The Bigger Issue

With those revised 2,551 tcf of natural gas reserves you are guaranteed of never being able to produce them profitably while in the hands of the bureaucrats. What we have is almost six years of unprofitable production in the natural gas business. Yet the exploitation of shale has been such a game changer. It still has provided us with such an endowment of natural gas reserves in that very short period of time. What will be happening now, as we have discussed on this blog in the past few weeks, is the investors and the people who work within the industry will try their hands in other industries. They’ve had enough of the business model of losing money and working long hours between occasional layoffs. Then what we will see is the slow decline and depreciation of the capacities and capabilities of the natural gas industry. And people will ask themselves, with so many resources, can no one make any money at this? Apparently not.

Just as the former Soviet Union’s method of organization was unable to provide for that society. And people would stop work in order to line up at the bakery to get some bread so they had at least had something to eat. While all production on everything else stopped because everyone was hungry. The current bureaucracies in the western world, our “advanced economies,” can no longer provide value in the same manner they’ve done for the past 50 years. They are too slow, too incapable and too self interested to bother to make the changes in the business that are necessary. At what point will the bureaucrats act? We see in many industries that change can be made easily, like taxi’s and bed & breakfasts which have been provided with innovative applications that can be accessed on your phone. However, Uber and AirBnB are in the fight of their lives with every taxi commission, city council, hotel association and visitor bureau in the world. These bureaucrats know when their franchise is in jeopardy. And will fight hard to keep it. Too bad they couldn’t put a little effort into making their business more profitable or consumer oriented.

And People, Ideas & Objects can just put together an iPhone app that runs the oil and gas industry too. It of course isn’t that easy. Oil and gas isn’t a taxi. It needs a bit more work. There are two ways in which we can make the changes which we desire. That at this point People, Ideas & Objects secures its funding and we continue with our development and reorganization of the industry. Or, the industry fails fundamentally in its primary function of providing adequate levels of energy to society's needs. This latter method is the route I think we have collectively chosen to go down. And I think that everyone agrees that that is a mistake that can probably not be fixed. A Humpty Dumpty kind of situation where all the King's horses and all the King's men... I wonder if it will be King Charles or King William?

As I have stated before, there is no Fed in the oil and gas business that can flood the market with production if required. There is no quantitative easing that will get us through if something does go wrong. We are stuck with what the bureaucrats give us. And they certainly have earned every right to be entitled haven’t they?

I can certainly paint a dire picture of what we are faced with. However, we have a highly unprofitable industry with no future. One where the next 25 years we will be faced with our most technical, financial and business difficulties, and a time when we should show that we are up to that challenge. As it stands, how we approach that future is going to be based on how we dealt with the past. And these bureaucrats have a bad record of providing little value outside of their own personal take. This needs to be considered. It also needs to be considered that Information Technologies are revolutionizing many industries as we speak. What we saw in the late 1990’s was the beginning of the trend. But with all trends people overestimate the short term and underestimate the long term impact of the change. It is for these reasons that we need to act. And soon, there is much work to do.

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. 

Price Maker, Embrace It

The Oil and Gas Journal reported last week that natural gas reserves in the United States now stand at 2,515 tcf. That is a number that is just beyond comprehension. At current consumption rates that is almost 100 years of natural gas supply. It is also a number that I can assure you that every joule of energy contained within those reserves will be produced unprofitably by our good friends the bureaucrats. They don’t care! Moving these reserves onto the marketplace as soon as possible will be their job and they will do it with other people’s money in an unaccountable fashion. As we stated last week. With the hamster in the Kentucky derby, what is it exactly that we're asking this industry to do in the next 25 years?

With People, Ideas & Objects Preliminary Specifications implementation of our decentralized production model. We enable the oil and gas producer to use the price maker strategy. When you're finished reading this post you’ll wonder why it is we haven’t been using the price maker strategy since the beginning of the industry. And for that I have no idea, I wasn’t there. The definition of price maker is provided by investopedia and is as follows.

A monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes.

People who drive Tesla’s may want to tell us that there is competition for the gas they put in the car. Soon they'll realize there really isn’t any competition for the oil and gas products that we produce in the industry. Think of the attributes of the commodities of oil and gas and you will soon realize there is no competition for either product. There are other products that produce energy, but they do not compete. You can’t put a nuclear reactor in a car, etc. You can’t lubricate anything with coal, etc. Here is more on the price maker position.

A monopoly is a price maker as it holds a large amount of power over the price it charges.

