OCI Blockchain, Part IV

 Partnership Accounting

It is the Partnership Accounting module that captures oil & gas accounting. It is a comprehensive module that includes the Material Balance Report, described elsewhere in this Blockchain module description. One of the unique attributes of the Partnership Accounting module over what is offered in the marketplace today is the Gas Cost Allowance and surplus capacity functionality and process management. These features cost each producer within the Joint Operating Committee depending on their investment in associated properties. If they have an interest in the Joint Operating Committees of gas gathering and gas plants, compression or other facilities, their costs will be unique. The complexity of these calculations is responsible for the manual manner in which they are calculated. Most are subject to annual, but sometimes monthly, equalizations and therefore use Gas Cost Allowance estimates for each month of the year. These estimates are corrected and filed at the end of the year. 

Gas Cost Allowance being a predominately manual process today, the Preliminary Specification seeks to automate it with the Material Balance Report capturing the data and information within the blockchain in order to build the automation, specialization, division of labor, innovation and quality of the various processes dependent on that data. Our user community should develop the Gas Cost Allowance calculations to a highly automated level. If that still requires estimates during the year, that will have to be done. However, the level of automation that can still be done outside of these, I believe, is comprehensive. This adds substantial value to a dynamic, innovative, accountable and profitable oil & gas producer. 

Once we’ve understood blockchain’s features and capabilities we begin to see the value it provides society. People, Ideas & Objects are concerned with the broader issues associated with society and not just the oil & gas producer. We see in this downturn the cost that society has incurred as a result of producer officers and directors not paying attention to their business. This has left overproduction and overcapitalization to fester and metastasize. Oil & gas is the primary industry that drives more than producers' profitability. The follow-on effects of their actions, and mostly lack of actions these days, are catastrophic. There are more than producers at stake in this situation. Investors were the first to experience difficulties and what I think we can see is that today's organizations are inadequate for society's needs. Revised methods are needed in order to deal with the issues and opportunities presented in the business, as existing organizations are too slow and conflicted. 

Blockchain is the Internet of Value. Augmenting the Internet of Information we've had for decades. Anything of value can be secured virtually and securely through the blockchain. Business in terms of organizational structure no longer is constrained by physical and intellectual constraints. People acting in their, and hence society's best interest will ensure progress everywhere and always. Despite the fact that this sounds too good to be true, the problem is that we cannot afford to sustain the failure rate of our current organizations. They drag us under faster each and every year. How much longer will it take for the operational, political and financial degradation that we’ve experienced to affect the industry in irreversible ways? The question I think most people ask is why is this necessary?

People, Ideas & Objects provides oil & gas producers with the most profitable means of oil & gas operations. Why is the oil & gas industry unprofitable today? Clearly, oil & gas producer organizations are unconcerned and uncaring about these larger societal issues. What we can conclude today is that those facing the consequences of oil & gas unprofitability are outside the oil & gas industry. These are investors, royalty holders, the service industry, taxing authorities, and the people involved in those groups who don't have a say in the industry's operation. Alternative methodologies are needed. I am proposing the Preliminary Specification as that methodology and with the blockchain module included as our 12th of 14 modules. 

Throughout the Preliminary Specification people can see a separation between administrative and accounting functions performed by service providers. This separation is present as a result of each service provider focusing on one process and applying it to their customers. These customers are the oil & gas industry. Each Joint Operating Committee that produces will be charged directly from each service provider each month. In this there is a highly objective nature of the work being done by the service providers. Oil & gas producers and industry have lost objectivity today. When CEO’s consider their bloated asset balances to be the value representative of their efforts, we see the current distortions in the oil & gas industry manifest themselves over the past four decades. Are oil & gas producer capital costs an asset or cost? That question should be the first question in the CEO's mind. If they recognized the capital expenditure, they would replace that with the cash they would receive from the price of their product sold. This assumes the producer prices their product appropriately with operations, overhead and capital. This last cost being the most critical in a capital intensive industry. 

The service providers' objectivity is facilitated by organizational specialization and division of labor within the Preliminary Specification. This is enabled through the Blockchain module in our software. People within the service provider have no appreciation or understanding of the customer whose data they'll be managing. It will mostly be in large batches that are homogeneous in nature. It will be treated accounting-wise like all other data. What will be applied will be the appropriate regulations and requirements inherent in the software that they, as our user community representative in the development of the software were and will continue to be defining. The service provider's accounting process will become more scientific and associated with the pure accounting of the needs of the industry and the data sciences that they’ll be able to apply to the large volumes of data they use. To manage the transactional nature of all of this data the blockchain maintains the private / public keys, the hash codes and transaction management necessary to ensure not only the automation and objectivity is attained by the service provider but also the timeliness, accuracy, security and objectivity that is needed by the producer in the marketplace today. 

People, Ideas & Objects recommends a different policy for recording assets. The SEC requires that a producer's capital assets never exceed the present value of the reserves base times the current price. As a result, anything below that number is an acceptable accounting policy for recording property, plant and equipment. We believe that producers' activities are focused on maintaining their production profile. And therefore the costs to maintain the production profile are not capital assets. Secondly any intangible costs of drilling, casing, cementing and completion are unrecoverable. These are therefore not assets either. What we suggest here is that anything with a serial number is the only cost that is an asset and part of property, plant and equipment. What this policy does is shift the burden of oil & gas exploration and production costs away from investors and onto consumers. That is how businesses operate. Ensuring that the consumer pays the costs of oil & gas exploration and production ensures that the oil & gas industry can sustain itself as a viable going concern. This is where their cash is fully returned to them within a few years of their investment. The second question a CEO, after our first question of what is a capital cost, an asset or a cost, is do they want to have billions of capital assets in property, plant or equipment or do they want to have an equivalent amount of cash and short term investments? That is the difference between the current situation and People, Ideas & Objects policies. 

Applying this policy across the industry objectively is one of the benefits of the Preliminary Specification configuration and service providers. The assurance of the integrity and validity of the process and charges being created by the service providers to either the producer or Joint Operating Committee is a result of integrating blockchain technologies within the Preliminary Specification and most particularly here within the Partnership Accounting module. We’re talking about objective, generic and standardized accounting across the oil & gas industry. Processes that consider the industry's needs and requirements and the rules and regulations that govern them. I fail to see the argument here in terms of how or why objective, generic and standardized accounting applied across any industry would be considered a negative attribute. This is an element of the vision I had for the Preliminary Specification when I wrote it. That the blockchain is the method that enables the technologies within the Preliminary Specification to more easily integrate the objective, generic and standardized accounting we’re discussing here. This is one of the features we're implementing in this Blockchain module.

We have a responsibility for our future to produce today’s oil & gas profitably. The calculation of the cost of oil & gas exploration and production can be found in the Partnership Accounting module. These calculations will include the profitability of the Joint Operating Committee, the producer and the price calculations needed for profitable oil & gas production. These will be the actual revenues and costs incurred by producers and individual Joint Operating Committees. Today in almost all instances quotes from producers about their profitability do not consider accounting information. These quotations are based on reserve estimates provided by consulting reservoir engineers. This practice needs to shift to base quotations, and most importantly producers' decisions, on the actual accounting costs and profitability. Then we can be assured that we’re producing today’s oil & gas profitably. 

Earlier in this Blockchain module specification we discussed the Material Balance Report. We spoke about how blockchain technologies were to be used to secure the production and associated data for the processes and automation within that report. Within the Partnership Accounting module there are other features that benefit from blockchain technologies. These include the pooling concept where members of the Joint Operating Committee, due to the potential future shortages of engineers and geologists, and further specialization and division of labor, need to pool these technical resources to cover all of the technical requirements of the property. We also have the Work Order which has two components that introduce the second business model of a dynamic, innovative, accountable and profitable oil & gas producer. The Work Order is a key to moving the producer and industry forward in terms of innovation on a producer's competitive advantages. 

Within the pooling concept we introduce the capability of each participant within the Joint Operating Committee to actively participate in the property's operations. Therefore each producer will charge costs to the Joint Operating Committee in the same manner that the Operator does on behalf of its working interest partners today. Blockchain ensures that only authorized producers will be able to make payments and charge the Joint Operating Committee on behalf of the property. Each producer writes to the blockchain blocks the transactions that make up the operations and capital that are the agreed and approved costs. These will be controlled through traditional means of AFE’s and annual operating budgets. In order for the pooling concept to succeed each producer must be able to spend and recover funds directly to the Joint Operating Committee on behalf of the partnership. The blockchain, as well as other software within People, Ideas & Objects and Oracle Fusion Applications, will ensure no unauthorized transactions are posted.

