Our Solution

Members of the user community will provide the oil and gas industry with a solution to the issues that I so frustratingly discussed yesterday. We will have changed the manner in which the producers are able to manage their operations so that each property can be engaged based on its optimal strategy. And only if it is profitable. The producers will be able to do what is in the best interests of the property and their shareholders, whoever they may be. A change from the focus on increasing production at all costs. To a focus on increasing profitable operations. Specifically we are moving away from the high throughput production model to the decentralized production model of the Preliminary Specification. In Professor Richard Langlois writings he has described the decentralized production model as follows.

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. p.58

We have applied the decentralized production model to the oil and gas industry in the following manner. In order to make the overhead costs of the property variable. We have to turn the fixed overhead of the producer into the variable overhead cost of the Joint Operating Committee. It will be in this way that when the property is shut-in, due to its inability to earn a profit in a low commodity priced environment, the property will be able to incur no overhead in the Joint Operating Committee or the producer firm. And when we talk about the overhead we are talking about all the administrative and accounting costs incurred to own and operate the property. We do this by stripping the prototypical producer down to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The administrative and accounting resources are then reorganized into service providers who focus on a process or subprocess and use the entire industry as their client base. Therefore when the property is shut-in no activity in the property is incurred and no administrative or accounting resources of the service providers are used during the month when production is shut-in, and therefore each of the service providers generate no billing or charges for that property.

The property then incurs a null operation. No profit and no loss from operations. And the producers other profitable properties will not be eroded by losses on the poorly performing properties. The commodity markets have less of the commodity on hand, raising prices to the marginal price. And the producer doesn't have to make up for the properties current losses from future operations. Making the Preliminary Specifications decentralized production model the most profitable means of oil and gas operations. Any producer that continues to produce unprofitable properties will be dealt with by the investment community. As there will be no justifiable reason to continue to do so.

This structural change in the way that the industry operates will provide the flexibility in terms of the industries production profile in both oil and gas. With high cost shale being as prolific as it is today it is necessary to ensure that this flexibility is afforded the dynamic, innovative and profitable oil and gas producer. The ability to overwhelm the markets with flush production from the shale formations has shown the capability to collapse both the oil and natural gas commodity market spaces. This is unfortunate and a reflection of the elasticity of supply and demand of the commodities. With little excess demand or supply of the commodity in the market, the price of the commodity reacts significantly. Therefore any overproduction must be mitigated before the price declines precipitously. Creating a means to allocate production amongst independent producers will only lead to difficulties if it is not seen as being fair and reasonable. And the only reasonable and fair method of allocating production in an environment such as the oil or gas industry is on the basis of profitability of the property itself. And the only way that we are going to be able to implement that method is through the adoption of the Preliminary Specifications decentralized production model.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Some Rambling Thoughts

Some might argue that our criticism of the bureaucracy would seriously affect our revenue stream. I can assure you that it hasn’t yet. As it is not in the bureaucrats best interest to be supporting People, Ideas & Objects. We eliminate them from the landscape of the oil and gas industry with the Preliminary Specification. So our criticism is more sporting than it is of a practical deficiency to us. This has always been the case and the bureaucrats have certainly never let an opportunity pass to take a swipe at us. One thing that is a negative outcome is the fact that this blog and all our communications are handled on essentially public facilities provided by Google. One should find this humiliating and embarrassing. Not to toot my own horn here but we appear to be the only ones that are addressing the profitability and pricing issues of the industry. The only ones who are offering solutions to these issues. And I do hope that the bureaucrats are humiliated and embarrassed that this is how these issues have to be resolved. A multi-trillion dollar industry has its issues resolved outside of the industry on a shoestring budget.

The bureaucrats “deer in the headlights” appearance might be acceptable if only they didn't have their own best interests as their priority. The concern for the business has been lost for some time and they have expressed no interest in making things right. After all what’s in it for them. Mostly just hard work. If I am at fault of anything in my derision of the bureaucracy is that I am pointing out what clearly needs to be stated. The truth about the situation in the industry today, and what it looks like in the future with the status quo bureaucracy that needs to be stated. The failure that we are experiencing is the danger that we need to be concerned about. Not only from the point of view of the failure itself but for the fact that these bureaucrats may cut and run to brighter pastures if their personal cash flows become jeopardized, or the problems in the industry become too difficult to overcome.

