Showing posts with label Financial-Marketplace. Show all posts
Showing posts with label Financial-Marketplace. Show all posts

Monday, October 23, 2023

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.

Tuesday, July 07, 2015

And More Miscellaneous Items

Shell President comments

The President of Shell was on Bloomberg last week with Betty Lu to speak about some of the things that they were working on. He made an interesting comment about her comment that Shell’s production was actually lower ten out of the last twelve years. He stated, and I’m paraphrasing here. “That we are no longer necessarily concerned with our production volumes, as much as we are focused on the value that we provide.”

Bureaucrats should take note of this. Your days are going to be ending very soon. When presidents of major producers start talking in this fashion it might be time to start thinking about strapping that parachute on.

$44 billion in debt and equity financing in the first quarter

Bloomberg was also reporting that there were $44 billion in debt and equity financing in oil and gas in the first quarter of 2015. This shouldn't surprise anyone when you consider the length of time that the EU has been in negotiations with Greece. With no one being able to invest in Greece the stupid money has to go somewhere.

Bloomberg also noted that the proverbial shoe was about to drop on producers with the expiration of $90 hedging contracts. The producers apparently were able to get past their semiannual debt reviews with their banks because the hedges were still in play in the first half of the year. Now that they are expiring the “real pain” may begin to be felt by the industry. Which is probably the case as it was also noted that the rig count was up last week!

Oracle vs. Google

Last week saw the U.S. Supreme Court hand down their annual decisions. One decision that they didn't make was on Google’s appeal in the case of Oracle vs. Google. Google had lost an appeal by Oracle a few years ago which Google appealed to the Supreme Court. Since the Supreme Court won't look at it, and now with no further appeals, they will have to pay Oracle and settle the case.

This is a significant moment for software developers. Many, including Google, thought that the code they wrote was not necessarily subject to copyright provisions. That may be a simplification of Google’s claim. It is however, not a simplification of the way in which the Supreme Court obviously sees it. They feel that copyright does cover the software code and there is nothing in the case for them to see.

What Google did is they took the programming language Java, made some minor modifications to it, and called it Android. Now they have to pay Oracle for this abuse, the award was in the billions, and Google will have to license Java from Oracle. Good luck with that negotiation.

Stanford and MIT on avatars

One of the more controversial elements of the Preliminary Specification is the Marketplace Interface contained within our Petroleum Lease, Financial and Resource Marketplace modules. This enables people to collaborate through the use of avatars in a virtual world. It is noted in a Wall Street Journal article that Stanford and MIT are using the same technologies that we are to provide their business students with the ability to collaborate through the use of avatars.

All of these miscellaneous elements that I have noted in the past two days. Are providing our user community with the facts that People, Ideas & Objects, our user community and the service providers time has come. If we could have our budget funded we could begin the process of building the Preliminary Specification, the user community and service provides and build industry real value by providing the oil and gas producers with the most profitable means of oil and gas operations.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here

Wednesday, May 27, 2015

Our Solution Part XIX

One of the more controversial elements of the Preliminary Specification is the Marketplace Interface. It is here that we are introducing and developing a new interface in which the users in oil and gas will interact, transact, collaborate, agree, and associate themselves with other users, companies, producers, leaseholders, service providers, service industry representatives, banks and governments. The Marketplace Interface is a single interface that is accessible through the Petroleum Lease, Resource and Financial Marketplace modules. The Marketplace Interface will enable you to extend your domain of influence beyond the physical presence that is a current constraint to your working environment. It is an enhancement to the current means of communication through telephones, email, tweets, meetings etc. Avatars of individuals within the Marketplace Interface will enable these interactions in real time from any distance and provide the full power of an ERP system to support the transactions, interactions and collaborations that could occur.

Pretty silly, I know. Until you realize that you can’t get everyone to the meeting until next Wednesday at 3:00. And to do so will cause you to disrupt yours and others schedules significantly. If only there was a way to get everyone together right now so that we can decide on this critical point… Certainly telephones are not going to provide the documentary value and group participation of a meeting. The Marketplace Interface, operating within the three marketplace modules of the Preliminary Specification, combines elements of both meetings and telephones. The ability to have them quickly, documented and with the full participation of the necessary individuals will be the capabilities brought about by this new interface.

Everyone is tired of the extensive number of meetings that they need to attend daily or weekly. If only they could attend some of them virtually, which is what they would be able to do with the Marketplace Interface. Cutting down on the time in meetings, which would allow for, wait for it, more meetings! Which is going to be one of the consequences of implementing the Preliminary Specification in the dynamic, innovative and profitable oil and gas producers. With high levels of automation in the transaction areas being conducted by the service providers. Their use of specialization, the division of labor and automation as their key competitive advantage we have stated here many times before that the types of work that people will be doing is going to change. We will be conducting different tasks that include leadership, issue resolution, creative, collaboration, research, ideas, design, planning, thinking, and generally making the computers work for us. Or in other words, many more meetings.