The first element of our Work Order is the ability for producers, that is any group or configuration of producers, to work together in a research project or study group. Since producers may have no prior relationships, ad hoc involvement in these studies creates administrative nightmares that prevent the use of adequate levels of studies and research. Innovation within the oil & gas industry demands an exponential level of these studies compared to today’s activity. In order to stimulate that producers need to enhance their capabilities in these areas. Once again the blockchain will be used to manage the disparate nature of the producers' individual contributions and costs of the research project or study and the distribution of these costs and results. By securing these transactions within the blockchain they are made accessible by the participants. Only authorized participants will be able to pay or process costs through the study. By eliminating the administrative disaster that these research projects have become in today’s environment we expect that they’ll expand significantly.

The second element of the Work Order is the ability of the producer firm to generate the revenues necessary to offset the costs of their earth science and engineering capabilities. The direct costs associated with these competitive advantages will be offset by charging these resources directly to the Joint Operating Committee. Without the COPAS overhead allowances these costs are not covered under the Preliminary Specification. Therefore charging the property directly for the work done by these resources is how this is remedied. Each of these resources will be required to charge their time to a Joint Operating Committee or producer's overhead account. Their time and standard charge out rate will apply and be billed each month. It is expected that these “consulting” revenues would always cover or be higher than the costs to maintain the producer's earth science and engineering capabilities. With many data elements of the Preliminary Specification captured on the blockchain. It will be possible for partners to view the Work Orders time, charge out rate, and other data regarding the billing to the Joint Operating Committee.

Here is what I see for the future. Blockchain is a distributed ledger technology. It is open source. Oracle is committed to the technology as seen in the development of Blockchain Tables within the Oracle Autonomous Database. Blockchain as a feature of Oracle Database seems natural. The Oracle Cloud ERP provides the immutable nature of the data. I think this is where we’re heading and will be the situation when we release the Preliminary Specification as commercial software.

Accounting Voucher

The Accounting Voucher and Partnership Accounting modules are the two pure accounting modules within the Preliminary Specification. They work hand in hand to provide the full scope of accounting requirements of the dynamic, innovative, accountable and profitable oil & gas producer and Joint Operating Committees. Each of these organizations will be provided with full financial statements that reflect their standardized, objective profitability. The scope and scale of the Preliminary Specification for accounting and process management includes everything an upstream producer needs. It can be defined as high levels of automation from field data capture to financial statements. Only this basis of accounting can be considered to be the base level of what is necessary and required for the next generation of oil & gas producers. Effectively changing accounting's role in the industry from a statutory compliance and governance requirement to a dynamic decision-making role and capability. 

The unique feature of the Accounting Voucher is the capability to manage the pooling concept introduced in the Preliminary Specification. Pooling sees all of the participants in a Joint Operating Committee actively involved in the properties' day-to-day operation. Through the expansion of the producer's earth science and engineering capabilities due to specialization and the division of labor. There will be few, and possibly no producers that will be able to fully staff their organization with the resources to cover the global scope of the sciences' demands. Producers will need to specialize in specific, high value capabilities to ensure their cost structures remain within commercial operations. It is also important to address the perceived shortfall in earth science and engineering resources in the future. The Preliminary Specifications pooling concept allows producers within the Joint Operating Committee to contribute their unique capability. Eliminating what People, Ideas & Objects have called the industry wide unshared and unshareable nature of the surplus unused and unusable capacity present in today’s earth science and engineering capability. 

In essence what will be possible is for a participant within a Joint Operating Committee to raise an Accounting Voucher for either their producer firm or a specific Joint Operating Committee. That Accounting Voucher would allow them to process what is traditionally understood to be an accounting voucher for whatever purpose. The Accounting Voucher itself is an electronic representation of the document. Therefore it is shareable between producers who participate in the Joint Operating Committee. Blockchain comes into play here. The concept of sharing seems inconsistent at first, given the inability for a specific block to be duplicated on the blockchain. The Accounting Voucher shares the block information without duplicating the block for each participant producer. 

It is also the immutable nature of the data contained in the blockchain block. These data elements would include everything regarding the Accounting Voucher. Be accessible only through the public / private keys of the participating producers in the Joint Operating Committee, or the individual producer. This depends on the nature of the Accounting Voucher. The data is encrypted and cannot be viewed by anyone. Changing any data within a block representing an Accounting Voucher would rewrite the hash code. Once the hash code is rewritten, it cannot be verified through its distributed ledger. It would be recommended by People, Ideas & Objects that the distribution of the blockchain ledgers used within the Preliminary Specification be distributed to each and every oil & gas producer within the industry. This is a security feature of the blockchain due to the immutable nature of the data. If all copies of the blockchain agree on each block's hash codes, no tampering has occurred. If someone attempted to tamper with the data they would have to replace the revised hash codes on each copy of the distributed ledger the instant they made the change. This is not considered reasonable or possible in terms of blockchain operation.

OCI Blockchain, Part III

Financial Marketplace

Within the Financial Marketplace we deal with something present in other marketplace modules. Oil & gas producers must acquire capabilities that are dynamic, innovative, accountable, and profitable. At the extreme, each producer can house all of their capabilities within their own organization and mine for steel to manufacture their own drill bits. Or it can use the market to obtain the capabilities it needs. Within the Preliminary Specification we shift from the current producer configuration to one that is more dependent on the market to meet its needs. This is most obvious in the change in administration and accounting performed by our user community-based service providers. Moving from the fixed overhead of the producer to a variable overhead of the industry. Moving resources around allows service industry representatives to focus on their key competitive advantages. Enhancing the focus on the service industry expands industry throughput through specialization and division of labor. Enabling producers to focus on their key competitive advantages, their land & asset base, and their earth science & engineering capabilities. 

The Joint Operating Committee also serves as our key Organizational Construct for an oil & gas company that is dynamic, innovative, accountable, and profitable. Therefore from a fiscal point of view we are moving from a producer perspective to a Joint Operating Committee perspective in order to advance the speed, accountability and innovativeness of the industry. In the Financial Marketplace and other modules we are therefore looking to establish each Joint Operating Committee as its own standalone reporting organization. With each providing full financial statements for each property. Enabling producers of any size to consolidate upwards to determine their cumulative interests. The Financial Marketplace module enables each Joint Operating Committee to have its own banking and financial resources for the producer firms in the partnership. Creating a better defined risk portfolio for banks, a standalone securitizeable organization and increased administrative efficiency.

The U.S. dollar is the currency in which oil & gas producers operate. Our use of blockchain within the Preliminary Specification is to secure transactions within distributed ledger technologies. The purpose of blockchain implementation is not to replace cash with coins or tokens. There is no value or compelling reason to challenge U.S. or Canadian currencies. Blockchain technologies within the Financial Marketplace module benefit the Joint Operating Committee. Having an immutable ledger of transactions within the Joint Operating Committee ensures only approved transactions are completed. When there are 3,000 individual service providers providing administrative and accounting services to each of the potential several hundred thousand Joint Operating Committees. Only those authorized public / private keys of the service providers and Joint Operating Committees will be used to write to the specific Preliminary Specifications blockchains. Eliminating the opportunity for other non-authorized organizations to bill the Joint Operating Committees.

The level of automation introduced throughout the Preliminary Specification is one of our products' many features. People, Ideas & Objects software development capability, our user community and service providers seek to enhance automation, specialization, the division of labor, quality, innovation and having computers working for us throughout the oil & gas, and service industries. Seeking to secure the Preliminary Specifications data within the blockchain itself enables us to ensure precision. Saving time by eliminating redundant checks. Securing that data and reporting it to the appropriate producers, Joint Operating Committees and users. Once this data is as it should be we can automate the processes. Not only the automation mentioned in the Preliminary Specification, but that which will be developed and included by our user community during initial development and the subsequent iterations prepared by our user community and the application of our permanent software development capability. Automation can relieve us of the menial tasks we are burdened with today by checking data, entering data, and processing it if the data quality is immutable and unimpeachable. Activities that are best left to computers which would then provide us with the time to approach the higher level tasks of leadership, problem solving, decision making, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromising, innovating and financing. A specialization and division of labor between people and computers for the 21st century.

The Financial Marketplace module will be where this vision hits the ground. That is the cash balance. Data checking, verification, validation, and audit processes must be automated. This is where a level of sophistication and understanding of the entire Preliminary Specification is necessary to make the appropriate changes to the industry and producer structures. In addition to the implementation of internal controls, our budget for the Preliminary Specification includes in the Compliance & Governance module a budget of $114 million for Public Accounting firms to review these processes on behalf of the oil & gas industry. It is used to ensure compliance, review the Preliminary Specification code, and ensure it does not violate GAAP. It will also certify that annual audits of producers undertaken by Public Accountants based on this overall systems review. Forming the basis of their annual audit.