If the bureaucrats do turn out the lights and lock the door then they certainly will have created the type of situation that puts us all in jeopardy. Instead of preparing alternatives like the Preliminary Specification to provide a means in which to manage the industry they will have moved on from a difficult situation irresponsibly. I have worked in oil and gas for 38 years and I can't think of a more precarious time for an industry. Banking prior to the 2008 fallout is probably the best example of another industry that was hiding from its obvious difficulties. Maybe I'm being alarmist but I have stated before that there is no Fed that is capable of flooding the market with deliverability if the industry should fail to meet the markets demands. That might be an odd thing to say when overproduction is the issue of the day. However the overproduction is laying the groundwork for the inability to meet the markets demands of tomorrow.

What I do know is that the way the industry is operated now is fading in all industries. The Internet is becoming the means in which to organize people more effectively, everywhere. Bureaucrats are out in terms of a future. The issue is that they still control the money and the power in oil and gas. And that puts us all as secondary considerations to their personal needs. I don't know how to break this situation in a timely fashion. I thought the owners and shareholders would be wise enough to see these difficulties coming. Aparently not, nor are they motivated to do anything about it. What we are seeing is the failure of the corporate model as it was conceived in the early 1900’s. Creative destruction is our future.

And it might well be that the Preliminary Specification, our user community and the service providers will not be the means in which the industry is reorganized. It is difficult to say one way or the other. I know that I will keep pushing this model of user based software developments as the means in which the oil and gas industry can deal with the issues of the industry for today and tomorrow. And who knows maybe we'll get that big break that we need. That is what I think we really need to make sure that this industry keeps operating.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Where Will Prices Head Now?

It seems now might be an appropriate time to note that the natural gas prices in North America are ripe for another major step downward. Natural gas storage facilities are already starting to show signs that they have completed the seasonal drawdown and will soon begin the rebuilding process for next winter. Storage volumes are up to 575 bcf higher than they were at this time last year. And the turnaround in the inventory rebuilding process appears to be about a month ahead of last years. Not bad considering last years storage volumes were depleted severely by the cold winter. The one constant in the makeup of this storage situation is the deliverability of the natural gas producers. Particularly from shale formations. It now appears that shale gas production exceeds 40 bcf per day and has no signs of slowing. The trajectory of the shale gas production increases remain the same over the past six years that natural gas producers have been suffering from low natural gas prices. And that is the point that we need to understand regarding the behavior of our friends the bureaucrats.

Which brings up the concern we should have for oil prices. Everyone believes that producers will soon curtail production in order to keep the prices from declining further. Oil storage is about to reach capacity which would put a limit on the ability of the market to absorb production. The inability to absorb the oil production would affect the prices in very negative ways. I think these past few months will lead the oil and gas producers to think back to these times as the best of times.

Surely the producers will realize the overproduction is the issue with respect to oil prices? Well they haven't learned that overproduction is the issue with natural gas prices. And that has seen almost six years of pricing that doesn’t support profitable operations. What will change and cause the producers to see the light now and curtail their oil production? Nothing. The only thing that will cause them to change would be a change in the business model to the Preliminary Specification with its decentralized production model or the exhaustion of the shale reserves. Remember bureaucracies can’t, won’t, don’t and will not ever change.

And that is the point. The Saudis understand well the characteristic of the oil shales performance. Unlike the natural gas reserves of the shale formations, which will last for decades or a half century. The oil shale reserves will only last about a decade. At which time the Saudi’s will be able to swing back into action and become the swing producer once again. Unless the high cost producer, being the shale oil producers, learn to allocate production based on profitability, a lesson that they have refused to learn in the natural gas side of the business, the next decade of oil prices will remain depressed. The Saudi’s have stated clearly that they believe that the high cost oil producers should not push out their low cost oil from their market share position. From a business point of view the Saudi’s position is 100% defensible and the shale oil producers position is 100% certifiable.

