The U.S. as Swing Producer

There has been some discussion that the United States has taken the role of swing producer away from Saudi Arabia. I happen to agree with this point of view and it is exactly this role that the U.S. should be taking in the world markets for oil and also the continental markets for natural gas. Shale has changed the dynamic of the business. It once used to be an industry based on the scarcity of the oil and gas resources. Now these resources, thanks completely to the shale formations, have changed the game to one in which there is an abundance of oil and gas. What should be clear to most within the industry is that oil and natural gas markets are being oversupplied by the producing shale reservoirs. What hasn't changed is the business model in which the industry and producers operate. The bureaucrats, who have a vested interest in the status quo will not, can not and won't change their business model to accommodate these realities.

Each day we are apprised of the difficulties that Uber or lyft, and AirBnb are faced with by the established taxi commissions and competitions for other innovative Information Technology products. When given a choice consumers use Uber, Lyft, AirBnb for the simplicity and convenience of the business model they employ. In Calgary for example Uber and Lyft are able to operate freely in the city. The only provision that city council has placed on them is that every ride must impose a minimum fee of $72.00. I am faced with similar, fill in your own expletive here, by the bureaucracy in the oil and gas industry. Our value proposition is valid and yet it doesn’t stimulate the types of movements in that calcified existence I call a bureaucracy.

So the U.S. is a swing producer. However the industry, run by the bureaucrats doesn’t operate it as a swing producer. A swing producer will remove production if the market is oversupplied. And will bring on new production if the market is in need of more supply. That is what a swing producer does. The bureaucrats only operate on the basis of the high throughput production model. Which is designed to operate at full capacity, at all times, in order to ensure that the high cost of the overhead are covered. Guess where the bureaucrats costs show up, in the overhead. So cutting production would force them to take a personal financial haircut in the manner that they are configured, and that is just not going to happen.

If the U.S. is going to successfully be deployed as the global swing producer it will need to be able to adjust its production volumes based on prices in the marketplace. The only manner in which to do this is to reorganize based on the Preliminary Specifications decentralized production model and price maker strategy. By doing so what will happen is that the prototypical producer will be reconfigured to contain the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remaining administrative and accounting resources are reallocated to service providers who are focused on one process or subprocess. They will have as their client base the entire oil and gas industry. Each month they will bill the individual Joint Operating Committees, not the producers themselves, for the work that they do within the Preliminary Specifications task and transfer network. If the property has no production for the month, nothing will be done by any of the service providers because nothing comes to them from the task and transfer network. Therefore no billing for any administrative or accounting overhead charges will be made to any property that is shut-in.

What we will therefore have achieved is to turn all of the producers costs into variable costs based on whether or not there was production that month. This will enable producers to focus on what properties they can produce at a profit based on the oil and gas prices that are available in the marketplace. This dynamic nature of the producers production profile, which is based purely on the decision to produce profitably, will also act as the U.S. swing producer status. Holding the rest of the world's oil production constant, the swing producer will increase or decrease their production based on whether the prices they can realize will produce profits. Its like its a business! Something that an oil and gas investor would be hard pressed to call the activities of the past few years. For if you look at it objectively, you are hard pressed to make out any logical reason for the activity of the North American based producers.

Technology is providing real value for industries of all types. People, Ideas & Objects Preliminary Specification enables the U.S. to become the swing producer. And that’s a good thing, but there is no way they are going to be able to exercise that market discipline with the current bureaucracy in place. People, Ideas & Objects needs our budget funded in order to undertake the development of the software, the development of the user community and the service providers in order to achieve this. It also won’t be an app that you can download to your smartphone. Understand that there is much work and difficulties for all concerned ahead and this will take time. So don't come to me and ask me what have I got. Oil and gas is a little more complex than operating a cab. What I have is the solution to the problem as described in the Preliminary Specification. And I own the copyright to that. No money, other than mine, has been put into this. So understand there is significant effort needed by all to make this happen.

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. 

And More Miscellaneous Items

Shell President comments

The President of Shell was on Bloomberg last week with Betty Lu to speak about some of the things that they were working on. He made an interesting comment about her comment that Shell’s production was actually lower ten out of the last twelve years. He stated, and I’m paraphrasing here. “That we are no longer necessarily concerned with our production volumes, as much as we are focused on the value that we provide.”

Bureaucrats should take note of this. Your days are going to be ending very soon. When presidents of major producers start talking in this fashion it might be time to start thinking about strapping that parachute on.

$44 billion in debt and equity financing in the first quarter

Bloomberg was also reporting that there were $44 billion in debt and equity financing in oil and gas in the first quarter of 2015. This shouldn't surprise anyone when you consider the length of time that the EU has been in negotiations with Greece. With no one being able to invest in Greece the stupid money has to go somewhere.

Bloomberg also noted that the proverbial shoe was about to drop on producers with the expiration of $90 hedging contracts. The producers apparently were able to get past their semiannual debt reviews with their banks because the hedges were still in play in the first half of the year. Now that they are expiring the “real pain” may begin to be felt by the industry. Which is probably the case as it was also noted that the rig count was up last week!

Oracle vs. Google

Last week saw the U.S. Supreme Court hand down their annual decisions. One decision that they didn't make was on Google’s appeal in the case of Oracle vs. Google. Google had lost an appeal by Oracle a few years ago which Google appealed to the Supreme Court. Since the Supreme Court won't look at it, and now with no further appeals, they will have to pay Oracle and settle the case.

This is a significant moment for software developers. Many, including Google, thought that the code they wrote was not necessarily subject to copyright provisions. That may be a simplification of Google’s claim. It is however, not a simplification of the way in which the Supreme Court obviously sees it. They feel that copyright does cover the software code and there is nothing in the case for them to see.

What Google did is they took the programming language Java, made some minor modifications to it, and called it Android. Now they have to pay Oracle for this abuse, the award was in the billions, and Google will have to license Java from Oracle. Good luck with that negotiation.

Stanford and MIT on avatars

One of the more controversial elements of the Preliminary Specification is the Marketplace Interface contained within our Petroleum Lease, Financial and Resource Marketplace modules. This enables people to collaborate through the use of avatars in a virtual world. It is noted in a Wall Street Journal article that Stanford and MIT are using the same technologies that we are to provide their business students with the ability to collaborate through the use of avatars.

All of these miscellaneous elements that I have noted in the past two days. Are providing our user community with the facts that People, Ideas & Objects, our user community and the service providers time has come. If we could have our budget funded we could begin the process of building the Preliminary Specification, the user community and service provides and build industry real value by providing the oil and gas producers with the most profitable means of oil and gas operations.

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. 