Speed and control are some of the objectives included in the Financial Marketplace module of the Preliminary Specification. Producers' ability to turn capital over quickly is a competitive advantage in today’s business model. Producers could become self-funded if they maintained a minimal or even zero balance of property, plant and equipment. Capital projects must be completed faster and easier, and as a business that should be a given. Shifting the focus to the Joint Operating Committee where the operational decision making, financial and legal frameworks of the Committee's nine frameworks exist will also speed up the process. Having the participants of each Joint Operating Committee come to a consensus on the issues and opportunities of the specific property provides a clear strategy and focus. This is without operator constraints impeding progress. Meanwhile, as the Financial Marketplace points out, speed is meaningless without control. It will be understood, I would assume, that if a property is not profitable, or a subsequent event takes the property into unprofitable territory then it will be shut-in. This will impose production discipline on the producer. Also, with the Financial Marketplace module's ability to enable banks to deal with only the Joint Operating Committee, the ability to leverage the returns of the producers' interest in the property becomes a reality.

Within the Petroleum Lease, Resource and Financial Marketplace modules there is a common interface known as the Marketplace Interface. At the time it was initially proposed it was quite controversial, but since then, things have settled down. It is a virtual representation of the industry marketplaces and Preliminary Specification. Users, vendors, service industry representatives, producers and others will have avatars within the People, Ideas & Objects Preliminary Specifications Marketplace Interface. This will enable them to interact within this virtual marketplace representation. Organizations may want to establish virtual real estate to house their commercial offerings. Ability to invoke components of all Preliminary Specifications modules for functionality and process management. This is done by conducting transactions, interactions and connecting through the interface elements through “tiles,” or the right click of a mouse. This is done to engage others in the oil & gas business. It is intended to be an innovative medium of communication, business and operational capability. This is positioned between the undocumented but highly available telephone call and the well documented and difficult to arrange on-time meeting. With the implementation of blockchain technologies within the Preliminary Specification the documentary elements of these exchanges, transactions and interactions become immutable and secure. More importantly, as noted in the two TED Talks below, trust becomes the commodity available between parties. 

The following two TED Talks are highly informative in the sense that they provide an understanding of blockchain technology's implications on trust. They also explain how blockchain will replace people’s trust in organizations and institutions with trust in strangers. The implications of the shift in trust are dramatic, and when viewing these videos please consider them from the point of view of their integration within the Marketplace Interface as described above and in the Financial, Petroleum Lease and Resource Marketplace modules definitions. 

Ted Talk by Bettina Warburg.

Ted Talk by Rachel Botsman

Within Bettina Warburg’s presentation she mentions that “Institutions are a tool to lower uncertainty to connect, interact and transact within society.” With Rachel Botsman's presentation providing the example of AirBnB where a visitor would not leave the place in anything but great condition because otherwise they’ll be rated poorly. Noting that distributed trust which is defined as transparent, inclusive, decentralized, accountable and bottom up is replacing institutional trust that is opaque, closed, centralized, licensed and top down. Ms. Botsman also introduced her “Trust Stack” concept which includes three steps. First, trust in the idea, then trust the platform, and then trust the other users. It is these elements of trust that help people earn the trust they need to take the “leap of trust” or “leap of faith” from the known to the unknown. 

It is the integration of blockchain within the Marketplace Interface that makes for what I believe to be a new environment of what and how business will be conducted in oil & gas. I see significant potential for people and organizations to interact at greater speeds. This is with less issues regarding what level of trust should be given and an understanding of the level of capabilities being offered. If the Marketplace Interface user can review the blockchain history of a potential party they may interact with. See that they are who and what they represent and that they have a history of delivering that capability to the marketplace. Confidence in those transactions may be higher than today's organizational structures. 

Included within the Preliminary Specification software written to the blockchain block that documents the transaction will be a video or screen capture of the sessions of all of the users in the transaction and of course the documents produced as a result of the interactions. These will be secured and captured within that blockchain block. Blockchain will make the Marketplace Interface highly secure, data immutable and documentary value unimpeachable. 

Within the Financial Marketplace module we briefly discuss the concept of securitization of oil & gas properties. Blockchain makes this possible. The ability to secure title through the Petroleum Lease Marketplace, as well as funding through the Financial Marketplace modules Marketplace Interface facilitates both. A service provider can handle the accounting and administration of the properties on behalf of the working interest owners. This allows the investor to work directly within the oil & gas industry for their working interest. They may have little in the way of oil & gas earth science and engineering capabilities, however the second business model of the Preliminary Specification is the trading of these capabilities between producers both within the Joint Operating Committee and throughout the industry. Investors would therefore obtain these capabilities through their Joint Operating Committee partners. The blockchain provides the investor with the trust model necessary to ensure that the title interest is theirs, and their property produces profitably at all times.

OCI Blockchain, Part II

 Security & Access Control

We’ll now walk through each of the thirteen other modules of the Preliminary Specification and discuss the Blockchain implementation in each. The first is the Preliminary Specifications Security & Access Control module. This seeks to ensure that “the right people have the right access to the right information with the right authority at the right time and at the right place, on the right device.” Which is one of the more difficult aspects of the Preliminary Specification. This requirement is complicated by unique elements introduced through use of the Joint Operating Committee as the key organizational construct. It is also expected that producers, and the service industries dependent on producers, will be required to expand their throughput through enhanced specialization and division of labor. This is as a result of the natural demand for more engineering and earth science effort for each incremental barrel of oil or gas produced. And the reduction in market availability of earth science and engineering resources due to the recent downturn. This is due to the anticipated retirement of large percentages of those professions. Triggering the need for technical resources pooling of each producer participating in the Joint Operating Committee. Imposing a temporary compliance and governance structure over this pooling through the Preliminary Specifications Industrial Command & Control, a feature of the Security & Access Control module. 

The majority of the information contained within each producer firm regarding the Joint Operating Committee is the same. Each producer shares all of the data and information pertinent to the Joint Operating Committee. They will be party to the service providers' billings for the administrative and accounting services rendered for that Joint Operating Committee. One clarifying aspect of using the Joint Operating Committee is that the data and information created and used within that organizational construct is unique to the partnership. The sharing of this data within the Joint Operating Committee is standard in the industry and has always been. This contrasts with the unique and proprietary nature of producer firms' data and information. Segregating these two distinct types of data from each other would and should be the first order of business during our development. That way members of a Joint Operating Committee, of which a producer firm may have an interest in several thousands of, won't leak any proprietary firm data. 

Continuing with the discussion of blockchain integration in the Security & Access Control module. At this point, the implementation of blockchain technologies opens up a number of possibilities. There are many possibilities, and there are too many to list and document all of them here. The need for our user community to fully identify and explore the issues and opportunities of each of these possibilities will be their responsibility during development. Producers' needs in the area of confidentiality and their specific concerns regarding the cloud, encryption and security, as are many other areas, need to be addressed through their active involvement with our user community. Otherwise decisions will be made without producer involvement. There will be little opportunity, after the fact, for them to make the substantial changes that the Preliminary Specification development provides. User community-based systems are the only development methodology worth pursuing. Our user community understands oil & gas, and can implement that understanding within the software on their own. Without producer involvement, only producers will suffer. It is in their own self-interest interests to participate by interacting with our user community. 

The key area that producers will suffer from is that their perception is that these developments are a one-way street. That the users absorb what the producers want and deliver that to them. Today, producers need to keep on top of the changes in the software and how those developments impact their organization. Implementation of the software will have to be done with significant consideration to its impact on the producer firm. Changes will need to be made during development and implementation. Sitting out the first round of software development with our user community may preclude the producer's organization from benefiting from the software. As the ability for a producer to assimilate the first round of changes alone while iterations are being made upon those in the second round of developments may render the producer unable to keep up with the industry's updated standard of profitable organizational performance. 

People, Ideas & Objects use Oracle's cloud implementation to host the software derivative of the Preliminary Specification. Oracle Autonomous Database provides Multi-Tenancy. Each “tenant” or producer in our case will have its own database instance, its data is separate and distinct from all other instances (producers)' data. Each instance of the database uses the same database for its functionality. From a software development and deployment point of view this significantly reduces our costs and difficulties in deploying the Preliminary Specification as conceived. Each producer will have their own, for all intents and purposes, database and applications that are distinct and independent to each and every other producer. In prior databases, and in other vendors currently, the need for cloud implementations of those databases was either separate containers for each or we would have had to use a producer ID to identify the data belonging to one producer in a pooled database of all of the other producers in the industry. Either of these last two options would have been unacceptable or costly from a licensing and support perspective. 

When we look at the decentralized nature of the blockchain we see a further separation of the data and information of the producer from each of the other producers in the industry. The addition of decentralized ledger technology which is the blockchain will enhance this Multi-Tenant effect of the Oracle database. It is difficult, in my opinion, to justify the use of hardware and software for ERP purposes within the producer firm itself. The feature that we want to maintain by using the cloud is the overall feature of Security & Access Control of “the right people having the right access to the right information with the right authority at the right time and at the right place.” For these purposes the “right place” is the cloud and whatever the location of the user. It is my understanding that blockchain has a feature called Blockchain Access Control. The blockchain's individual blocks are accessed via public / private key encryption technology. Eliminating passwords and providing the level of security and overall access control that not only the producers' data and information needs but also the Joint Operating Committee.

