This is where it starts.

Ever wonder how the revolution that I frequently speak of happens? How the people who diligently work in oil and gas begin to turn against their long term employer? How hard working diligent employees begin to percieve things with a jaded eye regarding their commitments to their employers? How they begin to take the opportunities, and apply them for themselves before they even consider their company?

Intel today announced it will layoff 1,000 managers or about 1 percent of its workforce, across the entire company as part of an effort to reduce bureaucracy and costs. Add 1,000 former soldiers against the revolution, now fighting for the revolution. The numbers of people that see and realize that Intel, being a prosperous company, maybe their comfortable days as the bureaucracy are numbered, and they need to do something about it. At least hedge their bets.

This is how and where it begins for the legions of bureaucracies that are plying their trade for the large corporation. Come on in the waters fine.

Technorati Tags: Genesys, Revolution, Lay-offs, Energy

Metcalfe's Law, social networks and Geologists.

The wikipedia entry explaining the law and its origins is available by clicking on the title of this entry. I had also commented on an MIT video that featured Dr. Robert Metcalfe. I find him to be one of the most understated and brilliant individuals of our time. I am writing about Metcalfe's law due to the triggering of something that was said on Fred Stutzman's web log yesterday. I highly recommend reading his entry and the referenced research of Odlyzko and Tilly before continuing. Stutzman is questioning the value of social networks and imputing there is more then just Metcalfe's law in play. I want to take this idea and apply it specifically to a network that should employ the benefits of Metcalfe's law. That is the earth scientists and engineers that are actively employed in the oil and gas industry.

I want to frame the context of my comments in this entry to the scientific domain of an oil and gas earth scientist or engineer. There has been an aberration in the method of these sciences development. Due to the commercial nature of the oil and gas industry these sciences have taken an era of the comical "Top Secret" or "Spy vs. Spy" type of interactions. Much of this stupid behavior and thinking is limited to the policies and procedures that are developed within the firm. This science may have also been restricted in its application due to the types of basin's and zones the firm were operating within. In other words from a very practical point of view the scientists within the firm may have become myopic in their approach due to their veil of secrecy, regions being exploited and geotechnical applications.

I know of one geologist with a master's degree, who over a thirty year career had made some of the most significant discoveries in the entire western sedimentary basin. Commercial fields that may have produced upwards of $10 billion in gas sales. I find it ironic and sad that this individual, who was the president of the firms that made these discoveries, could only point to one mention of any of his scientific discoveries. And this was in the academic field as a result of his master's thesis. What the %&*# has happened to the geological, and geophysical sciences? Has it become a secret backroom corporate holly grail? Where only certain people are ever exposed to the knowledge that underlies the firm? (Monty Python coconuts seems somewhat appropriate here.) Why haven't we seen many of the papers and thinking that is the underlying value of the entire industry? Certainly the individuals who have been able to apply the science have been able to attain significant monetary success, but they are not credited with their theories and the developments and benefits that they brought to the sciences. And far worse these ideas remain secrets that are locked away where no one else can benefit from them! Applying Metcalfe's law this is a network of 1. Which derives the benefit of 1 to the power of 1. Sad ridiculous and maybe a crime. "What I know is what I know and I will not let anyone know what I know because then they will take it from me?" This is pathetic thinking for an individual that has been educated in the scientific disciplines. It is also pathetic that this is not being actively addressed and corrected today by some new thinking individual who publishes their thoughts in a blog. Publishing is the only manner of securing your intellectual property. Use technorati to document what you know and when you know it. And let the rest of the world benefit and build from the ideas.

Off the soap box now and talking again about the network effect of Metcalfe's law. Can the earth sciences and engineering disciplines benefit from some thinking that is logarithmically better in its speed and quality. What if workers in oil and gas openly published their earth science theories and thoughts. Could we then move the entire industry to a fundamentally new basis of value. Could these scientists have the benefit of knowing that their thoughts were unique and valuable to society, and reap the monetary benefits. To not publish is to deny what is yours to give.

Somebody somewhere has to start a social network for the earth scientists to start thinking together. (I can only assume that the oil and gas companies are going to be unhappy with me again.)

Technorati Tags: Copyright, Metcalfe's-Law, Innovation, Energy

A new security risk?

This is a warning to oil and gas companies regarding a new and significant security risk. Normally I don't concern myself with these, however, the following is the most prolific risk in technology today.

Pod slurping has been known to be a reasonable risk since the beginning of the iPod craze. Podslurping involves high speed copying of hard drives onto an iPod at an unauthorized location. The difficulty is having physical access to connect an iPod device to the network and then copy the disk images to the iPod for later review. With these iPod's being upwards of 60 gigabytes, significant volumes of data can be taken in less then 2 - 3 minutes. That is until now.

If as Microsoft has claimed, their new iPod killer will be wireless, then the physical access is not required. A visitor to your office may be able to access the data on hard drives wirelessly and maybe not even require physical access. I believe this may be a significant risk.

