Oil and Gas Operations in the 21st Century

Last week we highlighted the ways in which People, Ideas & Objects would enable a successful oil and gas industry. One that was dynamic, innovative, profitable and successful. This is detailed in the Preliminary Specification and is what is required for the industry to move forward in the 21st century. Currently the bureaucracy provide no future other than the financial demise of the industry. Theirs is a form of operation that is consistent with how things were done in 1960 or 1935. The need for change is evident based on the earnings of the producers and the changes they have implemented to deal with their financial losses. And that is, they have done absolutely nothing. Sure they have cut their capital budgets, but as we are all learning that does little if nothing to deal with the issues at hand. It is 2015 and we offer a means in which to operate the industry up to 2040. That only seems to me to be a reasonable approach to the way we should be operating the industry.

Change of this scope, led by Information Technology, is occurring in every industry. In every industry the entrenched status quo is fighting to maintain their archaic ways of business. This is the situation in oil and gas. It won’t be the oil and gas producer, led by the bureaucracy, that stands up and says we need to adopt People, Ideas & Objects Preliminary Specification. They have fought long and hard to ensure that we don't see the light of day. What is needed is for those that will be the ultimate beneficiaries of the changes that are made when the system is implemented. And that is the oil and gas investor who are being abused by the bureaucracy as badly as we are. It might be wise to have the investor direct the producers to fund People, Ideas & Objects from their savings in the reductions of their capital budgets.

If we continue on in the manner that we have in the oil and gas business things are only going to get worse. And does it surprise anyone that there is no response from the bureaucrats? This summer its reasonable to assume that storage facilities for natural gas will reach capacity. What this will do to prices for the years to come is certain to be bad news. Recently I read that Canadian producers who were unhappy with the prices for their oil production were shifting to drilling natural gas targets. Bureaucracies are incapable of doing anything but meeting the prime directive. And that is, increase productive capacity and produce. After more than five years in the natural gas business their behavior should have changed. Clearly it hasn't, and it never will. Nor will it change on the oil production side of the business. Surely investors can see that the trend is there. In many ways the oil and gas industry is not a business. Its an engineering exercise.

Who can instill the business discipline that is necessary in the oil and gas business? Only those that are affected by it. There can be a strike by the investors and they can refuse to invest in the industry. This has essentially been happening since 2008, and still these problems exist. The bureaucrats found willing junk bond markets to fuel their needs. And now that that avenue is closed. The reduction in capital expenditures will enable them to continue on without less difficulty. However, you will see continued overproduction, and increases in production in both oil and gas in North America for at least ten more years. The only thing that will stop them is the end of the shale based reserves. Which in natural gas is 50 years. In oil its as little as 10. And that is the Saudi’s game plan. Let the shale based producers, their investors and junk bond holders suffer with losses and financial destruction for the 10 years that shale based oil exists in North America. And then they will have both market share and pricing power again.

Or maybe someone will come up with an idea that makes this nightmare go away. Provide the producers with commodity price making strategies like People, Ideas & Objects does. And we can skip the financial destruction that in my opinion is only really beginning.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

Will Be Off This Week

Returning Monday March 16, 2015.

How We'll Be Successful Part IV

People, Ideas & Objects capital structure also provides for its success. There is a long history of venture capital groups involvement in oil and gas ERP systems. And its not a beneficial one from the point of view of the venture capitalists. The number of oil and gas companies makes for a very small market. What the venture capitalists have learned is to avoid small markets as there is no way in which to leverage an investment without large volumes of sales. And that is the example that has been proven time and again in the oil and gas ERP software marketplace. The market is too small and the producers are able to “negotiate” with the ERP vendor to the point where the ERP vendor is selling their products well below cost. They are subsequently told to make it up on the next sale. Only to find the same movie playing.

We have skipped the venture capital chapters of the People, Ideas & Objects history book. I control 100% of the firm. We are structured much like a utility where the revenue stream that we earn from the producers has an element of profit included in the price. This way there is no confusion or conflict as to who’s money is who’s. The user community and software developers will be provided with the resources that they need for the budgeted year. Our costs to the producers will then be adjusted for the profits of the firm and the Intellectual Property royalties that are due.

It is in this way that I will be able to monetize the investment that I have made in People, Ideas & Objects and ensure that the priority of the user community remains the focus. If, in the traditional manner of monetizing an investment, I would have to sell the shares in order to achieve that. With the shares in other hands the decisions as to how People, Ideas & Objects capital structure and revenue flow could change. And the conflict between the shareholders and the user community, as a priority, may come into play. The oil and gas industry needs the user community to be the priority and that will be the case with the capital structure as is defined here.

These are academic ramblings that imply there is value in People, Ideas & Objects down the road. To define these points are important to determine what our priorities are when we are operational. And how we will in turn ensure that the user community, the service providers and the oil and gas producers are able to successfully build off of this initiative. We have spent the past year emphasizing the importance of, and focusing on the user community. This is the only manner in which the oil and gas producers are going to be able to deal with the issues and opportunities that are presented to them in the next 25 years. How we structure ourselves is an important element of how that is achieved and the success of all concerned.

It is also academic to state that I had the option of accepting venture capital funds. Nothing could be further from the truth. In my years of working on this project many have been approached, oddly enough just as many have said no. The scope and scale of what I was doing was beyond what they thought could be approached in a commercial environment. A diplomatic way of saying you're crazy. A classification, as you know, that I have come to appreciate. If I did take any of the money from the venture capital groups it would not have brought us any further towards our goal of building the Preliminary Specification. The need for the oil and gas investors to step up and direct their oil and gas producers to fund this project are clear. No one is going to do the job for them other than themselves. The bureaucrats are too conflicted. There is no money in it for anyone to invest in. And they have the benefit of the value proposition flowing from the producers bottom line onto their pocket book. Its really that simple. Besides what are you going to invest in today, another gas well?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

How We'll Be Successful Part III

One of the reasons that we will be successful is that we will enable the oil and gas industry to balance the short and long term perspectives of their business needs. This assumes that we are provided with a stable and consistent revenue stream in order to support the work that needs to be done. A criticism of the industry today, and it would apply to all industries, is that it is too focused on the short term and needs to balance this against its longer term needs. Selling today’s production for whatever it is worth would certainly fall into this category. With People, Ideas & Objects providing the dynamic, innovative, successful and profitable oil and gas producer with the most profitable means of oil and gas operations. We have provided the optimal short term perspective in which to operate. The need therefore is to continue to address the issues and opportunities of the business in order to ensure that when things change, the producers business model and mode of operation will change as well. With software taking such a key role in defining and supporting our organizations. This is a permanent software development capability that the oil and gas industry must support and financially commit too.

