A vigorous debate about alternative energy.

MIT Video has a "soap box" with Professor Donald Sadoway about the sources of alternative energy. The video discusses the majority of the alternatives that are "believed" to be available. And Dr. Sadoway dispatches some rather brutal common sense as to the viability of these alternatives.

The take away for me was the efficiency and ease of use of the internal combustion engine. Alternatives are not that easy, and they are certainly not within the scope of anything that is safe or affordable. Dr. Sadoway notes the following regarding some of the alternatives.

It was 1839 when William Grove invented the Hydrogen fuel cell. Today the costs and possibilities of this promising energy source are further then ever from being realized. I highly recommend watching the video by clicking on the title of this entry. It is a complex and difficult process that is best explained by Dr. Sadoway.

Batteries have experienced significant development over the last two decades. Fueling the laptop and cell phones to their prominence today. To power a vehicle however becomes rather costly. To travel 100 km would cost the consumer approximately $1 million in state of the art lithium ion batteries.

Dr. Sadoway responds to a number of questions from the audience, one being the viability of nano technology capacitors. These seemed promising yet many years away. Brief mention of Emery Lovins use of switchgrass and book "The end of the oil game" are, I can assure you, not cost effective at this point. To burn more energy then you produce seems somewhat counter productive to me. And that is what is required for switchgrass and corn based ethanol's. Just because of the large corn subsidies do these alternatives even get mentioned.

So what is the answer to the use of hydrocarbon based life style? I think there are three very good answers that promise the most value in the short to mid term. They are the increase in horsepower from the average internal combustion engine. To double the horsepower per gallon would reduce the size requirement of the engine and reduce the demand for energy. If each molecule of gas contains E=MC2 of energy, we are a long way from realizing the full value of each drop of gasoline. The second alternative is the Segway, and the third is the funding of this software to enable more innovation in the supply side.

In Formula One, the engines are as powerful as they were in the 1980's when they were propelled with 1.5 liter turbo specifications. Gobbling up gas at a phenomenal rate these engines were in race configuration capable of around 1,000 horse power. Today the use of normally aspirated 2.4 liter engineers generate almost 700 horsepower with spec gasoline and use less then 160 liters per race. This is directly comparable to the 3.5 liter engineers that were generating 500 - 600 horse power with exotic fuels at the end of the turbo era in 1989. In other words we have probably doubled the horsepower per drop of gas in the past 2 decades. How much more can be achieved in this area?

The Segway is faster then most cars in rush hour traffic. I'll leave Dean Kamen to explain the efficiencies of this transportation device that he invented on MIT video here. I think this type of rational thinking needs to be adopted. The prices at the pumps have done nothing to defer the desire for energy. The world is consuming 1.5 million additional barrels per day since this time last year. What price is necessary to stop the increase and reduce the demand? Obviously much higher. If the Segway can get 20 km on $0.50 of electricity, and get you to work faster, there is value in that.

Technorati Tags: Genesys, Alternatives, Innovation, Energy

Petro Canada

Petro Canada has revised it's offer for Canada Southern Petroleum Ltd. to $165 million from $113 million. Does this mean that they are overpaying for this asset? Recall what they said about Canada Southern Petroleum's expectation of value, that it was too high.

Petro Canada's increased offer of 146% may be the result of the humiliation in knowing that their previous offer received only 61,587 tendered shares. Thankfully they did not call themselves explorers in the press release.

Technorati Tags: Genesys, Petro-Canada

The Institute for International Economics

In an article entitled "Accelerating the globalization of America" the authors made two interesting comments in the Executive Summary.

"Innovations not implemented because resources cannot adjust forfeit some of the potential of the economy." p.xviii

"Two additional links between productivity and international trade are that trade in technologically sophisticated products is associated with higher productivity and the industries that have invested heavily in IT have a greater propensity to export." p. xxi

The bureaucracy is slowing us down, (a given) and innovations that would otherwise benefit the economy are now having their value forfeited. The market demands for energy continue to outstrip supply. Whether we are at the peak of production or not is not the question. The question should be, how much are we giving up economically by not proceeding with this project?

These comments make me want to declare another call to action, and if it were it would be number 11. Access to the article is provided by clicking on the title of this post. I highly recommend downloading the entire document. It is a substantial work in terms of its findings.

Technorati Tags: Call-to-action, Innovation, Energy

Is the joint operating committee revolutionary?

In the posting regarding NASA scientist Dr. Robert Casanova on MIT Video last weekend. I kind of intimated that this concept of the joint operating committee and the topic of discussion on this blog is revolutionary. Not one for understatement, I should probably explain my point and ask "Is the joint operating committee revolutionary?"

Unequivocally Yes.

Using the definition Dr. Casanova provided,

"Revolutionary paradigm shifts are simple, elegant, majestic, beautiful and are characterized by order and symmetry."

Required reading may involve those that are not familiar with oil and gas to read the "What is a joint operating committee" post I did a few months ago. This will provide readers with some necessary background.

The comments that I have received personally consist of the "well of course" type. People realize immediately the value of the concept. Over time they're thinking moves them to make comments like "this solves the majority of the administrative issues in oil and gas." Or "It's an entire new discipline."

I think it is revolutionary, and here is why. I can see each element of Dr. Casanova's description of revolutionary in the overall concept of using the joint operating committee as the organizational construct. It is simple, it solves so many difficulties in oil and gas, and provides a natural element of both order and symmetry. The ease of how the solution gets built in terms of functionality, logic and process is a true beauty when the power of Java is layered on to the solution.

