VGO Oil and Gas Corporation
Business Plan
Feb. 19, 2007
Executive Summary
VGO Associates, a consulting company with specialization in simulation, modelling, and data
mining, will create a company in 2007 named “VGO Oil and Gas Corporation”. VGO Oil and
Gas will be based in Houston. It will develop an integrated suite of commercial software-based
solutions that will assist oil and gas producers to improve field production operations by applying
advanced modelling and optimization techniques while leveraging the vast amounts of reliable
data that have become available with recent advances in information technology.
The market for software-based approaches that can help oil and gas operators increase
production, reduce operating costs, lower well and facilities downtime, and improve ultimate
recovery from the reservoir, has been seeing increasing focus in recent years. With the
appropriate software tools employed by the right people, software vendors with effective
solutions in this area can make a significant impact in this large but fragmented and rapidly
evolving market segment.
VGO Oil and Gas will bring together a team of experienced professionals with exceptional
industry-wide as well as cross-industry reputations in optimization and modelling to develop a
unique software-based offering for this marketplace. The focus of this team will be on developing
the products and associated services in the production operations environment in activities
involving field management, production enhancement, well and equipment diagnosis and
evaluation.
The role of VGO Associates in the formation and ongoing operations of VGO Oil and Gas
includes access to the expertise of the full range of VGO associates; creation of unique problemsolving sessions with world experts in simulation, optimization, and supply chain operations; and
the incubation environment in which the plans for VGO Oil and Gas were first worked out.
Central to our approach is the creation of an integrated set of software modules that allow
multiple oil and gas production functions to be modelled and optimized. Our approach is in
contrast to existing practices, typically a single point solution that is not integrated with other
solutions, or a patchwork of solutions assembled through acquisition.
The VGO Oil and Gas management team includes Kunal Dutta-Roy, formerly of IBM Global
Services and Schlumberger, a software development manager with 20 years of experience
creating commercial solutions for energy companies; Les Sisemore, a former Vice President of
Upstream Technology from Chevron; Lawrence Davis, President of VGO Associates and a world
expert in optimization with more than 25 years of experience in industry; Rod Sipe, a former
Ernst and Young partner with more than twenty years of experience in the development of
solutions for energy companies; Paul Bender, a consultant with more than 1,000 prior
engagements worldwide at the executive level; and George Danner, a former Anderson
Consulting partner with more than fifteen years of experience in developing simulation and
optimization systems for energy clients. In addition, VGO Oil and Gas will make use of SciCom,
a superb offshore software development team based in India, for the bulk of the software
development.
The goal of the company is to create a twenty-first century system for the integration and
optimization of upstream operations. To do so, we will integrate solutions from two sources: the
best of existing practices in the energy industry, and a variety of new Business Intelligence
techniques being developed in other fields. Our most important source of techniques for
upstream asset management is the supply chain area, where several VGO associates function as
thought leaders and are setting the standards for twenty-first century practice.
Critical milestones in the company’s first year of operation are: acquisition of $1.5M to fund the
first year of operations; the acquisition of two key clients, a large- and a mid-sized energy
company; creation of two central modules for those clients to demonstrate the general
applicability of our approach to integrated field operations; creation of an initial sales force; and
creation of an initial consulting force to carry out specification of system requirements and
adaptation of the system at client sites.
Critical milestones in the company’s second year of operation are: acquisition of $1.5M to fund
the second year of operations; the acquisition of three more clients; development of four more
modules together with their installation and field testing; expansion of the sales force; expansion
of the consulting force; negotiations with potential strategic partners; and the beginning of a fullscale sales and marketing campaign.
Critical milestones in the company’s third year of operation are: an option on a third investment
of $1M to fund more rapid expansion; completion of the set of modules so that the full, integrated
system is available for general use; revenues greater than $5M; and the development of strategic
partnerships with companies that have technologies that are complementary to our own.
Milestones in subsequent years will depend on the rate of growth of the company, its level of
revenues, the size of the market for additional modules, and the company’s strategic position with
respect to other vendors of software solutions. In any case, our goal is to have revenues in year 5
in excess of $20M.
VGO Associates will hold a minority interest in the company. The principals listed above will
also hold minority shares in the company. Investors in rounds 1 and 2 and the optional round 3
will hold shares based on their level of investment and participation.
No other company has the level of expertise in simulation and modelling that is found in VGO
Associates, and this expertise will be used by VGO Oil and Gas. The combination of supply
chain thought leadership and energy industry experience that VGO Oil and Gas will bring to the
creation of its software solutions cannot be matched by any other firm.
An investor in VGO Oil and Gas will be able to participate in the returns from this enterprise, and
assist in developing a company that will transform the way that energy companies manage their
upstream operations.
Table of Contents
Executive Summary ............................................................................................................ 2
Table of Contents ................................................................................................................ 4
Market Analysis .................................................................................................................. 5
Target Companies ............................................................................................................... 9
Market Penetration ............................................................................................................ 10
Pricing and Margins .......................................................................................................... 10
Sales and Marketing Plan.................................................................................................. 12
The Competition ............................................................................................................... 12
Oilfield Service Companies .............................................................................................. 13
Point Solution Vendors ..................................................................................................... 14
Internal Teams .................................................................................................................. 14
Midstream SCADA Vendors ............................................................................................ 15
Our Strengths .................................................................................................................... 15
Our Weaknesses ................................................................................................................ 16
Company Description ....................................................................................................... 16
Products and Services ....................................................................................................... 17
Intellectual Property .......................................................................................................... 18
Management ...................................................................................................................... 18
Ownership ......................................................................................................................... 19
Board of Directors............................................................................................................. 19
Funding Requirements ...................................................................................................... 20
Exit Strategies ................................................................................................................... 20
Conclusions ....................................................................................................................... 20
Resumes of Principals ....................................................................................................... 22
Market Analysis
Global energy demand is set to grow dramatically over the next twenty years and huge capital
investments in oil and gas production are required to add capacity. With new fields increasingly
difficult to find and located in inhospitable environments, the pressure to recover more from
existing fields is unrelenting. As a consequence, the energy industry is currently experiencing
unprecedented levels of growth and profitability driven by the upward movement in energy
prices.
Although growth in the energy industry has historically been highly cyclical, it is important to
note that unlike past hikes in the price of crude oil which have been the result of supply-side
constraints imposed by geopolitical upheavals in the Middle East and elsewhere, the recent runup is primarily due to the inadequacy of existing production capacity to meet longer term global
demand. This scenario has been created by the unexpectedly rapid industrialization of China and
India, and to a lesser extent other smaller growing economies in Asia and elsewhere, in recent
years. At their current pace China and India are expected to double their respective energy
consumption level in the next twenty years. The International Energy Agency (IEA) predicts
world oil demand to grow at an annual rate of 1.5 to 2 million barrels per day for the next several
years. The most recent outlook by the IEA underscores the need for very large investments in
energy. In 2004, IEA estimated capital investments totaling sixteen trillion dollars will be
required over the next 30 years to meet predicted demand.
Current analyses point to a scenario where the market gap between the growing demand for oil
and the supply available is under increasing strain, pointing to the inevitable rise in the price of
oil, at least for the foreseeable future. Fueling the gap between demand and supply is the
magnitude of capital investments and the high level of technical expertise required to discover
and produce new reserves, which are increasingly located in remote and hostile terrain, or in
politically sensitive environments. The growth in technology-driven, capital-intensive deepwater production (offshore West Africa, Brazil and the Gulf of Mexico), and the recent boom in
tar sand extraction in Alberta are illustrative examples of this phenomenon.
It is also true that higher oil prices help justify additional investments in alternative energy such
as renewable resources (wind, solar, hydroelectric and biomass), and in nuclear energy and
hydrogen. However, none of these are viewed as a significant challenge to the current dominance
of petroleum as an energy source (over half of total worldwide consumption) in the foreseeable
future. We believe that fossil fuels will continue to feed the world’s energy needs and the
contribution from other sources, while increasing, will remain relatively small.
The oil and gas industry, which for decades has exploited vast amounts of easy-to-find, high
quality conventional hydrocarbons from large reservoirs, is today going through a significant
realignment. According to the estimates of the American Petroleum Institute, with current
technology, about two-thirds of the original oil-in-place is left behind. Additionally, seventy
percent of today’s oil production is from mature fields that are more than thirty years into their
producing life. While recovering more from these declining assets poses many technological
challenges, more importantly, replacing these diminishing reserves poses even greater challenges.
Further discoveries of large oilfields are becoming increasingly rare. Over time, exploitation of
hard-to-extract lower quality unconventional hydrocarbons such as heavy oils and tight gas in
small, deep, or offshore reservoirs will become increasingly important. Unconventional
hydrocarbons are currently expensive to extract and refine. Devising the means to convert such
resources to commercially exploitable reserves within environmentally accepted norms will
require leaps in technology. All of these factors point to the industry’s increasing focus on
production optimization - the means of squeezing the maximum amount of hydrocarbon resources
from existing assets.
With the current energy boom come scarcities in resources such as rigs, crews, equipment and
raw material. These scarcities mean that companies who use those resources better will
experience more success and profit than those that do not. Central to increasing profitability in
the current economic environment for energy companies is the efficient use of their resources.
For many years, computer-based modeling has been a vital aspect of reservoir and production
engineering. It frees the engineer to concentrate on what the human being does well: creative
problem solving. The concept of the “digital oilfield” (also called Field of the Future, eField,
iField, and Intelligent Oilfield) involves the use of technology to measure relevant down-hole and
surface parameters in real-time, utilize this data to determine the most effective course of action,
and then automate the process that acts on this recommendation. The digital oilfields only now
beginning to demonstrate the vast potential benefits of production optimization at the asset level.
A widely-quoted 2003 study by the well-respected Cambridge Energy Resource Associates
(CERA) group is illustrative of the market potential for upstream asset optimization. They predict
the following benefits achievable to the global oil industry from implementing the “digital oilfield
of the future”.
a) 10-23 percent increase in oilfield Net Present Value
b) 125 billion barrel increase in recoverable reserves (about one eighth of global proven
reserves)
c) 2-6 percent increase in production capacity
d) 5-10 percent reduction in capital expenditures for surface facilities
e) $4-8B reduction in operating costs annually.
Against this background, oil and gas producers are looking for tools that will help them to
increase production to meet current demand, while maximizing ultimate economic recovery from
their reservoirs. To achieve this, operators need to understand how best to optimize production
from a hydrocarbon reservoir and its associated facilities over the life of the field.
The technology VGO Oil and Gas will offer targets both the exploitation of conventional mature
brown fields as well as newer green fields where the need for integration of services and
technologies to optimize production to increase recovery is becoming ever greater. Our target
market is the large and mid-size energy companies, both domestic and international.
A wide range of existing companies create and market software systems that help oil and gas
producing companies plan for expansion, improve the use of their resources, collect data from
real-time operations, and create operational plans. This is the market for upstream asset
optimization we will enter.
Our estimate is that the overall market size for software and associated technical services for
upstream asset optimization will grow from approximately $375 million currently to about $1.3B
in 2010, split about evenly between software licenses and services. In our analysis, we have
identified the following three distinct market segments.
1. Design & Diagnostics. This segment represents the traditional offline engineering
analysis tools. Although this still is a fragmented segment with many regional and niche
technology vendors, the market is beginning to mature and converge to a few key
application-specific players. Another significant sign of consolidation is that the major
services companies Schlumberger, Halliburton and Weatherford have entered this space
in recent years through acquisitions and/or partnerships.
2. Integrated Production Planning. This segment represents applications that integrate
subsurface reservoir models with surface pipeline network and process equipment
models, and couple these tools with economic analysis and optimization for field
development and operations planning. Although still relatively small, this segment has
seen increased focus in recent years, with a number of service companies and traditional
point solution providers in the Design & Diagnostics segment developing applications.
3. Field Surveillance.
This segment involves the monitoring of the production
characteristics of large numbers of wells though screening tools, advanced visualization
techniques, and engineering analysis. The projected growth in this space is driven by the
availability of reliable data acquisition tools and the increasing use of down-hole gauges
and multiphase flow meters, coupled with the potential for applying advanced analysis
techniques for real-time surveillance on the production engineer’s desktop. All of the
major oilfield service companies, along with a number of traditional SCADA/DCS
vendors, have targeted this space as a growth opportunity.
Our market analysis shows that there are two distinct application environments where these
solutions are used within an oil company: a) at the central engineering and planning groups; and
b) as an operations tool in the field by the asset team. The Design and Diagnostics tools are used
almost exclusively by the central engineering and planning teams whereas Field Surveillance, by
definition, is the exclusive domain of the asset team in the field. Use of the Integrated Production
Planning tools is common to both environments – more as a strategic field development planning
tool at the central engineering level and as a short to intermediate term production planning tool
at the asset level.
While we expect the current healthy growth in the traditional Design and Diagnostics segment to
continue, our analysis shows that a significantly larger part of the overall growth for the next
several years in the application of optimization related solutions will be in the relatively newer
Integrated Production Planning and Field Surveillance segments, targeted at the asset level. This
push towards the adoption of technology in field operations is driven by the following industrywide trends:

Access to vast amounts of reliable and inexpensive operations data from downhole and surface measurements.

The availability of IT infrastructure and software tools to efficiently acquire,
store, transform and visualize this information for early, field-level engineering
analysis.

The necessity for technology-intensive solutions for exploiting deepwater and
heavy oil reserves where the significant majority of the remaining new
opportunities exist.

The need for multidisciplinary, workflow-driven approaches that leverage the
large amounts of real-time and historical information from the reservoir, wells,
pipelines and facilities into effective solutions driven by the need to increase
production, lower operating costs, and extend the life of the asset.
VGO Oil and Gas proposes to develop solutions that will enable it to occupy a leading position in
these rapidly growing segments of the upstream asset optimization market through product
differentiation, agility and effective low cost development and deployment.
The solutions to be developed by VGO Oil and Gas will specifically addresses the upstream side
of the global energy industry. In assessing the size of the opportunity for asset optimization, we
have looked at the market for all oil and gas producing companies worldwide, with the exception
of the smaller companies (< $200M), and the less productive assets (< 20,000 BOEPD). Our
estimate of the $1.3 billion market for upstream asset optimization in 2010 was based on a twostage approach. Our initial conclusions from a high-level analysis of existing software sales and
accepted market growth projections, supported by assumptions derived from observed trends in
related but more mature industries (e.g. the downstream process industry), were validated by a
second more detailed bottoms-up exercise. This involved a review of all oil and gas producing
companies to assess their respective opportunity for asset optimization and design analysis
software, based on factors such as existing assets, production potential, and geographic location.
The following general conclusions were derived from our analysis of the market for upstream
asset optimization software:

The current market size for software and associated services in this area is about $375
million (not including captive consulting groups inside energy companies that produce
tailored systems), of which the largest segment is for traditional Design & Diagnostics
tools. The newer asset-focused Field Surveillance and Integrated Production Planning
solutions are gaining ground as operators are increasingly adopting the concepts of
production optimization, driven by the need to leverage technology to increase
production and reduce equipment downtime and costs, while maximizing overall
recovery.

Historically, the market for production analysis software has grown at a rate of about 20
percent annually, almost completely in Design and Diagnostics software at the central
engineering and planning organizations. Since 2003, with the increase in global energy
demand and corresponding rise in oilfield service industry spending, growth rates have
more than doubled to almost fifty percent. We expect this high level of growth to be
sustainable for the next few years as the vision of the digital oilfield takes shape at the
asset operations level and the benefits derived become more widely publicized. Based on
this analysis, we estimate an overall market size of about $1.3 billion (software and
associated services) by 2010.