If we believe that our work will continue to remain the same in terms of how we interact with people then I think we are going to need a lot more people. Either that or new methods of communication are going to be needed. The endless meetings will need to end. Maybe some of the attendees can instead review a video replay of the Marketplace Interface recording at twice the speed. Other methods of communication are going to be needed to be introduced into the way that we work if we are going to do the work of the humans and leave the work that is better suited to the computers, to the computers. Our volumes of work will increase. The types of work will change. And the importance of that work will also increase.

An ERP system that doesn’t introduce a new means in which to deal with these issues and opportunities is not doing its job. It is providing for yesterday’s ERP system needs. Our work is changing and the types of interfaces that we will use also needs to be changing. The Marketplace Interface is one of the opportunities that we will be using in the Preliminary Specification. It is based on the Open Wonderland framework developed by the former Sun Microsystems. Here is a video of the technology.



The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here

Tuesday, May 26, 2015

Our Solution Part XVIII

In addition to a number of Joint Operating Committees. The dynamic, innovative and profitable oil and gas producer will operate in a number of marketplaces within the oil and gas industry. The Preliminary Specification has three marketplace modules, the Petroleum Lease, Resource and Financial Marketplace modules. It is within these modules that the Preliminary Specification virtually replicates those markets.

Without a P&NG Lease, or a concession there is no title or ownership to the oil and gas that is produced. It is the marketplace of P&NG Leases that the North American oil and gas producer seeks to earn their profits by applying their earth science and engineering capabilities as competitive advantages. P&NG Leases can be bought and sold, traded, swapped, developed into a Joint Venture, pooled as some of the many possibilities within the North American marketplace. The constraints on a producer's creativity, of how they approach the business, is limited by the laws of Canada and the United States, and their earth science and engineering capabilities. The Petroleum Lease Marketplace will reflect the available opportunities that exist in the oil and gas market space. And also provide the means in which to manage those assets consistent with effective and efficient business practices.

To facilitate that creativity and business need the Preliminary Specifications Petroleum Lease Marketplace will need to accurately emulate that physical market space and all of its characteristics. So that the dynamic, innovative and profitable oil and gas producer can address the entire oil and gas market space and seek out their role within the industry. If it is to post some land, or bid. Buy some established production or pool an interest in a promising area. They will have the interfaces within the module to provide for the ability to participate in those markets.

The second marketplace module seeks to replicate what we have called the Resource Marketplace. This consists of the marketplace of human resources, service providers, service industry representatives and producers. The products and services that are made available to the dynamic, innovative and profitable oil and gas producer. Within this module producers will be able to find the interfaces to enable the engagement of the resources to conduct any and all activities within the industry. It is through this module that the producer will interact with the service providers. Which in turn enables the decentralized production model to be implemented as the business model for the industry. And therefore it is here that the flexibility in the producer's production deliverability is enabled. Automation of the processes between producers and others is an underlying assumption regarding the transactions that occur in the module.

Lastly there is the Financial Marketplace module. With the level of activity increasing in the dynamic, innovative and profitable oil and gas producer. The need to have its financial capabilities increase their velocity and throughput are necessary. As well, the alignment of the financial framework of the Joint Operating Committee to the compliance and governance framework is achieved in the Financial Marketplace module. Opening up the producer to new avenues of financing and greater capabilities in terms of their overall financial performance.

I'm really struggling to articulate the abstract definition of what these marketplace modules mean within the Preliminary Specification. These hold a special role in the software and will provide new ways in which the producers participate in these market spaces. As I stated in the beginning of this post; the dynamic, innovative and profitable oil and gas producer has an interest in many Joint Operating Committees and these three marketplaces.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative, profitable and successful means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz anyone can contact me at 403-200-2302 or email here

Friday, January 10, 2014

Joint Operating Committee User Budget Category Part IV

The key aspects of the Financial Marketplace module is to align the financial framework with the Joint Operating Committee and to have the producers capital structures perform beyond market expectations. To do this I have allocated the user community a budget of $5 - 10 million, or 15 to 30 man years. There are few areas where these budgets can be augmented by pooling them with other development efforts. There is the “marketplace interface” with the Petroleum Lease and Resource Marketplace modules, however that is probably all that there is.

The speed that the producer is able to attain over their investments in oil and gas properties will need to accelerate. That is, the expectation that the producer will be able to accelerate their investments in oil and gas with less time and investment will increase. This performance will be difficult to attain and will require the producer to have the systems and procedures within their own organizations, the capabilities, to be able to compete within the broader business environment and within oil and gas. The user community will have to define what is required beyond the Preliminary Specification in order to support this critical producer capability. This is the type of area where the user community will be able to differentiate itself from the other systems and organizations that it, the user community, will compete with. It can tackle an issue such as this and resolve it in a way that would materially affect the outcome of the producer firm.

