OCI Revised Organization Constructs, Part IX

 Summary & Conclusion

Culture and performance move together.

Safra Catz, CEO Oracle

It is People, Ideas & Objects opinion and hypothesis that the extent of the damage and destruction that has occurred in oil & gas is extensive. The failed business model of being wholly dependent upon outside financing to “build balance sheets” was discovered to be what it is by the investors in 2015. As a result the subsequent cancellation of new money coming in has caused producers to stumble forward on the cash flow generated from the weak assets they’ve developed. Not having to have performed at any point in the past four decades allowed the industry to become unproductive and uncompetitive. Since 2015 nothing has changed other than a steep trajectory downwards as these producers believed it was only “a matter of time before investors would rush back in.” 

The question becomes not so much about the state of affairs of the industry but what will happen in the mid to long term. Do our expectations of what this industry will be able to do in the future meet reality? Profits are the only source of capital large enough to satisfy the broad scope of industry and producer demands. What we know and understand through the development of these Organization Constructs is that they form the culture of the greater oil & gas economy. And none of these apply to the current state of producer firms. Which is best represented by stating they don’t understand they’re not profitable, they don’t know how to be profitable and are not motivated to become profitable. 

To resolve the current difficulties that plague the North American oil & gas industry demands that we organize an approach to how it’ll be resolved. That is the work that People, Ideas & Objects, our user community and their service provider organizations propose to do with input from the new oil & gas, service and all the tertiary industries involved in the greater oil & gas economy. Software is what defines and supports the organization in today’s society. Serendipity, spontaneous order and creative destruction have been hamstrung by the fact that software constrains an organization in proverbial cement based on its current process management definition. To make any organizational or process change has to be orchestrated through the software first in order to have the change take effect. Otherwise the organization will quickly regress back to the software definition of the existing process. This is the result of our dependence on Information Technology and is what we’ve called a modern day software bug. One that has cost the oil & gas industry its prosperity as officers and directors took this knowledge, never changed their organizations ERP software and therefore sealed their method of management. 

We’ve attributed the industry's destruction to chronic overproduction of oil & gas, or as we describe it, unprofitable production and excessive overhead costs. Which have both occurred systemically throughout North America as far back as July 1986. All that was necessary to reverse these difficulties was to shut-in any unprofitable production. Businesses recognize that overreported assets beget equal and commensurate overreported profitability, attracting disproportionate volumes of investors who in turn create overinvestment leading to the inevitable overproduction and the continuation of unprofitable production. This was done through a number of accounting methods that we’ve documented throughout the history of these writings. This became apparent and obvious in the downswing that began in 2009 with shale gas volumes destroying the natural gas marketplace, the oil markets experiencing the same characteristics which led to investors exiting the industry in 2015.

In terms of the categories of systems difficulties being experienced in oil & gas. The traditional cottage industry approach of cobbling together some code to build a system is woefully inadequate in terms of today's oil & gas industry needs. Yet there are iterations of these products that dominate the oil & gas market today. Products that consist of consolidations of small providers who were cobbled together for financial survival purposes in an attempt to service the producers. Or SAP’s approach of their custom integrations in each and every producer that’s purchased their system, based on SAP’s standard configuration of a manufacturing concern. Another category of systems related difficulty being experienced today is in the producer organizations who’s history extends over decades and may also have picked up a rival producer or two along the way. Their systems are best described as legacy systems that their IT departments maintain and support. 

The question I have is how will oil & gas survive and prosper in their difficult and challenging future? Which is the best approach? Or does “muddle through” get it done. The legacy applications of producers today are failing due to the organizations demands on the products are not what they were designed for. I would suggest the key issue facing each and everyone of these classifications of systems used in North American oil & gas are the age of the products, but most importantly of all, the overall producer organization has failed. 

The persistence and energy by the status quo to maintain these systems, and the fact the ERP providers exist on shoestring budgets, is remarkable. The question then becomes how do we rebuild the industry to achieve the dynamic, innovative, accountable and profitable foundation necessary? People, Ideas & Objects, our user community and their service provider suggest it is on the basis of the Preliminary Specification which in turn uses the basis of the culture as described in these seven Organizational Constructs. Based on today’s Information Technology. 

Oracle Cloud Infrastructure

The values that Oracle and People, Ideas & Objects share has always been strong. Focused on quality products and services, cultural influences such as this series on Organizational Constructs reflects and the emphasis on innovation. 

Investors ceased additional funding as a result of the betrayal they felt when producers overstated their asset values and profitability. A process that began in the late 1970s and continues today. Their accounting does not reflect the situation accurately. Producers state that their accounting is fully compliant with the SEC requirements, of which it is. Which is a liberal and uncompetitive interpretation of the regulations that has unintended consequences reflecting ill intent on behalf of the producers. Since 2015 no remedial action to change these methods has been undertaken by producers. They’re waiting for investors to return and fund their capital programs. 

Conflict between producers and People, Ideas & Objects rages at epic levels. In oil & gas this conflict is also evident in the dealings industry has with Oracle. How much of this disarray in the systems area of the producers is attributable to their desire to have an obscure, non-transparent level of accountability, as we’ve suggested. And are poor quality ERP systems, due to the lack of appropriately funding them, producers viable scapegoat that keeps on giving. Much as the producer officers and directors contend that investors need to return to fund the industry again. Producers' capacity to change has been tried and tested, and found to be inadequate. Decisions need to be made to deal with the consequences of their actions of the past many decades.

OCI Revised Organization Construct, Part VIII

 New Growth Theory

People, Ideas & Objects have taken the administrative and accounting resources of the North American producers and reorganized them in order for independent, individual service providers to be able to focus on one process and turn producers' overhead costs variable, based on profitable production. In turn none of the producer's costs are fixed in the Preliminary Specification. Creating six substantial value propositions that are tangible and clearly evident. Which include:

• Maximize producer profitability by not diluting corporate profits through the production of unprofitable properties.
• Save the producers petroleum reserves for when they can be produced profitably.
• Reserves would no longer need to recapture the additional costs of past prior losses as future profits.
• Reserves are seen as a cost free means of inventory and storage.
• Removing the marginal production from the commodity markets ensures that prices dictate market activities. 
• While shut-in producers can focus their innovativeness to increase production, reserves or cut costs of the property and return it to profitable production.

Secondly and possibly more substantially in terms of being able to build value for the greater North American oil & gas economy. Specialization and the division of labor which has proven to be the primary method of building all of the tangible value for western civilization since 1776. There’s been no other method and therefore the application of our reorganization of the administrative & accounting resources based on these principles builds value to ensure profitable operations. The ability to further enhance the industries productivity through specialization and the division of labor will add unknown, unquantified and unqualified means in which to do so. This is facilitated through our permanent software development capability, our user community, the implementation of these principles in their service provider organizations and their iterative approach to enhance the Preliminary Specification. 

We have adopted an incremental method of building value on top of these two methods through the adoption of Professor Paul M. Romer’s “New Growth Theory” of non-rival costs. In a December 1, 2001 Reason article he summarized his theory as “People, Ideas & Things.” I adopted this principle and named this initiative People, Ideas & Objects as we are object based software developers. We’ve applied “New Growth Theory” and non-rival costs throughout the Preliminary Specification and elevated it to the level of an Organizational Construct. Standing on the shoulders of giants and most specifically Adam Smith’s Specialization and Division of Labor. Professor Romer has elevated business thinking in this direction and it is a new frontier in building value for organizations through the mitigation of costs in substantial yet unquantifiable ways and enhancing the performance of those that use these methods. 

