Our Oil and Gas White Paper, Part XIV

Petroleum Lease Marketplace

The Petroleum Lease Marketplace is I think the most interesting marketplace module as its objective is to replicate virtually what the physical oil and gas marketplace is. Which of course begins with Petroleum Leases. When we’re replicating the physical oil and gas marketplace, the Petroleum Lease is the source document that is the common denominator of all activity and ownership within the industry. This is also one of the critical components of the producers key competitive advantages that include their land and asset base, and their earth science and engineering capabilities. As such it should be considered a producer facing module as its primary role. The Joint Operating Committee will also have a use for the Petroleum Lease Marketplace, however, their land position may be somewhat static for long periods of time. This is the opposite of the Resource Marketplace module which should be considered more of a Joint Operating Committee facing module where the markets resources are acquired. Any physical oil and gas asset will be attached to some lease, agreement, rights or concession granting the holders the rights and privileges of ownership, lease or rental. These are the things that are contained within a marketplace. They are what are purchased and sold, bargained and traded for, they are the things that people are recruited to provide services for. Generally a marketplace is a dynamic and evolving commercially oriented hub of activity. That is what we are replicating in the Petroleum Lease Marketplace.

When we look at the types of work that are carried out in the Petroleum Lease Marketplace we see a large group of administrators working within different areas of a producer firm. Whether it be the Land or Legal department, Production or Exploration Operations staff or Accounting people; all of these groups have an interest in the information, people, assets, documents, processes and functionality contained within the Petroleum Lease Marketplace. The primary concern of the people in these groups is the information and data contained within the module. its accuracy, access, and use by those within their firm, but also within the Joint Operating Committees that their firm have interests in. Some of this data will be similar to the data that is held by their firms partners, and much of this data will have been generated in a cooperative and collaborative manner by those partnerships.

One of the greatest opportunities that we have in developing this system is to address the division of labor and specialization. To take these people’s work and to reorganize it across the industry, so that it is focused on the needs of the producer and Joint Operating Committee and very specialized in terms of the tasks that they conduct. To apply those skills across the entire industry, a geographical region, or some other classification. Which is something that could provide significant increases in oil and gas industry productivity, overall cost savings and value. That is to say that an individual would work at an individual process that is billed to 1,000 Joint Operating Committees that might represent 100 oil and gas producers within a specific region that focuses on Shale and is geographically constrained. Specialization and the division of labor are determined by identifying and filling “gaps.” The natural process of gap filling in today’s business environment is now constrained due to the strict and unchanging structures that are imposed by today’s ERP systems. In order to make changes, to fill gaps, the producers will need the software development capabilities, user community and service providers to make the changes in the software first, then the changes in the organization can follow. These are what People, Ideas & Objects Preliminary Specification provide.

The types of documents and the associated processes that are managed within the Petroleum Lease Marketplace are somewhat self-evident. (Recall we are including Land, Legal, Production Admin, Exploration Admin, Accounting and Others in the classifications.) Most of them are created in collaboration with the participants of the Joint Operating Committee and include: Authority for Expenditures (AFE"s), Capital Budgeting (Firm and JOC), Construction Ownership and Operating Agreements, Mail Ballots, Daily Drilling Reports, management of the lease bidding process, Lease Bonus, Lease Rental, Lease Taxes, Areas of Mutual Interest are some of the forms, processes and attributes of the Petroleum Lease Marketplace module. A more detailed specification will be the result of our user communities contribution and commitments.

In Professor Giovanni Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” he notes the following three factors involved in the development of innovation.

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between:

• Capabilities and stimuli generated with each firm and within the industry in which they compete. 

• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc. 

• Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.) 

The innovative oil and gas producer relies on their competitive advantages of their land and asset base, and their earth science and engineering capabilities. The Petroleum Lease Marketplace is the module that provides the producer and Joint Operating Committee with the tools to build and manage their land and asset base. But there’s more, using the “Marketplace Interface” and the service providers that support the innovative producers and Joint Operating Committees. The Petroleum Lease Marketplace provides the producer with the competitive advantages that are necessary to compete in the 21st century.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Oil and Gas White Paper, Part XIII

Resource Marketplace

What we set out to accomplish in the Resource Marketplace module is captured in this quotation from one of the primary sources of our research. Professor Richard N. Langlois and Professor Giovanni Dosi were both extensive resources for the research that was conducted in the development of the Preliminary Specification. In this quote from Professor Langlois we learn the direction that we are headed.