Steeped in history the joint operating committee is, as I have said, the natural form of organizational structure in oil and gas. This is for the following reasons:

1. The mitigation of risk, spreading the exploration and production costs over a number of companies permits greater flexibility and capability within the ownership group.
2. Sharing of gathering and processing facilities. Not every producer needs to build a gas plant. These costs can be shared amongst a number of companies and reduce the impact on the environment and maintain higher levels of throughput.

In other words partnerships are a critical and inherently common occurrence in oil and gas. The reason the hierarchy has established itself was to manage the business in an effective manner after a certain size was attained. These forms of organization became the norm in the 1940's, 1950's and 1960's and have outlived their useful purpose in the 21st century. If using the joint operating committee is not revolutionary, a revolutionary manner of organization is needed to solve energies perfect storm.

Back to the partnerships, as everyone can well imagine there would be many legal documents that support and define the partnership and these have been in place since the beginning of the industry. Industry associations, codified documents, and the many agreements that have been executed form the legal foundation of the industry. The strength of these documents and procedures form the culture of the industry and establish normal and acceptable practices of operation, decision making, financial accounting and reporting.

The area where the joint operating committee fails is in the accountability framework. This has been the domain of the hierarchy. And now the hierarchy is failing in providing the shareholders with adequate and effective controls. This has become such a problem that the U.S. congress has implemented Sarbanes Oxley for the assurances the shareholders need. Clearly these are not working and provide little comfort to the shareholders at large. Form my point of view the legislation has done little outside of reinforce the entrenched bureaucracy.

What would happen if we moved the tax, SEC, FASB and Sarbanes Oxley accountabilities to the joint operating committee? Would there be a greater alignment between the decisions being made? Yes, most definitely. When accountability is separated from decision making, troubles occur. There is no one responsible for the bad decisions and no one can trace the good decisions to the successes. After a period of time people begin to realize the time and effort necessary to make the difference is not worth it and very quickly stop trying. Not the proper attitude of an innovative producer.

Technorati Tags: Accountability, Joint-Operating-Committee, Innovation, Energy

Project Management Part l

I've begun reading a book that I think is rather unique in the discipline of project management. Written by Francis T. Hartman a University of Calgary professor, "Don't Park Your Brain Outside" takes a political look at PM and provides an interesting perspective. I 'll comment on this in four separate postings with the points that I find unique and not part of the standard fare training in project management.

Professor Hartman starts out with his SMART acronym which stands for Strategic Management, Alignment, Regenerative work environment and Transitions. A little different approach but one can already see some changes to what I would call normal Project Management.

The first point he makes is not to assume that you know what the project requirements are. Take the time to ask the right questions of the right people. Most importantly know where to find the right answers.

Secondly a definition of success at the outset of the project. Noting here that the perceptions of people change as the project progresses. This will have to be determined for this project. I will post a separate entry after I give some thought to this rather complex and difficult question.

Another point that is made that I have not noted anywhere else is to ensure that you consistently focus on either the costs, the time or the quality. Jumping around or being confused on this critical aspect causes more confusion due to the poor communication it brings to the team. It should also be stated here that the objective of this software development is to provide the quality that the end user needs and wants. The focus on this will be achieved at the expense of time and cost. However, we are dealing with high risk elements in terms of the technical risk, and need to approach this project with the desire and ambition to resolve these hurdles. Cost and time are not secondary, just not the priority in this project.

Capital budgeting in oil and gas is what I consider to be fun. Making the right decisions on the right properties and finding a place for the money has become rather scientific these days. Applying these principles of return on investment and risk in the project components is something that will have to be built into the process on this software application. As I have proposed the CollabNet software as the primary tool for collaboration with the developers, this will be the critical point of what projects are started first, second and third.

Lastly the open communications of this project management program is the "what's in it for me". Voicing each participants secret agenda's and objectives at the beginning of the program is something that I have not seen before in project management. It has the desired purpose of freeing up collaboration and allowing team members to gel quicker and more effectively when their secret motivations are well known.

I'll post more as I travel through the text.

Technorati Tags: Genesys, Development, Project-Management, Energy

Ray Lane in BusinessWeek

Ray Lane is a partner at Kleiner, Perkins, Caufield & Byers and a former president of Oracle Corporation. He knows what he is talking about. The title of this entry will take you to a Business Week article that documents many important points. Two of these points I want to discuss in this entry.

"The traditional method of selling big corporate software applications as multi million-dollar packages that take years to implement is broken."

"The 70% of startups out there that are trying to do what the big companies do, only better, faster and cheaper - it's a fools errand. The customers would like to buy that from a large company, so their going to lose out." Ray Lane

Surprisingly, perhaps, I think he is right on both counts. The large multi year, multi million dollar packages are the dinosaurs of the software world. Even Petro Canada tried to implement SAP and after $14 million gave up. Its a fallacy that went too far in retrofitting the company to the software.

On the second point of Ray Lane's, stating that the startups will fail, is something that I struggled with at the beginning of this process and something that I think I can also prove is not valid in the oil and gas sector. The two points that I would assert in my defense is that I am the copyright owner of the methods and processes discussed in this blog, and in my thesis. I published my thesis in May 2004. I have tangible evidence that the state of the art thinking was not as advanced as what I proposed in September 2003, and earned in the publication of the Plurality document.

Back in 2003 I concluded that the software vendors could consume themselves competing with new offerings and no one would have been able to secure a competitive hold in the market. The only manner in which to establish a competitive offering, I felt, was to own the intellectual property as the key competitive advantage. The copyright, and other forms of intellectual property were the only sources of value in this new age is the conclusion I came too in 2003, and I believe is the case fundamentally today.

