work Order in terms of its ability to enable like minded groups of producers to collaborate on research projects and study groups. We then wrote a few weeks ago about the Work Orders ability to control costs within the producer firm. Today we want to stay within the Partnership Accounting module and discuss the Material Balance Report.

The Material Balance Report is present in the Accounting Voucher and Partnership Accounting modules of the Preliminary Specification. The purpose of the Material Balance Report is to replicate what the traditional industry standard material balance report does in the reporting of facilities. In the Preliminary Specification the report takes on an expanded and enhanced role of the innovative and profitable oil and gas producer. The report becomes the cornerstone of the producers production activities, reporting and marketing of its products. Everything that is produced is managed through one or many Material Balance Reports until its point of disposition, or transfer of legal title. The enhanced nature of the report is that the balancing of the volumetric information takes on the same characteristics that the financial information has in terms of its unimpeachable integrity.

This unimpeachable integrity is achieved through the fact that a Material Balance Report represents a Joint Operating Committee. And in the case of volumetric reporting this Material Balance Report will be an Accounting Voucher in the Preliminary Specifications Accounting Voucher module. A unique accounting voucher that imposes the balancing characteristics that we desire. And those characteristics are the systems balance, each Material Balance Report must balance between other Material Balance Reports, partnership balance, ensuring that the volumes of each partner or royalty holder are accounted for, and volumetric balance within the report itself. Without the ability to balance each element of the Material Balance Reports volumetric balancing, the Accounting Voucher will not close. Enforcing an integrity in the reporting that those volumes and those values contained within the report are correct.

For what purpose are we expending so much energy on the volumetric balancing of the Material Balance Report? The production, revenue and royalty accounting processes are ripe with amendments and corrections throughout a ninety day reporting process. Is this not unreasonable to uphold the accounting close to a process that is consistently subject to adjustment? I would note that accountants have the tools of accruals and other methods of balancing the Material Balance Report in the short term. The point in enforcing the integrity is to establish a base of volumetric information that is unimpeachable, as I said, that is however, after that ninety day process and is not subject to question. It is therefore at that point knowing that the information, ultimately, will not be inaccurate, from any perspective, that we can automate the processes that depend on this volumetric information. And begin this process of automation on the first day of that ninety day process.

The Material Balance Report will take what is a generic manner of reporting in the industry and expand it to accommodate the regulatory, financial and stakeholder needs. This process of automating the processes of production, revenue and royalty accounting will be comprehensive in nature. This automation has been beyond the scope and scale of the current business models of the software providers and the producers IT budgets. Yet is something that can be handled in the scope of the People, Ideas & Objects, our user community and service providers domain.

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. 

An Individual Plan

Cash starved producers are probably looking at the natural gas prices and the associated storage volumes and thinking that this summer is their chance to get some cash in hand. Although the prices are not that great, at well over $4 they provide the opportunity to pay the bills and have a little left over in the cash flow game. If they can spin that argument for six months, the time it will take to replace the storage volumes, maybe they'll be able to build some breathing room in the winter of 2014 / 2015. Lets face it, its been a brutal few years in the natural gas business. With these prices, it offers a slim opportunity to keep afloat.

If only there was a way in which the industry could allocate its natural gas production. So much pain and frustration would be eliminated. But it can't and most definitely it won’t. That would involve going hat-in-hand to People, Ideas & Objects and beginning with their developments. And we know that would require accepting that there are $705 billion in opportunity costs from what is being done today. And that just can’t happen. No one will ever admit to that.

There are just so many reasons that the bureaucracy will never proceed with our developments. We would be fools to think that we have an opportunity in working with them to make this initiative real. We are the ones that are going to have to make it real. Probably with the bureaucracy jumping on our back and standing in our way. I say bring it on and lets have some fun. So much of this is dependent upon the individual decisions that will be made by the people who work in the oil and gas industry. Decisions of when and where to join the user community. Decisions of how to drain the energy and life out of the bureaucracy as you keep that paycheck. I did mention this was a revolution didn’t I? A revolution where it shouldn't cost you anything.