With our budgeted resource implementations of thousands of man years that are needed for the development of this software, and thousands of man years within the user community. This capability will have one source of funding in order to ensure it continues to provide this capability to the oil and gas industry. Through the licensing, that source of funding is from People, Ideas & Objects and that means our revenue stream has to be supplied consistently from the oil and gas producers. This software development infrastructure provides the means of which the industry will operate profitably. Currently the bureaucrats are determining its future by not funding it. We can not be subject to this type of thinking now, or in the future. Our value proposition is only valid if we are operating successfully in the marketplace. Any disruptions to our revenue stream will affect the realization of that value proposition by the oil and gas producers. But will also create permanent damage to the capabilities of the software development team, user community and elsewhere. A shortage of funds requires the stoppage of work. I am not of the opinion that this type of software development capability can have an on/off switch for the industry to use.

The type of destruction that would be caused would be the laying off of people who are working on long term projects that require a constant, determined and consistent application of their time. Those that are focused on the long term that are required to “wander through the woods” in order to determine the next decentralized production model or other innovation. Innovations that are necessary so that the oil and gas producers maintain their most profitable means of oil and gas operations. Alternatively we could implement extreme measures, as if there was a funding cut, prioritizing which expenses were cut first. And it would be in that instance that we could address higher priority areas such as the costs of the cloud computing infrastructure. The point is not to threaten, it is to emphasize the need for an approach to the development of this capability that is inconsistent with the current bureaucrats method of doing business.

This is not only counter to the methodology of the bureaucrats today. It is raising the point of how important software is in society. Since the meltdown of the Tech industry in 2000. People have generally disregarded Information Technologies importance overall. And that reflects the manner in which change is reflected in society. Change is always overestimated in the short term, and underestimated in the long term. We are now clearly in the long term orientation of the changes brought about by Information Technology. The need for industry to develop the requisite software development capabilities is a key part of People, Ideas & Objects value proposition. This capability needs to be funded and provided for in a secure manner so that the development of this capability meets its full potential. And what that full potential is probably can’t be measured in a traditional software development firm. It needs a new commitment from the sponsoring industry in order to ensure that it meets that potential successfully

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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.

How We'll Be Successful Part II

That blind spot of the bureaucrats should be coming into focus for those that are concerned about the health of the oil and gas industry. The blind spot being that the industry is failing and that a serious problem exists in terms of its profitability. Discussion in the industry is about the future, which is good, however it looks to the possibilities of what could be. How there will be a trillion dollars spent in infrastructure alone to expand the marketplace for oil and gas. That the U.S. can lead the world in terms of production of both oil and gas. No one stops to ask on whose dime though. Money grows on trees as there are no earnings in the producers to support these investments. So how will these investments be made? And what will be done about those losses that are systematic, critical and terminal? Its that bureaucratic blind spot regarding the state of profitability that is so disconcerting.

This disjointed behavior of the bureaucrats is the traditional “muddling along” operating procedure of the industry. There is no capacity to deal with the issues of the industry. And no desire to change that characteristic. That would require effort and work. The key to the oil and gas industry is to build production capacity and to produce. Let everything else take care of itself. In the past this was all that was possible in terms of operational capabilities in the industry. Things haven't changed as far as the bureaucrats are concerned. In the past there was no Information Technology capability that could do the things that we are proposing with the Preliminary Specification. However things are different today and the seriousness of the problem in the industry requires the industry to make the necessary changes before it collapses.

Recently we pointed out that we would be successful as a result of the user communities vision that we have put in place. That the users were enabled and empowered to make the changes to the software that will operate the industry. This is a necessary first step in order for the industry to lose the “muddle along” strategy and turn it into the dynamic, innovative and profitable industry that it can, should and needs to be. Otherwise we are beholden to the delusions of the bureaucrats who will continue to dream of how they will increase their production for the next decade.

Right now what we need is to organize ourselves to approach the next 25 years. In ways the bureaucrats are right, the future could be quite robust given the endowment of the oil and gas shale reserves. However, there are a lot of equity and debt holders that are looking at the industry with fear that the bureaucrats are so out of touch with the state of the business. If you think natural gas prices are bad today, wait until summer when they'll be far lower as a result of full storage capacity. Not even that will stop the production increases however. As we have indicated, the industry functions on an operating system that has no programmers and no system administrators. There is no one who can make any changes to the way things are being done.

Until the industry solves its profitability problems nothing will happen of significance in this industry. Why? Look at the reserve estimates of the oil and gas shale reserves. This overproduction will never stop until there is a means in which producers have the capability to shut-in unprofitable production. Such as the Preliminary Specification provides. Only then will the industry return to profitability and only then will the industry be able to source the capital and debt that is needed to build out the industry. And its a catch 22 type of problem. There won't be any capital for the producers to invest, yet the overproduction will continue nonetheless.

The point is that the industry has changed. The ways and means that it has to operate has to change as a result. We live in sophisticated times where Information Technology influences our organizations substantially. In order to make any change requires that we build the software to emulate the changes that we desire. Specifically for the reason that it is the software that runs our industries and companies today. However the bureaucrats are unable and unwilling to give up their franchise that is supported by this older software. Getting rid of the old software gets rid of the bureaucrats. That should really be considered a good thing if you think about it. Especially from a profitability and success point of view. And one in which we will be able to move forward with a dynamic, innovative and profitable oil and gas industry.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful 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. 

How We'll Be Successful

Standard operating procedure in the oil and gas business regarding technology providers is to issue a comprehensive Service Level Agreement (SLA) to define the parameters of the task at hand. This enables the bureaucracy to ensure that their needs are met in the project and that the deliverable from the technology provider meets their standard. In a comprehensive technology environment this is a reasonable approach to ensure that the purchaser of the technology is getting what they want. And in almost all instances the oil and gas bureaucrats, with their SLA’s, have been able to ensure that they get what they want from the technology providers. However as we indicated the other day. The industry is run by an operating system that has no programmers or system administrators to make any changes. And the industry is failing. So although the SLA’s have met their technical terms, the industry as a whole is a failure as we see with the inability to deal with oil or natural gas pricing, or any other issue that might arise. And here I am raising the bureaucrats “muddling along” strategy as its only mode of operation.

At People, Ideas & Objects we don't accept SLA’s. We don't believe in them and therefore don't accept them. If industry, a producer or an investor wants something contained within the systems that we develop. We provide the user community as the means in which they can have those requirements implemented, have those changes made, and operate in the software. This isn't something that can be defined down to a contract and implemented at one point in time. It is a constantly evolving capability. One where the input of the users, whoever they may be, have representation and input into the systems that they use. And as we indicated the other day. This is how the people will have the computers work for them. Not the manner in which computers currently have people working for them.