Geographically, although the large majority of both current production and discovered
reserves are in the Middle East, the opportunity for software-based solutions over the
next several years is about evenly distributed across six distinct geographical areas: US &
Canada, Latin America, Europe & Africa, Middle East, Far East, and the former Soviet
Union (FSU). To succeed, any business initiative in this area has therefore got to focus on
an international marketing and deployment strategy

The current market split between software and services is roughly 60-40, although this is
expected to reverse in the next few years as the more service-intensive Field Surveillance
and Integrated Production Planning segments gain wider acceptance at the asset
operations level over the next several years.

Although there is a number of niche areas where individual vendors have
leadership in the Design and Diagnostics segment, there is no clear-cut market
leader in the newly evolving and potentially much larger field operations arena,
where the need for integration and interdisciplinary collaboration is critical. In
recent years, the larger service companies (Schlumberger, Halliburton and
Weatherford) have taken steps to push initiatives in Field Surveillance and
Integrated Production Planning but have yet to establish any significant presence.
Target Companies
VGO Oil and Gas will target large- and mid-sized energy companies. The ideal market segments
for VGO Oil and Gas to focus on initially will be:
a) Centralized “digital oilfield” teams associated with most oil majors with whom
we share a common vision for upstream asset optimization
b) Major asset teams in national oil companies, many of whom are in a capital
expansion mode.
c) A select group of larger US-based independents that are internal resource
constrained and look to upstream asset optimization as a competitive advantage
in their growth strategy, especially in the challenging deepwater arena.
Our initial focus will be in the Houston region, expanding to cover North America, and finally
selling to the larger national oil companies worldwide. We will begin in our first year of
operation with the acquisition of two key clients, preferably based in Houston, for initial software
module development and field trials.
In our second year of operation, we will target other companies in North America, and will
provide additional software modules to our key clients and our new clients.
In our third year of operation, we will complete development of our core set of software modules
for a range of large- and mid-sized energy companies, and begin marketing outside North
America.
The most desirable client for a system of our type is an energy company with an interest in
increasing profits with better use of assets, with a database containing historical and current data,
and with management members who can understand the impressive economic benefits that our
approach will provide, in comparison to current practice. Most large energy companies and more
than half of the mid-sized energy companies satisfy this description.
Our plan for market penetration is twofold. The first hurdle is to sell an initial installation of our
system at an oil field operated by a new client. The second is to expand to other oil fields inside
an existing client.
In order to build a referenceable client base, we will carefully limit the number of clients we take
on in years one and two, and we will concentrate on one or two key installations for each of these
clients. Beginning in year three, we will begin selling our systems much more widely. Our goal
in the first two years is to demonstrate impressive economic value from the use of our systems
with our initial clients. Limiting the number of clients we work with in years one and two will
greatly increase our chances of success.
In the past, each of the principals in VGO Oil and Gas has created successful point solutions of
the type that we will now create and integrate for general usage. We plan to use our connections
with those companies to acquire our initial key clients and to sell them on our plan.
Market Penetration
The market for our systems is on the order of several billions of dollars over the next several
years. Halliburton and Schlumberger, two large and well-funded competitors, already operate in
the space that we will enter. Although our systems will do in a much better way what they do
now, we have planned for slow penetration of the market, based on initial high-profile successes,
as energy companies learn by example what it is possible to do outside the scope of the offerings
of the major software vendors.
Our goals for market penetration are to secure two key clients in the first year and three more in
year two, before beginning our general sales and marketing campaign in year three. We will
work from a domestic, Houston-based sales effort through year three to a worldwide effort by
year five.
If our market penetration by year five is just one percent of current dollars spent in the overall
asset optimization software market, we would be generating revenues of over $30M in software
and associated services. If our system is successful, a much higher level of market penetration is
to be expected. Our goal of $20M in revenues after five years is therefore intentionally
conservative.
Pricing and Margins
There will be three distinct components to our pricing model – software licensing, associated
services, and system maintenance.
The software licensing fees will be linked to a base integration platform, to the modules being
purchased for a particular solution, and to the level of complexity involved in the installation and
integration of these modules. The Products and Services section of this document contains a list
of the initial modules we will produce and their projected prices, which range from $200K to
$400K per installation site.
Consulting services to determine client requirements, install systems at client sites, integrate with
client databases and software/hardware systems, and commissioning will be charged on a time
and materials basis. We will also provide advisory consulting services for model building
activities and advanced systems training. We anticipate overall service revenues to exceed
software licensing fees for asset level deployments by approximately 20 percent for a typical
installation.
In addition to the software licensing and consulting services revenues, we will charge 15-20
percent annual maintenance and upgrade fees for all software modules purchased. We will also
propose optional service maintenance contracts which will provide for system support services on
an annual basis.
The structure of the pricing model described in the preceding sections is the approach followed
by most existing software vendors. This approach is well suited for the traditional design and
analysis segment. For asset optimization at the operations level, another attractive approach
being reviewed is a subscription model favored by the larger service companies. Following an
initial installation and deployment charge, the client would pay for varying levels of service (e.g.
monitoring, surveillance, diagnostics, and optimization viewed as increasing steps up the value
chain) on a per well, per unit time period basis. The advantages of such a model are many – it
creates a continuous revenue stream based on the value extracted by the client at a particular
instance in time, it provides flexibility in pricing based on the size of the asset, and it is driven by
the level of service desired.
Our current thinking is that the subscription approach has significant merit and needs to be
explored further to determine how it best suits our proposed business model. While our pricing
strategy is not finalized at this stage, we expect to be able to support the flexibility to present both
approaches to our clients.
The following table shows our gross revenue projections and associated operating costs for the
first five years of operation.
Year 1
Year 2
Year 3
Year 4
Year 5
Revenue
$0.4M
$3.3M
$7.2M
$12.6M
$20.1M
Costs
$1.9M
$3.5M
$5.7M
$8.7M
$12.8M
Gross Income
-$1.5M
-$0.2M
$1.5M
$4.1M
$7.3M
We estimate no profits during the first two years in which these modules are being developed.
When the modules are being completed and are undergoing field testing at client sites, we
anticipate that margins on each software module will be in the order of 40 percent and the
margins on consulting time will be on the order of 25 percent.
To keep our development costs low and our corresponding margins higher, we will establish an
offshore development center in India. In addition to offshore software development, we will also
explore the feasibility of maintaining a resource pool of lower-cost offshore-based engineering
and systems integration experts for field deployment and maintenance activities at our client sites
through our offshore development center.
In order to encourage timely payments, we plan to offer a 1 percent discount for payment of
invoices within 30 days. We will offer initial, key clients a substantial early adopter discount
(approximately 30-50 percent) from the prices listed in the Products and Services section of this
document. We will negotiate discounts for volume—when a client is using the same module at
multiple sites with similar databases and integration requirements, for example.
Sales and Marketing Plan
In years one and two, we will select and enlist our key clients, approaching companies we already
know because we have worked with them in the past. Our sales efforts with these clients will
consist of persuading them that it is advantageous to them to help set requirements for the
modules that they will use. In addition, they will receive a substantial discount off the list price
of the modules we create for them.
In year three we will extend our efforts to all of North America. Determining what companies to
approach is not difficult—our potential clients are the major energy companies in North America,
as well as the mid-sized energy companies.
In years four and five we will extend our sales and marketing reach to energy companies of
similar size outside the United States. Our primary targets will be national oil companies, and
there are only a few of these.
The principal challenges in sales during the first five years will be persuading our target
companies of the benefits of our software, rather than identifying those companies in the first
place. After the targeted approaches of years one and two, we will work out our more traditional
sales and marketing plan in detail for a launch in year three.
Our prior experience suggests that there is a nine- to twelve-month sales cycle for the type of
software we will produce, and this lead time has been built into the specification of our yearly
milestones.
The Competition
Our competition falls into the following general categories:
1. Oilfield Service Companies. Larger oilfield service vendors who through a combination
of recent acquisitions, alliances and software development initiatives are in the process of
creating integrated offerings in the production optimization space.
2. Point Solution Vendors. These are point solution providers, who have traditionally
developed and marketed engineering design and diagnostics tools along with advisory
consulting and customization services to central engineering and planning groups in the
oil companies.
3. Internal Teams. Almost all operating companies of significance have engineering and
software development teams charged with supporting technology-driven initiatives at the
field assets. The “digital oilfield” teams within the major oil companies (e.g. BP, Shell
and Chevron) and some of the larger, more technically advanced national oil companies
(e.g. Statoil and Saudi Aramco), who are engaged in promoting production optimization
are of particular interest to VGO Oil and Gas in this category.
4. Midstream & Downstream SCADA Vendors. SCADA, control systems and
automation vendors, and systems integrators who have populated the more mature
midstream and downstream markets for the past 25-30 years are now expanding their
solutions into the upstream space – these include Invensys, Siemens, Honeywell and
SAIC.
Oilfield Service Companies
Halliburton and Schlumberger are the two largest oilfield service providers. Others with a
significant although substantially smaller presence in this area include Baker Hughes and
Weatherford.
In the production software arena, these companies have recognized the growing opportunity and
are developing systems that optimize upstream asset operations, perform real-time data analysis,
and eventually close the process loop through automated control of surface and down-hole
equipment. However, it is important to note that software and software-driven solutions
constitute a relatively small part of the revenue stream of an integrated oilfield service company.
The primary value of production optimization software for these organizations is the opportunity
such solutions create for up-selling expensive down-hole equipment and controls, along with the
associated oilfield services for production enhancement.
Part of our strategy for competing with these companies is based on the prior successes of VGO
associates in the supply chain area. In the context of the software solutions offered, the large
oilfield service companies are similar to the large supply chain software vendors such as
Manugistics (recently acquired), SAP, i2, and Oracle, that provide general supply chain support
from a series of modules acquired for the most part by acquisition or through alliances with
smaller software vendors. What those companies say they do and what they actually do are at
variance, both in the supply chain and in the energy areas.
In multiple articles written by VGO associates, and in our public lectures, we have characterized
the difference between a traditional, twentieth-century supply chain system and a twenty-first
century supply chain system in these three ways:



A traditional system optimizes based on certainty about the future. A better system
optimizes taking uncertainty about the future into account.
A traditional system relies on mathematical models of an organization’s performance. A
better system simulates an organization’s performance, and includes the organization’s
decision-makers in the simulation.
A traditional system optimizes different functions in isolation, requiring a user to go
through a series of sub-optimal steps in order to create a global plan. A better system is
designed and implemented so that any parts of the organization’s operations that are
selected by a user of the system can be optimized at the same time to produce a much
better solution.
Upstream operations are very similar to supply chain operations with regard to these three points
(some experts say that upstream energy operations are supply chain operations). What works
better for supply chain systems will also work better for energy company operations, as we have
proved in numerous projects with our prior oil and gas clients. Our strategy for selling against the
large oilfield service vendors is to demonstrate, through the creation and discussion of initial
projects, the impressive magnitude of the savings that can be achieved when different approaches
are applied to our clients’ problems. When these successes are achieved, we will then be in a
position of strength when talking to potential clients about the benefits we can bring to their
organizations.
We will compete with the large vendors, then, by demonstrating the superiority of our
approaches, both through example and through dissemination of our thought leadership articles
that describe the ways that our approaches differ from those that are currently in the market.
Point Solution Vendors
There are over fifty smaller software companies in North America and Europe serving the energy
industry in the areas we will work in. Most of them create and sell point solutions in the
optimization, simulation, or data analysis areas. Many of them will fail or be acquired by larger
companies.
Our goal is different from the goal of the typical smaller company of this type. We plan to create
the first general system for upstream asset management and planning that uses the new
approaches characterized above with reference to supply chain operations. A company that
purchases and uses one of our modules will have a range of other modules to purchase next.
Each module will fit with the others, and will produce impressive savings and improvements in
efficiency.
It is possible that some of the smaller vendors are potential strategic partners or targets for
acquisition, but it is not our intent in our first three years of operation to seek capability outside
our company. We intend to develop a truly integrated system by designing it and implementing it
in a consistent way, rather than by acquiring a patchwork set of systems implemented using
different methodologies, approaches, and interface principles.
Our strategy for competing with the smaller vendors, then, is to provide the best solutions
available wherever we create a module, to implement each module so that it links seamlessly with
our other modules, and to demonstrate great value both from individual modules and from our
modules in combination. We expect that this approach, combined with our position as thought
leaders in the upstream asset management space, will establish our value as opposed to specific,
point solutions produced by our smaller competitors.
Internal Teams
All of the large energy companies and many of the mid-sized energy companies have groups that
function as internal consultants, as process improvement specialists, as technical consultants, or
as information technology leaders. We will be in competition with such groups insofar as they
are perceived as capable of developing systems that seem to do what our systems do.
In a number of past engagements we have worked in close collaboration with such groups, and
having good relations with such groups is critical to the success of many of our future sales. In
order to persuade internal organizations to use our systems rather than developing systems of
their own internally, we plan to do the following:
Establish our thought leadership position early and dramatically. Internal consulting groups
will want to work with us to learn about new techniques and gain recognition for assisting in
bringing those techniques into their companies.
Work with those groups rather than against them. A substantial part of the sales effort for us
will be in persuading these groups that we can assist them, that we will be easy to work with,
and that our products will be of tremendous value when integrated into their operations.
Use our past experience as a guide. Each of the principals of VGO Oil and Gas has created
successful projects in collaboration with these types of groups in the past. This experience
will help us to be aware of the needs and motivations of internal consulting groups, so that we
are perceived as a way for them to succeed rather than as a threat or a more expensive way of
achieving the same ends.
Our strategy for competing with internal consulting groups, then, is to demonstrate that our
approaches and abilities are unparalleled, to form close working relations with those groups, and
to help them understand that they will succeed by working with us.
Midstream SCADA Vendors
The midstream SCADA/DCS vendors and system integrators have a significant amount of
experience in deploying optimization systems in the pipeline and process industries. However, to
date they have not been able to demonstrate the depth of domain understanding or credibility in
the upstream space to successfully deploy integrated subsurface-production optimization
solutions that incorporate the relevant effects associated with the depletion of the reservoir
upstream of the wellhead choke.
Our strategy with these larger downstream-focused organizations will be to partner with them on
a project-by-project basis, leveraging their extensive resources where applicable, and positioning
ourselves as thought leaders in upstream asset optimization
Our Strengths
The success of our business plan is based on several advantages that are unique to us.
Mastery of new business intelligence techniques. Our system will use traditional
techniques for planning and optimization, but in addition, and central to the success of an
integrated system with the ability to optimize plans at user-defined levels of scale, is our
use of optimization techniques that derive from new scientific disciplines such as
complexity science. Our team includes the world leader in applications of these
technologies as well as three other members who have implemented their own
applications of these technologies for energy companies. We will combine thought
leadership in the application of these technologies, prior expertise in their application to
energy problems and supply chain problems, and experience in creating successful
systems for our prior energy company clients.
Prior projects. Each of the principals in VGO Oil and Gas has completed high-impact
projects for multiple energy company clients. Each of the principals has more than
twenty years of experience in industry. We are well positioned to integrate our unique
approaches to optimization with a deep understanding of the energy industry and its
problems.
Access to world-class thought leaders. VGO Associates, the incubating company for
VGO Oil and Gas, contains 26 associates, many of them world-class in their areas of
expertise. It is their novel approach to supply chain problems that has inspired our
approach to energy production systems. VGO Associates is a unique combination of
individuals who will serve as a technical advisory board and brain trust for VGO Oil and
Gas.
A new approach to software integration. We are designing our software system in accord
with the goals stated above, in order to make it a true twenty-first century answer to our
clients’ problems. Because the system will be designed and produced using uniform
standards and using techniques that go beyond those in current use, it will be much easier
to expand, modify, and tailor to client needs than the systems of our competitors.
Our Weaknesses
There are four areas that we are weakest in, and that we will concentrate on from the first
day of operations.
Sales force. We currently do our own selling, and will need to build and train a sales
force so that when the full-scale sales effort begins in Year 3, we will have a team ready
to carry out our sales campaign.
Consulting force. After year 2 we do not anticipate using our principals to carry out the
routine consulting required to specify requirements and integrate our system into client
systems. We will need to build and train a consulting force capable of smooth, effective
installations in order to achieve our milestones on time.
Financial and legal. VGO Oil and Gas has not yet started operations, and we do not yet
have an accountant or a relationship with a law firm. We need to form long-term, useful
relationships with financial and legal entities in order to profit from their advice.
Key clients. Our first order of business is to form agreements with two key clients, but
we will not do this until the company is a legal entity.
Company Description
VGO Oil and Gas will be incorporated as a software company specializing in integrated modules
for the planning and management of upstream operations for large- and mid-sized energy
companies. The principal revenues of the company will be derived from software licensing fees,
consulting fees, and software maintenance fees.
The company will be based in Houston, Texas, but will carry out its principal software
development activities in India, through a relationship with a superb software development
company with an impressive track record and with petroleum engineers and geological engineers
on retainer.
Aside from software development functions, all the functions of the company will be based in
Houston, and we will pursue our initial clients in the Houston area during our first two years of
operation.
The company will create and sell software modules that improve the effectiveness of upstream
energy company operations. The modules will be integrated, so that any subset of them can be
used together, and so that each can be used in isolation.
Our marketing and sales strategy will be to create successful and profitable applications of a few
modules in years 1 and 2 of operations, with a few key clients that we have already worked with
prior to forming the company. In year three and moving forward, we will use a more traditional
approach to sales and marketing.
We intend to grow revenues after year two through sales to new clients, through applications of
our modules at different locations in existing client operations, through the creation of new
modules, through the extension of our sales and marketing efforts outside North America, and
through an increase in the size of our marketing activities.
Our sales force will be internal, but we anticipate forming strategic relationships with other
software vendors, and may use them to market our systems and services.
Products and Services
Our central offering will be a set of software modules for the control, scheduling, and planning of
upstream operations. Following is a list of these modules, their functions, and their projected
price to our clients.
1. Data integration module. May be needed if client Information Technology departments
do not have the ability to create an interface to their data and link it to our systems.
$200K per site.
2. Drilling plan module. Used to plan a drilling schedule and test it against potential
problems. $350K per site.
3. Land rig scheduler. Used to integrate a rig schedule with the drilling plan. Considers
unexpected difficulties. $250K per site.
4. Marine rig scheduler. Used to integrate ship-based drilling rigs with a drilling plan.
Considers contingencies and unexpected problems. $250K per site.
5. Workover scheduler. Used to plan, monitor, and acquire equipment for workover
activities. $250K per site.
6. Stimulation module. Used to plan and monitor steam, carbon dioxide, and other
techniques for stimulating an oil field to improve production. $200K per site.
7. Exploitation module. Creates a model of the reservoir and finds plans for reservoir
exploitation based on multiple client goals. Includes uncertainty in its plans. $400K per
site.
8. Budgeting module. Creates budget allocations that satisfy multiple client goals. Takes
uncertainty into account. $250K per site.
9. Project management module. Allows clients to see potential project cost overruns and
late completion dates in time to react. Helps clients plan when projects are impacted by
unexpected events and delays. Interacts with client management software to produce
effective plans. $350K per site.
We anticipate developing additional modules using our integrated data management and
optimization approach as we identify needs that are not being served by existing software
solutions. This list contains the modules we are planning to create during our first three years of
operation.
Intellectual Property
Our general approach to the development of our system is in the public domain. Members of
VGO Associates have discussed our suggestions for modern supply chain management and
optimization in technical conferences, articles, and public addresses for the past four years. We
do not anticipate protecting those ideas, for they are already in the public domain.
Our specific approach to designing and implementing an integrated set of software modules that
achieve the goals listed above for twenty-first century supply chain systems is another matter.
Some features of the system design that we are currently completing are novel and have not been
placed in the public domain. We do plan to protect those with one or more patents.
Our software systems will be delivered to our clients in compiled form, and the source code for
our systems will be a critical part of our intellectual capital. We do not anticipate discussing in
public the way we design our systems for integrated optimization. We will take all reasonable
precautions to protect our system source code, including offsite backups, contractual provisions
with employees and clients protecting our rights to our software and approach, and development
of key software components in North American rather than offshore in order to retain sole access
to our software and ideas.
Management
The initial principals in VGO Oil and Gas Corporation will be Kunal Dutta-Roy, Lester Sisemore,
Lawrence Davis, Rod Sipe, Paul Bender, and George Danner. The resumes of these individuals
are included in Appendix A.
The duties of these individuals will be as follows:
Kunal Dutta-Roy, former software project manager for Invensys, IBM Global Services
consultant, and business development manager for Schlumberger, will be President of VGO Oil
and Gas, and will direct its activities. He will also play a strong role in the design of the software
modules we produce. Dr. Dutta-Roy has directed software development companies and
implementation projects over the past 20 years.
Lester Sisemore, former VP of Upstream Technology at Chevron, will specialize in economic
models that are integrated into our planning and scheduling modules. Dr. Sisemore will also play
a strong role in directing the technologies we use.
Lawrence Davis, president of VGO Associates, will specialize in optimization algorithm design,
and will serve as the interface between VGO Oil and Gas and VGO Associates. Dr. Davis will
also work to strengthen the company’s image through public thought leadership activities.
Rod Sipe, former Ernst and Young partner in the energy domain, will specialize in middleware so
that our modules can interact effectively with a wide range of software systems at our clients’
sites.
Paul Bender, world-class supply chain consultant, will specialize in mathematical and heuristic
techniques for optimization. Dr. Bender will also work to strengthen the company’s image
through public thought leadership activities.
George Danner, former Anderson Consulting partner, will specialize in information display, user
interfaces, human factors, and simulation technologies.
Ownership
The specifics of the initial ownership in VGO Oil and Gas have not been decided at this time.
However, we envisage the following ownership structure:
At startup, we anticipate an equitable distribution amongst the following:
a)
b)
c)
d)
VGO Associates, the company that incubated VGO Oil and Gas
The current management team and members of the Board of Directors
Investor(s) funding the initial two years of operation
Ownership retained for future management hires and employee incentives
We anticipate further allocation of shares in the company as it proceeds, as follows:
e)
f)
g)
h)
Head of software development to be hired at the start of the first year of operations
Head of sales and marketing to be hired during the first year of operations
Head of field deployment and consulting to be hired during the first year of operations
Investor(s) funding the optional second round during the third year of operation
Board of Directors
We have not yet created our Board of Directors. Our plans are to begin with these initial
members:
a) A VGO Associates member from outside the energy industry, to provide further liaison
between us and VGO Associates
b) Kunal Dutta-Roy, President of VGO Oil and Gas
c) Two members from key clients, to be named in the early phases of the first year of
operations (after we establish agreements with key clients)
d) A business leader from the energy industry who has had substantial experience in
transforming a small company into a larger operation.
Funding Requirements
VGO Oil and Gas is seeking two rounds of investment in Year 1 and Year 2 that total $3.0M.
The first round of $1.5M in Year 1 will fund initial operations and development of the first two
software modules. The second round of $1.5M in Year 2 will fund expansion to further modules,
development of the sales and consulting staff, and creation of a marketing campaign.
The second round of funding will be contingent on our meeting objectives in Year 1 of
operations.
Beginning with Year 3 of operations, we anticipate meeting expenses through software sales and
consulting, but we wish to work out an option in advance for an additional $1M of investment at
the beginning of Year 3 if needed, at the discretion of the VGO Board of Directors. This
investment option, if exercised by the company, would provide the investor with additional equity
in the company.
Exit Strategies
Like most high-tech startups, we envision multiple ways to provide a return for our owners and
investors.
We could continue to operate in the way we have described above, expanding our offerings,
transferring new technologies into the oil and gas vertical, increasing sales and profits, and
creating software systems that are the best of breed in supporting our clients’ operations.
We could be acquired by a larger oilfield service company. Halliburton and Schlumberger have
both grown through significant acquisitions in the past few years, and they show no signs of
changing their habits in this regard. Our success will create an opportunity for them, and it is
quite plausible that one or both of them will offer to acquire us—an offer we will be happy to
consider.
We could merge with another company. We hope that in several years’ time we will not be alone
in our approaches and successes in transferring modern technology into the upstream domain. If
so, it is possible that we would change our character dramatically through a merger or an
acquisition, either of which would have equity implications.
Conclusions
VGO Oil and Gas is a new company that will combine the best practice from supply chain
thought leaders with the decades of experience and broad range of high-impact projects that the
VGO Oil and Gas principals have carried out. VGO Oil and Gas will exploit the supply chain
expertise of VGO Associates as well as its bank of world experts on simulation, optimization, and
related topics.
VGO Oil and Gas will help its clients find new value in old assets and new ways of planning for
the future, by using techniques that have been developed in other fields and have not yet been
applied in the energy industry.
VGO provides an investor with the opportunity to participate in and direct the activities of a
company that will transform the way energy companies carry out their upstream operations. The
approaches we will use have demonstrated their potential in the supply chain area and in prior
projects in the energy area, proving that there is a great deal of financial potential in the approach
that VGO Oil and Gas will take.
Appendix:
Resumes of Principals
Kunal Dutta-Roy
President
EMPLOYMENT HISTORY
April 2006 – Present
Scicom Technologies, Houston, TX
Vice-President, Oil & Gas
Scicom is an India-based technology company with niche competencies in offshore
software development and engineering services. I have full management responsibility
for all projects and business development activities in the oil and gas sector (roughly 50
percent of overall business volume). I also manage the company’s international
operations, based in Houston.
January 2002 – April 2006
Schlumberger Oilfield Services
Schlumberger Reservoir Completions Center, Rosharon, TX
Business Development Manager, Flow Assurance
I was responsible for developing the overall business strategy to establish and grow the
company’s presence in the deepwater flow assurance arena. The primary areas of focus:



Integration of software & hardware solutions for monitoring, surveillance,
diagnostics and interpretation of deepwater operations
Application of new technologies such distributed fiber optic sensors and
multiphase boosting systems for subsea production assurance
Creation of engineering consultancy capabilities in fluid flow, heat transfer and
fluids
analysis
through
internal
training/recruitment
&
external
alliances/partnerships
Schlumberger Information Solutions, Houston
Global Product Champion, Production Engineering Applications
Business responsibility for the company’s suite of production engineering software,
including established industry-leading tools such as PIPESIM (well modeling & surface
networks) and OFM (production surveillance); as well as new acquisitions such as
DecisionTeam’s DECIDE! suite for real-time reservoir surveillance & data mining, and
FloMatic, a tool for field development planning & economics used by PDVSA in
Venezuela.
In this role, I was instrumental in forging a strategic alliance between Schlumberger and
AspenTech for developing solutions in the area of Integrated Asset Modeling (now
marketed as Avocet IAM) combining Schlumberger expertise in the reservoir modeling
and production analysis domains with Aspen’s process simulation (HYSYS) and
advanced optimization capabilities. I was also actively involved in joint “digital oilfield”
initiatives with major oil companies such as Chevron, Statoil and BP.
February 2001 – November 2001
IBM Business Innovation Services, Costa Mesa, CA
Upstream Oil & Gas Practice
Member of a select team chartered with providing business process and technology
consulting services to the upstream oil & gas industry. My primary project involved the
assessment of the impact of deploying a field-wide (300+ wells) cyclic steam injection
optimization initiative at the Cymric field (operated by CVX) in the San Joaquin Valley
(see SPE 93906 for technical details). I collaborated with industry thought leaders and
suppliers of Genetic Algorithm tools in evaluating the feasibility of applying optimization
techniques towards improving existing operational processes in the field.
1997 – 2001
Independent Oil & Gas Industry Consultant, Yorba Linda, CA
Provided advanced engineering services to field asset teams and central technology
groups in the areas of operations analysis assessment, engineering design, operator
training, and technology integration. Specific projects included:

Integrated field-wide production analysis and optimization studies:





Fully-compositional model of the Muspac-Catedral field operated by Pemex
for history matching twenty years of reservoir performance (reference: SPE
74382)
Production de-bottlenecking analysis for the Krisna-Zelda field operated by
Maxus (now REPSOL) in offshore Indonesia
Production optimization study for the Bu Hasa field operated by ADCO in
Abu Dhabi
Production optimization analysis for sections of the Yibal and Al-Huweisa
fields operated by PDO/Shell in Oman
Transient analysis studies for engineering design & operations planning:




Field deployment of real-time transient modeling tools for monitoring pipeline
transmission operations in the areas of leak detection, product tracking, and pump &
compressor operations diagnostics:





Surge analysis for the Ameriven heavy oil pipeline transporting
emulsions/diluents cross-country from the Orinoco Basin in Venezuela
Surge analysis for the Cerro Negro heavy oil pipeline (Hamaca field, also in
the Orinoco Basin).
Impact of compressor shutdown/startup on pipeline operations and safety for
the 1200-well gas/condensate gathering system in the Burgos field (operated
by Pemex).
Real-time monitoring of PdVSA’s gas distribution network in Venezuela
Predictive modeling of an offshore gas/condensate transport pipeline operated
by PTT (Bongkot-Erawan-Khanom)
Tracking compositional fronts for the Zeepipe/Statpipe system in the North
Sea
Monitoring product movement for batched pipelines operated by Indian Oil
Corp., DOPCO in Korea, and RECOPE in Costa Rica.
Collaborated with commercial application software vendors SIMSCI (PIPEPHASE),
Schlumberger (PIPESIM), Scandpower (OLGA), Energy Solutions (TGNET) and
Nitech (Lynx/Styx) in seminars, training courses and sales presentations relating to
production optimization, flow assurance and pipeline modeling.
1994 – 1997
Simulation Sciences (SIMSCI), Brea, CA
SIMSCI (since acquired by Invensys) is a provider of applications software to the
petroleum industry.
1994-1997, Manager, Fluid Flow & Heat Transfer Applications
My primary objective was to extend the company’s market-leading process simulation
capabilities to the upstream oil & gas production analysis arena through a change in solution
strategy and market focus. Primary accomplishments included:

Led the reorientation of the company’s multiphase network analysis program
PIPEPHASE away from its traditional in-plant and pipeline applications base to focus
on oil and gas production analysis.

Initiated, designed, and internally promoted the concept of NETOPT, an integrated
production optimization tool. Subsequently led the development effort through
technology partnership (Mobil Research’s nonlinear SQP optimization), and
integration with third-party solutions (Geoquest’s ECLIPSE reservoir simulator).