A price maker is a firm within monopolistic competition which produces goods that are differentiated in some way from its competitors' products. This kind of price maker is also a profit-maximizer as it will increase output only as long as its marginal revenue is greater than its marginal cost, in other words, as long as it's producing a profit.

Therefore the innovative oil and gas producer needs to have the People, Ideas & Objects Preliminary Specifications decentralized production model operational in the industry in order to implement the price maker strategy. It will be in that way that they can be assured that we are meeting our focus of providing the oil and gas producer with the most profitable means of oil and gas operations.

Standard operating procedure in the industry today is to take the prices that are given. To produce as much as you can to cover off the overheads necessary to run the organization. This is referred to as the high throughput production model. This price taker strategy is defined in investopedia as.

A firm that can alter its rate of production and sales without significantly affecting the market price of its product.

This use of the price taker strategy in the industry is incorrect and a falsehood that the bureaucrats want everyone to believe because it is easier for them to manage as if it were valid. It is however, as the Shell president said a few weeks ago, that the price of oil has declined over 50% on the basis of only 1 to 2% overproduction! This is not what a price taker is doing. The huge swings in prices prove that the oil and gas producers are price makers. What is needed therefore is a means in which to allocate production amongst the producers within the industry on a fair and equitable basis. And the only manner that meets those requirements is to ensure that all production is profitable. To do that we need to get rid of these lazy and uncaring bureaucrats who won’t, can’t and will never do anything about the state of affairs in the industry. And implement the Preliminary Specification. If you think this is ridiculous that an industry can’t even get something so basic as to whether or not it's a price maker or taker correctly, you're not alone.

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. 

What Do Horses Have to do With it?

It has been one heck of a good week. For years I have been of the opinion that I have to keep my candle lit, and my powder dry. This week I started using some of our powder. I invite you to enjoy the fireworks. I am someone who is oriented towards action. I am a fighter, and I look forward to this next year's battles and war. I have been wanting to build the systems defined in the Preliminary Specification for almost 25 years now. And that is closer than at any time before. I think that the situation in the oil and gas industry provides us, the user community and the People, Ideas & Objects software developers with the opportunity to make a real difference in the performance of the industry over the next quarter century. That can have monumental benefits to our way of life and standard of living. Real significant work of tangible value.

This week has seen me rage at the bureaucracy. Something that I do to contrast the differences between our Preliminary Specification and the status quo. We are entering a phase where the difficulties are evident that action is needed to be taken. Evident to everyone within the industry that this is an unsustainable and particularly dire situation. But that is not the difficult problem. As we have discussed the investors have been abused in this industry for a number of decades due to the manner in which the SEC dicates the capitalization of assets. There is also the manner in which the people who work in the industry are abused. They are tossed on the street as soon as there is any problem being faced by the producer. The remaining people are expected to “pick up the slack.” It seems like we are still picking up the slack from the layoffs that occurred in the 1980’s.

An industry can’t be operated for the long term on short term thinking. And oil and gas has been operated on the basis of short term thinking. The third element that makes these actions all necessary is the natural decline curve of the oil and gas reservoirs. They are steep and unforgiving. A producer is the proverbial hamster in a wheel. This is what causes most of that short term thinking. If we take the decline curve into consideration at this point in time, on an industry wide basis. And understand the demands of the consumers of oil and gas in the next 25 years. We have more work than we could ever imagine. Not a time when the investors are considering writing off their investments in oil and gas and checking out technology. And the people in the industry checking out the tourist industry in Florida.

We are so poorly prepared for what is ahead. If you look critically at any producer firm. And in my opinion, the hamster is aged, running a marathon a day, at a sprinter's speed with nothing to eat. An impossible situation. We need oil prices that are at least twice what they are to meet the costs. And natural gas prices need to be at least three times as much just to cover their costs. I would suggest they need substantially higher prices than that. Consumers like to belittle the high prices of energy. They have so little regard for the value that they gain from the products that we provide that they have no respect for them.

I’ve developed a saying in my professional life that you should never expect a mouse to run like a horse. What I have seen is many people get promoted into positions that they are never going to be able fill and you know it’s going to fail. Right now we have an exhausted half dead hamster being loaded into the gates for the start of the Kentucky derby. All our money is bet on him winning the race, and really we know we’re doomed, but also know that damned hamster will run the best race of his life. He’ll just be run over as the horses come around the track again. What do we expect?