Some Miscellaneous Items

A Subdued Stampede

The Stampede in Calgary is as much of a corporate event as it is a tourist attraction. We welcome the tourists each year to what we call the “greatest outdoor show on earth.” And as a visitor, I can only assume they have a good time. The town transforms itself into one party city. I for one have looked upon Stampede as a time to let loose and enjoy the weather and the festivities. This tradition has been upheld throughout the city since the beginning of time. Well over the past 100 years, our big flood of a few years ago, gave it the appropriately named “come hell or high water” as the theme. That flood was the countries biggest natural disaster, happening one week before the big event, and it didn't slow this town down. Apparently this year we will witness what does slow the Stampede down.

Cancellation of corporate events is the name of the game in town. It would seem the oil and gas industry wants to send a message to the new government that they are not happy with their plans for a revised tax and royalty regime. Since when did the bureaucrats concern themselves about the business of the oil and gas business? Optics? It doesn't look good to be partying so hard when the people need to be told that their choice in government doesn’t sit with them. So instead of partying, everyone will be present at their desks for the entire Stampede. No corporate breakfasts or festivities. That'll send the message.

Its one thing to sit down and make representation about how the industry is having difficulties financially. To engage the government to advise them and educate them about the industry. The New Democrats are now running a $40 billion government with many of the cabinet ministers never being responsible for much more than their local communities budget. A little help and encouragement might have been the appropriate direction. Particularly their leader Rachel Notley is of fine pedigree and seems capable and approachable. These bureaucrats however have fallen into their classic pattern of attack and bully to make it as difficult for everyone, and the bureaucrats importance is the key and only issue.

These bureaucrats don't concern themselves with the business unless they can exercise some real public relations value out of the issue. By ramping down the Stampede festivities they attempt to destroy an annual tradition so that they can look good in the eyes of, well I don't know who will buy in to the BS, or who will give them credit for being prudent about the business. If they were really concerned about the business they would be focused on our $45.7 trillion value proposition over the next 25 years and how they can make that real. Not in punishing everyone during Stampede week.

The Cloud Paradigm

Amongst our distinct competitive advantages, the cloud provides us with much value over the traditional decentralized IT infrastructure. Today, each producer is tasked with the needs of developing, maintaining and operating their organization with the IT resources afforded by their budgets. This may have been easier in the past when the organization was less dependent on IT, and when the IT infrastructure was less robust and mature. Now with so much dependent on these technologies the ability and capability to have the skills, talent and resources housed within the producer organization are exceeding the budgets that are provided to these departments. None of this activity is within the domain of a producer's competitive advantage of their earth science and engineering capabilities, or land and asset base.

Maybe the best example of this is in the area of security. Where cyber security has become the issue of the day and is occupying many hours and days within a producer firm. Each producer is having to spend this time and effort to ensure the firm's data and resources remain secure. Each producer is undertaking the same tasks and activities to ensure their systems are safe. With the cloud, or more specifically with People, Ideas & Objects, producers will be able to rely on the efforts of our software developers, our user community and the service providers to provide this security. By aggregating the resources of the industry we are able to focus our budget on items such as cyber security and devote more resources to the issue than what a producer can. This centralization theme works most effectively in our key competitive advantage of providing the oil and gas industry with a software development capability for the long term. A capability that will enable changes to be made in the business model when and if they are required.

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. 

No Posting Today

In recognition of the U.S. Independence Day.

No Post Today

Sandwiched between two stat holidays seems like a good time take another day off. 

No Post Today

In recognition of the Canada Day Holiday.

You Thought I Was Bad

I frequently make the claim that our value proposition. Which is based on a comparison of our business model vs. the status quo bureaucracy. Provides the oil and gas industry with an additional $25.7 to $45.7 trillion in incremental value over the next 25 years. Some people may find this to be too much of a difference to be valid. I say look at the facts of how our value proposition is calculated, and the sorry state of affairs that the oil and gas industry is in. Then you will see that this value is available by implementing the Preliminary Specification in a timely manner.

Even my claims are now being out done by none other than the number one consulting firm in the world. McKinsey Consulting are claiming in an article that the Internet of Things (IoT) will generate $4 to $11 trillion in value by the year 2025. That’s annually! Which makes my $1.0  to $1.8 trillion per year look pretty small in comparison. Its good to have such prestigious company in the same nuthouse that I occupy. Here’s what they had to say.

The Internet of Things—sensors and actuators connected by networks to computing systems—has received enormous attention over the past five years. A new McKinsey Global Institute report, The Internet of Things: Mapping the value beyond the hype, attempts to determine exactly how IoT technology can create real economic value. Our central finding is that the hype may actually understate the full potential—but that capturing it will require an understanding of where real value can be created and a successful effort to address a set of systems issues, including interoperability.

To get a broader view of the IoT’s potential benefits and challenges across the global economy, we analyzed more than 150 use cases, ranging from people whose devices monitor health and wellness to manufacturers that utilize sensors to optimize the maintenance of equipment and protect the safety of workers. Our bottom-up analysis for the applications we size estimates that the IoT has a total potential economic impact of $3.9 trillion to $11.1 trillion a year by 2025. At the top end, that level of value—including the consumer surplus—would be equivalent to about 11 percent of the world economy.

McKinsey are on the same wave length that I am in terms of the impact that the Internet is going to have on the business community. They are applying their analysis to all industries to come up with their much larger number. However the reasons that the value are being generated are the same. They note.

The digitization of machines, vehicles, and other elements of the physical world is a powerful idea. Even at this early stage, the IoT is starting to have a real impact by changing how goods are made and distributed, how products are serviced and refined, and how doctors and patients manage health and wellness. But capturing the full potential of IoT applications will require innovation in technologies and business models, as well as investment in new capabilities and talent. With policy actions to encourage interoperability, ensure security, and protect privacy and property rights, the Internet of Things can begin to reach its full potential—especially if leaders truly embrace data-driven decision making.

A little background into our name. In the late 1990’s Professor Paul Romer then of Stanford University came up with what has come to be known as “New Growth Theory” how economies grow in the 21st century. It used to be that if you wanted to grow the economy you should invest in financial capital, transportation or communications. These investments had the effect of enabling further growth in the economy. This theory has waned as the economy has become more advanced. Therefore a new theory for growth was needed. In essence Professor Paul Romer of New York University “New Growth Theory” is that you invest in People, Ideas & Things. I thought it would be worthwhile to adopt this as the name of the company and only converted the “things” to “objects” as we are object based software developers. Clearly this also ties in with the Internet of Things being a large part of Professor Paul Romer’s new growth theory. McKinsey now seem to be on to this as well. Here is Professor Romer’s concluding remarks in the Library of Economics and Liberty.