Resource Marketplace

“A marketplace to support contracting from A to Z.” The issue that People, Ideas & Objects takes to the industry's operation is that producers appear unaware and uncaring that they are the benefactors of being a primary industry. They feel the secondary industries they rely on to complete the work they need done are “greedy and lazy” and leeches off of their revenue stream. It is simplistic to view the world from this perspective when producers collect 100% of the cash from oil & gas commodity sales. The problem is that it is difficult to understand that those revenues were not earned 100% by producers. And slashing activity levels, cutting the service industry's “costs” during times of difficulties, extending the time when accounts payable are paid by producers from 6 to 18 months can be done when everyone does it. Puts the service industry in severe financial jeopardy. And everyone does it when no one pays attention to the fact that producers' overproduction of oil & gas commodities is chronic and systemic. Which mitigates the impact to the producers and leverages it towards the service industry. The Resource Marketplace changes this. It also identifies the source of the innovations that producers first claim as theirs. These innovations are really those of individuals who have worked hard for decades in the service industry. Who have had their Intellectual Property disrespected by the producers and ignored until the producers desperately need the innovation from the service provider and they finally begin to approach the situation responsibly. 

Innovation in oil & gas will not withstand decades in which coiled tubing developers beg producers to try their product to see what the possibilities are. Or Packers Plus is abused for their ball-dropping and packer developments. People, Ideas & Objects can speak of these things as we’re only the most recent example of the abuse that people have to endure to deal with oil & gas producers. Nothing in the industry would have happened in the shale industry if it weren’t for a number of individuals who brought those technologies to life in the service industry. These innovations took decades for producers to accept as common sense. People, Ideas & Objects can assume that it’s only a short period of time from now when producers realize that producing only profitable production with our decentralized production model’s price maker strategy is considered common sense. 

A more cooperative and collaborative environment is created within the Resource Marketplace. This is to ensure the innovations the industry needs in the next few decades are brought to market in a timely manner. An environment where ideas are respected, supported and developed with the understanding that producers will benefit. What other purpose could coiled tubing or ball dropping serve? The service industry is not the producer's enemy and is not greedy or lazy.  

Blockchain is most valuable in this area of the Resource Marketplace module. We will implement distributed technologies to support the recording of transactions and reporting of them. Specifics of what and how will hopefully be done through collaborations between our user community and the producers. Even if it is just our user community that determines the details of the Resource Marketplace and its blockchain use, we’ll be more than satisfied with that. With the Resource Marketplace module there is the implementation of the Marketplace Interface. This is shared with the Petroleum Lease Marketplace and Financial Marketplace modules. There is also from a transaction processing perspective Accounting Voucher and Partnership Accounting modules. In addition the Resource Marketplace module feeds critical data and information into the Research & Capabilities, and therefore the Knowledge & Learning modules. It is the focal point, the point where much of the transaction history will be reflected on the blockchain. 

One of the markets blockchain is uniquely qualified to address is Intellectual Property. Particularly from the point of view of the smart contract technologies included in the Ethereum blockchain. As we noted the innovations and IP of oil & gas field operations mostly resides within the service industry. And those people or companies have ample protection from three forms of Intellectual Property, including copyright, patent and trademark protections. What I’m suggesting here in the Resource Marketplace module is that we have an element of the Marketplace Interface that is a registry of that industry specific Intellectual Property. This registry would be implemented within the blockchain and therefore be available for people to view and see when and where the ideas were created. In addition it could be used as a marketing tool by those who are behind the idea to recruit producer participation and active involvement in the funding and deployment of those IP-based technologies. The focus would be on innovation and ideas within the oil and gas industry. Concentrating the service and oil & gas industries on these innovations and developments.

Petroleum Lease Marketplace

Don Tapscott defines blockchain technologies as the Internet of value. In terms of value, land and mineral rights are the area where producers secure oil & gas reserves. Having a registry of land titles on blockchain is a logical direction for the industry to pursue. Most of these registries are managed by federal, state or provincial governments who lease mineral rights. Would they, or are they considering this as an area of service development? Nonetheless our user community should fully explore the opportunities and issues of using the blockchain to manage land titles for the industry. Is that feasible within a timeline that is consistent with our initiative for triggering governments to act. Otherwise we will depend on developing the Petroleum Lease Marketplace on the basis of the Preliminary Specification as it stands today. That is not an issue as I see it as a necessary part of our system. It would be an advancement compared to current market offerings. Subsequent developments to incorporate blockchain within the module would be enabled once jurisdictions enabled their registries to use blockchain technology. People, Ideas & Objects' software development capabilities facilitate subsequent developments.

Petroleum Lease is a marketplace module, which means that it is the place where buyers and sellers interact to transact for things of value. This marketplace would be populated by producers seeking to acquire and divest of oil & gas assets. They would make arrangements with partners in Joint Operating Committees, post and bid on available leases and engage with the market as a whole. As with the Resource Marketplace module the Petroleum Lease Marketplace module is a source of transaction origination. Therefore, administrative and accounting service providers, producers’ legal representatives and others would also be in touch with the principles behind the transactions. Ensuring that the transaction details were understood and implemented on that basis. As has been mentioned in the Marketplace Interface both “tiles” and contextual menus would be available to support these transactions and their principal users. Embedding these within the blockchain, even if it may not initially involve the issuing jurisdiction's registry, would still provide value with a history of the transaction. This would also provide integrity achieved over the property history. 

One of the advantages of blockchain is the immutable nature of the data contained within the blocks. However, due to the checks and balances inherent in the technology, it is nearly impossible to change the data within the block. Any changes to the data are written to subsequent blocks. The user can therefore see the result of the two blocks of data which provide them with the information they're looking for. This YouTube video describes it.

Using the Ethereum blockchain throughout the Preliminary Specification would be the preferred technology at this time. Blockchain technologies are being innovated. For instance, blockchain technology has now processed 2.5 million transactions per second. What People, Ideas & Objects and our user communities needs will be and the capabilities that will ultimately be provided by Oracle’s Cloud Blockchain offering will need to be determined by our user community after consideration of all of the industries needs and technical requirements.  

As the Petroleum Lease Marketplace describes there are a number of data elements, mostly attributable to the Joint Operating Committee, that come into play as a result. What is necessary is that the data captured by the Preliminary Specification in any module must be unimpeachable in quality and integrity. Searching for data elements to ensure they're the correct data is a known time-consuming and wasteful process. With blockchain the nature of the data within the Petroleum Lease Marketplace can achieve this unimpeachable level of integrity. This will save the industry time and effort checking information that's correct or should have been correct. The level of effort necessary to achieve this assurance consistently is the job of our user community. Doing the research, design and development once, then defining the process management in the software, and the data source that provides these levels of assurance can be done by our user community during our development. This level of examination and review is what is necessary for the oil & gas industry to move forward to the next level in systems quality.

OCI Security & Access Control, Part II

 People, Ideas & Objects and Oracle Corporation

Starting with the Security & Access Control module we find that Oracle Corporation has a comprehensive suite of applications that provide the security and access control that we are looking for falling under the Oracle Identity Management brand name. These products include tools for Access Management, Identity Administration, Directory Services and Governance. These product classifications come in a variety of different products and are configured in some specialty industry and management suites. 

Two areas in the Preliminary Specification that will be challenging to develop are the Industrial Command & Control (ICC) and the inter-relatedness of the Joint Operating Committee and service industry representatives. Early on in the specification we noted a number of research areas that needed to be conducted. These are two areas that will take research dollars to resolve. To have the ICC recognize members of different organizations will not be a challenge. To engage them and have them interact in the manner we expect them to when we expect them to, will. 

Oracle Identity Management resides within the Oracle Fusion Middleware product layer. As we indicated earlier in the Preliminary Specification this is Oracle’s Java Enterprise Server. Therefore these applications are open to tailoring to our users' needs through the process of “additions” as Oracle calls them. When we sit down with Oracle and define the Security & Access Control module based on our user needs. These needs can be accommodated by the technologies we have selected. 

And it is through our user community that we will resolve these issues. It is one of the reasons People, Ideas & Objects software developments budgets are where they are. We will have challenges to resolve in delivering these innovative systems to the industry. I would remind producers that our value proposition sees the one-time costs of these developments amortized over our producer base. Yet each producer receives the full scope of that development effort in terms of the software application. 

We now look at the Oracle product classification for Access Management. Included in the Access Management classification are the following products: Oracle Access Manager, Oracle Adaptive Access Manager, Oracle Entitlements Server, Oracle Identity Federation and Oracle Enterprise Single Sign-On Suite. Each of these products will be included in the Preliminary Specification as they have components required for day to day use by our users, service providers, producers and Joint Operating Committees.