In terms of our success as an initiative in the oil and gas industry it won't be as simple as this change. The classic bureaucratic posture of issuing an SLA and therefore having the appropriate scalps to blame for any problems down the road is all part of the standard operating procedure. This blame someone else for not fulfilling the spirit of the SLA is an extension of the gotcha politics of the bureaucracy. To make the changes from a losing oil and gas industry where “its the other producers fault” for the problems. To one where everyone begins to see success in the industry as their responsibility. Will require everyone to approach the industry with a new mindset. Today’s mindset of accepting the failed state of the industry is wholly inadequate for the future.

This therefore is technically what needs to be done. The politics of making that change is also necessary in order to ensure that it happens. Key to facilitating this political change will therefore be the user community needing to be the focal point of the industry. This is fine to establish a committee and say they are responsible and make them authorized. The manner in which user representation has been handled in the past. But what they really need is the power to make these changes and ensure that the industry does become successful. And here is where the Intellectual Property comes into play. Through licensing the users within the user community, they are the ones with control over the Intellectual Property that makes up the Preliminary Specification and its derivative works. Our software developers will only look to the user community for its software development requirements. If the user communities vision of the industry requires that changes be made to enable x, then they will design x and implement x into the software through their own means, funded by People, Ideas & Objects. They are the ones who are powerful enough to make the changes and have them implemented. Therefore we won’t find ourselves in consecutive decades of producing chronic losses such as we are in the beginning stages of now.

That leaves the question “who are the users in the user community?” That’s a good question. And with the position that the bureaucrats are taking it will apparently not include any of the producers. Which of course if they did join the user community, that might be the key to their future success.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Computers Working For Us

There are many things about People, Ideas & Objects Preliminary Specification that the bureaucrats dislike. One of them is the way that we plan to implement the system when the time comes. Traditionally an ERP system is implemented in a controlled environment where the system has priorities over the needs of the users. When there is conflict between these two elements the systems requirements override the users needs. Very simple in theory and in practice. This enables the ERP system to be controlled and implemented in a manner that is consistent with the technological point of view that the system was developed under. This has become a science as opposed to an art and people have become familiar with the practice and know what to expect and how to behave in the process.

These failures in terms of implementation function throughout the industry and have provided the metaphorical cement that keeps producers from making any changes to the way that they operate. The structure and responsiveness of these producers are somewhat the same as a robot that has been programmed to conduct two tasks. Produce at capacity and increase capacity. Ask it to shut-in unprofitable production and it will just start smoking. There is no ability or capability within the organizations to do anything other than the prime directive. This was fine when oil and gas was scarce. Now with everyone booking 2 tcf annually of additional gas reserves the need for change is evident to everyone, and no one can make any change. The industry has an operating system where there are no programmers or system administrators to make the necessary changes to the program that operates the industry.

User based systems are the solution to this rigidity and inability to deal with the situation on the ground. By having the user define and build the software that identifies and supports the organization the people are instructing the computers what to do. Not the other way around. If a change is necessary in the business model of the profitable oil and gas producer then the users can implement that change and have the industry operating under that business model in short order. The People, Ideas & Objects software development capability, our user community and the service providers will be able to make these changes and improvements on a constant basis.

This is the capability that will exist within the industry from now until the end of time. That is as far as I'm concerned. People, Ideas & Objects are organized in our Revenue Model to generate revenues based on the changes to the system from the user community. We are oriented to change unlike the current systems that are oriented to a point in time installation. We have the user community as a permanent established resource available to make the changes to the software. Our users are the only people that our software developers will listen too. Our users are also the critical founding resources of the service providers who are the manner in which the producers have their administration and accounting provided to them. They are the ones who will know what is and isn’t working. What needs to change and how that change needs to be implemented. And as members of the user community they will be able to make those changes at any time in the future through the permanent software development capability provided by People, Ideas & Objects. That way oil and gas producers won’t find themselves working against their best interests for decades at a time.

Someone has programmed the industry in the fashion that it has. Its losing money and is failing spectacularly. And we the people are unable to do anything about this. I suggest a change where we organize ourselves in a manner where the computers work for us. After all it makes a lot more sense in the long run, doesn't it?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

What's In It For the Investor

We've seen the Information Technology industry have another good run lately. Particularly Apple with its ability to disintermediate industries and build value on the changes that they create. Recent talk of production of a car in 2020 is only the most recent news from the firm. I’m sure they won't be making the car, however the Chinese might be doing that for them. What they will do is figure out the software that better organizes the industry and brings value for their shareholders. Disintermediation, the same thing that we are doing here at People, Ideas & Objects to the oil and gas industry.

People, Ideas & Objects and myself will do well financially as a result of this disintermediation. The users and the service providers, who are essentially one in the same will also be doing fine as a result of these changes. Having control of their own destiny in terms of their service provider businesses. However the real winners are the investors who are willing to step up now and actively direct their producer firms to fund the development of the Preliminary Specification. Everybody but the bureaucracy wins.

In many ways this is the first opportunity for the investor class to participate in the Information Technology revolution. It is they who will be the ones who are the recipients of the earnings that the producers will be able to earn once the Preliminary Specifications decentralized production model is the business model that is used by the industry. Our value propositions present value is $5.7 trillion over the next 25 years. Those incremental revenues and subsequent earnings would flow to the investors if they had the foresight today to trigger the funding for People, Ideas & Objects Preliminary Specification.

Our system would also be used in an aggressive strategy of purchasing oil and gas assets from the soon to be bankrupt producer firms. As it seems that is where we need to be headed with the current bureaucracy. Having those newly acquired assets loaded onto the Preliminary Specification, and then in turn producing profits for their new owners. Changing what is a failing business asset into a jewel is how real money is made and that is the opportunity that is being presented here through our offering.

I was shocked to read in a Bloomberg article of the following losses being reported by some of the oil and gas investors. The article entitled “Biggest Winners and Losers of the Oil Price Crash.” Noted the following.

Oil losses and year over year profits for David Rubenstein’s Carlyle Group (down 65 percent; Rubenstein shown here), Leon Black’s Apollo (79 percent drop) and Henry Kravis’s KKR (down 94 percent). The private equity gang had invested heavily in the industry during the boom years. 

I’m afraid to say that I don't see things getting any better for these funds. The losses that are being realized by these investors are going to be recurring as the ability and capability of the current bureaucracy to change is non-existent. They will not, can not, absolutely will never change their business model. It is impossible for them to do so. It has been five years in the natural gas business and they are at record production and soon to be record inventories. In 1986, the last time they had oil price declines. They suffered through it with systemic losses for 15 years. Without any changes made to the business during either of these past two instances, what has changed and what will be the difference as a result of the current oil price declines? Nothing. A shifting of drilling targets and throughput will not make any material difference to any of the metrics of the industry. If anything it will only help to focus the producers on the task at hand. Increasing their daily deliverability.

