Operational Flexibility From the Preliminary Specification

Before we begin our review of the Resource Marketplace module I thought we should take a moment to note the operational flexibility that a producer gains by using the Preliminary Specification. It is one thing for an ERP system to offer administrative flexibility and savings, its another to provide oil and gas producers with the most profitable means of oil and gas operations. It is through the use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer that we are able to provide that flexibility and operational control. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. By moving the compliance and governance frameworks from the hierarchy into alignment with the Joint Operating Committee we achieve these flexible operational benefits, speed, innovativeness and accountability.

These are reflected in the ability to deal with the current low natural gas prices. Under the Preliminary Specification producers will be able to shut-in production without the associated impact to their financials. Under the Preliminary Specification the fixed costs of all administration, accounting and overhead become variable through the use of the decentralized production model. What we do is we reduce the producer down to the c class executives, the earth science and engineering resources, some support staff and legal resources. The remainder are reorganized across the industry into service providers who are focused on the process. There these service providers are able to use the tools of specialization and the division of labor to provide better services to their industry wide client base. Charges for items such as production, revenue and royalty accounting services will then be billed directly to the Joint Operating Committee that produced the commodity. If there was no production as result of being shut-in due to the property not meeting its marginal cost, then no administrative, accounting or overhead charges are incurred and no billing from the service providers will be sent to the Joint Operating Committee for that month the property was shut-in. This provides the producer with the opportunity to improve their financial performance by reducing their marginal production. Save the reserves for the time when they can be produced profitably. Keep the costs of those reserves constant for the future. And holds the natural gas off of the market, keeping the downside in price swings to a minimum.

There is much to be gained from the service providers use of specialization and division of labor. Efficiencies are one thing, however better service is another. With each producer in the current environment having to provide an administrative, accounting and overhead capability within their organization. Efficiency is the objective in every instance. However by moving to the industry wide capability that is reflected in the Preliminary Specification. The quality of the administrative, accounting and overhead capabilities could be enhanced substantially. Adam Smith proved that the division of labor and specialization were effective tools. Used in the manner that is described here would provide substantial efficiencies, or even better yet, quality of services.

The toolset of specialization and the division of labor have also been used to provide solutions to other operational issues in the oil and gas industry. That being the supply of earth science and engineering resources available from the short to the long term. Applying these tools is the sensible way in which to deal with these shortfalls. Therefore a need to organize them in a different manner would be required. The Preliminary Specification sees the issue as each producer having to acquire the capabilities necessary to deal with each contingency associated with any of their operated properties. This requires the producer to develop capabilities that are unused and unusable at any point in time. In addition as the sciences expand the scope and scale of these sciences will require the producer to expand their payroll too broadly to fulfill their capabilities needs. What is needed is for the producer to specialize in terms of its earth science and engineering capabilities and pool these capabilities with its partners within the Joint Operating Committee. Additional capabilities will be available from the marketplace as is required.

Being a Jack of all trades may have worked in the past. As we move closer towards the science in terms of a competitive basis of the industry. It will be difficult to maintain the scope and scale of most producers earth science and engineering capabilities of today. The Preliminary Specification is designed to provide for this pooling, it is a feature of the system, and gives the producer the flexibility in dealing with the operational concerns they are faced with.

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

Conclusion to the Security & Access Control Module

It is important to remember here in the Security & Access Control module of the Preliminary Specification. That the role and identity based Military Command & Control Metaphor (MCCM) as has been conceived here has not been implemented, developed or conceived of anywhere else before. We are taking the concept and technology of role and identity based management to the next level with the MCCM, pooling and use of specialization and the division of labor in the oil and gas industry.

Why are we bothering with the MCCM and the pooling of the resources in the Joint Operating Committee anyways? The issue that we are resolving is the finite number of earth science and engineering resources that are available to the industry. With the anticipated retirement levels in the next 20 years. With the time requirements to bring on new levels of resources. And most importantly with the demands for more energy, and the demands for more earth science and engineering in each barrel of oil equivalent produced. We face a long term shortage of these critical resources. The need to organize the industry, to exploit specialization and the division of labor are necessary to expand the output from the same number of resources. Doing this without pooling the resources in the Joint Operating Committee will cause the producer firm to broaden the scale of their earth science and engineering capabilities beyond what would be a commercially viable concern. The Preliminary Specification notes that we have contributions of earth scientists and engineers from multiple producers working together to meet the objectives of the Joint Operating Committee. Therefore we need a means in which they can organize themselves and that is the Military Command & Control Metaphor of the Security & Access Control module.

How the MCCM will be implemented will be determined by the user community. However, I can speculate that the Joint Operating Committee will have standard roles and identities that are used throughout the industry. This standardization will probably be necessary for the purposes of making the technology work. The need to have the various areas “covered off” in terms of compliance and other requirements will require a standard template be used by everyone. Then everyone will know that that position is responsible for that role and responsibility. When Joint Operating Committees are small and have only a few people assigned, then multiple roles can be assigned to one individual.

There is also the security and access control issues associated with having the service industry and particularly the service providers accessing the People, Ideas & Objects systems and data. Removing the administrative and accounting resources from the producer firms and organizing them in their own service providers provides significant operational flexibility to the innovative and profitable oil and gas producer. The Security & Access Control module works to tie these disparate organizations into highly organized replacements to the current bureaucracy.

With the natural division in the types of information that are held within a producer and Joint Operating Committee. Producers will know that the Preliminary Specification will be able to deliver the right information to the right people at the right time. That leakage of their proprietary information can be mitigated by isolating the companies data, due to its unique nature and Oracle Label Securities ability to restrict access to database fields.

Oracle’s products provide a strong layer of mission critical capabilities in the Security & Access Control module. Although this comes with additional costs, I am certain that no one will argue with the quality and secure knowledge that these products bring.

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

People, Ideas & Objects and Oracle Corporation

Please note I will be posting twice per day as we pass through and edit the Preliminary Specification.

Starting with the Security & Access Control module we find that Oracle Corporation have a comprehensive suite of applications that provide for the security and access control that we are looking for. Falling under the Oracle Identity Management brand name. These products include tools for Access Management, Identity Administration, Directory Services and Governance. These product classifications come in a variety of different products and are configured in some specialty industry and management suites.

Two areas that are going to be challenging are going to be the Military Command & Control Metaphor (MCCM) and the inter-relatedness of the Joint Operating Committee and service industry representatives. Early on in the specification we noted a number of research areas that were needed to be conducted. These are two areas that will take some research dollars to resolve. To have the MCCM recognize members of different organizations will not be the challenge. To engage them and have them interact in the manner that we expect them to when we expect them to, will.

Oracle Identity Management resides within the Oracle Fusion Middleware product layer. As we indicated earlier in the Preliminary Specification this is Oracle’s Java Enterprise Server. Therefore these applications are open to be tailored to the user’s needs. So when we do sit down with Oracle and define the Security & Access Control module based on the user needs. These needs can be accommodated by the technologies that we have selected.