The only remedy is to encrypt literally everything so that the information is useless in the wrong hands. This can be done by ensuring all;

• data is stored in encrypted form.
• network connections are on a virtual private network.
• wireless connections are encrypted, and not broadcast.

Trust Microsoft to introduce the device that brings the greatest risk to data integrity. Which brings up the other risk. The ability to load programs and other data on to a harddrive is also a concern. The ability to store something in non-encrypted form would still be a threat if it were a script or, other compromising data.

When a company of size considers how many hard drives are accessible in this fashion it gives one the willies. Each computer is essentially a potential entry point when one considers that a wireless USB port can be augmented with a 802.11 b/g or Bluetooth connection in less then 10 seconds. Permitting anyone to create a new wireless network for their own use. However, it would be fairly easy to see someone using a computer in an unauthorized fashion, the iPod could be actively downloading information during a regular meeting. The network computer and service oriented architectures have never been more justified.

Now based on Microsoft's release schedule, their iPod killer won't be out until 2015. However, Apple won't sit idly by and let Microsoft introduce any innovation that isn't on their platform first. If there is to be a wireless iPod it could be seen as early as this years Apple World Wide Developer Conference in August. The time frame therefore to encrypt one's data is now, with very little time to do it.

Technorati Tags: iPod, Security, Innovation, Energy

Accidental innovation.

Harvard Business School has published an interesting interview in their Working Knowledge for Business Leaders series. Click on the title of this entry for the article. There are a number of interesting comments in the article and I am going to highlight two here, and then discuss the accidental nature of how I came upon using the joint operating committee as the key organizational paradigm for innovation in oil and gas.

"We have to be careful of these stories, in part because they make such good stories. Some scholars are skeptical of them, but the sheer number of them is interesting. And many scientists, like Fleming, talk very explicitly about the role of accident in their work. Some even argue that the orderly way people sometimes describe processes of discovery and invention, of the progress of science, is nothing less than fraud."

and

"Q: Is there a way innovators can encourage good accidents? In other words, is there anything we can control to foster this process?"

"A: Great question. Artists think they develop a talent for causing good accidents. Equally or perhaps even more important, they believe they cultivate an ability to notice the value in interesting accidents. This is a non-trivial capability. Pasteur called it the "prepared mind." There's an interesting analogy to evolutionary models of creativity here. In 1960, a guy named [Donald] Campbell proposed that we think of creativity as "Random variation + Selective Retention." That is, we need two processes, one to generate things we can't think of in advance, and another to figure out which of the things we generate are valuable and are worth keeping and building upon. In science, the arts, and other creative activities, the ability to know what to throw away and what to keep seems to arise from experience, from study, from command of fundamentals, and interestingly from being a bit skeptical of preset intentions and plans that commit you too firmly to the endpoints you can envision in advance. Knowing too clearly where you are going, focusing too hard on a predefined objective, can cause you to miss value that might lie in a different direction."

"In business, there's a saying that goes "if you don't know where you're going, any map will do." You can almost always get managers to nod in agreement with this suggestion that you might as well not start something if you don't have its end objective well defined. Working without a clear definition of your objective is considered wasteful, inefficient. But if you are trying to get outside what you can anticipate and see in advance, if you are going after the truly new and valuable, this way of thinking can be a problem. This is one truth about innovation that artists seem to understand a lot better than managers."

"Actually, though, I would not really label this "accidental innovation." The innovation itself can't really be said to be "accidental," even though it involves accident. It takes a considerable capability to see the value in an accident, and to build upon it to create even more value."

It seems like forever since I have been pushing this concept of the joint operating committee. If this method of organization for oil and gas firms has the perceived effect of what I think it does, then I certainly am not wasting my time by pushing it. I recall the early part of this century as a time when I was extremely busy. I was working as a CFO for a small oil and gas firm, I was taking courses for my MBA and I was haunted by the devastation that this software company had exercised on me. They were the worst of times, they were the best of times.

One of the things that bothered me about the software business was that I was more or less forced out by a number of mistakes on my behalf. All the value that had been created was dying on the vine. I felt the competitive advantages that were built up were fading quickly as others caught up with better technology and / or thinking.

In 2003 I can recall that I was thinking how could I strategically reclaim the higher ground and get back into the business on a full time basis. This was a raging thought throughout the three years I was studying. I then was required to pick a topic for my thesis. I thought that it would help me to combine my thesis and my intellectual property, together as one project to save time. The time pressures of my thesis came into play and I was desperately wanting to establish more intellectual property. This was based on my own realization that intellectual property was the only sustainable competitive advantage for any business, but particularly the software business.

