If You Don't Like Change, You're Going to Like Irrelevance Even Less, Part III

 There are many other important and valuable attributes that I had written regarding the Oracle CloudWorld conference. I’ve been going through a thinking process this past week that has deviated from what it was prior to the conference and throughout the past years. I personally am at a loss of how I could build any further incremental value to what I've proposed today! Having to deal with the surreal nature of thirty one years of my effort in building this value, seeing these issues continually manifest themselves and being repeatedly denied. Trying to determine what would ever satisfy someone who apparently is unsatisfied or unsatisfiable? The ease with which the producer makes two phone calls, one to SAP and the other to a CPA firm’s integrator are too competitive. Therefore I’ll post this with the information contained within it, and leave it at that. 

People, Ideas & Objects now provide a compelling and comprehensive value proposition through our user community and their service provider organizations. When funded, the work we’ll do with Oracle will place our collective offering on a much broader scope and scale in terms of the value we’ll bring to the dynamic, innovative, accountable and profitable oil & gas producers. In terms of our competitive advantage of providing the most profitable means of oil & gas operations, everywhere and always. Ensuring that we can prove that we wasted none of these valuable energy resources when they’re produced profitably. And in turn hand over abundant oil & gas resources, a viable and profitable industry to future generations for their needs.

Producers today, that is October 26, 2022, are having difficulties with high differentials and negative commodity prices. These are just some of the issues that they’re plagued with and are specifically addressed in our Preliminary Specification. Within our offering we have six Organizational Constructs that define what and how our software and the services of our user communities service provider organizations will provide. For producers these provide an inherent common sense, understanding and logic of how our software will operate that emulates the culture of the industry and society at large. Oracle has built these features into their Oracle Cloud ERP offering which we’ve made the foundation for the Preliminary Specification. Recently demonstrating their enhanced specialization and division of labor being applied between themselves and J.P. Morgan to enhance the expense reporting process from an organizational burden of thousands of man hours per year to a few seconds processing on Oracle Cloud ERP. This is the representative method Oracle is using to build value for its customers and what they’re applying to all generic business processes. In which they’ll market to the global business community. People, Ideas & Objects will use Oracle Cloud ERP to develop methods that generate similar value to specifically addressing the North American oil & gas processes as we have defined them in the Preliminary Specification. 

These are the business models of Oracle and People, Ideas & Objects converging to provide an overwhelming value proposition for North American oil & gas producers. One that is desperately needed in the industry today. And as the world engages in political conflicts based on these commodities. A world in which the North American economy has within its grasp the opportunity for energy independence from an oil & gas perspective for the remainder of this century. A critical requirement as the most powerful economy will also be the largest consumer of energy. People, Ideas & Objects, our user community and their service providers, and Oracle have formed a competitive offering based on the value that North American producers and the greater oil & gas economy will gain. We are prepared to undertake this task and need the financial support of the industry to conduct this software development and service preparation for them. There are no other takers or volunteers willing to do so when I can’t answer the question why aren’t the producers involved? And more than that there’s the need to see producers' to have some skin in the game in order to ensure this will be a success and the commitment that oil & gas is the central and only focus of the oil & gas industry. 

We have traveled a long distance in order to find ourselves in this most fortunate of positions of being able, I believe, to fundamentally assist the North American oil & gas producers to mitigate their issues and optimize their opportunities for the mid to long term. We need to proceed with these efforts in a timely manner. I must now place a deadline on the funding of the Preliminary Specification as it is proposed by November 24, 2022, the American Thanksgiving. If that doesn't happen then the earliest we’ll be able to regain the momentum we currently enjoy may be years from now. The last time we were in this position was 2017 when oil & gas investors were asking producers why not the Preliminary Specification? And were told they can't shut-in production without damaging the formation. We were denied then and faded due to events beyond our control such as viruses etc. Only now have I put the pieces back together and actions are being taken to remove this option from the marketplace. 

The realities that may preclude us from being able to make another run at generating the necessary momentum that we have now. Such as the time it will take for SAP to fail to attempt to resolve the issues and realize the opportunities in the North American oil & gas marketplace. Issues such as today's commodity price differentials and negative prices that are evidently of no concern to producers, and SAP would therefore not be compelled to have a solution. And unable to generate one that precludes the Intellectual Property of the Preliminary Specification. The one reality that I’m dealing with in terms of putting an effort into resurrecting another possible, viable chance is the fact that I’m sixty four years old. Although I am fit and capable, my willingness and commitment to this is undiminished, reality says otherwise. SAP may take a decade to prove they’re unable to solve the industry issues. I am not a wealthy man either. The fact of the matter is that sometimes these things don’t work out. I’m very pleased with what I’ve done and believe there is significant value in the Preliminary Specifications Intellectual Property. 

If You Don't Like Change, You're Going to Like Irrelevance Even Less, Part II

 As mentioned, the competitive nature of all businesses will need to transition in the short term in order to maintain a competitive capital structure. This will be most evident in the North American markets where the adoption of technology is seen as a cultural advantage, is the most advanced and the best prepared. We are now entering a period of advanced creative destruction where the old will no longer be acceptable in terms of its financial performance. When the alternative, albeit which only promises today, will go to those who undertake the journey in the most timely fashion. Oracle is setting a new expectation of how organizations must compete. The individual responsible for this fundamental change of the basis of competitiveness and ushering in this information revolution works for Oracle Corporation, its founder, Larry Ellison. More than anyone he’s provided the infrastructure that businesses need in order to implement the vision he and Oracle are offering. What was revealed last week was nothing more than the icing on the cake. The cake which he began creating when he sold his then unwritten relational database to the CIA in the 1970s. 