And it is through the efforts of the user community that we will resolve these issues. It is also one of the reasons that the budgets of People, Ideas & Objects software developments are where they are. We will have challenges to resolve in delivering these innovative systems to the industry. I would also remind producers that our value proposition sees the one time costs of these developments amortized over our subscribing base of producers. Yet each one of those producers receives the full scope of that development effort in terms of the software application.

We now look into the Oracle product classification of Access Management. Included in the Access Management classification are the following products; Oracle Access Manager, Oracle Adaptive Access Manager, Oracle Entitlements Server, Oracle Identity Federation and Oracle Enterprise Single Sign-On Suite. Each of these products will be included in the Preliminary Specification as they have components that are required for the day to day use by the users, service providers, producers and Joint Operating Committees.

One area that I was surprised to learn that Oracle had been working on was in the area of working with partners, vendors and suppliers. Within the Oracle Access Manager it is noted that they are able to provide... “Building federated user communities that span company boundaries.” These are the beginning of both the pooling and Military Command & Control Metaphor (MCCM) that are critical to resolving so many of the issues that the oil and gas industry faces.

On the heels of Oracle Access Manager is their Adaptive Access Manager which takes the concept of intra partner interactions further with “Oracle Adaptive Access Manager makes exposing sensitive data, transactions and business processes to consumers, remote employees or partners via your intranet and extranet safer.” This is the nature of business in the future. Working with your partners, as is done in the Joint Operating Committee, is an effective means of reducing costs and increasing innovation in any industry. It’s only reasonable that the technologies are beginning to emulate these needs. In addition Oracle Adaptive Access Manager takes the level of security and authentication to a higher level. As a result, our demands regarding the pooling concept and the MCCM, I feel, will be less of a technical risk for the People, Ideas & Objects Preliminary Specification and subsequent developments.

The next application is the Oracle Entitlement Server which provides a dynamic access control element to the applications that use the server. Instead of hard wiring access control privileges into each application and user, you can dynamically generate them using the Oracle Entitlement Server. “The solution can manage complex entitlement policies with a standalone server or with a distributed approach that embeds information at the application level.” So when it needs to be determined if user X has access to Joint Operating Committee Y, a decision from the entitlement server, based on criteria within the application, can be made. If this information changes then the user would be denied access. This provides greater security based on policies and reduces the amount of detailed specific software development that is difficult, time consuming, and costly to maintain.

Federated Identities are also a major part of how the pooling concept and MCCM are implemented in the Preliminary Specification. Oracle Identity Federation provides high levels (attribute federation) to the applications that use it. We have specified in many of the modules, such as the Resource Marketplace module, the use of Federated Identities. Situations like where the contact and other information is maintained by the vendor. That information is comprehensive in nature and includes key organizational contacts, calendars and scheduling information. Working with the partners in the Joint Operating Committee and the representatives of the service industry in this way will effectively mitigate many of the technical software development issues we have.

One area that we will continue to face challenges however is in the Work Order. The ability to dynamically put together a working group to study some earth science or engineering research subject is critical to the innovative oil and gas producer. These are ad-hoc and made with partners that you may have no history with. Federated Identities will provide you with some of the information you need to form the partnership and grant application access, however, there is still the pooling of and sourcing of costs, and budgets which is the bureaucratic nightmare that mitigates and destroys the motivation for these working groups to form. We need to make sure these roadblocks do not get in the way. We have proposed to overcome these issues by developing an intuitive interface for the users forming the working group.

The last thing we want our users to be involved in is some form of mindless security access maze. Oracle Enterprise Single Sign-On Suite Plus promises to keep this from happening. Logging onto and off of systems as the user proceeds through the various modules and components of the applications is a must have. This product also promises the ability to provide this level of service on a remote basis. Which is much needed.

Oracle Identity Manager which will be used as the base product for role and identity management will also be the base of the Military Command & Control Metaphor for the People, Ideas & Objects Preliminary Specification. It is part of the Oracle Fusion Middleware product offering and as such is part of their Java Enterprise Server. Therefore we are able to build off the functionality that exists and enhance it with the user community's needs. Building off of the functionality will be somewhat limited as many of the concepts that are inherent in the MCCM are already captured in the Oracle Identity Manager.

Oracle Identity Manager is a highly flexible and scalable enterprise identity administration system that provides operational and business efficiency by providing centralized administration & complete automation of identity and user provisioning events across enterprise as well as extranet applications. It manages the entire identity and role lifecycle to meet changing business and regulatory requirements and provides essential reporting and compliance functionalities. By applying the business rules, roles, and audit policies, it ensures consistent enforcement of identity based controls and reduces ongoing operational and compliance costs

Oracle Internet Directory and Oracle Virtual Directory product offerings are up next. A little off topic but Oracle Internet Directory is a relational database derived directory server. That Oracle is providing the marketplace a directory server based on relational database technology speaks to the power of their relational database. They claim they have the performance for two billion users. I see advantages of using this product over their traditional directory server and have therefore selected it for the Preliminary Specification. It will provide us with some flexibility when we ask some of the comprehensive and demanding questions of the technologies.

Oracle Internet Directory could be deployed as an industry wide, and by that I mean oil and gas and service industry wide directory server. There it can integrate with the information that is held in other Oracle products, such as Oracle Identity Manager which would be deployed at the producer firm, Joint Operating Committee and service industry representative level. I think we could provide large volumes of information consisting of everything that exists in the industry. The producers, service industry, Joint Operating Committees, the people who work within the industry, etc. Because this is a database we have some interesting opportunities here.

And Oracle Virtual Directory may be the beginning of optimizing the relational database opportunities. So what we will have is a global database of names within the Oracle Internet Directory and these will relate to the information contained with Oracle Identity Manager and other applications. What Oracle Virtual Directory will provide us with is a seamless way in which to browse, and for applications to see, these datastores as one.

Within the Preliminary Specification we want to access the contact information of the people or firm that provide services or products to the producers or Joint Operating Committees. As we indicated we want the individuals and service industry providers to maintain their own contact and basic data. These will be maintained in the Oracle Internet Directory for each and every producer or Joint Operating Committee to access the most recent and up to date information. This will save an immense amount of time on behalf of the producers and Joint Operating Committees, as well as the individuals and service industry providers. When looking for someone the search capabilities will be significant as we have added the “Vendor / Supplier Contact Database” and the “Actionable Information Interface” to this base data in the Resource Marketplace module.

Now we want to look into Oracle Identity Analytics as part of the Security & Access Control module of the Preliminary Specification. The primary purpose of this application is to provide governance over the access privileges granted to the users of the People, Ideas & Objects application modules. Many of the functions and processes that are provided in Oracle Identity Analytics are either necessary or of significant value that it has been included in the Preliminary Specification.

The first area is the “why and how” of the users access. Providing documentation of what information was accessed by what users and if any of the access violates any of the established policies. Ensuring that data access by users is compliant with the corporate and application policies, that users are not unnecessarily being abused by overtly secure systems and overall good corporate governance is achieved. All of the data that is collected during data access, that is the “why and how” of the users access. Is compiled in a “Data Warehouse” for further analytical analysis and querying. This will help to show trends and usage patterns that will form new policies and procedures and security provisions.