Investors have one option to make the changes to their benefit in the oil and gas industry. And that is to fund People, Ideas & Objects Preliminary Specification and realize the value proposition from the decentralized production model.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

We're on Trend Here Too, Part II

As promised we have the McKinsey article that shows that People, Ideas & Objects is on trend in terms of the technological aspects that are occurring in the marketplace. Specifically the Preliminary Specification will see the movement of the administrative and accounting resources of the producers move from the producers themselves to the service providers. This will change the dynamic of the industry in fundamental ways. Making the administrative and accounting resources an industry wide capability that is variable based on production. What is also included in these resources is of course the IT resources of the producer firm. People, Ideas & Objects being a cloud computing solutions provider, these IT resources will also be handled by the service providers, which includes us. Additional IT resources will be held within the producer firm in order to manage the earth science and engineering applications. However, from an administration and accounting point of view these will be managed through People, Ideas & Objects, the user community and service providers.

To the McKinsey article. It seems like there is little love being dispersed to the IT people at most corporations today. The article speaks to a general dissatisfaction with the job that IT is doing in corporate America.

On the whole, executives’ current perceptions of IT performance are decidedly negative. Beyond providing basic services and managing infrastructure, just one-third or less of respondents say their IT functions are very or extremely effective at a wide range of tasks. Even within IT, the shares reporting effective performance are small (Exhibit 1). The results also indicate fading confidence in IT’s ability to support key business activities, such as driving growth. In the 2012 survey on business and tech­nology, 57 percent of executives said IT facilitated their companies’ ability to enter new markets. Now only 35 percent say IT facilitates market entry, and 41 percent report no effect.

From People, Ideas & Objects point of view IT is a critical element of a producers strategy. It is not enough to own the oil and gas assets, today you need to have access to the software that makes the oil and gas asset profitable. In a sophisticated world that we find ourselves in you can operate in the cave man style of hiring bureaucrats. Or you can employ software to identify and support advanced specialization and division of labor such as the Preliminary Specification does. This is the role of IT in an organization today.

What the bureaucrats are increasingly focused on is the upgrade to Windows 10 and the role out of a new network topology. IT hardware, software and services of the organization. In terms of implementing those components in a manner that will enhance the organization's profitability, there is no hope of them going beyond the Microsoft claims of the value of Windows 10 in your organization. What is increasingly disturbing is that the McKinsey article is saying that they need to involve themselves in strategy. And that they are also doing the job of supporting the technology poorly. McKinsey should be careful they may find more and more bureaucrats will be cancelling the subscription to their research.

What is needed is a new approach. The industry is failing. Chris Grisanti stated on Bloomberg that the last supply side pricing decline was 1986 and it was sustained for 15 years. I remember those days and it was not something that the industry wants to relive. If you think that producers will soon change their mode of operation check back in 15 years and see if they have. 15 years is what they went through with previous low oil prices without making any strategic or tactical changes. They are certainly well prepared to do it again. Who is going to stop them? Unless I'm mistaken and the sole purpose of the oil and gas business is to generate losses.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

We Are on Trend Here Too

I have two articles today that show that we are on trend in terms of the implementation of our technological infrastructure. The articles are from McKinsey and from Forbes. Both speak directly to the type of activity that we are applying here at People, Ideas & Objects to the oil and gas industry.

The first is the Forbes article which was published on January 27, 2015 and is quoting Mark Hurd who is the CEO of Oracle. As you are aware we are using Oracle as our infrastructure provider and recently made the decision to use their cloud based offering to support our development environment, and the hosting of our software to the oil and gas industry. Here is how they think the market will develop in the next few years.

He said that Cloud applications will account for 50 to 60 percent of the total enterprise application market within 5 to 6 years because of advantages related to speed of development of new functionality, easier implementations and much, much easier upgrades.

This is not a significant revelation to anyone and I think he might be underestimating the size of the marketplace changes in that short period of time. The important element of the discussion in the Forbes article comes later when he talks about the unique requirements of cloud computing and what kind of approach that requires companies to take.

Steve Miranda, the Executive VP of Development at Oracle, said that because of these advantages, “It is not a question of ‘if,’ it is a question of ‘when,’ all new applications (from all enterprise vendors) will be delivered in the Cloud.”

Miranda made the point that to fully leverage all the advantages inherent in the Cloud, applications need to be rebuilt from scratch rather than just hosting existing applications.  In particular, the Oracle applications were rebuilt to: first of all, support frequent updates, through the use of more metadata; and secondly, to reduce the need for customization by building out Platform as a Service (PaaS) capabilities that allow extensions to the SaaS-based Cloud applications to be built and thus allow for protected upgrades.

Industry and producers need to rewrite their applications in the coming years “from scratch” in order to realize the value of the coming new technologies. At least that is how I interpret those statements. And I agree with the statement. The current crop won't do for the future. What better way to do that application rewrite than with a value proposition who’s present value is in the $5.7 trillion range.

I like to keep these posts down to small bite sized format. Have each day with something tangible for my readers to digest. Therefore to add the McKinsey article here would violate that need. So I'll be putting that up in Part II tomorrow.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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 is Our Budget so Large

In a world where there’s a $3.99 app for that. It seems odd that People, Ideas & Objects needs such a large budget in order to build the Preliminary Specification. Why not just an app on a phone and be done with it. If that were the case you would have the choice of 3 or 4 apps to choose from already. The difficulty is in the level of change that we introduce into the industry. The impact of that change and how it affects the people that work within the industry. The wholesale changes that we are making to the producer firm and the industry. And the need for these changes to be made in order for industry to function profitably in the future. This requires the level of commitment in terms of the financial resources detailed in our budget. However, this commitment is supported by the value proposition that is realized once we make these changes.

The change dynamic that we introduce is that the Preliminary Specification identifies and supports the industry standard Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. When we do this within our system, everything within the industry is affected by this change. Not one element of the producer or the industry is unaffected by moving from the current corporate model to the Joint Operating Committee. It therefore invokes the need for a complete review of all aspects, the interactions and systems that are used by the producer firm, service and oil & gas industries. People, Ideas & Objects becomes an operating system for the industry. That is a very appropriate description of what the Preliminary Specification does.

At the same time we are only moving the compliance and governance frameworks of the hierarchy into alignment with the seven frameworks of the Joint Operating Committee. This is the paperwork that consumes the bureaucracies time and energy today. Once we have attained this alignment within the People, Ideas & Objects software the producer and the industry will realize a speed, innovativeness, accountability and profitability over the current situation. It is those frameworks of the Joint Operating Committee that are the foundation of the industry and it those frameworks that none of the current ERP systems identify or support. It is the result of our research that we were able to determine “what” and “how” a producer and industry would operate, that People, Ideas & Objects can bring you this offering. This is the cornerstone of our Intellectual Property and available only here.