We need to prepare for that race in the Kentucky derby as a real thoroughbred. An industry that is in tip top shape and capable of taking on the challenges that face us in the next quarter century. We need to start from the ground up. With a new organizational construct, the Joint Operating Committee. The legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. An industry based on the Preliminary Specification, the user community and service providers. It will be in that way the producers will be able to approach the expectations of running like a horse in the most difficult race we have before us.

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.

Speaking of Personal Best Interests

If the bureaucrats were smart. I know, I expect too much. They would want to extend their run at the helm of the producers. Then they could keep their personal circus going for a while longer. Not a bad idea, but how? Funding the development of the Preliminary Specification. That of course meets my personal best interest but I can assure them that they will also be able to keep their show going for a while longer. Here’s how. They can say they are doing something to remedy the situation in the marketplace! Action! Just what is required to pass through the next quarter and year end reporting process and solve the problem.

We’ve discussed before the difficulties that we are going to have if they try to pass through this reporting season, starting with this very difficult third quarter, without addressing the state of affairs in the industry. The situation is dire. The worst the industry has ever faced before. And there are no discussions, plans or ideas being debated anywhere on how to resolve the problem. Day by day our community grows larger and it is inevitable that at some point we are “discovered” by the marketplace and then what. The bureaucrats deny that they were aware of the Preliminary Specification? They need to remember the times that they hired other firms to steal the Intellectual Property that makes up the Preliminary Specification. That those attempts leave residual claims in the marketplace that provide evidence of the attempts by the bureaucrats.

I, unlike Mrs. Clinton, am not about to go deleting emails at this point. These are too valuable. The point is there is a record that exists regarding the Preliminary Specification in the marketplace. Although not mainstream, it is known. Attempts to state that they were unaware of the ability to implement a price maker strategy isn’t going to sell for too much longer. And unlike Mrs. Clinton, these bureaucrats may not be able to lie like a sidewalk, particularly about a previous lie. Speaking of honesty, what personal best interests were assured to the investors when they took their money? Just asking.

The tone of my argument has taken on a rather nasty perspective. And that is when I started writing this blog ten years ago. Lately I find I’ve found my voice. If you’re a bureaucrat and find this unkind I suggest you don’t pick up the phone in the next six months. The Internet has enabled people to voice their concerns with those that hold power in society. Nothing wrong with holding the power in society, as far as anyone is concerned, you just need to be accountable. There is some accounting that needs to be done in the oil and gas industry. Just as John Boehner thinks he can hang on for the next month or so, our friends the bureaucrats will see the hostility that exists in the marketplace. They’ll want to return to this blog for some civil treatment.

I can’t decide which would be the more appropriate at this point in time. Would it be a salty or sweet snack? I'm glad I have a front row seat. This is going to be one heck of a good show. I don’t think that we have seen anything of the scope and scale that we are about to see. The 2008 financial crisis was no fun because it scared everyone half to death that the paper they were thinking was useful might become redundant. Spooky. This one is going to gouge the bureaucrats from their most comfortable positions in the industry. That is what I would suggest, unless that is they’re smart, and proactive.

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. 

Bureaucrats Have Made Money

To understand what’s in store for oil prices we have the situation in natural gas to show us the way. For almost six years the bureaucrats flooded the marketplace with unprofitable natural gas production. Losing progressively more money each fiscal year as they went along. The response was to cut capital expenditures to balance the markets supply and demand. Each of those six years cuts to the annual budget were made. Natural gas is now at $2.50 and costs many times that to produce. In areas like the Marcellus shale they are lucky to get a $1.30 for their production. You have to remember that the bureaucrats are paid out of the money that comes in from general revenues. So they can’t cut off the hand that feeds. And who cares what natural gas prices are, there is nothing that the bureaucrats can do about them. So they state. Has anyone noticed the level of discussion in the industry about its current situation is a little frightening?

We discussed the decline in natural gas prices that will happen as a result of the continental storage filling to capacity in the next few weeks. We have some more news that should hit the natural gas prices here immediately. It would seem that all of the international LNG contracts are priced based on a factor of oil prices. With oil prices down, it doesn’t make economic sense to ship LNG from North America. The cost to purchase the gas, liquify it, ship it and return it to a gas is beyond the price in the destination countries. This is what I mean when I state that the bureaucrats are not taking care of business and as a result we risk losing the capacities and capabilities of the industry from a societal point of view. The investors who were committed to building the LNG facilities were told they would be making money. But just as in all things oil and gas, only bureaucrats make money.