I was therefore thinking through the entire process of the oil and gas industry and trying to analyze the key piece of data and information that the industry could be made to be more innovative. The ability to become innovative was more or less going to be a revision of the organizational structure, and I can remember vividly it was December and I was parking my car when it just hit me. The joint operating committee needs to be recognized as the key point of the organization. It is the point where most of the conflict and contradiction flowed from. The oil and gas hierarchies have been more or less in direct conflict with the committee for possibly 100 years. The efficiencies of the hierarchy in the large organization were diminishing, the technologies were moving to provide alternatives and the joint operating committee was sitting there as ripe fruit ready to be picked and put into play in the industry.

As soon as I thought of this it was like everything that I was doing was solved. I could build better software, I could increase the organizational capacity of oil and gas producer and I could finish my thesis with a killer topic. All my Christmas' had come at once.

Thinking the idea would sell I published the document to only realize afterwards that no one was going to support the idea. The bureaucracies I criticized and declared redundant, owned the budget process. And said bureaucracies were quick to show me how little they thought of the idea and the rest as they say is history. Being somewhat ostracized from the industry is somewhat refreshing I have to say. The time that I have been given has provided me with lots of opportunity to put more meat on these concepts and acquire more intellectual property through the publication of this blog. The pay is nothing, however, I can exist for as long as I need to finish off the concepts that I am researching and publishing. Besides I can't think of anything I like more then writing this blog. It is challenging and rewarding, the two things that I need the most.

Back to the Harvard article was this the result of a "prepared mind," yes most definitely. With 25 years experience in the industry, a masters level education, competitive stimulation, revolutionary technological opportunities were all factors. As the article also states, knowing that this was the point to push I think is also a key point. I could have easily justified letting this slip away under the basis that, it's too difficult, it would never sell or any other excuse. The last point that the article notes of interest to me is that I had a clear objective in mind, how to increase the innovative performance of an oil and gas producer. I was looking for some key attribute in this area and this remains the overall objective for now and for the long term.

But maybe most importantly, was I lucky? Yes, unquestionably. Serendipity is a good thing.

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

Petro Canada piles it on, again.

A press release from our favorite company notes that they have increased their offer for Canada Southern Petroleum Ltd. from $11.00 to $13.00. Recall that Petro Canada was more or less disgusted with the Canada Southern Petroleum Ltd. expectations when they were negotiating with them, I wonder how the management feel now. This whole episode could probably have been avoided if the pig headed management of Petro Canada just sat down with Canada Southern Petroleum. This latest offer bumps the original offer of $113 million a whopping 73% to a total of $195 million.

I'm sorry to be the one that explains that this whole situation is taking on an enhanced perception of panic on Petro Canada's behalf. With only 55,000 shares tendered to their $11.00 offer the message to Petro Canada is more. Will Petro Canada figure that this is a game that they are not able to play and fold, or will they pull out the heavy artillery and acquire more bank debt to acquire this tiny little firm.

To the management of Petro Canada, give your head a shake, at least until it hurts. Your acting like you haven't got a clue about what your doing. The message that this transaction is sending the market is that management is running around in "fire fighting" mode. Stop it and let this bad piece of history die quietly. Now that is my advice and it hasn't actually cost you anything has it.

You have a quarterly report that will be out soon. This report is going to show how bad things really are within the company. Regroup for that public relations nightmare and forget about this Canada Southern Petroleum fiasco, your out of your league.

Start the PR machine to mitigate the effects of your loss of operational control of your flagship Terra Nova property. And the inevitable financial losses of the firm. Canada Southern Petroleum is too small to provide any cover from a PR perspective.

Technorati Tags: Incompetence, Petro-Canada, PR-Nightmare, Energy

Energy Secretary Samuel W. Bodman

This video is on MIT World and is accessible by clicking on the title of this blog entry. At almost 60 minutes it is time well spent. Recall that MIT has declared that energy is the great challenge of the next 50 years. Describing it in terms that are best summarized as a "perfect storm". MIT has arranged as part of their Energy Research Council, U.S. Energy Secretary Samuel W. Bodman to speak on "Our Energy Future: Why American Science and Technology Must Lead the way."

Many of the things that Dr. Bodman speaks of are directly pertinent to the topics and thoughts within this blog. Quoting liberally from his speech:

"Science and Engineering can and should be used to advance the public good. To solve complex problems and to help our society and economy to adapt in a complicated global environment."

and

"A time for breaking down the walls that could limit our future economic growth. And in many cases the tools that we use to do this will be found in breakthroughs in science and engineering."

and

"At a time of increasingly aggressive global competition America must do what we have always done best. We have to take risks, we have to lead, we must invent, we must innovate."

That last quotation is directly in line with the justification for using the joint operating committee, and direct support for these software developments. These are the same points to a large extent that I wrote in my plurality thesis. That science and technology are constrained by the organizational conflict, and bureaucratic interference that limit and kill speed and innovation.