People, Ideas & Objects Preliminary Specification sees the producer firm's footprint reduced by extracting their administrative and accounting resources from them and reconfiguring them into our user communities service provider organizations. Focused on one individual process and managing that process on behalf of the entire North American producer population as their client base. The ability to do this provides the oil & gas industry with our decentralized production model, turning its overhead costs variable based on profitable production. These are managed through the use of what are commonly referred to as microservices. Microservices are able to break down monolithic systems and enable them to be managed in ways that are, more or less, possible. What we propose to do is to break down the business processes associated with the oil & gas producer and service industry operations in North America and reconstruct them through our user community and their service provider organizations based on the individual process management of microservices. 

At their CloudWorld conference Oracle announced it’s implementing a broader vision on a much larger scale. Using a partnership they’ve established with J.P. Morgan Chase to provide expense reporting as a microservice. Oracle Cloud ERP, the base system of the Preliminary Specification, will provide individuals that use their credit cards, on behalf of their employer or business, the ability to designate the classification of the charge and its disposition. Oracle's microservice will assess whether it is an acceptable charge based on the firm's expense policies, if it’s an eligible corporate expense it would be coded directly into the general ledger. At the end of the month these charges would be paid back to the employee. At no point in this transaction did J.P. Morgan Chase or the employer consume any administrative or accounting resources in the recording of this transaction. A few milliseconds costs of electricity replaced the transaction costs of the employees at J.P. Morgan Chase. The employers administrators and accountants time in reviewing, processing, approving, coding and paying the charges may have incurred double digit hours. The incremental seconds incurred by the firm’s employee to tag the charges designation offsets the many hours spent by them each year in preparing their expense reports. Those that may have missed the discussion on designing transactions in last week's blog posts may want to revisit the Resource Marketplace module and its role in implementing these features in oil & gas through our user community.

We see these features of Oracle Cloud ERP leveraging many of the same Organizational Constructs of the Preliminary Specification. Specialization and the division of labor, the only proven method of generating value, is employed here. Oracle is doing their work in developing the relationships and writing these microservice capabilities. J.P. Morgan Chase is doing their job in providing a better banking service by leveraging their capabilities with Oracle technologies. And the division of labor between computers and people is working by separating the processing and storage, and people are better redeployed to productive and profitable activities. The Organizational Construct of Information Technology is well presented in this example. What we can assume through the automation of these business processes is the accuracy of the data will be higher, less money will be spent on costs being incurred on unauthorized expenditures, and time is not wasted when alternatives such as this exist.

The specialization and division of labor between People, Ideas & Objects and Oracle is clear. Oracle is involved in the generic business processes that would be marketed and of value to all businesses that use their product in any industry anywhere on the globe. People, Ideas & Objects will be implementing the Preliminary Specification on top of Oracle Cloud ERP and therefore the North American oil & gas producer is able to gain this value proposition throughout their organization for both the oil & gas and generic business attributes. 

It’s no doubt the producers will claim they’ve had this level of functionality in their organizations. And that will be a true statement when we see they pay their employees expense accounts. However I do challenge them with their limited budget to undertake the work that Oracle did with J.P. Morgan Chase and all the other banks. Write the software for them and then all the other banks North American producers use. Then do the same for each of the service industry providers and other generic business processes that Oracle will be undertaking. And do so with all the other North American producers doing the same work individually in order to obtain the same value that Oracle and People, Ideas & Objects et al would have otherwise provided. If the fallacy of the officers and directors obstinate business approach to the Preliminary Specification isn’t comical to you, please visit our value proposition. Or maybe the summation of our offering as represented in Cloud Administration & Accounting for Oil & Gas is just too good to believe.

Although I did not hear it from Larry Ellison, Safra Catz or any of Oracle’s other leaders making presentations at the conference. Two presenters did make comments regarding Oracle's approach to deal with “medium to large business” organizations. This is contrary to People, Ideas & Objects thinking and it’s important to note here that Larry Ellison is the founder of NetSuite, a small business Cloud ERP system now owned by Oracle. However I believe this to be a redundant approach. We will provide our solution to all classes of oil & gas producers from Exxon to yesterday's startup. We feel our approach is valid and ask, what is it that’s provided in the expense report example with J.P. Morgan that Oracle would be unable to provide to the startup oil & gas producer? This is the standard of expectation that I demand that our user community take the Preliminary Specification to in terms of functionality and process management. This expectation raises the level of our systems quality needed to be produced for all producers and users in order to attain this level of service. It is a necessity as the propensity to overproduce is precipitated through the need for revenue which is assumed to only ever be made up on the basis of “more volume.” 

If You Don't Like Change, You're Going to Like Irrelevance Even Less, Part I

 The title is a quote from General Eric Shinseki, Chief of Staff U.S. Army.

I left a cryptic message on Friday in order to buy myself some time to write more about what I saw last week and its implications to People, Ideas & Objects, our user community and their service provider organizations. There will be significant impact felt across the oil & gas producers and the greater oil & gas economy. It feels to me that the landscape has tilted decidedly towards the vision presented in the Preliminary Specification. Except it hasn’t done just that. It has shifted well beyond that vision and into a conceptual model that I feel is enhanced from today’s vision of People, Ideas & Objects and to one that will be undertaken in other industries in the short term. Presenting further difficulties to any business that doesn't understand and undertake the direction that is put forward for what I think will become the short term norm for North American businesses. What I see is the capital structures of all firms have a new element of understanding which sees a firm's ability and capability to operate and compete will be on a substantially greater upward economic trajectory. Those that are unable or unwilling to exist in this new environment will be subject to the same or even more dismal conditions than what North American producers have faced this past decade. 