Only a failure of imagination, the same one that leads the man on the street to suppose that everything has already been invented, leads us to believe that all of the relevant institutions have been designed and that all of the policy levers have been found. For social scientists, every bit as much as for physical scientists, there are vast regions to explore and wonderful surprises to discover.

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. 

Intellectual Property

There is nothing more important to the membership of the user community, People, Ideas & Objects, the service providers and of course myself than the topic of Intellectual Property. It is how we function and operate in the 21st century. Just as Jeff Immelt of General Electric states “that every industrial company will become a software company.” Every software company is an Intellectual Property company. Therefore we begin on the basis of that foundation as the key asset of People, Ideas & Objects. A license agreement between the firm and myself granting the firm certain rights and privileges in terms of the development of my Intellectual Property. I am the rightful owner of the copyright of the Preliminary Specification, this blog and many publications that came before it. Most particularly the May 2004 “Plurality should not be assumed without necessity” that determined the Joint Operating Committee is the key organizational construct of the dynamic, innovative and profitable oil and gas producer. It is these works that make up the Preliminary Specification and how the industry, producers, the user community, service providers and the service industry participants would operate in a dynamic, innovative and profitable manner.

It is through the strength of this Intellectual Property that I will be able to raise the budget for our software developments and the user community. These funds will then be used to build the derivative works of software and other information from the current Intellectual Property. This will be done by the software developers and user community participants who will be paid from our budget. It is their knowledge, information, skills and Intellectual Property that we are purchasing from them to form a unified and consistent base of Intellectual Property. This base will be used on an annual basis to raise the funds necessary to support the software development and user community on an ongoing basis.

Under the terms of the license that I have provided People, Ideas & Objects, all derivative works from the Intellectual Property, in terms of ownership flow back to me. People, Ideas & Objects only hold a commercial license. The user community and our software developers will be granted individual licenses from People, Ideas & Objects that enable them to prepare derivative works from the Intellectual Property. And they will release their ownership of those prepared works back, through the People, Ideas & Objects license, to me, where through all of the licenses they remain available to all of the members of the user community and our software developers to use and prepare derivative works from. If we did not do this we would end up with a situation where the Intellectual Property would be scattered across the industry and producers would be subject to numerous cross licensing requirements and multiple royalty payments to multiple owners of the Intellectual Property. By keeping the Intellectual Property together under ones ownership control these issues are rectified and we are able to build off the value generated by everyone. In the 21st century, I believe your work will require you to own some Intellectual Property, or to have a license to some Intellectual Property, or to be employed by someone who does in order to make a living. Without access to Intellectual Property you will not have the tools to earn a living in the future.

The service providers are comprised of the user community participants who are the principals who make up the service provider firm's that will be established to form this sub-industry. These service providers will also be licensed by People, Ideas & Objects in order to access the software they will use to provide the oil and gas producers with the services and software they will need to operate their businesses.

There have been many attempts by the bureaucrats to breach my Intellectual Property. On each occasion they were discovered and ultimately refuted. And each time that there was an attempt foiled it only made my Intellectual Property stronger. Now it stands alone and is the solution that is necessary for the oil and gas industry to get back on track to profitability. We will probably fool around and waste more time at the expense of the industry. But one thing I can assure the bureaucrats, I have only begun to fight to make this real.

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. 

The False Narrative

I made the comment the other day that there has been a false narrative about the industry and its operations. That this narrative was being discussed in the press these past six months and I have noticed and been monitoring it. It may very well have been going on for much longer. These are some of the statements that I have noticed being made that seem to me to be self-serving and colorful.

Shale costs have been coming down from innovations and improvements in drilling. 

This little nugget holds one falsehood and one truth. The truth is evident from the falsehood. Once you have expended the costs in drilling a shale well, and have paid for these expenses they are assets under the current methodology. How then would these costs come down? Unless you never recognize the asset costs in your calculations. Then the fact that it used to cost $90 to produce shale and now only costs $55 shows that they only include the costs of operations and royalties, not capital or overhead.

The innovation and dynamic nature of the industry has production being shut-in and resumed on a constant basis, based on price. 

Not quite. You need the decentralized production model in order to do that. What the producers have today is the high throughput production model which demands full production to cover the costs of overhead. Most specifically the bureaucrats paycheck. Nothing has ever been shut-in due to the price being low, anywhere. The natural gas marketplace is all the evidence that is necessary to prove this falsehood. Shale gas has gone from 10 BCF a day in 2010 to about 42 BCF per day today. Remember the high throughput production model. This is not a dynamic industry. The Preliminary Specification wants to make it a dynamic industry and the bureaucrats in their desire to make what they are doing look good next to the Preliminary Specification will say anything.

We can make money at $55.00.

In many ways this is the same argument as the first falsehood listed here. There is a culture that is so ingrained within the industry that capital assets are sunk costs and they are not considered in current calculations. And therefore they never are. You can’t play the shell game unless everyone follows the same rules. And for oil and gas the rule is, don't mention the costs of the assets. And why would you, they never show up on the income statement anyway.

We are now one or two quarters away from the longest decline in oil prices ever. 

a.k.a. hold on a little longer, all will be well soon. Those that don't follow history are bound to repeat it. This is inconsistent with the history that I personally recall the industry having to experience. It’s also inconsistent with the time that the industry has experienced in terms of natural gas pricing. It’s been five years since the big declines started and they don't seem to want to stop. If you want to know what the future of the oil price is, look at natural gas prices. The fact that the bureaucrats are over producing and using the industry for their own personal gain is a common theme that I have been suggesting here.

Crickets

Those being the solutions, and the discussions of any difficulties or problems that the industry is currently faced with. Nothing, not a word. I can't remember the last time things were so peachy. I think the bureaucrats should give themselves a mid year bonus for managing the industry so well.

Big Data

I’m on record as stating that anyone that tries to sell you a big data solution should have you sprinting in the opposite direction. They are selling you technology you don't need and have no idea what your business involves. If big data is the solution to the shale problem, which I have heard specifically, that only means they will have a real solution in a few decades.

Buy Oil Stocks

All the pain has been experienced in the oils so far. You need to buy these companies while they're still cheap. I don’t give stock advice, but this seems to be irrational.

Lift the export ban

This is what Harold Hamm Chairman and CEO of Continental Resources said in the Wall Street Journal.

If America’s interest is stability of supply, peace and prosperity, then our current policy doesn’t work. There isn't a more urgent issue affecting the future of our nation and the world than lifting the ban on U.S. oil exports.

Lifting the export ban may help in bringing the differential to Brent Crude prices down. However, refiners are free to export refined products. Trading refined products exports for crude exports seems like a bad business idea to me. Refiners generate value do they not? And it's just one big market is it not? If the crude is exported it still counts in the same 93 million barrels of oil produced every day.