Others may be able to determine other ways in which to organize the producer firm and the oil and gas industry. If so they can spend the time and energy that I have spent in developing People, Ideas & Objects Preliminary Specification. This multi-decade investment will pay off when the industry funds the initial development costs through Intellectual Property royalties to myself, and corporate profits for the firm. These are the costs of business in the 21st century. These Intellectual Property costs are also contrary to what the industry has been willing to pay for in the past. However, they have a choice, to continue on with their losing ways or realize the value proposition that we offer by funding our budget.

Therefore it is change on a wholesale level throughout the industry and Intellectual Property which are the real costs that make our budget the high cost that it is. There is nothing that can be done about either element of these budget categories and I'm sure it will cause much discussion and pain for the bureaucrats to ever have to fund this. In the mean time we can just keep score with the amount of money they are losing, the loss in their market capitalization and their loss of hope for the future. Its important to remember that bureaucracies never change. It is impossible for them to do so. That is why we are appealing to the oil and gas investor to direct their producers to fund People, Ideas & Objects so that they can remove the bureaucracy and replace it with the Preliminary Specification, our user community and service providers.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Some Issues Past and Present

Over the past number of weeks I have suggested that the volume of discussion regarding the profitability situation in oil and gas is rather poor. That there is very little in terms of the issue and certainly no one is discussing any solutions to the problem other than idling rigs. Which of course did a world of good and has ceased the decline in natural gas prices over the past five years. One thing you should note about this lack of discussion. Is that the bureaucracy has not offered any criticism of People, Ideas & Objects Preliminary Specification. You would think that a system that was unable to solve a problem or be unable to function would be riddled with holes from the criticisms of those that were challenged by that system. It would seem to me that there is no discussion as there is no criticism of the People, Ideas & Objects Preliminary Specification that they can offer. I wonder why that is?

One thing that can be stated for certain is that I have been at this for a long time. It’ll be 24 years in May 2015. Each of these years has been a great adventure. The turning point for me to start this firm was in May of 1991 I was doing an audit at Imperial Oil and suddenly I saw an opportunity that was so obvious, so possible and so complete that I had to take the chance to make that opportunity real. It really has been an attempt by myself to communicate that vision of what I saw in May of 1991 and make it real.

Another turning point came when I had to find a topic for my thesis for my MBA. Thinking that it would have to have something to do with this business I thought hard about what it was that was so different in that vision of 1991 that is different from today’s industry. And it was the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer. I therefore wrote my thesis on that basis and set up the hypothesis for a long term research project. If the Joint Operating Committee was the key organizational construct of the dynamic, innovative and profitable oil and gas producer. “What” would it look like, “how” would it function, and “how” and “what” would the industry operate? That was May 2004 and this research could be done in a couple of quick sprints and that would be that.

The final edited version of the Preliminary Specification was published on December 20, 2013. That was only eight years and seven months. So a quick sprint is the equivalent of four years and three and one half months. The key was we now had a product. One that solved the administrative, accounting and operational issues and opportunities of the industry now and for the future. One that provides the industry with a dynamic, innovative and profitable footing for its long term health, and for society and individuals too. What was personally so difficult was the work was hard. The hardest work I could have ever imagined. A million things didn't work. And what made it harder was the fact that I was run out of town when I published the May 2004 Preliminary Research Report which was my master’s thesis. This told the bureaucracy I was gunning for them and they fired the first of many shots from then on. So although I don't pretend to hide my dislike of the bureaucracy here, it is personal. This could have been a lot easier.

The bureaucrats might be concerned that I will quit my pursuit of this project. Why when we’re just a few quick sprints away from completion. Compared to the early days, life is just a breeze. There was so much missing in 1991, like the Internet and the Information Technologies that we are using now. Fully mature technologies that weren't even thought of back then. This vision from 1991 only became technically practical in the past five years or sooner! The issue for the bureaucrats is that the only impediment to our future is them. And we have overcome much larger difficulties in these past 24 years.

Nonetheless our friends the bureaucrats have destroyed the business so fundamentally it makes this work more valuable. Did I ever mention that we have a value proposition in the trillions of dollars. Run it yourself. Take the present value at current rates of an annuity of $350 billion and you come up with around $5.7 trillion that industry can earn by using the Preliminary Specification through to 2040. But don't tell the bureaucracy, that will only upset them.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Scaling Up and Down a Producers Productive Capabilities

There are few solutions being discussed in the oil and gas industry regarding the commodity prices. This week we have had a look at what the shale based reserves unique characteristics are. And spoke about the motivation of the producer to involve themselves in increasing their levels of shale based reserves. When shale based wells are drilled the producer is rewarded with substantial reserves to increase the value of their firm for their shareholders. The downside is the commodity markets continue to be flooded with more production that collapses the prices producers receive on those reserves. The motivation to increase their reserves will continue to persuade producers to keep drilling no matter what the commodity prices are. What is needed is a method of production allocation of those reserves to ensure that only those properties that can be produced profitably are put on production. That way commodity prices will find their marginal cost and lead to a healthier industry.

With People, Ideas & Objects Preliminary Specification high levels of drilling activity will be undertaken. When producers shut-in production they will have an inventory of shut-in properties in which to focus their innovative energies to bring their costs down, increase their underlying reserves or increase their production throughput. Then when they achieve one of those objectives they will be able to return the property to profitable production and increase their daily deliverability. This is how a producer needs to operate. And with the decentralized production model the producer will be profitable at any level of their capacity. Whether they are at 50%, 80% or 100% of their capacity, as long as they hold to the principle of only producing profitable properties they will have a profitable operation. Unlike today where at 100% capacity, all producers are creating massive, systemic and terminal losses with a business model that has ceased to function.

The People, Ideas & Objects Preliminary Specifications decentralized production model functions in a manner that is consistent with the characteristics of the shale based reserves. If shale exists in the marketplace, with its unique dynamics, a new business model must provide a means for the producers to use. The decentralized production model gives the producers this business model by reorganizing the producer firm and the industry resources in a way that enables the producer to operate profitably at less than 100% capacity. By reducing the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remaining and quite sizable administrative and accounting resources are reallocated to service providers who focus on one individual process and have the entire industry as their client base. They then bill for their services, based on activity, to the individual Joint Operating Committee. Making the administrative and accounting resources an industry wide capability that is a variable cost to each Joint Operating Committee.

As a producer operates their properties based on the profitability of the production. Those that are located in the shut-in inventory are not billed anything from the service providers for any administrative or accounting costs. Since those properties are idle they are not creating the work for the service providers and as a result, no work and no billing is generated for any of the service providers for that month the property is shut-in. The property will record a null operation, no profits but also no losses. Only the costs of capital involved in bringing the property from the shut-in inventory back into production will be incurred. This relieves the burden of what producers are doing today by producing at capacity. Producing profitable properties and unprofitable properties which wipe out the profits of the firm.