Professor Romer’s theory is the basis of how cloud computing has brought such value to our economy. Users are able to share the costs of the heavy capital investment in technology, the capacity, capabilities, resources, maintenance and support costs on a variable basis, variable based on usage. Conversely providers are able to enhance their service offering through specialization and division of labor that would be otherwise unavailable to individual organizations. We have extended this thinking to include not only Oracle Cloud ERP but to add oil & gas administrative and accounting to the managed shared and shareable resource. Eliminating the need of each producer to build, resource and maintain the necessary non-competitive accounting and administrative infrastructure they need as dynamic, innovative, accountable and profitable oil & gas producers. Providing a standard, objective and value driven service that shares the sole objective of ensuring oil & gas producers achieve the most profitable means of oil & gas production, everywhere and always.  

The capture and implementation of Professor Romer’s theories are one of the seven Organizational Constructs of the Preliminary Specification. All seven are focused on building value for the producer firms and a tangible means to do so. They are available through the Preliminary Specification, our user community and their service provider organizations in this proposed configuration. They’ll be established with a permanent software development capability and user community that will iterate on these principles to bring further value over time. 

Professor Paul M. Romer

Published in October 1990 “Endogenous Technological Change” became the foundation of “New Growth Theory” in economics that has developed and is providing value throughout the economy through its application. In a Reason Magazine interview Professor Romer was able to explain many of the points of

Growth in this model is driven by technological change that arises from intentional investment decisions made by profit-maximizing agents. The distinguishing feature of the technology as an input is that it is neither a conventional good nor a public good; it is a non-rival, partially excludable good. Because of the nonconvexity introduced by a nonrival good, price-taking competition cannot be supported. Instead, the equilibrium is one with monopolistic competition. The main conclusions are that the stock of human capital determines the rate of growth, that too little human capital is devoted to research in equilibrium, that integration into world markets will increase growth rates, and that having a large population is not sufficient to generate growth. S71

Professor Romer won the 2018 Nobel Prize in economics for these principles. They are an incremental value-add to the traditional specialization and division of labor that has carried that weight exclusively until now. It is this principle of sharing non-rival costs that will mitigate what we believe to be the secondary reason for the systemic lack of profitability in oil & gas. High overhead costs are currently at the corporate level and we have shifted those to charge the actual, factual overhead costs as incurred by the service providers' billings directly to the individual Joint Operating Committee. There they become a cost of the properties product that is captured in the profitable price of the commodities sale. And therefore recaptured and returned through the sale to establish a cash float to be used for the subsequent months overhead costs. Currently producers capitalize their overhead and therefore are selling their product below cost and not recovering the cash that is incurred in the monthly overhead expenses. As they indeed state they are “putting cash in the ground.” Having to source new cash to finance their overhead expenses. Each month.

By sharing the administrative and accounting infrastructure, turning these costs variable based on profitable production, and applying specialization and the division of labor to the administrative and accounting areas through the development of our user communities service providers. People, Ideas & Objects are adding real value to the North American producers in terms of resolving what can be stated as their largest impediments to profitability. Chronic overproduction, or unprofitable production as we describe it and high overhead costs. Which leads to their unique characteristic and phenomenon of “putting cash in the ground” and “building balance sheets.”   

Oracle CloudWorld 2022 Conference

It was during this conference it became apparent that Oracle was pursuing the incremental value adding process that Professor Romer defined in his paper “Endogenous Technological Change.” Augmenting their generic business processes with service providers such as banks and logistics companies with fully optimized and integrated services with Oracle Cloud ERP, just as People, Ideas & Objects are approaching the unique oil & gas attributes. Each of us has an extensive software development workload ahead. I see at least 20 years of work to be done in this area. Incrementally building value upon prior innovations. 

The best example provided during the conference was the expense reporting features that were done with J.P. Morgan, Chase. Use of their credit card for business purposes would enable the user to select the classification of the type of expense. Then Oracle Cloud ERP would evaluate the charge based on the company's policies and determine its eligibility. If eligible it would be processed and payment made to the employee or the credit card company. Eliminating the massive number of hours and costs that are incurred in the process of expense reports by organizations during the year in their current systems to a few milliseconds of processing time. Whereas the cost to the organization to use Oracle Cloud ERP is incidental in terms of the time of Oracle Cloud Infrastructure and the engineering incurred to develop the specific system. These software engineering costs are amortized across the global population of Oracle Cloud ERP customers using the feature. To a lesser extent People, Ideas & Objects provide this level of service to the North American producers for their unique oil & gas attributes. The lesser extent being a result of the smaller population of users in oil & gas that we are targeting this development and implementation towards. Nonetheless North American producers have the opportunity to realize both the Oracle and People, Ideas & Objects innovations concurrently and at substantially reduced costs due to the theories of Professor Paul Romer. 

OCI Revised Organization Constructs, Part VII

 Information Technology

The Information Technology environment and the revolutionary impact that these have had on business in the past number of decades in terms of improved productivity, performance increases and leveraging value out of new business models. The promise of additional performance and productivity enhancements are just around the corner as these technologies have now matured, are more integrated and therefore able to provide businesses with even greater value. The key technology today and the one that we’re leveraging in this community is the establishment of cloud technologies. Introducing a shared and shareable cost model across its users. This is how People, Ideas & Objects et al sees this change. Instead of incurring large capital costs to acquire capabilities, manage complex systems and maintain resources in non-competitive administrative areas of their firms. Users are able to access their needs as a monthly operating cost. The shared and shareable cost model doesn’t end there. The costs of providing those services are provided on a variable, or as used basis. The producer's users will be provided with the most recent applications and the quality of technology service and support is increased through a further definition of specialization and division of labor. People, Ideas & Objects see cloud technologies as revolutionary to oil & gas. Having oil & gas producers accessing the same state of the art IT capabilities, capacities and infrastructure at low, variable and affordable prices would enable producers to participate in the expected future performance, productivity and value enhancements that they choose to. 

People, Ideas & Objects et al sees a further extension beyond the IT infrastructure, software, service and support. We have adopted the shared and shareable cost methodology of cloud computing and applied it throughout the oil & gas administrative and accounting processes and functionality conducted in the Preliminary Specification, our user community and their service provider organizations. What we call "Cloud Administration and Accounting for Oil & Gas." If we look at the difficulties of “what, how and why” producers are consistently unprofitable. We see the high overhead costs that are incurred within each producer are what we consider to be the secondary issue causing a systemic lack of corporate profitability. Building the necessary administrative and accounting capacities and capabilities, particularly in this regulatory environment, is costly to achieve and maintain. These high overhead costs are incurred by each and every producer on an independent, isolated, or unshared and unshareable basis by each one of the producers today. These are not core strategic competitive advantages. They are not competitive advantages from any point of view or perspective of the oil & gas producer. 

Attaining state of the art administrative and accounting capacities and capabilities are not seen as a necessity or desirable part of the producer as we’ve witnessed and are unfortunately experiencing. If anything, People, Ideas & Objects' multi trillion dollar value proposition should show that the need for attention in the area of managing the business more effectively and efficiently is necessary, desirable, achievable and tangibly valuable. Our shared and shareable business model through Cloud Administration & Accounting for Oil & Gas will achieve the variable, industry based administrative and accounting state of the art capabilities and capacities. This will be done with lower, variable overhead costs based on the producer's profitable production profile. 

When we listen to customers who have implemented Oracle Cloud ERP applications within their organizations there are a number of consistent and interesting messages coming through. The first is that their roles in senior management and officers of the firms change. They begin dealing with the prospective changes that are coming in the quarterly release of upgrades of the Oracle Cloud ERP offering. These are now in the area of around 200 individual "additions" per quarter. Note, the Preliminary Specification will also have their own specific additions once operational. These additions would either be the concern of the producers senior management or as we propose in the Preliminary Specification, our user community and service providers as the two possible means of dealing with them. The majority of these additions would be handled by our user community under the People, Ideas & Objects et al model and implemented, maintained and supported by their service providers. Input from the producers, as always, being funneled through to our user community, consolidated and optimized from the producers point of view. Let’s therefore put this task in the shared and shareable category of what a senior management and officers role consists of. Ensuring effective and efficient management of the producer's processes, both from a time, effort, cost and reduction of error perspective. Which brings up an important question. Who’s in control of this entire ERP ecosystem as proposed by People, Ideas & Objects et al? It will be the new greater oil & gas economy and most specifically the new producers who our users look to for input of any and all information. Our user community are deaf, dumb and blind to any others. Our software developers are deaf, dumb and blind to all others except our user community. 