The only discussion and solutions to the overproduction and unprofitability of the producers is what you'll read here in this blog. People need to focus on the primary areas of this industry before it’s too late to do anything about these issues.

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.

Choice is a Good Thing

The choice that we provide the oil and gas industry could not be greater. On the one hand you have the status quo bureaucracy who are unable and unwilling to address any of the present or future issues within the industry. They are at the same time leaving any future business opportunities to whither on the vine. An industry where the overproduction and lack of profitability will lead to both future capacity and capability issues. With the Preliminary Specification you have the opposite. A prospective method and business model of how the industry could operate in the 21st century. A system, software development capability, user community and service providers who are focused on the dynamic, innovative and profitable oil and gas producer.

I suggested in my post before taking any time off that maybe the Preliminary Specification was too radical or too extensive of surgery to undertake by the industry. When you're tired and you need a rest you might say some things that you'll later regret. The Preliminary Specification is radical and extensive surgery for the industry to undertake. And it is the right treatment to cure what ails it. Nothing less is what the patient needs in order to heal and prosper in the 21st century. Does anyone believe that the bureaucracy has the legs to carry us much further?

The differences between this choice are significant. As a result of the differences, our value proposition is in the trillions of dollars. The present value of the incremental profits over the next 25 years are calculated to be $5.7 trillion. As a result of our ability to enable the producer price making strategy and the way that assets are capitalized. Capital is included in our pricing calculations. And as a result investors will see their capital returned to them over the next 25 years. So if the amount of capital is $20 or $40 trillion that needs to be spent to meet the consumer demands. It will be $20 or $40 trillion that will be returned to the investors with their profits. This is our value proposition. Depending on the amount being spent in capital expenditures in the next 25 years. We will provide incremental value of $25.7 to $45.7 trillion to the investors in this industry.

The primary way in which we do this is through the decentralized production model. Turning the oil and gas producer into a price maker and leaving the price taker strategy behind. By stripping down the prototypical producer to the C class executives, the earth science and engineering resources, some land and legal, and support staff. The remainder of the firm's resources are reallocated to service providers who are focused on one administrative or accounting process, or subprocess and will use the entire industry as their client base. It will be the producers who focus on their competitive advantages of their earth science and engineering capabilities, and their land and asset base. The service providers will focus on their key competitive advantages of specialization, the division of labor, automation and standardization. What is critical to this redesign is that each Joint Operating Committee, not the producer, will be charged for the administrative and accounting overhead charges from the service providers.

Then when the price of the commodity dips below what is necessary for that property to report a profit. A profit based on the revenues less royalties, operating costs, overhead and an allocation of capital. Note we have converted all of these costs into variable costs. Then that property would be shut-in in order for it to report a null operation. No profit and no loss either. That is because, while the property is shut-in, the service providers will have no activity in their systems to incur any of the service provider's processes for that month and there will be no billing for any administrative or accounting overhead. It is in this way that the marketplace has the marginal barrel of oil or natural gas removed from the market, the individual properties reserves are saved for the day when commodity prices are higher and can therefore earn a profit, and the producer reports the highest profits based on the commodity prices that are available. With the marginal production being removed from the marketplace, there will be shallower and shorter declines in the commodity markets prices.

There are many other ways in which we provide value to the dynamic, innovative and profitable oil and gas producer. The bureaucracy can't and won't, do this. It is physically impossible for them to make this level and scope of change. It has to come from the outside like People, Ideas & Objects, our user community and the service providers are providing. Only in that way can these changes be implemented.

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. 

Why the Focus on Profits?

It is our focus, our claim, our desire and everything that we do at People, Ideas & Objects, the user community and service providers to provide the oil and gas producer with the most profitable means of oil and gas operations. Is this appropriate? Should we be focused on other goals and objectives other than that dirty word profits. It would seem inconsistent in this day and age that we should be focused on profits. The world seems otherwise occupied on other pursuits like fairness and equity, and the oil and gas industry should follow those. I disagree, focusing on profits is the appropriate and only thing that we need to be doing in oil and gas. And that is why we will continue on this path, always.

To whose benefit does the development of an industry that focuses on profits provide. Simply everyones. And by that you can include everyone. The consumer, the investor, the employee of the producer, members of the service industry, governments, society and anyone who doesn't clearly fall within any of those groups. When producers earn profits they provide for the employees of the producer and those of the service providers that they use. This gives these people jobs and resources that enable them to fulfill their lives. They also pay a lot in taxes to their local, state and federal governments. Additionally new employees are hired to provide further growth and benefits to the overall economy.

Producers can take the profits that they earn, pay taxes, pay off debts, pay dividends to their shareholders and investors, and further invest in the business. Banks are then able to loan money to other borrowers and investors can invest in other businesses. Government, state and freehold royalties are paid to those leaseholders who are entitled to those payments. Producers can also invest in more innovative and productive areas of the production process making the total cost of the exploration and production process less costly. Society benefits by having a competitive producer environment, a healthy economy, and balanced government budgets.

In contrast today, what we have is a sink hole. Where money goes in and nothing comes out. Unless you count the benefits accruing to the bureaucratic class as a benefit to anyone other than a bureaucrat. Investors have been “building the business” in oil and gas for the past number of decades waiting for the day in which “things” will turn around and be prosperous. It sure doesn’t look to me like they can expect anything positive to come from this industry in the next decade.

Employees are told to deal with the situation as it is today or lose their job. Service industry providers are told to cut their prices drastically or have no business at all. Investors are told maybe next year. Governments are told that they need to continue to support the business because it is so important to them. In essence everyone is threatened and told to do with what you have and don’t mention anything about the overproduction.

We can turn this around. Where the oil and gas producer is provided with the most profitable means of oil and gas operations by developing and implementing the Preliminary Specification, creating the user community and the service providers. That way trillions of dollars will be added to the bottom line of the producers and then achieve the type of industry that is self sustaining and provides the consumer with the reliable and affordable energy that they deserve. Let's dump these bureaucrats and replace them by funding our budget.

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. 

An Alternative Asset Capitalization Policy

I have been critical of the method of asset capitalization used in oil and gas. Arguing that the balance sheets of the producers are bloated with assets that are never recognized as costs in the production process. I have also never offered an alternative to the current methods and one that would be more in line with what the investment communities needs and what they would prefer to see from the producers. My point of view is there is no redeeming quality in a producer who capitalizes everything under the sun. And that is what the current SEC inspired full cost and successful efforts methods permit as the accounting treatment for recording of assets. What these methodologies do is enable the amount of the assets of the producers to expand to the limit of the reserve base times the current commodity price. Or, the probable entire future revenue of the producer. A significant value that represents the producers capitalized overhead and every and all field activity.