Secondly, if anyone thinks that a large vendor is going to be able to write the code for the Partnership Accounting module that I have spoken about here (to aggregate the stories just click on the Partnership Accounting tag). I think they would be mistaken in their expectations. This needs a clean slate approach and the heavy involvement of the potential and future users.

So on that basis I would agree and disagree with Mr. Lane. Intellectual property is the only method of securing any kind or competitive advantage in this new day and age. Those that attempt to build systems without their differentiation being codified and protected are in my opinion wasting their time. What is required to compete with this software is some fundamentally different basis of organizational structure for the software to define and support.

On an unrelated note, Rod Boothby has an excellent summary of the CTC in Boston with a number of quality links to other blogs of importance and significance.

Technorati Tags: Genesys, Partnership-Accounting, Innovation, Enterprise-2.0

Dr. Robert Cassanova on MIT Video.

Dr. Cassanova is the Director, NASA Institute for Advanced Concepts (NIAC). Clicking on the title of this entry will take you to the video.

What Dr. Cassanova talks about is revolutionary thinking. Taking a variety of quotes from visionaries, genius', and revolutionaries Cassanova defines what revolutionary thinking is. My purpose in posting this topic is due to the radical nature of this project. Upsetting the bureaucracies is not an easy task, but the need to address the demands for energy are great and the bureaucracies are not aware of these needs. With today's high energy prices there is a disconnect in the motivation of oil and gas companies.

Consisting of a variety of quotes Cassanova starts with his own definition:

"The true revolutionary delights in an unfettered creative imagination, exploring the possibilities of understanding the mysterious."

Einstein:

"The genius is in the generalities, and not the details."

and

"imagination is more important than knowledge."

These next three quotes are not attributed to anyone, and I believe that Cassanova developed these as a result of formulating the strategy of NIAC.

"A sense of malfunction can lead to crisis as a prerequisite to revolution."

"New paradigms seem revolutionary only to those whose paradigms are affected by them."

"Revolutionary paradigm shifts are simple elegant, majestic, beautiful and are characterized by order and symmetry."

I find these definitions comforting. To me the concepts being discussed in this blog are revolutionary, particularly from the point of view of the groups that are challenged by them. Cassanova also mentions his definitions of grand challenges and grand visions. The grand challenge we face is "energies perfect storm" and a conflicted organizational construct.

Technorati Tags: Genesys, Revolution, Innovation, Energy

Petro Canada's accountability framework.

As was intimated in the top ten excuse list, the accountability of Petro Canada is broken. The self - serving management are only interested in what they can get away with and boosting the value of their options. The problem now becomes how do you deal with it? The problem as I see it is there has been a clear separation between operational decision making, which is done by the joint operating committee, and the accountability framework that is the bureaucracies only claim to justify their existence.

The accountability framework consists of reporting to the SEC, Tax, government and other accounting related areas. It is the sole domain of the bureaucracy. Where the hierarchy seeks and defines itself and the needs of the bureaucracy.

When I say that it is in conflict with the operational decision making framework of the joint operating committee, I mean the following. With respect to an oil and gas property, the methods and decision making processes are defined and codified in the operating agreements. (and at larger facilities the Construction, Ownership and Operatorship agreements.) If you want to participate, then you will incur the % allocation of any costs of that decision. If you don't want to participate, then the agreement deals with participants that elect not to participate by incurring penalties should they subsequently decide to return.

Further down the line the definition of who has voting control and what threshold of concurrence must be achieved to implement the decisions are contained in the standard operating procedures. If a joint operating committee is the benefactor of a significant find then the associated costs of gathering systems, batteries and gas plants may automatically fall within the decision making formula's. These agreements may also define a large area of land to be part of an "Area of Mutual Interest" and govern all the partners dealings on those lands that may be purchased by any party to the agreement.

My question here today is how is it that a CFO, and lets take the Petro Canada example, Mr. Harry Roberts of Petro Canada, can stand in front of Wall Street and say he will be raising the production profile of the firm by 10% in the next fiscal quarter. Based on the plans that are set in place by the joint operating committees, of which he is a member of, he can say it, however, the influence that he has in making these decisions is more or less, zero. He like any of his counterparts is literally speaking through his hat.

And as for the remainder of the management team, how can they assert that their management skills are attributable for the results that are being reported and budgeted. They have no influence! If they did not have an interest at the committee level, would the production have ceased? I think not. The sole domain of the management team are to report the results to the various regulatory and government bodies that they are required by law to report to. That's it. When it comes to oil and gas, they could be manufacturing widgets for all they know, and can influence.

In reality these organizational constructs are conflicted and obstruct the natural form of oil and gas, the joint operating committee. If SEC Chairman Christopher Cox can implement the regulatory framework of the SEC within XML tags, what will the bureaucracy then do. With the SEC's XML tags and tags that are developed through this software venture. The decisions of the joint operating committee will govern the various regulatory compliance frameworks and the reporting would fall out of the process naturally. So why have I such a difficult time in gaining concurrence? The hierarchy controls the budget for administrative operations, and therefore a sale to SAP occurs.

Now it has been pointed out to me many times that the reason that firms go to SAP for their systems is due to the "integrity" the application has with the investment community. And I agree that the investment community's perception is real. However, I would argue that just as the tax tail should not wag the dog, the compliance tail should not dictate the organizational construct. You do not need a bureaucracy to run a company in this day and age.