The ability to scale up and down the producers level of capacity at anytime based on the commodity prices is something that will be necessary for every producer to assess each month on each property. If the commodity prices are unable to support the property, then it should be shut-in the following month until either prices recover, or the property has some innovation that brings it back to profitability. And when we calculate the properties costs in the Preliminary Specification it will be the actual costs. Not an estimate based on what an analyst thinks the margin is in the general area of operations. It will be the actual revenues, less royalties, less operations and include the administrative and accounting costs. The full costs of the property in terms of what it costs to produce. A fundamental shift from what is done today. Ask a producer what the specific costs are for a property down to the actual administrative and accounting costs and you'll get a deer in the headlights kind of stare back. Not one producer anywhere in the industry can answer that question. And that is kind of sad, isn't it? I'm sure they'll respond to you saying that their administrative and accounting costs are not that significant. And you can ask them what the “total” G&A that was capitalized last year. Then that deer just can’t jump out of the way fast enough.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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 Don't Bureaucrats Do Something?

As an investor in the oil and gas industry. I would be concerned with the level of discussion occurring in the marketplace. That there is generally little to nothing being discussed anywhere regarding the business of oil and gas. There are a lot of talking heads that impart their understanding of what is going on. And it is clear from their recommendations and analysis that they have no clue how the oil and gas industry operates. They seem to be chirping what they heard some other analyst heard from another analyst. What is disappointing about this discussion from an investor point of view is that now is the time in which the bureaucrats have to be on their best behavior. Leading up to the annual report and annual general meeting season is the time when the investors do have some influence over the bureaucrats in terms of what is going to happen in the future. Once the annual general meeting is over. The bureaucrats can implement operating procedure number one and ignore anything from the outside. That is until about this time next year.

Since there is no discussion about the situation in oil and gas there is not going to be any changes made in the producer firms as a result of the losses that are being incurred from the low oil and gas prices. A continuation of the status quo will be the end result and maybe some wholesale layoffs will be announced just to make it look good for the historical record. A sad state of affairs in my opinion. What is needed is change in the business model of the producers or we'll see more of these losses and eventually, what I think will happen, the moving on of the bureaucracy to greener pasture in other industries, or wholesale volumes of retirements. When was the last time a bureaucrat stuck around to take a licken and push through the pain of the destruction they caused?

The effect that this leaves People, Ideas & Objects in terms of funding its budget is that it is “sol” for another year or more. The ability to foresee our project being pushed through by the bureaucracy doesn’t exist. It has to be done by someone with a vested interest. The investors are the only ones with that interest as they are being sacrificed in this environment. They are the ones whose heads are on the line. I don't expect them to put their own money into People, Ideas & Objects but to have them influence their producer firms to fund us. This can only happen when they have some influence over the bureaucracy. And that time is generally late January to late April. However there has to be a level of discussion ongoing in the marketplace about the scope of the problem and the need for a new solution before we can hope to be funded. And we are no where near that level of discussion that there is even an issue in the marketplace! Its a dead zone. Everybody must have so much money that no one ever has to care anymore.

Of course I've been in this situation before. And when the s*$% does hit the fan is when people turn to me and say “lets see what you've got.” Expecting me to roll a fully tested industry wide ERP system that is ready to go. I've made it clear that the budget needs to be funded. And that budget will go to the development of the system, user community and service providers. With the scope of that budget it is fair to impute that it will take some time in order to implement these plans and build these requirements. We do have several years of hard work ahead of us. Of course we all understand this. This is business. All businesses have budgets and plans and proceed on that basis. Businesses also have revenues to ensure that those plans are enabled. People, Ideas & Objects have never had the support of the bureaucrats. They see the end of their franchise in the Preliminary Specification, therefore we have never had revenues. So don't ask me what I’ve got expecting me to have much more than what is on display.

Then I'm sure we'll be funded in an appropriate time frame that provides us with the opportunity to solve the industry issues in a timely fashion. I'm just not certain that this is the year or the time. I could be wrong, but there doesn't seem to be anyone too worried about the state of affairs in the oil and gas business these days. Its like the bureaucrats don't care! Which is interesting don't you think? If the apocalypse does occur, they’ll just leave, but to do something productive to stop that from happening is beyond their scope of interest.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Record Production, Record Inventories Part II

The impressive nature of yesterday’s natural gas production from shale gas reserves showed the prolific capabilities of these formations. Growing from almost nothing to 55% of the U.S. natural gas production in less than a decade is impressive. Today’s graph is no less impressive. It shows the history of U.S. oil production and the impact that shale (tight oil) based oil production is having in the U.S. See any similarities? I frequently point out that People, Ideas & Objects should be considered in light of the fact that the industry needs a new business model in which to operate for the next quarter century. One that deals with today’s issues and opportunities. That includes the new technologies like the Internet to disintermediate the bureaucracy. I think however there is a compelling argument that there is a need to have control over the power of these shale based formations as the one priority of the industry for today. Here is the graph of oil production from econbrowser.com

It won’t take long for the oil production from shale to emulate yesterday’s graph of the natural gas side of the business. How many more years before the tight oil production is 55% of the productive capacity of the United States? Certainly we have seen producers reduce their capital expenditure programs, and the number of rigs that are being used is down. However, these are very blunt tools that have limited effect. It is safe to assume that the same tools were applied to the natural gas business in the past five years and still the productive capabilities of shale gas grew to 55% of the deliverability of the U.S. What is needed is a new business model. One that eliminates the bureaucracy. That allocates production based on the profitability of the property. And uses the Internet and Joint Operating Committee as the replacement organizing mechanisms to the bureaucrats.

The prolific nature of these formation exposed on a go forwards basis for the next 25 years, the lifetime of People, Ideas & Objects in its current form. Will provide for energy independence. However the destruction to the commodity markets will also bankrupt everything in sight. A need to incorporate a new business model into the industry should be obvious. This isn't being discussed by the bureaucrats. They only want to continue on in the same fashion as before, albeit with a smaller workload in terms of their capital expenditures. If they were to work on People, Ideas & Objects that would require significant effort on their behalf and only accelerate their retirement plans. All unnecessary and extreme in their opinion.