The traditional approach to having a distinct ERP system that caters to the needs of a specific industry is to customize the vendor's application to do so. The vendor application sitting on top of the ERP system. This is not recommended by Oracle, and People, Ideas & Objects have adopted their policy in our user community and service provider licenses. Stating that all customizations, as Oracle defines them, of the application are to be avoided at all costs. This certainly seems to be at odds with what it is that we’re doing. The point is subtle and is a distinctive characteristic of the Oracle Fusion Applications. Other than Workday they are the most recently written applications of all ERP systems. They were the first ERP systems to be written in the Java Programming Language which introduces the full object model to those applications. The Fusion Applications are supported by the Fusion Middleware which is an advanced Java Server with expanded ERP function and process management written by the Oracle Fusion developers. Oracle Fusion Middleware is the base of the Oracle Fusion Applications. It is also the base of any “additions” that are written to provide industry specific application capabilities to the Oracle Fusion Applications. Using the object orientation features of encapsulation, inheritance and polymorphism. Enabling People, Ideas & Objects to embed the oil & gas industry features directly into the Oracle Fusion Applications through the Middleware as “additions.” 

Oracle’s method avoids a key difficulty in the environment where the needs of the users and producers are dynamic, innovative and rapidly changing. Any system changes at the Oracle Cloud ERP, or Fusion Application ERP level are therefore not going to necessarily break any of the People, Ideas & Objects customizations that sit on top, as there will be nothing there. The new quarterly release of Oracle features will be embedded with the “additions” from People, Ideas & Objects in the Fusion Middleware and therefore, as they too are object based, updated with the new features or unaffected by them without any of our additional developer involvement unless there are some exceptions during compile time. 

People, Ideas & Objects have chosen to pursue our user community, research and Intellectual Property as the three areas of our competitive advantages. None of these involve the development of the software code. We’ll own and provide the software code that is derivative of the Preliminary Specification and our Intellectual Property. We have contracted all of our software developments to Oracle Corporation. Their services division are well versed in their products delivery through its development and are provided as a service and capable. We believe we would need to dedicate at least a half decade in order to assemble a team of the size capable to deal with this project and then an unknown amount of time necessary to turn them into a functioning capable team competent to put out the quality of software necessary. We’ve been working on the development of our user community since the first quarter of 2014. A task we’ve assigned as our priority since then and one that will differentiate our product offering in terms of quality. Time is not the commodity available to the producers at this stage. Focusing on our user community and the IP aspects of this project is a better use of our time, resources and skills. It’s also where we see we can build value for the producers and how the software’s quality is best achieved. It is consistent with our belief that specialization and the division of labor will need to be applied to all aspects of the economy and by contracting development to Oracle we can do a better, more productive job.

If producers officers and directors believe these ERP developments can be done within their organization then why hasn’t that happened? Our scope of application development in the Preliminary Specification would be considered equal to what each and every one of the producers would need to undertake if they chose to continue to go it alone in their unshared cost model. The main difference is in terms of scale and its relative cost implication. Sharing the costs of People, Ideas & Objects development is substantially less than what the aggregate of each individual producer would otherwise need to expend. To acquire just the depth of understanding and detail necessary of the Oracle Cloud ERP offerings would require the same costs being incurred and replicated across the industry in each and every one of the producer firms. And that's assuming producers had a workable, profitable business model, or have a viable model developed within the next decade. A model that does not conflict with the Intellectual Property contained here. 

I could be reading things differently regarding the producers shareholders and bankers expectations. 2015 was when they began to express their discontent with the industry at large. The industries lack of performance, accountability and transparency were identified as issues by them at that time. I, like others, would never have assumed that eight years of comprehensive inaction was a tolerable amount of time. 

Throughout our writings we have alleged the accounting conducted by producers over the past four decades, and particularly the profitability reported, is specious. That overhead and other costs are handled inappropriately. Raising serious governance issues that have now resonated throughout the investment community and elsewhere with similar concerns. This accounting allegation of ours is that the specious accounting conducted throughout the industry is best obscured through poor ERP systems. Governance over the quality of the accounting and the companies systems has become an issue at the level of the board of directors in the past few years. However, in addition to the accounting, the ERP systems that are used throughout the industry are woefully ineffective. There are no tier 1 ERP systems providers selling oil & gas systems today and more importantly, outside of People, Ideas & Objects et al no interest. There has been abundant opportunity for producers to participate in the development of these systems. SAP provides ERP software to some of the senior senior producers but SAP does not have an oil & gas based application. The workarounds in SAP to accommodate the oil & gas industries' distinct characteristics are horrendous. SAP’s specialty are large manufacturing concerns like Ford who need to interact with tier 2 and tier 3 suppliers “just in time.” To bring wheel nut part z in d volumes to production line x at y time. SAP’s sale to Ford is more profitable for them than all the revenues they could ever earn from oil & gas. 

In May 1991 I contacted Oracle to begin joint development of oil & gas ERP systems. It was in 1992 we signed an agreement to do so and I feel Oracle threw their entire weight behind the project. This is the project that orchestrated my first failure in the oil & gas ERP market in February 1997. My point here is that not only myself but all the ERP systems vendors have been doing the job that was necessary. Without financial or any other form of support from the producer firms. It’s odd how officers and directors have prospered personally, accounting is as specious as it is, tier 1 ERP systems providers aren’t involved due to the lack of financial resources, the industry is such a spectacular failure and investors and bankers are unsatisfied. 

It was in our May 2004 Preliminary Research Report that I noted the research of Professor Anthony Giddens and Professor Wanda Orlikowski. They’ve defined Structuration Theory and The Model of Structuration. Which suggests that organizations, people and society move together in lockstep. Any disparity in one of the three's progress will create conflict and potentially failure. Professor Orlikowskis model suggests that technology is part of society which of course has a disproportionate influence today. We therefore applied this research and showed that Information Technology, particularly in the form of ERP systems, was defining and supporting the producer organizations, but also constraining them. Therefore I have alleged on many occasions that the purpose behind the use of old, stale and for lack of a better description homegrown ERP systems are what the producers have relied upon and maintained to ensure their franchise was competitively unchallenged and financially unaccountable. 

This is not to disparage my competitors who have done extraordinary work in impossible conditions. Officers and directors intentionally set out since May 2004 to not support any further developments of these systems by cutting off funding to People, Ideas & Objects and other ERP suppliers. What was a thriving ERP marketplace in the 1990’s with over 20 providers leaves a dominance by P2 who are a consolidated accumulation of many other ERP providers solutions that were unable to continue profitably. And at the same time we’ve seen the maturation of the IT market overlooked by these producer firms in the administrative and accounting areas. Whereas producers have declared frequently the latest version of Microsoft Windows was moving them forward on a renewed trajectory. Unknown and undetermined at the time if it was an upward trajectory. It’s always appropriate for producer firms to state the latest IT trend as to what “sounds good” from a progressive, assertive oil & gas user of IT. These items include the Internet of Things, Artificial Intelligence, Machine Learning or whatever technology promises the biggest bang for the buck. 

Oracle CloudWorld 2022 conference

There is a clear divide in terms of the consumer facing applications from those that are provided to corporate customers. The user interface is not an area that has attracted much focus in the enterprise world it would seem. The issue appears to have been the complexity of enterprise applications makes the user interface more difficult to design and implement. Oracle appears to be making some changes in this area with their Redwood Platform for enterprise applications which they began developing four years ago. I highly recommend reviewing these two videos, here and here.