Technorati Tags: Petro-Canada, Innovation, Accountability

The perfect job.

For me that is. If I die at my keyboard writing another blog entry, I will have lived my dream. I can't think of any way to make this more enjoyable. The prototype blogger for me is Tom Peters who mixes his blog with speaking, consulting and books. If I could aspire to be like him, I would have been a very content blogger.

Speaking of Peters I downloaded one of his slides that has a quote from Dr. Peter Drucker.

"The corporation as we know it, which is now 120 years old, is not likely to survive the next 25 years. Legally and financially, yes, but not structurally or economically."

Ties nicely into the theme and purpose of this blog doesn't it.

Technorati Tags: Tom Peters, Consulting, Innovation, Energy

The oil and gas reserves of Petro Canada

At least that is what the companies calls them. The theme of these Petro Canada posting is to highlight the broken nature of the bureaucracies accountability and transparency frameworks. To me the reserves calculations of this firm push Petro Canada's management above and beyond the Enron's and WorldComs in terms of brashness. These people have guts.

Petro Canada wants its shareholders to believe that $11.8 billion in oil and gas assets are fairly valued. That these reserves are sound and that no missallocations or miscalculations would have occurred. Traditionally the company would hire an engineering firm to critically review the reserves of the firm. These independent engineering firms are standard fare and represent an industry and profession with a long tradition. Find me a geologist who likes the reserves engineering report and I'll show you a scam. I am fairly certain that their are a number of very happy geologists in Petro Canada.

First of all Petro Canada opens themselves to these types of criticisms due to the fact that they prepare the reserve report themselves! This from the 2005 annual report.

"The Company's reserves data and reserves quantities are determined by Petro-Canada's staff of qualified reserves evaluators using corporate-wide policies, procedures and practices. The Company believes that these reserves policies, procedures and practices conform with the requirements in Canada, the U.S. SEC and the Association of Professional Engineers, Geologists and Geophysicists of Alberta's Standard of Practice for the Evaluation of Oil and Gas Reserves for Public Disclosure. Petro-Canada also employs independent third parties to evaluate, audit and/or review its reserves processes and estimates. In 2005, 30% of North American and 39% of International proved reserves were assessed by independent reserves evaluators. The independent reserves evaluators concluded that the Company's year-end reserves estimates were reasonable." p. 32

Well if you tell me so, it must be true. If the firm has had these reserves estimates done, why not spend the extra few hundred thousand dollars to have the whole company evaluated? And what exactly are these policies, procedures and practices. Let's check it out.

The top review, I would assume, would be the board of directors. People with the names at the top and the first out the door when the fan gets dirty. Apparently Petro Canada has a committee of Directors reviewing the reserve report. We should also note that these are the same directors that said "no" to the managements request for more stock options. None of these directors are either engineers or geologist's.

Now I have personally read many reserve reports and I can show you the ins and outs of the documents with the best. But I can not tell you weather the report is the greatest find in the history of time, or a pile of crap. I suggest that anyone without a science degree in the two disciplines is in the same boat.

To be on the safe side, Petro Canada has hired the firm of PriceWaterhouse Coopers as internal auditors to review the process of how the reserve calculations are done. Well now I feel better. The Accountants will have the boys straightened around. I am going to make a suggestion to the management. Take the money that you pay PriceWaterhouse Coopers for their review and give it to Sproule & Associates to do a proper reserves evaluation. There I saved the company a few hundred thousand dollars.

Progressive explorers such as Talisman Energy have over 80% of their reserves evaluated each year, and I would assume not the same 80%. I see no reason for Petro Canada to hold on to such a flimsy basis of reporting transparency and accountability, unless they have something to hide. And since I have predicted that the company will lose money in the second quarter of 2006. These loses should be the cornerstone of truth about the real value of those reserves.

Technorati Tags: Petro-Canada, Innovation, Reserves

Petro Canada Depreciation, Depletion and Amortization.

One area that I think Petro Canada has been pushing the profits up is in recognizing the cost of their production. The recording of Depletion, Depreciation and Amortization are as subjective as the reserve estimates they are based on. But Petro Canada has taken the science of recording depletion to a whole new level.

During the past 4 quarters Petro Canada has recorded $1,557 million in Depletion, Depreciation and Amortization. This represents approximately 9.5% of the fixed assets of the company being written down. However, 12% of the Oil and 13.75% of the Natural Gas was produced in 2005. If we assume they average at 12.5% then the company should have recorded $2,048 million in depletion! That's a whopping $491 million in overstated earnings and capitalization. There must be something more here that I am missing.

For the past twelve quarters the company records an estimate of around $300 million in Depletion, Depreciation and Amortization per quarter. Yet oddly enough during this time Petro Canada spent over $9.7 billion in Capital Expenditures. Their policies support my calculations, they use the more conservative method of successful efforts and record Depletion on the basis of unit of measure. Why has the depletion calculation not kept pace?

Now I know that Petro Canada is an integrated company with refinery and marketing operations. However, only $143 million in Depreciation was recorded for these items in 2005. What I think has happened is really simple. The clerk that records the Depletion decides to record the same amount for each quarter. Not thinking that the dynamics of the calculation require them to review the situation each quarter.

I think it is time for the company to adjust their financial statements for this clerical oversight. Record the difference of $491 million in depletion as a prior period adjustment, and recalculate the more accurate amount for the second quarter of 2006. Then I think the shareholders will have a fairer perception of the earnings capability of this management.

Technorati Tags: Genesys, Petro-Canada, Financial, Accounting

The Genesys development model.