Another useful function within the Oracle Identity Analytics application is the Segregation of Duties feature. In many areas of a corporation, certain process functions must be undertaken by specific individuals and in some cases different individuals. This feature provides for that assurance. It is also Sarbanes-Oxley compliant. This is important when the Joint Operating Committee is small, as we mentioned the other day. And we have to assign many roles to a few individuals. This application will ensure that the processes provide the appropriate governance is maintained by segregating the roles that need to be kept apart for compliance purposes.

There is a comprehensive and customizable dashboard interface for the users of the Oracle Identity Analytics software to analyze the data and particularly the data warehouse. Filled with reports and data that an effective user can use to determine where and how the People, Ideas & Object producer client might be susceptible to access control violations.

The last feature that I want to highlight is what Oracle calls their Role Lifecycle Management. This provides the Oracle Identity Analytics user with the ability to do “what if” analysis in terms of the implications to identities and roles within the People, Ideas & Objects application. It also contains a role change approval process, role versioning and a role rollback feature. These will be needed in determining and maintaining the Military Command & Control Metaphor.

We now step down from the Oracle Fusion Middleware layer to the actual Oracle Database for some of the security features that we seek. The first product in this stack is Oracle Advanced Security. It provides the authentication, and encryption of both the database and the network activity. It is possible, and I highly recommend that all the data and information that is used in the People, Ideas & Objects application modules be encrypted in the database and on the network. This increases the load on the systems and will require additional effort in terms of key management, however, I think the nature of the data and information and the manner in which the applications are provided, a “cloud based” solution, this level of security is necessary.

Oracle Audit Vault is another product that I recommend for the Preliminary Specification. It provides a central location and management of the audit information for compliance purposes. Giving our users the ability to manage the data, information, privacy policies and security. Oracle Audit Vault is also Sarbanes Oxley compliant.

This next Oracle product is a definite addition to the Preliminary Specification. Oracle Label Security will work in many different ways within the modules however here is how I see just two examples. What the application does is designate certain individuals with higher level security clearances. It also designates certain data fields with certain levels of security clearances. Those with high enough security clearances and appropriate authorizations are then able to read these database fields. Within the People, Ideas & Objects application we want to make sure that the reserves, accounting information and strategy discussions of each producer firm remain confidential to a select group of individuals within that firm. With Oracle Label Security that is possible. We also want to ensure that the appropriate people within the chain of command in the Military Command & Control Metaphor have access to the appropriate materials to make the appropriate decisions. This will allow those individuals to have access to these materials without making it available to everyone in the chain of command.

Although not that pertinent to the users of the People, Ideas & Objects applications we have also included Oracle Configuration Management, Oracle Database Firewall and Oracle Database Vault as part of the Preliminary Specification. These will help to keep the applications and the Oracle Database running as they should. Oracle Configuration Management will determine if there is a change in the configuration, either a patch, or if something has gone wrong it will correct itself back to the specified configuration. Ensuring that what is promised to the users of People, Ideas & Objects is what is provided. Oracle Database Firewall ensures no SQL statements that are inconsistent with the users or applications are passed through to the database. And Oracle Database Vault provides the ability to have only certain IP addresses or users to run certain SQL commands and to lock databases from having any operations being conducted on them.

Backing up your data and information are two of Oracle’s strengths. They provide excellent tools for this in Oracle Secure Backup. With the database being encrypted it is interesting that the backup is of the encrypted database. What we will need to do in the Preliminary Specification is to determine in great detail what precisely will be the backup strategy that will be used for the People, Ideas & Objects application.

Lastly there is Oracle Total Recall. A product that helps in accessing historical data. Oracle Fusion Applications provides some interesting solutions with respect to how they handle legacy applications and we will get into those as we proceed through the Preliminary Specification.

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

Access, Roles and Responsibilities

This topic discusses the manner in which authorizations, roles and responsibilities are handled in the Security & Access Control module of the Preliminary Specification. We should also discuss, the topic of delegating the authority and responsibility during absences, which is something that can come up at any time.

As background we should recall that each individual would have different access levels and authorizations in terms of access to the People, Ideas & Objects systems. Assuming different roles and responsibilities would impose different access levels to data, information, processes and functionality. On top of that, the Security & Access Control module is the key module for imposing the Military Command & Control Metaphor throughout the People, Ideas & Objects application modules. This structure, particularly in a Joint Operating Committee, would work to weave the multiple producer firms under one chain of command. It would also need to provide an interface to ensure the coverage of all the processes were “manned” to ensure compliance, governance and overall completeness of the process.

Throughout the Preliminary Specification there is the perception of a heightened role for technology in terms of enabling the authorization to conduct operations within the system. That is to say the ability to do things and get things done is through the collaborations with partners and to authorize actions through participation in the processes managed by the systems. This participation dictates that the designation of the roles in the Security & Access Control module “means” more than just data access; it also imputes authority and responsibility to undertake actions on behalf of Joint Operating Committees and / or producer firms.

It would also be necessary to be able to assign this authority within the Security & Access Control module during any absence. If someone with authority and responsibility were to be away for whatever reason, they should be able to assign their authority to another person to fill that role while they are away. This will ensure that the process isn't held up during their absence. Delegations of authority have been used for years in larger firms and with a system that imposes the authorizations and responsibilities on specific roles, the ability to temporarily move them down, across or up the chain of command is a necessity to keep the organization functioning.

Lastly we should talk about the interface that helps to identify the missing elements of a process. It would simply show the command structure of the people who are assigned to a Joint Operating Committee or to a process and their related role, authorizations and responsibilities. If someone was to be away then it would show who was taking over their role. It would also help to identify how you could impose the chain of command to fill the void of any vacancies. This would be particularly important if the role or process was needed to be documented for compliance purposes.

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

The Military Command and Control Metaphor

People, Ideas & Objects development of the Military Command & Control Metaphor (MCCM) of the Security & Access Control module is not without some historical context. Before the hierarchy, which I perceive as somewhat of a commercial development of the 20th century, there was only the military structure in terms of large organizations. The main difference between the two is rather subtle but significant. The military structure is much broader and flatter than the hierarchy. That is one of the ideals that we are seeking, but the more important feature is the ability for the chain of command to span multiple internal and external organizational structures.

If we analyze the U.S. Military we find a number of interesting attributes of using the military chain of command that will provide value in the use of People, Ideas & Objects software applications. First is the title and assignment of an individual in the military.  For example, “Sgt. Richard Knuth, Company A, Brigade Special Troops Battalion, 3rd Heavy Brigade Combat Team, 3rd Infantry Division.” A similar title and assignment for the people within a Joint Operating Committee (JOC) would help to clarify the role and responsibilities, authority and capabilities the individual would have within the JOC. For example this individual might have the following “Richard Knuth, Chief Engineer, Field Straddle, Elmworth. Irrespective of which firm this individual is from. Each of the participants, and the People, Ideas & Objects system, would recognize that the authority of a Chief Engineer was the same throughout the industry and that the designation of Chief Engineer entitled the individual to authorize the appropriate actions.

