Our Priority, the User Communities Development

It is our current number one priority at People, Ideas & Objects to be developing the user community. The user community is the third pillar of our offering to the innovative and profitable oil and gas producer. As we develop the user communities capabilities to provide the oil and gas industry with an alternative means of organization. We can then challenge the bureaucracy and its hold in the administration of the industry. We do this on the basis that there are significant issues unaddressed. Primarily the financial performance of the industry. Capital is being destroyed at a remarkable rate and there is no plan, no hope and no prayers to do anything about it. The bureaucracy are satisfied that they are in control and expect to remain unchallenged. Their interpretation of “earnings” is an example of the disrespect and slack approach they take to the business of the oil and gas business.

I’m confused, when a CFO or a CEO touts their earnings numbers in an investor meeting, do those numbers include a deduction for the costs that the producer incurred for overhead or depletion? Someone should ask that question directly because I think that in most cases the investors assume that the overheads are deducted, and in nine cases out of ten, the bureaucracy has not included the deduction for overhead when they are promoting their next big program. What they are selling is just the revenues less royalties less the operating costs. And that’s it. The overhead and the costs of capital are things that will be eventually accounted for in the Annual General Meeting that will spill all the bad news at once. And say “things didn't turn out like we expected them to.”

And these are the earnings of the industry according to the bureaucrats in power. What came into one pocket, and left the other pocket, leaves what's left, which is my profit. Why would an industry operate on such a basic level? Think about it for a minute. It makes things so easy. There is no hard work in an environment where all you have to do is count the money that’s left at the end of the day. No planning, no budgeting, no thinking about the things that you should do right. Its just what you have in hand at the end of the day. For a bureaucrat it is a great business.

Some investors have become wise to the ways that the industry has operated. They see the bars fill up at 4:15 each day and have stopped wondering where these people are coming from. The party is almost over and there will be a reckoning for those that participated in this charade. Or alternatively, I'll get even fewer invitations for lunch. At some point the industry will need to account for the actions of the past decade and the value that has been destroyed.

What needs to happen is for a proper accounting of the properties performance begin to be provided. That is the revenues less royalties less operations less the overhead costs, a return on investment, and depletion of the capital be accounted for. And in that way if there is no profit recorded questions can be asked as to why. Because there is no reason that the producer should be producing losses at this time. Particularly with the industry wide capabilities in the Preliminary Specification to make the natural gas prices what are necessary for profitable operations. This shrugging of shoulders and shaking of heads that “its not my fault that prices are this low” isn’t going to fly anymore now that a solution has been proposed. A solution has been proposed and the bureaucracy has done nothing to work with it to make it viable in the industry! How does that work when you go to ask for more money?

It will be the user community that provides the alternative to this charade. And its development is our priority at this time. Real profits are what make the industry operate for the short and the long term. And real profits are the hard thing that an industry has to do. That is why the bureaucracy has avoided the topic. Its the hard work and they are not accountable to anyone, so they have let the profitability slip. Therefore its time to hand the reigns of the administrative power over to someone new and that is the user community who are defined in their own vision.

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

Internal Use of the Work Order

The last time we took a short break was to discuss the Work Order of the Partnership Accounting module of the Preliminary Specification. Then we discussed the ability of like minded producers to participate in a much greater number of industry based research and study groups without the associated bureaucracy that they cause in today’s environment. There is another aspect of the Work Order, and that is the topic of discussion for today’s break from the conversation.

When we last discussed the Work Order we noted the capability of the Work Order to provide cost distribution to any working group that was formed. That would include producers that you had worked with before, and of course the producers and vendors that you may have not worked with in the past. The Work Order is unlike the AFE and Lease ID in that it is not dependent on an agreement in which to pull its working interest distribution from. It can therefore have any combination of participant distribution that it needs to have in order to accommodate the working group, and for the purposes of its internal use, the topic of today’s blog post.

One thing we didn't mention in our April 1, 2014 blog post was that the Work Order has an approval process similar to that of an AFE. And this is required for the internal needs as well. What the Work Order is used for internally is very simple. To control costs. With the producer firm stripped down to the C class executives, the earth science and engineering resources, some land, legal and support staff. Most of these people should be chargeable to the joint account, or in other words a Joint Operating Committee. However, not all of their time will be chargeable to one Joint Operating Committee and some of their time will be spent on internal work that is for the producers purposes only. These may have special charge codes that charge them to the various capital accounts of the firm. The method that the employee uses to charge their time to the various properties, overhead items or research and working groups is through the Work Order.

The next aspect of this process is the critical one. All of the employees time needs to be charged to a Work Order at all times. At no time during the day should the employee not have coded into their phone, their tablet or computer a Work Order number that is associated with the work that is being done. If there is a departmental meeting then everyone at that meeting should be charging the departmental charge code while they are there. It is in this way that the costs of every operation and task is detailed down to the minute. If you receive a call that is for a different Work Order, then you will be able to assign the time of that call, and that calls costs to the Work Order that you key in after the call. It is this level of cost control and identification that is necessary for the innovative and profitable oil and gas producer.

When we look at the financial statements of the producer we will be able to see the Revenues less Royalties and Operating Costs for their share of the field costs. In addition, with the People, Ideas & Objects use of the Work Order the capital accounts will have detailed entries into each of the properties for the types of overhead costs that were incurred primarily by the earth science and engineers. Their work is primarily of a capital nature and will be capitalized on the balance sheet. The administrative and accounting charges will be coming through from the service providers who are not on the payroll of the producer but are billing for their services, when the property is producing, and the producers share of these costs are showing up on the Income Statement as General & Administrative costs. As a result the accounting during the month will be extremely precise, will be highly specialized with advanced divisions of labor for efficiency and effectiveness. This is how the oil and gas industry needs to be operated in the 21st century. The bureaucracy wants to keep selling shale gas that barely covers the costs of operating. Its time for the user community to be given the chance to operate the industry, and show the investor that they can provide for the most profitable means of oil and gas operations.

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

The Rivers are Beginning to Flow

Its an ambitious task that we have set out for ourselves. Removing and replacing the bureaucracy from their comfortable position in the administration of the oil and gas industry. The problem is they won't leave and they're not doing their job. When the opportunity costs for a decade total $705 billion there is something fundamentally wrong with the way things are being done. Look at the natural gas business and you know what that is. They don't talk about it. They don't have a solution for it. And they just continue on like its blue skies and rainbows.

Throwing the bureaucracy down the river is our responsibility. We need to prepare ourselves in a manner that offers an alternative method of organization to the oil and gas producer. The problem is they just aren't leaving without a fight. So its a fight they'll get. I mentioned yesterday that we didn't need to consider any of their needs in the development of our solutions. Did Steve Jobs consider what the record stores wanted and needed when he developed iTunes and the iPod? No, and it will be the same with us. The way things are done today are constraints that do not affect us in any material way. When it comes time to design a process we can chose the clean sheet approach as the most efficient and effective method for the innovative and profitable oil and gas producer. This is not altruistic or idealistic thinking, its a practical approach to the opportunity that is before us.