[I]t seems to me that we cannot hope to construct an adequate theory of industrial organization and in particular to answer our question about the division of labour between firm and market, unless the elements of organization, knowledge, experience and skills are brought back to the foreground of our vision (Richardson 1972, p. 888).

To deal effectively with the resource marketplace in oil and gas, the producer will need tools to effectively engage with the suppliers and others for the resources they need. The Resource Marketplace Module provides a window on the “Resource Marketplace” for Joint Operating Committees (JOC) and producers. Anything of value that is contracted between “actors” in the oil and gas, service, service provider, software and user community generated businesses will be found, contracted, managed, transacted and developed through this module. It's simply a virtual representation of these marketplaces. Therefore the negotiation, determination of available resources, determination of transaction costs, contract execution, effective software tools to monitor and verify compliance to the contract with the full support of the accounting system of an ERP system are all part of the Resource Marketplace module and its interfaces to other modules of the Preliminary Specification.

Similar interfaces will be provided for use by the service industries. Transactions have two parties, the efficiencies of the producers would inherently include the efficiencies to the service provider. Since we are an accounting system, then certainly offering similar services to the suppliers would only make sense. It is not just producers in the Resource Marketplace. Key to the efficiencies in the Resource Marketplace are the mitigation of transaction cost friction. Friction on both sides of the transaction, due to the fact that transaction costs in the Resource Marketplace are costs that will ultimately be borne initially by the Joint Operating Committee and eventually by the producer itself.

Contained within this virtual marketplace will be all of the producers and suppliers who will be able to define, create and conduct business in the actual marketplace that exists today. The scope and size of the Resource Marketplace will accommodate the needs of Exxonmobil and their $250 billion annual operating costs down to the single entrepreneur starting out in the oil and gas business. To preclude any group, profession, organization, or person from the Resource Marketplace would limit the value available to the industry. To call this just a Human Resource Marketplace would be incorrect because it would limit the participants in the market. Whatever service, product or solution is provided to the energy industry, from either individuals, those employed by producers or Joint Operating Committees, or companies providing services to the producers. This should include Schlumberger and anyone directly or indirectly employed in the energy industry. Therefore acquiring as Professor Langlois suggest’s “the elements of organization, knowledge, experience and skills.”

It is the use of the Joint Operating Committee and the “Marketplace Interface” by the Resource Marketplace that provides the value to the innovative oil and gas producer. Enabling the service industry to grow thick markets for their products and services. Where a diversity of offerings from new competitors, with new products or innovations on the products provided by existing suppliers. Producers have a role in defining and supporting a dynamic, competitive and healthy service industry. However, before that happens, the need for the software that is defined here in the Resource Marketplace has to be built for the producer, the Joint Operating Committee and the service sector to support these markets. From Professor Richard Langlois paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.”

The second hypothesis, which has resonances at least as far back as Gerschenkron’s famous “backwardness” thesis (Gerschenkron 1962), is that the way an economy responds to the problems of coordinating economic development depends not only on its own institutions and capabilities but also on institutions and capabilities elsewhere. It depends not only on an economy’s own history but on the history of other economies as well. The force of this observation is that an economy at the frontier of economic development (however we care to define that) is likely to respond to the coordination problem differently than an economy lagging behind that frontier. Specifically, an economy at the frontier is arguably more likely to rely on decentralized modes of coordination. This is so because uncertainty is greater at the frontier — uncertainty about technology, organizational form, market direction. p. 18

The division of labor and specialization play a large role in the Resource Marketplace as well. By outsourcing many of the administrative functions from the producer firm to specialized service providers who provide the People, Ideas & Objects software and process management to the producer firms. The producer firm is able to focus on those core competitive advantages of their land and asset base, and their earth science and engineering capabilities. Having the land, accounting, production and other administrative functions sourced through the Resource Marketplace by specialized service providers.