The alternative that I would suggest is simply that any controllable equipment be capitalized based on its vintage. This would better reflect what the assets of the producers are. The assets that are controllable are those that can be physically identified, separable and reused. Well heads, tubing, downhold pumps, pump jacks etc. What wouldn’t be capitalized in this is the intangible work that is done. The drilling, cementing, casing, fracing etc. These costs would be expensed as they are unrecoverable.

Now most people will bring in the argument that the property is worth so much more than its uncontrollable equipment. I say lets hope so. The fact that the property is worth more is a reflection of the market, and we are talking about the book value of the assets of the firm. When we are talking about the book value of the firm we are also determining the method of the profits and other attributes of the producers. Lets not confuse book value with market value like the SEC and public accounting firms have.

By letting the costs of the intangibles flow to the income statement in the current period, as our methodology would do. The producer will be profitable / unprofitable based on their level of activity. They are going to need higher levels of revenue in order to participate in the exploration and development process when it has an immediate hit to earnings. And with the decentralized production model enabling the price maker strategy, higher prices and higher revenues is what producers will have. Astute readers will realize that the producer will have few assets and probable losses and invoke the going concern questions from the public accountants. Certainly those that are unable to produce any value through development of their drilling and completion activities. These producers who can not generate value will be subject to immediate harsh criticism. This will be in sharp contrast to the party just beginning under the current methodology. Those that can’t build value will have difficulty with this methodology. I also think the motivation to overproduce in oil and natural gas will also be rectified.

The question is therefore what is the purpose of the current methodology of bloated balance sheets? Building up the costs of the assets on the books based on every conceivable cost within the producer. Allocating all of those costs to the reserves that are established. And then, only recognizing the asset costs of the reserves that are produced in the current year. It hides a lot of fudge. No costs are being recognized so everyone is making big profits. Allegedly. Yet they also have no cash. Perpetually having to beg, borrow and steal to keep afloat. Show me another industry where the book value is so consistent with or exceeds the market value of the firm. There is none. Companies like Apple have $750 billion market caps and $20 billion in assets. The difference has been expensed to offset the revenues and earnings. That’s what a mature business does. Recognizes its costs and gets rid of them. In oil and gas they collect their costs like they're ancient artifacts, only to be relinquished in the next millennia.

There is very good news in changing this accounting methodology when the Preliminary Specification is implemented. The capital costs of the past number of years and decades. That are sitting on the balance sheets of the producers. Will be moved to the income statements based on the above noted procedure. This will enable the investors to capture these values in after tax dollars. Recall that this altered methodology works hand in hand with the decentralized production model. Ensuring that no production is produced unprofitably. Making the producers price makers. Therefore recognizing that these past costs will need to be factored into the prices needed to make the producers profitable. This change in methodology will also convert these bloated balance sheets into healthy bank balances in the producer firms.

I'm sure thats another trillion or two of value added to our value proposition in comparison to the status quo bureaucracy.

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. 

Bureaucrats Win!

...the battle that is, the war however rages on. I needed that break. It became clear that the bureaucrats were successful in pulling the wool over everyone’s eyes for another fiscal year and surviving the “accountability test” these past few months. No need to approach the development of new systems and organizational methods, all is well, the bureaucrats were put on record as stating. And that is exactly what they will be expected to show for this fiscal year as it progresses. I wish them the best of luck with that. The facts still remain that their business is in a tragic state and they are doing exactly nothing about it. Other than developing and implementing their personal plans to maximize their gains, expand the cabin and smooth their exit.

I’m willing to concede that we lost this battle, however the war still needs to be fought. The book value of the producers is so bloated by the asset costs of the properties that the producers don't recognize any of the real costs of capital in the calculations of profits. In a normal business their retained earnings would be as bloated as their assets were. In the case of oil and gas producers they don't have any retained earnings and their bloated assets are therefore offset by investor money and debt. As long as the bureaucrat has a source of capital to continue their escapades they will continue on building their elaborate cabins in the mountains. The problem they have is that they have been living off junk bonds as their source of capital and there isn't any readily apparent form of capital after that. The bureaucrats ability to win these battles is diminishing quickly. The time for them to exit may soon be upon them.

Much of what I read and heard in the business market about the situation in oil and gas this past half year was a well orchestrated discussion of how the business would be in the future. We'll talk more about these points on Wednesday of this week. Let's assume for the moment that what I am stating is true. That producers put a shine on the business that is not consistent with the facts. At the same time I was “selling my book,” that change was needed in order to deal with some serious issues. I don't think, that is to say, it should not be assumed by the bureaucrat that this sales job of theirs necessarily won over the powers that be. There are two opposing points of view on how to manage the industry. I think it is reasonable to state that People, Ideas & Objects Preliminary Specification and the bureaucrats “corporate model” are both being evaluated in the current market. One of the key differences between the two alternative models in the industry is that I can back my model up.

Recently OPEC met and resolved to continue with their status quo. If you dig down deep into their logic, for them to cut production requires them to determine which customers to tell to take a hike. Once a customer is forced to change their oil supplier it is nearly impossible for them to make the change back again. Why would that customer change? Therefore OPEC is doing what is in the best interests of their customers and ensuring that they keep those customers for as long as they can. Sounds like a pretty good strategy for OPEC to pursue. What is the shale producers strategy? We'll be discussing this more in the weeks and months to come. Other than deceiving their shareholders and bondholders, it is to lose money. Which is a pretty bad strategy. In oil you have 5 million barrels of shale production dictating the price of 93 million barrels of oil because you have some bureaucrats who are more interested in building out the cabin. In other words they just don't give a damn.

Let the evaluation of these alternative business models begin. Both methods have put their ideas and strategies on record. Just make sure that when you are evaluating these methods you are getting the truth from the protagonists. And be careful, there’s been a lot of fudge coming from one side.

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. 

And That's the Way It Is

One of the problems that I have is that at night when I turn off the lights I glow radioactive. People know that I am associated with this 24 year legacy, and for good or bad, don’t want to be seen with something that is for all intents and purposes, bad for their career. So it is a dark green luminous radioactive discharge that I give off that repels people from wanting to be associated with this project, or me. Today is different, like every stopped watch my time has come. The problem is that I have no reach within the oil and gas industry in which I can leverage the strength of these ideas and raise our budget. This is good news for the bureaucracy. Being on the outside for so long has left me with no inside access.

I desperately want to build this software. There is very little that I can do to take it any closer than what it is today without our budget being secured. So how we get to that point, and when, is something that is unknown and unknowable by me at this time. I’m on the outside. And maybe it is that I have a flawed understanding of the situation in the oil and gas industry. That everything really is ok. And that the bureaucracy will have things well in hand in short order. That muddling it through will work out one more time. And maybe the Preliminary Specification is just too radical and too extensive of surgery to undertake in any industry at anytime. I think the answer to all of these questions are out of the hands of any one individual. And fate will be what determines the outcome of our efforts. I've provided a choice.