Recently I completed the discussion regarding the technical vision that supports these software developments. And noting how this model of technology is fundamentally different from the client server model that's in place today. I also highlighted the importance of Java in making this vision real, and how important it is for everyone to have an understanding of the advanced concepts that Java brings to the table. With out hands on Java training, the future innovativeness of individuals will be approximately equivalent to their familiarity and comfort with Java.

I have also commented before that Genesys is the core processing engine. With applications providing the unique attributes of each local region being owned by separate developers. The purpose of this is to have the system deal with the unique naming conventions and terms in use for each area of operation around the globe. (Lease numbers, field codes, government id's, etc.)

Today I am suggesting that the engineers and earth scientists are joined by a software developer that fully understands their needs and can enhance the code for them to meet the specific needs of each and every joint operating committee. After all these are business units that are long lived. Any development costs would be amortized over the long life of the JOC. The primary role I foresee for these developers is to support the Joint Operating Committee with the unique capabilities of the systems. Their ability to communicate and make the system work the way that users want and need it to operate.

What I am proposing is not so much "custom development" but custom implementation. Making the system do what it is designed to do and represent the users of the joint operating committee, to the core and local development groups.

The level of communications that these tiers of users / developers will be extensive. The developers are driven by users needs. To understand what the developer can do, a user will need to at least understand many of the advanced Java concepts. It is these concepts that provide the power for the users to have what it is they want and need. It is not a luxury item that most of the IDE's like NetBeans are now chat and voice enabled. Providing the ability of the user and developer to be virtually across the table from one another. This is the future of software development.

Technorati Tags: Genesys, Development, Innovation, Java

Petro Canada, the garage sale continues?

I suspect a garage sale attitude may be on management's mind. Reviewing the 2005 Annual Report and first quarter of 2006, Petro Canada appears to me to have more then just an earnings problem, but also a severe cash problem. If they are selling an asset it would be for the cash and to boost the second quarters earnings.

The seriousness of the situation leads me to think that last years sale of Syria may have been "forced" to earn enough cash and earnings to continue the pretence. Selling the Syrian property would have otherwise never happened. Think of Skilling and Lay selling to make the profits as opposed to shuffling.

So lets keep our eyes and ears open for any large property sales out by our favorite company.

I can't seem to find any reason why the company is hemorrhaging so much cash. In the last 4 reported quarters they have increased their debt by $2,091 million. Most of this coming from long term debt to finance capital expenditures. Additional sources of cash have been through the discounting of accounts receivables, to the tune of $480 million.

Hold it, I think I might see where some of the money is going. There's a normal course issuer bid. In the last 4 quarters Petro Canada management have spent over $1 billion in share buy backs. Now to be fair I don't like share buy backs, particularly when the company has to go into debt to do them. It's dumb, very dumb. Instead of buy backs, companies should think special dividends if you have the money.

Technorati Tags: Genesys, Petro-Canada, Financial's

Petro Canada's first quartile operations.

As I read the 2005 Petro Canada annual report I find that management holds itself to the rather high standard of "First Quartile Operations". It's good to see they strive to be amongst the best in the business.

But wait! What's this footnote?

"Reference to first quartile operations in this report do not refer to industry wide benchmarks or externally known measures. The company has a variety of internal metrics which define and track first quartile operational performance."

That's like having your kids grade themselves in school! Dad I got straight A's. Again.

Lets revisit some of the fine work that Petro Canada does do.

• Does not have their reserve estimates reviewed by independent engineers. This task is left to the vice president in charge of production, or whom ever has the highest number of stock options.
• Doesn't use outside metrics of performance evaluation.
• Uses hokey calculations such as "195% reserve replacement" to obfuscate the truth.
• Can't buy a small company because they won't give it away.
• Can't make money at $70 / bbl.
• Can't make money on confiscated assets. (Those that were nationalized and given to Petro Canada)
  
• Management have endowed themselves with over $350 million "in the money" stock options.

I have to ask what is this company worth? This is a festering sore on the Canadian oil and gas industry. It should be dealt with quickly.

Technorati Tags: Genesys, Petro-Canada, Bureaucracy

A coincidence? I think not...

Today's Calgary Herald reports two items of interest. First T. Boone Pickens has now stated that the energy system is at 100% capacity and there is no more. Essentially declaring for the Peak Oil theorists that this day is the highest attainable production volume, ever. I fundamentally believe he is right. 85 million barrels a day is lot of production. If you add the natural gas equivalent, its over 120 million barrels a day. (That's over 5 billion gallons per day, or, almost one gallon for each person on earth).

The second point the Herald notes is the vast number of career openings for engineers and geologists. Seems like the bureaucracy needs more of these people to push the paper around.

The point of course is that these are saying the same thing. The productive capacity of the oil and gas industry is dependent on the human resources available. The number of engineers and geologists is rather limited in the whole scheme of things. What is needed is a new form of organization that will enable the geologists and engineers to work faster, and more effectively.

As it stand today, just as T. Boone Pickens has called the Peak, I can assure my readers that the bureaucracy is on the verge of choking on the paper, and quite frankly, never been happier.

Technorati Tags: Genesys, Peak Oil, Innovation, Bureaucracy

Military command, part III

I want to follow up quickly on my military command entry and concepts. The points that I want to establish today are:

• Allies = Other producers, or members of the joint operating committee, or service based organizations.
• Each army can be parsed into further classifications such as Navy, Marine, Army and Air Force.
• Each participant in the joint operating committee organizations may have several roles, several tasks and several "superiors" and / or underlings reporting to them from various organizations.

