The Dynamic, Innovative and Profitable Producer Part II

Continuing on with our exploration of what the prototypical producing firm will appear like as a result of implementing the Preliminary Specification, the user community and its service providers. Without having to host the administrative and accounting staff. Without having to deliberately and actively go about the development of the necessary capabilities within your organization. The prototypical oil and gas producer will be able to offload, not just physically, but also mentally and emotionally the development of these internal capabilities. What the Preliminary Specification does is move the producer from a reliance on their administrative and accounting capabilities, to a reliance on the industries administrative and accounting capabilities.

The burden for the development of the industries administrative and accounting capabilities falls on the user community and the service providers themselves. They will be the ones that are incurring the physical, mental and emotional effort on behalf of all of their industry clients. When the time comes to enhance the tax capabilities of the oil and gas industry due to some change in legislation it will be the individual service providers that augment their organizations with the requisite resources to enable them to meet the requirements on behalf of all the producers in a timely fashion. The producers will be busy pushing the sciences.

It is the division of labor that enables the producer firm to focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. It is the same division of labor that has the service providers and user community focused on their competitive advantages of automation, specialization, division of labor and reduction of the bureaucracy. Currently the producer firm enjoys none of the competitive advantages associated with their administrative and accounting capabilities. They are a tax on their speed, their innovativeness and most importantly their profitability. Each producer must maintain x capabilities in order to function as a producer. This level of compliance and governance is costing the producer a large share of the profits and there are no opportunities for cost control or cost sharing among producers. Use of the service providers moves the capabilities to the industry, enables the service providers to control the costs and most importantly shares the cost and resources among the producers. Key to the cost sharing will be the reduction in costs from the key competitive advantages of automation, specialization and the division of labor. The fact that the bureaucracy will not be paid for is a triple bonus.

This lightweight form of organization gives the producer distinct advantages. People, Ideas & Objects state that the Joint Operating Committee is the key organizational construct of the oil and gas industry. It is the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. By moving the compliance and governance framework of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee we attain a speed, innovativeness, accountability and profitability in our producer organization. It is these attributes that a dynamic, innovative and profitable producer needs in the 21st century.

What is the bureaucracy offering you today. Exactly what was on offer during the 1960’s. The fact of the matter is organizations don't change and the current bureaucracy is proof of that. Although they have taken elements of our ideas and used them to make them sound like they offering more than a hope and a prayer for a cold winter, as a strategy. Its a false hope. Organizations don't change, but people do. And that is why we appeal to the individuals in the oil and gas industry. The investors who are fed up with the earnings performance. The people who are tired of the bureaucratic ways of stuffing another ream of paper in the printer. It is the individual decisions of those that will join us in the next few years that will offer an alternative means of organization to the oil and gas industry. And then the investors can choose who they want, the bureaucracy or People, Ideas & Objects, the user community and the service providers to manage their assets.

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 Dynamic, Innovative and Profitable Producer

One topic that we haven't spent too much time on is the effect that the Preliminary Specification, the user community and the service providers will have on the producer firm itself. We have noted that the producer will have a smaller footprint in terms of its size. With only the C class executives, the earth science and engineering resources, the land and legal and some support staff. However we haven't discussed the implication beyond the footprint size of the producer firm. Specifically in terms of how they will operate in this new environment as a result of the changes that we are discussing in the Preliminary Specification.

First of all the producer firm will be more focused on its competitive advantages of its earth science and engineering capabilities, and its land and asset base. Those are the only remaining resources within their domain that are of interest to the producer. And here specialization and the division of labor is at work to enhance the producers capabilities to focus on their specialized attributes of the sciences. This is done through the Preliminary Specifications ability to mitigate the resource restrictions in the earth science and engineering disciplines that are affecting those professions in the mid to long term. By each producer firm specializing within the sciences; then they are able to share these specialized capabilities among their Joint Venture Partners and pool their resources to achieve the necessary capabilities to meet the demands of the projects.