With this change in the administrative function of the producer firms we are able to transition from the “high throughput production” model to the “decentralized production” model where production and overhead costs more accurately match revenues. As a result we are able to initiate pricing related production decisions that better manage the producers oil and gas reserves, ensuring profitability everywhere and always. What this means is with the service providers focused on their process, such as production accounting, they will be engaged by the Joint Operating Committee not the producer. When the decision is made to temporarily suspend production, the associated costs of production accounting and other accounting, administrative and overhead costs will not be incurred. Moving from a reliance on the producers fixed administrative and accounting capabilities to the industries variable administrative and accounting capabilities. The Preliminary Specification turns all of the producers cost variable, based on production. Please see the Preamble for further definition of the decentralized production model. Lastly I would point out the Resource Marketplace module is an active participant, as is the Petroleum Lease and Financial Marketplace modules, in the “Marketplace Interface” which will be discussed further in the other Marketplace modules of the Preliminary Specification.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Oil and Gas White Paper, Part XII

    A quick note about software

All of these components of our competitive advantage require the software known as the Preliminary Specification to be built and operational. As we’ve learned in the Preliminary Research Report (2004), software defines and supports the organization. What we also learned at that time was the producers response to that knowledge was they would not change their software, and hence, there would not be a threat to the manner in which they managed the oil and gas producers. This has been the policy of the producers since that time and they’ve been able to ensure that they’ve been handsomely compensated at the expense of everyone else in society. We believe the current bureaucracies within the producers are only riding out the last few minutes of their prosperity before they exit. That would be consistent with the history of organizations going back to the 1930’s. Without the software to run the industry and producer firms profitably, as described in the Preliminary Specification, it will not happen. We have declared the economic concept of spontaneous order null and void as a result of the role that software occupies organizations in the 21st century. In order to change the organization you must change the software first. Otherwise any attempted changes will only see the organization regress back to the way that the existing software manages the organization. This provides further support for the defined software development capabilities that People, Ideas & Objects are offering with our user community who hold the power and control necessary to make changes to the software and services used in oil and gas. Without these oil and gas will remain stagnant.

Hosting of the People, Ideas & Objects Preliminary Specification applications and modules, and Oracle modules, will be via cloud computing architectures. This provides a more cost effective solution to the industries needs as the budget requirement for hardware and support will be on an as used basis. We will also have the resources and capabilities to meet the producers demands of our software during month-end closing etc. In addition throughout this sub-industry that we’re creating between the Information Technology firms and the producers. We will be using Google’s Apps for your Domain based applications and collaborative environment. These enable us to be far more flexible and productive in the tasks that we need to undertake.

These are a summary of the six aspects of our competitive offering for the oil and gas industry. They are structured to provide the producer and industry with a profitable operating base in which to approach the 21st century. However, what we know is that by using the Joint Operating Committee, the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. We enable our software to approach and undertake the administrative, accounting and operational issues that the industry faces today and for the future.

Security & Access Control

What we have with using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer. Is the interactions of many producers and suppliers who are involved in the day to day commercial and strategic concerns of a Joint Operating Committee. What we need to concern ourselves within the Security & Access Control module is that the right people have the right access to the right information and data with the right authority at the right time and at the right place.

Throughout the Preliminary Specification we discuss one of the premier issues of the oil and gas industry. That being the demand of the earth science and engineering effort is increasing with each barrel produced. This is best represented in the steep escalation of exploration and production costs involved in oil and gas. At the same time the critical earth science and engineering resources are somewhat fixed and are difficult to expand in the short to medium term. Add to that, an anticipated retirement of this brain trust in the next twenty years, the depression we are in is stalling the careers of recent university graduates, the expected production profile of the North American continent and the problem becomes of critical concern.

There are few short term solutions to the short fall in geologists and engineers over the next twenty years. It takes the better part of that time to train them to operate in the industry. What we do know are several “things” that are being applied in the People, Ideas & Objects Preliminary Specification. Key to a number of concepts application are what we call the Military Command & Control Metaphor. Which is a method developed in the Security & Access Control module of imposing command and control over any and all Joint Operating Committees, working groups, producer firms or organizations the producer may need to add structure to.

