John Chambers on Where We're At

We have highlighted John Chambers, the Chairman of Cisco on this blog before. He is articulate and well versed in both the business and Information Technology domains. McKinsey have a 4 minute video of him summarizing his opinions of where we stand in terms of the disintermediation of industries.

If you’re a leader in today’s world, whether you’re a government leader or a business leader, you have to focus on the fact that this is the biggest technology transition ever. This digital era will dwarf what’s occurred in the information era and the value of the Internet today. As leaders, if you don’t transform and use this technology differently—if you don’t reinvent yourself, change your organization structure; if you don’t talk about speed of innovation—you’re going to get disrupted.

I think he is stating these points in the context of a business that is doing well in a traditional sense. That those healthy businesses are under threat from technology. In oil and gas, I prefer to think in terms of the next 25 years. Are these bureaucratically congested producers the ones that are going to carry us through the next generation? The industry has been decimated by low prices. Investors have lost most of their investments. Banks have written off much of their oil and gas loan portfolio’s. Nothing has been done to address the issues around the systemic overproduction. Is this the environment and foundation that we can look towards the next generation with? Or, has the bureaucracy failed?

Using the Joint Operating Committee is a fundamental shift in the dynamic of the oil and gas industry. It changes everything and aligns it within the organization that has been developed to deal with the specific property that it was created for. A producer simply consists of many interests in many Joint Operating Committees. In our Preliminary Specification it is the Joint Operating Committee that drives the organization. Not the corporate model of today, which is driven by accounting, tax, SEC and compliance requirements. Those frameworks, the compliance and governance, are brought into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee by People, Ideas & Objects Preliminary Specification.

When many people think about this, you want to think about the intelligence of an architecture, where you can get access to any data, any point and time you want. It’s simple to describe, but it really means you’re dealing with intelligent networks—a next generation of the Internet, if you will. But connecting 500 billion devices doesn’t get the job done. It’s the process change behind it. So you’ve got technologies like cloud or mobility and cybersecurity and the Internet of Things that are very important. That’s actually the easy part.

The hard part is how do you change your organization structure? How do you change your culture to be able to think in terms of outcomes for your customers? It’s all about speed of innovation and changing the way you do business. The majority of companies will be digital within five years, yet the majority of their digital efforts will fail, which speaks to what a CEO has to do differently.

It is this alignment to the Joint Operating Committee that provides the dynamic, innovative, accountable and profitable oil and gas producer with the speed, innovativeness, accountability and profitability. The Preliminary Specification was developed specifically with innovation as its foundation. Using the research of Professor Giovanni Dosi and others as our foundation. We applied their work to our understanding of the oil and gas industry. Innovation is the core of the Preliminary Specification. And this is where the value in the oil and gas industry will be generated in the next 25 years.

She or he has to think much more outside the box. They have to reinvent themselves. They have to reinvent their company. Not stay doing the right thing too long, if you will. That’s what got companies in trouble in the past. But the rate of change then was much slower. Today, you’re talking about digitization being an integral part of the fabric of a company’s business strategy or the way it interfaces its supply chain with its customers. Not enabled by technology—technology will become the company.

I have stated the similar effects of Information Technology many times before on this blog. It’s not enough to own the oil and gas asset anymore. You must also have access to the software that makes the oil and gas asset profitable. Without the Preliminary Specification operational in the industry the systemic overproduction will continue. In natural gas six years of overproduction continues and it doesn’t stop. Bureaucrats don’t change. Prices are in the $1.80’s and there is no positive outlook for prices. The natural gas producers went through a period, like today in oil, where they believed things would get better, they just needed to “rebalance the market.” Eventually things became so oversupplied that the market and its price collapsed and continues to do so. This is where the oil market and its prices are headed. To an oversupply driven collapse. Until the industry has a method in which to deal with shale, the industry will systemically overproduce. Only the Preliminary Specifications decentralized production models price maker strategy enables a method in which to allocate production fairly and equitably, on the basis of profitability determined on a detailed and accurate accounting.