As a result I’ll be rewriting the Preliminary Specification to make the adjustments to reflect this new environment and overall vision. What I began in April in terms of the rewrite of the Preliminary Specification, its organizational implications and structure remains 100% valid and everything being added is incremental. I do not expect it to take much more than an additional quarter to rewrite what has been published since April. Once people understand our more robust and broader vision, its implications to our user community and their service providers will be better understood. People, Ideas & Objects user community is one of three of our distinct competitive advantages, our priority and we’ve been focused on its development since March 2014. It is in this area that others in the broader commercial marketplace are seeing the value in its organization and structure. How our user community and their service providers are the critical aspects of how these changes come about. Others are taking what we’ve started in oil & gas and expanding it far further than I considered, creating even greater value for all concerned. Providing a massive opportunity for all North American businesses to advance to a new metric of financial performance, and raising the standard of living of all, much as the industrial revolution did the past century.

So what's happened? Last week Oracle held their annual CloudWorld conference and I saw what it was that they were doing with their products and services. Yeah, yeah, yeah technology schmology. I hear you. If you ignore this however I feel it will be at your peril. Of the approximately 350,000 words in the Preliminary Specification there are maybe 5,000 of those discussing technology with most of that being Oracle related. Which would be close to the same number of words regarding technology that have been written in this blog’s over 3.5 million words. People, Ideas & Objects, our user community and their service providers are providing a business focused solution to the oil & gas industry and how to solve them through Information Technology. Providing a sub-industry as a gap that we see between the oil & gas producers and the technology providers. Oracle is presenting a much broader landscape in which we can operate. This provides significant advancement of our product offering and value to our user community and their service provider organizations. All to the betterment of North American based oil & gas producers. Therefore it is your right to turn your back if you should choose to do so, and your responsibility to have turned your back on what it is that we’re doing here. What Oracle has done in my opinion is to use their product technology and services to double the value that we’re able to provide the dynamic, innovative, accountable and profitable oil & gas producer. A substantial value proposition unmatched in the ERP marketplace.

My plan here is to organize my thoughts of how Oracle is now configuring their products and services to make these changes. There is a substantial amount of material that I still need to go through and I’ll be posting short posts such as this daily until I’ve finished. I’ll then begin the rewrite of the Preliminary Specification starting with the impact on the user community and service providers. Next week is the beginning of third quarter earnings for the oil & gas producers and we’ll see what effect the officers and directors have had on the productive capacity and financial performance of North American producers. I can only suggest that with the state of affairs in oil & gas, now would be the point in which a redoubling of one's efforts in terms of reviewing the Preliminary Specification might be considered. To consider the opportunity with an understanding of what may be. Time in the long term is the factor that appears to be evaporating quickly. 

And Just Like That, Everything Changes...

 Details regarding this cryptic message will be explained on Monday. 

Revised Resource Marketplace Module, Part II

Defining the Term "Designing Transactions"

Discussion now begins on what is meant when it is said that users of the People, Ideas & Objects Preliminary Specification will “design transactions” in the Resource Marketplace and Accounting Voucher modules. Transaction Cost Economics is an important element of how the energy industry can control its costs and designing transactions is a key to those savings and efficiencies. Also to highlight the role of the user of this Resource Marketplace module as an active agent in making things “happen.”

As with any marketplace the focus has to be on the user. The user in this case could be either a producer and most particularly an engineer or geologist, a service industry representative or service provider. A user is someone with access to the People, Ideas & Objects Resource Marketplace module who would be optimizing the “tasks” and “actors” involved in transactions, and will be able to turn the producers or Joint Operating Committees needs into a demand for services in the Resource Marketplace Module.

Two changes that may make things appear different in the future as a result of organizing on the basis of using the Joint Operating Committee as the key organizational construct of the innovative producer. One is that designing transactions will become a skill that is going to be used substantially more. And two, the division of labor is going to expand substantially, meaning that the job which may have had a few contractors that were needed to complete today, may now have an order of magnitude more in terms of the numbers of contractors tomorrow. Consider the following.

When people buy a major item in their lives such as a house or a car. They itemize the details of what is, and what is not included in the price. Who is to provide what and the terms and conditions of when the items will be completed. This is what is meant by designing transactions. It's more or less what Lawyers do for a living, or that is to say, it is an important aspect of their work in any commercial sale agreement. This type of work is where the costs and efficiencies of the organization can become onerous and complex. If a firm has “engineered” their transaction costs down to a fine point then they’re able to manage their costs efficiently. This will be the case for an oil & gas producer or Joint Operating Committee. Transactions when their costs include installation, finance, testing, the specifications, types of materials to be used and the engineering consultants, etc. In oil & gas, even for a small job these costs could become problematic. Adding an enhanced level of the specialization and division of labor with the Organizational Construct of the Preliminary Specification and we have a more complex transaction. 

As a producer focuses on their land & asset base and the coordination of the markets earth science and engineering capabilities. Product and service providers will be focusing on their key competitive advantages. Releasing some of their noncompetitive work that they may have done in the past to specialists at different companies. This will increase the number of vendors that a producer will use to conduct normal operations in the field. This specialization and enhanced division of labor will provide greater efficiencies and cost control for the producer firm through more competitive and innovative solutions. Expanding the throughput of the service industry in material ways. It will also increase the throughput of transactions that a producer will have to deal with and put more emphasis on the ability to initially design these transactions. Today the costs of transactions can be reduced substantially through use of today’s Information Technology with special emphasis on the Internet.