Members of the user community have this opportunity to make the difference in the oil and gas industry. It is they who can take the Preliminary Specification and make it real. All of the processes and functions that operate within the oil and gas industry are within the domain of the Preliminary Specification. Making this a comprehensive solution that uses today’s technologies and today’s thinking as the starting point of the user communities solution. Is this possible? I see the Preliminary Specification and the user community developments as a more viable solution than continuation of the bureaucracy for the foreseeable future. We have discussed some possible outcomes of the bureaucracy through either their quitting or failing, there’s also the possibility that they just continue on without anyone asking if its working. The status quo, I feel, is becoming more difficult to maintain than starting with the developments that we are discussing here.

If its not us that takes the time and effort to remove the bureaucracy from its position in the industry, who will? And with what? Many industries have been disintermediated by technologies in the past decade. The Internet will do this eventually to every industry that exists today and that includes oil and gas. However, if we fail in this attempt now with the Preliminary Specification the bureaucracy will be relieved that it will be at least a decade before another opportunity will arise to remove them. For that is how long it will take to prepare another solution to get to the position that we are at today. I know it doesn't seem like much but the Preliminary Specification took ten years of research to put together. And that was on the basis of using the Joint Operating Committee.

There is an investment of time and effort in committing to this user community. Not a lot, but there is some. We need to be able to show the oil and gas investor that we have the overall capability in which to compete against the bureaucracy for their business. What that is and what that means, I don't exactly know. The rewards for doing so are down the road. For when we are able to meet their expectations then we can expect that the funding for these developments will begin. And the user communities budget is $333 - $667 million for the initial funding. The service providers, which are derivative of the user community, will be establishing businesses that provide the General & Administrative services to the oil and gas producers. The current General & Administrative expenses of the producers will then be diverted to the service providers as revenues for their services. The annual G&A expenses of the producers total $40 to 60 billion for the North American marketplace. A majority of those would then be diverted to the service providers. So there is substantial opportunity for those who see value in providing the producers with the most profitable means of oil and gas operations.

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

A Quick Summary of Where We're At

In the past week we discussed profits in oil and gas and the differences in how People, Ideas & Objects provides the most profitable means of oil and gas operations, and the current bureaucracies “plan” to calculate profits at the property level. The bureaucracies plan is designed to counter People, Ideas & Objects claims in the marketplace, theirs being a “bullshit baffles brains” strategy. We also discussed the difficulty they will have in calculating profits at the property level and suggested that the bureaucracy would not be doing any of the changes to make these calculations permanent. That they only needed to get through annual report season with an alleged “plan.”

When making changes to the industry methods of accounting required a process of getting everyone on the same page. A process that I referred to last week as herding cats. I also stated that I had given up on herding cats as a career choice but with so much change in the Preliminary Specification and decentralized production model. How could one believe that they could orchestrate so much change without the task of herding cats at some point?

The behavior that we see in the bureaucracy is consistent with the behavior that was apparent back in 2004. And it will be the same behavior that will be demonstrated in 2024 if we keep them in power. They are not going to give up to any alternative means of organizational method in the oil and gas industry by choice. The power that they have to administer the industry has to be taken away from them. That is the only way in which they are going to lose the capabilities that they currently enjoy. And that is why we are focused on the user communities development as an alternative means of organization for the oil and gas producer.

We are not waiting for someone to grant us the approval to begin our work. We are focused on providing the oil and gas producer with the most profitable means of oil and gas operations. Providing a choice to the oil and gas industry, a self interested bureaucracy without a plan, a hope or a prayer, or a user community focused on the producers most profitable means of oil and gas operations. That alternative is what we are preparing to the producer firm and oil and gas investor and comes in three pillars. The first is the Oracle Fusion Middleware and Applications as the technological base in which we operate. The second pillar is the overall vision captured in the Preliminary Specifications eleven modules, three marketplaces and two business models. The third pillar is this user community complete with their own vision of how they operate. This is the alternative that we offer the producer firm.

As time passes and the user community develops to offer a substantial alternative to the bureaucracy then we will be able to secure the funding necessary to build the software and support the user community. These costs are detailed in our budget. We will build our solution in the manner that it needs to be built to provide the oil and gas producer with the most profitable means of oil and gas operations. And that means that we will not be compromised in the way that we would by dealing with the bureaucracy and having to herd cats for a living. Ours will be a clean sheet operation where we start with the Preliminary Specification and build what is necessary and what we want from there. The bureaucracy doesn't want to deal with us and therefore we don't have to deal with them. This ultimately works in our favor.

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

The Bureaucracies New Plan

So that is the bureaucrats idea to fight People, Ideas & Objects Preliminary Specification, our user community and the service providers claim that we provide the most profitable means of oil and gas operations. To calculate profitability on a property basis. As we detailed here in the past few days they will spend the approximate equivalent of what it costs to develop the Preliminary Specification in order to complete their task of enabling themselves of this simple exercise. They were never structured to calculate net profits at the property level. Theirs is a corporate model focused on the compliance and governance of the corporate entity. Anything to do with the property or a Joint Operating Committee, you might as well talk about Mars.

And costly it will be. The first phase will be to have the industry agree to some changes in the way that overhead is dealt with. That is the elimination of the overhead allowances. Expect this to be the first kitten that enters the room. Next they'll have to agree amongst themselves that a change in the manner that overhead is handled will be adopted by the industry. Yet more kittens. The implication of which is that the operators will be offloading their working interest shares of the overhead that they have been carrying. By then the kittens have filled the room and grown to become cats. I’ve tried to herd cats before, particularly in the oil and gas industry. I swore I would never do it again. I’m sure that there will be more people that will swear that they've giving up herding cats, after trying to herd those cats.

What will be the purpose of the exercise? To better calculate profitability at the property level. And why are we doing that? We haven't done that in 60 years, why start now? At which time those that are doing this to counter the Preliminary Specifications claim that we provide the most profitable means of oil and gas operations have no response. Its political. An exercise of enormous effort. And when I say enormous, the cost and effort to do this is approximately equal to a ⅕ of the accounting effort that is currently done today. And its all to counter People, Ideas & Objects claims. It shows you how much of a threat to the installed base of the bureaucracy the Preliminary Specification is. They are wiped out. These people are fighting for their lives it's no wonder that they are making such desperate moves.

I forgot one important element of this whole conversation. It was what we discovered in our Preliminary Research Report of May 2004. That the changes that you make within your organization have to be made first and foremost in the software that you use. Otherwise the changes won't become the established process. So there’s that to consider as well. They'll need to develop the software for all of those systems that they use. That’ll take a lot of money. The problem is there isn’t just one system that a company uses that impacts the overhead. Usually they have several, essentially one for each process. And every time they want a change, the software vendor has their hand out. And they’ll no doubt ask why do they want these changes when some producers don’t?