This drop in demand from the LNG facilities, and inability to make any money will push natural gas prices lower yet. Making the industry more difficult to turn around. If it has been six years in natural gas, that means we have five more years in the oil side of the business before we see this kind of destruction. And with these bureaucrats, their sense of urgency, you know we’ll get there. In the future getting the investors to follow the industry is going to be next to impossible when all they did was lose their shirt. All I see is devastation. An infrastructure that doesn’t provide any value for anyone. A history of losing money for years on end in terms of the shale technologies impact. All of that natural gas has gone to waste in the form of a large subsidy to the consumers at the expense of the investment community. No plans, no ideas or worries from the people who manage the industry. Just carry on losing.

When the bureaucrats ran me out of the industry for my ideas. They knew what the implications where if we implemented them. The elimination of the bureaucracy. They laughed and enjoyed themselves in their turning the screws and making my life miserable. Sure is funny now isn’t it. They’ll have to live with the fact that they had made the decision not to go with my ideas more than eleven years ago. If they would have, the industry would have had the price maker strategy implemented and oil and gas prices would be profitable for all of the oil and gas production. However, now they do have their cabins and boats to keep them company. So there is that.

No doubt all the silence is attributable to the plans that are being made for the mass layoffs that will be announced around Christmas. The investors are not going to want to invest in a business that never pays. People are never going to want to come back into an industry that when it finds itself in difficulty it lays people off like it was 1920. They’ll move on to bigger and better things. Something more reliable. And so the seeds of the destruction of the industry are being sewn by these selfish, corrupt bureaucrats who had the chance to do the right thing. It only conflicted with their personal best interests.

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. 

No Money Being Made Here

Any idiot can spend, just give them the money. And that is what we have in oil and gas. A bureaucracy that can spend. Commodity prices are up, increase spending by 200%. Commodity prices are down, reduce spending by 10%. Commodity prices are up once again, double spending again. If you're an engineer or geologist with oil flowing where their should be blood. Forget it. You're nobody in a world of bureaucrats with checkbooks and contacts in New York. How can you compete in a world where there is no differentiation between the things that are done? Everyone just spends, drills and reports profits. Miss your projected deliverability targets however, and you’ll find yourself in the ash heap of history. Those are the rules.

The problem is that none of the production, at any point in time, has been profitable if you consider the actual costs. Production needs to include the capital that was used in the drilling, equipping, and production facilities. And would also need to consider the costs of all of the overhead of those people and offices. These costs are never counted because they are capitalized and only the smallest sliver of them is ever recognized in any one year. When bureaucrats verbally state if they are profitable or not they are not subject to any regulatory requirement of what a profit is. So they state the “netback” which is the revenue less royalty less operating costs number that never ceases to amaze and confuse.

So commodity prices have fallen as a result of the mismanagement and inherent unprofitable overproduction by the bureaucrats. This shell game is going to be exposed here for what it is in the financial reports of the producers in the next few months. What we need to focus on is the state of affairs of the industry today. The trajectory it's on. Where the investors are in terms of their thinking about the industry. What needs to happen to ensure that society maintains its standard of living in an uninterrupted manner. And mostly importantly, what trajectory is the industry needing to be on? There are many things to be done.

I know that today’s and yesterday’s discussion may have left some people behind in terms of the value that the industry has generated. They point to the fact that properties sell for far greater amounts than the costs. And that their cousin Vinny made a killing in the stock market. Both are true statements. But stock markets should not be confused with earnings in an industry. And we are talking about accounting, not market values of properties. The difference is that the accounting is the basis of valuation and profits of the management of the firm. If the basis is skewed, which I am suggesting that oil and gas is skewed by capitalizing everything and recognizing very little of the capitalized costs. You then skew the basis of the company's earnings. An oil and gas company only needs a few drops of oil in order to report an annual profit. This is not the reality of the situation that is occurring in the industry.

Offsetting these bloated balance sheets is the other side of the issue. Yes they are balanced by the overstated earnings of the producers. But here’s the catch, the producers have not been reporting very good earnings! In light of the fact of the distortions on the balance sheets they should have been reporting windfall profits. This goes to show you how much more valuable the commodities are than what they are being sold for. The other offsetting element to the bloated balance sheets is the amount of equity they have been able to generate from the markets. Which has been substantial. However the largest offsetting element is the debt these firms are carrying. In most cases, large debts based on the reserves, those same reserves used to value the company in the accounting. These bank loans and debt instruments make the producers highly levered.