And I'll be satisfied with that. It is these past 24 years that I would not trade for anything. If you don’t look upon these as an adventure then you probably couldn't survive them. It has been an adventure. And I have survived. I look forward to what the future holds. I think I'll be taking a bit of time off. I will return June 22, 2015.

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. 

A Call to Action

It was during these past 24 years that we have been able to conceive of a better way in which to operate the oil and gas industry. Something that would enable the dynamic, innovative and profitable oil and gas producer to deal with the issue and opportunities of the 21st century. In August 2003 we developed the use of the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. By aligning the compliance and governance frameworks of the hierarchy with the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee. We achieve a speed, innovativeness, accountability and profitability in the oil and gas producer. It is within the administrative and accounting domains that we realized this was valid. However we soon learned that it also applied within the operational domain.

Upon the realization of the value that developing software for the Joint Operating Committee provided the oil and gas industry. We then embarked on a “quick sprint” of research to determine what the industry and the producer would look like if we adopted the Joint Operating Committee as the key organizational construct. Developing the “what” and “how” things would need to be in order to operate the industry and the producer with all of the frameworks aligned. This research was completed in December 2013 with the edited publication of the Preliminary Specification. So much for quick sprints! Of note and interest is it is these two attributes of our offering that the industry does not have to go through, the development of a new method and the research of how that method would work. I would suggest they would need to spend as much time as I have in order to develop an alternative to the Preliminary Specification. The full 24 years. If they have that much time and money available then they certainly have every right to do their own thing. However, People, Ideas & Objects are offering an effective short cut in time. I also started this in 1991 on the basis that I knew something was not working in the industry. It took me until August of 2003 to discover the solution is the Joint Operating Committee and then ten years of research to figure it all out. The Preliminary Specification exists, and it functions. Now that they see the problems they should congratulate themselves. Now those industry representatives can take the time and effort to find other alternatives, or, raise the budget for these developments, either way just leave my family out of it. Your in-direct approach only demeans you further.

The Preliminary Specification now needs to be developed. Like the San Francisco bridge it's expensive. But it also builds value as it solves the issues in the marketplace today. And those that will arise in the future. With all of the Joint Operating Committees frameworks in alignment with the compliance and governance frameworks. With the user community defining the needs of the software. With People, Ideas & Objects providing the software development capability. The industry will be able to have their issues resolved in a timely manner. Big issues and little issues. Making small and large changes. It won't matter, the ways and means of the industry will be accommodated in a timely fashion.

The bureaucracy have begun their migration to the retirement cabin. That the bureaucrats would leave their post when the industry issues are so prevalent is something that we have been stating, based on our research, for many years. It has now begun, and on the one hand the scope of the problems in the oil and gas producers are so big, there is no ambition that will overcome them. It is time to remove and replace the bureaucracy. However, the clock is ticking. The bureaucrats are leaving and that means they are putting the industry in greater jeopardy. Action on having our budget funded is necessary. I don't know who, and I don't know where but someone has to step up quickly and fund these developments.

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. 

Remember Its Cut and Run

It’s coming up to almost one year since the pressure on oil prices began. Natural gas prices look to me like an absolute disaster will be detonated some time this summer. This due to the storage facilities filling to capacity. The bureaucrats were therefore artful in getting through another annual report season. The time to cut your losses from the oil and gas industry is now. Those individuals at Cenovus last week were the first, but maybe they were the smartest of all of the bureaucrats. Remember, it’s cut and run. Metaphorically get out of town before the problems are so big that they come looking for scalps. In an industry that has been flushing trillions of dollars down the toilet. Using first the investors money and then when that dried up, shifting to junk bonds to fuel their deception. There will be hell to pay for those standing around looking conspicuous. Remember I place the focus of the cause of this issue on the SEC and the accounting firms for their accounting policies that don't recognize the cost of capital or overhead in the operations of oil and gas producers. The fact that the bureaucracy new better is a moot point, after all what did you expect, they're bureaucrats!

What to do, who to turn to? As I have mentioned here on several occasions I have been at this for over 24 years now. And I will be at this for another 24 years. I have the solution in the Preliminary Specification. And I will develop the software derived from the Preliminary Specification and lead the user community in its development and its creation of the sub-industry of service providers. The bureaucrats want and need to capitulate, I want the job. Fund my budget and let me get the job done. What do you have to lose. Well actually a lot. Trillions of dollars in fact. Keeping these self interested bureaucrats in power any longer is counter to the best interests of everyone. The sooner we can have the Preliminary Specification, the user community and service providers established the better. And all that is required at this point is for our budget to be funded.

I foresee a lot of pain to be experienced in the oil and gas sector. Approximately equivalent to what the banking sector saw in 2008. This is a disaster. The opportunity is therefore to fund us and let us get on with our job. And then wait until the fire sale of oil and gas properties begins. Big properties, little properties, producing properties, non-producing properties, profitable and unprofitable properties. Then when we have the Preliminary Specification, the user community and service providers operational you can have those acquired properties operated for you on the basis that we guarantee you the most profitable means of oil and gas operations. And that is how this transition to the new oil and gas environment will occur.

If you think otherwise. That an organization methodology conceived of in the 1920’s, built on technologies available in the 1980’s and with a bureaucracy that has ossified since the 1990’s. That an organization of that pedigree in this market has a chance. Then your choice is made up and I can do nothing to convince you otherwise. I found this quote about the times that we find ourselves in today. Its from Tom Goodwin of Havas Media.

Uber, the world’s largest taxi company, owns no vehicles. Facebook, the world’s most popular media owner, creates no content. Alibaba, the most valuable retailer, has no inventory. And Airbnb, the world’s largest accommodation provider, owns no real estate. Something interesting is happening.

But maybe, just maybe oil and gas is immune to these types of forces. And the bureaucracy will succeed in fooling some new source of unknown capital. Beyond the junk bond market that is. That will line up to invest in a business that can’t stop overproducing or recognize any of its costs. And we can all just sing kumbaya and drink penakolada’s. If so, then you can count me out.

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. 

It's a Confidence Game

Last week we briefly discussed the levels of intervention by governments in the banking business. There are estimates that over $22 trillion in support has been used in various quantitative easing programs and other forms of fed policy interventions. You would think that after almost seven years the problems that caused the great recession in 2008 would have passed by now. Why is there a continued high level of government involvement in the financial industry? I think that the confidence of the average person in the financial marketplace was shaken to the point where there was question to the viability of that marketplace. Were my investments safe? I can recall many people liquidating their portfolios and not trusting the integrity of the system itself. Restoring the confidence of the people in the viability of the system is the effect that the fed governor and their European and Japanese counterparts are trying to achieve.