First up are allies. Many military commands expand beyond the scope of the current army. In WWII the entire allied forces were under the command of General Eisenhower. The English and Canadian militaries, although separate from the Americans, were engaged in similar exercises and were coordinated as one. This is the type of application that I think is needed to solve the current and prospective energy issues. Working for a company you may be seconded to work for several different joint operating committees that your company has an interest in. This military analogy is only a more formal method of recognizing the loosely coupled nature of the missions, tasks, physical resources, and personnel.

Second separate tasks or specialty roles are segregated between certain military disciplines. In this analogy the Navy, Airforce, Marines and Army are replaced by the Geological, Engineering, Administrative and Field disciplines. As with the individual disciplines the military chain of command remains in tact through the various disciplines. As an Army Captain would have superior rank to a Navy Private, the Senior Geologist would also have a recognized authority and superior rank over a junior Engineer.

Each worker within the oil and gas industry is therefore tasked in many different situations with different rank and roles. The producer that is his / her employer will have the opportunity and latitude to second each individual to work in any capacity and area that they are authorized in. This dynamic component being actively managed through the Genesys system identity management. Each worker in turn may have several different producers, which is almost a given, to be assigned tasks from.

Lastly I want to raise a point that dovetails nicely with what Susan Hockfield, MIT President and Professor of Neuroscience has stated. Noting that the situation in energy was in a "Perfect Storm" and I quote.

"President Susan Hockfield unveils MIT's grand-scale initiative to confront the urgent challenge of our time: clean, affordable energy to power the world. In much the same way that MIT played a decisive role in the Allied victory in World War II, she calls for the Institute to muster its formidable forces to speed a transformation of the global energy landscape."

Note her tie in to the level of effort equivalent to MIT's in WWII. I share the concern and strongly recommend everyone to watch the MIT video of Professor Hockfield to understand better our concerns.

The analogy to the military has unfortunate connotations. However, it is by far the best manner of layering a component of command and control over the joint operating committee. The systems that we develop here are best suited for these interactions. So much of what we discussed here would be transparent and seamless to the user.

Nonetheless I think it is generally agreed that the hierarchy that is now in full command and control is not the organizational structure that will marshal a solution to energies "perfect storm." After all they don't even believe there is a problem.

Technorati Tags: Genesys, Military Command, Innovation, Energy

Dr. Giovanni Dosi, Sources Part IV, F & G

Part F. Determinants and Patterns of Investment in Innovation: Toward a Sectoral Taxonomy.

Up until this point Dosi has laid some groundwork for future classification of business types of which he describes in four sectors:

• Supplier dominated sectors: "innovations are mainly process innovations, embodied in capital equipment and intermediate inputs and originated by firms whose principal activity is outside these sectors proper." (Agriculture, Printing, etc.) p.1148
  
• Specialized suppliers: "Innovative activities relate primarily to product innovations that enter most other sectors as capital inputs." (Mechanical and instrument engineering.) p. 1149
  
• Scale sensitive Sectors: "Innovation relate to both processes and products and production activities generally involve mastering complex systems." (Transport equip, electronic durables, food, glass and cement.) p. 1149
  
• Science based sectors: "Innovation is directly linked to new technological paradigms made possible by scientific advances: technological opportunity is very high, innovative activities are formalized in R & D labs." (Chemical industries, drug companies, bio-engineering.) p.1149
  

In my thesis I suggested that oil and gas industry was moving from the Supplier Dominated Sectors to the Science Base Sectors. That this change is due to the demands of finding and producing oil and gas in remote areas with higher risks and smaller reserves. An era where the engineering and geological effort is substantially higher then what had been experienced before. Dosi suggests this leads to new and better methods. Methods that require the capability of the firm to learn and keep up with the changes in the underlying sciences and other innovative producers.

I believe it is fairly evident in this era of high commodity prices that their will be a new basis of leadership in oil and gas. One where the science of geology and applied science of engineering dominate the organizational decision making and competitive capability. Moving from one sector to another may or may not have happened in other industries before. One thing for certain is, that it won't be easy.

Technorati Tags: Dosi, Science, Innovation, Energy

Another call to action?

After almost a week off I'm back and fully charged.

The call to action that I am referring to here to is an article in last Friday's Calgary Herald. The article states that the junior oil and gas producers and royalty trusts are having difficulty making money. Peter Knapp of Iradesso Communications states "Everybody thought it was going to be easy to make a lot of money and that just isn't the case". With natural gas prices down almost 50%, they are also finding their costs are high. They also clearly and unanimously feel that the gas price will rise after June.

So how is this a call to action? I have suggested a solution to this problem is to innovate and move with the science. Not that this hasn't or isn't being done, it is just that we have hit a critical period in which the sciences are changing quickly. The capital being generated from higher prices is a reallocation of the resources to fuel innovation. A profitable firm in the future will be able to collaborate with a greater population of all resources to determine the most effective ways and means of exploration and production.

This is the role and responsibility of the joint operating committee. And for the "business" end of the oil and gas business to continue to ignore the joint operating committee in its organizational structure and systems, the industry I suggest, will continue to fail in making money. A further failure will occur in that the industry will be unable to deliver the appropriate amount of oil and gas to the market.

By my count that's 10 calls to action.

Technorati Tags: Genesys, Call-to-action, Innovation, Energy

Military command, part II, why project management isn't the solution.