Back in the 1980’s I did a stint in Touche Ross’ bankruptcy practice. This was during the last time oil and gas producers were going bankrupt. I was surprised by all of the trustees and judges were of the opinion that if the firm had good cash flow then it would be restructured as a viable going concern. Since the SEC and accounting firms implemented full cost accounting practices in the late 1970’s, that’s all I’ve heard about in the oil and gas industry. It has good cash flow. I don’t think this similarity is all that coincidental.

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

Who's Making Money?

Clearly no one is. And that has been our assertion here at People, Ideas & Objects for many years. Capitalizing everything that moves in an oil and gas company leads to high asset balances, low cost operations and overhead, and high profits. Doing this over the life of the organization leaves assets on the balance sheet from the beginning of time, an overstatement of the value of the producer and overstatement of the producers earnings. When you add in low commodity prices from natural gas for the past 5 - 6 years these losses on those properties could be hidden by the higher priced commodity operations in oil. Now with oil being in decline as well, there is no hiding the losses that will be stated in this third quarter of 2015. Producers have bloated their balance sheets to the full value of all of their future revenues. Which is ridiculous. But when they were recorded at the previous commodity price highs and now need to be “impaired” to reflect current commodity pricing realities. The write downs in oil and gas that will begin this quarter, and must be reported this fiscal year, are going to be spectacular. The full scope of how much of a scam oil and gas has been will be on display.

Oil and gas always lived on OPM, or other people’s money. Have a capital budget? Better have a stock offering to go with it. Those were the good days. Just dilute your existing shareholders on an annual basis and eliminate any hope of them earning their share of the company's earnings. Now as the tide has begun to go out, as they say, we’ll see who has been swimming naked. Look at any producer today and you’ll see a firm with property, plant and equipment that is so much higher than their revenues. So much higher than the market capitalization of the producer. So much higher than anything that could ever be justified. Remember it is potentially as high as the highest prices ever attained in the marketplace times the reserves that are able to be produced. Or, all of the future revenues of the producer. And this is what has kept the stocks so high. It hasn’t been based on earnings. The value of the producers has been based on the balance sheet which justified the stock's performance and the annual stock offering. This has been a modified Ponzi scheme. Modified in the sense that in a Ponzi scheme there is money that goes out.

So here we are with a situation where the powers that be have hoodwinked the investors on an industry wide basis for decades. Who’s responsible? I’ve pointed to the SEC and the public accounting firms and will continue to suggest that they are the ones that implemented these ridiculous rules and audited to them. Most of the producers are run by engineers and geologists. They don’t understand what it is that I am talking about here. They think they pass their annual audit and therefore everything is fine. They don’t understand the nuance of valuations or accounting. Spending is not the development of value. The industry has been on a spending spree for decades and the chickens are coming home to roost.

We are starting to see the effect of this situation becoming the norm. PennWest is trading at about $0.50, formerly at about $9.00 in 2014 and $20.00 earlier. Encana is at $6.98 formerly at about $90.00. Everyone is down about 50% in the past year. The cracks have been showing for a while. There are a few high profile bankruptcies in the states. This third quarter will show a few who have been frolicking in the nude. And the annual report will show that all of the producers have been. How did this happen? How could this have happened?

A better question is what are we going to do about it. I think investments in oil and gas will be all but lost based on a lack of confidence in the numbers. If the bureaucrats have their way that’s not a bad thing. They will still manage the carcasses. What we need to do is to start building the industry on the basis that is focused on providing the oil and gas producer with the most profitable means of oil and gas operations. And in that way we can forget about this nightmare and move on.

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. 

Third Friday Off

Leadership From the User Community, Part IV

Independence is one of the attributes of the user community members that gives them the ability to maintain their leadership position. They are not dependent upon anyone in terms of what and how they do their jobs in this new oil and gas industry. They have the oil and gas producers as their clients. And they are committed to providing them with the most profitable means of oil and gas operations. How they are able to provide these services is upto the innovations and creative capabilities of the individuals that will be members of the user community. Ownership of the service provider that provides the software and service for that specific process will be theirs. This will generate the revenues from the producer firms that enable them to maintain that independence. They will also have a much smaller source of revenue directly from People, Ideas & Objects for any of the work that is done with our software developers.