Bodman notes that the majority of his funding for the scientific research and technology has been as a result of a reallocation of resources under the Presidents "American Competitive Initiative"(ACI). He goes on to state that the:

"scientific disciplines are increasingly being linked." And that the effort of the energy department and the ACI go to the "future economic well being and security of our country".

Also noting that he is expecting more then just the development of new knowledge from these government funded research programs.

Although the research that he mentions in his "Advanced Energy Initiative" is on ethanol, hybrids, fuel cell, solar, wind, nuclear and clean coal. It is fair to assume that he fully aware of the demand of the U.S. for gas and oil is and will remain high. His approach currently seems to be limited to establishing some of the alternatives as viable enhancements for the long run in the U.S. and he noted as such the expectations of the market makeup of energy sources.

"Science and Technology must lead the challenge to provide good, clean and abundant energy."

Some noted targets, facts and objectives.

• Ethanol = 5% of the current supply = 14% of the U.S. corn crop.
• The department of energy expect that Ethanol supply will grow to 5 million barrels / day in 20 years.

Needless to say based on these facts the expectation of the US is to continue to use fossil fuels as its primary source of energy. Bodman sees the parallel between these energy related difficulties as similar to those in the cold war inspired space race. Having the Secretary of Energy making these types of comments adds some real depth to the issues at hand.

Technorati Tags: Genesys, Call-to-Action, MIT, Innovation, Energy

Topics of the week.

Oil prices have reached record highs. This seems to be a bigger surprise to the producers than the consumers. I believe the prices will continue to rise due to the increased demand of China and India, duh. Other contributing factors are the general health of the global economy. More people are living better today than at any other point in time and these economies operate on energy. No energy, no economy. With the far larger number of participants in the global economy the more energy is and will be demanded.

The second topic of the day is the cost escalation at Fort McMurray based heavy oil plants specifically. And in general, the increased costs of the oil and gas companies regular operations. Shell and its partners are suggesting the costs of their heavy oil plant are escalating 50% to $11 billion. Which is not bad for a project that started out at $3.5 billion. Would these heavy oil plants benefit from using a system such as Genesys? Yes most definitely, so why has this not happened? I have no idea and would ask any readers that may have an opinion to share it through the comment facilities of this blog.

Many of the participants in heavy oil projects also have conventional oil and gas operations, and many of the plants they own have their own joint operating committees to manage the needs of the plant development and operation. Joint operating committee's are synonymous with good industry practices. This is systemic throughout the industry, the bureaucracies only get in the way.

The only question that remains is how much longer this Genesys software development project will sit on the shelf waiting for the day in which it begins full development. The market needs the producers to produce more and faster, and the community needs to rally around the various calls to action that I am noting here in this blog.

Whether it is the producers that finally say "enough" and finance the development. Or the community of users that says "enough" and finances the developments themselves, these developments need to be done. Who and when are the questions that I ask. With so much academic support such as Hagel & Brown, the various other blogs that provide further insight, the use of the joint operating committee makes so much logical sense that to not attempt to build these systems is foolhardy, I think in the extreme.

Technorati Tags: Genesys, Topical-Subject, Call-To-Action, Energy

The producers paradox.

I had been catching up on some of the better blogs and noted the commentary on Peter Rip's Early Stage VC. He noted a few things that are not only unique in Silicon Valley, but are applicable here in Calgary as well. He of course was talking about enterprise software. How the market for the software had all but dried up and was more of a wasteland in terms of venture capital. I can attest that the oil and gas marketplace suffers from the same symptoms as he speaks of in California.

To be more specific the only software that will be purchased by producers is SAP and Oracle. The producers believe the ability for smaller software players to provide any valuable product or service doesn't exist. However, we all know that the level of innovation and capability being built into these two jurgernauts is non-existent. So what is a company to do? What is an oil and gas producer to do? They could call IBM who have all the solutions if you listen closely enough. The producers are in the unfortunate position of needing something to enhance their performance and make them more innovative. Something more then just a blog, such as this one.

I am tempted to say that you reap what you sow. But since I still would like to do business with most of the producers, I of course won't say that. The paradox comes into play as the most innovation that has occurred in oil and gas systems in the past year was written in the theoretical vacuum of this blog. Nothing happens with the big software vendors because they truly don't understand the producers business. Besides they sold them the latest do-dad just last week.

At the lower end of the market. The place where I exist, nothing happens because we are too small to do anything of "value". That is other then I get to claim a lot of valuable intellectual property.

I could if I wanted too, sell the intellectual property to one of the big software vendors. Well of course I tried that, IBM said they weren't interested. I would not deal with Oracle as our last relations ended in them claiming ownership of what was rightly ours and one bitten, twice shy is the best way to restate that situation. And lastly I don't speak German. Now to be fair to SAP Calgary is one of the smaller ponds in a market that they don't really concern themselves with. Oil and gas is poorly handled by SAP and they seem to be more proud of that then anything else.