The first step is merely making it an independent group, because if you do it inside your organization, your existing culture will kill it. So why do these transitions fail or succeed? Companies fail to understand the implications of how quickly this technology will transform their business. And they underestimate what it really means to their economic growth or that of their competitors.

Secondly, they stay doing the right thing too long. And that’s what gets so many of us trouble, because we’re trained to get a 3 to 5 percent increase in productivity. To just crank it: do a little bit better each year; cut expenses a little bit; grow the top line. This is about exponential change.

There are exponential and trillion dollar value propositions to be realized in this new manner of economic reorganization. For those that participate. There is a rapid demise for those that don’t. Oil and gas bureaucrats have been successful in asserting that theirs is the only way. These next six months are going to provide a different vision. A war of ideas. In the meantime we have work to do, the user community is developing, and we need more people to join.

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. 

Record Natural Gas Production

Some interesting facts came out of last Thursday’s Wall Street Journal. “U.S. natural-gas production hit its highest level ever over the winter even in the face of low prices, a conundrum at the heart of one of the year’s worst-suffering markets.” And in the U.S. Energy Information Administration’s March 24, 2016 weekly update they stated that the “EIA forecasts natural gas will overtake coal as the primary source of generation in 2016.” In the same report they state that “Working gas stocks are at record high levels for this time of year.” And lastly the EIA estimate of “unproved technically recoverable” shale gas reserves is at 622.5 tcf for the U.S. and 572.9 tcf for Canada.” U.S. production of natural gas is approximately 25 tcf / year providing almost 25 years of natural gas and 130 years for Canada based on their production profile.

Its as if the oil and gas industry's current business model exposes all of these reserves to the commodity markets at once. These are overwhelming numbers and prove that the basis of the industry has fundamentally changed. Instead of an industry based on the scarcity of the commodities it’s an industry that needs to understand that there is an abundance of their product available to the market. The business changed when the shale volumes produced became material to the overall deliverability of the industry. We can’t go back, we wouldn’t want to go back, and we are now wholly dependent on the high cost shale production. Without shale the conventional sources would be inadequate for our needs. With this change in the oil and gas business it demands that we change the business model of the industry to accurately deal with the situation on the ground.

In a scarce environment it is appropriate for the producer to produce everything that they can. A market for the energy that is produced will always be found. The producer accepts the price that is offered and continues with the business of finding and producing more oil and gas. In today’s abundant shale based reality this old business model over supplies the market with the energy resources that it needs. Simple supply and demand principles dictate that the price must therefore decline to reflect the over supplied nature of the market. Over time producers are eventually unable to earn enough from their production to cover their payroll. There is however significant discussion in the market that today’s production is profitable for the oil and gas producers. I have argued here that the true costs of the operations, which includes the overhead of the producer and the capital that has been expended, are not being taken into consideration when those comments are made. We’ll be discussing this point tomorrow.

The method currently used by the producers to deal with the market's oversupply is called market rebalancing. Effectively reducing capital expenditures until production volumes fall in line with demand. This is a blunt and ineffective instrument. This was used during the last downturn in oil. Beginning in 1986 and lasting for the better part of 15 years. Rebalancing is inappropriate for today’s shale based oil and gas industry, particularly with respect to the work that the industry has to undertake in the next 25 years. We have waited six years for the natural gas market to rebalance and as we see we are at record production. It's two years in oil and there is no hope in the foreseeable future for rebalancing there either.

Unlike the natural gas markets the oil markets were precipitated by a change in strategy by Saudi Arabia. What the Saudi’s did in changing their production strategy is logical to me. Moving from their traditional swing producer role to dedicating themselves to their specific customers, and not letting anyone take those customers away from them by competing through lower prices. They see shale production in the U.S. as the high cost production and therefore feel that the U.S. should occupy the swing producer role. If the Saudi’s were to maintain the swing producer role and leave the shale producers to produce as much as they wanted to. They would eventually have both low oil prices and no customers. They are defending their business against what they believe are the high cost producers, the U.S. shale producers.