And so it is that we will take one more downward step in terms of the natural gas prices this spring, with oil following not far behind. How much pain can these bureaucrats really create for themselves and their shareholders. What we do know is that neither of those two groups will do anything about the losses that are piling up in the industry. It is deemed to be acceptable for the industry to be losing money as there is nothing that anyone can do about it. This lack of imagination will catch up to them soon and the realization that the industry has accumulated too large of losses to sustain operations will one day occur. And it will be at that time that those that have the foresight to disintermediate a dying industry will be able to come in and scoop up the value from these dinosaurs. And the fact is that day is not as far away as it seems.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Easter Monday

No posting today. Returning April 7, 2015.

Good Friday

No posting today. Returning April 7, 2015.

Just a Small Difference

What we had identified in yesterday’s post is a significant difference in our value proposition in terms of the amount of money that is returned to the owners of the producers. We have asserted and supported our value proposition provides $5.7 trillion in additional profits over what the bureaucrats are able to offer. The is over the next 25 years. What we have been able to establish is that our method of accounting at the property level is going to provide a return of the capital that is invested in the business in addition to those incremental profits. So in summary, over the next 25 year period. Assuming it is correct that $40 trillion were invested in the industry. And we don't know what share of that would be attributable to the North American marketplace. And if the current bureaucrats continued as they were they would provide an approximate $1 trillion in profits, I'm sure I'll be accused of creating a biased estimate. People, Ideas & Objects accounting methodology based on the decentralized production model would return $46.7 trillion to the owners of the producers. And the bureaucrats in their current configuration would provide $1 trillion.

The basis of the difference once again is the fact that we are using the cost of capital and overhead in the determination of what the cost of the property is. That no property will produce unless it can produce a profit. Imputing that the oil or gas revenues would need to be adequate to cover all of the costs. Fixed, variable, operational and capital. No matter what the type of cost it would be included in the calculation of what the property required in order to earn a profit. This would therefore remove the production from the marketplace that was being unprofitably produced. Leaving only profitable production in place, based on a complete accounting. Therefore removing a large percentage of the production profile of North America for oil, and most particularly gas. Imputing that much higher commodity prices would be required before the production from shale returned to the market. This would create the market conditions in which shale could be produced profitably. When you have a commodity that can be produced abundantly, this is the only reasonable methodology that will extract the industry from its current situation.

The fault for being in the situation that we are in is mostly attributable to the accounting firms that apply the SEC regulations of full cost accounting and successful efforts. Accountants have had a miserable life. From having their briefcases taken in grade school, to being bullied throughout high school. And some of the accountants that I know are still paying their lunch money to kindergarten bullies! For them to be cool and hip, the center of attention is something that is foreign to them. So when the producer wants to report high levels of profits by leaving the balance sheet bloated. All they have to do is flatter the partner at the accounting firm. As a result the industry ends up with a valuation on the books that is so unreasonable that it makes no sense. It also makes no sense to declare that these producers are profitable. What they really are is marginally cash flow positive. And that is all that they are. As a result of this, they are creating a dynamic which creates a production profile that is inconsistent with the commodity price.

It should be the objective of the producer to have their capital costs depleted fully in a three to four year time frame. From a business point of view there are many reasons to want to do this. We don’t need to go into them here. Full cost accounting and successful efforts define the limit of what can be capitalized, not what is reasonable from a business point of view. If after three to four years the property will achieve the point where it has returned all of its capital and will be able to earn a profit from that point forward. Or at least it should be able to. In the process however the commodity prices are high enough that the return on that investment can be adequate to provide a good return of the capital. Which is something that a ponzi scheme is consistently unable to achieve.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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.

Annual Report Season is Here!

This is the time of the year in which we can clearly identify who the bureaucrats are. They are the ones that are hiding under their desks while their phone rings constantly. This is the one time of the year that they need to stand up and be accountable for the mess they've caused. Questions about those skeletons that have been neatly packed and highly compressed in the closet can only lead to misery as far as they're concerned. If anyone of those skeletons is discovered the whole closet could explode due to the high numbers of them so tightly compressed. If only they could take their vacation now and come back after everything dies down.

We should expect to see some awful performances from the producers this season. Having both oil and gas prices so low was never a scenario that was considered. Shale based reserves have truly changed the dynamic in the industry. It is now an abundant industry with very high costs. I read in World Oil last week that the Saudi’s Opec representative commented on the following.