One area Oracle had been working on was working with partners, vendors and suppliers. Within Oracle Access Manager it is noted that they provide... “Building federated user communities that span company boundaries.” These are the beginnings of both pooling and Industrial Command & Control (ICC) that are critical to resolving many of the issues that the oil & gas industry faces. 

On the heels of Oracle Access Manager is their Adaptive Access Manager which takes the concept of intra-partner interactions further with “Oracle Adaptive Access Manager makes exposing sensitive data, transactions and business processes to consumers, remote employees or partners via your intranet and extranet safer.” This is the nature of business in the future. Working with partners, as is done by the Joint Operating Committee, is an effective means of reducing costs and increasing innovation in any industry. It’s only reasonable that technologies emulate these needs. In addition Oracle Adaptive Access Manager takes security and authentication to another level. As a result, our demands regarding the pooling concept and the ICC, I feel, will be less of a technical risk for the People, Ideas & Objects Preliminary Specification and subsequent developments. 

The next application is the Oracle Entitlement Server which provides a dynamic access control element to the applications that use the server. Instead of manually wiring access control privileges into each application and user, they can be dynamically generated using the Oracle Entitlement Server. “The solution can manage complex entitlement policies with a standalone server or with a distributed approach that embeds information at the application level.” When it needs to be determined if user X has access to Joint Operating Committee Y, a decision from the entitlement server, based on criteria within the application, can be made. If this information is changed, our user would be denied access. This provides enhanced security based on policies and reduces the amount of detailed specific software development that is difficult, time consuming, and costly to maintain. 

Federated Identities are a major part of how the pooling concept and ICC are implemented in the Preliminary Specification. We have specified in many modules, such as the Resource Marketplace module, Federated Identities. Situations such as where the vendor maintains contact and other information. That information is comprehensive and includes key organizational contacts, calendars and scheduling information. Working with the partners in the Joint Operating Committee and the representatives of the service industry in this way will effectively mitigate many technical software development issues we have. These data elements are maintained by each producer / service industry company and available globally throughout the People, Ideas & Objects applications.

One area that we will continue to face a challenge is in the Work Order. Putting together a working group to study earth science or engineering research is critical to innovative oil & gas producers and the industry in general. These are ad-hoc organizations formed with partners that may have no past history to draw from. Federated Identities will provide users with some of the information they need to establish the partnership and grant application access. However, there is still the pooling of and sourcing of costs, and budgets. Costs and their contributions are traditionally what invoke the bureaucratic nightmare that mitigates and destroys the motivation for these working groups to form. We need to ensure these roadblocks do not get in the way. We have proposed to overcome these issues by developing an intuitive interface for our users involved in organizing the working group. 

We don't want our users to experience a mindless security access maze. Oracle Enterprise Single Sign-On Suite Plus promises to keep this from happening. Logging onto and off of systems as our user proceeds through the various modules and components of the applications is a must have. This product promises this level of service seamlessly and remotely. Which is needed. And considered a must have feature in today’s software offerings.

Oracle Identity Manager which will be used as the base product for role and identity management. This will be the base of the Industrial Command & Control for People, Ideas & Objects Preliminary Specification. It is part of the Oracle Fusion Middleware product offering and part of their Java Enterprise Server. Therefore we can build off the functionality existing and enhance it with our user community's needs. Building off of the functionality will be somewhat limited as many of the concepts inherent in the ICC are already captured in Oracle Identity Manager. 

Oracle Identity Manager is a highly flexible and scalable enterprise identity administration system that enhances operational and business efficiency. It provides centralized administration & complete automation of identity and user provisioning events across the enterprise and extranet applications. It manages the entire identity and role lifecycle to meet changing business and regulatory requirements and provides essential reporting and compliance functionalities. By applying business rules, roles, and audit policies, it ensures consistent enforcement of identity-based controls and reduces ongoing operational and compliance costs.

Oracle Internet Directory and Oracle Virtual Directory product offerings follow. A bit off topic but Oracle Internet Directory is a relational database-derived directory server. That Oracle is providing the marketplace with a directory server based on relational database technology speaks to the power of their relational database. They claim they have performance for two billion users. I see the advantages of using this product over their traditional directory server and have selected it for the Preliminary Specification. It will provide us with some flexibility when we ask some of the most comprehensive and demanding questions of these technologies. 

Oracle Internet Directory could be deployed as an industry wide directory server. In this case, I am referring to a directory server for the oil & gas and service industries. There it can integrate with other Oracle products, such as Oracle Identity Manager, which would be deployed at the producer firm, Joint Operating Committee and service industry representative level. This being a relational database we have some interesting opportunities here. 

Oracle Virtual Directory may be the first step toward optimizing relational databases. What we will have is a global database of names within the Oracle Internet Directory. These will relate to the information contained in Oracle Identity Manager and other applications. Oracle Virtual Directory will provide us with a seamless way to browse, and applications will see these datastores as one. 

Within the Preliminary Specification we want to access the contact information of the people or firms that provide services or products to the producers or Joint Operating Committees. Individuals and service industry members are expected to maintain their own contact and basic information. These will be maintained in the Oracle Internet Directory for each and every producer or Joint Operating Committee to access the latest and up to date information. This will save an immense amount of time for producers and Joint Operating Committees, as well as individuals and service industry providers. When looking for someone the search capabilities will be significant as we have added the “Vendor / Supplier Contact Database” and the “Actionable Information Interface” to this base data in the Resource Marketplace module. 

Now we want to look at Oracle Identity Analytics as part of the Security & Access Control module of the Preliminary Specification. This application provides governance over the access privileges granted to our users of the People, Ideas & Objects application modules. Many of the functions and processes provided in Oracle Identity Analytics are either necessary or of significant value included in the Preliminary Specification. 

A key area of our strategy is to understand the "why" and "how" our users access our services. Providing documentation of what information was accessed by what users and if any of the access violates any of the established policies. Ensuring that data access by users is compliant with corporate and application policies. This is to ensure that users are not unnecessarily abused by overtly secure systems and overall efficient corporate governance is achieved. All of the data collected during data access, that is the “why and how” of our users' access. Is compiled in a “Data Warehouse” for further analytical analysis and querying. This will help to show trends and usage patterns that will form updated policies and procedures and security provisions. 

Another useful function within the Oracle Identity Analytics application is the Segregation of Duties feature. In many areas of a corporation, certain process functions must be undertaken by specific and sometimes different individuals. This feature provides for that assurance. It is Sarbanes-Oxley compliant. This is particularly relevant when the Joint Operating Committee is small, as we mentioned the other day. And we have assigned many roles to a few people. By segregating the roles that need to be kept separate for compliance purposes, this application ensures that the appropriate governance is maintained. 

There is a comprehensive and customizable dashboard interface for our Oracle Identity Analytics users to analyze the data and particularly the data warehouse. Filled with reports and data that an effective user can use to determine where and how the People, Ideas & Objects producer client might be susceptible to access control violations. 

The last feature I want to highlight is what Oracle calls Role Lifecycle Management. This provides the Oracle Identity Analytics user with the ability to do “what if” analysis in terms of the implications for identities and roles within the People, Ideas & Objects application. It contains a role change approval process, role versioning and role rollback. These will be needed in determining and maintaining the Industrial Command & Control. 

We now step down from the Oracle Fusion Middleware layer to the actual Oracle Database for some security features. The first product in this stack is Oracle Advanced Security. It provides authentication, encryption, and encryption of database and network activity. It is possible, and I highly recommend that all the data and information used in the People, Ideas & Objects application modules be encrypted in the database and on the network. This increases the load on the systems and requires additional effort in terms of key management. However, I think the nature of the data and information and the manner in which the applications are provided as Cloud Administration & Accounting for Oil & Gas, this level of security is necessary. 

Oracle Audit Vault is another product I recommend for the Preliminary Specification. It provides central location and management of audit information for compliance purposes. The ability to manage data, information, privacy policies, and security for our users. Oracle Audit Vault is Sarbanes Oxley compliant. 

This next Oracle product adds to the Preliminary Specification. Oracle Label Security will work in many different ways within the modules however here are just two examples. The application designates specific individuals with higher security clearances. It designates specific data fields with certain security clearance. Those with high enough security clearances and appropriate authorizations can read these database fields. Within the People, Ideas & Objects application we want to ensure that the reserves, accounting information and strategy discussions of each producer firm remain confidential to a select group of individuals within that firm. With Oracle Label Security that is possible. We want to ensure that the appropriate people within the chain of command in Industrial Command & Control have access to the appropriate materials to make the appropriate decisions. This will allow those individuals to have access to these materials without making them available to everyone in the chain of command. 