On the other end of this process is the product or service provider who is able to contract for what the producer needs. They too will have interfaces to the Resource Marketplace module that are similar to the producers. These users, who may have anticipated what the market's demand is going to be, are the first to configure an innovative solution. Are able to market their product or service effectively in the specific interfaces of the Resource Marketplace Module. These elements of the competitive market changes are reflective of the producer's needs as determined in the Resource Marketplace, and its use of transaction cost economics. This process involves an iterative loop of constant improvement and automation of the transactions and processes in the energy industry. Leading to an enhanced productivity, throughput and performance of all concerned but most particularly the producer firm. 

Lastly, when resources are discovered by the Joint Operating Committee or producer, the contract negotiation between the two parties can begin to take place. The first step in contracting will be the determination of exactly what the transaction should look like as determined by the interfaces provided in the Accounting Voucher module of the Preliminary Specification. This would then lead to the specific negotiations, automation of the creation of the contract, and assignment of the Resources to the contract. From there the Preliminary Specification with Oracle’s software would enable high levels of automation in order to relieve the user from work that is better suited to computers, and focus on the optimization and efficiency of the transaction.

How the Market Must Develop

In many ways the Resource Marketplace module of the Preliminary Specification is the crossroads of many of the other People, Ideas & Objects application modules major processes. It is where the Accounting Vouchers design of transactions will ultimately be exercised. And where the Research & Capabilities overall process of capabilities development and implementation will be realized. Maybe most importantly it is a marketplace module where people will be able to buy and sell their ideas for products and services of what the innovative and profitable oil & gas producers need. The Research & Capabilities module is a long term process of maintaining and increasing the earth science and engineering capabilities of the producer firm and Joint Operating Committees. And the Resource Marketplace module is the day-to-day implementation of those policies from that long term process.

We also see in the Resource Marketplace module some of the efficiencies of using the Joint Operating Committee as the key organizational construct of the innovative producer. And that is an important differentiation of the Resource Marketplace module in comparison to the Accounting Voucher and the Research & Capabilities modules. It is a Joint Operating Committee (primarily) facing module. Therefore it is representative of the many participants of the Joint Operating Committee and therefore will have the influence (industry standardization) of many producers Accounting Voucher needs and Knowledge & Learning modules developments. Optimizing transactions between contracting parties will provide enhanced performance to the overall industry. These changes will not lead to small increments in overall performance, but I believe based on my research into Professor's Langlois and Baldwin's theories, will have exponential performance improvements in terms of reducing their administrative costs.

Another key point is the establishment of the basis of Intellectual Property (IP) which is another Organizational Construct employed in the Resource Marketplace module. An industry such as oil & gas which is based on its earth science and engineering needs is a business based on science. If we are to expand the capabilities in science and innovation in the industry we will be needing 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’s no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling people to earn the rights to their Intellectual Property within the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. Turning the oil & gas industry into a far more dynamic business.

Therefore it needs to be asked, if the status quo continues, what officers and directors of the producer firms will be able and willing to address in terms of the redevelopment needs of the service industry. What will they offer as the motivation for rebuilding of the service industry if the Intellectual Property is managed the same as it is today? What will they offer to the service industry in order to prepare for a dynamic, innovative, accountable and profitable environment for all concerned? Or will they continue to ignore the rights of others Intellectual Property and just “muddle through.” And after so many years in which People, Ideas & Objects have been discussing this point, why do we not know the answer?

A quotation of Professor Giovanni Dosi from his 1993 article “Hierarchies, Markets & Power” which is a must read for those that want to dive deeper into these subjects. He states a simplistic model of organization will include the following, and I have annotated the area where these are addressed in this sub-industry People, Ideas & Objects are creating;

• The distribution of formal authority. [Industrial Command & Control.]
• The distribution of actual power in the above distribution [The people]
• The incentive structure. [Innovation, Intellectual Property, and capabilities.]
• The structure of informational flows. [Security & Access Control Module]
• The distribution of knowledge and competence. [The people] p. 10
• History, so to speak, solidifies into structures which constrain future developments. p 12

The purpose in developing this “Marketplace” is to ensure the future of the industry structure remains flexible and amenable to the changes in the sciences and innovation. But also to attain and maintain the highest performance. And in this next quotation Professor Dosi notes how this will come to be.

Clearly, it is the domain of Schumpeter’s creative destruction’, and of Moore’s (1978) analysis of the social bases of obedience and revolt, to name but two famous examples, and it applies also to the dynamics of economic organizations and institutions at large. p. 13

As we’ve noted, the big issues in oil & gas are not going to be solved until the incentive structures are aligned towards those that have the capability to solve the problems. Today, in the service sector, the oil & gas industry exploits the lack of identifiable Intellectual Property (IP) by more or less ignoring it and passing it around to the originators competitors in the service sector in order to establish price competition. This lack of respect to those that developed the ideas has brought about a situation where the service industry has ceased to innovate or sponsor any new start-up firms as competition. The producers, and now society, are the ones that lose as they’re unable to have their needs met by a diminishing capacity in terms of the service industry and potential decline in the productive deliverability of the producer firms..