Herding cats is such fun. But then again, it could be just politics as I said. None of these tasks will really be initiated. Its just a game of “bullshit baffles brains.” They could talk about this process, yet not do anything about it, and no one, that is no investor, the individual whose brains need to be baffled, will be able to discern whether it is truly ongoing in the industry or not. And there will be no shut-in gas to fix the price structure. And we'll continue on for another year of low, and maybe even lower natural gas prices and profitability in the North American oil and gas industry. But that’s one more year where the bureaucracy was firmly in control. And in a way, by saying they'll be calculating profits on properties, it’s almost like they have a plan.

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

Accuracy, Precision a.k.a. How We Do It

Yesterday we critiqued the manner in which industry will have to go about calculating profits for each property that they have. This is in response to the Preliminary Specifications claim that we provide the most profitable means of oil and gas operations. You'll notice that in yesterday’s discussion there was no mention of how the producer would produce profitable operations, just calculate them. Thier idea here isn't to actually make the radical changes necessary to be profitable, just to confuse people long enough that the bureaucrats can stay at the helm for a little while longer. The term I believe is “bullshit baffles brains” and it is in use in this instance. Calculating profits on individual properties is the initiative. Not providing the industry with the most profitable means of oil and gas operations.

Nonetheless as we pointed out the bureaucracies exercise will be costly and the results will be questionable in their accuracy. How is it then, that the Preliminary Specification would handle the accounting for overhead at the property level. What a good question, and I'm glad you asked! First there would be none of the fudge regarding whose costs the General & Administrative expenses you were incurring and reporting. When a service provider was sending an invoice to the Joint Operating Committee it will be for the 100% cost of administering their process at that property. At that point the invoice will be paid and the actual costs will be distributed to the individual producers who are working interest owners in the property. Exactly the same treatment that is done today for capital and operating costs would be handled for overhead costs in the Preliminary Specification. Therefore no costs of other producers overhead would be borne by other producers. And there would be no need for the ambiguous overhead allowances that are used today.

Therefore if the property requires an inordinate amount of effort to administer. Or if you carry a large percentage of the working interest share. Your overhead costs are going to be higher. The fact of the matter is under the Preliminary Specifications decentralized production model you will have the precise amount of your share of overhead recorded in the accounts that the property took to administer. The service providers are focused on the processes that they administer. The process of how the costs of the service providers administration is billed will be fully automated. So for example in the instance of the Production Accounting service provider, when a gas chart is read, that is noted in the task and transfer network, when production is captured in the field data capture network it is noted in the task and transfer network. And each unique task in the task and transfer network carries its own unique billing amount. So at the end of the month, the tasks and transfers are aggregated by the service provider to determine what the individual bills will be for the various Joint Operating Committees that produced that month. Then the individual invoices are sent out to each of the Joint Operating Committees.

This precision is being used throughout the service provider network. Again if there is no production from the Joint Operating Committee then there are no activities in the service providers task and transfer networks to create any billings to incur overheads for the month. It is in this way that a producer can shut-in 20% of their production and immediately see a commensurate 20% reduction in their overhead by using the decentralized production model of the Preliminary Specification. And actually improve their overall profitability. In yesterday’s example of a current system, if a producer reduced their production by 20% they would still incur 100% of their overhead for the foreseeable future. Only layoffs would make any changes to those values. If gas prices took six months to a year to respond to the removal of production from the market, the producer would be faced with the same problems that they are faced with today. Angry shareholders and the motivation to produce more.

It comes down to the breakthrough that we made in August of 2003 of using the Joint Operating Committee as the key organization construct of the innovative and profitable oil and gas producer. To not recognize it in your systems is to avoid the legal, financial, operational decision making, cultural, communication, innovation, and strategic framework of the industry. And as a result of not using the Joint Operating Committee you are forced into compromises that in the end make no sense, and do not provide any value to the oil and gas producer. Compromises that were made to accommodate situations that don't exist today. The Internet enables us to overcome these compromises, now we just have to overcome the bureaucracy.

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

Industry Catches the Religion

Running around as I have on this blog promoting the fact that we provide the oil and gas producer with the most profitable means of oil and gas operations. Quantifying that profitability at $705 billion in additional revenues for the North American marketplace for the decade beginning in 2009. The time when shale gas volumes created the collapse in natural gas prices. Accusing the bureaucracy of not have a plan to deal with these issues of the industry. And now with the decline in natural gas prices since the cold winter of 2013 - 2014, the bureaucracy not having a hope or a prayer either. You would expect a response from the bureaucrats to the claims that we are making. And now we have.

Going back to the breakthrough that I had in August of 2003. That being the use of the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. When we move the compliance and governance framework of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee we achieve a speed, innovativeness, accountability and profitability in our organizations not otherwise attainable.

The power of this idea is understated and unrealized by the bureaucracy. They use the corporate model and focus on the compliance and governance of the corporate entities requirements to the SEC, tax, royalty and regulatory bodies. Partners and Joint Operating Committees are things that don't exist in their systems. Those are responsibilities of other people.

Now the bureaucrats say they want to determine the profitability of their properties in order to determine which ones are the most profitable. Sounds to me like they want to copy our ideas again. Well why don't we just look it up in the general ledger? There is no information on the properties net profitability there. So now we have the admission that the industry doesn’t know if a property is profitable or not. What a ridiculous thing to say! Do they not employ accountants? It is at this point that I advise the oil and gas producers to cease and desist their pursuit of this path to counter my claims. Calculating net profits at the property level will only reveal your current systems inefficiencies and defects, be at great cost and with little accuracy. It will only get worse for them, much worse.

Well they could certainly determine the operational profits of the property couldn’t they? Yes, and that detail would be down to the well level in some cases. Certainly down to the property level in most. But that doesn't give the producer anywhere close to a reasonable picture of what the property produced in terms of profit. There is the issue of overhead. And there is a lot of overhead. And lets look at what happens to most of the overhead. Large portions of the overhead are capitalized and pooled along with the capital assets, such as wells and facilities. These are held on the balance sheets as assets and will be expensed as depletion or during a write down of the assets. The rest of the overhead sits in the General & Administrative category and is expensed in the current period.

Within the General & Administrative category is the costs associated with running the company during the year. These costs were the costs that were incurred in operating the properties on behalf of the Joint Operating Committees. Production, Revenue and Royalty Accounting etc. Therefore these overhead costs are the 100% costs necessary to administer the properties. They are offset by the token overhead allowances that the operator is able to charge the Joint Operating Committee in lieu of actual overhead costs. However the overhead allowances are rarely able to make a dent in the actual costs of the overhead incurred. The issue therefore is the ability to allocate the actual overhead costs to the properties in order to determine the profitability of the property. This is not done and is unknown. Some properties take more effort to administer than others. And others have smaller working interest shares imputing that you are carrying a larger portion of the partners share of these costs. That’s correct you are carrying the share of your partners General & Administrative costs. Overhead costs are grouped under General & Administrative and that’s it. No allocations or further accounting treatment at all.