It is the development of the user community that is our focus and our concern over the next five years. Keeping the day job during this time is of critical concern. What we need to be doing is providing an alternative means of organization to the oil and gas investor. Whatever an alternative means of organization actually means is something that we will have to define in the next five years. We have already set out the objective for the people who want to participate. And that objective is to provide the oil and gas producer with the most profitable means of oil and gas operations. We have talked about the leadership roles that need to be developed in the user community as well. The CEO, CFO, COO, and other roles within the user community itself. And other roles that are involved in the leadership with respect to our product. The twenty or so Product Owners that make up the modules, marketplaces and business models of the Preliminary Specification.

So we have much to do. We have a big adversary. We have more value to generate for the oil and gas industry than they’ll know what to do with. And we will have strong advocates, eventually. Ones who will be willing to bankroll our initiative. They're watching now and I think they like what they see. And if we add this user community to the vision of the Preliminary Specification, both of which will sit on top of the technological infrastructure of Oracle Fusion Middleware and Applications. They will believe that we do have an alternative to the current bureaucracy and will move to support us financially and provide us with the opportunities that we need. So this is what we need to do. Have a look around, if you like the way the industry is operated, we're probably not for you. But if you think there is a better way and the Preliminary Specification is a good start, then you'll know what to do.

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. 

Engaging the Bureaucracy

Our appeal to the individuals who know there is a better way in the oil and gas industry continues. This includes the user community, our service providers and the investors who are all of like mind with respect to the Preliminary Specification. We have drawn distinct lines around the bureaucracy in the oil and gas industry and are at, no better way to describe it, war with them. They don’t like us and have chosen to not deal with us in every aspect of their organizations. We don't blame them, as the biggest side effect of the Preliminary Specification is that the bureaucracy is eliminated from the landscape. Kaput, Nada, out of here. So their response is more of a self preservation styled response of a self interested group. And we hurt them badly. Offering a solution that provides the oil and gas producer with the most profitable means of oil and gas operations makes the bureaucracy look really bad. Especially when they're kneeling at Church praying for successive cold winters as a solution to what ails the business.

But we are not alone in our difficulties with the bureaucracy. Other industries are in various stages of similar disintermediation. And some industries have seen the bureaucracy destroyed. So our friends know what’s in store for them. There is also the flack that they are getting from above in terms of the investment communities disappointment in the manner that the industry is run and the investors ability to influence how it is run. Lashing out at us is an understandable strategy for a groups of self interested bureaucrats who are being challenged in their franchise. The problem is its getting serious. I've been at this process of writing and developing these ideas around the Joint Operating Committee for over a decade now. And trust me I know how to be pesky, which I have. I have noted the times in which the bureaucracy have attempted to establish their own Intellectual Property that violates our copyright, and each time they have been knocked down. They are unwilling to accept that Intellectual Property means something much more substantial in the 21st century than it did in the 20th century.

So now we stand here with the Preliminary Specification gaining steam in the marketplace. Our primary focus is to build on the Oracle Fusion Middleware and Applications, and the vision of the Preliminary Specification by focusing on the development of the user community. And the bureaucracy has been exposed as having no clothes. What are the prospects of the bureaucracy to establish “something” to offset our momentum. Clearly this next year is the time in which they need to do something if they are going to succeed, scratch that, survive for the next decade. Survival is all that they need to achieve for survival assumes they continue to control the cash. They need to do something that is either brilliant in terms of how it solves the issues in the industry. Or is ruthless in terms of its attack on People, Ideas & Objects, its user community and service providers.

Brilliant solutions from the bureaucracy will be forthcoming from the committee that is being formed and will have its first meeting February 1, 2015. So that leaves us with an attack on us collectively. And we have been the focus of this in the past. But I think this can be classified as something more substantial. I am wise to their ways of keeping their enemies close. But I think that they will keep us at arms length and employ other more radical means to attempt to ruin us in the “mind share” game we have chosen to operate in. We would love the attention to say the least. So lets keep a look out for what our friends are up to this next year. I for one am looking for a good knock out brawl. I haven't been in the ring, so to speak, for a couple of decades. All this jabbing and prodding around the edges only gets you hungry to take your opponents on in the ring. The only thing that I demand is that they put some clothes on.

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. 