The situation has become so dire as there is little to no research being done and no start-up opportunities in the oil & gas service sector. The exact reverse of what is required at a time like this. The oil & gas producers are reputed to be so difficult to work for that securing staff makes it all but impossible to start a firm, and even if a firm is started, the producers would only look down their nose at it, scoff at the fact the firm was so small. Such is life in their rarefied air.

Nonetheless, what's in it for the producers to accept that the IP should pass from their control to those that will take the time, energy, financial and intellectual risk to solve the producers problems? If we go back to one of the base assumptions that the People, Ideas & Objects software is operating under. We find that the competitive advantages of the producer firm are its land and asset base, and the coordination of the markets earth science and engineering capabilities. Where in these producers competitive advantage does any product or service of the oil & gas service industry provide any value to the producer? Why would they need their Intellectual Property or the ability to control it?

The means to acquire, explore, exploit and produce oil & gas reserves profitably is how the producer makes money. That should be pretty obvious, but on the basis of how producers manage IP in the industry, they seem to think that drill bits and rigs are their future competitive advantages. What the producer needs is the most advanced and dynamic service industry marketplace that is innovative, productive, profitable and fiercely competitive in order for it to achieve its optimal productive output. What the producers should ask themselves, what is it that they have?

Add this cultural change to the numerous other cultural changes that parallel the scope and scale of change introduced in the People, Ideas & Objects Preliminary Specification and the greater oil & gas economy has an idea of the difficulty that lies ahead. These are the difficulties for the bureaucracy of the producer firms themselves. They are the ones that have to change. And I can’t see that happening. “Organizations don’t change, people do.” It's a matter for Schumpeter’s creative destruction to sweep out the old and bring in the new. Or a time to revolt. The new being of course the thirteen module Preliminary Specification that deals with IP in the manner that will allow for the difficult problems to be solved. Based on the culture that our six Organizational Constructs impute and every individual in the greater oil & gas economy will be able to intuitively understand and apply to their work in the industry.

Serendipity, spontaneous order and creative destruction are hamstrung by the ERP software that organizations use. Software and most particularly ERP software defines and supports organizations while at the same time constrains them within that defined configuration. Without the permanent software development capability of People, Ideas & Objects, our user community and their service provider organizations the industry will remain in their current state. Without the IP in the hands of those entrepreneurs and innovators, how will oil & gas be able to rebuild itself and undertake the challenges of its future. 

It All Starts With Actionable Information

Our main objective in the People, Ideas & Objects software application modules is to identify and support the innovative and profitable oil & gas producer. It is within the Resource Marketplace module that I continually run into the conflict that is currently in the marketplace between the producers and the service industry. The conflict being the high cost of field operations and ownership of Intellectual Property. This conflict is the issue that the Resource Marketplace module must therefore seek to resolve by first opening up and developing the actionable information that is available within the marketplace.

The alleged high cost of field operations is the point of view of the producer firms. We have been subjected to the mismanagement of the industry for all but 6 of the last 36 years. It is during those six years that demand for field service far exceeds any capability or capacity of the service industry during the times the producer imposed their “other” thirty year periods. Price is the means in which to control demand for the service industry capacity and that is how the resources are allocated. This violates the producers officers and directors principles in some manner and sets them in the direction of attempting to control their field costs at all times. Cost control is not a business model. It is an engineering activity that limits the scope and understanding of their operation to the minimum level of understanding of the business. The field costs are the focus while the rest of the producer firm incinerates the cash provided by their investors and bankers. A more comprehensive understanding of business is necessary in oil & gas and this is what’s being applied throughout the Preliminary Specification. 

This actionable information can be captured in an interface that is similar to any contact database. The actionable data can be plans and aspirations of the service industry provider in the short to midterm. For example, if they were a small drilling rig company looking to acquire a new rig they could post within the actionable information area of the database, that they were actively looking for producers within a certain geographical region to contract for drilling in the third quarter of next year. Producers seeing this could then see this opportunity and evaluate it on the basis of further discussions with the vendor. The drilling rig company, having contracts in hand from the producers, would then be able to secure the financing and purchase the rig they’ve specified. The rig specification would be highly dependent on those producers' input.

Actionable information can also be from the producer who might be approaching the start-up of a large project and will be looking to staff up to meet the demands. Or a producer may be wanting to develop in a new remote area and needs to have more infrastructure in place. Expressing a need is the first part of having the solution provided. As Professor Giovanni Dosi notes.

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

Centralizing this industry wide information within one location will help to provide the users of it with its ease of use. This information is available on the web in some form and can be imputed what they mean from their plans. By stating clearly what their actionable plans are within a central database will make it easier for users to access. Innovation comes about when the plans are not set and the ideas and opportunities are able to flow leading to business opportunities for those parties.

I want to make clear that this Actionable Information Interface will be different from the interface that is in the Petroleum Lease Marketplace module. Recall there is an interface that takes the capital expenditures of the firms for the next few years, primarily from the AFE and reserves reports, scrubs any proprietary information from it, aggregates all of the producers data and publishes it based on general geographical region. This provides the marketplace with a general understanding of the size of that marketplace in the next few years. And is different from the detailed and producer / vendor specific information that is contained within the Actionable Information Interface. These expenditures are more or less seen as necessary in order to maintain and fully exploit the known reserves. The Actionable Information Interface would be for potential new business. This interface will be a critical part of the process that begins in the Resource Marketplace module and continues through the Research & Capabilities and Knowledge & Learning modules.