Now this is not fundamentally different from how the industry operates today. What is different is the ability to operate in a fashion where the interactions between the producers in the JOC are done as if they were all employed by the JOC. Where multiple producer firms are contributing many full time staff to the JOC. This interaction between producers through the JOC can only be replicated if there is a recognizable chain of command between the firms that make up the JOC. In addition to the recognizable chain of command each organization must have additional governance concerns handled, and compliance plays a big part in this as well. (We will talk more about these in the Compliance & Governance module.) That although it would be an easy thing to implement from a people point of view, the actual implementation of pooling the staff from multiple organizations becomes complex when we consider all of the implications. However, with the Information Technologies that exist today, and the issues of the shortages of earth science and engineering talent we have few choices but to pursue this pooling concept.

The nature of the people that will be working through the chain of command that is layered over the Joint Operating Committee will include all of the disciplines that are involved in the oil and gas industry. The contributions of staff, financial and technical resources will include everyone that is employed by the industry today. I can foresee many of the office buildings being refurbished to accommodate the staff of a single JOC. There the staff from the different producers would be seconded to work for the JOC, working at a single JOC not at any particular producer firm.

In previously discussing the Military Command & Control Metaphor (MCCM). I noted this inter and intra organizational use of the MCCM was similar to that used by NATO. That armies of the various countries could work together and recognize personnel from each other's armies and immediately recognize and use the same chain of command. The Joint Operating Committee is the financial framework of the industry. This means that all of the members of a JOC are equally driven by their financial interests. And that financial interest drives consensus. The point in using the NATO example is to show the ability to recognize the chain of command spanning multiple producer organizations represented in the JOC.

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

Two Types of Data

In this second post of the Security & Access Control module we discuss the two types of data that are found within the oil and gas industry and how People, Ideas & Objects Preliminary Specification deals with access control and the security of that data.

When we talk about the various people within the producer firms affiliated with a Joint Operating Committee. And the number of Joint Operating Committees that a firm may have an interest in. And the number of people a firm may have employed. Access control becomes challenging. It becomes a challenge when you consider that your people certainly should have the access that you require, but the level of trust that you may have with respect to the other partner organizations is probably not as strong. That is to say, does using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer, open the producer firm to any data loss to its partners? This is how People, Ideas & Objects deal with the access and trust issue in the Security & Access Control module.

When we concern ourselves with the data and information of the producer firm, and the information that is cleared from the various Joint Operating Committees that the oil and gas producer has an interest in. We can all agree that this information is proprietary and is subject to the internal policies of each producer firm. (Information such as reserves data, accounting information, internal reports and correspondence, strategy documents.) What we are also concerned about is the information and data that is held in the Accounting Voucher module and the associated data that is common to the joint account. (well file, agreements, production data, capital and operating costs, revenue and royalties.)

Closer analysis of these two types of data and information that are held within the firm and the Joint Operating Committee fall within the proprietary and partnership domains. In Canada at least, most of the data and information regarding a wells operations can be freely obtained through various regulatory agencies. Nonetheless, the majority of the data is shared through the partnership who have an interest in the data and information. Not so for the producer firms data. Most of the information is kept close at hand and is only reported through filtered reserve report summaries and annual reports. Therefore keeping a handle on proprietary data, while operating the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer, as proposed in People, Ideas & Objects, does not present any data leakage.

Access control can therefore be limited by precluding any company personnel from viewing any other companies files. Which is a given. While in People, Ideas & Objects access control is limited to the Joint Operating Committees of the firm and the firms files only. To extend this further we would have access control limited to the appropriate roles within the firm, then it is a matter for the user community to define a standard set of generic roles in which access is required to certain data types. This would also apply to the types of operations that can be handled by that role, for example, read, insert, update, delete. These generic roles could then be assigned to each individual within the organization based on their needs. Assigning multiple roles for more complex access. Access to your proprietary data would be for your company’s personnel eye’s only.

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

The Right Information to the Right People...

As promised we now start with our review of the Preliminary Specification and we begin with the Security & Access Control module.

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

Throughout the Preliminary Specification we discuss two of the premier operational issues of the oil and gas industry. Those being the demand for earth science and engineering effort is increasing with each barrel produced. This is best represented in the steep escalation of the costs involved in the exploration and production of oil and gas. At the same time the critical earth science and engineering resources are somewhat fixed and are difficult to expand in the short to medium term. Add to that, an anticipated retirement of this brain trust in the next twenty years, and the problem becomes of critical concern. The second issue regards the manner in which the administrative and accounting resources are organized within the industry. With the Preliminary Specification the need for each producer to develop their own administrative and accounting capabilities internally is replaced by an overall industry capability. Then each producer can access those resources on a variable basis with direct charges to the Joint Operating Committee. This provides operational flexibility in how a producer approaches their strategic and tactical needs.

There are few short term solutions to the short fall in geologists and engineers over the next twenty years. It takes the better part of that time to train them to operate in the industry. What we do know are several “things” that are being applied in the People, Ideas & Objects Preliminary Specification. Key to a number of concepts application are what we call the Military Command & Control Metaphor. Which is a method developed in the Security & Access Control module of imposing command and control over any and all Joint Operating Committees, working groups, producer firms, service providers or organizations the producer may need to add structure to. The concepts are the further specialization and division of labor, and a reduction in the redundant building of capabilities within each oil and gas producer, or as we describe it, a pooling of resources in the Joint Operating Committee.

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

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

These same principles are present in the second issue noted above. The administrative and accounting acquired through an industry wide capability provides the producer with the flexibility to address the operational concerns of the firm. Issues such as today’s low natural gas prices are able to be addressed through this revised structure. By having the administrative and accounting service providers charge their service fees directly to the Joint Operating Committee. The producer gains the ability to shut-in production without any negative effects on their financial performance. All administrative, accounting, and production costs are eliminated during production shut-in. And the producers are then able to keep those reserves available for the time when production will provide for profitable operations. Natural gas prices will have less volatility as a result of producers removing the marginal production from the marketplace.

Being able to provide the service providers with systems access and security during these day to day operations will be a unique situation for the oil and gas producer. The service providers will be aggregating data on an industry wide basis. And there will be many service providers involved in providing administrative and accounting services to the producer firm and Joint Operating Committees. Consideration for the proprietary nature of the information and security will be priorities for the Preliminary Specification.

A quick note on mobility. People are being provided with new devices that enable them to do their work anywhere they might be. These phones and tablets, in addition to laptop computers, open up security and access control concerns for the innovative and profitable oil and gas producer. Some producers are enabling their staff with policies that allow them to bring their own device to work. The fact of the matter is these devices provide for enhanced productivity and are appropriate for the innovative and profitable oil and gas producer. People, Ideas & Objects Preliminary Specification includes within it an understanding that these devices will be part of the day to day that are used in the oil and gas industry.