What we have seen in these last two blog posts is that shale brings a new dynamic to the industry. At the same time the search for shale is the real prize. Most producers who aggressively approach that side of the business can soon book 2 tcf of gas or more. The equivalent of the lottery. So although they may say they're reducing their capital expenditure programs, the search for larger reserve bases continues. That will never end and is a healthy market response. What is needed is a method of production allocation. The way the producers are organized, the high throughput production model, is incapable of dealing with anything other than production at capacity. What is required is a new model that enables production at any level of productive capacity based on the profitability of the production. Just as People, Ideas & Objects Preliminary Specifications decentralized production model does. Then and only then will the power of the shale reserves be of any value, and the industry can return to its “commercial” roots.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Record Production, Record Inventories

These attributes, record production and inventories, may not be fact at this time. Let there be no doubt in anyone’s mind that these are where we are heading in the North American marketplace. The destruction of the industry is unfortunately the net result of this abundance and there is nothing anyone can do to stop these bureaucracies from this destiny. If there was it would be reasonable to assume that it would have happened by this time. For five years the natural gas price has been depressed, collapsed or significantly below what anyone needs to make a profit. Yet the United States is now the largest natural gas producer. We have experienced seven months of depressed oil prices and the U.S. is the largest producer of oil. The fact that there are not record inventories is the result of plus or minus a week or two of production in storage of each commodity.

The nature of shale reserves brings a new dynamic to the oil and gas industry. One that demands a new business model is employed. One that allocates production amongst the producers based on reasonable and fair basis. A basis of production allocation that can be verified, and those producers that don't abide by the methodology can be disciplined by the marketplace. This production allocation methodology is contained within People, Ideas & Objects Preliminary Specification and we call it the decentralized production model. We will discuss that more later in this post. What I want to do is impress upon you the scope of the difficulties that are presented by the shale reserves and the need to allocate production.

The graph below is from the Energy Information Agency and is entitled the “Monthly dry shale gas production.” This is for the U.S. shale gas reservoirs and shows the history of the production from these reservoirs. We can see that in 2008 there was a little over 5 bcf per day of dry shale gas production in the U.S. And today there is almost 40 bcf per day of dry shale gas production. The U.S. produces around 72 bcf per day of natural gas. Shale therefore is making up approximately 55% of the U.S. supply in as little as six years.

In a decentralized industry where decisions are made based on the best interests of the producer. The ability to coordinate and allocate production between these producers does not exist, and will never exist in the current “high throughput production model” that the bureaucracy employs. No methodology will provide the means in which all producers will be satisfied with the decisions as to who is allowed to produce. Hence, what we end up with is every producer concerned with only their own production, and other producers are not their concern. This worked well when the resources were scarce. In an age of abundance like shale it leads to the destruction of the commodity market prices.

What People, Ideas & Objects Preliminary Specifications decentralized production model does is enable a methodology of production allocation based on the profitability of the oil or gas asset. If the property can be produced profitably based on the current commodity price, then it should be produced. If it can not produce a profit, it should be placed in the inventory of shut-in properties. Any producer that cheats, will be incurring losses and can be dealt with by the investment marketplace in a manner that is consistent with the losses that they are incurring. By removing the unprofitable production from the marketplace the commodity price will move towards its marginal cost. Then the industry will have a basis in which to make rational decisions in terms of its capital investments. The losses that would have been incurred in the current environment, which have to be added to the cost of the reserves, in order to calculate an adjusted cost base, will no longer have to be incurred in our proposed environment. The producer will either incur null operations on their shut-in properties or profits on their producing properties. With shut-in properties the producers will record higher levels of profits than with the unprofitable properties producing. And have higher revenues as a result of having higher overall commodity prices.

The decentralized production model does this by stripping down the prototypical producer to their C class executives, their earth science and engineering resources, some land, legal and support staff. The remainder of the administrative and support staff are reallocated to service providers who focus on one process and service the entire industry as their client base. Specialization and the division of labor will be the keys to the service providers profitability and competitive advantage. When a property is producing, the associated costs of administration and accounting will be billed by the service provider to the appropriate Joint Operating Committee. If the property is shut-in then the service providers charge isn't incurred as their is no activity at that property to create the administrative or accounting work. Therefore the property incurs a null operation, only the costs of capital are incurred during times when production is shut-in. It will be the service providers who will carry the administrative and accounting costs of the industry during any shut-in production activity. For the first time giving the producers real cost control over their administrative and accounting costs. On the other hand the service providers will know at any time that their annual revenues may be reduced by 10 - 15% and are able to budget for these possible revenue shortfalls in their annual budgets.

Looking at the graph above the first candidate to be shut-in would be the Marcellus properties. These are highly unprofitable and need to be stopped. Due to pipeline constraints in this area production receives sub $2.00 natural gas prices. If the 15 bcf / day Marcellus production were taken off the market, the natural gas price would be around $30.00 tomorrow. Something for the bureaucrats to think about. But don't expect it to happen, it makes too much sense and as hard as they try, they just aren't configured to do it. This decentralized production model works for both oil and gas and we'll look at the oil situation tomorrow. What we will also discuss is the extrapolation of these shale based properties productive capacity forward into the future. Anyone agree we need a new business model?

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

No Posting Today

In recognition of Alberta's Family Day holiday and President's day in the U.S.

Change Doesn't Happen That Way

To set out and deliberately construct the oil and gas industry in the vision of the Preliminary Specification is what is required to ensure its long term success. This type of change however, where we go about making wholesale changes to the structure of the industry, hasn't been done before. Usually changes are made gradually and organically as they’re required. I would argue that last point. Nothing really has changed in terms of the structured hierarchy since the 1920’s. As much as there have been reorganizations, the same general concepts are still in play. And we still rely on elements of that structure in some areas within the Preliminary Specification. However, the movement of the administrative and accounting functions from their development within each producer, building their own in house capabilities to a reliance on the industry wide capabilities of the service providers. And the recognition of the Joint Operating Committee as the key organizational construct of the dynamic, innovative and profitable oil and gas producer, are just two of the key changes in the Preliminary Specification. And they will need to be changed deliberately through the development of this software.

What we also do is recognize this new innovation called the Internet as a means to organize people. Dropping the bureaucracy from its role as the glue that holds organizations together is something that the Internet does much better. This type of change has taken place in many industries already. Steve Jobs of Apple did it with computers, music, telephones, entertainment and a few other industries. All of these changes were deliberate, with Information Technology, and many companies and people were displaced. To be replaced by new and innovative products and companies that grew to fill the void that those that could not understand the new dynamic.

Does the Preliminary Specification introduce a new dynamic to the oil and gas industry? According to our value proposition it does. When we can provide trillions of dollars in value to the industry then we are introducing a new dynamic. Our efforts have been to have this new dynamic, the decentralized production model, adopted in the industry since 2010. The time when natural gas prices collapsed. What is also clear is that this new dynamic is unable to be understood by the marketplace as the natural gas prices are almost at their lowest level of the past five years. And oil prices are now reflecting similar trajectories to the natural gas prices. Sometimes you can't teach an old dog new tricks.

Sometimes you have to put the old dog down. And its time we put this old bureaucracy down. If you have a yearning for its younger days when it performed well, like the 1960’s. Then there is nothing here for you. However if you are looking forward to 2040 and what we will do in the industry in the next 25 years. Shoot the hound and lets get on with the job at hand.

