Some of the "What" and "How"

When it comes to the future organizational configuration of the oil and gas industry. “What” and “how” are the two key questions to ask in terms of its configuration. The Preliminary Specification uses the Joint Operating Committee as the key organizational construct in order for the industry to focus on its innovative and profitable needs. Those would be a large part of the answer of “what” is required. “How” it obtains these is through the Preliminary Specification and maybe most importantly, through the cultural ways that the Joint Operating Committee is used throughout the industry. We are moving to the cultural norm of the industry as the key organizational construct, and building the systems that identify and support that organization and culture. A radical shift in the way the industry is managed, to one that is consistent with the industry makeup.

Change within the industry is happening at a rapid rate and the current bureaucracy are at a loss to deal with the issues and opportunities. The earth science and engineering capabilities are moving faster than the organizations ability to address the changes. The best example is the shale revolution bringing on deliverability issues that are unidentified and unaddressed by the bureaucracy. We would expect that once the earth science and engineering resources are unencumbered by the bureaucracy that they will accelerate their capabilities even further.

The constraints to these resources may not be obvious at this time but there would be many. The critical resource constraints of time and money are controlled by the bureaucracy and they are expert in allocating the limits of time and effort. In an industry based on engineering principles, time and effort is a principle of unlimited expenditure. However, the unnecessary cutting off of time and effort in the time of the shale revolution and other discoveries is a destructive process, not one in which builds value. The future of the industry will be based on innovation in the earth science and engineering arenas and will be profitable to those that can compete on the principles in these disciplines.

Having an organization that supports this type of producer will be the organization that we set out to build today. It will be the organization that we set out to build the software that identifies and supports that organization. If we set out to build that software today we can have that industry tomorrow. It’s that simple. These are the steps that need to be taken in the 21st century for the innovative and profitable oil and gas industry. It doesn’t happen by chance anymore. That was in previous generations. The world has become too complicated to leave it to chance. There are too many vested interests that are working against the best interests of everyone to have the right things happen.

With the opportunity costs being $94 billion for the calendar year of 2012. The time is well past due that we begin down this road. The costs of these developments are incidental to the costs that the industry is already incurring by employing tired and outdated modes of organization. The Information Technology revolution is here for the oil and gas industry and its name is the Preliminary Specification, brought to you by People, Ideas & Objects. These are bold claims based on innovative ideas inherent in the Preliminary Specification. Ideas such as using the Joint Operating Committee as the key organizational construct and many others.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Recalculating the Opportunity Costs

It is reasonable to assume that the bureaucracies yet unannounced “Behemoth” system will maintain the organizational layout that has served them so well since the 1960’s. Why not keep what has been in place for fifty or more years for fifty years more. The fact that the overhead burden is making the industry less dynamic and incapable of dealing with natural gas deliverability issues is of little concern to the bureaucracy themselves. Thinking of new ways, or even changing to the Preliminary Specification which provides a solution to the problem, would be counter to their best interests.

It will be interesting to see if the Preliminary Specification can overcome the inertia that is the bureaucracy in the oil and gas industry. We have quantified the issue at $67 billion for the 2012 calendar year based on the Preliminary Specifications ability to remove the marginal natural gas from the marketplace and effect an increase in the overall price. The impediment to doing this is the producers overhead structure is fixed and as a result looks distorted when there is any reduction in production. Therefore they continue to produce at capacity and take the price declines as an industry trend in which they have no control over. The problem is that the industry recently indicated that they would recommend a price of $6.70 per mmbtu as what the industry would want for a healthy natural gas business. I had calculated the $67 billion opportunity costs for 2012 at $5.50 per mcf. If the industry needs the higher price then we would need to remove an additional five percent of the production and therefore the opportunity costs would be in the range of $94 billion for 2012 alone.

In theory the Preliminary Specification is just an idea the bureaucracy will say. And without “Behemoth” they have no response to the idea. And remember, they will have to respect that idea when they go to build “Behemoth” as the “ideas” inherent in the Preliminary Specification are copyrighted. So how will they find a solution to these natural gas pricing issues that they have lived with and have not recognized now for almost three years. It has become pretty obvious, and I have to say that the bureaucracy is pretty bold these days. The question will remain how much longer will natural gas prices remain depressed using the business model that the bureaucracy is employing?

If you look at the U.S. Energy Information Administration chart for Monthly Dry Shale Gas Production you will see that this natural gas pricing problem will not go away with the prayers of the bureaucracy for one more cold winter. Since January 2007 production has shot up from about 2.5 BCF / day to approximately 27.5 BCF / day today. That accounts for almost 40 percent of the U.S. marketplace. The point is that all the gas, whether it is conventional or unconventional, needs the $6.70 / mmbtu in order to be profitable. With prolific formations such as shale gas, a new business model is needed in order to produce the natural gas at a profit.