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

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

The End of Summer

Its the beginning of a long weekend and what amounts to the end of summer for the oil and gas industry. It'll be time to get back to work on Tuesday and that goes for this blog as well. We're going to start reviewing the Preliminary Specification once again and we'll start on Tuesday with the beginning of the Security & Access Control module. This will provide readers with an opportunity to go through the Preliminary Specification in detail over the next few months and get a good understanding of the what and how of the product. The topical discussion that we have been having will also continue as I think that we have been able to show the value of the product in the marketplace today. So the blog will consist of a bit of both, the Preliminary Specification and topical discussion for the next few months.

If I had a topic to close out these summer months on it would have to be natural gas prices. I really like discussing this topic. The Preliminary Specification provides solutions to the operational issues that occur in the oil and gas industry. The natural gas prices are one of the critical operational issues that are addressed by our product. Who wouldn't want to discuss them. The bureaucracy has an inability to even discuss the problem and choose to ignore the consequences of these low prices. I would expect that this winter we will see no marked improvement in the natural gas prices, and no further actions by the bureaucracies.

The amount of time that the natural gas prices will remain depressed will be based on two factors. One the duration of the shale gas reserves. And the length of time that the bureaucracy remains in control. Its as simple as that. We can't expect anything to change on the basis of prayers or wishes from the collective bureaucracy. No matter their faith. However by adopting the Preliminary Specification we can remove the bureaucracy from the scene and affect the prices by removing the marginal production from the marketplace. In that way we have the opportunity to produce the shale gas reserves on a profitable basis.

Everyone is aware that the issue regarding natural gas prices is over production. The prolific nature of shale gas reserves and their abundance have depressed prices. Making all production unprofitable. The removal of 10 - 15 % of production would be all that is required to restore prices to what is recommended by the industry as what is required for a healthy industry, $6.70 / mmbtu. However whom is to take the production cut is unknown and certainly “not in my backyard” is the standard operating procedure. Therefore it continues. The concern of the producers is that the high overhead of the firm will be exposed with the lower production volume. That high overhead being a fixed cost of business and is unable to be reduced without significantly diminishing the capabilities of the firm.

The Preliminary Specification takes the producers fixed costs of the overhead capabilities and makes them a fixed cost of the industries capabilities. They are then charged on a variable basis to the Joint Operating Committee when there is production. If there is no production then there are no charges for the overhead or production costs and the property only has the costs of capital uncovered during times of shut-in production. Removing the bad optics of high overhead and low production volumes from the producer during times of shut-in production.

Making the overhead of the producer variable is the appropriate step in allowing for the producer to shut-in production. It is this feature of the Preliminary Specification that will enable the producers to reduce their production during times of overproduction and to successfully produce the shale gas reserves.

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

Service Providers for Earth Science and Engineering

Just as there are service providers who are providing services in the administrative and accounting fields for oil and gas producers and Joint Operating Committees. It is anticipated and designed into the Preliminary Specification that similar requirements will be needed in the earth science and engineering disciplines. The critical nature of the resource shortfall in these professions dictate that a solution to these medium to long term shortfalls arise. People, Ideas & Objects have identified the issue and resolved it through the software in the following manner.

The source of the issue is the manner in which each producer is building their earth science and engineering capabilities. Just as in the administrative and accounting areas none of these resources are shareable between the producers. Each producer is building unique capabilities for just in time deployment for any of the properties they are responsible for. This generates unused and unusable earth science and engineering capabilities that are trapped within each producer firm. Looked at from an industry wide point of view these trapped resources are substantial.

The solution is to use specialization and the division of labor to free up the trapped unused and unusable resources in each producer firm. Instead of each firm generating the capabilities to meet the demands of all of their properties. They focus on key competitive specializations in the earth science and engineering areas. They also coordinate with working interest partners who are able to bring other specialized capabilities on an as needed basis. If any additional capabilities are required they can bring those in from the Resource Marketplace module.

It is there in the Resource Marketplace module that specialization and the division of labor have enabled a marketplace for the generic earth science and engineering tasks. A place where the majority of the day to day technical work can be completed on behalf of the producer or Joint Operating Committee. This enabling the specialization that the producer firm is able to undertake. This specialization and the sourcing of other specializations from working interest partners and the marketplace are how the Preliminary Specification eliminates the trapped resources within the producer firm. And how the unused and unusable resources are freed up on an industry wide basis to be used on a shared basis throughout the industry.

Providing the capabilities for all that is required of a producer within the domain of a producer will become increasingly more difficult as time passes. As the excessive demands of these professions continue, the need to specialize and divide the labor further, within the producer firm itself, will require the producer to have such a broad scope of earth science and engineering operations as to be uneconomic no matter how large the production base. This “hoarding” mentality, that it has to be done from within the organization, is quickly becoming unfeasible, if it already hasn’t. People, Ideas & Objects suggest it is the source of the shortfall in these resources today.

The solution in the Preliminary Specification, although controversial is the only reasonable approach to dealing with the problems of an industry that is accelerating in terms of its scientific basis. Specialization on key determinants will be the differentiators that earn the producer profits that they desire. Continuing to “hoard” these resources will only lead to further difficulties for all producers as the demand for the resource base escalates.

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

Producing Shale Gas Profitably

The fact of the matter is only People, Ideas & Objects have a viable plan for the industry to produce the shale gas reserves profitably. The prolific, however high cost reserves provide an opportunity for the industry to fuel the North American continent for the foreseeable future. That is if it is a viable business. Today it is an activity that keeps bureaucrats gainfully engaged in what they do. We are in a transition period where the business is unable to sustain itself with profits, and indeed is cannibalizing itself with losses. Investors have had enough and are on strike, unwilling to participate with more capital to fuel the bureaucrats furnace. Even with the investors striking there is an imbalance in the supply and demand of natural gas. What needs to be done is producers need to reduce production. Everyone knows that, yet no one has done it in the three years that prices have been depressed.

The problem with reducing production in the high throughput production model that is employed today. Is that it only makes things look worse. Overheads look even more top heavy than they do at full capacity. Layoffs are one of the solutions to the poor optics but that only masks the problem. The problem is that each company must maintain certain capacities with respect to what they are capable of achieving as an organization. Cutting staff only reduces the capabilities in certain areas. What is needed is a different way in which the oil and gas producer achieves, accesses and develops those capabilities. In the Preliminary Specification those capabilities are developed on an industry wide basis, not an individual producer basis. This reduces the redundancies of each producer building the same capabilities within each firm and having no ability to share these resources.

By having the service providers staffed by the resources of the producer firms. These service providers can then reorganize themselves based on the specific processes that they specialize on. Using the entire industry wide data set as their client base they would be able to use specialization and the division of labor to provide efficiencies and effectiveness that was far greater than that of the largest producer today. The quality of their services would also be enhanced.