Project management fares poorly in comparison to the global scope of accomplishment of military command and control. In "Organization, the key" I noted the use of military command and control type structures as the replacement to the bureaucratic hierarchy. This military analogy and metaphor needs to be implemented within oil and gas in order to facilitate a method and a means of getting things accomplished. Since, as we have discussed, software defines the organizational constructs, this command styled implementation is an element of this Genesys systems, and specifically the technology will be built to superimpose the military command and control style organizational structure.

The implementation here is not dissimilar to the military metaphor, with "orders" being simply replaced in the "work order" system of Genesys. All tasks, equipment, human and other resources are managed through the system to provide a means for things to be accomplished.

This system will also be responsible to maintain the encryption, authentication and authority of each transaction. Since we are talking about the commercial elements of an oil and gas concern then "role" and "rank" also need to be implemented to provide a seamless manner that work should be accomplished in. I will write about role and rank in this series many times.

Project management is limited in its application as a means of operating a going concern. It therefore fundamentally violates its basic premise, that is it's temporary. Other problems in attempting to retrofit a project management structure to manage oil and gas assets include, diversity, depth and scope of communications.

Project Management teams may not have the diversity of resources necessary to effectively manage the assets. Consider for a moment how many people it takes to drill a well. From the point of view that if you include all the individuals who would be paid for their skills in drilling that well. I am talking about the billing clerk at the water trucking company to the chairman of the joint operating committee. Project management can not facilitate the scope and diversity of the 100's and possibly thousands of people that are involved in getting something done.

Another area where Project management falls apart is in its depth of resources. In oil and gas it is generally considered, as it is with anything complex, that the quality of the well drilled will be as good as the least experienced individual on the platform. Mistakes happen and the reduction of mistakes takes on a greater role then risk management. The active participation in activities can also broaden the scope of the problem solving capability. It is my fundamental belief that the more eyeballs that review the situation the better. The virtual environment can marshal more resources in this fashion then the physical world can.

The last deficiency of project management that I will point out today is that it is generally limited to human resources. We have discussed on this blog the types of communication being asynchronous and synchronous. We have also discussed the four methods of those communications being person to person, person to process, process to person and process to process. We can not limit the scope of the organizational construct of the joint operating committee to just human resources. The physical assets and capabilities of vendors, suppliers, or anyone and anything involved in oil and gas must be managed with the utmost efficiency. If we preclude certain resources at this point then we preclude the holistic solution this system will be. And if we preclude the methods and modes of communication (asynchronous vs. synchronous and Person to person etc.) then we will certainly have limited the potential for this new way of working.

Technorati Tags: Genesys, Military Command

Top 10 management excuses from Petro Canada.

Since I have predicted that the second quarter of 2006 will not be a very good quarter. I thought I'd come up with some excuses for the management of Petro Canada to use for their poor performance.

• Number 10, My Porsche was delivered this past quarter.
• Number 9, It really is just about us.
• Number 8, Production was down, it's the oil business.
• Number 7, You won't believe the costs to do business these days.
• Number 6, Just be thankful oil isn't trading at $18.
• Number 5, Precisely, what do you expect?
• Number 4, Selling Syria may have been a mistake, the clerk responsible has been fired.
• Number 3, Employee costs were so high!
• Number 2, We were trying very hard to buy Canada Southern Petroleum so we could become an explorer.
• and the Number 1 reason we lost money this quarter,
  
• We got ours, too bad about yours.

Technorati Tags: Accountability, Bureaucracy, Leadership, Petro-Canada

A bad attitude towards locals.

Reading yesterday's Calgary Herald I see a trend that continues to shape the oil and gas industry in Canada, in a negative way. I mentioned in an earlier post the response I received regarding the research that was the basis of this blog's copyright. How I was promptly shown the street, informed that the industry only conducted research with large firms like Cambridge Energy Research Associates (CERA) and that CERA was ultimately hired to conduct the research based on my intellectual property. Thankfully I was able to publish the results of my research before Cambridge, and as a result, earned the full rights to the copyright and associated intellectual property.

Is it a lack of confidence or disbelief in our own capabilities that causes an industry to look outside for its own research and decision making. What I found disturbing is that it is not just the industry but also the Alberta Government. They hired a Texas based firm to review the prospects of building a super refinery in the province for around $10 billion. The results of the Texas based consulting firm was that Alberta did not have the capability to undertake such a task.

I find this rather insulting. That we have the industry "leadership" deferring to our competitors to determine the activities in this province is bad enough. To have the Alberta Government doing the same is regrettable. So forget about courage and leadership, just defer the decision to those that may have vested interests in building their own super refineries, and have them make the decision for you. At least you will have covered you ass.

This is the reason that this project is now a global operation. Little if anything can be expected from these "local business leaders". Which makes this whole situation kind of ironic, instead of working in developing things together, lets just defer to strangers why we shouldn't do anything.

Technorati Tags: Genesys, Petro-Canada, Innovation, Energy

Oh how the mighty have fallen.

Petro Canada that is. Seems they have attracted some other bidders in their hostile offer for Canada Southern Petroleum Ltd. Greg Noval of Canadian Superior Energy is making a competing bid and it will be interesting to see if Petro Canada has the gumption to make a revised offer.

Recall that this process was so that Petro Canada was able to call themselves an explorer, however, I am afraid they may soon be better known for the company they keep.

Technorati Tags: Genesys, Petro-Canada, Innovation, Energy

I have seen the future,

Google in general, and Google Spreadsheet in particular.

I was invited to Google Spreadsheets today, if you do not have a Google account, you need to get one and start using their services.

Brilliant implementation.

Technorati Tags: Google, Innovation

I found this quote on Good Morning Silicon Valley.