And the Preliminary Specification is that business model. It reduces the producer to the C class executives, the earth science and engineering resources, some legal and support staff. The remainder of the resources are allocated to service providers who are focused on industry wide processes. This focus enables them to use the scope and scale of the industry wide client base to use the division of labor and specialization to provide the most efficient and effective solutions to their clients the Joint Operating Committees. Therefore when the Joint Operating Committee determines the property is to be shut-in due it not meeting its marginal costs, the costs of the service providers are not incurred and the properties production and overhead costs are not incurred during times when production is shut-in. Only the costs of capital are uncovered during times of shut-in production. This removes the marginal production from the marketplace and therefore reduces the downside swing in natural gas prices. And stops the losses that would otherwise have to be added to the reserves costs. Losses that will not have to be made up or earned in the future. A far more reasonable business model, but one that requires that the Preliminary Specification be built in order to define and support the innovative and profitable oil and gas producer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

It's the 1960's

As much as we discuss the concepts of the division of labor and specialization. They are an important tool kit of the Preliminary Specification in providing value to the innovative and profitable oil and gas producer. Looking at the organizational structures of the oil and gas industry today does not reflect too much in terms of differences from the oil and gas producers of the 1960’s. You would have thought that in those fifty years there would have been some changes. It is appropriate to ask today is this same organizational structure the one that will provide the value generation for the industry in the future? If not then the tools of the division of labor and specialization are the means in which to generate that value.

Our current corporate model which focuses on the compliance and governance elements of the business have become distortions of what the innovative and profitable producer should be. The bureaucracy have become well briefed in the requirements of Sarbanes Oxley and other requirements and have these concerns front and centre in terms of their priorities. The business of the business, the Joint Operating Committee, is of little concern and is generally ignored. The focus and concern is of the corporation as a lone entity operating as a single entity. Its partners are non existent and the business of the business is as foreign to them as the people who reside in the earth science and engineering departments.

This separation and division of the organization between these two groups has been growing for the past fifty years. And is unnecessary. Compliance and governance should be the result of the focus of undertaking the business of the business. So what is the bureaucracy doing? A reasonable answer to that question is that it is a make work project. Much of what their domain of operations consists of can be automated and their role in the organization eliminated. But then that is why they are fighting so hard against People, Ideas & Objects. They don’t want anyone to hear this. Moving the compliance and governance frameworks into alignment with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks is earth shattering. This alignment will have profound effects on the performance of the organization.

Adding to this alignment the division of labor and specialization that the software development capability that People, Ideas & Objects provides will bring further efficiencies and effectiveness. All economic development has occurred as a result of the changes made in the division of labor and specialization. To take the next step, from the organizational focus of what we have been trapped in since the 1960’s, needs the further definition being defined in the software. If you want to make a change in our organizations you must make the change in the software the organization uses first. Only then can the organization change.

The bureaucracy are aware of this and have used this knowledge to secure their future. They have not and will not sponsor any changes to the software as that would impose changes on their franchise. A very convenient situation. Do nothing and your salary and retirement benefits are assured. You only have to persevere through the brutally boring and increasingly maddening day to day.

The financial crisis showed us that the old ways were not working any more. As soon as we recognize that fact and make the changes that are necessary we can begin building value again. And the first step in building value is to organize ourselves for success.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Supply and Demand of Industry Technical Resources

Another key issue that the Preliminary Specification addresses is the shortfall in the sourcing of earth science and engineering resources. It is believed that the staffing of these key people will be in a shortfall for the foreseeable future. The difficulty is that you just can’t train additional resources in the short term. It takes decades and the number of people that are oriented to these professions are limited. Therefore a solution to this problem is difficult to prescribe and the cause of the shortfall would be complex. Here is how the Preliminary Specification sees the issues and how it has resolved the problem.

Much of the difficulties comes about as a result of the designation of one of the partners in the Joint Operating Committee as the operator. The producer who is operator is usually the operator of many properties and has developed their earth science and engineering capabilities to meet the demands for any and all contingencies that might occur for any of the properties that they are responsible for. In this day, with the broad scope and scale of the earth science and engineering specializations this is a very difficult aspect of a producers internal capabilities development. They are required to have just in time capabilities that are available for contingencies that are not budgeted for or planned. Building these organizations requires that they have at any time unused and unusable surplus capacity within the earth science and engineering disciplines to meet their overall demands.

Replicating this same organizational development across the industry in each producer we have additional unused and unusable capacity developed in each of these producers. So that on an industry wide basis there is substantial unused and unusable earth science and engineering capability that is unavailable to be used as a result of the way in which the industry organizes themselves around the concept of operator.

If we also look at the future of these organizations we understand that specialization and the division of labor is one way in which to resolve the shortfall and increase the productivity. However, if we apply these principles to the operator model we will find the scope and scale of the capability of the producer firm to expand further, and only exacerbate the problems that we are facing today. Specialization and the division of labor are a necessary aspect of the solution however what is needed is to resolve the method of organization and the elimination of the concept of operatorship.

Within the Preliminary Specification is the concept of pooling which has been developed to replace operatorship. It sees that the partnership which is represented by the Joint Operating Committee pools their technical resources to make up the earth science and engineering capabilities that are necessary. Each participant in the Joint Operating Committee are focused on different specializations in terms of their earth science and engineering capabilities. And as a result with the pooling they are able to cover off large areas of the necessary capabilities needed. Additional resources can be sourced from the marketplace. These being more of the generic or non critical tasks.