It is assumed in the Preliminary Specification that the oil and gas producers competitive advantage is their asset base and their earth science and engineering capabilities. Not their administrative and accounting functions. Taking the administration and accounting processes of the entire industry and setting them with the service providers would provide each producer with the appropriate administration of their assets. Any oil and gas producer that is competing based on their more efficient administrative capabilities should have their head examined. These are generic aspects of the business that all producers need to have taken care of. They are not critical to the business.

Each service provider, and there would be hundreds of service providers, but only one for each process. Would become highly specialized in their domain of knowledge and capabilities. Providing services to producers of all sizes. Bringing to the industry the state of art in terms of what is possible for that process. In addition they would be backed up by the People, Ideas & Objects software development capability that would enable them to make the changes to further their specialization on a constant basis. Competition between the service providers would be at a high level. It just wouldn't be at the direct level of competing for the business of the process. Each service provider would in essence have an industry wide monopoly on the process that they managed. It would be in that they way that they could achieve the most from specialization and the division of labor.

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

A Prayer for Natural Gas Prices

If we could now all bow our heads. But seriously, that is the extent of the planning and management that is currently ongoing in the natural gas business regarding the prices. The bureaucracy have completely given up any pretense of concern or regard for the business in which they operate. They couldn't care less about the losses that are being incurred as a result of the low natural gas prices. And its not that the summer saw any marked depletion in the shale gas reserves. These reserves will be around for a while longer. I am surprised that the bureaucracy have gotten away with such blatant disregard for so long. Bureaucracies are leaderless. I guess expecting some leadership from them is the foolish thing.

How the oil and gas industry continues in the 21st century has to be as a dynamic and innovative industry. What it is today is the furthest thing from that. And it is paying a large price for that lack of leadership. We have calculated the opportunity costs for 2012 at $94 billion when we compare the status quo to what is possible with the Preliminary Specification. Making the investment in People, Ideas & Objects one of the highest return investments that the industry could make. This is the power of software and why the industry has to begin to respect the capabilities of the technologies when combined with innovative business models.

The Preliminary Specification solves the natural gas pricing problem by removing the marginal production from the marketplace. 15% of the production in the 2012 scenario that provides for the opportunity costs. Producers are able to remove the marginal production from the market without the associated losses on other operations, or the losses on the shut-in properties. And they are able to keep the shut-in reserves for a time when the prices return to the point where they can be produced at a profit. Additionally the production that is removed from the marketplace helps to reduce the downside in natural gas prices and normalize the marketplace in terms of supply and demand.

It does this with two fundamental mechanisms that are unique to the Preliminary Specification. One is the manner in which the overhead or the resources of the industry are organized. And secondly on how the costs of the resources are allocated when the production is shut-in. The first element is how the resources are organized in the industry. The oil and gas producer is a stripped down version of itself that consists of the c class executives, the earth science and engineering resources with some legal and admin support staff. The remainder of the resources of the producer are reorganized into service providers who are focused on a process or sub-process that uses the entire industry as their client base. Then they can use the tools of specialization and the division of labor to provide the most efficient and effective service in terms of lease rental payment, production, revenue and royalty accounting, etc. When the service provider provides their service they then bill the Joint Operating Committee a fee for their service.

If the property has been determined to be marginal at the current prices it is shut-in until prices rise. The associated costs of production and overhead are all stopped. There will be no charges from any of the service providers to the Joint Operating Committees for the months where there is no production for production, revenue and royalty accounting, etc. Thus enabling the property to be subject only to the cost of capital during times of shut-in production. The cost control for the production, revenue and royalty accounting is with the service providers and they can budget on an annual basis that they will experience an approximate 10 - 15% production decline at anytime. Therefore the ability of the producers to remove any amount of excess production from the marketplace at any time would exist without the associated losses in operations. This would alleviate the downswing in pricing that is currently being experienced and allow the shale gas reserves to be produced at a profit.

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

Leadership Within the User Community

In addition to having the power, the user community will provide the leadership for the industry in terms of its direction and implementation of the solutions it determines. With participation being as broad and as diverse as the industry itself, representation will include all areas of an oil and gas producers domain. Additional representation will be made from the service industry and the service providers. Anyone dissatisfied with the decisions that were made within the user community would have to blame their lack of participation as the cause of those decisions being made. With the role of leadership comes the responsibility to lead.

Some will argue that the movement of the leadership of the industry to the user community is unnecessary and should not happen. I would suggest that they reread the Preliminary Specification. It is within the domain of the software to take the leadership role within the industry. For the industry to acquire the capability to suspend marginal production can only happen if the Preliminary Specification is operational within the industry. I say “only” on the basis that the bureaucracy has shown no capacity to do so yet. It is within the software that the leadership is exercised and the software is driven by the user community. Therefore the user community will be the ones that provide the leadership to the oil and gas industry in terms of its strategic and tactical business direction. The alternative is that it continues to lose money in the natural gas business for as long as the shale gas reserves exist.

What I am arguing is that participation is the means in which the leadership is exercised. Its a different mode of operations is what is occurring. Instead of being an opaque unknown, it will be a transparent and visible process that is seen throughout the user community. This is the nature of business in the 21st century. Software and by extension user communities are a necessary ingredient in the capabilities of the industry. That they haven’t been up to this point reflects poorly on the implementation of the technologies. It is necessary to have these capabilities tightly integrated within the DNA of the industry, the service industry and the service providers. That is what the Preliminary Specification does. And it allows for those capabilities to be used in a manner that will provide for the most profitable means of oil and gas operations.

Arguments to the validity of these points will continue for some time. Software doesn’t command that much respect in the oil and gas industry. Certainly not to the point that is discussed here. There will have to be an education process undertaken to provide an understanding of how these changes are implemented in the software and user community. The point about profitability resonates with the investors however. And that is our focus in sourcing the funds, or the direction of the funds to complete the first phase of these developments. Developments that will be solely the result of the user community.

There are times when “things” change. And there are times when those that accept those changes and move forward in the new ways as a result. This is one of those times and one of those places. Oil and gas is being disintermediated by People, Ideas & Objects Preliminary Specification. New leadership will find the user communities ways and means of making the changes they want in the industry. Those who are unable to accept these ways will be left behind and will have to accept a different future for themselves. That is the way that change is implemented and growth occurs.

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

The Power Within the User Community

A decade has passed since we began writing about developing software for the Joint Operating Committee. And it has been one year that we have actually had a product, the Preliminary Specification. I am a fan, let me restate that, I was a fan of research. After nine years of it I have had enough. If I never see another paper I will be fine with it. What gets me out of bed in the morning is checking my stats. Its a simpler life, but just as satisfying. Discussion of the product will keep me going for a few more years. I hate to admit it, but I started developing oil and gas ERP systems in my first company in 1991.

The Preliminary Specification provides an overall vision of how the industry could operate in the 21st century. An ambitious plan. However, one that is needed for the times that we live in. People who work within the industry who can see this vision can align themselves to it and begin the process of orienting themselves and their commercial lives around it. This is how the changes will take place. Individuals acting in their own best interests. Joined together through the user community. A place where they have the means to effectively provide for the most profitable means of oil and gas operations.