The world needs $40 trillion of oil investments in the next two decades to meet growing demand by emerging nations, al-Madi said. Demand will grow 1 MMbopd every year for the next 15 years to about 111 MMbopd, Nasser Al-Dossary, Saudi Arabia’s OPEC national representative, said at the same conference on Sunday.

We should all be surprised by that $40 trillion number. However it must have some credibility. That’s an average of $2 trillion per year which seems within the ballpark. It is also a global number. What it would be for the North American market is unknown. The point is there is an important question that needs to be asked to the bureaucrats who are under the desk, if only they would answer the phone. What is the vision, plan and idea for earning a profit on those investments? And what kind of return are you providing the industry now? Now you understand fully why they hide.

The answer is this is an industry that operates on gross margin. Bureaucrats don't consider the cost of capital in determining the cost of business. That’s probably not the right thing to say. Its truthful but it sounds stupid. As we have discussed before the past investments of the industry sit on the balance sheets of the producers. Bloating them out of all sense of proportion to their revenue streams. With the amount of depletion that is recognized, the income statements in the past few years have looked OK, but as I said we only work on gross margins, or cash flow as we call it in oil and gas. And with the low cost of our head office being such a small percentage of our revenue you'll see we run a tight ship. Just don't ask about how much of the head office staff that we have capitalized to that already bloated balance sheet.

So here’s the deal the bureaucrats will say, trust us, we’ll make you money…

Doing some simple math in terms of the $40 trillion investment should shock the average bureaucrat in believing there is a capital cost associated with the oil and gas business. A simple allocation of the $40 trillion over the 111 million barrels per day for the 20 year period brings in a whopping $65.82 / barrel in additional capital for each and every barrel. Not bad for a product that sells for $50. However if you look only at the incremental production and allocate those costs over those 15 million barrels. It comes to $487.06 in capital costs per barrel. Maybe I'm beginning to see the light as to why the bureaucrats preclude any capital costs in the calculation of their profits.

And of course People, Ideas & Objects, our Preliminary Specification, the user community and service providers are different. We include the costs of capital and overhead in the determination of profits at the property level. Then if the property is profitable it will be produced. Otherwise it will sit in the shut-in inventory where the engineers and geologists can apply all of their innovative thinking to make the property profitable. This is our plan, our vision, our idea and how we provide an incremental $5.7 trillion in profits in that approximate time period. Real profits after that $40 trillion has been returned to the investors. Not profits that are declared with the $40 trillion in investments still sitting on the balance sheet.

Oil and gas is a failing industry. Bureaucrats will fail to meet the market expectations described here. They will fail to provide a business case for the investments to be made. And they will fail in providing answers to the critical questions that are going to be asked here this month and next in what is commonly referred to as annual report season. And if the bureaucrats can get to mid-May they will have made it through another year where they can continue to incinerate more capital and maybe even think about expanding that boat launch after all.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Who Are We Looking For?

The business opportunity that was defined in yesterday’s post will appeal to those that are of interest to People, Ideas & Objects. Those that are intimate with the details of a process and have the fundamental understanding of how the oil and gas industry operates in terms of its operations, administration and accounting. Those people that can define and support a process that includes the elements of the industry that need to be there, and those that the producers want to be there. People who have been working in the industry for upto a few decades and have risen through the ranks to include themselves in a variety of different roles and areas. These are the people that interest us.

Those that are entrepreneurs within the industry that are able to take the opportunity that we have defined here and run with it to its ultimate expression. This is how the industry will be remade in the vision that is the Preliminary Specification. Where people will act in the best interests of the profitability of their clients, the producer firms. Without profits in the producer firms there is nothing for the individuals or society in the long term. A losing industry such as we have today is a drag on our governments revenue streams and puts the jobs of many in jeopardy of loss, unnecessarily so. We also have a job to do in terms of ensuring that society is provided with the energy necessary to maintain our way of life. That doesn’t seem in jeopardy today. However it will be if the industry continues to lose money over the long term.