The bureaucrats will find a way by hiring an army of accounting analysts complete with three levels of management to allocate the overhead. That will solve the problem. And then they will know, approximately, what the property produced in terms of profits. If this feels a bit wobbly in terms of the precise nature of the accounting that you were expecting from your producer firm. I would say talk to your auditor. On second thought they don’t understand the need to stay out of the fudge.

So yes the Emperor has no clothes. And the bureaucracy will spend, in aggregate, approximately what is necessary to build the Preliminary Specification to fix this. So from their point of view I may have just done them a big favor, especially with those three layers of management!

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

Specialization and the Division of Labor

We noted recently the ability of specialization and the division of labor to enhance the producers profitability. What we want to discuss in this post is how these tools will be applied during different phases of software development to enhance the profitability of the oil and gas industry. Access to the tools of specialization and the division of labor are provided through the use and application of the decentralized production model. By changing the prototypical footprint of the producer to the C class executives, the earth science and engineering resources, some land and legal, and support services. The remainder of the firms resources are permanently moved to service providers who are focused on a process or subprocess that uses the entire oil and gas industry as its client base.

Then as a result of having the process managed for the entire industry under one roof, the scope and scale of the service providers operation can deal with application of specialization and the division of labor in its optimal application. It will be the movement of the people from the producers to the service providers in the first phase of the developments of the Preliminary Specification that provides initial value to the producers. However there will be a secondary phase of equal or greater value that will be attainable in the second phase of development that will be undertaken once the Preliminary Specification is fully developed.

By this time the service providers, the user community and the People, Ideas & Objects developers will have become familiar with the manner in which the industry operates with their new software. And the service providers will have an understanding of the process they manage as to where the efficiencies and difficulties are. They will then be able to determine what is the optimal way in which to execute the process on behalf of industry, both in terms of costs and in terms of quality of service. Further iterations on the process can then be conducted from there.

This process of specialization and the division of labor has been limited in its value to the industry over the past number of decades. What a producer has had to achieve in terms of their administrative and accounting capabilities has been fixed and determined based on regulations and professional requirements. The scale of their data set in terms of preparing royalty calculations, for example, has been determined based on the number of properties the producer has, designating the number of accountants it needs. Each accountant conducting the same tasks for each property. There being no benefits that can be obtained from specialization and the division of labor due to the fact that these tools were not and could not be used. No matter the size of the producer firm.

In the future with the Preliminary Specification in place. The service provider will look at the process in a different manner. Understanding the same regulations and professional requirements are in place. They will have the computer power, the software development capabilities and software of People, Ideas & Objects, application of advanced scientific methods and the ideas, innovations, collaborations, creativity, research and resolution of issues of the people at that service provider to process the industries royalties each month. And the same will be the case at each of the service providers for the individual processes that they manage on behalf of the industry.

It will be in the second phase of development, after we have completed the Preliminary Specification. That we will be able to concentrate on developing software that focuses the service provider on the most efficient processes that the producer will see another bump up in their profitability. The first coming from the fact that the decentralized production model is in place, the second from the full use of 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. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Why Focus on Profits

We have been focusing on profits here at People, Ideas & Objects and making them the key focus of the user community and our service providers. Why is it that we are providing the oil and gas producers with the most profitable means of oil and gas operations. It is certainly a position that is counter to the culture of the industry. In that the industry operates on cash flow. Net earning do not hold much appeal to those that operate within the industry. Yet, as an investor, I am interested in investing my money in businesses that are proven to produce profitable operations. I have a broad choice of industries and businesses to choose from and oil and gas is but one of many that I assess on the same basis as the others.

Its a competitive investment marketplace for any oil and gas company to compete in. If a producer goes to an investor with performance showing the lack of profits for the last five years, they will receive a cool response. And the argument would be that you have to talk to someone who is familiar with the nuances of the oil and gas business. And in a cottage industry that is true. But when you compare the opportunity to invest in Apple, which is wildly profitable, oil and gas is a poor second cousin who can’t compete for the top tier investor.

The argument that would then be put up in defence of the producer would be that Apple will be subject to declines as a result of their innovative technologies running their course. And that is true, one day that will happen, just as the iPod is not what it once was. But for today they are very profitable with iPhones and iPads and they are earning money that they can then invest in their business to develop the next iteration, and the next innovation. This can be done without having to go to the investment community, or a bank to make those investments. They have the cash in hand, and a profitable business that drives those investments in future innovations and that keeps them in the marketplace that they choose to be in. Investors win by earning profits, upside on future innovations. All without the costs of having their investments diluted by adding new shareholders to finance basic investments.

What the oil and gas producers do in the current environment where they rely on cash flow is make themselves wholly dependent on others investment or banking practices to do the next deal. They have no discretionary capabilities in terms of how they will grow the business other than to go hat-in-hand to their benefactors or banks. This may have seemed like a reasonable business model when the business was in a development stage. However, as a primary industry with $3.5 trillion in revenues, to continue to operate it as a cottage industry is, I think, beneath the industries stature. Investors lose by not participating in a profitable industry, continually supporting their investments with more capital or watch their investments get diluted by further investments by others.

The focus on profits will provide the independence for the producer to pursue their optimal course, whatever that is. It might very well be a stand still strategy of not growing but maximize the profits from the assets that they have. The fact of the matter is that they will generate the resources necessary to open opportunities for the future, and also have the profitable operations as a secondary resource to depend on to keep that engine running. They won't have to go to the investors to ask for money or the banks, they will be able to operate with a certain level of independence. If you don't like shareholder activism, give them what they want, profits and earn a high level of independence from them. They'll be happy with the profits and the fact that they're interests are not being diluted by each years stock offering.

This is the reason the industry needs to adopt a model that focuses on profits. And only the Preliminary Specification with the decentralized production model can provide the industry with the most profitable means of oil and gas operations. First by making the industry a price maker, instead of a price taker. And then secondly through the expansion of the industries capabilities through specialization and the division of labor. I suggest we develop the People, Ideas & Objects Preliminary Specification and user community and provide the oil and gas industry with an alternative means of organization. Then we can begin generating some real profits.

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

Previous Failures to Learn From

In our last post we discussed the possibility of the bureaucracy failing or quitting in the oil and gas industry. In this post I want to discuss some of the failures that we have seen and relate them to the current situation and show where we are in terms of a potential failure and how dire the consequences can be. The two examples are of course the former Soviet Union and the great depression where government had to step in and take a more pronounced role in the economy.

Some readers may take offense to the comparison of the current situation to the former Soviet Union. We'll see. The collapse of the Soviet Union came about when production of everything fell into steep decline. The primary reason production was falling was that all of the workers were at the bakery waiting in line for bread. Which there was none, and had been of very limited supply because of the steep decline in production. A catch 22 of the highest order. Without anything to eat the country declined precipitously and rapidly. The simple solution would be to make more bread, which of course could not be done because of the dependence on the system that was breaking down.