Its up to the user community now to take the Preliminary Specification and make it theirs. To mold it into the systems that they can use on a day to day basis. One in which they can address the issues and opportunities that arise in the oil and gas industry, the service industry and the service providers. The service providers potentially being a part of their own commercial operation. Where their dual revenue streams are split between user community contributions and service provider fees.

The impact that the user community has on the oil and gas industry will be significant. We can see already in the Preliminary Specification how it solves the operational concerns of the industry today. How will it solve the issues of tomorrow. This will be the role of the user community. We’re not talking about a committee of people who are endlessly publishing technical requirements that no one will look at. We are talking about the people who are responsible for the systems that will be built. Any change by the user community will see an immediate change to the software by the People, Ideas & Objects software developers. That’s the point. Instead of producing reams of paper that no one will look at. They will have the power to effect change. And the power to effect change on a grand scale. As we can see the changes that are made in the Preliminary Specification impact the industry significantly.

That is why this user community is different. It has a role to play in the development of the industry. And it has the power to affect the changes to develop the industry. Participation has to be as broad and diverse as possible to ensure that all points of view are represented and that changes are in line with the industry needs. One thing we can be certain of in the future. And particularly with the dynamic and innovative oil and gas industry. Change will be the constant that requires the user community to be creative, dynamic and innovative in its ability to provide direction and solve the issues of the industry in the future.

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

In the beginning...

What would we do without the Joint Operating Committee. It was in August of 2003 that I was preparing my proposal for my master’s thesis and it was on using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. I finished that work in April of 2004 and rewrote it for commercial publication in the May 2005 Preliminary Research Report. It has been a roller coaster ride since. What we were able to provide in the May 2005 Preliminary Research Report was that the Joint Operating Committee was the natural form of organization for oil and gas and that innovation can be reduced to a quantifiable and replicable process.

Since that time it has been an effort to undertake the research necessary to solve the following. If we moved the compliance and governance frameworks of the hierarchy to the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee what would it look like and how would it work? This research was extensive and began with this blog in late 2005 continuing on into the summer of 2012. It was in August of 2012 that we finally published the Preliminary Specification, the 175,000 word eleven module summary of what that system would look like in the oil and gas industry.

The implications of using the Joint Operating Committee are significant. I don't think any position within the oil and gas industry will remain unaffected by the changes from the software. By developing this software we move away from the current corporate model. Which is a contrived and makeshift organizational construct that is patchwork and make do. To one, the Joint Operating Committee, which is the unique and natural way in which the industry has used to deal with the partnerships that are systemically used in the industry. We are moving directly in line with the culture of the industry and the Preliminary Specification has a certain harmony as a result. Things are done with the understanding that that is the way they are done in the oil and gas industry.

There is also a focus on the business of the oil and gas business. When you analyse the current corporate model the focus and drive of much of the administrative and accounting needs are on the tax, SEC and royalty needs of various external stakeholders. With the Preliminary Specification the focus is on the business of the oil and gas business with the compliance and governance being as a result of the activities in that business. Not a driving force in the business.

It has been a year since the publication of the Preliminary Specification. And as I noted a few days ago the acceptance of the marketplace has been better than expected. It is our first year in a ten year plan to have the system operational in the oil and gas industry. And by all accounts we are on track. We are continuing on in our second year with the same activities as we were in the first. Getting the word out that the Preliminary Specification can solve the operational concerns of the oil and gas industry. And provide the most profitable means of oil and gas operations. With natural gas continuing to disappoint, and many producers seriously looking at what they can do about it, maybe they will begin to see some of the solutions that we have put forward here as the way forward for the industry.

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

A Dynamic and Independent User Community

One thing we should note here is that we haven't discussed any of the technologies that are available in the marketplace. And we certainly will not start now. We are focused on the business issues of the oil and gas industry. And the associated needs of the service industries and service providers that are in support of the oil and gas industry. We are a software development firm and we will provide the technology that meets the business issues that the user community demands. That is our focus. Not on the technology.

We have discussed in previous posts how the user community will provide us with the direction in terms of what, why, where, when and how the software needs to be. That this user community will be dynamic and mirror the activities and thinking that is occurring in the industry itself. That is what I would like to see. The user community having the ability to know what the industry will want and need and to anticipate those needs, and have the software delivered to the producers and service providers just in time. This is what is possible today and I set this as an objective of the user community to achieve.

In a dynamic and innovative oil and gas industry, a dynamic user community with a software development capability as defined by People, Ideas & Objects is what will be required. The foundations of the oil and gas industry will include the user community and software development capabilities. They will be a critical part of the industries needs in the 21st century. We see today that with the ability to resolve the natural gas pricing issues, the Preliminary Specification provides a framework for the user community and the software development capability to address the needs of the industry in the future. And it all comes down to the Joint Operating Committee as the key organizational construct. Recognizing that has been the critical piece that has been missing in the software up until now.

Taking this infrastructure and putting it on its own financial footing is a key part of its ability to becoming dynamic and independent. As defined in our Revenue Model we can not be subjected to disruptions in our funding for either the user community or the software development capability. Disruptions in funding could divert our focus, or affect the capabilities of either group. It is in the best interests of the oil and gas producers to review the Revenue Model and understand how we address the funding of these groups and avoid these issues.

The fact of the matter is, is that software and the user community will be taking up a much larger role in our lives in the future. What has happened in the software development community for the past 50 years has been a great experiment. There have been advantages for certain but the real value is about to be realized. What we are beginning to realize is there is a maturing of the technologies. What was once potential is now doable. And the infrastructure is there to accommodate what is doable. So now we will see what was possible only a few years ago become the norm. And that will require that we have a stable and healthy user community and software development capability that we have been discussing here. For without these things, the industry will find that the issues and opportunities that seem to be at their fingertips, just can't otherwise be resolved or realized.

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

Intellectual Property in the Preliminary Specification Part II

One of the areas that Intellectual Property (IP) will affect the industry will be the way in which everyone who works within the industry is connected to the IP. As IP becomes more important in the day to day of each and every individual in the industry. Their access and use of it will make up their relationship with their employer or customer. That is to say the relationship will be defined by a license for copyright and patent purposes. And contract law for brand management with respect to trademarks.

Users of the People, Ideas & Objects software will be subject to an End User License Agreement (EULA). And like many of the hundreds of EULA’s that you have agreed to in your life these will not form any significant part of your relationship with your employer or customer. The access to the software will of course be free to any user. The access to the producer and Joint Operating Committee data is as a result of having a relationship with them and they granting security access to you through the Security & Access Control module.

That brings us to the user community. People, Ideas & Objects are user based software developments. Our user community will be our competitive advantage in the marketplace. Key to that community is their use of the Intellectual Property that makes up the Preliminary Specification and its derivative works. This will be done through a specific license with each member of the user community and People, Ideas & Objects. It will be this license that defines the relationship with the individual in the user community and their involvement in these developments. This, by their choice, could be a material commercial arrangement in which they establish a foothold in the user community and a service offering as one of the many service providers to the oil and gas producers.