A couple of quick points to note. The first item is that the Resource Marketplace module is both a producer and Joint Operating Committee facing module. That is to say it will be used in the producer organization for human resources, payroll and for securing the resources that the producer needs. And will be used by the Joint Operating Committee for the field products and services needed there. The other item pertains to all of the modules in the Preliminary Specification and that is by right clicking the mouse will bring up a contextual menu of options that the user will be able to select an appropriate action from the People, Ideas & Objects software application. Whether this is a Work-Order, a Purchase-Order, AFE, or any of the other documents that are managed throughout the system. This will be available to users through this facility.

It is an underlying assumption of People, Ideas & Objects that high commodity prices are the necessary financing to both rebuild and then enhance innovation throughout the greater oil & gas economy. Therefore the need to stimulate innovation between the producers and the service industry starts with this actionable information. In addition to the funds necessary to finance innovation there are what Professor Giovanni Dosi calls “technical trade-offs.” These trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs the change and is usually abundant and available at low costs. For innovation to occur in oil & gas, People, Ideas & Objects assert that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers facilitated by the Internet for a number of technical paradigms which will provide producer firms and participants in the greater oil & gas economy with fundamental innovations.

Professor Dosi states “In very general terms, technological innovation involves or are the solution to problems.” Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and uncodified capabilities, or “tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.”

This is the point that I wanted to make in this follow on discussion to the “Actionable Information Interface.” Where will the innovative solutions come from? Who will solve the problems? It will come down to the person who first sees the problem. And that person may be situated anywhere within the industry. He may be the vice-president of production at an oil & gas producer. Or he might be someone such as Steve Jobs who starts out in his parents garage. The point is for the industry to be all inclusive and to have its problems being identified by those who can see them and resolve them with their innovative solutions. I wonder what reading the Actionable Information Interface of 200 producers would provide in terms of seeing what those people in the field discerned were the producers' imputed issues? And how they began solving them.

Revised Resource Marketplace Module, Part I

Resource Marketplace Module

Abstract

People, Ideas & Objects, our user community and their service provider organizations provide our Cloud Administration & Accounting for Oil & Gas service based on the Preliminary Specifications integration within Oracle's Cloud ERP tier 1 solution. Providing North American producers with the most profitable means of oil & gas operations, everywhere and always. We see that it’s no longer enough to own the oil & gas asset, it’s also necessary to have access to our Cloud Administration & Accounting for Oil & Gas service to make their oil & gas assets profitable.  

Adam Smith wrote in the Wealth of Nations that “political economy” is based on three attributes. First there is the “Economizer Argument” which is the fact that each person seeks out the most efficient use of the resources they have. Second, the “Local Knowledge Argument” holds that individuals are best to make decisions regarding themselves and their resources. Third is the “Invisible Hand Argument” where self interest is the motivating factor which forms the invisible hand of the market. In “The Theory of Moral Sentiments” Smith states the three “P’s,” consisting of “person, property and promise” provide individuals with the means of pursuing their interests by appealing to others interests. We therefore are in the business of building value for society in exchange for our efforts. Oil & gas is a primary industry. Its revenues are generated through the sales of persistent oil & gas production. Its interests are captured in the service industry and all of the subsequent tiers of supporting industries that service and supply oil & gas. It is this perspective that the Resource Marketplace module of the Preliminary Specification undertakes.

In the 1990s Professor Paul Romer formulated a number of new theories which became what are known as New Growth Theory. And in 2018 was awarded the Nobel Prize in Economics for these. Professor Romer replaced the economic growth theory of investments in transportation, communication and capital markets which appeared to have waned in their effectiveness due to their maturity. And established New Growth Theory which uses People, Ideas and Things as the three areas where investments will yield the greatest growth. Introducing the conceptual model of non-rival costs which is inherent throughout the Preliminary Specification. Such as our Cloud Administration & Accounting for Oil & Gas provides for the sharing of the non-competitive areas of a producer's overhead infrastructure. Substantially reducing the oil & gas industries aggregate overhead costs. Romer suggested ideas such as the consolidation of one size of coffee cup lids eliminates the need for incremental and unnecessary costs as an example of his principle. It was on January 1, 2006 that I named this initiative People, Ideas & Objects which reflects our adoption of these principles throughout our modules and organizations and that we’re object based Java developers.

People, Ideas & Objects Resource Marketplace module is the manifestation of these broader economic principles. We’ve chosen to employ the invisible hand of the market and Internet to disintermediate the centralized control of the producer firms who have failed comprehensively in their ability to meet their investor needs and other stakeholders, and now appear to be jeopardizing their customers' access to affordable, reliable and abundant energy. The service and other industries provide producers with the scale of operations, geographical diversity and technological skill to undertake their field operations. They are employed exclusively by oil & gas producers yet are treated as leeches and lepers, are and have been serially and chronically abused for decades. This has led to the fundamental breakdown in these industries with their capacity and capabilities diminished far beyond what is currently realized. And like the producer firms themselves, decimated capital structures. The Resource Marketplace module adopts the perspective that the producer firms caused the difficulties in the service and other industries. It is therefore the attitude we’ve adopted that the “producers broke it, the producers will need to fix it” in terms of providing the financial resources from the oil & gas primary industry revenues to rebuild these industries and active involvement in doing so. There’s no one else. And a rebuilding of these markets in the vision of the Preliminary Specification is necessary as the destruction and dismantling of the oil & gas industry at the hands of its officers and directors is comprehensive and complete. 