The concept of specialization and division of labor is well known as a principle of economics that brings about greater amounts of economic productivity from the same volume of resources. Given that the volume of earth science and engineering resources are known for the foreseeable future, specialization and the division of labor will provide us with a tangible means in which to deal with the productivity of the oil and gas industry. In today’s marketplace to approach a heightened level of specialization and division of labor, particularly from a scope and scale point of view, without the use of software to define and support it would be downright foolish.

The pooling concept is the solution to the current desire that each producer firm acquires the earth science and engineering capabilities necessary to deal with all the needs of their “operated” properties. This creates unneeded “just-in-time” capabilities for these scarce scientific resources. When each producer within the industry pursues this same strategy substantial redundancies are built into the industries capabilities. Redundancies that are left unused and unusable. What is proposed through the People, Ideas & Objects software application modules is that the producers operational strategy avoids and eliminates the “operator” concept and begins pooling technical resources through the partnership represented in the Joint Operating Committee. That way the redundancies that would have been present in the industry can be made available to the producers and used by the producers through an advanced specialization and division of labor.

What these concepts require therefore is what the Security & Access Control module is designed to provide. The system must provide the right access to the right person at the right time and the right place with the right authority to the right information. With the Military Command & Control Metaphor there will also be the manner in which the technical, and all the resources that have been pooled from the producers, interact with an appropriate governance and chain of command within a Joint Operating Committee that spans many producers.

Oracle’s products provide a strong layer of mission critical capabilities in the Security & Access Control module. Although this comes with additional costs, I am certain that no one will argue with the quality and secure knowledge that these products bring. I also am proud that I maintain the two ugliest websites in this blog and our wiki. This is for two reasons the first being, I’ve provided a solution to what I see as the issues to oil and gas without any support from the producers. On the contrary it has been a protracted and ugly fight since August of 2003. If the best ideas are being expressed on the ugliest websites I hope the bureaucrats are adequately humiliated. Secondly these sites are both hosted by Google. Which provides me with a technical infrastructure that is more or less impenetrable from a security point of view. Our websites are not generally allowed past the producers firewalls but they also are not subject to any denial of service attacks or malicious behavior. As far as I’m aware we have a 100% up time record. By using Oracle and Google in the configuration for the sub-industry and also the delivery of our products we gain the same kind of advantages from a security and access control point of view.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Oil and Gas White Paper, Part XI

   4) Innovation for Profits

As the fourth element of our competitive advantage of providing the innovative oil and gas producer with the most profitable means of oil and gas operations. We focus on innovation as the way in which to enhance the profitable nature of the producer and to ensure that the consumers cost of energy is as low as it can be. Innovation for profit, particularly from the science basis of the business, is the successful perspective for the 21st century oil and gas producer. It is within the DNA of the Preliminary Specification how the processes of innovation are identified and supported that enhance the ability of the innovative and profitable oil and gas producer. From Professor Giovanni Dosi.

In the most general terms, private profit-seeking agents will plausibly allocate resources to the exploration and development of new products and new techniques of production if they know, or believe in, the existence of some sort of yet unexploited scientific and technical opportunities; if they expect that there will be a market for their new products and processes; and finally, if they expect some economic benefit, net of the incurred costs, deriving from the innovations.

With an inventory of oil and gas assets that are non producing. The dynamic, innovative, accountable and profitable oil and gas producer will have readily available properties to focus their innovations on.

    5) Lower Costs of Exploration & Development

The oil and gas industry needs a dynamic, innovative, accountable and profitable service industry in order for it to be dynamic, innovative, accountable and profitable. In the brief moment that we’ve had “good times” in the industry, producer firms accused the service industry of being greedy and lazy due to the high field costs that were being experienced. Today the service industry has had their activity levels slashed and their accounts receivable extended for up to 18 months by the producers. A situation that puts their organization, unnecessarily, in jeopardy. There is substantial conflict between what is required and what exists. The Preliminary Specification works to mitigate this conflict by addressing the issue of how the producer firm deals with the generation and management of ideas in the service industry. Currently the producers ignore and abuse the rights and ideas developed by the vendors that they use. And as time has passed, the number of companies that have initiated new products, services and competition have dwindled. Leading to the situation where the producers have a limited number of very large service industry participants who have the pricing power on their side during the alleged “good times.”