And speed is nothing without control. The producers ability to maintain their capital discipline in an environment as discussed above will be of critical importance. How they do that is detailed to some extent in the Preliminary Specification but it is here again that the user community will need to determine “how” the producer firm can maintain control of the higher throughput in terms of investment capital.

It is these tasks and budgets that the user community will undertake during the development of the system. Users who have special knowledge of what is required and how to implement the Preliminary Specification will organize themselves to define what is required. These budgets are healthy but the scope of the problems that are being addressed are the ones that need to be addressed in the industry. The budgets are primarily composed of user participant fees. There are other costs associated with the budgets but I expect that approximately 85% of any of the User Budget allocations are for the hourly fees that we have established. These fees are the $185 U.S. per hour that we have established as our rate for user participation. And these are not “employees” of People, Ideas & Objects. Our developers are employees and though we have costed them at $185 as well, there are elements of overhead and other costs in the rate which are needed to support the developers and the users. The users are paid directly $185 U.S. per hour as third party businesses that have a close relationship with People, Ideas & Objects.

It is that close relationship that the user community has with People, Ideas & Objects that brings them to the user community. Some of the user community participants may be involved in the service provider sub-industry that we note will be created as a result of the decentralized production model. This requires the prototypical producer to be stripped down to the C class executives, the earth science and engineering resources, some land, legal and support staff. The remainder are moved to service providers who are focused on the process and use the entire industry as their client base. These service providers will be a large part of the user community as they are using the software in their day to day management of the processes of the oil and gas industry. Other members of the user community will come from the producers themselves, whether that is from a producer or a Joint Operating Committee both will be required. And some will need to be provided from the service industry. Lastly there will be some who are specialized in the needs of the user community itself and are exclusively employed in the community.

It may not be rare in the future that you will have multiple sources of revenue from different types of clients and the user community should be considered one of your roles in the future. Once we secure the funding for development and proceed with these developments the work of this community will be the critical element of success for the profitable oil and gas producer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Wednesday, October 09, 2013

Conclusion to the Financial Marketplace Module

I have been critical of the bureaucracy of the oil and gas producers. They have resisted the changes proposed in the Preliminary Specification and have governed as if all is well. It needs to be asked if the oil and gas industry is the same industry when it receives $100.00 for its products when only a few years ago it received $25.00? I’m not of the opinion that it is the same. There has been a fundamental change from a low cost easy energy era, to an era that will see the rise of the innovation focused dynamic producer. The type of producer that operates in these two domains is fundamentally different. The Preliminary Specification is designed for the innovative producer. To make the transition from the easy energy era to the era of the innovation focused dynamic producer will require that we build the Preliminary Specification first. The Financial Marketplace module is a critical aspect of the Preliminary Specification. By aligning the financial framework of the industry with the legal, operational decision making, cultural, communication, innovation, strategic, compliance and governance frameworks we will achieve the speed, accountability, innovativeness and profitability we desire. In his book “The Dynamics of Industrial Capitalism,” Professor Langlois notes.

As soon as we go into details and inquire into the individual items in which progress was most conspicuous, the trail leads not to the doors of those firms that work under conditions of comparatively free competition but precisely to the doors of the large concerns – which, as in the case of agricultural machinery, also account for much of the progress in the competitive sector – and a shocking suspicion dawns upon us that big business may have had more to do with creating [the modern] standard of life than with keeping it down. (Schumpeter 1950 [1976, p. 82].) p. 2

My two criticisms are that the velocity at which the bureaucracy operates at is too slow, and the innovativeness is non-existent. In the financial marketplace the pace of activity will need to accelerate and mirror the changes in the producers. I think we have addressed these with the changes we have documented here in the Preliminary Specification.

Schumpeter’s account of progressive rationalization takes the form of a contrast between two modes of economic organization, modes roughly cognate to the difference between the small owner-managed firm and the large multi-unit enterprise. Characteristically, however, the issue in Schumpeter is a dynamic one: he is concerned with the respective merits of these two modes of organization not in the static allocation of existing resources but in generation of economic change and growth. The paradox of Schumpeter is that he famously defended, and has come to be associated with, both of these modes as drivers of economic growth. Schumpeter has returned to prominence today as champion of the role of bold entrepreneurs in creating new combinations and redirecting the means of production into new channels, to such an extent that he is revered as an inspiration to the present-day field of entrepreneurship studies (Shane and Venkataraman, 2000). In this (Schumpeterian) literature, the force behind economic growth comes from individuals or small groups of individuals who work mostly outside the established structure of organization rather than from within it. pp. 17 - 18