Commercialization of IFP’s transient multiphase flow simulation code TACITE.
1984 - 1993
Scientific Software-Intercomp (SSI), Houston
SSI’s Pipeline & Facilities division (now Energy Solutions International) pioneered the
use of simulation and optimization tools in the real-time pipeline operations environment
for monitoring and control applications such as leak detection, inventory management,
product tracking, and pump/compressor operation.
Positions held:
1991-1993, Manager, Pipeline & Production Facilities Consulting Team
I led a team providing engineering analysis and systems integration services in pipeline
monitoring and oil and gas production. Typical applications included leak detection,
quality/front tracking, predictive and look-ahead modeling, and online optimization.
1989-1991, Senior Consultant, Real-Time Projects
Projects involved the building of robust, accurate simulation models of pipeline gathering,
transmission & distribution networks driven by field measurements in real/relevant time from
SCADA/DCS.
1984-1989, Pipeline Engineer
Member of software development and applications engineering team responsible for
supporting, maintaining and enhancing the company’s suite of transient and steady-state
pipeline analysis applications. These included TGNET and TLNET for transient analysis,
and MTRAN and HCOMP for steady-state multiphase flow modeling. My primary
contributions were in the development of compressor modeling capabilities, front
tracking algorithms, and in the implementation of network optimization solutions.
1979-1984
Tulsa University Fluid Flow Projects (TUFFP)
Research Assistant / Associate
I conducted research into the analysis of transient multiphase flow phenomena in pipes in
support of my MS and PhD dissertation. While the primary focus was on numerical model, a
part of the work involved the experimental validation of the results in a 1300-ft 3-inch test
facility.
1980-1984, Consulting Engineer (part-time, while enrolled full-time in Graduate School)
Brill Engineering, Tulsa, OK
Fluid Flow Engineering, Tulsa, OK
Brill Engineering and Fluid Flow Engineering were university-based consulting
companies run by my thesis advisors, Prof. J.P. Brill and Prof. Z. Schmidt, respectively.
Typical consulting studies involving software development, model building &
interpretation in the areas of multiphase flow analysis and nodal analysis. Significant
projects I was involved with included the development of the industry’s first mechanistic
severe slugging model for a North Sea pipeline-riser system (SPE 12334), and an
evaluation of gathering system configuration options for a large offshore field in the
Middle East (SPE 11517).
EDUCATION
1984, PhD, Petroleum Engineering, University of Tulsa, Tulsa, Oklahoma
Dissertation: Transient Phenomena in Two-Phase Horizontal Flowlines for the
Homogeneous, Stratified and Annular Flow Patterns
1982, MS, Petroleum Engineering, University of Tulsa
Thesis topic: An Investigation of Transient Phenomena in Two-Phase Flow
1979, MBA program (incomplete), Indian Institute of Management, Ahmedabad
1979, B.Tech., Petroleum Engineering (First Class, Honors), Indian School of Mines,
Dhanbad
Field training at Ankleshwar and Sibsagar fields operated by ONGC and Duliajan (Oil
India Ltd.).
Lester Sisemore
economic analysis and technology leadership
Former VP of Upstream Technology for Chevron’s New Orleans business unit.
[full resume will be included in the next draft of this document]
Lawrence “David” Davis
Optimization algorithm design and liaison to VGO Associates
Employment History
President and founder, VGO Associates, Newbury, MA. 2006-present.
Chief Consulting Scientist, NuTech Solutions, Inc. Newbury, MA. 2000-2005.
President and founder, Tica Associates and Tica Technologies Inc, Cambridge, MA.
1990-2000.
Lead Operations Research Engineer, Manugistics, Inc. Rockville, MD, 1998-1999.
Senior Scientist, BBN Laboratories, Artificial Intelligence Department, Cambridge, MA.
1985-1990.
Artificial Intelligence Researcher, Computer Science Laboratories, Texas Instruments
Inc, Dallas, TX, 1982-1985.
Systems Analyst, Intelligent Software Systems, Amherst, MA, 1981-1982.
Assistant Professor, Philosophy Department, University of Hawaii, Honolulu, HI, 19781981.
Principal Responsibilities and Projects
Am an internationally recognized authority on the use of genetic algorithms for
optimization. I have edited one book on this topic, wrote/edited a second, and am writing
a third. I created an eight-hour video presentation on genetic algorithm applications that
sold many copies. I wrote a software system that has been marketed in the field since
1990. I have pioneered many of the techniques that are now being used to apply genetic
algorithms to solve practical problems. I have been on the Program Committee for the
international conferences on genetic algorithms during the past fifteen years, have given
the conference tutorial on applications three times, and have lectured widely on genetic
algorithms and their applications. I helped found the Evolutionary Computation in
Practice track for these conferences, and have participated in its organization each year. I
have been a columnist on genetic algorithms applications for a high-technology
newsletter, and have reviewed genetic algorithm papers for five computer science
journals and many conferences. I am on the editorial board of Evolutionary Computation
and Heuristics, and referee papers for many conferences.
As President and co-founder of VGO Associates, I head the administration, sales, and
consulting coordination efforts of VGO.
At NuTech Solutions, I managed the New England office. I led data mining and
optimization projects, and headed the projects implementing two systems for company
use: HEURO and XCS. I specialized in systems related to logistics and oil production
optimization. I led a project with ChevronTexaco that produced a system to schedule the
steaming of wells in a heavy oil field. I led a project with Oxy that transformed the way
they think about well workover operations. I also led several prototype projects related to
optimizing production and flow for simulated pipelines. I was project manager for a
large-scale supply-chain system for a pipeline client in Texas.
At Manugistics, I created genetic algorithms and heuristics to solve industrial scheduling
problems and wrote the genetic algorithm code that is used to optimize in the early stages
of the supply chain.
At Tica Associates and Tica Technologies, I directed a series of studies on applications of
genetic algorithms to securities trading, a series of projects extending over three years.
At Tica, I carried out a series of studies for U S West on optimization of
telecommunication network message routing, on telecommunication network design, and
on pattern recognition algorithms.
At Tica, I wrote the prototype of most parts of the pilot’s cognitive system for the
MIDAS simulation system for NASA Ames. This system is being used to simulate the
behavior of pilots involved in high workload situations, and is being used to determine
procedures that pilots will be required to follow when free flight is instituted.
At BBN, I was the Technical Director of a project that built an expert system for the
Internal Revenue Service that decides which tax returns to audit, and for what issues.
When fully fielded, it is likely that this system will produce the greatest return of any
expert system ever built, owing to economies of scale.
At BBN, I designed a simulation system for testing telecommunication network design
protocols. I trained the network analysis team in artificial intelligence programming
techniques and led the programming effort.
At BBN, I was system architect of and principal programmer for a human factors
simulation system for NASA Ames. The system simulates the visual, cognitive, auditory,
and motor loads on pilots during flight. The human factors core of this system was used
in many other projects at BBN.
At Texas Instruments, I initiated a genetic algorithm study project that yielded several
papers and prototypes of two commercial applications of the technology.
At Texas Instruments, I developed expert system, simulation, and interface tools for an
intelligent front end to a seismic data processing system that contains five million lines of
FORTRAN code. I instructed the nine-person team that implemented the system on the
topics of LISP programming and artificial intelligence techniques.
At Texas Instruments, I helped develop an expert system shell in PROLOG, and
consulted on the expert system shell developed for the TI personal computer.
At Intelligent Software Systems, I led the programming of a software system for a small
New England foundry. The system did inventory tracking, assisted in scheduling, and
performed cost control functions.
I was a professor of logic, formal semantics, modern philosophy, and philosophy of
science as a philosophy professor at the University of Hawaii.
Books
Currently completing a book titled Very Good Optimization, to appear in 2007.
Am a co-editor of a book titled Evolutionary Optimization in Practice, to appear in 2007.
Wrote an extended tutorial and edited the other chapters of Handbook of Genetic