Busted Again

We have evidence of the bureaucracy attempting to circumvent the Intellectual Property that makes up People, Ideas & Objects, the user community and the servicer providers, again. We went through this just in October 2013 with Ernst & Young and here we are again. This time its with The Oxford Institute for Energy Studies and the author of the paper is, not surprisingly I guess, a Senior Partner at Ernst & Young. So although Ernst & Young stated that they would not be publishing the document that they had, that does not necessarily apply to any of their staff. I have been in contact with the Oxford Institute and informed them of the copyright and I am awaiting their reply.

The important thing in these copyright claims is to frame the issue correctly. That although The Oxford Institute paper does not address the organizational construct necessary to undertake all of the changes. That can be introduced in a subsequent paper. What the industry is doing is reverse engineering our work by starting with the effects of the breakthrough of using the Joint Operating Committee, and then working their way back to that conclusion. It will be in that way, using their logic, that they will be able to use our ideas as theirs. The fact that I took ten hard years of research after the breakthrough of using the Joint Operating Committee isn't relevant to them. This is why the industries costs are so high. If after 10 years of hard work you risk having your customer steal your work, no wonder no one is willing to do the hard work of innovating.

And its not like industry is going to begin the process of herding cats or writing software code. That is the last thing that they want to happen. They just want to have a plan in which they go to the investment community and say “here, we have a plan.” They will never proceed with any aspect of the Preliminary Specification with People, Ideas & Objects, the user community or service providers and they certainly wouldn't do it if they had the idea themselves. Things are too comfortable for them to be bothered with work. What they need to do is give the appearance of working at the problems of the day and buy time. Time in which they earn their paychecks and shuffle the papers.

So it comes down to a communication issue for People, Ideas & Objects, the user community and the service providers. One to make sure that the industry does not have the right, or alleged right to claim to have any plan to deal with low natural gas prices or the performance of the industry. That our claim of providing the oil and gas producer with the most profitable means of oil and gas operations is the only competing vision to the existence of the bureaucracy. That they the bureaucracy can’t muddy the water with a vision that competes with ours, because it is ours, and turns people away from us with an attitude of “let's give the bureaucracy one more chance.”

So we will continue to pick off any of these attempts to take our Intellectual Property and compromise it. This is how the industry, a three and one half trillion dollar industry chooses to compete. By theft. The real problem is they don't see it this way. And they don't see it this way because it has become so mainstream in the manner in which they operate. Ideas are intended to be stolen and too bad for the fool who came up with the idea. These are also the rules that govern recess in grade two. Unfortunately for the bureaucracy its the 21st century and Intellectual Property is the way in which most industries operate. The fact that they left their flank open to someone to come along and take it, is their problem. My problem is having to deal with these pesky little thieves.

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. 

Value Provided by the Decentralized Production Model

In our discussion yesterday we noted the decentralized production model made the oil and gas industry a price maker, as opposed to its current role as a price taker. Its been a while since we reviewed the decentralized production model. And with over $705 billion in opportunity costs attributable to this model, we need to continue to highlight this important element of our competitive advantage. This value is contrasted to the current bureaucracies lack of a plan to deal with the industries issues. With this past cold winter now a distant memory, last years plan of hoping for a cold winter, leaves the industry without a plan, a hope or a prayer. I am pleased to therefore offer the Preliminary Specification complete with the decentralized production model on behalf of the user community, the service providers and People, Ideas & Objects to fill this void.

It is our competitive advantage that we provide the oil and gas producer with the most profitable means of oil and gas operations. An element of that is the decentralized production model. What this model does is take the prototypical producer organization and reorganize its resources in a manner that focuses the producer on its key competitive advantages of its earth science and engineering capabilities, and its land and asset base. It does this by stripping the producer down to the C Class executives, the earth science and engineering resources, the land, legal and some support staff. The remainder of the people, the administration and accounting resources are permanently reallocated into service providers who are focused on a process or subprocess and use the entire industry as their client base.

What the service providers will be doing is conducting the management of their process on behalf of the entire oil and gas industry. It is in this way they will have the volume of activity to apply the toolset of specialization and the division of labor to the process that they manage. Then they can achieve new levels of efficiency and effectiveness that are not available to the stand alone oil and gas producer. Not even ExxonMobil. It is the application of these tools along with process automation and computers that will provide the service providers with their competitive advantages.