The decentralized production model of the Preliminary Specification solves this conundrum by enabling the dynamic, innovative, accountable and profitable oil and gas producer to shut-in any unprofitable properties, and to only produce profitable properties, occupying the swing role producer in both the oil and gas markets. Shutting-in any unprofitable production leaves the property with a null operation, no loss and no profit. This is as a result of the reorganization that is done through the Preliminary Specification of the producer and of the industry itself. Enabling People, Ideas & Objects to provide for the most profitable means of oil and gas operations.

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. 

Good Friday

No posting today.

The Speed of Change

People, Ideas & Objects is all about change. Using the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer introduces change everywhere and to everyone. Nothing within the oil and gas producer and the oil and gas industry is untouched by making this fundamental change. What we are doing is moving the corporate model’s focus on the compliance and governance frameworks, and aligning those frameworks with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks. With the alignment of these nine frameworks we achieve a speed, accountability and profitability in our producer organizations, and a platform in which to operate for at least the next 25 years.

The establishment of People, Ideas & Objects has with it our user community which consists of the people who supply the tacit knowledge of how the industry operates. They provide our developers with the understanding of what and how they need the People, Ideas & Objects software to operate to do their jobs, based on the alignment of the nine frameworks to the Joint Operating Committee. The user community members are also the people who have a financial and operating interest in the service providers who provide our software and their services to the oil and gas producers. It is this reorganization of the accounting, administrative, land administration, production administration and exploration administration that enable the producers to achieve these positive outcomes. Bureaucrats would have you believe that their accounting proficiency is their competitive advantage.

The structure of the producer is changed fundamentally from the configuration today to a stripped down version in the Preliminary Specification that includes the C class executives, the earth science and engineering resources, some land, legal and support staff. The service providers process the accounting and administrative processes on behalf of the industry. Replacing the need for each producer to build the redundant and unshareable accounting and administrative capabilities within each producer firm. Focusing on the industry as their client base, the service providers use specialization, the division of labor and automation of the individual process that they manage for industry to achieve the greatest administrative efficiencies. Having control of the software as a user community member they are able to change the process they manage by changing the People, Ideas & Objects software through the user community, and if necessary, with changes to the people in the service provider itself.

The advantage of our Preliminary Specifications decentralized production model’s price maker strategy is that it turns all of the producers costs into variable costs. If the producer finds a property is no longer profitable based on the price in the commodity markets. They can shut-in the property and none of the service providers will receive any data in our task and transfer network to process anything, and no subsequent service provider billing will occur. Creating a null operation on that property as opposed to that property incurring a loss as it does in today’s environment. Therefore increasing the producers overall profitability by only producing profitable properties, reducing their future capital costs by not having the costs of the losses added to their reserves capital base which needs to be recovered in the future, reducing the volume of the commodity in the marketplace allowing the commodities price to seek the marginal costs, and increasing the profitability of the producers other properties by having higher prices received for their production.

I haven’t calculated our value proposition for at least a year. The last time I ran the calculation it was in the range of $25.7 to $45.7 trillion. The $20 to $40 trillion is the amount of capital that is projected to be expended in the industry in the next 25 years. Our value proposition calculations include all of these capital costs being depleted over the course of at least three years. This returns the capital to its owners and is a critical part of our value proposition. The current bureaucracy like to let capital rot on their massively bloated balance sheets. Leaving no way in which to return the capital to its owners. In addition to the $20 to $40 trillion we have included in that number the amount that exists on producers balance sheets today. These capital costs will be included in our pricing calculations and is in essence the money that was invested in the industry in the past and will finally be returned. The $5.7 trillion is the amount of money that the oil and gas prices were able to provide in a profitable industry vs. what they are receiving at the time of the calculation. Oil was priced at $60 then and gas was much higher than today’s $1.90, therefore this element of our value proposition is at least double. But I don’t want to make the bureaucrats look too bad now do I.