Additionally new engineering and earth science based service providers will need to be employed to provide some of the basic services that are currently handled within the producer firms. This offloading of lower level tasks will be as a result of a reorganization based on specialization and the division of labor across the industry that seeks to increase the output from the limited resource base. A new organizational method is the only way in which to achieve the mid to long term demand requirements of the professions. Having each producer firm build individual silo’d capabilities that cover off their domain of responsibilities will soon bankrupt each producer. Specialization could be used to correct this, however, specialization without reorganization will cause further problems. A bankruptcy will occur as the scope of the specialization without reorganization within the professions would become so broad as the requirements would exceed the financial capabilities of one firm.

Moving back to the administration and accounting of the producer. These will be done by the service providers that we have been talking about. The service providers that are derivative of our user community. These people will be located within their own firms away from the producer firm and will process the producers documents remotely. Much as the administration and accounting is remotely conducted today. Earning a service fee based on the task and transfer network. Denoting that only when activity occurs within the network will their be a service providers billing generated to the producer. Automation, specialization and the division of labor are the key competitive advantages that the service providers are able to provide the producer firm. And we should add the elimination of the bureaucracy to that list too.

This lighter weight of a producer firm will be much easier to manage for the production profile of the firm. Based on the capabilities of the firm, they may be able to scale up or down based on the commodity prices, or depending on their earth science and engineering capabilities. The administrative and accounting capabilities are industry based capabilities and are available to them on a service fee basis. Their production profile will determine the amount of their G&A costs. If they should double or triple their production profile their administrative and accounting capabilities would immediately be capable of dealing with the new properties or acquisition. And if the producer were to scale back production, the G&A costs would scale back in line with the production profile. This is the nature of the revised industry makeup based on the decentralized production model of the Preliminary Specification and the service providers.

The key focus is what are you capable of in terms of your earth science and engineering capabilities. Both in terms of the scientific capabilities and in terms of your production profile. Those are the two guiding objectives of the producer firm in terms of what they need to concern themselves in managing their organization. The issues of where to get a new tax accountant are today’s problems with the bureaucracy, and I'm suggesting we leave those issues behind by adopting 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. 

The Value in Technology

I have spoken many times here on this blog about the maturation of the Information Technologies that we are using at People, Ideas & Objects. It is that maturity of the technology that enables us to undertake the large scope and scale of our project. And many of the technologies and companies that appear to be generating a lot of interest in the capital markets are focused around the development of social networks and big data. These two areas are calling into question whether or not the technological industry is getting itself into another bubble where valuations and perceptions of value are getting out of sync with the real opportunities. These are my thoughts in terms of what I see.

I think the real value in technology is in the application of Information Technologies infrastructure to the business model of an industry. Much in the way we are doing it here in People, Ideas & Objects, the user community and service providers. This has been done in other industries and will happen in every industry as time passes. This trend, known more or less as disintermediation is the updating of the business model to include the Internet and remove the bureaucracy. Both are good things and provide value for the industry for all concerned. This is where the value in the technology business resides. It is in the “old” technology companies that provide the mature Information Technologies that will see their involvement in this business. The Oracle’s, the IBM’s, Cisco’s, and Intel’s.

In terms of the social networks they are probably here to stay. Some like Twitter and LinkedIn have been able to establish themselves in the business arena. And therefore will be able to build value outside of the “social” space. As for the rest, as it was in the 1950’s and 1960’s to show home movies as a fad, companies like FaceBook may be wholly dependent on a fad of exchanging useless bits of information with other people. Professor Herbert Simon coined the phrase “A wealth of information creates a poverty of attention.” FaceBook may want to adopt the byline “A wealth of FaceBook friends creates a poverty of friendship.” More innovation comes from FaceBook everyday and that keeps the masses interested. At some point there will need to be some point to the exercise and I think that day is coming soon.