Preamble

The Preliminary Specification invokes six major organizational constructs which seek to provide everyone that works throughout the greater oil & gas economy with a fundamental understanding of “what” and “how” the dynamic, innovative, accountable and profitable oil & gas producers operate. “How” and “what” is necessary in order to achieve the most profitable means of oil & gas operations, everywhere and always. There are other constructs that are imputed such as the law, the economy and regulatory environment. These are obvious and are not mentioned here other than as frameworks in the Joint Operating Committee as our key Organizational Construct, or elsewhere such as in the Compliance & Governance module. 

The six organizational constructs that are employed in the Preliminary Specification and are particularly evident in the Resource Marketplace module include. 

• Markets
• Joint Operating Committee
• Specialization and the Division of Labor
• Innovation
• Intellectual Property
• Information Technology

Further information as to “how” and “what” influence these have over the Preliminary Specification can be found in our RFP Response and in the Organizational Constructs pages of this wiki. 

Resource management and development are the focus of this module. The unique nature of the oil & gas business demands field operations scattered across the continent. Producers therefore rely on the geographical, technical and operational capabilities and capacities of the service industry's participants in the diverse areas of their chosen operations. In an ideal situation producers would be provided with a broad and diverse offering through dynamic, innovative and thick markets. Due to the past treatment of the service industry by producers this is not the case. It is therefore incumbent upon the producers to seek this objective through their active participation, development and financial commitment to this purpose of rebuilding the service industry to meet its needs. In a situation which is best described as “you broke it, you fix it” producers have degraded the performance of the oil & gas industry to the point where it’s unable to profitably sustain operations. People, Ideas & Objects believe this began soon after the July 1986 oil price collapse and has been the case each and every day since. 

It is our hypothesis that the issues producers face are a result of chronic and systemic overproduction of oil & gas. Capitalizing all of their costs that are incurred, including the majorities of overhead and interest, have bloated balance sheets and conversely over reported profitability. Attracting investors which led to overinvestment which brought about further overproduction. Cutting costs in the field service area was the only method used throughout this period in an attempt to deal with the fact they never were able to capture their costs from their revenues. After 2015, without the investors annual cash infusion as a subsidy. And operating with the assumption that oil & gas commodities were “price takers” they’ve destroyed their business and the greater oil & gas economy. And now they suggest, as we enter a period of deprecated capabilities and capacities, we are to look elsewhere for our oil & gas as they as producers are incapable, unmotivated, distracted and leaderless.

Officers and directors argue that overhead is not the concern that People, Ideas & Objects represent it to be. With some producers reporting overhead being 1% of their revenues. It's good to know someone still has faith in these financial statements. Overhead is capitalized in the industry by 85% on average. This is contrary to what we believe to be the appropriate method of reporting a capital intensive business. It is reasonable to assume an operation such as oil & gas would therefore have significant capital costs being passed to the consumer in the prices charged for their product. That is not the case in oil & gas when the objectives of “building balance sheets” and “putting cash in the ground” override common sense. The cash consumed by the producer firm is literally stored in the ground as they do not receive the appropriate cost of capital, overhead and interest cost in the prices they pass to the consumer. These costs are offset by the investor to allow the producers to have them sit on the balance sheet in property, plant and equipment for decades, or as we call it “The Unrecognized Capital Costs of Past Production” account, and stroke the ego’s of the CEO’s and CFO’s as they strut down main street. This cash deficiency has not been rectified since we initially identified the issue over a decade ago in the Preliminary Specification. Leading us to conclude there must be something in those overhead accounts other than just the excessive size which officers and directors don’t want disclosed. 

Overhead is a material cost in oil & gas and we believe that its size, particularly for the producer firm, is the secondary reason for chronic unprofitability. We therefore in addition to addressing the primary reasons for the lack of profitability, our decentralized production model also addresses the overhead costs of the producer firms. Through the reorganization of the administrative and accounting resources of the producer firms to the service providers in the Cloud Administrative & Accounting for Oil & Gas service, each producer will no longer have to incur and maintain the heavy cost of fixed administrative and accounting capacities and capabilities. These costs which are non-competitive attributes of the industry will become shared and shareable. We are using Professor Paul Romer's “non-rival” costs to offer this service. Turning these into the variable cost, variable based on profitable production, industry wide capacity and capability for administration and accounting. 

Officers and directors have argued this couldn’t be done due to the scope and scale of the service. However, I’ll temporarily concede they may have a point on scale, what I won’t concede is how they’ll approach the issue of scope when it is as large as ours, each producer would need to individually undertake the same scope as People, Ideas & Objects, what Intellectual Property would each one of the producers use and their budget limited to their own resources. Conversely with respect to scale, People, Ideas & Objects conceptually has an aggregate budget of the industry's resources to apply to this issue and resolve it through the principles of engineering. 

Secondly these overhead costs are subject to the abilities and capabilities that People, Ideas & Objects, our user community and their service provider organizations are providing in the form of a long term software development and service capacity and capability. Therefore specialization and the division of labor will be the iterative process of enhancing the quality of our service and at the same time increasing the throughput of our productivity. Specialization and the division of labor will provide a short term increase in performance in terms of costs over the status quo. And when the overall throughput capacity of these resources are increased substantially due to the iterative long term application of these enhancements from specialization. 