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. 

Canada Eh!

We’ve noted these next six months will be difficult in the oil and gas industry. Then again maybe Opec will solve all the overproduction issues by cutting their production and shale producers can then produce as much as they want and continue drilling for more! Bureaucrats should notice that proposed cuts in production do have an upward increase in prices which supports our Preliminary Specifications price maker strategy. Has anyone noticed these stories out of Opec seem to be serially produced fairy tales, or are bureaucrats really buying what they’re selling. Maybe I’m wrong, and something will come out of the meeting. Before we would know we’d need to see the formal seating plan for the members at the meeting. If that issue is ever is settled then I might begin to believe. Here in Canada things will be very desperate for the next six months and will dive into the deepest of ditches after that. The desire to fix the overproduction doesn’t exist in Canada either, and we are about to begin significant overproduction of natural gas.

I read the other day that the Marcellus regions producers are focusing their marketing efforts on the Ontario and Quebec marketplace for their natural gas. This market has traditionally been serviced by the Western Canadian based producers in the form of a multi-billion dollar pipeline from Alberta to those markets. With this distance you can be sure the tariffs are significant which makes the Marcellus gas attractive at one sixth the overall distance. Canada used to produce 16 bcf / day and now produces only 12 bcf / day. This is mostly due to the lack of export demand into markets in the U.S. that are now serviced by the American shale producers. If U.S. shale begins to provide Canada’s two largest populated provinces with their natural gas, there will be little demand for that current 12 bcf / day of Canadian production.

Our current federal government is about to bring about its first budget which I think in traditional Trudeau fashion is going to shaft the province of Alberta by cancelling any pipelines under review, in the name of global warming. Therefore I think it’s going to be a hard time in Canada for the next few decades to find work in the oil and gas industry. Bankruptcy trustees aside. There is a notion in the snowboard instructor, bar bouncer of a Prime Minister that we have that we should be more focused on the manufacturing areas of the economy. The oil and gas, and coal are dirty and really beneath Canadians. We Canadians like to just tag along when the going is good. My recommendation is don’t buy real estate in Alberta.

Somebody else will always fix the issues in the oil and gas marketplace. That’s the position of the bureaucrats who reside within the investors and producers. No matter what, they don’t have to do anything. Someone else will fix their trillion dollar issues for them at no cost to them. I really should have accepted this logic when I began this initiative so many years ago. I could have started coding the Preliminary Specification at the start and we would therefore be only 4,975 man years from completion. Which is what I think is missing from the equation in being assessed as not doing enough, I can’t produce an iPhone app that organizes the industry in the manner of the Preliminary Specification. With the user community, and service providers where the producers only produce if it’s profitable based on a detailed accounting. This of course would sell for $1.99 and be available in an Android version as well.

Well I know what I need to do now, that $1.99 will come in mighty handy I can tell you. But then that just shows you the value of technology today, solve a multi-trillion dollar industry wide issue with a $1.99 app. Who would have thought.

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. 

Our Low Interest Environment

The Federal Reserve is in the news once again. Changing their position on interest rate increases for the remainder of 2016. Having such low rates in the marketplace has been the wrong policy for about four or five years. It’s time to return to normal and stop the chronic bad decisions that are being made in business and in individuals personal lives from such low rates. Here in Calgary people are buying their first homes with $400,000 mortgages which is about as bad a decision you could make in your life. You could never pay that amount of money off, and at some point regular interest rates will resume and you will have valued your debt at that ridiculous level. With housing values based on the carrying costs of the home, in an era of rising interest rates, your home could be worth half of your mortgage in just a few years. Then what do you do. Its these kind of bad decisions that need to be avoided by increasing the interest rates to normal now.