It is through the Preliminary Specification that the producers begin to respect, sponsor and support the ideas generated by the service industry. Oil and gas producers do not compete on the basis of drill bit manufacturing technologies. It is on the basis of the respect by producers of the service industries Intellectual Property that will enable service industry representatives to respond with new and innovative products, services and competition. Through a variety of interfaces in the Resource Marketplace and Research & Capabilities modules the producers are able to participate and lead the creation of new and better products and services by clearly expressing their needs and allowing the service industry to respond.

When the oil and gas industry has a dynamic, innovative, accountable and profitable service industry supporting the oil and gas industry then the profitability of the oil and gas producer will be enhanced, further contrasting People, Ideas & Objects business model to what the current bureaucracies may be using today.

    6) Earth Science and Engineering Resources

The Preliminary Specification recognizes and supports the dynamic, innovative, accountable and profitable oil and gas producers competitive advantages of their land and asset base, and their earth science and engineering capabilities. It is through the use of innovation, specialization and the division of labor that we leverage the earth science and engineering resources of the producer firm. As with the fourth and fifth point above, investments in innovation are undertaken with the express intent to return a profit. Innovation on the sciences of oil and gas are part of the producers competitive advantages and are therefore the express purpose of the modules within the People, Ideas & Objects Preliminary Specification.

In terms of specialization and the division of labor, the producer firm must approach the issue of the pending limited base of earth science and engineering resources. Pending due to the retirement of the brain trust of the industry, the lack of new hires from the universities, the expected throughput increases in North America and the ever increasing demand of geology and engineering with each incremental barrel produced. People, Ideas & Objects have developed the pooling concept to eliminate the unused and unusable surplus capacity of these resources that are trapped within the silo’s of each bureaucracy. In addition we have used specialization to reorganize certain skills within these professions to service providers who can specialize in the specific skills. It is with the pooling, specialization and division of labor that the demand for engineers and geologists will be more manageable. This organizational structure is identified and supported throughout the Preliminary Specification.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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.

Third Friday

Our Oil and Gas White Paper, Part X

This post reflects my approach to writing this paper, and the difficulties that I’m making for myself. The randomness of the order and presentation to this point is not necessarily what it will be in the final edited position paper. There is significant material that needs to be included in this paper. And the means in which the full scope of this material is not necessarily top of mind when it’s written. The following number of posts is a rewrite of the Preliminary Specifications Executive Summary. I will also be rewriting the Abstract and Preamble during this process.

The Preliminary Specification is a twelve module ERP (Enterprise Resource Planning) software system designed for the dynamic, innovative, accountable and profitable oil and gas producer. It uses as its key organizational focus the Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the industry. By moving the compliance and governance of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee we achieve a speed, innovativeness, accountability and profitability that is necessary for at least the next twenty five years.

Keep in mind while reviewing the Preliminary Specification that it is People, Ideas & Objects claim that we provide the oil and gas producer, as our competitive advantage, the most profitable means of oil and gas operations. And we do this in the following six fundamental ways.

    1) Our Value Proposition

The Preliminary Specification provides the most profitable means of oil and gas operations. We have quantified the value of the difference between our system and the status quo at $25.7 to $45.7 trillion over the next 25 years. These are as a result of the ability of producers to avoid any losses on operations by knowing precisely which properties are losing money and which ones are profitable. Something quite remarkably they are unable to determine today. Then they’ll be able to shut-in any losing properties leading to the dynamic that is discussed below in item 3.

    2) Specialization and the Division of Labor

If we review the Preliminary Specification there is a defined restructuring of the industry that takes place throughout the modules. The oil and gas producer is a stripped down version of itself that has the C class executives, earth science and engineering resources, land, legal, and minor support staff. And that’s it. The rest of the administrative and accounting resources of the producers are reallocated and provided by service providers. And each of these service providers are focused on one process, or one element of a process using the industry as its client base. So for example there would be one lease rental payment processor that handles all of the industries lease rental payments. Where the cost of the lease rental payment, and the billing for the lease payment service provider is billed directly to the appropriate Joint Operating Committee, not the individual producer. We are moving from the reliance on producers fixed administrative and accounting capabilities to a reliance on the industries variable administrative and accounting capabilities.