Although not that pertinent to our users of the People, Ideas & Objects applications we have included Oracle Configuration Management, Oracle Database Firewall and Oracle Database Vault as part of the Preliminary Specification. These will help keep the applications and the Oracle Database running as they should. Oracle Configuration Management will determine if there is a change in the configuration, either through a patch, or if something has been done wrong it will correct itself back to the specified configuration. Ensuring that what is promised to our users of People, Ideas & Objects is provided. Oracle Database Firewall ensures no SQL statements inconsistent with our users' or applications are passed through to the database. Oracle Database Vault allows you to restrict certain IP addresses or users to running certain SQL commands. It also locks databases from having any operations conducted on them. 

Backing up data and information is two of Oracle’s strengths. Oracle Secure Backup provides excellent tools for this. Because the database is encrypted, the backup is encrypted as well. What we will need to do in the Preliminary Specification is to determine in extensive detail what precisely will be the backup strategy used for the People, Ideas & Objects application. 

Lastly there is Oracle Total Recall. A product that helps access historical data. Oracle Fusion Applications provides some interesting solutions for how they handle legacy applications. We will get into those as we proceed through the Preliminary Specification.

Conclusion

It is important to remember that here in the Security & Access Control module of the Preliminary Specification. That the role and identity-based Industrial Command & Control (ICC) as conceived here has not been implemented, developed or conceived anywhere else before. We are taking role and identity-based management to the next level with the ICC. This is done through the usage of the Joint Operating Committee, through pooling and taking advantage of specialization and the division of labor in the oil & gas industry. 

Why are we bothering with the ICC and the Joint Operating Committee pooling of resources? The issue we are resolving is the finite number of earth science & engineering resources available to the industry. With the anticipated retirement levels in the next 20 years. With the time requirements to bring on increased levels of resources. And most importantly with the demands for more energy, and the demands for more earth science & engineering in each barrel of oil equivalent produced. We face long-term shortages of critical resources. The need to organize the industry, exploit specialization and division of labor, and Professor Paul Romer's theory of non-rival costs is necessary to increase the output from the same number of resources. Doing this without pooling the resources in the Joint Operating Committee will cause the producer firm to broaden the scale of their earth science & engineering capabilities beyond what would be a commercially viable concern. The Preliminary Specification notes that we have contributions from earth scientists and engineers from multiple producers working together to meet the objectives of the Joint Operating Committee. Therefore we need a means to organize themselves and that is the Industrial Command & Control of the Security & Access Control module. 

How the ICC will be implemented will be determined by our user community. However, I can speculate that the Joint Operating Committee will have standard roles and identities used throughout the industry. Standardization provides many benefits and will be necessary in this instance to make technology work. One of the key benefits of standardization is enhanced innovation. The need to have the various areas "covered" in terms of compliance and other requirements will require a standard template used by everyone. Everyone will know that that position is responsible for that role and responsibility. When Joint Operating Committees are small and have only a few people assigned, multiple roles can be assigned to one individual. 

There are security and access control issues associated with the service industry and particularly service providers accessing People, Ideas & Objects systems and data. Removing administrative and accounting resources from the producer firms and organizing them in their own service providers provides significant operational flexibility to the innovative and profitable oil & gas producer. The Security & Access Control module ties these disparate organizations into highly organized replacements for the current bureaucracy. Contributing substantially to People, Ideas & Objects' overall tangible portion of our value proposition.

With the natural division in the types of information held within a producer and Joint Operating Committee. Producers will know that the Preliminary Specification can deliver the right information to the right people at the right time. Leakage of proprietary information can be mitigated by isolating company data. This is due to its unique nature and Oracle Label Securities' ability to restrict access to database fields. 

Oracle’s products provide a strong layer of mission critical capabilities in the Security & Access Control module. Oracle provides comprehensive coverage of security, access control, audit, back up and roll management to name just a few of the highlights provided. Although this comes with additional costs, I am certain that no one will argue with the quality and peace of mind that these products bring. 

OCI Security & Access Control, Part I

 Introduction

Joint Operating Committees are the key Organizational Construct of a dynamic, innovative, accountable and profitable oil & gas company. It is the interactions of many producers, service providers and suppliers who are involved in the day to day commercial and strategic concerns of that Joint Operating Committee that we need to concern ourselves with. The Security & Access Control module's focus is to ensure the right people have the right access to the right information with the right authority. This is at the right time at the right place and through the right device. 

Throughout the Preliminary Specification we discuss two of the most pressing operational issues in the oil & gas industry. Those being the demand for earth science & engineering effort is increasing with each barrel produced. This is best represented by the steep escalation of oil & gas exploration and production costs. At the same time, critical earth science & engineering resources are fixed and difficult to expand. And with the anticipated retirement of this brain trust in the next twenty years, the problem becomes critical. The second issue regards the manner in which the administrative and accounting resources are organized within the industry. With the Preliminary Specification the need for each producer to develop their own administrative and accounting capabilities internally is replaced by an overall industry capability. Then each producer can access those resources on a variable cost basis with direct charges to the Joint Operating Committee. This provides operational flexibility in how a producer approaches its strategic and tactical needs. 

There are few short-term solutions to the shortfall in geologists and engineers over the next twenty years. It takes the better part of that time to train them to operate in the industry. What we do know are several "things" being applied in the People, Ideas & Objects Preliminary Specification. Many of these concepts are based on what we call Industrial Command and Control. Which is a method developed in the Security & Access Control module of imposing command and control over any and all Joint Operating Committees, working groups, producer firms, service providers or organizations the producer may need to add structure to. The concepts are the further specialization and division of labor, and a reduction in the redundant building of capabilities within each oil & gas producer, or as we describe it, a pooling of resources in the Joint Operating Committee.

The first concept of specialization and division of labor is well known as a principle of economics that brings about greater economic productivity from the same volume of resources. Given that the volume of earth science & engineering resources is known for the foreseeable future. Specialization and the division of labor will provide us with a tangible means to deal with oil & gas industry productivity. In today’s marketplace, approaching a heightened level of specialization and division of labor without software to define and support it would be foolish.

The pooling concept is the solution to the current desire that each producer firm acquires the earth science & engineering capabilities necessary to deal with all the needs of their “operated” properties. This creates unneeded “just-in-time” capabilities for scarce scientific resources. When each producer within the industry pursues this same strategy substantial redundancies are built into the industry's capabilities. Redundancies that are left unused and unusable. What is proposed through the People, Ideas & Objects software application modules is that the producer's operational strategy avoids the “operator” concept. Instead, it pools their specialized technical resources through the Joint Operating Committee partnership. That way the redundancies that would have been present in the industry can be made available to the producers and used by the producers through hyper-specialization and division of labor.

These same principles are present in the second issue noted above. The administrative and accounting capabilities acquired through industry-wide capabilities provide the producer with the flexibility to address operational concerns. Issues such as today’s low natural gas prices can be addressed through this revised structure. By having administrative and accounting service providers charge their service fees directly to the Joint Operating Committee. The producer gains the ability to shut-in unprofitable production with only positive effects on their financial performance. Administrative, accounting, and production costs are eliminated during shut-in production. Providing the most profitable means of oil & gas operations when unprofitable properties no longer dilute profitable properties. Producers can save their reserves for the time when they can be produced profitably. Reserves costs don't have to carry additional losses if unprofitable production continues. Reserves can be seen as a low-cost solution to production and storage. Commodity prices will have less volatility due to producers removing marginal production from the marketplace. 

Being able to provide service providers with access to and security during these day-to-day operations will be a unique situation for the oil & gas producer. Service providers will aggregate data industry wide. And there will be many service providers involved in providing administrative and accounting services to the producer firm and Joint Operating Committees. Consideration of the proprietary nature of the information and security will be priorities for the Preliminary Specification. 

A quick note on mobility. People are provided with new devices that enable them to work anywhere. These phones and tablets, in addition to laptop computers, open up security and access control concerns for the innovative and profitable oil & gas producer. Some producers enable their staff with policies that allow them to bring their own devices to work. The fact is these devices provide enhanced productivity and are appropriate for an innovative and profitable oil & gas producer. People, Ideas & Objects Preliminary Specification includes an understanding that these devices will be part of the day to day used in the oil & gas industry. 

What these concepts require is what the Security & Access Control module is designed to provide. The system must provide access to the right person at the right time and at the right place with the right authority to the right information. With the Industrial Command & Control there will be a manner in which the technical, and all the resources, that have been pooled from the producers, interact with an appropriate governance and chain of command.

Two Types of Data

When we talk about the various people within the producer firms affiliated with a Joint Operating Committee. And the number of Joint Operating Committees that a firm may have an interest in. And the number of people a firm employs. Access control becomes challenging. It becomes a challenge when we consider that people certainly should have the access required, but the level of trust they may have with respect to other partner organizations is probably not as strong. That is to say, does using the Joint Operating Committee as the key Organizational Construct of a dynamic, innovative, accountable and profitable oil & gas producer, open the producer firm to data loss? This is how People, Ideas & Objects deal with the access and trust issue in the Security & Access Control module.