The Preliminary Specification enables this pooling through a number of collaborative interfaces and particularly through the Research & Capabilities and Knowledge & Learning modules. The overall strategy being the deployment of the right information by the right people at the right time. This is how we see the demand and supply of earth science and engineering talent rebalance itself for the long term and the producer address the needs of the energy consumer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Scope of the Service Providers

I commented that one service provider might be employed in providing the royalty calculations for the Texas Railroad Commission in yesterdays post. That would be a fairly broad scale and scope for one service provider to undertake. And with the royalty process being made up of a variety of sub-processes I would think that many of the sub-processes would be able to be managed by their own service providers. Taking the division of labor and specialization a step further. The point of the exercise is that with the industry being approached as one client in terms of the data set, the process and its management will provide ample opportunity for the service providers to expand on the service and provide it at the lowest possible costs. Having the royalty processes managed by a variety of service providers would be the optimal solution in my opinion.

We have also discussed the capability with the People, Ideas & Objects Preliminary Specification to have the costs of these service providers, for the overhead incurred, charged directly to the Joint Operating Committee. So that when the property is shut-in these costs are not incurred and the property has no production or overhead expenses. It is important to note that the actual charges for the overhead costs are charged based on standards and are created based on tasks and units of work that are completed within the system. When the service providers are working on their processes they may not know that your property has been shut-in as it is not pertinent to their work. However, because the system is generating the invoice for the Joint Operating Committees for the unit of work in the tasks completed by the service provider, no invoice would be generated for your property for the months that your property is shut-in. This will not take the conscious attention of someone to turn off the billing for your property.

The service providers revenue may be diminished by the amount of the service fees for the months of shut-in production. However, it may be that only 10% of the production will be shut-in at anytime during the year. It won’t be a difficulty for the service provider to manage their budget on an annual basis to accommodate these fluctuations in their revenue. This will be a cost associated with the business and can be dealt with in the normal course of business. It will be necessary to ensure that the service provider does not move to a monthly fee for service in order to smooth out their revenues. As that would defeat the entire decentralized production model that the industry is working to establish through adoption of the Preliminary Specification.

In one example of how this would operate would be with the service provider who determines the eligibility of capital costs for gas cost allowance for the Texas Railroad Commission. They would have as their domain all of the capital costs that were incurred by the clients who use the People, Ideas & Objects systems. And have worked with the developers to define very clearly the cut-off between eligible and ineligible capital costs according the regulations of the TRC. Each ineligible item is reviewed by the service provider to ensure its ineligibility and this validation notes a completed task within the system. At the end of the month the tasks are summarized by the service provider and the billings are prepared and sent to the appropriate Joint Operating Committees. In this case a small charge for the review of the capital charges eligibility for gas cost allowance is automatically generated on the basis of the unit of work completed in the task network.

And that is all that that service provider does. So in terms of eligible capital costs based on the TRC, they could write the book. The producers using the system are assured they are paying the lowest possible gas royalties and that they are calculated correctly and at the lowest possible costs due to the efficiencies of the system. This is how I see the processes managed in the industry with the Preliminary Specification.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Dealing With the Producers Overhead Burden

In yesterday’s post we discussed the approach that People, Ideas & Objects were taking in providing software solutions to the oil and gas industry. One that is more consistent with an approach of a Google in terms of its size than what has been seen in the past. What has happened in the past has been very technologically focused and limited in its scope and scale in terms of its functionality. Our proposed budget is an order of magnitude larger than anything that has been developed in the industry to date. This is necessary to address the impact that using the Joint Operating Committee has on the producer, the service providers and the service industry. It is also as a result of the greater role that Information Technology plays in the day to day, and strategic aspects of the oil and gas industry.

Information Technology should not be seen as a cost but as a strategic tool to aid in all aspects of the business. People, Ideas & Objects claim that we provide the producer with the most profitable means of oil and gas operations. And we do, which can be proven by reviewing the Preamble of the Preliminary Specification. There is no other way in which the industry can organize themselves to attain the benefits that are defined in the Preamble. Software is a necessity in today’s society and it is certainly a necessity in terms of defining and supporting the innovative and profitable oil and gas producer.

Just from a specialization and division of labor point of view. And it should be noted that these two tools are the manner in which all economic value have been created. We can’t move to a higher level of specialization and division of labor from the levels we currently enjoy because the software we use has us stuck where we are. We could try and make some changes, but without the software being changed first, any changes will fail. We live in time where the software has to be made to change first before the organizational changes are made. Only then will we have success in terms of the definitions of new specializations and division of labor.

The Preliminary Specification makes heavy use of specialization and the division of labor. In essence the entire administrative aspects of the producers are reorganized to enable a greater specialization and division of labor. One that will enable a focus on the process or elements of a process. And enable that process to be specialized by using the entire industry scope and scale of processing. So for the Texas Railroad Commission there may be one service provider providing royalty calculations for the entire industry. And they will be so specialized as to be able to provide the services to all Joint Operating Committees in a manner that they can guarantee that they are the lowest possible royalties under the guidelines, correctly calculated and calculated at the lowest possible costs.

This type of reorganization across the industry is what is required for the 21st century. The producer themselves need to focus on the earth science and engineering aspects of the industry. For them to be proficient in the Texas Railroad Commissions royalty guidelines, SEC, Tax and myriad other regulations and requirements of an oil and gas producer today, within their own four walls is an administrative nightmare and a cost burden that is destroying the profitability of the industry. We therefore have to turn to the standard tool kit of economic development to deal with this problem. Specialization and the division of labor applied to the administrative minutiae of the oil and gas producer is what is resolved in the Preliminary Specification.