The same can be said for the business community. All investment decisions are based on the anticipated return and its performance in the marketplace. When secure investments provide no return, pretty much any kind of investment appears to make sense. This leads to the overproduction that is systemic in a disinflation and deflationary environment. One that low interest rates are attempting to avoid.

I want to make it clear that I don’t think low interest rates are what have lead to the systemic overproduction of the oil and gas commodities. Opec is certainly a constant that appears in the oil markets of today and of course back in 1986 through to this century. They had upwards of 10 million barrels of surplus capacity that was believed to be part of the reason for the low prices in 1986. I think however you have to look at the business model of the oil and gas industry, on an international basis, in order to find the real reason behind the systemic overproduction. And that business model is the high throughput production model. It takes significant infrastructure in order to be an oil and gas producer. These infrastructure costs are what drive the need for more production. In addition, the never ending demand for higher production volumes from the investment community is further application of the high throughput production model. The element of shale, on top of the inherent overproduction arising from the high throughput production model is the toxic destructive environment that demands a solution in both commodities.

Whether we agree on the aggravating causes of the price declines over the past history of the industry is probably unnecessary. We could all agree that shale is an aggravating factor that will not be handled without some intervention in the market in the short to mid term. Shale has changed the oil and gas business fundamentally. Moving it from commodities that are scarce to abundance in a material way. As a result what the Preliminary Specification seeks to do is to move the industry to our decentralized production model and away from the high throughput production. Turning the producer from a reliance on their administrative and accounting infrastructure, to a reliance on the industry based administrative and accounting infrastructure of the People, Ideas & Objects Preliminary Specification, our user community and our service providers. And therefore turning their infrastructure costs from fixed to variable in nature.

Making the change to the existing oil and gas producers is not something that is contemplated as being a possibility. Organizations don’t change, but people do. The bureaucracies that exist today are the same that began in the 1920’s, only accelerated by today’s computer technologies. The hierarchies useful life has ceased to exist in many of the industries that have been disintermediated. They are replaced by networks of people who are capable of dealing with the opportunities and issues in the specific industry. Changing a hierarchy into a network would require the energy equivalent of what we have in all of the shale based reservoirs today. You won’t see me volunteering for such a frustrating and difficult job as that. We are relying on the forces of creative destruction to make the change from the hierarchy to our networked world quickly and effectively through implementation of the Preliminary Specification. We should thank the producers for following our script so diligently to this point, failure has a distinct feeling, now if they would just step aside.

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. 

Low Water Mark

You want to establish a high water mark in terms of your performance during your career. The proven track record that you can succeed at a high level consistently. In oil and gas the bureaucrats have now established the low water mark in terms of how bad they run the industry. In these days where the oil price reaches $40 we get the sense that the worst is over and the good days are around the corner. To establish the pressing need for change in the bureaucrats now would be a hard sell, don’t you think? They were able to muddle through the worst period the industry has seen and they were never challenged in terms of their franchise being questioned or challenged. That is other than by a blogger. There were no calls to make the necessary changes to the business model, just to wait out the time necessary for “market rebalancing.”

I have argued that the next six months will be by far the worst period that the industry has ever seen. These temporary price increases will not last much longer. It appears to me that people are covering their shorts in both the stock and commodity markets. This attitude of the bureaucrats is telling. They did nothing then, and they’re feeling bolstered by the prospect of the good times. Time to start working on fixing up the cabin for the upcoming season. My visits to downtown Calgary reflect that the planning and execution of the summer time activities is well on the way. There is no discussion of business that you overhear. It's all personal business that is the topic of discussion. The pace in which people walk from point to point has a sense of entitlement and leisure that I have never seen before. There is no sense of urgency anywhere. There is no concern as to the future of the industry or their business.