People, Ideas & Objects key competitive advantage, our priority and our focus is our user community. Establishing quality enterprise applications demands user involvement. Which is the difficult, time consuming process that we began in the first quarter of 2014. Based on a unique User Community Vision our users have the tools to build the application that producers need to ensure they produce the most profitable means of oil & gas operations everywhere and always. 

Our method of approaching the issues in oil & gas is focused on quality. With Oracle we can see they’re constantly pushing the envelope in every aspect of their products and services. Our user community will have these resources as part of their toolkit to ensure they maximize their opportunities to solve the difficult issues they’ll be faced with. And importantly they’ll be augmented with a rich and diverse level of Oracle communities of developers and user groups that will be available to assist them. Once our budget is secured, People, Ideas & Objects, our user community and their service providers will be able to maximize this opportunity with Oracle’s products and services and achieve what we’re setting out to do. 

OCI Revised Organization Constructs, Part VI

Markets

Three modules of the Preliminary Specification are “market” modules, including the Resource Marketplace, Petroleum Lease Marketplace, and Financial Marketplace modules. Each establishes marketplaces where producers can engage in the markets which they need to function. The marketplace modules mimic the three markets that producers participate in and are designed to deal with the day to day activities of each of the producers, service industry and others. Supporting them with the contractual, transaction processing and other capabilities of Oracle Cloud ERP the Preliminary Specification, our user community and their service providers in our Cloud Administration & Accounting for Oil & Gas. Enabling producers to apply their competitive advantages and strategies in the greater oil & gas economy. 

The economic principles of markets and price discovery are two of the mechanisms by which North America has advanced its overall quality of life. Adoption of these within the oil & gas industry are therefore a necessity and the Preliminary Specification will do so as part of the structures that define and support these industries. Our decentralized production models price maker strategy relies on the principle of oil & gas commodities being priced based on the price maker principle. The need for producers to produce only profitable production, after full consideration of all of their actual costs on a timely and accurate basis, is how they’ll operate with Cloud Administration & Accounting for Oil & Gas. Using all of the information contained within the commodity markets price, (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is these same mechanisms that are involved in every transaction involved in a free market. 

From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard N. Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21”

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17

In terms of the Resource Marketplace module we first need to discuss two components of how operations are conducted in oil & gas. The reliance on the field service industry providers to extend the producers capabilities and capacities into their regions of interest. If producers were to own and operate their field infrastructure it would otherwise be an impossible impediment and constraint towards progress. The second component is the history of abuse and disrespect that producers have displayed and presented to the service industry over the past forty years. And particularly since 2015 when producers recognized their financial difficulties were amplifying. The status quo long ago accepted the assumption that oil & gas is a boom / bust industry. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance by producers that has left us with a legacy of maybe six good years out of the past thirty six. Officers and directors don’t understand this argument as they’ve experienced thirty six years of superior executive compensation. Producers assumed the service industry would adjust to the boom / bust trend in lock step with them. There is an implied assumption that the service industry, like the oil & gas industry itself, enjoys revenues as a primary industry and therefore continues business as usual during any of the bust cycles. The diversity of the service industry offerings, and their coverage across the various regions of their operations throughout North America spreads them thin operationally. As secondary industry participants they are not as resilient as the producers believe them to be. Scaling back from 1,900 active drilling rigs to 400 during 2015, forcing 50% price reductions on to the drilling operator or they would use another vendor, the producers induced a collapse of their revenue streams into the low teens in terms of percentages of prior levels, which has been devastating on the financial health and viability of the entire service industry.

Now in 2023 the repercussions of this downturn have decimated much of the service industries capacities and capabilities that were once available to producers. The largest service industry providers have left the continent as a result of the abusive treatment they’ve received. Therefore for producers to be working out the boom / bust cycle through our price maker strategy will go a long way to rectifying this issue in the long run. Profitability everywhere and always will build a stable infrastructure throughout the greater oil & gas economy. Providing a stable environment, or constant level of demand for which the service industry can prosper. 

After this and similar treatment over the past four decades investors in the service industry are unwilling to participate in the rebuilding of their much needed field operations. They invested in good faith and were abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal to pay the light bill and taxes on the shop. This was due to the producers determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. Producers should have enlightened the service industry representatives of these plans beforehand. The dilemma today is who’s going to provide the financial resources for the service industry to recapitalize itself and reestablish the capacities and capabilities that will be necessary for a self-sufficient and profitable oil & gas industry? The service industry feels the producers broke it, they can fix it. Maybe when they have some skin in the game they won't be so abusive.

This is what’s known and understood in the market today, it’s not news. Producers expect the service industry to resume normal operations, yet fail to consider the consequences of their prior actions. A similar example is the history of the ERP providers in oil & gas over the past thirty years. I can report there’s still no consideration whatsoever of a second chance these first tier ERP providers will be riding to the rescue of the producer firms. Why, they feel the industry is too complex, too costly and there are not enough producers to be able to negotiate their sales prices fairly. SAP is a custom implementation for each sale. The last two ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper, due to the inability of producer officers and directors to pay for their software development in advance. The only method that these vendors would approach the industry. Producers have had ten years to invest in the Preliminary Specification to make their organizations profitable and accountable and to avoid this inevitable, predictable and fatal outcome but didn’t do so. Not a penny has been spent on People, Ideas & Objects at any point. The need for skin in the game is the apt approach when so many oil & gas ERP investors and vendors have been betrayed so comprehensively three decades ago and as has now been done to the service industry. People, Ideas & Objects are instilling market principles in the producer firms, that however does not imply that those who support them have the inherent trust in producers as a result of their prior actions to be able to rely on market mechanisms at this time. 

As the producers sit upon the primary industries revenues they so enjoy. They will show a thumbs down to this idea as if People, Ideas & Objects is the only vendor they’ll be faced with who has this ludicrous prepayment idea. Officers and directors actions have consequences which have been wholly detrimental to everyone else in the industry. Officers and directors will no doubt argue, rightly, this does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of the markets they’ve caused. 

These facts on the ground are what the officers and directors refuse to consider or admit. Until they do the industry will be beset with problems. These issues need to be dealt with and I am unaware of any other solution. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means now available. The primary industry revenues of the dynamic, innovative, accountable and profitable oil & gas industry. Facilitated through the Preliminary Specifications Resource Marketplace module and decentralized production models price maker strategy. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the officers and directors pockets. However, that does not create the dynamic, innovative, accountable, profitable and energy independent oil & gas industry that we need. 

The Financial and Petroleum Lease Marketplace will also implement the market's organizational structures into the Preliminary Specification and provide the organized interface necessary to access and interact within these markets. Modules in which the full transactional power of the Preliminary Specifications ERP system supports the activities within these markets. We’ll also briefly discuss the Marketplace Interface that we’re building as I believe COVID provides the opportunity to adjust one's opinion to the use of this feature. I have suffered the slings and arrows, the ridicule for it in the past and there is not much that can stand in disagreement to what I haven’t already heard. In my opinion it is revolutionary and needs to be seen in the context of the changes that occurred in 2020 - 2022. At a minimum it adds an element of serendipity to working from home. One issue that I may not have been clear about is the Marketplace Interface is a virtual representation. Users will be able to access it through any screen on any of their devices. It does not use a headset for the person.