All very pious and grandiose claims. The alternative is that we really are here just to shop and keep up with the neighbors latest purchase. I prefer to think that we have better control of ourselves. The point is that this ecosystem will be valuable for the people that participate here in the user community. It is they who will be the ones that fulfill the user community vision. Who will have the power to influence the business models that the industry uses and how best the industry can earn its profits. That collective wisdom will be implemented through the software that is delivered from their efforts.

It is this kind of individual that holds the keys to the future of the industry. That should be clear through today’s post and throughout all of our discussions. And this is how they can transition from the position of where they are today to one in which they can be operating their own service provider in a few years. Where the scope and scale of their operation is a substantial organization that they have built from nothing with their own skills and talents. Something that provides them with a far better standard of living and satisfaction than what they may be enjoying today. And maybe its a partnership with some of the other users that they will meet along the way. Who knows, what is obvious however is that the industry is not performing and has no plans or vision in how it can.

This motivational speech will appeal to the person that we are interested in. It will also alienate the bureaucrats that feel it is inappropriate for the oil and gas industry. Thats because they think the Preliminary Specification is inappropriate for the industry. The bureaucrats have failed miserably. They are completely out of ideas as to how to change the situation in the industry. Prayers are not being answered this year because none were asked in the run up to the winter months. What do you do with an industry that has kept your family fed and housed for the past decades and now is not performing, has no plans or vision, no ideas and most importantly not even a prayer?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Copyright is the Glue That Hold Everything Together

The other day we noted that the service providers would have the exclusive rights to manage their process. That there would be no competition in terms of other firms providing the same processes management. The manner in which service providers compete is on the basis of specialization and the division of labor. The way that we ensure that no direct competition is generated for the service provider is that each service provider is licensed in terms of its access to the underlying Intellectual Property based on our copyright and of course by way of access to our software to manage the process. The copyright in this case also precludes others from operating within the service providers field of operation. There are many other ways that the copyright is used throughout the People, Ideas & Objects environment that makes up the Preliminary Specification, the user community and service providers. This post will touch on those areas and give a brief overview of the manner in which the copyright is used.

I am the beneficial owner of the copyright that defines the Preliminary Specification and the contents of this blog. These ideas form the Intellectual Property contained within this ecosystem. It is on the basis of the ownership of this IP that I am able to, eventually, raise the revenue from the producer firm to support our budget. Our budget includes the cost of our developers and pays for the time of the user community. Service provider revenues are sourced from the producers directly as the replacement to their current G&A costs. This is the flow of money in this ecosystem. It is important to establish this flow as it also details the flow of the ownership of the Intellectual Property.

The first thing that is necessary is to grant a license from myself to People, Ideas & Objects for them to prepare derivative works of the Preliminary Specification and the ideas contained here in this blog. This will be in the form of software code and will be, through the license, renounced back to me as I will be the one paying for the development of the software. The user community operates in the same manner. Since they are paid for their work, the Intellectual Property that is generated flows back to me and becomes part of the total IP consisting of software code and other input. This is important as each user community participant and developer are granted within the license the right to access and prepare derivative works from this Intellectual Property. What would be unworkable would be the entire community making IP claims to their contributions as their Intellectual Property and then having to cross license each others contributions. The method that we are using in this community allows access for those that are licensed to these developments all of the necessary access and use that they need to do their work.

The user community participant is also a key member of each individual service provider. And therefore they have the rights through a specific license to manage a specific process. This license is an end user license that governs the use of the software. It is in the service providers where the user community participants will earn the majority of their capital appreciation and earnings. The user community participant also earns money for their time and effort with our developers, however building a service provider organization provides them with the opportunity to build real long term value for themselves.

It is the nature of Intellectual Property that the oil and gas industry has ignored for the better part of this century. And as a result they have lost large portions of it to initiatives such as People, Ideas & Objects. It will be the case in this century that you will need Intellectual Property in some form in order to do your work. You will have to own it outright. You will have to have a license in which to access some IP, such as the user community participant and their service provider firms. Or you will have to have access to it through your employer, such as a service provider. One of these methods will be the only way in which you will be able to work in whatever industry you choose to work in. That of course is my opinion. And we already see this happening with the proliferation of end user license agreements, etc.