We sort of new the store wasn’t being minded by the bureaucrats all along. They don’t care. The oil and gas industry is ripe for disintermediation and the destruction that it has set itself on. If the bureaucrats don’t see it now, and are not concerned in the least, then they won’t be part of the battle of ideas that will be raged in this next six months. They have nothing in this field. Other than rebalancing the market which has been the operating strategy in natural gas for six years. Nothing is being offered as a strategy or idea by the bureaucrats. Six years is an economic cycle. Is the oil and gas investor expected to sit out many economic cycles in order to treasure an oil and gas investment? Other than the Preliminary Specification, there is nothing, just a quiet, passive death of a way of life known as the old oil and gas industry.

This is the standard of expectation of an oil and gas investor! How the bureaucrats were able to get away with this is unknown. Our own campaign in the past three years has generated no interest from these investors. They must feel that our value proposition does not build the trillions of dollars of value that these bureaucrats are losing for them. Whichever. The point of the exercise is that disintermediation is occurring in all industries. Information Technology is defining new ways to organize and build value where the old can’t. This is the larger trend that People, Ideas & Objects needs to tack towards. Holding out the trillions in our value proposition in terms of the prize that is available to those that are willing to do a little hard work here. What we see in oil and gas today is an industry that will do nothing to defend itself or offer up any challenge or resistance. The investors who have been taken to the cleaners apparently couldn’t care less either. An industry that is well past ripe for the taking.

What we have also learned through this process is that it is not enough just to own the oil and gas assets. Now, in this Information Technology driven world it is necessary to have access to the software that makes the oil and gas asset profitable. The existing bureaucracy have proven themselves to be a complete failure and incapable of being resurrected as a viable going concern. Now we just have to position ourselves in the manner to disintermediate the industry.

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 Operational Concerns

Only a fool would continue operations as we are at People, Ideas & Objects without a penny from the bureaucrats in these past 25 years. Especially after having been assessed by the investment community of not doing enough to solve their trillion dollar problems. Yet here we are. Well I take offense to being called a fool, and would state that you don’t have to be crazy to do this job, but it sure helps.

We’ve had a lot of fun this past week highlighting the conflict and contradictions that we find ourselves in. Bureaucrats are bureaucrats whether they exist within the producer firm or in the firms that invest in the oil and gas producer. And those investors continue to invest in the oil and gas producers. My argument about investors subsidizing consumers for their costs of energy doesn’t seem to have been made. Maybe the oil and gas investors should just buy the commodities instead of the producers. They’ll get the same performance but with no risk of the firm defaulting. Which brings into question what is it that the bureaucrats are doing if they’re just mirroring the commodities moves. I thought I read somewhere at sometime that the point of management was to eliminate the downside risk of investing in the commodity.

One area that the bureaucrats criticize me for is the broad scope and scale of the Preliminary Specification. Applying this across the industry would be difficult and doesn’t seem, to them, to be a viable solution to the issues facing the industry. I agree with the scope and scale point of view. It is very broad and includes the accounting, administration and operations of an oil and gas producer. Which raises the question how is it that the bureaucrat is able to cobble this solution together within their own shop, but feels it would be impossible on a broader scale? I will have a much more efficient budget where the costs of operations will be covered on a greater percentage basis than they can achieve. For example, the costs of managing an email server takes 30% of one individual's time within the producer. Whereas it may take ten fully committed specialized team members at People, Ideas & Objects. Yet these ten team members costs when allocated over the production profile of the industry will be mere pennies on the dollar compared to the individual producer's costs. We also have the advantage of specialization and the division of labor to expand the industries capacities and throughput when and where it is necessary. These traditional economic tools are not available to the bureaucrats small internal technical teams with their limited capabilities when applied against this broad scope and scale. We also have the budget in terms of our ability to research and develop new initiatives and capabilities that will provide value to the producers in the future. Something that the producers don’t appear to have today.

If we were to commence developments without the full budget secured. Then we would be at risk of having the bureaucrats cancel our project each time the price of oil went up by more than $2.00. Their attention spans do not breach the next quarterly report. Therefore we need to have these resources secured to ensure that the outcome of the project is viable, but there is a far more important issue here. The bureaucrats are vindictive and will take the baseball bats to those that are involved in this project. If those people find that their opportunities in this initiative are suddenly cut off, then they’ll only have the angry, vindictive bureaucrats to deal with to save their careers. No one should have to commit career suicide in order to save the industry from these most lovely people.