The Petroleum Lease Marketplace module is as one could imagine. An opportunity to post, bid, purchase, sell mineral rights and producing properties in the marketplace that exists and is replicated virtually within the Petroleum Lease Marketplace module. Everything from the opportunity to participate in a joint venture to establishing the surface rights payments is fully supported by the ERP system of the Preliminary Specification. Our product sits on top of Oracle ERP Cloud which includes their tier 1, Oracle Fusion Applications that Gartner rates as the highest quality offering. These oil & gas markets include the data of the Federal, State, Provincial, Freehold and Offshore leases. An opportunity for industry to consolidate on a dynamic platform which uses proven tier 1 technologies with the constant support of the service providers maintaining transaction administration and accounting in a standard and objective manner. (Note: People, Ideas & Objects have maintained the policy, and it is written into our user community and service provider licenses. That we will maintain arm’s length distance from all royalty administrations. We are operating in the best interests of the oil & gas industry. To ensure that they are provided with the most profitable means of oil & gas operations. There will be no compromise on this anywhere within this community.) This will be enhanced with the constant iterative design and development being undertaken by People, Ideas & Objects user community and developers on a permanent basis. Whereas if a jurisdiction reviewed and changed their royalty rates at some point, in terms of either the rate or method calculated, producers would not need to concern themselves with the administrative or accounting aspects of those changes. Our user community, developers and service providers would have them covered and implement the necessary changes in the software and services in a timely and accurate manner. Producers would only need to deal with any issues regarding the revised costs of the royalty. 

Administration and accounting are not competitive advantages of the producer firms. Thankfully that is one of the statements that we’ve received no pushback on. That doesn’t mean that these areas have to be a hodge podge, slapped together system that only makes do. There’s no reason why the industry shouldn’t have achieved state of the art ERP systems within their firms. That producers haven’t, has led to many questioning not only the integrity of the accounting but also the systems that are being used by industry. This questioning should never have been necessary and implementation of tier 1 ERP systems is now an explicit demand of the investment community. Oracle Cloud ERP is the premier tier 1 ERP system in the market. 

And why is it that the issue of overproduction, or as we define it as unprofitable production, can be documented to have existed in the North American marketplace back as far as July 26, 1986? The solution we propose to the overproduction issue, in addition to aligning all of these organizational constructs which has been available since August 2012. In terms of markets, it is alleged that there is double the amount of oil needed up until 2050. This capacity overhang forces North American high cost producers to assume the swing producer role and produce only profitable production. Saudi Arabia's production costs of $3.00 and probably $0.00 capital costs and could therefore produce profitably at any price during the next 28 years. They could use the money, and markets in 2050 are too far away and unpredictable for them to sit back and wait for. 

The third marketplace module is the Financial Marketplace module. Moving to the Joint Operating Committee as the key Organizational Construct of the dynamic, innovative, accountable and profitable producer is achieved through the Preliminary Specification. In the Joint Operating Committee section we noted that the movement of the knowledge, which includes the detailed actual, factual accounting information for that specific property, to where the decision rights were held, which is the Joint Operating Committee, enhances accountability. It's here that the Financial Marketplace enhances that accountability with the board of directors' interaction with their current and prospective shareholders and bankers. A review of the Financial Marketplace modules specification would be the best source of information to capture an overall understanding of the module. With the standard and objective nature of the accounting that is conducted throughout the Preliminary Specification and the service providers. Would that satisfy some of the issues that investors and bankers have raised regarding their investments and loans in the industry? Where everything being produced is profitable and the producers are seeking to maximize their profits by shutting in unprofitable production. Would People, Ideas & Objects, our user community and service providers be helping producers satisfy their shareholders and bankers to the point where they’d begin investing in the industry again? 

OCI Revised Organizational Constructs, Part V

 Innovation

People, Ideas & Objects et al need to be concerned about the startup to junior sector as much as any other classification within the industry. This is purely for the fact the industry’s rebuilding will be done on an innovative basis. Innovation is the basis of the Preliminary Specification. It enables People, Ideas & Objects, our user community and their service providers to achieve our two opposing objectives of providing oil & gas producers with the most profitable means of oil & gas operations everywhere and always, and providing consumers with the lowest possible cost of an abundant and reliable domestic energy supply. We do this with our decentralized production models price maker strategy that ensures all production is produced profitably. Including Exxon's, Shell’s and that startup oil & gas firm that began this morning. And to do so innovatively to ensure that the ever escalating costs of oil & gas remain affordable to consumers and the commodities production profile and reserves continue to expand. Achieving profitable, North American energy independence.

Enter two variables that were not available in prior decades and centuries. The cloud computing era with the maturation of the overall technological infrastructure that is best represented by the Internet. We are at the infancy of what the Internet can provide. And the second variable being the “service” aspect of our user communities service providers. It was discovered in our research that the level of innovation that is attributable to the small and medium sectors of an industry were as substantial as the larger sectors. Although the larger sectors contributed large amounts in terms of total spend it was no greater than the effect of what the other sectors contributed. People, Ideas & Objects et al provides our solution for all sectors of the North American oil & gas industry and for all producers. Professor Giovanni Dosi was one of the key sources of research that we used to determine the framework necessary for an innovative oil & gas industry. Innovation within a science and engineering based business is therefore an inherent part of both these demands for profitable operations and consumer affordability. Professor Dosi’s paper “Sources, Procedures, and Microeconomic Effects of Innovation” September 1988, discusses and asks what are “the sources of innovations opportunities, what are the roles of markets in allocating resources to the exploration of these opportunities”?

People, Ideas & Objects research in oil & gas focused on these points: 

• The main characteristics of the innovation process. 
• The factors that are conducive to or hinder the development of new processes of production and new products.
• The processes that determine the selection of particular innovations and their effects on industrial structures.  (p. 1121). 

There are two major issues identified by Professor Dosi: 

• The first issue is the characterization in general of the innovative process.
• And second, the interpretation of the factors that account for observed differences in the modes of innovative search and in the rates of innovation between different sectors and firms, and over time. (p. 1121). 

Professor Dosi then makes the statements that, 

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between: 

Capabilities and stimuli generated with each firm and within the industry of which they compete. (p. 1121). 

The purpose of People, Ideas & Objects research in oil & gas was to focus on the organizational capability and capacities of the firm. Specifically in the earth science and engineering disciplines. It was also emphasized that innovations are based on both the firm and the industry. Coordination of the capabilities and stimuli of both the firm and the industry would therefore need to be advanced through changes in the organizational structure of both.

• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers, and so on;  (p. 1121). 

Additional issues include 

the conditions controlling occupational and geo - graphical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulations, tax codes, patent and trademark laws and public procurement.) (p. 1121) 

As People, Ideas & Objects would suggest these define an organizational construct that innovation demands in order to either flounder or foster. As both an Organizational Construct in itself, and as we defined in the Joint Operating Committee, a framework of that key construct. What we can impute from this definition of innovation is that it is a defined and replicable process that can be established through organizational design. And this design must be part of the organization's ERP software that identifies and supports that organization and its industry, such as the Preliminary Specification is configured to do. 

Our second source of primary research material regarding innovation came from Professor Richard N. Langlois. Throughout our review of his work we were able to determine the appropriate nature of the organizational design of the producer firm and the oil & gas industry itself. Selecting specific areas of the firm or market as to which the process and its management should fall under. Where the capabilities should reside. By fully implementing the Internet and using Professor Langlois research, which included Professor Carliss Baldwin determination of where exactly that transfer between firm and market should occur. We were able to design the appropriate software tools, such as our task and transfer system that will enable our user community to define which processes to undertake and manage in their service provider operations. Introducing enhanced efficiency in the manner in which the administration and accounting is conducted in oil & gas. 

Building on the other innovations that are rapidly providing value generation such as cloud computing. People, Ideas & Objects, our user community and service provider organizations are able to undertake this through the introduction of our Cloud Administration & Accounting for Oil & Gas. A service that turns the fixed producer overhead into a variable industry based overhead that can be provided to any producer no matter what their size or production profile. Enabling producers to shut-in unprofitable production, and therefore incur a null operation, and only produce profitable properties, maximizing shareholder value. A substantial portion of our published value proposition of $25.7 to $45.7 trillion over the next 25 years is attributable to introducing this production discipline to eliminate the damage and destruction caused by overproduction over these past decades.