What is needed therefore is a different approach so that these administrative changes can take hold. That requires the software changes first, and that requires a different scope and scale of software development than that which has been undertaken in the oil and gas industry to date. People, Ideas & Objects Preliminary Specification is measured to undertake that scope and scale.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

A Different Software Development Approach

Once “Behemoth”, the yet unannounced systems development of the bureaucracy, is announced who will lead it? The difficult aspect will come about by trying to secure a unifying vision in which the industry can follow. Or in other words the point that the Preliminary Specification provides today. And remember they can’t use any of our ideas. But the bureaucracy are leaderless and visionless. They will have to strike a committee to determine what the needs of the industry are... And we have all been there, seen that.

One of the benefits of People, Ideas & Objects and the Preliminary Specification is you know where it is that we are going and generally how we are going to get there. The eleven module specification sits on top of the Oracle Fusion Applications and Middleware stack on a cloud computing offering. The software developments are driven by the user community that uses the vision of the Preliminary Specification as their guide towards the final product. The necessary ingredient that is missing from this formula is the financial resources to make it happen. That is what these writings are about and are intended to generate.

The ability to fund the remaining developments are a challenge that is of the highest order. I not only like a good fight, I also like a challenge. The resources are tied up in the industry and harboured by a bureaucracy that sees their survival at stake if the development in the Preliminary Specification proceeds. And they are correct. Our appeal is to the remainder of the industry, and specifically the oil and gas investor who are disappointed with the performance of the oil and gas producers. The scope of People, Ideas & Objects software development costs are beyond the scale of anything that has been attempted before in the industry. This is of concern to the community that we are attempting to appeal to, as they see it as a cost to the business.

These software development costs should be seen as an investment in the business as we are providing the oil and gas producer with the most profitable means of oil and gas operations. In 2012 our business model would have provided an additional $67 billion in profits to the North American oil and gas industry. Bold claims that can be backed up by the review of the Preamble to the Preliminary Specification. Annualized these opportunity costs are of significantly higher value than the cost to develop the software defined in the Preliminary Specification. These costs are indeed incidental.

The scale of these software developments are an order of magnitude higher than what has been undertaken in the industry before. Providing software that is able to meet the demands of the industry will take a higher level effort than that which has been undertaken before. Software development in the past has been undertaken in a variety of ways that could be argued as a “cottage industry” approach. A few people sell a system to a couple of companies, and then try to market it to the rest of the industry. This approach has failed as a business model as the marketing to the oil and gas industry fails due to the small number of oil and gas producers.

Its not that People, Ideas & Objects approach has worked either. But I can assure you there are no more investment houses funding a couple of people with an idea for an oil and gas system. Our value proposition, noted in our Revenue Model, sets out why our approach provides value to the oil and gas producer. What is needed is something close to the Google approach to business. A large software development group. Funded by the ultimate benefactor. Free to the user to use. A different approach on a much larger scale. That is how the issues of the oil and gas industry will be resolved with People, Ideas & Objects software development approach.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Keeping Our Audience Tuned

Lets be clear, when the bureaucracy announces “Behemoth”, the bureaucracies yet unannounced competing product to the Preliminary Specification, the bureaucracy will set in motion its own demise. They however have no choice but to make that announcement. Their survival will therefore rest on their ability to ensure that “Behemoth,” and therefore all systems, fail. This strategy might even be implemented by the bureaucracy supporting People, Ideas & Objects Preliminary Specification in order to make it fail. So we need to be mindful of any support that we might receive from our friends the bureaucrats. Their control of the budget would be very effective in keeping us on life support, and then at critical times force us to scale back on key initiatives. Not something that we can contemplate or expect to achieve our goals with that kind of funding. That is why we have established the Revenue Model to set out the terms and conditions as to how the development needs to be undertaken.

With the projected costs of these developments being beyond the scope of anything that has been contemplated before. There will be those in the bureaucracy that will bark and yell. While the losses on the natural gas side of the business continue to mount. We provide the oil and gas producer with the most profitable means of oil and gas operations. And that is the driving motivation to support and complete the software developments that will be derived from the Preliminary Specification. Let the bureaucracy bark and yell and ultimately fade to black. This is an investment in how the business of the oil and gas business is run and managed.

The future of the industry and how it approaches the difficulties in the decades to come is to be addressed within this software development process. Setting out an organization of the industry that is a more natural way in which it operates, around the Joint Operating Committee. Moving towards this natural bias will orient the people and the organizations towards a more efficient and effective industry. This is what is necessary in order for the industry to approach the difficulties ahead. The first thing we need to do is to organize ourselves. Organize ourselves for success.

These are the aspects that are missing in the bureaucracies “plans” for “Behemoth”. There focus will be on their own survival, at the expense of everything else. I certainly can’t see the industry succeeding in the future with the bureaucracy in control. It is failing by all accounts today, but that is a matter of opinion, I guess. What I have tried to provide industry is a choice for it to deal with its future. One where innovation and profitability are cornerstones of a growing and dynamic industry. I am glad that I am here and able to offer the Preliminary Specification as that choice.