In the oil and gas industry we have a similar situation today in that everyone produces natural gas, and oil, at capacity. As a result of oversupply, the prices have declined for the past five years to the point where capital is being destroyed on a wholesale basis. An industry that destroys capital is not fundamentally different than a society that is starving. The real tragedy in oil and gas today is that this destruction of capital would be considered news. At least in the former Soviet Union they knew they were starving. The simple solution is that everyone scales back their production by a small amount, say 15% in order to return prices to a normal threshold. This like baking bread is apparently impossible to do. And therefore the cannibalization of value in the industry continues.

The other example of the failure of the bureaucracy was during the great depression. Who knows what the cause of the depression was. Whether it was tight money or trade wars or both it is still argued today. The fact is that businesses large and small failed. And those that didn’t fail scaled back severely to conserve cash and survive. Management who were new to the scene, in that they had just taken the reigns of power from the merchants. Didn’t have a vested interest in the game at that time. And were quick to seek greener pastures elsewhere. Precipitating a further decline in the performance of the firms in which they left. With society experiencing homelessness and hunger, government became a new force in the economy and has been vigorously debated as to its purpose in doing so, since.

With the destruction in value in the oil and gas industry the bureaucracy are losing their incentives to keep at it. Losing value in the industry will eventually affect them and they will have little in the way to keep them from looking to greener pastures in the many other industries that exist today. They are not builders and they are not movers & shakers. They are able to maintain the status quo and keep things at an even keel. If things go wrong its not their fault and they usually move on as opposed to address the skeletons in their closet.

What will stop the destruction of value in the oil and gas industry today? It is the elimination of the attitudes of the CEO that after I pay all my bills and I still have cash left over, positive cash flow, and therefore I am successful. Earnings don’t enter into the mindset of anyone in the industry. That investors and banks only give out free money. That a write down of assets doesn’t affect my cash so that is not a bad thing. This attitude is laughable if it were only played out in a schoolyard. The fact that it is played out in the oil and gas industry is evidence of how serious this problem is and the sense of urgency that this user community should look towards building an alternative means of organization for the oil and gas industry.

Continued value destruction at the level that the industry is currently incurring in the North American marketplace is not sustainable. Yet this is not considered an issue by the bureaucracy. This continued value destruction may lead to failure or to the bureaucracy leaving the scene. What we can do is continue on in an oblivious manner to a systemic, generational, ingrained and illiterate understanding of how this business operates. Or begin developments of the Preliminary Specification and begin the process of building profits and value once again.

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

Brick by Brick, and Stick by Stick

People, Ideas & Objects have ambitious plans in terms of what we are setting out to do. Using Oracle Fusion Applications with the Preliminary Specification as a vision of what the industry could operate as, and the user community vision providing the means in which it would operate. How is it that this user community is going to develop, and particularly without the help or resources of the industry as it stands today? Well the long and short answer is I don't necessarily know. It hasn't been done before, and what we are setting out to do will have never even been tried before, anywhere. What I do know is that it will be built brick by brick and stick by stick over the next five years, and lead into the time we start the software developments in 2019. Thats the plan.

What I am finding is that there are not a lot of people in oil and gas that are using Twitter. That is both a good thing and a bad thing. I assume they are using Facebook as their social network and the majority of that use would be for personal reasons. For us to use Facebook would therefore interfere with the personal nature of that medium and by using Twitter we are establishing a purpose built network for the user communities needs. Therefore your first step should be to set up a Twitter account and Follow @piobiz as the beginning of this user communities development. Then we can have a means in which we can communicate with other members of the user community and the beginnings of the collaborations can begin. Don't expect too much at first, this is just the beginning, and we have a lot of work ahead.

Our objective is to establish the capabilities necessary to provide the oil and gas producers with the means of organization for the oil and gas industry. If the bureaucracy was to fail completely in the near future. Or if they just decided they had had enough and quit. Not something to take lightly, that has happened before. Then our capabilities would be something that the industry could turn too to provide a solution the industry found itself in. And in turn would find a group of like minded people committed to providing the oil and gas producer with the most profitable means of oil and gas operations. Complete with a technological base in Oracle, and a product vision in the Preliminary Specification. This is what I think it will take in order to make the change away from the current muddling along strategy and the mindless, self-centered bureaucracy.

The need for change in the oil and gas industry has been evident for many years. And it hasn't happened. Low natural gas prices are not even seen as an issue by the bureaucracy. They certainly have no plans to deal with any of the problems that the industry is facing. And technology is used in its most basic and elementary way. I have been an outcast for over ten years now since I published the idea of using the Joint Operating Committee as the key organizational construct of the innovative producer. Plenty of time for industry to have acted positively. But they never will as it eliminates the bureaucracy as its key side effect. That and we use the Internet which also reduces the demand for the bureaucracy. Two good reasons that the bureaucrats will never fund these developments. They will either fail, as a result of their inability to deal with the speed and complexity of the business, or they will quit through attrition, retirement or greener pastures. They are more dangerous than useful at this point in time.

And that is why we need to organize ourselves now. To ensure that the industry will be able to continue to function. This all sounds quite surreal and probably a bit on the crazy side of the scale. I however would prefer we had a solution available for the marketplace to pick up when the bureaucracy does decide to take that permanent vacation.

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

The Three Building Blocks

The power in which the industry is operated. That is who is running the show is currently held within the bureaucracy. That low pitched hum which is occasionally interrupted by the grinding of gears is the quiet droning on of our favorite people. If you want to make a change to the business model in which the industry operates? You'll have to talk to, well there is no one. And there is no way in which you can make any changes. It is what it is. You muddle along and hope for the best. The industry has always survived and will be around tomorrow, so just carry on. The problem is it isn’t working anymore. Now that may just be my biased opinion, but the industry has a problem with its profitability. And the bureaucracy has no answers.

What I have proposed is that we replace the bureaucracy and put in place the user community and People, Ideas & Objects. It will be this user community that will have the power to effect the changes to the business model that the industry operates on. What we have proposed is the Preliminary Specification and the decentralized production model as a start. The control of this business model will be in the hands of the user community. It is they who will have the power in the industry when the bureaucracy is removed from the landscape.

It is also the user community that the industry will turn to in order to have their changes made. They will be the ones to go to, unlike the bureaucracy who have no one. The user community will be able to take the industries input and effect the changes in the business model to accommodate the industries needs. That assumes of course that the industry and the specific producers participate in the user community. The user community is open to all within the industry, however, there are requirements of the participants.

The user community also has a budget. And not just any budget, a budget that is similar in its makeup to People, Ideas & Objects budget. Please review our Revenue Model for a better understanding as to the differences in our budgets makeup. In essence we are not blind sleepwalking agents of anyone who will feed us. The Revenue Model is based on the Intellectual Property of the Preliminary Specification which determines what is required in terms of software development, as dictated by the user community, and the user communities costs. It is those determining factors that set out the budget for both organizations and then determine what the fees will be for the producers to use the software. The software and user community that provides the producers with the most profitable means of oil and gas operations.