When that is out of the way we will finally be able to address the issues and opportunities that the oil and gas industry has in this next quarter century. The area of focus that I think we should be concerned about. To start, it would be wise to have an organizational structure that accurately replicates the culture of the industry and is consistent with the way in which it works. The Joint Operating Committee is the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. If we take the compliance and governance of the hierarchy and align it to the Joint Operating Committee we will achieve a speed, innovativeness, accountability and profitability for the next quarter of a century.

We will also have an administrative, accounting and operational framework that is dynamic and capable of dealing with the issues and opportunities that arise in the industry. So that when “things” happen in the industry we can respond to them and leave this strategy of muddling along with the dead dog bureaucrats.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

Gripping Again

As I had mentioned a few days ago. In a previous life I was an auditor. What I learned about myself in doing that job was that I was a professional gripper. This is a skill that I realized was of value and has provided me with insight throughout my career. Now I’m not a miserable person except when there are bureaucrats around. Usually I am positive and have an optimistic point of view. But then it starts, and I don't really notice it, I begin to gripe about something that is under my skin and only after a period of time do I realize that I have been gripping about something. What I have learned about this skill is that this is the time for me to pay attention. That something is needing my attention, that there is a problem that needs to be solved and its just below the surface. Something that is not readily obvious.

Now I have been gripping about the bureaucracy for many years in this blog. And that is not what I am talking about here today. I have been focused for the last couple of weeks specifically on the bureaucracy as there is something that is particularly concerning to me that has not been realized or expressed here before. And that is, where does this all lead? Lets assume for a minute that People, Ideas & Objects Preliminary Specification is not available in the marketplace. That the bureaucracy is the only alternative for the industry to proceed with the administration of the industry. If we also assume that we are at the beginnings of a failure of the industry in the next few years. One in which the producers can not stop the overproduction, and hence the losses. A given in my opinion and one that will play out in frustration over the next few years. One in which the bureaucrats will inevitably leave the administration of the industry to seek greener pastures in other industries. What happens to society if then the oil and gas industries capabilities are diminished to the point where they are unable to meet the needs of society.

We currently stand on the shoulders of giants, as the saying goes. To move from where we are to the next level of organizational capabilities is assumed to be a gradual transition towards it. The Preliminary Specification is very probably that next level and the gradual transition to it from where we are today is impossible. The level of change introduced is dramatic. Maybe our next transition has to be made in such a dramatic fashion as to leave the legacy constraints behind. It would appear to me that these legacy constraints are the ones responsible for keeping us in a holding pattern for the last number of years. Unable to break out of the status quo and expand on the capabilities that have been built before. For us to make the necessary changes to move to the next level of performance requires us to deliberately design and implement the next level of organizational performance. To assume that “spontaneous order” will generate new value from the sophisticated level that we currently enjoy is too far of a stretch for me to believe. One would assume “spontaneous order” would see producers shut-in unprofitable production when the commodity prices decline.

What is the cost of not making this deliberate act of change to the oil and gas industry. We can quantify the value proposition for the bureaucrats, investors and people within the industry. Who frankly believe that things will change in the behaviour of the producers and all will be ok again very soon. But what about the costs to society and individuals who depend on oil and gas for their daily needs. And what if their needs are disrupted as a result of a lack of oil or gas is made available to them due to a long term unprofitable, failing industry. People depend on energy for so many aspects of their life that they would be severely disrupted if energy was not provided to them in the manner that they were accustomed. Would the bureaucracy be held accountable for that? What if they weren't around?

I think this is the bigger issue that has been motivating my gripping in the past number of weeks. We have a job to do that is more than just what we do. We provide a product that is a significant contributor to the way that we live our lives. If we put that in jeopardy, which is what I am suggesting the bureaucracy is doing, then we are not doing our jobs.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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. 

"More" is the Calling of Bureaucrats and Drug Addicts

“I want you to slash your staff in half and double your productivity.” This is the type of thinking of the bureaucrat. More with less. Its that simple to run an oil and gas producer. When that is achieved do it again. “More” is the calling of bureaucrats and drug addicts. It all comes down to a simple matter of pushing your staff for “more.” You have a job to do, it has to get done and the number of staff you have is fixed. Last month they produced x, this month you need y, they'll just have to produce “more.” This is the life of a bureaucrat. Its all about the numbers that make up the domain of their existence in their business life. Outside of this there only exists future domains that one could seek to conquer. The planning and execution of this expansion will take many years and much effort to ensure that the opportunity is presented, until then we will have to produce “more.”

Whether you're in administration, accounting or the sciences the behaviours become the same. Stratifying people in layers has the effect of classifying them into their own class system. There are the people who get the things done, or the drones, the executives, the many layers of management and supervisors. Each respecting those above and belittling the ones below. These activities and formalities begin to take up a large part of the day when everyone has to recognize and administer this social class system.

In the future the tasks of the drones will be taken up by the computers. Alleviating the mind numbing work that has to be done by half of the staff. As a result this will free up all of the staff to do other things. The kind of work that will be done in the future will be fundamentally different than what is done today by the self interested, conflicted bureaucracies. The types of jobs we will be doing will be leadership, problem solving, acquiring and processing new information, being creative, collaboration, research, idea generation, design and planning. The kinds of work that are not suited for computers. This is how the industry will become dynamic and leave the muddling along strategy behind. This position of letting things work themselves out is incapable of dealing with the industry issues and opportunities. There is too much at stake. We need to take a proactive approach and that means we have to work to actively manage the industry.

In order to make this transition we have to deliberately go about making the change. Developing the systems that will do the types of processing that will offload the types of work that are being done now by half of the staff of the oil and gas producer. And unnecessarily so. So that people can get to the work that needs to be done to ensure that the industry provides the energy for the next century and provides it profitably. Just because we did things like this in 1950 doesn't mean that we have to do it like this in 2015, or 2040. The only way we will change is to do it deliberately, it won't happen with the current bureaucracy in place protecting its turf.

Whether we get the funding for the People, Ideas & Objects Preliminary Specification in the current downturn of oil and natural gas prices is questionable. The need to experience pain by the average oil and gas investor is apparently quite strong. We are taking the long term perspective of providing the solution for the next 25 years. When you place our solution in comparison to the bureaucracy for that length of time, it becomes more evident for the need for action. Therefore we have the short term call to action with the pain from the low commodity prices. And the obvious common sense of how you run an industry in 2040. When you consider the bureaucracy vs. the Internet that common sense falls into focus.

What is the bureaucracy offering? What I see is total failure. That however is just one mans opinion. I don't see anything positive being offered. In an era of disintermediation of all industries by the Internet I guess it's reasonable to assume that the oil and gas industries bureaucracy will survive throughout the 21st century and prosper! The difficult question remains as to how we make this transition so the bureaucracy is removed.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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.