It is the things that I say and do that make logical sense for the industry to move towards. It also frightens the bureaucracy with its ultimate demise. Which is a good thing I think, and a lot of people seem to agree. The bureaucracy however hold the power in the industry and have not feared the consequences of demonstrating that power to me. It’s quiet now. But with the amount of money on the table and their existence being questioned they will be agitated soon. Don’t get me wrong I love the fight. I just don’t want to lose this audience who will be disappointed that there is a fight. This could be interesting for all concerned. So I would suggest that you stay tuned.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Not a Kumbaya Moment

Another aspect of the bureaucracies “Behemoth” that they should consider before they make its announcement is what is the fundamental justification for the project. If the Preliminary Specification provides the opportunity costs of $67 billion for the calendar year 2012. And that is the justification to develop “Behemoth” then how is “Behemoth” going to capture that value without the ability to use the IP that is inherent in the business model of the Preliminary Specification? If that value is not available to the bureaucracy why are they developing “Behemoth”? It’s questions like these that are best left unspoken.

Here we are striking at the heart of the very survival of the bureaucracy. They have no answer to the question as to where the value will be generated by “Behemoth”. They will be only conducting the exercise in order to appear to be generating value through the development of systems. This development being undertaken as a means to justify the bureaucracies very existence. For without the existence of the development of “Behemoth”, they stand naked in terms of a response and accountability to the business model in the Preliminary Specification. They must do something. And they must do something in terms of systems development. And their very existence depends on it.

Now we see why this will be a fight and not a kumbaya moment. With the Preliminary Specification the bureaucracy is all but eliminated. The power of the Internet is disintermediating this dinosaur from all industries as we speak. Oil and gas is not immune from this. And the instinct to want to persevere and prosper is also a characteristic that is common in the bureaucracy. The fact of the matter is its coming down to a point in time not of their choosing, very quickly and its at their doorstep.

I’m only too happy to be the one delivering the bad news. The bureaucracies ultimate demise will bring new value and prosperity throughout the oil and gas industry. A lot of their structure is configured around what I call the corporate model. The focus of the corporate model is the compliance and governance of the firm towards the SEC, tax, royalty and regulations of the corporate business. The idea or concern for the actual business of the business is not even a secondary concern for the bureaucracy. This is why the Preliminary Specification is a fundamentally stronger model for the innovative and profitable oil and gas producer. It moves the compliance and governance frameworks of the hierarchy into alignment with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. This alignment provides the producer and Joint Operating Committee with greater speed, innovativeness and accountability over the corporate model. In addition we see the opportunity costs it generates in terms of the value it can provide the industry.

The bureaucracy ignores the Joint Operating Committee in their corporate model and in their systems. And that will include “Behemoth” as well. They are operating on a different planet with different objectives and different plans to what the business of the oil and gas business needs and wants. The Preliminary Specification focuses the resources of the industry, and the service industries, on the needs of the business through the Joint Operating Committee. An innovative solution whose time has come and whose only impediment to its implementation is the same impediment that was there ten years ago, the bureaucracy and their self serving agenda.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Competing Based on Intellectual Property

One area that the bureaucracies “Behemoth” solution will be unable to compete with People, Ideas & Objects Preliminary Specification will be on the use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. They will have to find some other organizational construct in which to use to build into their systems. Using the Joint Operating Committee is part of my Intellectual Property (IP)and I certainly am not granting them any right to use any part of it. And that goes for all of the IP in the Preliminary Specification, the business model and anywhere else they may find it within the pages of this blog or elsewhere. This IP is the product of ten years of dedicated research, derived from twenty five years of oil and gas experience. If they want to compete with Behemoth, then I believe they need to begin with the process of the ten years of research. That’s ten years after they come up with an organizational construct. And remember there are no shortcuts in conducting your research.

So the starting line to this fight is a little staggered in my favor. I have been in the business of software development for oil and gas ERP systems for twenty two years. And I have seen their power in terms of what they can do through effective business models and software developments. The Preliminary Specification is a reflection of this. Intellectual Property is a key aspect of the strategy that People, Ideas & Objects used to undertake the research in the past decade. That was the manner in which value would be built over the long term. Not through hard assets, but through IP. We now have a competitive offering and will enforce these standards on our competitors.

When I first began developments in 1991 I have to admit it was a bit of the wild west in terms of IP. If you had anything of value it was taken, copied and used by everyone that could get their hands on it. Today it’s a fundamentally different situation. One in which IP is recognized as the building block of the new economy. One where IP is the cornerstone of some of the largest corporations in the world. The management of IP is as a result far more easier to assert than in 1991. The following are some of the administrative steps that we have taken to assure that our IP is recognized.

Everything is published on the web. Either through our blog or our wiki all of the research and material that has been written is available to be viewed. There you can see the genesis of the ideas of how the Preliminary Specification originated from the idea of using the Joint Operating Committee as the key organizational construct.

Secondly, since we were engaged in a protracted and unfriendly battle with the bureaucracy. This occurring throughout the decade we were conducting our research. And since they sponsored two initiatives to compromise our IP, we advised the CEO’s of the major’s, independents and a few other firms of our IP, its origins and the time frame in which it was developed. It was therefore inappropriate for them to proceed once provided with notice. We also advised the two research firms of our competing solutions which caused those projects to be terminated.

We also advised the major developers SAP, Oracle etc. of our IP and that it was not in their interests to be involved in any developments that breached our IP. With their firms being derived from IP themselves it was something that they respected and understood.