The advantages of moving to a system and methodology such as this is its lower cost and efficiency. The costs associated with the lease payment processor would be a small percentage of what is incurred by the industry today. By focusing on the most efficient way to process lease rental payments, and only lease rental payments, the service provider would become specialized and reduce the time and effort in administering these tasks to a small component of the costs incurred today. Around 1776, in Adam Smith’s pin factory, his research yielded a 240 fold increase in productivity from the changes that he made in the process of making pins. Having the lease rental payment process, and most particularly the administrative and accounting processes of the oil and gas industry subject to this type of analysis, complete with a software development capability as proposed by People, Ideas & Objects, similar results in productivity would be attained. All economic growth since the late 1700’s can be attributed to enhanced organization through specialization and the division of labor. Society today requires software to define and support any enhanced version of specialization and division of labor. People, Ideas & Objects software and our software development capabilities are critical capabilities for the oil and gas industries performance and future growth.

    3) Capability to Remove the Marginal Production and Become Price Makers

With the high costs associated with exploration and production, and particularly shale, it’s no surprise that producers are reporting losses on operations. What is surprising is that producers have done nothing to mitigate the chronic and systemic overproduction that has caused the decline in oil and natural gas prices. The reason for this chronic overproduction is the producers have to generate the revenues to cover the overheads they incur in what is called the “high throughput production” model they employ. This model has the overhead costs of the producer firm being incurred whether there is production or not, and as a result, it makes their operation a high cost operation, even at full production. At lower production volumes it skews their earnings and their overhead costs appear out of place.

In the Preliminary Specification we have employed the “decentralized production” model. As we mentioned in the second point above, the service provider charges for their services directly to the Joint Operating Committee the costs of their accounting or administrative service. If the property is shut-in due to low deliverability, high costs or other reason then there is no charge incurred for the overhead item by any of the individual service providers as they’ve conducted no work on that property, and neither the producer or the Joint Operating Committee are incurring any of the accounting or administrative overhead during times of shut-in production. Therefore the only costs that are not covered during times of shut-in production are the costs of capital. The producer can therefore shut-in unprofitable production based on an accurate, detailed accounting and attain their highest level of corporate profitability by not having their losing properties diluting their profitable ones. They can save those reserves for a time when they can be produced profitably. Those reserves will not have to carry the incremental costs of subsequent monthly losses that need to be recovered in the future. And finally, by keeping that unprofitable production off the market those commodities will find their true marginal costs.

If producers across the industry follow this process then oil and gas prices would not have the significant declines that we’ve experienced in the last number of years. If the downswing in oil and natural gas prices were averted by way of a reduction in unprofitable production volumes, the total revenues and profits of the industry would provide for profitable operations everywhere and always. People, Ideas & Objects believe we have a responsibility to use oil and gas resources effectively, and that implies that we at least produce them profitably from an appropriate accounting basis. Producer bureaucrats claim this is collusion and have used that as an excuse to lose effective control of the financial, operational and political frameworks of the industry. They will not listen to the fact that making effective, independent business decisions based on actual, factual accounting that determines profitability is not collusion. As a result they have destroyed the industry and are unable to provide an alternative strategy or plan to deal with the issues and opportunities they face.

 The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Oil and Gas White Paper, Part IX

Service providers are independent and are not concerned if its Exxon or a startup that is the owner of the property that they’re billing for their services. Understanding that the service providers will be limited to the data elements that will be necessary for them to manage the process they’re responsible for, it is doubtful they’ll know which client it is they’re charging when they issue their billing to a Joint Operating Committee. Their concern is the efficient and effective management of the process that they’re exclusively responsible for. If a producer does have an issue with their service they’ll know who to contact, the user community member that heads up that service provider. That member of the user community will have the power and the tools necessary to deal with the issues and opportunities that the industry may have as a result of any changes or defects in the software or process the service provider manages. As we always say in today’s current software environment, who do you go to see when your current software solution is not as it should be?