It is within the Resource Marketplace module that we’re able to approach these costs in significant ways. First by eliminating and reducing the overall costs that the industry incurs in replicating exact capacities and capabilities within each producer firm that are not distinct competitive advantages. Turning them into the variable, based on profitable production, non-rival costs that they are and establishing the Cloud Administration & Accounting for Oil & Gas service. Secondly, subjecting them to the primary means of value generation through specialization and the division of labor, in an iterative process by way of our permanent software development capability. And lastly charging these costs directly to the Joint Operating Committee and therefore ensuring they are priced into the production costs of oil & gas. Removing the cash sink-hole the industry is known for. With the Preliminary Specification ensuring that only profitable production is produced everywhere and always, and the variable nature of these overhead costs in the Preliminary Specification, the cash incurred in overhead will be returned to the producer in the current period, or not be incurred during times when a properties production may be shut-in.

Dare I ask again, in light of the obvious value this would provide, and the technical viability of doing this is just as possible as what could be attained within a producer firm, what is it that’s in those overhead costs that’s so controversial to the producers officers and directors?

Executive Summary

What People, Ideas & Objects, our user community and their service provider organizations have set out to accomplish in the Resource Marketplace module is captured in this quotation from one of the primary research sources we’ve used. Professors Richard N. Langlois and Giovanni Dosi were used extensively for the research that was conducted in the development of the Preliminary Specification. In this quote from Professor Langlois we learn the direction that we’re headed.

[I]t seems to me that we cannot hope to construct an adequate theory of industrial organization and in particular to answer our question about the division of labor between firm and market, unless the elements of organization, knowledge, experience and skills are brought back to the foreground of our vision (Richardson 1972, p. 888).

To deal effectively with the Resource Marketplace in oil & gas, the producer will need tools to effectively engage with the suppliers and others for the resources they need. The Resource Marketplace Module provides a window on the “Resource Marketplace” from Joint Operating Committees and producer firms. Anything of value that is contracted between “actors” in the oil & gas, service industries, service provider, software and our user community generated businesses will be found, contracted, managed, transacted and developed through this module. It's simply a virtual representation of these marketplaces. Enhanced with the full capabilities of a tier 1 ERP system in the form of Oracle Cloud ERP. Therefore the transaction processing, negotiation, determination of available resources, determination of transaction costs, contract execution, effective software tools to monitor and verify compliance to the contract with the full support of our Resource Marketplace module and its interfaces with all other modules of the Preliminary Specification and Oracle Cloud ERP.

Similar interfaces will be provided for use to the service industries. Transactions have two parties, the efficiencies of the producers would inherently include the efficiencies to the service provider. It is not just producers in the Resource Marketplace. Key to the efficiencies in the Resource Marketplace are the mitigation of transaction cost friction. Friction on both sides of the transaction, due to the fact that transaction costs and most particularly dynamic transaction costs in the Resource Marketplace are costs that will ultimately be borne by the Joint Operating Committee and passed on to the producers.

It is the use of the Joint Operating Committee and the Resource Marketplace that provides value to the profitable and innovative oil & gas producer. Enabling the service industry to grow thick markets for their products and services. Where a diversity of offerings and services from new competitors, with new products or innovations on the products provided by existing suppliers. Producers have a role in defining and supporting a dynamic, competitive and healthy service industry. However, before that happens, the need for the software and services that are defined here in the Resource Marketplace have to be built for the producer, the Joint Operating Committee and the service sector to support these markets. From Professor Richard Langlois paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.”

The second hypothesis, which has resonances at least as far back as Gerschenkron’s famous “backwardness” thesis (Gerschenkron 1962), is that the way an economy responds to the problems of coordinating economic development depends not only on its own institutions and capabilities but also on institutions and capabilities elsewhere. It depends not only on an economy’s own history but on the history of other economies as well. The force of this observation is that an economy at the frontier of economic development (however we care to define that) is likely to respond to the coordination problem differently than an economy lagging behind that frontier. Specifically, an economy at the frontier is arguably more likely to rely on decentralized modes of coordination. This is so because uncertainty is greater at the frontier — uncertainty about technology, organizational form, market direction. p. 18

It is here we find the reason for what plagues the North American oil & gas economy. Producers have chosen centralization as their theme to deal with the situation they’ve created. Issues remain unaddressed and the offered solutions to those issues remain limited to People, Ideas & Objects et al. In 2022 similar solutions have been successfully implemented in many other industries through the form of disintermediation or decentralized organizational business models and structures facilitated through the use of Information Technologies and most specifically the Internet. Issues in the producer firms have now manifested themselves to the point where their capabilities and capacities through the producers and service industry are highly deprecated. The service industry is an industry established exclusively to provide producers with the operational, geographical and technical diversity they need to function. To the point where the capital structure of the service industry is non-existent due to the destruction authored by producer firms officers and directors. At the same time producers are standing on oil & gas production deliverability volumes that haven’t been maintained over the past seven years and may collapse due to their neglect and the service industry’s deprecated capacity and capabilities. An uncertain situation best encapsulated as I see it as, oil & gas everywhere, but not a molecule left to burn.

Introduction

Contained within this marketplace will be all of the producers and suppliers who will be able to define, create and conduct business in the actual resource marketplace that exists. The scope and size of the Resource Marketplace, our user community and their service provider organizations will accommodate the needs of Exxonmobil and their costs down to the single entrepreneur starting out in the oil & gas business. To preclude any group, profession, organization, or person from the Resource Marketplace, or any module of the Preliminary Specification, would limit the value available to the industry. Whatever service, product or solution is provided to the energy industry from individuals, those employed by producers, Joint Operating Committees, or companies providing services to the producers which should include Schlumberger and anyone directly or indirectly employed in the energy industry. Therefore acquiring as Professor Langlois suggests “the elements of organization, knowledge, experience and skills” and we include ideas in that list.