When we concern ourselves with the data and information of the producer firm. We also concern ourselves with the information cleared by the various Joint Operating Committees that the oil & gas producer has an interest in. We can all agree that this information is proprietary and subject to each producer firm's internal policies. (Information such as reserves data, accounting information, internal reports and correspondence, strategy documents.) What we're concerned about is the information and data held in the Accounting Voucher module and the associated data common to the joint account. (well file, agreements, production data, capital and operating costs, revenue and royalties.) 

Close analysis of these two types of data and information held within the firm and the Joint Operating Committee falls within the proprietary and partnership domains. In Canada at least, most data and information regarding well operations can be freely obtained through various regulatory agencies. Nonetheless, the majority of the data is shared through the partnership who have an interest in the data and information. Which is not the case with the producer firm's data. Most of the information is kept close at hand and reported through filtered reserve report summaries and annual reports. Therefore keeping a handle on proprietary data, while operating the Joint Operating Committee as the key Organizational Construct of the innovative oil & gas producer, as proposed by People, Ideas & Objects, does not present any data leakage.

Access control can therefore be limited by restricting any company personnel from viewing other companies' files. Which is a given. While in People, Ideas & Objects access control is restricted to the firm's Joint Operating Committees and the firm's files only. To extend this further, we would limit access to the appropriate roles within the firm. Then it is up to our user community to define a standard set of generic roles in which access is required to certain data types. This would apply to the types of operations handled by that role, for example, read, insert, update, delete. These generic roles could then be assigned to each individual within the organization based on their needs. Assigning multiple roles for more complex access. Access to proprietary data would be restricted to company personnel only.

More on the ICC

Throughout the Preliminary Specification we've discussed our solution to one of the premier issues the oil & gas industry faces. That is the demand for earth science & engineering effort per barrel of oil increases with each barrel produced. This is best represented by the steep escalation of oil & gas exploration and production costs over time. At the same time, critical earth science & engineering resources are fixed and difficult to expand in the short or medium term. Add to that the anticipated retirement over the next twenty years of the current brain trust of the industry and the problem becomes a critical concern.

There are few short-term solutions to the status quo volume of geologists and engineers. It takes the better part of that time to train them to operate in the industry. Our resolution in the People, Ideas & Objects software applications modules involves what we’ve developed and called “Industrial Command & Control” (ICC) and the application of specialization and division of labor. Specialization and the division of labor are well known principles of economics that bring about greater economic productivity from the same volume of resources. Given that the volume of earth science & engineering resources is known for the foreseeable future, specialization and the division of labor will provide us with a tangible means to potentially increase the capability, capacity and productivity of the oil & gas industry, yielding multiples of today’s performance over the long term. With software defining and supporting organizations, today’s producers must approach a heightened level of specialization and division of labor through software in broadly dispersed North American markets.

People, Ideas & Objects ICC involves the implementation of specialization and the division of labor in the fields of geology and engineering. It is currently necessary for each producer firm to acquire all the earth science & engineering capabilities necessary to deal with the needs of the properties they "operate". Which allows the full scope of these sciences to be deployed "just-in-time". When each producer within the industry pursues this same strategy, organizational inefficiencies in these critical resources are introduced. This is due to the method of organization built into the industry's overall capacity and capabilities. Leaving resource utilization rates lower due to the volume of unused and unusable resources locked in each producer firm. 

What is proposed through the People, Ideas & Objects software application modules ICC is that the producer's operational strategy avoids the “operator” concept. Instead, it pools these technical resources through each of their partnerships represented in their Joint Operating Committees. That way the inefficiencies that would have been present in the industry can be made available and used through industry wide, producer focused, advanced and advancing specialization and division of labor. Where many of the lower end processes are offloaded to service providers who specialize in that basic skill on behalf of many producers. This is done in a geographical area or other specialization. And each individual producer focuses on a specialized element of science as it develops and innovates upon that. People, Ideas & Objects believe producers will soon be unable to commercially support the full scale of engineering & earth science disciplines tasks and responsibilities as they have in house. This will be due to the shortages of resources, the cost escalation of these resources in the market due to their shortages, the expansion of demand from higher production volumes to achieve energy independence, the demands for more science in each incremental barrel of oil produced, the anticipated, substantial expansion of the sciences and the need to innovate upon that expanding science. For producers to maintain a broadened division of labor to deal with these issues and “operatorship” capabilities, it will extend them beyond any producer's commercial capacity.

What these concepts demand is what the Security & Access Control module is designed to provide through the ICC. The People, Ideas & Objects system must provide access to the right person at the right time and at the right place. This is with the right authority and the right information. With the ICC there will be a manner in which the technical and all the resources pooled from the producers, interact with the appropriate governance, compliance and industry standard chain of command.

Before the hierarchy which was a commercial development of the 20th century, there was only the military structure in terms of large organizations. The main difference between the two is subtle but significant. Military structures are broader and flatter than hierarchy. That is one of the ideals we are seeking, but the more significant feature is the ability for the chain of command to span multiple internal and external organizational structures and to move resources from different areas of the military through standardization.

The nature of people working through the industry-standard chain of command layered over the Joint Operating Committee will include all oil & gas disciplines. The contributions of staff, financial and technical resources will include all those employed by the industry today. I could foresee many office buildings being refurbished to accommodate the staff of a single Joint Operating Committee of a large property. There, staff from the different producers may be seconded to provide support for the Joint Operating Committee. They may work for a single Joint Operating Committee, not for any particular producer firm.

As background we should recall that each individual would have different access levels and authorizations in terms of access to People, Ideas & Objects ERP systems. Assuming different roles and responsibilities, they would impose different access levels to data, information, processes and functionality. People, Ideas & Objects application modules rely on the Security & Access Control module to implement Industrial Command & Control. This structure, particularly in a Joint Operating Committee, would weave multiple producer firms under one industry standard chain of command. The interface ensures that all processes are monitored for compliance, governance, and overall completeness.

Access, Roles and Responsibilities

This topic discusses the way authorizations, roles and responsibilities are handled in the Security & Access Control module of the Preliminary Specification. We should discuss the topic of delegating authority and responsibility during absences, which can come up from time to time.

As background we should recall that each individual would have different access levels and authorizations in terms of access to the People, Ideas & Objects systems. Assuming various roles and responsibilities, they would impose different access levels to data, information, processes and functionality. In addition, Security & Access Control is the key module for implementing Industrial Command & Control across People, Ideas & Objects. This structure, particularly in a Joint Operating Committee, would weave multiple producer firms under one chain of command. To ensure compliance, governance, and overall process completeness, it will need to provide an interface to ensure all processes are monitored.

Throughout the Preliminary Specification there is the perception of a heightened role for technology in terms of enabling authorization to conduct operations. Thus, the ability to do things and get things done depends on collaborating with partners and authorizing actions through processes managed by the systems. This participation dictates that the designation of the roles in the Security & Access Control module “means” more than just data access; it imposes authority and responsibility to undertake actions on behalf of Joint Operating Committees and / or producer firms.

It is necessary to assign this authority within the Security & Access Control module during any absence. If someone with authority and responsibility was away for whatever reason, they should be able to assign their authority to another person. This will enable them to fill that role while away. This will ensure that the process isn’t held up during their absence. Delegations of authority have been used for years in large firms and with a system that imposes authorizations and responsibilities on specific roles, the ability to temporarily move them down, across or up the chain of command is a necessity to keep the organization functioning.

Lastly we should talk about the interface that helps to identify missing elements in a process. It would simply show the command structure of the people assigned to a Joint Operating Committee or a process. It would also show their related role, authorizations and responsibilities. If someone was away, it would indicate who took over their role. It would help to identify how they could impose a chain of command to fill any vacancies. This would be particularly helpful if the role or process needed to be documented for compliance purposes.

OCI Profitable Production Rights, Part IV

 Issues Involved in Profitable Production Rights Licenses (Continued).

Value Proposition

Our extensive value proposition is based on this premise. This is the value leveraged by both classes of Profitable Production Rights Licenses. As a result of their dependence on and destruction of outside capital and what value was built over the past four decades, the producer companies were never profitable or commercial in nature. We have established the well-known principle that over-reported assets result in over-reported profitability, culminating in overinvestment, which results in overproduction. Price maker principles apply to oil & gas commodities. Doing so for decades is devastating to the prosperity of all parties involved in the oil & gas industry. 

Considering these facts, it is evident that an insidious cancer eats away at an industry's performance criteria over time. Profitability and financial performance are automatically assumed and never questioned. In fact, they are too easy to attain. Over decades, the organization's performance deteriorates to the point where it becomes wholly dependent on outside capital for its basic operations. Oil & gas culture is one of persistence that refuses to change and is unalterable. A chronic lack of performance has rendered the industry worthless as its present value is negative and it requires capital in some form to function. This is attributed to its dominant, permanent, and unchanging culture.