Anyways I determined that there was no market for any sales of the intelectural property "product" to the big guys. The producers are therefore left to cobble a series of tiny vendors with Cobol code together to make up their software systems. Ensuring that these software companies are run ragged and fed a diet of rice for sustenance. All and all a great situation.

So now we have a situation where the market is deemed as mature. The software companies are pursuing other industries like automotive and health care, and maybe in Houston the SAP sales rep will show up for a meeting. Here in Canada producers can continue to look down their nose at the small vendors across the table and generally complain about the poor state of any offerings. Meanwhile back at the stock market the demands for more continue to escalate and they are unable to figure out why they are having more trouble making money in this high priced environment!

I can assure anyone that may have a good idea on how to solve the producers paradox, your better off staying at home. The industry is just full of demanding users that are never satisfied and can only complain. Besides there is always hope that someone somewhere will pop out a new, all encompassing software application that they just cobbled together in their parents garage.

Technorati Tags: Genesys, Producers-Paradox, Innovation, Energy

Hagel & Brown, Pull Models, Part II

Continuing on with the review of this fine paper from John Hagel III & John Seely Brown.

Exploring the layers of pull platforms.

This paper continues on discussing the various layers of pull platforms. Needless to say these points have what the authors call a "High Tech Focus." A technological envrionment where the community of oil and gas workers and producers can and will be supported by the various frameworks. The implementation of these communication technologies creating the communities of users that aquire more elaborate and sophisticated capabilities.

Summarizing the information within a table provided by Hagel & Brown;

Infrastructure Layers

1.) Communications Networks

Facilitate the basic movement of information and goods.

2.) Service Grids

Provide enabling services to create more robust and tailored connections.

Performance Fabric Layers

3.) Technology enablers

Create more flexible ways of organizing and mobilizing resources.

4.) Social networks

Increase willingness and ability of people to share resources, especially knowledge.

Creativity Framework Layer

5.) Aggregation networks

Create metadata to help connect participants and resources.

6.) Process networks

Orchestrate capabilities to create new products and services.

7.) Networks of creation

Establish collaborative environments to generate new practices.

(Please note items 1 - 7 are verbatim recreations of a Hagel & Browns table.)

The activities within the pull platform are augmented by "Find, Connect, Innovate and Reflect in each layer of pull platforms." Hagel and Brown go on to further define the categorization of the layers in Infrastructure, Performance Fabrics and Creativity Frameworks. I highly recommend downloading this article and reviewing the details closer.

A key attribute of these Networks and Frameworks is to provide enhanced capabilities to all those within the pull systems. Reflecting on the oil and gas industries potential use of these networks. There could be such a rich environment to operate within. An environment in which the desire and capability of each individual and producer are enriched by their potential of employing resources in this optimal pull manner.

An environment where the limitations of participation are reduced to the lowest common denominator. Where anyone and everyone who has value can contribute. To open a much larger dialog where the collective knowledge and capabilities of larger communities are applied in the most efficient manner. And as Hagel & Brown say

"These communities can also amplify the power of reflection and accretion by bringing together a diverse and often distributed set of participants." p. 38

Or what I foresee is the elimination of the bureaucracy that invades, restricts and limits the potential of companies and individuals. A bureaucracy that has fullfilled its role in enabling the communications and technology markets to be built. A bureaucracy that must now fall on its sword as opposed to fight for its inevitable elimination.

In addition of the bureaucracy stepping aside Hagel & Brown suggest the core capabilities of the company will need to reassess its purpose and role within the community. Companies that limit their role to the "Innovation, Learning and Capability" realize these can be achieved through other intermediaries then command and control. Enabling "each other to reach new levels of awareness and understanding".

Hagel & Brown also suggest as companies begin to adopt these communities of practice the performance tragectory will accelerate quickly, such that companies that choose to maintain command and control will have fewer competitive advantages in the marketplace. I foresee Genesys impacting the performance tragectory of oil and gas firms such that it would be very difficult to maintain any current competitive advantage without its use.

"In a world of pull platforms, the rationale for the enterprise itself must be re-examined. Enterprises will continue to add value in one of three ways; accelerate capability building within communities of practice; orchestrating capabilities across multiple enterprises in process networks or aggregating so that they can be more conveniently found and accessed by other participants in pull platforms. Ultimately, the success of these enterprises will depend on their ability to master different approaches to talent development, including the deployment of more flexible IT support systems to develop talent." p. 42

In oil and gas the reality of this environment is what Genesys provides. The joint operating committee as the key social and organizational construct is the only logical choice. With the legal, financial, operational decision making and cultural influences reflected within oil and gas operations over the past 100 years, how could their be a more effective means in which to define and build software to support the producer.

Technorati Tags: Genesys, Hagel&Brown, Innovation, Energy

Follow on article from Fast Company.