Management of the process will include automation of the task and transfer network which is part of the Preliminary Specification. In the instance of a Production Accounting service provider the field data capture, reading of a chart, completion of regulatory reports all denote the completion of a task in the task and transfer network. It is at the end of the month that the service provider prepares their billings on the basis of the tasks and transfers that occurred during the month, and charges the pertinent Joint Operating Committee for the services that were incurred. And it is in this process of preparing the billing that if any property was shut-in for the month there would be no billing generated from the task and transfer network.

Billing directly to the Joint Operating Committee for the costs of administration and accounting, the general and administration costs of the producer, provides us with a new flexibility from the decentralized production model. If the property is shut-in none of the associated overhead is incurred by the producers of that Joint Operating Committee. The overhead doesn’t disappear. It is still the responsibility of the service providers. And they will need to manage their organizations with the understanding that at any time their revenues from operations may be reduced by shut-in oil and gas operations by as much 15%. It is they who can control these costs providing the oil and gas producer with the ability to control their G&A costs with the volume of their production.

The net result is that all producers can shut-in any production that is not profitable. Reducing their production profile however will also reduce their overhead burden as well as their operating costs. When they shut-in their production that isn't profitable they will become more profitable at the lower production volume. The reserves of the properties that have been shut-in will be saved for a time when they can be produced profitably, and the commodity marketplace will have the high cost production removed from the market, putting a floor on the commodity marketplace prices.

This is the manner in how the decentralized production model provides the industry with the ability to be a price maker. It is radical surgery. It is also a plan that has significant opportunity costs. The current bureaucracy doesn't have a plan, hope or prayer. What they will do to fill this gaping void is the interesting question. As hoping for another cold winter isn't going to fool anyone this time. I think that we are going to have an interesting year in terms of dealing with our good friends 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. 

When Innovation is Implemented

One thing that we have not mentioned for a while is that the Preliminary Specification is designed to identify and support innovative processes for the innovative and profitable oil and gas producer. It is within the Preliminary Specifications DNA that innovation becomes the focus and drive of the producer. Innovation is at its greatest value when and where it is needed. And in the People, Ideas & Objects system innovation is needed where shut-in production exists. The ability to return the property back on to production will require some innovation that either materially expands the reserves and reduces the capital cost of each unit of production, increases the throughput of production to reduce the operational cost per unit of production or reduces the operational costs per unit in a material way. It is in this way that the Preliminary Specification is structured to provide the oil and gas producer with the capabilities to operate in this manner.

With the decentralized production model, which reduces the producer to the C class executives, the earth science and engineering resources, the land and legal with some support staff. The producers remaining resources are reallocated permanently to service providers who are focused on the process or subprocess and use the industry as their client base. These service providers are then able to charge for their services directly to the Joint Operating Committee for the administrative and overhead costs of the various services they provide. Then if the property is shut-in these service providers will have no work associated with that specific Joint Operating Committee and as a result no billing for their services will be presented for that month the property is shut-in. Allowing the producer to incur a null operation on the property, no profit or loss, saving the reserves for a time when they can be produced profitably and reducing the amount of the commodity on the marketplace, therefore placing a floor on the commodities pricing. This is how the industry becomes a price maker as opposed to a price taker. No production, other than profitable production is produced. A reasonable and fair means of allocating production discipline.

Once the property has been inventoried as a non-producing property. That is when the engineers and earth science resources of the firm, and associated working interest partners are able to engage in any number of initiatives that any of these producer firms have developed the specialized capabilities for. Conducting a complete review on the property, its opportunities and issues and determining what the best course of action is to either lower the cost of production, increase the reserves or deliverability, or just keep the property in inventory. These actions are taken in the Research & Capabilities and Knowledge & Learning modules of the Preliminary Specification. It is there that these people can see what the capabilities are that are contained within the many firms that make up the Joint Operating Committee. Selecting the most promising and innovative plans and programs and applying them to the inventoried property with the anticipation of returning it to profitable production.

It will be this overall process of applying innovation to the inventoried properties that identifies and develops the key innovations in the oil and gas and service industry. This overall process will have the net effect of reducing the overall costs of the industry. Both in terms of capital and operating. The incentive to move production onto the marketplace is one of the strongest that the company faces. Holding capital assets or capacity offline is costly. Moving the firm to produce at 100% of capacity is the pressure that each firm will experience. However, there will be market discipline to ensure that any unprofitable properties remain off the market. The punishment will be in the form of the investment community looking elsewhere for their investments.

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.