These three components make up the fundamental power that the user community has. Control of the business model, the key point of contact for changes, and their own budget based on its needs makes this user community not your grandfathers user community. With this power comes the associated responsibility of operating the industry. And providing the industry with the most profitable means of oil and gas operations. One day the bureaucracy will be gone. They will either fail or just give up. Either way the industry will be looking for an alternative means in which to operate. I am proposing that we organize ourselves on this basis.

We have at this time selected the Oracle Fusion Applications and the complete Oracle stack of technologies as the technological base for our solution. We have a product vision contained within the Preliminary Specification. And now we have this user community vision in which to build the user community to operate the industry upon. I think we are a formidable alternative to the bureaucracy. We need to organize ourselves to make this opportunity real. The industry, I think, is in desperate need of a solution and the bureaucracy has no plans, hopes or prayers.

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

Greater Science and Innovation With the Work Order

I am thinking that our focus has been on the user community development and the decentralized production model. And these are two worthy topics to be discussing at this time. However, there are many more attributes of the Preliminary Specification that we have not discussed for some time. I thought that from now on I would bring up a feature in the Preliminary Specification to remind people that there are many more attributes of the system. I'll do this from time to time and for no other reason than to broaden the conversation. Today I want to discuss the Work Order system.

The Work Order system seeks to resolve how the industry, and each producer can be more innovative. Collaboration on the sciences is a key to the establishment of new innovations as we learned from Professor Giovanni Dosi. The point is that new science leads to new innovations which leads to new science and so on. So how do we initiate more science and innovations in the industry and the producer firm. Collaboration and knowledge are two commodities that are low cost and effect a trajectory change in a dynamic and innovative industry. These are the things that we learned in our research of Professor Giovanni Dosi.

It used to be, and is not the case as much today. And needs to be the case tomorrow, on a wholesale basis, that working groups between producers were established to study, research, collaborate and experiment in the earth science and engineering disciplines. These study groups are founded by like minded producers who are interested in determining knowledge of a certain type and are willing to pay to learn of it. The costs of these working groups are small, usually in the tens of thousands or small hundreds of thousands of dollars. And shared across the groups of producers who are participating. Participation provides access to the knowledge when it is completed. As was indicated, for the oil and gas industry to become an innovative industry these working groups will have to become several orders of magnitude in terms of volume of what they are today. Participation between like minded producers is what makes them valuable. Both in lowering the costs, and increasing the diversity and quality of the population of participants.

One of the difficulties, and what People, Ideas & Objects asserts is the primary reason that these working groups current lack of use is. The bureaucratic difficulty in accounting and recording of costs for these working groups. Participation is not always straight forward as all participants are not always equal. Some can earn their way through contribution of some Intellectual Property, others through staff and resources and others through straight cash contributions. These working or study groups can take many months in which to complete so the accounting for them is conducted over a long period of time. Usually the direct participants are hounded by accounting more than they are participating in the working group. This constant barrage of questioning and administrative detail doesn't stop. And eventually affects the motivation of the participant in wanting to participate again in any other working groups. They may cherry pick a group here and there, but the needs of an innovative industry and producer requires that the number be an order of magnitude higher. We can all assume how that would be in terms of the accounting and administrative difficulties.

There has to be a better way. And that is what the People, Ideas & Objects Work Order provides. An interface that enables the participants to capture the structure of the deal within the interface as it is being agreed to. Then, with all the detail programmed into the Work Order the administrative details will operate within the People, Ideas & Objects Work Order as they should, without the bureaucratic nightmare they have in the past. As long as the detail of the deal has been captured properly, there should be no difference between planning and execution of the working groups administration. Accounting will be satisfied with the methods that are consistent with the plan and the earth science and engineering resources of the firm will be able to participate at the level necessary to move the industry and the producer forward.

Review of the Work Order in the Background section of the Preliminary Specification is here. And its part of the Partnership Accounting module if you would like to review that entire module.

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

Plans, Hopes and Prayers

What we have seen in the past few weeks is the absolute failure of the bureaucracies strategy of “hoping and praying for a cold winter.” We all know this has been their key point to building value in the industry for the past two years. And when we had the cold winter it certainly seemed like the need for the Preliminary Specification tanked with the temperature. Why would you need the Preliminary Specification when the natural gas prices had returned to the point where producers could earn a profit? Well you wouldn't necessarily, other than for the many other reasons it provides. But in terms of the decentralized production model the value of that model would be diminished in an environment where higher natural gas prices existed.

In January and February of 2014, all was well as the temperature of the continent was icy cold and forecast to continue. What the bureaucracy didn’t understand is that the prices are also determined by supply and a large part of the supply is from shale gas. And there is no end to the shale gas reserves. Certainly one winter is not going to affect the supply of shale gas reserves in the North American marketplace.

Now prices have reached a point where they were for the last five years on average. That’s surprising! So what has really happened here is that the bureaucracies strategy of hoping and praying for a cold winter is nothing but a pile of you know what. It is, and always was, bubble gum for the masses. They never really had a plan for how they are going to run the industry. They're just hoping and praying for things to get better. They haven't a clue.

I suspect that the natural gas marketplace is going to figure this out pretty soon. And when it does the floor on pricing is going to drop out from under our good friends the bureaucrats and leave them with a price that is truly jaw dropping. That’s what markets do to the unprepared. They punish them. Continued overproduction is a systemic problem that is in the bureaucrats DNA. They can not do anything about it. If they could, would they be hoping and praying for a cold winter?

Expect to see some grand strategy being formulated by the powers that be that will address the business model coming out of central command. Some industry wide initiative that is systems oriented to deal with the problem. And yes it will violate our copyright in some form. But its the only chance they have to baffle the brains of anyone who might still happen to be listening to them.

The fact of the matter is that natural gas prices are destined to stay well below their marginal costs until the industry puts in place a business model that can address the needs of shale gas. The Preliminary Specification with the decentralized production model does that. The other attribute of the model is that it eliminates the bureaucracy in the oil and gas industry. Which at this point is not just a good thing, its a great thing. This past season has shown they don't have a plan for how they'll manage the industry. Its now they don't even have a hope and a prayer.

Winston Churchill once said that you can always count on the Americans to do the right thing. That is after they had exhausted all the other possibilities. Now that they have no plans, hopes or prayers. Maybe they will do the right thing and build 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. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here. 

Putting the Cart Before the Horse

Its a difficult question to answer, why do we need to develop the user community before the industry will fund these developments? If there is so much value generated by the Preliminary Specification, why doesn't the industry just fund it? I understand the point of these questions and the logic is obvious. It seems that I am putting the cart before the horse in trying to have the user community developed before the industry funds the developments. I have to say its a bit of a Mexican standoff right now in that everyone sees the value, and everyone is expecting someone else to act. However with the scope of the undertaking, who decides?