The title of this entry will take you to an article from Fast Company. The article entitled "Team Doctors Report to ER" asks if the focus on teams is misguided or appropriate in certain situations. In light of yesterdays article "The Social Aspect of Software" I think it has some very valuable insight.

Technorati Tags: Genesys, Social-Context, Innovation,

The social aspect of software.

Ross Mayfield writes one of the more popular blog's and also comments on the "many to many" blog site. He is the CEO of social text, a wiki platform that I am reviewing as a possible addition to this blog. I recommend visiting his websites as the commentary is of a high quality and he speaks with authority on the topic of social software.

Mayfield's July 3 posting "Markets are Social" provides a link to an excellent research article called "How not to build an online market: the sociology of market microstructure." this is a research article that was written by Peter Kollock of UCLA and E. Russel Braziel of Bentek Energy. This research reflects on the B2B exchanges that were the rage in the .com boom days and provides an excellent analysis of the social aspect of markets.

In the article the success of the propane B2B exchange in Texas is contrasted by its lack of market acceptance in the smaller California market. The information is invaluable, I think. I want to add a related matter before I discuss the implication and affects in oil and gas. Implications that are directly related to these entries and as it applies to the Genesys software developments.

I want to introduce another comment from another blog Professor Andrew McAfee has also written an article that is closely related to Mayfield's. Entitled "Raising the least common denominator" McAfee notes from a comment that there is a risk that the effect of too great of participation could erode the quality of the business decisions. If everyone has a say then the collective wisdom may be reduced to the least common denominator. A concern that these social markets have and one that I think can and should be addressed here.

McAfee notes in essence that the broader participation is already evident in many things that we do these days. Google searches provide the entire world of information, yet we generally are able to discern the right provider of what we are looking for. The technology is more a tool of the users and as a result the users decide what is satisfactory.

The UCLA research paper describes the success that the propane exchange experienced in Texas and also shows why the same software failed in California. Two completely separate markets with Texas being sizeably larger due to the international flavor of the operations. The Texas market was large enough that the software did not impede the communication that the market participants wanted. The size of the market enabled everyone and anyone to conduct their business as they needed. With ample buyers and sellers in the market, it was able to operate just as a commodity market should with a high level of anonymity.

In California the market only had a few small players. Their understanding of each other made the transactions transparent and everyone could essentially discern the buyer and seller behind each transaction. Here is where the software failed as it didn't capture the personal relationships that the buyers and sellers had. Going on to state that employees of the various companies were more like employees of the market as opposed to the firm. And it was their job and their benefit to help and get along with the other players. In essence creating a market of favors that someone would do for someone else when and where they were needed. These personal attributes were best dealt with over the phone and the software was unused, unlike the Texas marketplace where the software was a success.

Mayfield's posting notes in "Markets are Social" that most markets fall within the California category where the generic manila transaction based software was of no value. The social aspect circumvented the California market and the players created there own "favor" market.

How do I see these "social" aspects playing out in Genesys' software. I think clearly the two articles define exactly the role and nature that people will have in using this software. What I see happening is that the people that you do business with now would not change fundamentally other then providing access to greater numbers of partners and participants.

The decisions remain with the people that are involved and the personal face is implied in the software through codification of the agreements and understandings that the partners have. The way that I see things happening is the people will be able to rely on the system to document, facilitate communications, and process transactions based on these personal or social attributes. In essence sharing a social environment that is noted in the UCLA paper and captured in the collaborative tools that are essential features of this software. Whether they are blogs, wiki's, email or instant messaging, the commercial components and transactions will be handled with these communications as a result of the communications.

For example, if I agree that we will drill a well at your recommended location, the systems would record these transactions and report them as a basis of the fall out from the communication. Essentially eliminating the capture and processing of the data as separate, instead it will be implied and processed as it is agreed to.

I foresee these transactions being a critical part of the communications that are part of the joint operating committee. The participants in the industry will feel more of a belonging to the partners reflected at the committee level as opposed to the investor that they work for. The joint operating committee has for over 50 years on a global basis operated in that fashion. It is only recently that the bureaucracies have been preoccupied with accountability requirements and are essentially disregarding the tools and value of the joint operating committee.

Given that the focus will be on the property that is jointly owned and operated, this will allow these social aspects to flourish. The understanding and speed that the communications and transactions can move will be directly dependent on the capabilities of the collective ownership group and participants. The accountability will fall out of these processes as opposed to driving them, as they do so poorly today.

Technorati Tags: Genesys, Social-Context, Innovation, Joint-Operating-Committee

Hagel & Brown, Pull models, Part l

John Seely Brown and John Hagel lll have written another excellent paper entitled "From Push to Pull, Emerging Models for Mobilizing Resources." (October 2005) These two researchers continue to impress me with their leadership capability in this new technology frontier. As I have stated here before, they have been pushing these themes now for over 5 years that I am aware of and continue to be the leading edge thinkers.

The final paragraph of the introduction captures much of what I believe and write about in this blog.