The Preliminary Specification has captured this understanding of innovation and incorporated it within the culture of the industry we are rebuilding in these Organizational Constructs, and as part of the innovation framework of the Joint Operating Committee. Each of the fourteen modules of the Preliminary Specification are materially affected when we identify the Joint Operating Committee as the key Organizational Construct. That provided us with an opportunity to incorporate this understanding of innovation in the design and reorganization of the oil & gas producer firm and industry. These can be identified by several major processes of innovation within the Preliminary Specification. One of these ensures that failed innovations and experiments, and their underlying processes are not repeated by separate and distinct areas of the organization, each year. Attempting the same failed “ideas” repeatedly is not innovation. Another major process of innovation is to enhance the scientific basis of the producer firms and industry as a whole. Moving forward on the basis that an idea that would generate a dollar today will only produce ten cents tomorrow. We therefore must increase the volume of ideas generated and incorporated in our work processes to continue increasing our value. Various other processes of innovation have been incorporated throughout the Preliminary Specification based on the primary research conducted by Professors Giovanni Dosi and Richard N. Langlois. Enabling producers to earn the unquantifiable value that needs to occur throughout each of the producer firms and all tiers of the oil & gas industry in the decades to come.

Oracle Cloud Infrastructure (OCI)

Continuing our discussion regarding the recent Oracle CloudWorld 2022 conference. The incremental and continuing value that producers need to generate through enhanced innovation can be facilitated through the development and implementation of the Preliminary Specification. Oracle’s products are the stand alone premier technologies in database, systems development and ERP systems and the base of the Preliminary Specification. Oracle is now partnering with service providers to enhance their products with a variety of service providers in order to bring about the innovation based benefits we have been discussing throughout the Preliminary Specification. Theirs will be in the domain of the generic business processes such as banking etc, or the non oil & gas specific processes that we handle through the 14 modules of the Preliminary Specification. Our proposed combination of Oracle Cloud ERP, People, Ideas & Objects, our user community and their service provider organizations are designed to deliver the foundation in which the producers, the oil & gas industry and all the tertiary industries can succeed in the 21st century. Without these facilities and capabilities the question we would ask is how will industry “muddle through” so many of these issues and opportunities otherwise?

Since Oracle’s beginning they have pioneered the development of their technologies to be the premier tier 1 provider in all categories of their offerings. Oracle has been the critical and essential innovator in each of their products markets. They continue today with products such as Oracle Cloud ERP and Oracle Cloud Infrastructure that continue that heritage. Recently with the Oracle CloudWorld 2022 conference we saw a new direction beginning with their development of service providers to augment their products. These new products and services bring tremendous incremental value to the oil & gas users of these Oracle products. And are consistent with the work that People, Ideas & Objects have undertaken to complete on behalf of the North American producers. 

Innovation throughout the business and industry specific process management, built upon the premier tier 1 Oracle products augments the dynamic, innovative, accountable and profitable nature of what is demanded of the North American oil & gas producers. This is not a static environment. It will be throughout our user community and their service providers that producers will be able to interact with all aspects of the business and industry specific process management. To make changes, to innovate and develop these further which is an inherent part of the People, Ideas & Objects and our user communities permanent software development capability. But there’s more.

With the producers configuration being oriented towards this innovation Organizational Construct. With the Joint Operating Committee Organizational Construct holding innovation as one of its seven frameworks. Not only oil & gas producers, but the entire oil & gas industry and its tertiary industries and supporting institutions will be culturally aligned and oriented through Oracle Cloud ERP and People, Ideas & Objects Preliminary Specification towards innovation in the earth science and engineering disciplines. Providing the means to rebuild the industry in this configuration with the software that defines and supports these objectives. Where the industry's approach towards its next 25 years can be the most dynamic, innovative, accountable and profitable of its history. A future that is unquestionably the most demanding, challenging and exciting in its history. 

OCI Revised Organizational Constructs, Part IV

 Intellectual Property

The Preliminary Specification establishes a solid foundation for which the Intellectual Property of individuals within the industry becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published here in final form by August 2012. From the Resource Marketplace module I summarized the point as.

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil & gas which is based on its earth science and engineering needs. After all, it is a business based on science. If we are to expand the capabilities in science and innovation in the industry. We are going to need to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there is no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to their Intellectual Property through the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This therefore will turn the oil & gas industry into a far more dynamic business.

With the state of the industry as it is, its IP is in disarray, the capabilities and capacities that are derived from it are deteriorating as we speak. Making this somewhat of an IP gold rush in the industry, in order to save it. Producers' difficulty is that none of this is published and the act of publishing is how copyrights are earned. Let me pass on one more important fact that I’ve determined since I’ve been so reliant on copyright. Patents and trademarks are defensive, in nature in that they protect what is known of your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Building on the shoulders of giants. Copyright does not secure for you the rights to an idea. It only provides you with the monopoly rights to the expression of that idea. Implying it must also be pursued and maintained much in the manner that I do here at People, Ideas & Objects. Until the Resource Marketplace and other modules of the Preliminary Specification are built I see this IP of the industries earth science and engineering unclaimed. Therefore the first thing we must do for the dynamic, innovative, accountable and profitable producers in the oil & gas industry is change their competitive advantages. They'll now read: 

Coordination of the markets earth science and engineering capabilities and capacities, their land and asset base. 

One of the most promising forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of a producer firm as competitive advantages, generating revenues for these producers and the people who developed them in the form of service revenues, license fees and royalties etc? Helping to establish the new and innovative oil & gas industry.

Business is changing quickly. Intels dominance in the chip market is now a constraint that is causing them to lag that market in consequential ways. As the dominant manufacturer of processors, theirs has been deemed a redundant business model. The business value is no longer in the manufacture of processors, it's in their design. Contract manufacturing is a commodity business where others are finding profits and opportunities in that area where Intel does not compete. In terms of design being the value, that is now the case and you should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will be running the Preliminary Specification exclusively on Ampere which will be far better due to the better cost / performance than the Intel based cloud computing can offer. 

This is the new business world and these are the new business rules. It comes down to one word, the individual. If you don’t see what the rebels at Intel did when they established Ampere your best opportunities may remain with the current bureaucracies. Individuals in technology, oil & gas and everywhere are facilitated by that great innovation known as the door. The Internet demands one thing which is the one thing that’s difficult to achieve. The software to organize. To organize society today, with its global reach, can not be done in a spontaneous manner. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet through software providing them the means to conduct their business. Software defines and supports the organization. Without People, Ideas & Objects none of this oil & gas vision will come about by sitting and waiting for the phone to ring. At least it doesn’t appear to have happened.

The question also needs to be asked: why is it that Apple continues to innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovativeness they provide. They too rely on Intellectual Property as the basis of their value. They in fact consider themselves a software company that sells hardware in order to bring about that customer value. Again, software defines and supports their organization. What fool would run a company that sources their handful of products from a number of countries that total in excess of 3.5 billion in population? And then have the gall to snap their fingers and say “now innovate.” It doesn’t happen without software.

It’s no longer enough to just own the oil & gas asset, you must also have access to the software that makes the asset profitable. We now believe as a result of the Oracle CloudWorld 2022 conference that all firms in all industries will have distinct competitive advantages by using Oracle Cloud ERP. These should be seen as incremental to the benefits of People, Ideas & Objects et al. The importance of IP in the oil & gas industry is it will organize innovation. The most productive innovation is when it’s organized under a structure that provides for the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in its Constitution. Copyright has to be published in order to be earned. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that producers have created in the past to generate price competition in the service industry and elsewhere and ensure everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with producers sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? Are the oil & gas issues we’re faced with to be resolved on this basis?