Members of the user community are compensated for their time and efforts in the user community. This is not a volunteer situation where we expect people to contribute time and effort for the community spirit. People will be compensated commensurate with their education and experience on an hourly basis for their contributions. These costs are also part of why our costs are larger than any software development initiative before. No one has based their developments on the user community as we are on ours.

There is another reason that the user community must be paid for the work they do in these developments. It is to acquire the Intellectual Property that is derived from the Preliminary Specification and other areas. This IP must be acquired so that it centralized in one location from a legal point of view. All IP will become part of the copyright that is owned by me. There it will in turn be available to everyone within the user community and service providers through the above noted license that they have been granted. Without this we would have to deal with thousands of IP trolls who would have developed an idea for this or that and would obstruct each and every producer with a license agreement for their idea and an invoice. If you feel your ideas are too special to be handled in this manner then you should feel free to launch a competitor to People, Ideas & Objects. This is the way that we have chosen to deal with it here.

Building a service associated with the software that includes participation in the user community will provide a commercial opportunity that, I think, will be valuable. The oil and gas producers will have the best people providing them with the capabilities to work with the software and to change the software. An ideal situation. If you want to be part of that, that is what I am working towards.

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

Intellectual Property in the Preliminary Specification Part I

One of the controversial areas, or maybe I should restate that. One of the more controversial areas in the Preliminary Specification is the manner that it deals with Intellectual Property. Intellectual Property is becoming a more important element of what and how an industry operates and that applies to oil and gas, the service and the service provider industries that are the targeted market of the Preliminary Specification. The manner that it deals with Intellectual Property is fully contrary to the manner that the oil and gas industry operates today. That is to say that it recognizes, promotes and markets the Intellectual Properties of others and respects them.

To compete in a technically diverse industry such as oil and gas. And to have that industry foster innovations from everywhere and at all times. Requires that the industry see that the IP that is generated within the industry respected by those that make up the marketplace. That has not always been the case in the oil and gas industry. There is an attitude that companies are better off not recognizing the IP and sponsoring competition based on the IP efforts of others. This strategy may have been successful at one time, however, I think it is questionable in today’s marketplace, and it will certainly be a failure in the future. It takes too much effort to develop on the behalf of the inventor to come up with anything new. That effort is not as easily replicable and cannot just be passed about its competitors. The industry, I think, is better off working with the inventor, developing their capabilities to achieve scale, and obtaining the benefits of the ideas in that manner.

By not recognizing the IP of the inventors in the industry for so long the oil and gas industry has created a larger problem for themselves. Companies and individuals with the ideas needed to move the industry forward see that their ideas won't be respected. That they will be just passed on to their competitors by their customers the oil and gas companies themselves. This has the effect of diminishing the number of startup and innovations within the industry. People know that they will not receive the benefits of their labor. And anyone who has gone through the efforts of developing some IP will tell you, it is amongst the most difficult business process to manage.

After all what are the competitive advantages of the innovative and profitable oil and gas producer. They are their oil and gas asset base, and their earth science and engineering capabilities. Contained within those capabilities are the abilities of their resources to use the abilities of the service industry to conduct field operations. They have to have the capabilities of others to do this work. That is significantly different than having the Intellectual Property necessary to do this work. For example, having the IP for the best drill bits will not provide the oil and gas producer with any competitive advantage over any other producer. However having the capability of knowing who has the best drill bits, where to get them and how to get them delivered provides great value. The oil and gas producer by sponsoring competing firms to “wash” the Intellectual Property of individuals and companies from one firm to another is a useless, time wasting activity with negative long term repercussions.

The Preliminary Specification recognizes and encourages the efforts of the inventors and those within the oil and gas industry with marketplaces for their ideas. A place where ideas can begin and find a market quickly. And a place where oil and gas producers can find new ideas that will help them to be more innovative.

Dealing with IP in the manner that the industry is today is counter to the way that society is moving. IP is becoming stronger and industry needs to deal with this fact. These changes implemented in the Preliminary Specification are therefore necessary for the innovative and profitable oil and gas producer to compete and prosper in the 21st century.

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

Shale Gas Reserves

Wikipedia lists Canada and the United States as holding 1,238 trillion cubic feet of estimated recoverable shale gas reserves. That is a fantastic number that is beyond recognition of anything that we are dealing with before. The volume of proven natural gas reserves is 386 trillion cubic feet. Current consumption of natural gas is 29.9 trillion cubic feet per year. Therefore there are approximately 41 years of reserves of natural gas at current production rates. Without shale gas, there would be 13 years of reserves at current production rates. One can certainly see why the natural gas prices are so low, however, the economics of supply and demand are not in line with the business needs. What this abundance requires is a new business model. One that considers how the industry will produce these reserves profitably.

It would be reasonable to assume that the shale revolution is not finished. As innovation occurs more reserves will be moved into the estimated recoverable and proven categories. Another area that sees an abundance of reserves in the United States is coal. The U.S. has the greatest coal reserves in the world. This is important as they offer a competitive alternative to natural gas in the $3.00 to $4.00 range. Natural gas has many other competitive advantages and should command a premium in the marketplace, making the industry realize its recommended price of $6.70 / mmbtu as a minimum.

$6.70 is a world away from the prices that are being realized by the producers today. And they are not something that companies are going to experience in the near future either. There are no plans or ideas in which to deal with the issues of the natural gas marketplace. More shale gas production is coming on stream everyday. Making the problem even more difficult.

Producers are structured to maintain their capabilities in terms of the administrative and accounting requirements of the firm. And those costs need to be covered by cash flow and that requires production. Otherwise the performance of the company looks top heavy with staff. Laying off staff only diminishes the capabilities that are otherwise necessary for the company to maintain irrespective of the production profile. Therefore companies within the industry continue to produce at capacity.

The alternative in the Preliminary Specification sees a few changes in the way that the industry operates. Instead of each company building individual silos of capabilities for administrative and accounting capabilities. The industry as a whole builds the capabilities for administration and accounting. This is done by moving the resources of the producer, outside of the C class executives, the earth science and engineering resources, some legal and support staff into service providers. These service providers are focused on individual processes and subprocesses that enable the service provider to use specialization and the division of labor to bring efficiencies and effectiveness to their customers, the Joint Operating Committees. By charging the Joint Operating Committees for the costs of these administrative tasks, the producer is enabled to shut-in production if commodity prices drop below the marginal cost. When production reaches the point where it becomes marginal and is shut-in. All of the administrative and accounting charges from the service providers cease for the period that the production is shut-in. Leaving only the costs of capital uncovered. This also removes the marginal production from the marketplace, putting an effective floor on the natural gas prices in the future.

Proceeding further into the 41 year life of the shale gas reserves. Without the ability to deal with the marginal production as prescribed in the Preliminary Specification is foolhardy. Producing gas is not an activity that we undertake as if we were in daycare. Its a business. And we need to approach this new era with a business model that will enables the industry to make the types of profits that recognize the risks associated with it.

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