"By mastering the techniques required to make this new model work, companies will be well positioned to create substantial value. Those who adhere rigidly to the old model will likely destroy significant value." Hagel & Brown p.4

Contrasting the efforts of Petro Canada in this blog is designed to provide a real life example of what this blog is attempting to solve. If the "pull" model of innovation and creativity were operational in the oil and gas industry, this commentary would have achieved its objective. However, there is ample resistance to these changes. Many vested interests have aligned against these ideas and Petro Canada to me provides the greatest contrast to what this blog is not proposing. If by reviewing this Hagel and Brown document, we can gain additional insight from these two top notch researchers it will be well worth the effort.

Forces that are driving the search for alternative mobilization models, Hagel and Brown identify 5 forces that undermine the push model.

• Increasing uncertainty.

Push models require stable environments. "In today's environment it is harder to deploy resources in anticipation of demand." p.14 Oil and gas producers seem to be unable to agree on why the high energy prices persist. I believe they are a fundamental reallocation of the financial resources to encourage and reward innovation. The companies themselves seem to believe they are a temporary aberration.

• Growing abundance.

With bigger markets, involving more competitors and shorter product cycles. China and India have joined the Former Soviet Union and eastern block countries in consumer based economies. The production from these areas is substantial and the markets are immense. All of these markets will demand greater volumes of energy.

• Intensifying competition.

Outsourcing of secondary tasks like accounting. Push models are overwhelmed "by extended business processes." p.17 The authors are essentially noting the interdependent nature of the supply chains are growing longer and more diverse. I fundamentally believe that the joint operating committee configured with the proper software is the best way for the industry to deal with these "extended business processes". The complexity of the supply chain, the diversity of the offerings leads to greater opportunities for innovation.

• Growing power of customers.

Hagel & Brown cite iTunes and other applications that are effectively disintermediating large portions of distribution channels. Due to the oil and gas industry being capital intensive I don't see the risk of disintermediation, however, the efficiencies that can be had with better systems is something that the industry needs to consider today.

• Greater emphasis on learning and improvisation.

Training is replaced by coaching and apprenticeship. The retirement of the oil and gas industry veterans will need to occur after their tacit knowledge is captured.

Pull Platforms.

I believe it is a testament to both Sun Microsystems and Dr. James Gosling that so much effort and time has gone into providing Java with superior exception handling capabilities. It is not by accident that pull platforms are identified by Hagel and Brown as heavily relying on exceptions to the standards.

"Pull platforms are designed from the outset to handle exceptions, while push programs treat exceptions as indications of failure." p. 22

and then go on to say;

"Because of loose coupling of modular design, pull platforms can accommodate a much larger number of diverse participants. The more participants, the more valuable the platform becomes."

Although this may currently run against the more secretive culture of the oil and gas industry. The demands for energy are now insatiable and remove the competitive nature of the industry. This competitiveness is, I think, going to be replaced by coopetition.

Pull platforms have the following characteristics which work to encourage creation and use.

• Find

All the necessary resources are available at the critical time they are needed. The authors note WSDL (Web Service Description Language) an XML description of a resource. Just as I have noted the value in XML tags here before, WSDL provides an automated manner of discovering new resources.

• Connect

With other participants of resources as required through elaborate networks. The technologies that are available today are designed to provide greater participation. Participation with like minded groups that are able to identify and resolve issues in the oil and gas industry.

• Innovation

Provide a more flexible environment to innovate with the resources made available to the producers.

• Reflection

Recombine and improvise with much more rapid feedback regarding their impact.

I will cut the conversation at this point and pick up the rest of this document in another post starting with "Exploring the layers of pull platforms."

Technorati Tags: Genesys, Hagel&Brown, Innovation, Energy

IPv6 is available today!

That's right today. A cornerstone of the Genesys technical vision, IPv6 can be implemented now. The title of this post will take you to "Command Information" a web site that is designed to "leverage the change" to IPv6. This is significant news to this blog's developments in that there is now no technology that is not available today. The market for technology is moving so fast now that these software developments are possible with today's commercial technologies. Please click on the IPv6 technorati tag below to aggregate the posts I have written on this subject.

According to this website (downloading the two .pdf's is very valuable) President George W. Bush in his state of the union address on January 26, 2006 launched the American Competitiveness Initiative. Within this initiative it was noted that the majority of the east Asian countries have already implemented IPv6 in their network backbones. That for America to compete requires the rapid implementation of IPv6 in their networks.

"This paper emphasizes that American organizations must adopt IPv6 today." Describing what IPv6 provides as accommodating more devices, faster speeds, greater mobility, enhanced connectivity, integrated security, enforceable privacy and easier management. IPv4 provides 4.3 billion unique addresses, IPv6 provides 3.4 trillion, trillion, trillion, trillion (340 undecillion) unique addresses.