And there’s the bureaucracy. If you read the Preliminary Specification the bureaucracy has been effectively dispatched to the trash heap of history. It wasn't a deliberate thing it just happened as a result of using the Joint Operating Committee and the effects of the Internet. They're just gone. No need for them. Yet they still effectively control the industry and are not stepping aside for anyone no matter what. And they don't care that they're losing money with their current business model. What is anybody going to do about it, they will state. And they have a point, there is nothing that anyone can do to challenge the bureaucracy, their control and their position in the oil and gas industry is secure.

We therefore have to organize ourselves to put ourselves in the position to offer the investors in the industry with a choice as to how they want to operate the oil and gas industry. The bureaucracy and its business model, or this user community and the Preliminary Specification. And then, when we can show that we have a solution that is committed to providing the oil and gas producer with the most profitable means of oil and gas operations, the bureaucracy will be swept aside and we will proceed with our solution. I don't see an alternative. This is the ultimatum that the bureaucracy has put forward to the investors in the industry. They have had plenty of opportunity to do the right thing and have chosen not to do it.

Even with so much value at stake they choose to do nothing. Natural gas prices were looking promising a month ago, and now it is evident that waiting for a cold winter as a strategy is a failure too. That won't matter. They'll continue on without doing anything. They may pick up some nonsense strategy to make themselves look good, and make it look like they're doing something but the real strategy will be to push a “bullshit baffles brains” strategy.

I know its a fair bit of work in order to organize ourselves for the ability to provide industry with an alternative means of organization. But this will have to be how it is done. In the traditional business world it doesn't maybe make a lot of sense. However, we are not dealing with a rational group when we are talking about the self interested bureaucracy.

The alternative is that we wait. And for what I don't know. The bureaucracy would like that. I have been fighting them on this for ten years now and they will not proceed with these developments on their own initiative. They will have to be physically removed. And that is in a nutshell what we are doing here by developing the user community now. Building an alternative means of organization for the oil and gas industry. We have the technological infrastructure in Oracle Fusion Applications. We have the overall vision in the Preliminary Specification. Now we need the third critical component, the user community to make this a viable alternative to the bureaucracy.

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

A Plan to Deal With a Possible Scenario

We have to guard against a scenario that might play out like this. And then, just as everything starts to pull together and the user community is developing the software that they want and need. The producers decide that the business model inherent in the Preliminary Specification is, on second thought, not something that they really want at this time. How many times have we been at that point in a major project only to have the funding pulled and all the work and effort of the people turns out to be for a lost cause. These disappointments happen frequently in business. Things happen and priorities do change and there is risk involved in every project.

I would hope that no one would be subject to any career risk in participation in the user community. That however is the naive part of me that doesn’t recognize the politics of major change initiatives. The reality is that the work that we will be doing here in the user community will be unique and of interest to those that can handle the risks that they take to their careers. We are changing the industry significantly, and for the better. One look at the user community vision and you can see that the power and authority that the community has will make the work exciting and rewarding. Risk is a part of that.

What I can do is assure you that once we commence the developments of the project we will complete them. And that is because we provide the oil and gas producers with the most profitable means of oil and gas operations. They can not attain that profitability without the user community, People, Ideas & Objects, the service providers and cloud computing infrastructure, “the sub-industry” becoming operational. Therefore it is in their best interests to continue to push forward until the completion of the project.

If there were small increments of value being attained by the business model then we would be subject to greater risks than we are. With shale gas, and the prolific nature of the resource, a new business model must be brought into the industry. And that is what this sub-industry is doing. It’s a big problem, the unprofitable nature of the natural gas business. It can’t be sustained. We as a community have a solution to the specific problem of shale gas profitability. But also to a variety of other operational, administrative and accounting related problems that have been present in the industry for years. The Preliminary Specification addresses many of the current issues and is a framework for resolving future problems.

We will have our setbacks and there will be times when progress is interrupted unnecessarily. Those situations happen. We are however making wholesale structural changes to the way that the industry is configured. This level of change will invite a few hiccups. What we need to do is look beyond the bureaucrats to see the movers and shakers in the oil and gas industry. It is these people that I am certain that we will resonate with. And as far as their concerned we will be moving far too slowly for their liking. They'll be wanting to operate that stripped down version of an oil and gas producer that is focused exclusively on their earth science and engineering capabilities, and land and asset bases as their competitive advantages. The administrative and accounting work being done for them out “there.”

The other aspect that members of the user community can be assured of is that there will be revenues for the user community and service providers. People, Ideas & Objects have $667 million in user community funds budgeted in the initial developments. And the service providers will have the current producers G&A expenses diverted to them as revenues. Currently in North America the producers spend $40 to 60 billion on G&A. Therefore a large portion of these funds would become the revenue streams of the service providers. With risk there is also reward.

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

A Sub-Industry

Our commitment to user community developments in our software is comprehensive. With the scope and scale of the Preliminary Specification it is necessary to have the user community define and design what it is they need and want in their oil and gas ERP systems. Not only do we provide the oil and gas producer with the most profitable means of oil and gas operations. We provide the user community with the software that they want and need. The only way to achieve that is to provide them with a sound vision of what a system could be. A vision such as what the Preliminary Specification provides, and let the users take it from there.

What People, Ideas & Objects provides the oil and gas industry and the user community with is the software development capabilities they need to achieve the objectives we have set out for them. Currently software development is an ad-hoc and cottage industry approach where either small software firms or employees of producers themselves stitch together applications of limited scope and scale. It is assumed that the employees of the producer firm will figure out the nuance of either integrating the applications with other applications, or shuttle data between the two applications in order to have the applications work together in the producer firm. This is how the bureaucracy likes to keep busy. Taking upwards of a dozen applications and making them all work as one.

Now many have criticized People, Ideas & Objects for having a scope and scale that is too large and will be impossible to manage. Of course many of these critics are the bureaucrats who are somehow stitching together the same scope and scale of application functionality out of dozens of applications with very limited budgets. Also under a cloud computing delivery infrastructure, which is what People, Ideas & Objects will be using, the centralization of all of the operations in one virtual location reduces the logistical difficulties of these tasks.

There is also the point that needs to be considered regarding the service providers and the software that they will be using. Much of the administration and accounting work of the producer firm will be done by these service providers on software provided by People, Ideas & Objects. These service providers will be derived from the user community and will work closely with them at all times. In fact service providers and the user community participants will for all intents and purposes be the same people. The software they use to process the oil and gas producers information will be purpose built by the user community to meet the needs of the service provider and the producer.

The point that I want to make here is that the user community, the service providers, People, Ideas & Objects developers, and our cloud computing platform all make up a sub-industry that is new and dedicated to the profitability of the oil and gas producer. This sub-industry is being created between the oil and gas industry and the traditional technology providers as a “gap filling” measure. What we know about specialization and the division of labor is that when a “gap” forms where someone can fill it with a new job, that is how specialization expands. This sub-industry is being created to fill the gap that exists between the oil and gas industry and the traditional technology providers. On the one hand we have the oil and gas producers as our clients and on the other hand we have Oracle as our supplier. We as a sub-industry have a fundamental understanding of oil and gas. We are trained in the disciplines of business. And we have a strong aptitude towards technology.