One of the reasons for the Intellectual Property becoming so prevalent in the future is its ability to hold communities together. In our case it is the glue that enables the user community to do their work. That authorizes their management of the process. And precludes those from working against the interests of those that have contributed to this community and therefore have earned some rights and capabilities that are a part of the communities offering. One of the things that the bureaucrats were notorious for was to take the Intellectual Property and capabilities of a service based firm and freely pass these among their competition and sponsor several “me-to” competitors. That’s not going to happen in this environment. You will be protected as a user community member by the license that is granted to you in the process of joining the user community and contributing. It is important to note not everyone will be granted a license and only user community participants in good standing will be able to establish service providers. Since the service providers are a new sub-industry there will be large numbers of these formed. The population of user community participants in the budget have been specified at 3,000. Recall that we expect that service providers will be taking the load of the G&A of the industry which we estimate to be a large portion of the current $40 to 60 billion in G&A costs of the North American producers. Taking a rough average then, a service provider would generate $10 million per year in revenues.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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 Service Providers Role

With the combination of the Preliminary Specification and the service providers. People can see the difference in the way that business will be conducted in the oil and gas industry. Administration and accounting will be handled by the service providers on a global industry wide basis. No longer will the oil and gas producer be constrained by their administrative and accounting capabilities affecting their growth or profitability. Having the service providers operating in the manner we noted yesterday makes these costs variable in nature. Allowing the producer to shut-in unprofitable production and therefore reduce the royalties, operating costs and overhead on the property and the firm overall. Enabling the producer to select their production profile based on the profitability of their production ensures that they, as a producer, will always be profitable. And their ability to scale up their production is immediate by accessing the administrative and accounting capabilities that support any new production through the industry based capabilities of the service providers.

Getting these concepts into the minds of the future user community participants is critical to the success of People, Ideas & Objects Preliminary Specification. We are not rebuilding the existing systems that are so deficient in providing value to the oil and gas producer. The entire configuration of the industry, where the service providers are separate from the producers. And focused on one individual process of the producers business. Demands a different perspective and point of view of how the industry operates and the systems that are built by the user community.

Our objective in making these changes is to provide the flexibility in the producers deliverability and production profile, and to allow them to focus on their key competitive advantages of their earth science and engineering capabilities, and their land and asset base. The service providers on the other hand are handling the administrative or accounting process that is theirs. They own the process and are solely responsible for the management of it on behalf of the industry. Their process is their competitive advantage. And with that they have the people to manage the process, the capabilities to make changes to both the process and the software itself through their participation in the user community. This is the critical point of failure where the quality of systems usually fail. The producer currently has no one to turn to who has ownership of the issue. The service provider, who contains the user community participant, has the power through the user community vision to enable the changes to be made. They will have the people to deal with the producers issues.

It will be the service providers process that is the source of their competitive advantage. And it will be on the basis of specialization and the division of labor that they are able to compete. Taking the data set of the industry and being responsible for it for that process is a completely different basis in which to look at the industry. It is also the only reasonable approach here in the 21st century. Having each producer develop the administrative and accounting capabilities to support their organization is a constraint and is the primary reason that so many producers are losing money. The scope and scale of the actual overhead of the producer is not that significant, however it is large enough that it requires them to continue producing in the current environment. With all the staff on their payroll they need to keep operating all of their properties to continue paying everyone. The shale revolution is declaring this business model is out of step with the needs of the industry. The bureaucrats won’t listen and continue on despite putting their firms in jeopardy. Change is desperately needed.

What we as individuals need to do is to think of the ways that the service providers will work in this new environment. That is the way that we need to go about building these new processes. First in the software itself with People, Ideas & Objects Preliminary Specification. Remember software identifies and supports the organizational constructs. That will enable the changes to be made in the organizations. Then with the user community participants developing the service providers themselves the changes needed in the industry can be implemented with the software, the process and the people operating in the manner that makes the oil and gas producer the most profitable that they can be.

It will be on the competitive basis that the service provider will use specialization and the division of labor. These will be their key tools in assisting the oil and gas producers. However, people will also need to think what the division of labor between computers and people will be. We need to stop doing the work that is best left to the computers. And begin the far more exciting work of leadership, unstructured problem solving, decisions, creative work, collaboration, research, ideas, design, planning, thinking and making the computers work for us, instead of us working for them.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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.