We also hop in the car for a cross country trip every once in a while. Expect to fly to wherever as soon as possible. And see the seasons change with little thought to how we’ll keep warm and dry during the winter. We are confident people. And it is this confidence that provides us with the ability to experience high levels of Gross Domestic Product on an individual basis. Our quality of life is very good. And unlike in the banking industry nothing could happen to shake that confidence and put in jeopardy our way of life. Maybe it's in our nature to realize the downfall of our ways and means before we begin to appreciate them. That to solve problems proactively is unnecessary and subject to the whims of the ridiculous. I could certainly agree with that.

If it takes at least seven years and $22 trillion to fix the confidence in the banking system. And it doesn't seem that we are that close to declaring victory there. How long would it take if people lost confidence in the ability to rely on the oil and gas industry if those capabilities were suddenly removed and put into question. Would people be able to just carry on? Reduce their demands and proceed as they were? In California in the 1970’s we saw the successful implementation of gas rationing throughout that state. In a novel implementation, those with even numbered license plates were allowed gas on alternate days to those with odd numbered license plates. And except for the lines that were very long at the gas pumps, and the fact that those pumps were emptied relatively quickly each day, the rationing was a screaming success!

We should give a thought to our friends the bureaucrats in this scenario as well. What will the likelihood of abundant marine fuel be at the cabin? We saw last Wednesday half of Cenovus’ leadership team announced their retirement. Now I ask you, who would have thought that that might happen? Wholesale losses of the leadership team! Bureaucrats don't abandon ship when the going gets tough! I think we should expect to see the rush to the doors begin in earnest now. Who really wants to stick around and clean this mess up? If you note in the Cenovus press release there really are no replacements. No one to replace the Executive VP and COO of the firm. A coveted prize of the energy bureaucrat.

And those bureaucrats that are not ready to retire will be seeking their fortunes in other industries. You really can't quantify the level of inertia that is needed to overcome the bureaucracy in these producers and make the necessary changes. It saps the energy out of even the most ambitious. And that is why we need to start with a blank slate. Something like the Preliminary Specification where people can begin building the future of the industry so that we can confidently move forward in society.

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. 

I Know, It's Ridiculous!

We have now entered the phase in which the bureaucracy have become untouchable. Annual report and annual general meeting season are over. Accountability is no more. As I mentioned the other day, thoughts move to the cabin and the pension benefits that will be earned over the next nine months of relative stress free living. Has anyone noticed that the level of discussion in the industry regarding the situation that it's in is non-existent! And isn't it odd that the “strength” in oil and gas prices seems to have abated. What to do? I guess one could join the crowded highways and enjoy the summer months with the bureaucrats. Or, depending on your point of view. That is if you agree with the points that I have made here before. And you are an investor in oil and gas, or are a potential user community participant there is much that we can do while the brain trust parties the summer away.

It is ridiculous to expect that our budget will be funded. Just as it is ridiculous to think that the bureaucrats will change and fix the problems in the industry. And just as ridiculous to think that the ridiculous tens of trillions of dollars of our value proposition will come about without the Preliminary Specification. And so here we sit and wait for that one unhappy individual that realizes that as ridiculous as all this is. Someone has to pull the trigger and fund these developments before it's too late. Too late being the bureaucracy find the pension benefits too healthy and the cabin too comfortable to bother with accounting for their actions three months of the year and retire. Then there will be no one and nothing in which to operate the industry. But that is a ridiculous assertion.

All of this doesn't seem too ridiculous to me. There are a large number of people who read these words each and every day. Some may be doing it for entertainment, others may agree with the ridiculous nature of the problem. In most cases they may be living with the difficulties in the oil and gas producers and know that there is a better way and see how the Preliminary Specification can help to solve those issues. They also know that their careers are not going anywhere with the status quo and are stuck in an unchanging environment that is unhealthy for all concerned. It is these people that the Preliminary Specification appeals to. And it is these people that I see as the potential market for the user community participant.

The banking crisis that we experienced in 2008 was evident to everyone, everywhere for many years. Watching house prices rise to levels that no sane person would want to participate in. Having mortgages for those houses being issued to people without full time work, or liar loans as they were called, and then having those mortgages “securitized” and sold to “willing” investors was a bad business model. Then they took it the level of creating synthetic derivatives of mortgages. And thats when people really began to make money. Anyway we all know the history and the fact that the banks are still not able to stand on their own without massive, unprecedented fed stimulus. Which has become about as normal as the summertime commute to the cabin.

The business model of the oil and gas producer is no longer functioning to provide any value to anyone. Except the bureaucrats. They need to keep full production to ensure that they can cover their salary, benefits, pensions and perks. Outside of that who cares what happens to the industry. The problem is that there is no fed to flood the market with deliverability if the oil and gas industry fails in the manner that the banks did in 2008. There is no “adult” supervision. There is only the energy that we depend on for everything that we are. But then again, in a very big way, that too is ridiculous.

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. 

Our Solution Part XX

We have quickly gone through some of the highlights of the Preliminary Specification in this series called “Our Solution.” All of these blog posts can be aggregated by using the blog label PS-Solution. There are many other attributes of the Preliminary Specification. This list may best represent the attributes that I find are the most valuable to the oil and gas industry. The purpose in preparing this summary is to provide you with a better understanding of the Preliminary Specification and to encourage you to read the entire specification. I know it is rather long and people don't generally have an interest in the areas outside of their domain of knowledge. It is however somewhat necessary to get an understanding of the total specification to help you better understand how your domain fits within the bigger picture. At 175,000 words in the Preliminary Specification I know I am asking a lot however it will provide for a better user in the long run.

It may seem that we are several million light years away from becoming the manner in which the oil and gas industry operates. Now with annual report and annual general meeting season over. The ability to hold the bureaucrats accountable for their actions has once again ceased to be possible. Their window of opportunity to enjoy the cabin and count the value of their pensions provides a never ending level of satisfaction. This however does nothing for the profitability of the industry or deal with any of the issues that are certainly pressing. It is a “business as usual” situation in the oil and gas industry today. The looming financial disaster that the bureaucrats have engineered is well within sight of everyone in the industry. And their exit strategy from the industry at that time is well planned.

Therefore from our point of view this should be good news. However, I can't think of a more disastrous situation. The last time the bureaucracy cut and run, it was the government that had to step in to mitigate the situation. I personally think there is enough government involvement in business today, we don’t need more. When the bureaucracy does cut and run the capacities and capabilities of the industry will take a decided step downwards. This is not what we should have to experience. The bureaucracy should responsibly deal with their exit by putting their replacement in place and manage the industry until such time as they are not needed. Then again who said we live in a perfect world.