To deal with the issues of the oil and gas industry we have the opportunity to work on the Preliminary Specification tomorrow, as in June 13, 2013. Or you could join the yet unannounced “Behemoth” project which would have at least a decade of research to undertake and be of some unknown form to the industry. A choice that has definite implications to the future of the oil and gas industry.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

And In This Corner

Having been responsible for the 2012 opportunity costs of $67 billion. And being shown the way in which to resolve the natural gas pricing issues in the industry. The bureaucracy will need to show some resolve that they too are on the job. That is why they will put up the fight with People, Ideas & Objects and our Preliminary Specification. And we should expect that fight to be one in which their attempts will be to talk over us as the premier method that they take us on. It’s not that they will have a vision of what they are offering. It will be technologically focused, probably SAP derived, cloud computing solution. But there will be no mention of any of the business issues in the industry or discussion of how those issues are going to be dealt with. There will be no Preliminary Specification in which to turn to.

To go forward in 2013 and 2014 without any solution to the problems in the industry when the industry is experiencing such quantifiable and qualifiable difficulties would be irresponsible even for the bureaucracy. With the evidence of the Preliminary Specifications ability to resolve the issues in industry with Information Technology. The bureaucracy will assert an Information Technology based solution. Without any vision, specifics, details or ideas on how to solve the problems they are facing. They will commit vast resources to resolve those details and come up with the ideas necessary. The point is when they are called on to explain the losses in the natural gas side of the business, they will be able to say they have an Information Technology solution under development to resolve those issues. And hence buy themselves a few more years of salary and pension plan vesting.

But that’s not the real plan. The real plan is to show a concerted effort in making these systems, only to have them ultimately fail. That will be the fatal blow that is needed to deal with the likes of People, Ideas & Objects. A systems development failure that proves that these types of systems don’t work would set the bureaucracy in the driver seat for a few more decades of power. This could be so easily done the bureaucracy would be fools not to make this their premier strategy in dealing with People, Ideas & Objects. I would expect to see something being announced as early as the fall of 2013. We should also give it an appropriate code name to refer to it in the future. Let’s call it Behemoth.

And there will be other strategies used in addition to the bureaucracies Behemoth to fight us. Our primary appeal is to the investor of the oil and gas industry in terms of raising the funds for development. It will be here that the bureaucracy will focus their energies on attempting to disrupt our resources. It is the attention that we seek and are garnering from this constituency that has the double edge sword of concern for them. It raises the resources for us, and diminishes the perception of the incumbent and their current performance in the industry. They need to be very careful how they travel through this minefield as it is not something that they can easily defend in terms of their own record, or as to their purpose in disrupting our activities.

Ignoring People, Ideas & Objects and hoping it will go away hasn’t worked. And doesn’t look like it will work in the future. This strategy has seen us come up with a strong vision which is now the appropriate solution for the industry at the appropriate time. It’s time for the bureaucracy to rethink and redeploy on this strategy. It will be interesting to see what they come up with. I don’t think they're so dumb as to attack it. But you never know.

And what is all this talk of fighting about. Why wouldn’t the bureaucracy just adopt the Preliminary Specification and begin the developments right away. This last point is the fairy tale. With $67 billion per year on the table, a fight this will be.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

A Solution Whose Time Has Come

Our last few posts have shown that the bureaucracy has failed. That they are leaderless and do not change. Particularly at the scale necessary to rectify the difficulties in the natural gas marketplace and other areas of the oil and gas business. And in a somewhat unrelated point we recently noted that there is an implied guarantee that People, Ideas & Objects will be capable of completing the Preliminary Specification once we commence developments. A solution whose time has come.

The difficulty, or impediment now to having these software developments take place is the speed at which the marketplace takes up the Preliminary Specification. This however is 2013 and not 1999. Now that the marketplace is ripening in terms of the issues becoming prevalent. Solutions will be sought out and those solutions that are available will be evaluated. And its not just the natural gas pricing issues that the Preliminary Specification resolves. Moving the compliance and governance frameworks of the hierarchy into alignment with the Joint Operating Committees legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. Allows the producer firm and Joint Operating Committee to operate in a natural manner. Where speed, innovativeness and accountability are the result. Where all the issues in the industry can be approached with fresh and innovative solutions.

I see a point in time in the future where the full specification of the Preliminary Specification is operating within the industry. Things happen fast in the marketplace today and I think things will happen fast for us now. Something has to happen, an IT driven revolution is happening in every industry. It is desperately needed in the oil and gas sector. SAP doesn’t have a vision. And I am offering the vision that is provided in the Preliminary Specification. We know the bureaucracies choice is SAP and it is the dominant application in oil and gas today. And SAP is the bureaucracy. So the choice is rather stark with the future of the industry held in the balance of which IT application it uses. Who would have thought.

So I don’t see it as a matter of choice as to which system the industry will choose. It will be a bit of a struggle between the bureaucracy and their use of SAP vs the rest of the industry and the Preliminary Specification. One of them will win this conflict and be accepted as the ruling application in the oil and gas industry. It will be an interesting time. And not a fair fight. The bureaucracy have control of the budget and have used it to their benefit effectively in the past. You can expect that they will do so again. I would expect to see that they will prematurely announce victory. Along with a list of promotions and announcements designed to feign support and direction for an SAP application that will “solve” the industry problems.

And we’ll continue as we have since August of 2003. For that is when the idea of using the Joint Operating Committee came to me and we began this adventure. I see the battle lines being drawn by the bureaucracy. They have much to lose. If it’s a battle that they want it’s a battle they will get. So let the battle begin.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

What is Failure?