Consolidation within the industry is a symptom of creative destruction. Startup oil and gas producers have been extinct for many years now. Another symptom. We see Anadarko throwing in the towel and many of their fellow intermediates believing, hoping, and anticipating, that they may be the next intermediate to be poached. Shell, BP, Exxon and Chevron will survive because that is what they do. That doesn’t make them efficient. If Exxon undertook the development of a system to provide the industry with ERP applications would Shell, BP or Chevron be interested? Of course not and the same would go for any of them. It is the independence of this sub-industry that People, Ideas & Objects are creating and their independent approach to the technical aspects of the accounting and administration of oil and gas that makes it useable by each and every producer no matter what their size or configuration. Startups won’t care that Exxon uses it and has, as a result of their production profile, paid the majority of the software development costs through our coin holders levy. The independent nature of our “sub-industry” is an attribute that all producers, that is the ones that will still be around, will appreciate when our coin holders have funded the Preliminary Specification.

The giddy nature of the producers during AGM’s is something we’ve seen each year. We’ve also seen strong stock performances, particularly in 2019 due to the high price of oil and what I suggest is the previously dedicated allocation of stock buybacks. We’ll know which one of these attributes is responsible for this bullish activity when the second quarter of 2019 is reported. The global oil price may be high but natural gas prices are not. In fact differentials in North America are creating continental oil and gas prices that are truly shocking. For the producers shares to rise on the basis of oil and gas prices would assume that the producers are realizing global prices and we know that is a false assumption. Differential are also not a short term trend as it is implied when the producers do nothing about them or to even recognize them. A few weeks ago in the Permian natural gas prices dropped to their all time low of $5.95. That’s correct negative $5.95. Paying people that much to take your gas is a viable solution to what ails the industry. It is also understood that within the Permian and North Dakota there are 1.5 bcf of gas that is being flared on a daily basis. That’s enough gas to fuel all of Texas’ residential requirements. So yes, your producer firms are on the job and yes, it is almost 100% certain that any bullish share activity is attributable to the one buyer authorized to purchase their own shares.

Chevron purchased Anadarko in order to increase its footprint in the Permian. They expect to increase their production profile there to 900,000 boe / day. So yes we now know that the lessons of the oil and gas investors have been fully heard, understood, comprehended and implemented. Nothing of the sort, the purchase of Anadarko disproves that in a myriad of ways. First Anadarko has lifetime earnings of $910 million based on the specious reporting conducted throughout the industry. If you took our recommendation of the pro forma adjustment of what the real earnings situation would be, our adjustment is to correct for the unrecognized capital costs of past production by moving 65% from property, plant and equipment to depletion, we believe these are the unrecognized capital costs of past production and are not assets, Anadarko would then have a pro forma, cumulative, lifetime adjustment in the amount of $17.7 billion. An amount that is twice as much as their current shareholders equity of $8.5 billion. Therefore they have a lifetime retained loss of $9.2 billion, after all the investors money was destroyed. This is what you paid $33 billion for? The fact is the industry is valued based on reserves. The purpose of the industries activity is to create reserves. Profitability is unknown, unheard of and irrelevant to the producers. Its all about cash flow of which Anadarko had $6 billion in 2018. Earnings will come after all the reserves are built out and the properties are all engineering marvels that make it on to the cover of Scientific American. No these losses are culturally ingrained and are the results of the methods the industry operates on and have been in place since the late 1970’s. No one in power today understands the situation is in crisis, otherwise why would they spend $33 billion? In order for bureaucrats to make the necessary changes to deal with the losses they don’t see or realize are happening, these necessary changes will never come about as a result of the culture and organizational stagnation that exists. They just don’t understand and for the industry to make the transition is counter to the bureaucrats best interest. Creative destruction is therefore the only solution. What we are experiencing in Chevron’s acquisition of Anadarko is an understanding between the bureaucrats who manage these producers, that the value will be based on reserves. That way the ponzi schemes can continue to report that they’re generating value. Why else would you spend $33 billion?