It speaks to the one identifiable risk I think exists in blogging.

"The problem I am concerned with here is not the Wikipedia in itself. It's been criticized quite a lot, especially in the last year, but the Wikipedia is just one experiment that still has room to change and grow. ... No, the problem is in the way the Wikipedia has come to be regarded and used; how it's been elevated to such importance so quickly. And that is part of the larger pattern of the appeal of a new online collectivism that is nothing less than a resurgence of the idea that the collective is all-wise, that it is desirable to have influence concentrated in a bottleneck that can channel the collective with the most verity and force. This is different from representative democracy, or meritocracy. This idea has had dreadful consequences when thrust upon us from the extreme Right or the extreme Left in various historical periods. The fact that it's now being re-introduced today by prominent technologists and futurists, people who in many cases I know and like, doesn't make it any less dangerous."

-- Jaron Lanier sees hazards in the hive mind

I have felt that in the collaborative environment the drive for consensus can overcome all obstacles, even the truth. And although I am guilty of applying this in my criticisms of Petro Canada I am basing my attacks on the theories of Dr. Thomas C. Schelling's works and most specifically "The Strategy of Conflict" for which he received the Nobel Prize for in 2005.

I can assure you as the copyright owner I am aware of the danger that the Mr. Lanier speaks of. I can also ensure those involved in these developments that I will exorcise this from of discipline in this blog and software development project if the problem should develop.

Technorati Tags: Accountability, Conflict, Energy, Genesys, Intelectual-Property, Petro-Canada, Thesis

Java, the fourth component of the Genesys' technical vision.

Over the past couple of weeks I've identified elements of the Genesys' technical vision, initially commented on here. The technical vision provides a paradigm for the manner and type of application that operates in the Web 2.0 environment, and specifically in the oil and gas industry. Today, I am going to talk about Java, the fourth component of the Genesys technical vision, and then later in the next few weeks I will tie in why I believe the technical vision is so important in oil and gas.

Highlighting some of these features with a number of separate postings. I am attempting to show the different elements and there designed purpose in the Genesys application. I'll briefly note the three other components of the vision IPv6, Wireless and Asynchronous Process Management, and then focus on the fourth, Java. To aggregate stories I have written around this technical vision, just select the tag "technical vision" noted in the Technorati tags.

Some quick notes about the other three.Asynchronous Process Management (APM), or, how life rarely goes as planned. Asynchronous communication are designed to accomodate out of sequence events and deal with them as they occur. Processes that deviate from the norm can therefore be handled particularly well with Java's exception handling capabilities.

IPv6 eliminates the client server paradigm. With static addressing that enables anything and everything to be controllable, monitorable and any other ...able that you can think of.

Wireless and the ability to have a network in an instant. Where speed and "last mile" issues are eliminated through the use of the wireless Internet.

Java, number four on the technical vision list. Where to begin. As I indicated earlier, registration for the Java Introductory course is encouraged. Everyone needs to understand the concepts that have developed within the language. The ability to understand and to appreciate many of the future technologies and capabilities is dependent on these fundamental Java principles. Writting code is always fun as well.

Essentially what the technical vision points to is the elimination of the client server model. A model that is the foundation of the Internet today. Replacing this with the ability to manage and control any and all electronic devices. So what the fourth element of the Genesys technical vision, Java, provides is a "programming language" to deal with this new prospective world. And when we think of Java it is best to frame it in the context of a "programming environment".

Several of the critical components of Java are well known. The ability to write once and deploy anywhere is largely in place. What may not be fully appreciated is Java's strict typing, polymorphism, inheritance and object implemenation. Each of these links are to Dick Baldwin's online tutorials on how these components can be used to make such a difference. I highly recommend reviewing his site. Dick Baldwin is one of the better websites providing quality Java development education.

At this point in time the introduction of these four elements of Java are all that need to be introduced. What I want to achieve in this entry is to bring together why Java, wireless, IPv6 and Asynchronous Process Management are so very important in the very near future.

You can imagine a world where everything electronic is reporting, being monitored and controlled, and in a wireless environment how things don't need to get confused. Sudden system failure due to unseen events are a common theme in Hollywood and systems in general. This problem is what Java set out to solve by typing the language so strongly. I see Java as providing the ability to make this environment where any and all devices are operating, predictable. There is no area for ambiguity in many of these systems. How do you know you used the correct encryption algorithm to decode the production volume, from the right well? Java typing can differentiate anything and everything and that is why it is included in this technical vision. No other language is as strict in its interpretation of typing as Java.

Lastly I will note the value of inheritance in Java. Inheritance is where the ability to build off many other excellent frameworks and works of others. An excellent example of this is the GlassFish server Genesys is using as its base, or Java Enterprise server (v. 5.0). Testing and development was done from many different perspectives, and although it has little to do with oil and gas or accounting, it covers off many of the basic services that must be provided first. Once we write to a specification and achieve certification, then the evolution of the application will be managed without any glitches.

This is why Java is so important as a future programming environment. This technical vision exists today and only needs to be implemented in order for it be operational. Since Genesys is implementing this vision, only IPv6 needs to be deployed in all markets, something that is scheduled to occur soon, and certainly much sooner then this application will be completed by. Now that I have completed the high level review I will move on to more oil and gas and accounting specific applications of the Genesys technical vision. I encourage any and all readers to comment on this important aspect of what we are doing here, I look forward to your comments.

Technorati Tags: Genesys, Glass-Fish, IPv6, Java, Sun, Technical, Technical Vision