We have been discussing the situation in the natural gas pricing marketplace and the response over the past few years of the bureaucracy. We have discussed the makeup of the marketplace and the nature of the shale gas formations prolific characteristics could keep the natural gas marketplace in a similar situation for the foreseeable future. We have discussed the nature of the losses that are being incurred by the bureaucracies and contrasted those to the changes in the Preliminary Specification and how it works to mitigate the $67 billion in 2012 opportunity costs. What would we therefore define as failure in the natural gas marketplace and when would it be determined?

Declaring that the bureaucracy has failed would be a significant claim. It would need to be able to be proven, both qualified and quantified. It would have to be asserted that the existing situation would persist and could not be mitigated as a result of the current administrations actions. The failure would have to have a material impact on the business. Failure would require the actions of others to step in to offset the financial impact of the failure. And failure would see the lack of planning and budgeting to offset any future failure. So lets determine if the bureaucracy has failed with respect to its management of the natural gas business.

Lets first look at the quantifiable aspects of the situation. In 2012 the opportunity costs were determined to be $67 billion. As it stands in 2013 the natural gas prices are generally higher than they were in 2012, however, its still only June and we are counting opportunity costs as there are losses on operations in almost all instances at the current prices. The present value of continued losses on operations over a ten year time period bring the value of a solution to this problem into the stratosphere. More value can be earned by solving this issue than can be generated by conducting any other operation in oil and gas today. So from a quantifiable point of view the operation of the natural gas business today, by the bureaucracy, is a failure.

What about the quantifiable aspects. Are there plans in place to deal with the situation and remedy the losses to fix the issue. Can the issue be fixed. As we detailed yesterday if the producer shuts-in production, their overheads are fixed, which lead to larger losses on their operations. In a competitive capital environment they feel the best situation is to produce at capacity, and hence limit their losses. What they are in fact doing is saturating the natural gas marketplace, but that is a situation that they claim they have no control over. So the situation continues with the production at capacity and no plans to deal with the losses that continue. That is except to continue to hope for a cold winter. A fundamental failure to act in its own best interests.

Expecting others to step in to offset the losses is inherent in the bureaucracies mindset. Discussion about cash flow and operating profits divorce themselves from accountability towards their performance in terms of the capital invested. Capital was invested yesterday and is not relevant to today’s performance, so we have left it out in our current discussion, they will say. This is a dishonest and corrupt discussion that shows the state of affairs in the industry and is designed to avoid the discussion of the real issues. Losing money. What they hope to achieve by doing this is to fool prospective investors that they are a good investment so they can live off their capital for a little while longer. Kind of like a ponzi scheme. Expecting others to step in to cover for your failures is a clear sign or indication of that failure.

It is clear from these points then that we have proven, from both a quantifiable and qualifiable basis that the bureaucracy in the natural gas business has failed. Will continue to fail and has no plans or capability to stop failing. There is no question that at this point in time, we can say the bureaucracy has failed.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Bureaucracies Don't Change

When it comes to transitioning from the current corporate model to the business model defined in the Preliminary Specification. One thing we do know for certain is that bureaucracies don’t change and they are leaderless. Expecting a solution to the current natural gas pricing situation from the bureaucracies will leave people disappointed and losing money. We are entering our third year of depressed natural gas prices and the bureaucracy have not even identified it as an issue. They are more interested in the point in time when their pensions are fully vested. The fact that the changes proposed in the Preliminary Specification would have increased profits in 2012 by $67 billion seems to inspire little more than a guilty shrug from the bureaucrats.

People, Ideas & Objects have a solution to the natural gas pricing difficulties that are currently being experienced, and those that are in the future. The Preliminary Specification enables the producer to remove the marginal production from the marketplace until prices rise to the point where they will provide an appropriate return. During the time that the property is shut-in, no losses on those operations are incurred due to the fact that all production and overhead costs are variable and based on whether there is production.

The Preliminary Specification uses the decentralized production model to ensure that all costs are variable. By reducing the profitable and innovative oil and gas producer to the C class, earth science and engineering, some support and legal resources. With the remainder of the traditional resources deployed in service providers who are focused on a process, or part of a process, across the industry. These service providers are then able to provide the traditional production and overhead costs and services directly to the Joint Operating Committee. Then if the property is shut-in for the month none of the charges for overhead or production are incurred or charged to the Joint Operating Committee.

When none of the charges are incurred for production and operations to the Joint Operating Committee then no loss on operations is incurred. Only the costs of capital are uncovered during times when production is shut-in. Losses, which are being incurred in today’s marketplace, have to be added to the reserves costs to be made up for with even higher prices in the future. By shutting in the property, under the Preliminary Specification, the producer is minimizing their losses and saving the reserves for when the prices will provide a return.

In the current environment if the bureaucracy did have the sense to shut-in production to remove the excess production from the natural gas marketplace. They would still have to deal with the staff levels they have. No changes to the current staffing would happen in the current high throughput production model that is employed today. Therefore incurring higher losses on operations as a result of any shut-in production. Is it any wonder why producers produce at capacity.

It could be argued, and it is partially correct that in this process of moving from the high throughput production to the decentralized production model. The oil and gas industry is moving the burden of controlling their overhead costs from their own administration to that of the service providers. That is true and the service providers will have to ensure that they are providing the lowest costs services to the Joint Operating Committees that employ them. However, the service providers will also have the capability to deal with those costs in a far better manner than the producers will have been able to deal with them.