It is our responsibility therefore to be prepared to take over from the bureaucracy when they do decide to leave. We are working on having our budget provided to us in the January 2017 time frame. Until that time we are working on our key priority of developing the user community. It is the user communities development that is the difficult and time consuming element of our solution. It is also something that we can do without the benefit of our budget in place. I have therefore made it our priority in terms of our activities for the next number of years.

In terms of priority of your time and energy during this time. As a prospective user community participant. The understanding of the Preliminary Specification in its entirety, helps significantly in terms of understanding why some things need to be the way they are. Your understanding of how the user community fits within the industry, its role and significance. Particularly the power they hold in terms of change and enabling the dynamic, innovative and profitable oil and gas producer. Also the user communities participant in terms of their role in the service providers that will be developed to provide the administrative and accounting services to the oil and gas producers. It is this model that is fundamentally different than what exists today. We will be changing the makeup of the industry and it is the user community that is at the heart of the industry. These are significant business opportunities for those that can see their way into the manner in which the industry will operate. Both as a user community participant and as a service provider. It is that these two roles are filled by the key individual who is the user community participant and the principle behind the service provider.

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. 

Our Solution Part XIX

One of the more controversial elements of the Preliminary Specification is the Marketplace Interface. It is here that we are introducing and developing a new interface in which the users in oil and gas will interact, transact, collaborate, agree, and associate themselves with other users, companies, producers, leaseholders, service providers, service industry representatives, banks and governments. The Marketplace Interface is a single interface that is accessible through the Petroleum Lease, Resource and Financial Marketplace modules. The Marketplace Interface will enable you to extend your domain of influence beyond the physical presence that is a current constraint to your working environment. It is an enhancement to the current means of communication through telephones, email, tweets, meetings etc. Avatars of individuals within the Marketplace Interface will enable these interactions in real time from any distance and provide the full power of an ERP system to support the transactions, interactions and collaborations that could occur.

Pretty silly, I know. Until you realize that you can’t get everyone to the meeting until next Wednesday at 3:00. And to do so will cause you to disrupt yours and others schedules significantly. If only there was a way to get everyone together right now so that we can decide on this critical point… Certainly telephones are not going to provide the documentary value and group participation of a meeting. The Marketplace Interface, operating within the three marketplace modules of the Preliminary Specification, combines elements of both meetings and telephones. The ability to have them quickly, documented and with the full participation of the necessary individuals will be the capabilities brought about by this new interface.

Everyone is tired of the extensive number of meetings that they need to attend daily or weekly. If only they could attend some of them virtually, which is what they would be able to do with the Marketplace Interface. Cutting down on the time in meetings, which would allow for, wait for it, more meetings! Which is going to be one of the consequences of implementing the Preliminary Specification in the dynamic, innovative and profitable oil and gas producers. With high levels of automation in the transaction areas being conducted by the service providers. Their use of specialization, the division of labor and automation as their key competitive advantage we have stated here many times before that the types of work that people will be doing is going to change. We will be conducting different tasks that include leadership, issue resolution, creative, collaboration, research, ideas, design, planning, thinking, and generally making the computers work for us. Or in other words, many more meetings.

If we believe that our work will continue to remain the same in terms of how we interact with people then I think we are going to need a lot more people. Either that or new methods of communication are going to be needed. The endless meetings will need to end. Maybe some of the attendees can instead review a video replay of the Marketplace Interface recording at twice the speed. Other methods of communication are going to be needed to be introduced into the way that we work if we are going to do the work of the humans and leave the work that is better suited to the computers, to the computers. Our volumes of work will increase. The types of work will change. And the importance of that work will also increase.

An ERP system that doesn’t introduce a new means in which to deal with these issues and opportunities is not doing its job. It is providing for yesterday’s ERP system needs. Our work is changing and the types of interfaces that we will use also needs to be changing. The Marketplace Interface is one of the opportunities that we will be using in the Preliminary Specification. It is based on the Open Wonderland framework developed by the former Sun Microsystems. Here is a video of the technology.

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. 

Our Solution Part XVIII

In addition to a number of Joint Operating Committees. The dynamic, innovative and profitable oil and gas producer will operate in a number of marketplaces within the oil and gas industry. The Preliminary Specification has three marketplace modules, the Petroleum Lease, Resource and Financial Marketplace modules. It is within these modules that the Preliminary Specification virtually replicates those markets.

Without a P&NG Lease, or a concession there is no title or ownership to the oil and gas that is produced. It is the marketplace of P&NG Leases that the North American oil and gas producer seeks to earn their profits by applying their earth science and engineering capabilities as competitive advantages. P&NG Leases can be bought and sold, traded, swapped, developed into a Joint Venture, pooled as some of the many possibilities within the North American marketplace. The constraints on a producer's creativity, of how they approach the business, is limited by the laws of Canada and the United States, and their earth science and engineering capabilities. The Petroleum Lease Marketplace will reflect the available opportunities that exist in the oil and gas market space. And also provide the means in which to manage those assets consistent with effective and efficient business practices.

To facilitate that creativity and business need the Preliminary Specifications Petroleum Lease Marketplace will need to accurately emulate that physical market space and all of its characteristics. So that the dynamic, innovative and profitable oil and gas producer can address the entire oil and gas market space and seek out their role within the industry. If it is to post some land, or bid. Buy some established production or pool an interest in a promising area. They will have the interfaces within the module to provide for the ability to participate in those markets.

The second marketplace module seeks to replicate what we have called the Resource Marketplace. This consists of the marketplace of human resources, service providers, service industry representatives and producers. The products and services that are made available to the dynamic, innovative and profitable oil and gas producer. Within this module producers will be able to find the interfaces to enable the engagement of the resources to conduct any and all activities within the industry. It is through this module that the producer will interact with the service providers. Which in turn enables the decentralized production model to be implemented as the business model for the industry. And therefore it is here that the flexibility in the producer's production deliverability is enabled. Automation of the processes between producers and others is an underlying assumption regarding the transactions that occur in the module.

Lastly there is the Financial Marketplace module. With the level of activity increasing in the dynamic, innovative and profitable oil and gas producer. The need to have its financial capabilities increase their velocity and throughput are necessary. As well, the alignment of the financial framework of the Joint Operating Committee to the compliance and governance framework is achieved in the Financial Marketplace module. Opening up the producer to new avenues of financing and greater capabilities in terms of their overall financial performance.

I'm really struggling to articulate the abstract definition of what these marketplace modules mean within the Preliminary Specification. These hold a special role in the software and will provide new ways in which the producers participate in these market spaces. As I stated in the beginning of this post; the dynamic, innovative and profitable oil and gas producer has an interest in many Joint Operating Committees and these three marketplaces.

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.