It is, unfortunately, terminal. A market economy cannot function with a useless culture, and the culture should be destroyed to elevate performance as the criterion for success. There is not enough energy in the world to combat this bureaucratic culture and overcome it. Fortunately for People, Ideas & Objects, the oil and gas industry's culture is self-selecting and we are prepared to rebuild it with the performance-based culture of the Preliminary Specification. To ensure that producers are provided with the most profitable means of oil & gas operations, everywhere and always. 

Producers' "muddle through" culture and lack of performance are based on this assumption. Its fundamental belief is that commodity markets will handle any production producers place on the market. As a result, it is imperative that all producers produce at 100% of their production profile at all times. The Preliminary Specifications decentralized production models, price maker strategy is criticized as a collusion strategy. Price makers shut down unprofitable production until it can be produced profitably. Cloud Administration & Accounting for Oil & Gas views oil & gas commodities as price makers. To increase supply, only profitable production is brought on board.

Directors and officers assume that the market is magical and will handle whatever they produce. In these circumstances, oil & gas prices will decline precipitously as price makers. We have witnessed several oil & natural gas price collapses since 1986. A negative oil price of $40 in April 2020 is an example of one of the steepest declines. Markets are not magical. There is only one thing they do. Price serves as a means of information. Producing the product would be worthwhile if the market price was sufficient to make a profit. In any other case, you actively destroy value. Officers and directors of oil and gas producers fail to understand that they are market participants. In their view, the market is magical, and they do nothing to address current market conditions. Regardless of the circumstances, they will muddle through, accept the loss, and continue to produce at 100%.

Profitable Production Rights Licenses leverage the differential between these two industry visions to deliver their value proposition. Over the next 25 years, we have consistently stated their value at $25 - $45 trillion. It generates incremental profitability of $5 trillion. Furthermore, producers claim that $20 to $40 trillion in capital is required to rebuild, refurbish, reclaim, and expand the industry's productive capacity and infrastructure. In the Preliminary Specification, this amount is not necessary, since capital costs are recognized competitively with all other industries in North America. Internally generated cash is reinvested to be recovered repeatedly. As a result, it will be invested again and again competitively with what other industries in North America achieve. The costs of a capital-intensive industry such as oil & gas are primarily capital-related and therefore are the predominant cost passed on to consumers. In contrast to officers and directors strutting down main street comparing their well-built balance sheets and "putting more cash in the ground," the Preliminary Specification puts cash to work, quickly and repeatedly.

Disintermediation by any other name… 

Cloud Administration & Accounting for Oil & Gas offers many benefits. The fact that the industry's officers and directors chose instead to destroy the industry when they had this value available is not surprising to me after 18 years of writing this blog. In a number of industries, the value generated by disintermediating the bureaucratic death grip has been well documented. 

The theory of specialization and the division of labor increases industry throughput using the same resource base. In Adam Smith's research at a pin factory in the late 1700s, production increased over 240 times (24,000%). As a result of division of labor, specialization, and mechanical assistance, these benefits were achieved. All the value generated in our economy today is attributed to specialization and division of labor. There is no doubt that ERP software has locked organizations into unchanging environments where the status quo becomes satisfied with the status quo and only the status quo is satisfied. People, Ideas & Objects propose the establishment of permanent software development capacities and capabilities to eliminate what we consider a modern-day software bug.

New Growth Theory

Professor Paul Romer's theory of non-rival goods supports and enhances the specialization and division of labor. It is People, Ideas & Objects' goal to eliminate the unnecessary and redundant practice of each producer developing their own administrative and accounting capabilities. Using Cloud Administration & Accounting for Oil & Gas instead to establish shared, variable cost, industry-based administrative and accounting capacity. From Professor Paul Romer

Because the economics of ideas are so different from the economics of markets. We’re going to have to develop a richer understanding of non-market institutions, science like institutions, this is going to be a new endeavor for economics.

Budget

There are few individuals who would argue that People, Ideas & Objects' direct costs would fall within the $5.79 billion U.S. It is particularly troubling for the status quo to accept equal amounts for Intellectual Property royalties, equal earnings, and a similar valuation for Flexible Profitable Production Rights. Based on the value proposition identified in the Preliminary Specification. The costs associated with this initiative are incidental to the value generated. In our Organizational Constructs section, we provide further detail regarding the justification of the People, Ideas & Objects budget. It is of course our pleasure to compare the prospective value generated from the Preliminary Specification with the plans and specifications of the officers and directors. There have been no calls for this and we cannot determine if they have a plan.

Promotion of Profitable Production Rights

People, Ideas & Objects has reintroduced Profitable Production Rights. This is to raise funds to develop the Preliminary Specification and establish our user community. In the coming months, I plan to periodically return to this topic and include relevant attributes as they arise. As a result, I will be able to develop a more comprehensive conceptual model. 

Our oil & gas industry has lost its capacities and capabilities to the point that it is no longer functionally capable of maintaining its production profile. As a result of our reliance on shale-based deliveries, we have never seen or experienced the full scope and scale of a potential industry-wide decline curve. First and foremost, we will need an all-hands-on-deck approach to resolving the loss of capacities and capabilities. Complacency has superseded and circumvented any and all industry motivation for taking action. The severity of a problem that needs immediate attention and concern is increased as a result. While I find this issue challenging, exposure levels to shale based production volumes create a much larger issue. Shale exhibits steep decline curves. This is the first time we have been here and we have never been so exposed. 

The people responsible for this situation are the ones who have the authority, responsibility, and resources to deal with it specifically. In most cases, they prefer to "muddle through." This has been made possible by capital intensive industry cash flows to offset the hefty executive compensation they receive. All they do is pretend not to notice the problem.

Conclusion

Status quo producers have lost sight of their purpose. They have failed, will not succeed, and have proven culturally incapable of earning "real" profitability. They have no desire to change or succeed. As time passes, the difficulties in the industry will become more apparent. The choice of alternative organizational opportunities for the greater oil & gas economy is limited to one choice offered by Oracle, People, Ideas & Objects, our user community and their service provider organizations in the form of our Cloud Administration & Accounting for Oil & Gas application. The time to consider these issues has passed. As part of the Intellectual Property available to develop any alternatives, it will be necessary to consider what solutions have already been developed and avoid what exists in our Preliminary Specification. 

In light of the level of damage and destruction caused by producer officers and directors throughout the greater oil & gas economy. People, Ideas & Objects provide extensive value propositions developed new business models that bring new value as a result of disintermediation. The cultural methods we implement in the Preliminary Specification to achieve these advantages are described in our seven Organizational Constructs. We are building the future oil & gas industry on these cultural foundations.

As a result of our budget, the producers' officers and directors have maintained their distance from this project. Because of the scope and scale of these issues and this project, these costs must be recognized. Our next phase of development will not be built on one individual's success. As a result, it will be based on a comprehensive sense of urgency necessary to address these issues in the industry. In addition, the revenue potential and characteristics of Profitable Production Rights should reflect a negotiated share of the BOE's value proposition. And determined by the rights owner.

The purchase price of these rights is $600 U.S. per North American BOE. In addition, the potential revenues and characteristics of that right reflect a negotiable share of the Profitable Production Rights with those who own the oil & gas production. The proceeds are used to build the Preliminary Specification. Fulfilling the need for People, Ideas & Objects revenues from oil & gas production, albeit indirectly in this case. By operating Cloud Administration & Accounting for Oil & Gas software and services, the Profitable Production Right will reflect the intrinsic value of oil & gas production's ability to organize profitably. It is a perpetual right and exists beyond today's oil & gas producers. Although our costs are large they pale in comparison to the significance of the damage done by these officers and directors. This damage is accelerating, has not been identified or approached and continues. Therefore anyone and everyone can share in the effort, the success and the reward of resolving this industry catastrophe to prevent what could become a societal catastrophe.

The Battle

What we know is that billions of barrels of oil and trillions of cubic feet of gas have passed through the North American industry over the past four decades and more. We’re told that it is represented on the balance sheets and was put in the ground by the producers' officers and directors. For what purpose has not been explained and maybe there was a productive reason that is beyond our current comprehension. We should keep an open mind to these things. The fact is no one claims to have prospered from oil & gas. It stands at a point that puts society in serious jeopardy. 

Leadership has been well compensated during this era. They appear blinded by this and cannot see objectively past their “muddle through” strategy. Their recent saunter off the stage towards clean energy, with oil & gas revenues in tow, may now be realized to be a step too far. As a result, they are claiming to be born again shale producers. The point proves one thing: the money in the form of those oil & gas revenues is on the table and will be directed by whichever system is in place.

Profitable Production Rights are the means by which the industry can transition to a performance culture. Driven by the most profitable means of oil & gas operations, everywhere and always. It is where the seven Organizational Constructs define an organizational culture that is comprehensive, intuitive, appropriate, and understandable. An environment in which those who are concerned about today's situation and looking to actively participate and prosper. Creating dynamic, innovative, accountable, and profitable oil and gas producers, industries, and sub-industries.