The .pdf's also provide an understanding of the key impact areas such as:

• Mobility. Maintaining constant fixed point (static IP address) no matter where you are or move to.
• Security from better architecture and limited ability for viruses.
• Real time / peer to peer, or as I call it "the elimination of the client server model".
• Providing a faster broadband and less costs by removing the need for NAT boxes. (Network Address Translation).

IPv6 is available in operating systems from Apple, Microsoft, CISCO, HP and Sun. Your ISP will be linking to root servers this summer. The good news is that the entire IPv6 infrastructure is available today. Genesys only needs to purchase Internet service from a tier 1 telecom provider in order to begin developments and operational use of IPv6 within oil and gas.

The author of this .pdf refers to a recent government report that states the move to IPv6 will cost $1 billion per year for the next 25 years. The returns will be over $10 billion / year in savings. The costs are mostly bourne by software developers, such as us in reprogramming to use the enhanced feature and capabilities.

Is IPv6 big? Bill Gates thinks so. He is quoted in the article that "Enterprise Applications will be the "Killer Application" that makes IPv6 necessary."

Technorati Tags: Genesys, Development, IPv6, Technical-Vision

June Business Report

Marketing

Petro Canada continues to provide ample material for analysis and comment, and we are anxiously awaiting the companies second quarter results. The results of this marketing are beginning to provide the exposure that we seek, particularly locally.

In the Technorati service we are still jumping around a fair amount, however this last month we have seen our ranking down to the low 500,000's. Not bad for a six month blog, and considering the total number of ranked blogs has jumped to almost 42 million.

Content

We set out to see what kind of pace we can attain in terms of the frequency of blog postings. With the stated May objective of writing one article per day, I am now putting this in place for the long term. The discipline to write one story per day is a rather torrid pace for one individual. But it has an indirect effect of increasing and focusing the quality and value of the entire process. Therefore I want to try and establish a new guideline for July, that being of 8 posts per week, and, one per day as new minimums in posting.

My Favorite entries.
My favorite entries for the past month are:

• The completion of the summary series on partnership accounting.
• The completion of the summary of Genesys' technical vision.
• The ongoing series on Petro Canada
• Is the joint operating committee revolutionary

Technical Architecture

No changes to the overall technical architecture were made in June 2006. GlassFish continues to soar in terms of its acceptance and value to the community. Discussion with BEA Systems were brief and uneventful. The cut off point between GlassFish and a business oriented functionality is unanswered at this point. The more I research this area, and the more we define the unique areas of using the joint operating committee, the more I believe that we may be best off developing these ourselves.

Budget

Revenue to the end of June: $0.00

July 1, 2006 budget items. (All costs are in U.S. dollars and include the 33% premium for the development copyright fee.)

1. Project management and development = $300,000
2. Sun Grid The first thing we need is a home for the code. The grid provides everything we need in this instance, and the Grid that I selected was Sun's. At $1 per processor hour, a very affordable way to secure the resources we need. I think that our first years requirements would be amply satisfied with 10,000 hours of processing for the remainder of 2006 calendar year. Total requirement = $13,300
3. Ingres Open Source database and part time DBA, Total requirements = $57,000, Collabnet, I would like to have a generous budget for this critical tool. Provides the code management, community process, project and issue management. Budget includes tools, appropriate setup and consulting services. Total requirements = $34,000
4. General and Administrative, first 6 months of operation Total requirements = $60,000
5. Membership in W3C Total requirements = $9,000
6. Total Capital and Operating budget, 2006... $484,000

Notes

• Sponsors, producers, and user contributions and donations are accepted.
• Please recall that this community is and will be supported by the producers. Based on an annual $ assessment per barrel of oil. For 2006 the assessment was fixed at $1 per boe per day per year.
• A company such as Encana in Canada would therefore be expected to support the community to the tune of $700,000 for the 2006 calendar year.
• These Monthly Business Report budgets are being proposed on a pay as you go basis for 2006 to support the community and ensure the community develops in the manner that is expected.
• Your donations are greatly appreciated, no donations mean no development work is being done.

Technorati Tags: Business-Report, Genesys

Genesys' definition of success.

The project management book that I am reviewing and commented on earlier stated a project needs a definition of success. This is my definition of success for this project, please feel free to comment. Also recall that the definition of success can and will change over the course of the project life.

"Revolutionize the managerial and administrative performance of the innovative oil and gas firm. Through active participation of the future user's of these systems develop a global "Enterprise 2.0" software application. An application built explicitly to identify, support and unleash the potential of the joint operating committee. The natural form of organization of all producers."

I'll post this as the header of the entire blog so that it is available and can easily be referred to. This will also make any changes more noticeable.

Revolutionary? Yes based on the criteria that I noted here earlier this week and in consideration of this other point.

"Doubt is the father of innovation". Galileo

Technorati Tags: Genesys, Success, Innovation, Energy

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