Algorithms, Van Nostrand Reinhold, 1991.
Edited Genetic Algorithms and Simulated Annealing, a volume in the Pitman Series on
Artificial Intelligence. Pitman Publishing Limited, London, England, 1987.
Videos
I produced Genetic Algorithms Made Easy, a 16-hour video course on genetic algorithms
and their applications. I was the speaker in the final eight hours of the course, on genetic
algorithm applications.
Oral Presentations
I have given invited presentations on genetic algorithms and their applications at 21
universities and more than 100 commercial organizations.
I have presented computer science papers or tutorials at 32 conferences, nearly all of
them refereed.
Papers and Publications
I have published over forty refereed papers and articles, primarily in the area of genetic
algorithm applications. A partial listing follows.
Education
Ph.D., M.A., Philosophy, University of Massachusetts at Amherst, 1978. Teaching
Assistant, Teaching Associate.
B.A., Philosophy. University of Colorado at Boulder, 1968.
Rod Sipe
Data integration specialist
20 years at Ernst and Young, where he was head of the Natural Gas practice.
Active in creating BiosGroup, the first company to apply complexity science techniques
to the energy industry.
Currently head of EnCORE Alliance Partners, a company specializing in the creation of
new solutions for the energy industry.
[full resume will be included in the next draft of this document]
PAUL S BENDER
Optimization specialist, supply chain thought leadership
Position
President of P S Bender & Company, LLC a company based in Miami, Florida, U.S.A.,
offering worldwide services in management consulting, research & development,
facilitation and executive education.
Career
Acknowledged as a world-class expert in supply chain and logistics management, has
worked more than 30 years as a senior management consultant, mostly with his own
company, and 8 years as a high-level executive with International Paper Company, VF
Corporation, and ITT Industries.
Education
Degrees in Mathematics, Engineering, Operations Research and Information Science.
Studied at the Massachusetts Institute of Technology, the Swiss Institute of Technology
and the Polytechnic School in Paris.
Languages
Speaks six languages and has worked, lectured and published throughout the United
States, Canada, Latin America, Europe, Middle East, Africa, China, India, Japan, Korea,
Australia, New Zealand, and Southeast Asia.
Work
Focuses on the development and application of advanced concepts, quantitative
techniques and automation technology to the solution of complex management problems.
Has developed many original management concepts, methods and techniques, including a
comprehensive model for global management under risk and uncertainty.
Specializes in supply chain and logistics management, with emphasis on the strategic and
tactical aspects of integrated purchasing, production, distribution, sales, and customer
service.
Has helped clients develop innovative strategies, turnaround problematic situations and
implement advanced concepts and techniques offering major strategic competitive
advantages.
Experience
Has completed more than 1,200 consulting projects for over 450 clients across the world.
Most of those projects included one-on-one advisory services to senior executives. His
clients include a wide variety of business and governmental organizations with annual
revenues or budgets ranging from US$100 million to over US$250 billion.
His clients include AmBev (Brazil), Australian United Foods, AT&T, Bowater, Bunge y
Born (Argentina), Campbell Soup, Canadian Pacific Forest Products, CEPSA/DISA
(Spain), Cemex (Mexico), Coca-Cola, Compagnie de Saint-Gobain (France), Danone
(France),
Dominion
Stores
(Canada),
Dow
Chemical (Europe), Edgars Group (South Africa), Esso, Federal Mogul, Ford Motor
Company, Fletcher-Challenge (New Zealand), Frito-Lay, Foster's Brewing Group
(Australia), Fujitsu (Japan), Georgia-Pacific, Générale Biscuit (France), General Electric,
General Mills, General Motors, Groupe Bull (France), Grupo Gerdau (Brazil), HewlettPackard, IBM Corporation, International Paper, ITT Automotive (Europe), Kawasaki
(Japan), The Kellogg Company, Lee Company, L'Oreal (France), Loblaw (Canada),
MAN (Germany), The Mahaphant Group (Thailand), Melbourne Water (Australia), 3M
Company, Mobil, Molinos Rio de la Plata (Argentina), Maremont/Gabriel, Monsanto,
Motorola, Nestlé (Switzerland), Nordstrom, North American Van Lines, NTT (Japan),
Pakhoed, Packaging Corporation of America, Penney, Pepsico, Peters Foods (Australia),
Pfizer, Ponderosa Industrial de Mexico, PPG Industries, Repsol (Spain), Roadway,
Rockwell International, Santista Alimentos (Brazil), Sara Lee (Netherlands), SEAT
(Spain), Siemens (Germany), Sony Corporation (Japan), Spanish National Railroads
(RENFE), Tenneco Automotive (Europe), Tenneco Paper, TNT Transportation
(Australia), Unilever (United Kingdom), United Parcel Service (UPS), United States
Postal Service, Volkswagen do Brasil, White-Martins/Praxair (Brazil), Whirlpool
Corporation, the U.S. Departments of Commerce, Defense and Transportation, the
French Ministry of Research and Technology, the Spanish Ministry of the Interior, and
the Congo Republic's Ministry of Transportation.
Benefits
Using his integrated optimum management approach, his clients have documented major
performance improvements and savings far exceeding a total of US$10 billion. Their
improvements, measured as percentage of cost reductions obtained, can be summarized
as follows:
SCOPE Minimum Average Maximum
Strategic 5 12 25
Tactical 4 8 15
Operational 3 5 10
Lecturing
Has lectured at the Massachusetts Institute of Technology, Stanford University, Columbia
University, Northwestern University, Georgia Institute of Technology, the U.S. Air Force
Institute of Technology, the American Management Associations, the Federal University
of Rio de Janeiro in Brazil, the Chinese Mechanical Engineering Society, the Institute for
Logistics of the People’s Liberation Army of China, Beijing University, TsingHua
University in Beijing, the Singapore Institute of Systems Science, the Japan Institute of
Systems Research, the Indian Institutes of Technology in New Delhi, the University of
New South Wales in Australia, the Imperial College of Science and Technology in
London, the Polytechnic School in Paris, the Royal Institute of Technology in Stockholm,
IBM Corporation, General Electric, The Conference Board, The National Academy of
Sciences, the U.S. Departments of Defense, Commerce and Transportation, the United
Nations Commission for Trade and Development (UNCTAD), and many other
professional
and
technical
organizations
throughout
the
world.
Professional Activities
Served as Chairman of the Customer Service program at the American Management
Associations (AMA).
Served in the Executive Committee of the Council of Logistics Management, now
Council of Supply Chain Management Professionals (CSCMP).
Served as Director of eight international executive missions to Japan to study state-ofthe-art manufacturing and logistics technology there. Was appointed by the Technology
Transfer Institute of Tokyo, then an affiliate of Japan's Ministry of Economics, Trade and
Industry (METI).
Current member of the Editorial Review Boards of the U.S. Journal of Business
Logistics, and the Asia-Pacific Logistics Journal.
Publications
Has published more than 60 articles and technical papers in a wide variety of
publications, including the Harvard Business Review, OMEGA The International Journal
of Management Science, INTERFACES of The Institute of Management Sciences, the
International Journal of Physical Distribution and Materials Management, the Journal of
Business Logistics, the Supply Chain Management Review, and Inside Supply
Management.
Has authored and co-authored several books containing original concepts, methods and
techniques. Author of "Principles of Physical Distribution System Design", (Marketing
Publications, 1971), "Design and Operation of Customer Service Systems" (American
Management Associations, 1976), translated into Japanese, French and Spanish, and
"Resource Management: An Alternative View of the Management Process" (John Wiley
& Sons Inc., 1983), translated into Spanish. Coauthor of "The Economics of Information
Processing" (John Wiley & Sons Inc., 1982), "Using Logical Techniques for Making
Better Decisions" in the Harvard Business Review Executive Book Series (John Wiley &
Sons Inc., 1983), "The Distribution Handbook" (The Free Press, 1985), "Handbook of
Logistics & Distribution Management" (Gower, 1990), "The Distribution Handbook"
(McGraw-Hill, 1994), “The Supply Chain Handbook” (2002), Global Supply Chains in
“The Handbook of Supply Chain Management” (Tompkins, 2004).
Is currently working on a new book: "21st Century Management". The book will present
original concepts, methods and techniques for the design and management of enterprises.
It will focus on the use of informational and behavioral technologies and scientific
management of risk and uncertainty to serve worldwide customers while maximizing
benefits.
George Danner
Simulation and interface specialist
[full resume will be included in the next draft of this document]