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

Business Model Transitions

What we can all agree on is that sixty years of shale gas reserves is an opportunity that the North American society can build significantly upon. Its too bad that the bureaucracy has its interests in front of all those in the oil and gas industry. But lets be honest they do need their paychecks, their pensions, their bonuses and stock options. Without those perks they just wouldn't show up. And that’s the threat that they keep over the investors in the business. Without the bureaucrats, you have no alternatives.

And that is why we are building the user community here at People, Ideas & Objects. To offer the investor community with an alternative means of organization to the oil and gas industry. The problem is we have no funding, and we have no support because the bureaucracy sees us as a threat to their franchise. That’s because we are a threat. There is no bureaucracy in the Preliminary Specification, it has been eliminated. So we are reduced to building the user community brick by brick, and stick by stick, the long and hard way. We are planning on doing this for the next five years. The time it will take to incur those additional $325 billion in opportunity costs to 2019. And then we will be able to begin the software developments. Surely by then some sanity will have overcome the industry and the loss of $705 billion by 2019 will have frustrated someone to act. Or we might have to wait until it hits a trillion dollars or more.

Either way we'll be ready with the user community that is focused on providing the oil and gas producer with the most profitable means of oil and gas operations. A fundamentally different business model. One that is a business. Not one that is a charity, which is a charitable way to describe how the oil and gas industry is operated today. We understand how the business grew to become what it is today. And we know why the business operates the way it does. That doesn't mean that the business has to stay that way. New business models are brought into industries all the time. If the old business model fails to build value, then replace it with one that does. It is a simple process of change and renewal that should be supported by all that are in the business.

The one cautionary note we raise in the Preamble to the Preliminary Specification is that we do stand on the shoulders of giants and we need to fully appreciate and understand this. Making changes at this point without fully understanding the consequences of our actions could be highly detrimental to the industry. It requires planning and in this day and age the software necessary to support any changes. Nothing will last unless the software exists to support the changes that we want. And that is the role that People, Ideas & Objects is taking in this business model transition. We have laid out the vision of what the industry would look like. People can see how that will work and how they will interact with it. And now we have to build the infrastructure, the software, that will enable those interactions to occur.

As important as the software is today, the software must be user community defined and supported. Having a group of developers in a room by themselves is useless. Its like having an engine mounted on a table. Without the users defining and designing the needs and wants of the systems, the developers will not know what is needed. And that is why we are so focused on the user communities development. And if it takes us the long hard slogging of the next five years, that is what it will take. If industry decides to join us now then we can do it much quicker. But that seems to be such a big “if.”

What we can do today is promise the industry that we will provide them with the most profitable means of oil and gas operations. We can prove it in the Preliminary Specification, and if we can prove it there we can prove it when the user community is developed and the software is operational.

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

#Shale Gas Dynamics

If we look at the nature of shale gas we understand why there is a need for a new business model in the oil and gas industry. One that moves the industry away from its role as a price taker to that of a price maker. Here is the U.S. Energy Information Administration's Natural Gas Weekly Update. There you can find a variety of information regarding the situation in natural gas. Of note are the natural gas inventories, and this winters drawdown was substantially greater than the five year average. In any market that would be a sign of significant changes in the marketplace. And a positive signal that suppliers should look forward to stronger pricing power. However in natural gas, it is necessary to look at the next graph which shows the shale gas production.

Since 2009 when shale gas production appears to be in the neighbourhood of 8 billion cubic feet (BCF) per day. It has grown to 32.5 BCF / day today. An increase of almost 25 BCF / day in a 5 year period. Total production for the U.S. is around 72 BCF per day. So that shale gas in a period of 5 years has grown to almost 45% of natural gas production. Remarkable. And that has been during a time period where the average price was $3.77. I would hate to think what producers could do if they were motivated.

At $3.77 no one made any money on this natural gas. We don't need a graph to tell us that. With the prolific nature of the resource, both in terms of the size of the reserves discovered and the deliverability, these natural gas reserves are exposed to the natural gas marketplace immediately. Causing the natural gas price to collapse, and as we noted recently, the pricing structure fundamentally changed from a 10:1 factor to a 23:1 factor in comparison to oil.

Producers are their own worst enemies. They drill wells and throw the production on the market with little thought to the consequences of their actions. Its not the bureaucrats fault that the price declines, “we are only a small part of the marketplace” they will state. And there it will stay producing irrespective of the financial losses that it incurs. Because it has too. They have all these people employed at the company and they need the cash to pay them. Otherwise they would be out of business.

They say that shale will be around for 60 years. This certainly looks like an interesting business to invest in. With the breakdown in the pricing model to 23:1, its obvious the marketplace believes the producers will never be able to regain control of the pricing situation to the point where they can reassert the old markets 10:1 dynamics. And the bureaucrats are providing evidence of that each and every day. Therefore shale will lose money every one of those sixty years.

What is needed is a business model that enables the producers to allocate production based on the profitability of the property. If the property can produce a profit at the current price it produces. And if it can't produce a profit then it doesn't produce, but should not create a financial loss on operations, saves those reserves for a day when they can be produced profitably and removes the excess production from the natural gas marketplace. And also reduces the overhead and administration costs incurred by that producer in line with the declines in revenue. People, Ideas & Objects does this with the decentralized production model. A business model based on the Joint Operating Committee that provides the oil and gas producer with the most profitable means of oil and gas operations.

By reducing the footprint size of an oil and gas producer to the C class executives, the earth science and engineering resources, land and legal, with some support staff. The producer is focused on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. The remainder of the resources of the producer are allocated to service providers who are focused on a process or subprocess and use the entire industry as their client base. Then these service providers are able to use their competitive advantages of specialization and the division of labor and provide their clients, the producers, with the services they need to be the most profitable oil and gas operations.

The charges for the service providers services will be charged directly to the Joint Operating Committee where the services are provided. Then if the property is shut-in due to the commodity price being too low to produce a profit, the events, activities or production does not trigger the service provider to conduct any of their services on the property for that month, and as a result no charges for any of the services will be charged to the Joint Operating Committee. Creating a null operation, no profit and no loss on the property. The reserves are held for a time when they can produce a profit, and the commodity marketplace has the higher cost production removed from the marketplace, placing a floor on the commodities price.

We have lost $380 billion in opportunity costs since 2009 as a result of not using the decentralized production model. The time when shale gas production began in significant volumes. We are potentially losing another $325 billion in the period up to 2019 by not using it now. The only people that are happy in the industry are the bureaucrats. And they are the ones that are holding People, Ideas & Objects software developments up. I say that an industry that can operate $705 billion more efficiently is something worth pursuing. But then I am biased.

I am biased because the industry can’t make this transition without having the software in place before any of the other changes are undertaken. We have to plan this next step with care and diligence and that is the role of the user community and the People, Ideas & Objects software development capabilities.

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