If someone approaches you with a product that is in the “Big Data” field, run. Like Y2K they both have three syllables. I don't think thats a coincidence. There is something about naming conventions and three syllable product names are code for those in the know, to stay away. If anyone finds a bit of information that provides value for a business from “Big Data” then I will be the first to be surprised. In the Preliminary Specification there are the Performance Evaluation and the Statistics & Analytics modules to apply analytical thinking to the data set in a Joint Operating Committee or a producer firm. This is not “Big Data,” this is only the practical application of the tools to the data streams that have always existed in oil and gas. Don't let anyone sell you on the concept of “Big Data” becoming a force for generating value in the oil and gas industry. Its not going to happen and the need to spend any money on this initiative is approximately equivalent to what you should have spent on Y2K, nothing.

So that is how I see the Information Technology business. The real money is in the traditional industries that will use the mature technologies in new business models that disintermediate the bureaucracy. And the real money will be made in the area of higher profitability in these traditional businesses. The old school technology companies will come out alright as well. Just don't look for too much excitement from your investments in them.

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.

Motivating the User Community Part II

Our discussion has been focused on the motivation that we can provide to those that may be interested in participating in the user community. And particularly those that might qualify for one of the 28 leadership positions that we are looking to fill in this the first phase of developing the user community. Yesterday we spoke of the monetary component of this motivation from the investor, user community and service provider point of view. Today we want to discuss the power and influence that the user community and service providers will have in the oil and gas industry. And how these intangibles are a motivating force for those that wish to participate in this project.

Right now the bureaucracy holds significant influence in the oil and gas industry. Things are done the way they are done due to the fact that the bureaucracy is the only manner in which they can be done. What choice does anyone have. Therefore this provides the bureaucracy with an inordinate position in terms of how the industry will be managed. We see this in the approach to natural gas prices. The industry is a price taker with no discussion on how to deal with the abundance of natural gas reserves from shale. The bureaucracy says take it or leave it, that is the choice in terms of management of the industry. There is also no influencing the way it is done, and there are no opportunities or mechanisms for change. This “muddle along” strategy has been ingrained in the mindset of the industry and has become the standard as to how issues are dealt with. This is the power that the bureaucracy currently holds in the oil and gas industry today.

If People, Ideas & Objects, the user community and the service providers were to remove and replace the bureaucracy we would essentially hold this same power in place of the bureaucracy. It is the administrative and accounting authority and responsibility of the industry that has the ability to enable and constrain its actions. Without the bureaucracy, our offering would fill the void of any power vacuum. However, things would be different. People, Ideas & Objects are structured through its Revenue Model to be oriented to change. Without change there would be no revenues flowing through People, Ideas & Objects. Without revenues through People, Ideas & Objects there would be no revenues flowing through to the user community. These two organizations are dynamically focused on changes within the oil and gas industry. It is the inverse of the “muddle along” strategy of the bureaucracy. The service providers have in contrast a steady flow of revenue directly from the industry in the form of service fees. Their service offerings are directly reflective of the changes being made by the user community and the People, Ideas & Objects developers.

So although the power that currently is held hostage by the bureaucracy will only be held by a different group as a result of our removal and replacement of the bureaucracy. We are directly accountable to our revenue streams to the industry. We are also wholly accountable to the industry for the changes that are necessary to keep the business models and issues up to date and operational. Something that is currently not contemplated. This accountability is given to the oil and gas industry in the form of a software development capability that is dynamic and available to meet the needs of the industry on a go forward basis. Something that is critical in the 21st century. We are offering an accountability and dynamic capability that is currently lacking in the industry business model.

At the same time it will be those within the user communities leadership team that will need to be able to exercise the skills and leadership necessary to ensure that industry is provided with the software, software development capabilities and services that are needed. This is a difficult task to undertake from the point of view of developing the software in its initial stage. And a difficult task in terms of what is required on an ongoing basis. They will need the power necessary to make the decisions and implement the plans that the industry will need to see this come about. And I think with the structure being discussed here and the user community vision that is provided the leadership team will be enabled. Promises of money and power are serious forms of motivation, necessary to complete difficult tasks.

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. 

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.