The organizational structure of the new oil & gas industry People, Ideas & Objects et al will be building has innovation structured and based on the laws of the land. It will be these laws that define what innovation is undertaken and what is not. The violation of another's copyright is not allowable under the law so there would be no violators. A self policing mechanism reducing the overall costs of unnecessary, endlessly repeated duplication of innovation in the industry. Providing the incentive for those with a few ideas of their own, and as a result, the inherent motivation to do the subsequent hard work that is necessary. Knowing their work will now be trusted and respected. To do so not just for today, but for always and everywhere. 

These copyrighted publications enable an understanding of how things are done. Building upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that promotes innovation, eliminates the costly redundancy of duplication of efforts, educates and provides the motivation to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil & gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for the leverage of Intellectual Property, or intelligence. Much as the last century has been about the leverage of mechanical work. Avoiding this new reality or attempting to opt out would be foolhardy in the extreme.

What is the motivation for people to develop these “ideas” of theirs? Are they not in it for themselves and looking to siphon off what they can from the industry? Self interest is a part of every human endeavor. It comes down to whether or not it builds value. Officers and directors have been well compensated and the industry has been destroyed. A further contrast is the fact they’ve not been motivated by the discovery of ways in which they can build value. Intellectual Property is therefore not only a structural Organizational Construct that can enable the means to control the innovation process throughout the industry. The motivation behind the participants is purely from the point of view of building value through the establishment of incremental profitability, reduction of cost, improved production deliverability or the expansion of reserves. It is the law, and most importantly of all, proven. The reason the United States dominates the global economy in terms of performance is due to the fact their Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are Intelligent beings, not serfs like the officers and directors assume. It is productive, constructive, focused on generating value and is an overall benefit to society. As a science and technology business, that is reputed to be second only to the space industry in terms of complexity. What has and what have these officers and directors been doing under their business model?

The business model of the producer firms, I believe, was and is to have a pool of knowledge freely available to them when and where they want it and need it at its lowest possible costs of nothing. Therefore they couldn’t have anything published in this environment as it would be counter to their best interests in terms of any of their availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of the science and technology of earth science and engineering. Leaving themselves fully exposed at this time through the publication of this IP by any author.

Two other aspects of Intellectual Property are first, what’s known as the safe harbor provisions. Why don’t producers just turn around and launch a lawsuit against the copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to cooperate with their every command. The safe harbor provision states that you can not launch a lawsuit against the copyright holder. Secondly, the division of tacit and explicit knowledge. Tacit knowledge can not possibly be captured or written down. Only explicit knowledge can. Therefore it is up to people to take the explicit knowledge they have, earn the copyright, and apply their tacit knowledge to generate their value as a service. The services associated with Intellectual Property are as important as the IP itself. Just as People, Ideas & Objects have our user community heading up the service providers that are delivering our software and their tacit knowledge providing services to the producer firms. Therefore fulfilling our need to have the effective and efficient delivery of the tacit and explicit knowledge underlying the Preliminary Specification. The ability to manage and implement the producers' second revenue stream is through the Work Order we identified earlier. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the publication of the Preliminary Specification. A full decade of rigorous research that is reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be industries largest cost of all. The time needed to generate a sustainable, viable, workable business model. We enable them to yield untold value creation in the short term and not have to undertake that ten years of research themselves. In addition our three strategic competitive advantages are our user community, research and Intellectual Property. Anyone offering similar aspects to the Preliminary Specification in their ERP software would be violating our Intellectual Property and we would expect, as law abiding citizens, the oil & gas producers and its employees would adhere to these principles of law, recognize that and refuse to use any software that violates that. 

It is People, Ideas & Objects, our user community and their service providers that are channeling these Organizational Constructs towards innovation, productivity and profitability through software. It is software that defines and supports the organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that are and have been proven to be disastrous. 

OCI Revised Organizational Constructs, Part III

 Specialization and The Division of Labor

Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil & gas today and the systemic lack of profitability throughout the industry in what we refer to as the “modern day software bug.” We should note here that People, Ideas & Objects, our user community and their service provider organizations target market for the Preliminary Specification is the North American based production profile. We are focused on providing an industry wide solution, that upon reading the Preliminary Specification in full, you may agree it demands participation from all producer firms. In the categories of the junior and startup oil & gas producers, the advantages we provide their organizations ensures they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under today’s business model. We also know that consolidated producers are not how the industry will survive. It will be the small and startup sectors of the industry that will rejuvenate the industry. It was discovered in our research that the level of innovation attributable to the small and medium sectors of an industry were as substantial as what the larger sectors contributed. Although the larger sectors contributed larger amounts in total spend it was no greater than the effect of what these other sectors contributed. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We believe the overhead costs of the producers demand these be dealt with by making producer organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn producers' overhead costs from a fixed, producer based, capacity and capability, into a variable, industry based, capacity and capability. The overheads variable behavior being based on a Joint Operating Committees ability to produce profitable production. 

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire North American oil & gas industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to the individual Joint Operating Committees. If the property is not profitable then the producer will shut-in the production and none of the service providers will receive any data from our task and transfer network and therefore no accounting or administrative processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property therefore does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

Producers today defer the recognition of overhead costs by capitalizing on average 85% of their overhead to property, plant and equipment and recognize them through depletion over the course of the subsequent decades. Leaving them looking for the cash necessary to pay next month's overhead costs as the current month's overhead costs are never included in the costs passed to the consumers. And hence the producers' past excessive demand for annual investor injections of financial resources. This error in basic cash management continues unaddressed today as overhead is where their executive compensation skeletons are hidden. The lack of transparency on these costs is due to the remaining uncapitalized overhead costs realized in the financial statements do not rise above the point of materiality.

There are many benefits for producers to begin operating in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. When all costs are variable, production will be profitable at 25%, 100% or at any level of their production profile. This also preserves their oil & gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have been incurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage as opposed to incurring the costs of production and storage or what may be sold unprofitably. 

Producer officers and directors assert the Preliminary Specifications price maker strategy is collusion. If making independent business decisions at the property level, based on detailed, actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once they realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such excuses. That is until they ran the oil price down to negative $40 in April 2020. Refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of the covid induced shut-in level of 25% of the global production profile, producers reported there was no reserve damage whatsoever. There stands today no justifiable reason not to implement the Preliminary Specification. Oil & gas commodities are price makers, not the price takers the producers assumed they were for all these decades. The one critical aspect of a price maker is that they will only bring on new production when it’s profitable. This method we’ve developed is detailed further in the Preliminary Specifications Preamble. It is a direct result of the reorganization through a hyperspecialization of these resources in the service providers noted above.

The question is asked regarding heavy oil production. These operations are not able to be shut-in as the process dictates constant production. Shut down and start up costs would be somewhat terminal to the operation. There is also the argument that they’re not operated in the same manner as a conventional or shale Joint Operating Committee. Including their ERP systems which are quite different from the oil & gas producers. The question therefore is why wouldn’t this preclude them from participating in the costs of the development of the Preliminary Specification? Their production profile is in excess of 4 mm boe / day and are therefore significant benefactors of the industry activities in ensuring that all production is produced profitably. People, Ideas & Objects' alternative question is why would the heavy oil producers be allowed to benefit in such a material way on a free ride basis. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil & gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in prior years. With technology and other industries providing growth opportunities, for oil & gas companies to argue they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect producer's capital allocation and capital discipline. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets,” “putting cash in the ground” and the like to the scrap heap of history. 