This independence is necessary to enable them to fully explore the capabilities of their team. How to organize their offering in terms of automation, innovation, specialization and the division of labor to ensure the producers are given the appropriate service necessary to meet our profitability focus. And this will be a competitive environment with the other service providers and members of the user community. However not a competitive environment in the traditional manner that is used by the producers today. There will be no “me too” types of service providers enabled in the marketplace. Once the user community member is granted a license for the service to be offered to the industry, that will be an exclusive license and there will be no direct competition created for that specific process. Some exceptions in the production accounting areas will apply for geographic purposes, etc. The competitiveness comes about between the service providers and user community members by way of the manner in which specialization and the division of labor are used and implemented. How automation and innovations are accelerated and iterated upon throughout the community. These will be the competitive foundations that focus the user community and service providers.

The perspective of what a service provider involves themselves in terms of the oil and gas producers administrative and accounting domain will be rather limited in comparison to the work that is done today. The “jack of all trades, and master of none” demands of the current positions in all of the producers administrative and accounting fields will be gone. People will become very specialized in the types of work that they do. Understanding every aspect of the process and its implications. Applying this specialization across the entire industries data set, which would be your client base. This will bring about new and interesting perspectives on the work that is done. Thinking about the process and how to improve it constantly will be in the mind of the user community representatives. Their team will be comprised of various people who have different skill sets and are specialized in their own ways. It will be more about the science and art of process management than administrative and accounting in oil and gas.

So when we discuss change within the industry. We can see this involves change in everything and everyone. The business of oil and gas has been operated in the manner that it has since the 1950’s. Computers have been used to accelerate manual processes. Not the most efficient uses of computers, or of people. We need to focus on the things that people do well, the leadership, problem solving, decision making, creative, collaboration, research, generation of ideas, design, planning, thinking, innovating and negotiating. What we need the computers to do is what they are designed for. And that is the storing of data and process management. This is how we need to restructure the oil and gas industry and the leadership of the user community will be how we get there.

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. 

Leadership From the User Community, Part III

The capacity to deal with change at any level is what the user community provides over the status quo bureaucracy. This is the key differentiation between the two systems of organizations and the reason why we must move to the Preliminary Specification. The capacity to deal with the changes in the underlying oil and gas business has to be matched by the organizations that define and support the producers. What we have currently is a fundamental change in the business. Where shale has brought about a level of abundance in the commodities. And the business organizations are incapable of dealing with the situation. The old will die off, or we can be proactive and make the changes necessary and not have to experience the negative general effects of an energy shortage in society.

The President of Shell was interviewed by the BBC last week and commented that the oil prices have declined over 50% with as little as 1 or 2% over production. Welcome to the new oil and gas industry. This is basic economics which is usually learned in your first business economics course. The elasticity of supply and demand are unique to each product. An oversupply of Ford F150 trucks will not have any effect on their price. Supply and demand are considered inelastic. Whereas oil and gas are elastic and are subject to wide swings in prices as a result of small changes in supply or demand. What we need to do is to find the right prices necessary to fuel a profitable industry, which the Preliminary Specification decentralized production model provides. What is going to happen due to the bureaucracies inaction is that the industry is going to atrophy and supply will drop 2% below demand and the commodities prices will reach the moon. Not good for anyone, but the bureaucrats will be happy.

Is it appropriate that we have an industry as fundamentally important as energy is to the world economy. Being unnecessarily subject to the principles of economics that we learned hundreds of years ago? Are we incapable of accepting ideas that challenge the vested interests and bureaucrats who chose to do nothing and just accept our situation as the way things are? I believe there is a better way and that is the method that we have been discussing with the user community in the leadership position in terms of providing the necessary changes in the industry. Then when the business does change, in whatever permutation or combination that it does, the leaders within the user community will be able to make the changes necessary in the organization to accommodate the needed changes in the underlying business.

It is the toolkit that is provided through People, Ideas & Objects that makes the user community capable of implementing the changes that are needed. With the full power of the Intellectual Property under their control they can make whatever changes are necessary to their process or functions through their work in the community and with the People, Ideas & Objects software development team. How do the bureaucrats make changes in the organization to accommodate changes in the business? Who has the authority to make the changes in the software today? This power and control over the Intellectual Property is the dynamic solution to the current muddle along strategy.

The third tool that is unique to the People, Ideas & Objects user community is the fact that the service providers are owned and operated by the user community members. They are therefore the ones on the front line in the industry providing the software and services to the oil and gas producers. They are the ones who see and can understand the need for the changes in the IP and software first. What needs to be changed and how that change needs to be implemented most efficiently in the software and the service they provide. They will be the most effective and efficient in terms of ensuring that the oil and gas producers are provided with the most profitable means of oil and gas operations on every day the Preliminary Specification is operational. That is the difference between the old and new ways of doing things and why we need to change.

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.