The use of software automation, specialization and division of labor are all able to be used more effectively by the service provider than by the producer. Using the industry as their client base they are able to specialize and divide the labor across a larger scope and scale of processes. And with a dedicated software development capability provided by People, Ideas & Objects they will be able to continually evolve their service offerings based on the software changes they desire.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

A Guarantee

The Preliminary Specification presents a business model to the oil and gas industry that provide for profitable and innovative oil and gas operations. In our Preamble to the specification we detail the six key attributes of how it provides this profitability and innovativeness. These are the foundations of the eleven module software application that will define and support the oil and gas producer and Joint Operating Committee’s operations. These attributes are what the industry should be focused on and they can only be attained, in this the 21st century, by first defining and building software that supports the organizations that supports the attributes. Without the software to define the organizational foundations and attributes, nothing will happen otherwise.

Specialization and an enhanced division of labor are the means in which economies expand. Without the ability to further specialize the economy and the organization will stagnate. It is the source of real value generation. However we have a problem that is presented to us by the use of software. Without the changes first being defined and supported in the software, no further specialization or division of labor can spontaneously occur. Therefore we have to predetermine the changes that we desire, build them into the software and release them into the organization. This is the nature of our organizations today.

People, Ideas & Objects in addition to providing the Preliminary Specification provide a software development capability that is focused on the changes that producers and Joint Operating Committees want to see in their organizations. Our Revenue Model is designed to focus our organizations around the changing needs of the industry. A fundamentally different focus to that of our competitors with a fundamentally more competitive value proposition.

Key among the attributes of our value proposition is our claim that we provide the most profitable means of oil and gas operations. Our claim is validated by our business model noted in the Preamble. It is our way of asserting that we can deliver the Preliminary Specification and its derivative software and software development capability to the marketplace. Oil and gas producers can see the business model and know that its value is material to their business. And they know that they can only attain that value through the software that defines and supports their organizations. It is therefore incumbent on them to ensure that that software is developed, built and delivered to them in the manner that their organizations require. That is how People, Ideas & Objects can guarantee that once we begin the developments of the Preliminary Specification we will complete them. It is in everyone’s interest to do so.

Except maybe the bureaucracy. We may not have seen the end to their tactics. I would expect them to put up a few more good fights, they have a lot at stake. I would suggest they look to the future and ask where they fit-in in any scenario. Times have changed and the writing is on the wall. It’s time to go. Although I am certain they will need more encouragement, the investor class has a particular issue with the way that oil and gas is operated at the current time. Our appeal to the investors continues and the transition is beginning, so lets stay focused on these points.

I am certainly looking forward to the transition. There is nothing more exciting than seeing a sleepy industry focused on muddling along turn itself into a dynamic, profitable and innovative industry. Just in time for when the real demand for energy strains the ability of the industry to meet it demands. We live in exciting times and we have much to do.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Bureaucracies or Information Technology Management

Without a plan to deal with any declines in the natural gas prices you can be certain there will be losses in 2013 that will be equal to those in 2012. Losing money has no impact on the mindset of the bureaucracy. Other than the need to provide excuses during the financial reporting season, the fact that they are incurring losses concerns them little. If you listen carefully, you’ll also hear very little in terms of how the low natural gas prices are being raised as an issue by these people. They truly couldn’t be happier and more self satisfied than they are today.

This is no way to run a business. What makes anything that is happening in the natural gas business acceptable. Hope? We’ve had three years of that. The structure of the industry is now in a situation where the natural gas prices appear to look like they will remain low for the foreseeable future. Is that the hope of the industry, that it will continue to generate losses for the foreseeable future? This is not too different from the manner that the business has operated in the past but there have been some fundamental changes. And the bureaucracy has not recognized or accepted these changes. Key among these is the prolific nature of the shale gas reserves. Bringing a new dynamic to the natural gas business. One in which the supply of natural gas can overwhelm markets.

It is imperative that the natural gas producer change their operating strategy from one that produces at capacity to one that produces above the marginal cost. Then and only then will the industry take the steps to responsibly manage the resource. Continuing to produce at losses for much longer will only destroy the industry, leading to shortages in the natural gas commodity, leading to much higher prices, causing distortions in investment and an eventual collapse in prices once again. Producing at the marginal cost will help to mitigate the broad swings in pricing and help the industry to grow and prosper in an appropriate manner.

It is reasonable to assume based on the actions of the bureaucracy that until the People, Ideas & Objects Preliminary Specification is built and operational within the industry. The $67 billion in annual opportunity costs will be incurred each and every year by the bureaucracy. A bureaucracy that refuses to even recognize this as an issue. One that has vilified me for my efforts in asserting the Preliminary Specification as a solution to the problems of the industry. One that shows that the bureaucracy is at the heart of all of the issues.

It comes down to the same old conflict that is being played out in every industry. Will the bureaucracy win or the Information Technologies that replace and provide alternatives to the bureaucracies. The battle is being fought everywhere and the economy is on shaky ground because the bureaucracy is only interested in its survival. It truly doesn’t care about value. The force for self preservation is stronger than the idea that they do the right thing. Whereas the Internet is providing solutions to the way that business had been done for the last century. Ways that are more efficient and effective. Providing business models, like what the Preliminary Specification provides the oil and gas producer, that bring a dynamic, innovative and profitable nature to the business.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.