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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 Oil and Gas White Paper, Part VIII

In addition to recognizing the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Preliminary Specification contains three modules that are Marketplace modules. The Petroleum Lease, Resource and Financial Marketplace modules all establish markets in which the oil and gas industry have traditionally operated in. Each of the Marketplace modules share a Marketplace Interface that enables producers to interact and conduct the commerce that they undertake as a producer. These interactions are fully integrated within the ERP system of the Preliminary Specification allowing producers, service industry and government agencies to buy, sell, trade and assign land, products and services etc. The Joint Operating Committee and markets are what replace the bureaucracy of the corporate empire that exists today. Centralization as a theme in corporate America has waned and decentralized models are enabled through the speed and availability of the Internet. It is the contrast between our decentralized industry and producer structures that frighten the bureaucracies of the existing producers with the termination of their command and control, but let's not forget the healthy compensation they receive for losing all that investor money.

What is generally known and understood for the past number of decades is that the knowledge and skills necessary to make a pencil isn’t and can’t be contained within one individual. Whether this is the case or not is unknown, which in a way implies its validity. People, Ideas & Objects budget involves 5,000 man years of effort for the development of the Preliminary Specification based on the user communities definition and participation. These developments will be made on top of the commitments and investment that have been made by Oracle to develop their generic accounting and ERP systems that form the base of the Preliminary Specification. The number we are recruiting for our user community is approximately 3,000. A number that I believe we need in order to develop an understanding of the industry and how it fully operates. These people will have to be well versed in their knowledge and specialization of how the industry operates. Their contributions will also need to be reviewed and confirmed by other users. The end product of the software will need to be tested within the industry to ensure that if functions as it’s designed to.

These attributes need to be done carefully and thoughtfully. We are not recreating the failing systems that support the industry today. We are designing, developing and delivering software that supports the business model in the Preliminary Specification and the way in which work needs to be conducted within the industry. It will be a creative and innovative process that the users will use to solve the issues they will face during the development process, and to discover the solutions that will meet their needs. It will be the users as the principal in the service provider organization that will manage a process that they’re most familiar with. Although the process may be simple and easy to use, the scope and scale of the data that is produced across the industry will demand that they comprehend these new data related implications within their process design. Here is where their competitive advantages of quality, specialization and the division of labor, automation, innovation, integration and leadership will begin. Once our software and services are operational they will constantly iterate the process through their access to our software developers via their principals membership in the user community and their hands on understanding of what works and what doesn’t in the process that they manage.

When we consider the number of organizations that will be permanently working on the development and betterment of the software and services contained within this sub-industry, as I choose to call it, we will find that its diversity, scope and scale is designed to match the difficulties of the tasks that we are approaching. We are not taking our responsibilities lightly. However at the same time we are not conducting rocket science. We have assessed that oil and gas, both the industry and producers are failing. We feel that the difficulties of our competitors has limited their opportunities to address these oil and gas industry issues. The producers starvation diet will do that. The technologies that are employed in the industry, their level of integration and innovation in which they’ve been implemented are steeped in the software vendors legacies of the 1980’s. The maturation of the Information Technologies that People, Ideas & Objects are using in the development of the Preliminary Specification, our budget and our approach will be able to successfully achieve these tasks.

People, Ideas & Objects is more accurate and valid today than when we first proposed the use of the Joint Operating Committee in August 2003. It is far more valid since the final edited version of the Preliminary Specification was published in December 2013. Producers have and will continue to fail spectacularly so. Their future is the most comprehensively difficult that they’ve ever faced. Yet their preparation and approach is to continue to muddle along and do nothing. Essentially what they’ve done for the past four decades. A time in which they learned, through specious accounting, that “they made bags of money without even trying.” When in reality the value was slowly seeping out of the industry in what is a ponzi scheme. That the producers value as represented in their big beautiful balance sheets only goes up each and every year is validity to their argument that they are good business people. It’s just that capitalizing all the money that you spend and holding it on your balance sheet for decades makes you look that way too.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in our future Initial Coin Offering (ICO) that will fund these user defined software developments. It is through the process of issuing our ICO that we are leading the way in which creative destruction can be implemented within the oil and gas industry. 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

Good Friday