The producer's 2020 / 2021 consolidation route is contrary to every possible reality on the ground in the business world today. Concentration of the bureaucracy is not going to resolve what has afflicted the industry for the past four decades. Rebuilding as People, Ideas & Objects propose will involve a dynamic industry based on a decentralized, connected environment such as the Internet provides. Hierarchical strata of advanced paper shufflers is a future failure, best defined. To bring about an ERP system for the industry such as the Preliminary Specification provides; must consider the opportunity of what is commonly referred to as disintermediation and the tried and true specialization and division of labor principles. 

However, bringing one of the most complex systems into one of the most complex industries into the environment of the small and startup producer is foolhardy to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small, junior, intermediate and integrated oil & gas producer? And that is the fact of the issue. We need to ensure the future of the industry is in the hands of the oil & gas men and women who will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of just the regulatory, compliance and investment demands are real and an impediment to these needs. That is, if small and junior producers could not access the kind of systems necessary to operate in that capital environment, no matter their size, the capital markets will remain forever closed to them. An untenable barrier today that will be even greater in the near future. Effectively shutting the door on a large portion of the innovative nature of the industry.

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate the excess of $3 to $5 million of free cash flow necessary to offset the annual base overhead of the firm. For the administrative and accounting they’ll only be incurring the variable overhead costs of the service providers fees when and if used. The service providers are there to enhance the explicit knowledge contained in our software with their tacit knowledge they provide as their services. It is a variable cost, industry based capacity and capability available to the industry in the form of Cloud Administration & Accounting for Oil & Gas. Not only are these overhead costs variable, but if they’re incurred that denotes profitable production, indicating these costs are covered, or the property is not producing and as a result not incurring any of these overhead costs. At the same time, due to specialization and the division of labor, all firms in the North American industry will be fully capable and have the administrative capacities available to deal with all of their needs through these service providers. And there are more attributes of our system that provide benefits for the new oil & gas industry People, Ideas & Objects, our user community and their service provider organizations are building. 

People, Ideas & Objects have identified new cost structures that will diminish the performance of the producers. These include the costs of:

• Recovering the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and passed to the consumer it would provide incremental cash flow via our decentralized production models price maker strategy to provide dividends in compensation for the past excessive reliance on investors. And reduction of bank debt that predominantly supports the property, plant & equipment account.
• The refurbishment of the infrastructure as it stands today. 
• The rebuilding and expansion of the infrastructure. 
• And finally the looming and escalating reclamation costs of the industries past. 

The producers have incurred each of these costs as a result of providing for the consumers energy needs. Without a means of passing these capital costs incurred in a capital intensive industry on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the officers and directors current and consolidated business model. These form the legacy of the producers in terms of the property, plant and equipment balances which we’ve determined are not transferable out of the corporation. Taking on the expansion of the infrastructure may be the largest of these costs, and I would suggest the greatest opportunity for all concerned in a dynamic, innovative, accountable and profitable primary oil & gas industry, and most specifically the secondary and tertiary industries. 

The Preliminary Specification implements specialization and the division of labor across the producer firm and most particularly in the earth science and engineering capabilities and capacities of the producer firms and industry overall. We list this as the first step in our solution for the startup and junior producers. These capacities and capabilities are becoming increasingly burdensome to each of the producer firms due to their unshared and unshareable nature, but for different reasons from the administrative and accounting difficulties mentioned. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development which demands further specializations be undertaken within each of the producer's capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, the increased deliverability and greater demand for the technical resources for each incremental barrel of oil produced a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, unable to expand the deliverability of the North America based industry. 

In addition to this limited technical resource supply we also believe that the producer firms are at a point now where the costs of their scientific engineering and geology needs are growing beyond their commercial grasp. Nonetheless, a decidedly higher level of specialization and division of labor will be needed in the areas of earth science and engineering in order to increase its throughput from this resource. It is the unshared and unshareable makeup of these capabilities that we find the difficulties once again. Producers need these technical resources for a variety of just-in-time purposes, as operators, for their highly technical areas. If we assume that across the industry the utilization rate of these technical resources are at 75% due to organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution of these pending and most certainly future difficulties. Achieving a minimum of a one third increase in the capacity with higher output from improved specialization and division of labor, providing us a good start to solving this difficulty. The question therefore arises what are the producers distinct competitive advantages. They are their land & asset base, and the coordination of the markets earth science & engineering resources.

People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. The first is to consider the producer firm from the time the Preliminary Specification is operational, to have two sources of continuing revenues. The oil & gas sales and the revenues earned by all of their earth science and engineering capacities and capabilities being deployed and employed in the form of a revenue generating capacity. Whether that be to one of the producers own Joint Operating Committees, or in the consulting of the individual to other producers / Joint Operating Committees, as a client, of which they may / may not have an interest in. Due to the specialization and division of labor demands producers will need to have chosen to specialize or acquire a specific capability on the basis of the distinct specializations and competitive advantages they hold or desire. These producer specialized technical revenues will then offset these engineering and geological costs incurred and will be directly charged to either their Joint Operating Committees or other producer clients who need to augment their needs with other specialized services. 

In terms of an opportunity in this new oil & gas industry this second source of technical revenue may be seen as the initiation of the start up oil & gas producer firms' initial revenues. More than that they’ll be able to offset some of the additional costs of the head office burden that are not considered part of the Cloud Administrative & Accounting for Oil & Gas. And this will apply to all producers no matter their production profile. When producers are specializing on their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their diverse needs. The ability to offset some of their engineering and earth science costs with direct revenues of a non oil & gas revenue source. And the ability to access only the administrative and accounting software and services they need when they need them works to defer much of that base load $3 - $5 million dollars of overhead that is an inhibiting factor to the startup and junior oil & gas producer success. 

In a world where software has to define and support the organizations that exist. This is some of the “what, how and why” we’re able to provide North American oil & gas producers when the Preliminary Specification is delivered. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry is our Work Order. Officers and directors may claim that charging labor directly is already available through the systems they use. Which is true they are able to allocate their labor costs to the field. However not with the necessary features of raising it to the point of making it a defined technical revenue stream of the firm. And the feature of making it a system that interacts throughout the industry. Allowing for the interactions between the resources they need and where they need them. Subject to the appropriate approvals and governance. Or enabling the second defined purpose of the Work Order system in order to enhance the industry wide innovativeness through the establishment of working groups etc. Our Work Order system is able to bill its costs at all times to either corporate overhead, Joint Operating Committees AFE or to a lease. Therefore the billable time of the individual engineer or geologist would be deployed within the producer 100% of the time they were working for the producer. And this is an inherent part of people beginning the establishment of their own producer firms which rely on their talents of their much needed earth science and engineering capacities and capabilities, not their skills in attracting capital.

Oracle CloudWorld 2022 Conference

It was during this conference where Oracle announced what I consider to be the next phase of the Enterprise Resource Planning (ERP) evolution. My perception of what was announced is a new direction where the overall technological architecture is accepted as mature and capable to undertake this phase and that technology can begin to bring substantial value to clients through Oracle Cloud ERP. When I look at the overall landscape in business today I see many decades of iterative development work that can be done which is similar to what is now available for the North American based oil & gas producers by adopting the Preliminary Specification. It may be that we are beginning what will be considered the era where the promise of Information Technology is realized. 

There is a specialization and division of labor between Oracle and People, Ideas & Objects, our user community and their service provider organizations. Oracle is focused on building value for their clients through the development and implementation of generic business processes, applying the principles of specialization and the division of labor, standardization, objective process management and automation to. The Preliminary Specification focuses on these same methods to develop value for North American producers in the oil & gas business. Therefore the combined approach of Oracle and People, Ideas & Objects et al are covering off all aspects of the producer's business needs. Such that we state “It’s not enough to own the oil & gas asset anymore. It’s also necessary to have access to the software & services that make oil & gas profitable.”  The significance of Oracle CloudWorld 2022 is that any operation in any business across the globe will need to operate on Oracle Cloud ERP or face the inability to compete or profit from their operation. I do not see a viable alternative available in the market.