I want to point out why Exxon, BP, Shell and Chevron can’t go it alone in terms of their own systems development and why we need them in the user community. The big guys like to do things their own way and we can all understand their reasoning for that. But we need them. It is their production profile that will be responsible for offsetting much of our costs. Or in other words they’ll be paying most of the freight. They’ll be doing that anyways with their own systems development, and once their system is built there will be no one else that’ll touch it. Is Devon going to want to use a system that was developed by Exxon? People, Ideas & Objects independence from any individual producer, working on behalf of the best interests of the producers, providing producers with the most profitable means of oil and gas operations, is the objective way in which all producers, large and small can willingly use a system that was designed and developed by a user community.

I’d also like to point out the recent discussion we had regarding IBM and Oracle’s participation in the oil and gas ERP marketspace. After many years of trying to secure support from the producers they were wholly unsuccessful and left the market. All of the producers stood united together expecting that the Information Technology vendors would be the ones that “invested” in the producers ERP applications. IBM and Oracle could see the devastation that had been created in the oil and gas ERP space over the years. For more on that read our Revenue Model. Now, outside of the existing SAP and P2 installs which have no further development plans, there is only People, Ideas & Objects who have a value proposition in the trillions of dollars, which coincidentally has been determined to be not a good enough effort by the producers and their investors. The fact of the matter is they wouldn’t do anything then, and they don’t do anything now. The only difference today is that I have provided them with a comprehensive vision of how and what the producer and industry would need to operate in order to earn our multi trillion dollar value proposition. Creative destruction is about the old being washed away by the new. We obviously don’t know who will be the ones who step up to earn those trillions of dollars. What we do know is it's not the existing bureaucrats.

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. 

Options for Investors

What the oil and gas investment community should be thinking about these days is their options for dealing with the difficulties they are experiencing in oil and gas. I have to assume that at some point the story that the market will rebalance itself is going to begin to look a little tired. Someone is bound to notice that it’s the same story that’s been told for almost two years in oil, and for six years in natural gas. And its not working. We should ask the bureaucrats, what exactly it is they’re doing? Is there anything being done? How have things changed as a result of the discovery of shale based reserves, and how will these changes fix the issues we are experiencing. These I would expect would be the questions that are being asked in the marketplace.

I sat in amazement in the 1980’s and 1990’s when all of the producers, and I mean all of the producers, continued to overproduce oil into the marketplace. It was clear to me that if each producer was to shut-in some of their production, and only a very small percentage of it, then they would experience significant increases in price, revenues and finally earn some profits. This never happened and the producers only complained about how bad it was and waited for the market to “rebalance” itself. After what I think was at least 15 very bad years the market rebalanced itself and things resumed somewhat with prices that at least covered costs. Why did they continue to overproduce? Because that is the way they are structured. They can do nothing but produce at full capacity at all times. What would enable the producers to change to a more appropriate method of organization? What was that method of organization? And could it continue to meet the needs of the marketplace and to also earn a profit?

Then in May 1991 the vision of the Preliminary Specification came to me. Now not in a coherent, expressible way that made sense. I knew however that given time I would be able to solve this problem. I also knew that software was the means in which to implement the solution. I then started out with these ingredients, built a team, promoted Oracle on this vision and raised some money. We then began developments on a solution to solve this vision that I had. The history of the next six years is well documented in this blog. Unable to continue with the software developments, I was still able to work on solving what eventually became to be known as the “business model.”


