Today's podcast introduces a different format from our previous Synallagi discussions. It reflects the launch of our new Consider This... series, a collection of concise, focused papers intended to engage more directly with our user community and the broader North American oil & gas industry.
Our objective is straightforward. Each paper examines a single topic central to Synallagi, our user community, or their service provider organizations, and compares that perspective with established thinking. By grounding these discussions in both academic research and practical industry experience, we hope to stimulate constructive debate rather than simply present conclusions. More importantly, these papers are intended to contribute to what we describe as Synallagi — A New Discipline. They are not merely discussions about software; they are discussions about how North American oil & gas should be organized, governed, and managed throughout the remainder of the twenty-first century.
The accompanying podcast serves that purpose well. It presents the competing viewpoints fairly, allowing listeners to evaluate both the strengths and weaknesses of each position. In my opinion, the discussion effectively illustrates that meaningful progress begins by questioning assumptions that have remained largely unchallenged for decades.
The Consider This... series will therefore continue as a permanent part of our publications. We believe it provides an effective forum for exploring individual ideas without the complexity of our broader 21st Century Marketplace Vision papers. It also allows us to focus attention on one of the industry's greatest obstacles: organizational latency. North American oil & gas possesses extraordinary technical knowledge and expertise, yet repeatedly struggles to translate that knowledge into timely business decisions. Reducing organizational latency—shortening the time between recognizing an opportunity and acting upon it—is becoming one of the defining competitive advantages of the twenty-first century. That challenge extends well beyond technology. It is fundamentally an organizational issue.
One unexpected challenge with producing these podcasts has been pronunciation. Our two product names, Synallagi and Synnefa, continue to present difficulties for automated narration systems. Several excellent podcast segments ultimately had to be discarded because repeated mispronunciations distracted from the discussion itself. Interestingly, however, I discovered that Synallagi naturally follows the same pronunciation pattern as the words philosophy and technology, which may help listeners become more comfortable with the name over time.
If I had participated directly in this debate, there are several additional observations I would have raised.
First, consumers may not ultimately experience any increase in the cost of energy. It is entirely possible that today's retail prices already contain sufficient economic value. The issue is not necessarily what consumers pay; it is how that value is distributed throughout the industry. Producers have largely concentrated on ensuring their own financial well-being while the secondary and tertiary industries upon which they depend have operated for decades without the financial resources necessary to sustain their capabilities and capacities. This has become a culturally accepted pattern within North American oil & gas. Meanwhile, organizations outside the industry that better understand markets have increasingly captured economic value that could and should have strengthened the service industry supporting producers.
To illustrate, assume oil sells for $80 per barrel and includes approximately $10 of producer profit. The important question is not simply who receives that profit, but who actually created it. Producers certainly contribute, but so do engineers, geologists, drilling contractors, service companies, technology providers, and many others. The consumer may ultimately pay the equivalent of $120 per barrel after downstream processing and distribution, yet that additional value demonstrates that economic opportunities existed throughout the value chain that producers failed to recognize. Under Synallagi, a greater proportion of that value would remain within upstream oil & gas, strengthening both producers and the service organizations essential to their long-term competitiveness.
Second, our proposal to recover capital investment over approximately thirty months is driven by the expectations of North American capital markets rather than by accounting convention. Producers compete with companies such as Apple, NVIDIA, Tesla, and many others for investment capital. They cannot expect investors to finance decades-long capital recovery while accepting a culture of "muddling through." The thirty-month period therefore represents a pricing and investment discipline rather than a regulatory requirement. Securities and Exchange Commission reporting establishes the maximum period over which property, plant, and equipment may be depreciated; it does not require producers to maximize that period. A highly profitable producer could legitimately report substantially lower property, plant, and equipment balances if its performance justified doing so.
Third, arguments suggesting that shutting in production damages oil and gas reservoirs no longer withstand scrutiny. Prior to 2020 this concern was frequently cited as justification for continuous production regardless of market conditions. The global response to the COVID-19 pandemic provided an unprecedented real-world experiment when approximately one-quarter of worldwide oil production was temporarily shut in. Production subsequently resumed without widespread evidence of permanent formation damage. The argument therefore no longer provides a compelling reason to continue producing unprofitable volumes.
Finally, I have enabled comments on this blog for readers wishing to continue the discussion. That is, after all, the purpose of the Consider This... series. Progress begins with thoughtful discussion, constructive disagreement, and the willingness to challenge assumptions that have become accepted simply because they have existed for a long time.
Please note that all comments should be submitted with the understanding that they constitute derivative works of Synallagi's Intellectual Property and are licensed solely for participation in this discussion. Where comments materially extend or enhance these concepts, they will be considered Intellectual Property of People, Ideas & Objects.