In 2000 I started my MBA with the specific purpose of fully vetting my ideas through the process of that education. It was in the process of writing the proposal for my thesis that I finally determined that the Joint Operating Committee was the key organization construct of the dynamic, innovative, accountable and profitable oil and gas producer. I then ran around town announcing that it was the Joint Operating Committee that was the answer to the problem and most people looked at me and asked what exactly was the question. Many of the very senior people in the industry fully understood the implications of using the Joint Operating Committee. I also knew that although I solved the problem, the implementation needed to be determined. That is, what would the industry and the producer look like and operate as if we adopted the Joint Operating Committee as the key organizational construct.

The Preliminary Specification which represents the codified research that determines what the industry and producer would need to look like and operate as if we adopted the Joint Operating Committee as the key organization construct was completed on December 20, 2013. It total’s 175,000 words and is based on the 1.5 million words of my research that have been published on this blog. That was a little over two years ago, based on a vision that I had almost 25 years ago, about an issue that I saw in the industry around that time. Some may think I haven’t done enough, but then I’m the only one who did anything.

The point of this history lesson is that the bureaucrats have rejected the Preliminary Specification in its entirety. It eliminates the bureaucracy through the technology that disintermediates the industry. A phenomenon that is happening in every industry, and one that is being battled between the old and new ways of doing things. If there is to be a third way that is generated to operate the industry. That is if you think the bureaucracy is as much of a dead end as I do. To generate a new implementable business model could be available as soon as 2041. I wonder what things’ll be like then?

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. 

Stealth Mode

We have to focus on what we can do to solve the issues that are present in the oil and gas marketplace today. Our primary time constraint is the development of the user community. If we had our budget in hand it would be the development of the user community that would dictate the pace in which we developed the Preliminary Specification and our delivery date. Since we published the Preliminary Specification, development of the user community has been our primary focus. With the Internet we have the means in which to communicate with people of similar mindsets and prepare them for this work. Giving us the opportunity to state that we are working as quickly as we possibly can to solve the issues in the marketplace today. That those people who are out the trillions of dollars don’t see this, is one of those unique contradictions that we all know and love in the business world. Maybe they’ll realize the bureaucrats are feeding them a line and understand who is really working for their best interests. In time they may see that our efforts are to provide them with solutions to the bureaucrats failings, and that by providing them with options gives them the choice to move in the appropriate direction to solve their problems.

Our user community is the critical element of People, Ideas & Objects products quality. And they are much more than that. They are the means in which the oil and gas industry will affect the administration, accounting and operational strategies and changes in the industry. Software defines and supports the organization. As the bureaucracies have shown it turns them into unchangeable cemented fixtures. Without a dynamic user community with the power and control over the software that defines and supports the organization then there will be no dynamism in the oil and gas industry. We will simply re-cement the industry with the Preliminary Specification and live with the consequences of that. Not an acceptable outcome. We look to our user community to also provide the service provider organizations that will deliver our software and their services to the oil and gas producers.

The capability of the user community to enable this dynamism in oil and gas is provided through the user community vision. This grants them the effective control over all aspects of the software and ensures that they are the ones that are seen as the people who are able to make the necessary changes. People, Ideas & Objects software developers are blind, deaf and dumb to anyone and everyone other than the user community. We will have no Service Level Agreements with the producers. It will be the user community that is the exclusive organization in which to deal with the softwares form and function. The user community is designed to include approximately 3,000 part-time members and each will have an interest in one or more service providers that are providing a processes management to the entire oil and gas industry as their client base. Through licensing it is the user community that has full access, control and development of the Intellectual Property that makes up the Preliminary Specification and its derivative works. It is this power that will make them the effective go-to group to have the industry's problems solved. Which bureaucrat do you go to today to have your issues resolved? And if you find one, will they have the power to do anything?

We have set up a process where people can apply to become members of the user community. No one better than I understands the vindictive and insidious way in which the bureaucrats operate. This application process remains completely confidential until such time as the full resources of our budget are secure. There is no reason that anyone needs to risk their career as a result of being seen to be involved in this initiative. You can think of us as being in stealth mode until such time as it is safe from the likes of our good friends the bureaucrats.

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.