Big, small, lean or bloated with the bureaucracy it doesn't matter what configuration the producer firm is in. The future requires that we are able to provide for the markets demands for energy. The financial crisis is providing relief in terms of overall global economic growth and therefore reduced demand for energy. Eventually the increase in the demand for energy will resume and that is not something that we can currently contemplate. What we have proven here in the Financial Marketplace module is that the innovative and profitable oil and gas producer will demand more efficient capital structures. Those structures lead to the overall performance of the producer and the Joint Operating Committees they participate in. We need to get our head around this energy demand situation and start to deal with a solution. Muddling through just seems to be too much of a risk.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

The Who, What, Where, When and Why of Investment Decisions

The speed and performance of the innovative and profitable oil and gas producer come about as a result of the demands from the capital markets. Investors want to deploy their capital at that critical moment when the results are about to be achieved. Such is the way of their business. Having their capital turnover quicker is a means to making it more effective. The innovative and profitable producers that are able to replicate this turnover within their organization will gain market recognition for their speed and performance. Speed is good, but not at the expense of performance. Quickly drilling a series of dry wells doesn't impress anyone. It is easy to understand what a reasonable approach involves when it comes to making this trade off.

There also needs to be a means to control what the firm is involved in in terms of investment criteria. This will be managed through the “Capital Allocation Interface” of the Financial Marketplace module. All investments are assessed based on their expected returns and provide for certain risk profiles. It is imperative that the firm evaluate every opportunity and critically review the results to ensure their investment selections are appropriate and within the framework of what the producer is able to carry out.

And let’s be clear, most if not all the producers have these processes operating within their organizations. However not within the financial domain of the organization. What is proposed here in the Financial Marketplace module is controversial because of its administration of these processes will be within the financial jurisdiction of the organization. One in which this falls under the responsibility of the Chief Financial Officer and is administered in the Financial Marketplace module. It is my opinion, that the CFO will continue to move away from the financial to a more technical background. Having a geologist or engineer as the CFO will become the norm in the future. The CFO will have the technical accounting aspects provided to them by their accounting firm, the service providers and the staff that they employ. Their ability to discern which projects to proceed with will be as a result of the collaborations conducted within the speed, performance and control decision processes and their participation in the senior management or C class executive meetings. However, having these decision processes managed by a CFO who is an accountant would be the same as giving the keys to your Ferrari to a teenager, what positive outcome would you be expecting?

To manage these processes we turn to the Oracle Middleware layer and specifically the Oracle Business Process Management Suite. We need to take these from the spreadsheet and ad hoc nature that they are currently managed under and put them through a defined and rigorous process that meets the organization's needs. From the C class executives to the people who are grinding out the calculations. The decision process needs to be defined and managed by the software within the organization. It also needs to be highly collaborative with the decision making process well documented. It will be in this way that a firm can then learn from what it may be doing wrong, maybe most importantly. But also from what it is doing right. Right down to the detail of who came up with the idea and who pushed it through. And then you'll begin to be able to answer who it is that is responsible for that last big success in your firm.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Tuesday, October 08, 2013

What About the Cash?

Let’s get to the real issue that has to be dealt with within the Financial Marketplace. The cash. With each Joint Operating Committee being funded and operated through its own bank the cash of the producers will be scattered through a variety of accounts that are held within the various Joint Operating Committees they have an interest in. Or will they? Through this discussion we will trace the cash that is generated through the properties and the various operations that occur in the day-to-day of an oil and gas operation. What we will find is that from a cash balance point of view, the balances that the producer holds will be fundamentally unchanged between the People, Ideas & Objects method of conducting business and the way in which it is done in the majority today.

What happens today is the net proceeds from the operation of the property are determined, each working interest share of those proceeds are calculated, and depending on if the property is generating or consuming cash a check or an invoice is sent. The difference in the People, Ideas & Objects system is that in the case where the property is generating cash instead of issuing a check, the balance will be transferred to the individual producers. In the case of where the property was consuming cash it would still send an invoice, and there would have to be some operating advance provided for the Joint Operating Committee to deal with the short falls while these invoices were being processed by the producer firms. In times when there are capital expenditures, cash calls which are the norm in the industry, will offset the demand for cash.

One of the other key differences in the People, Ideas & Objects application modules is that the Joint Operating Committee is open to contributions from all of the participants. Producers are pooling their resources in order to fulfill the requirements of the property and that requires that each producer participate in some form or fashion. This is the pooling concept that has been developed in the Preliminary Specification to deal specifically with the resource restrictions in the earth science and engineering disciplines. Each month these contributions are equalized in the process of determining the net cash payable or receivable, and will be accounted for in the joint venture billing in that manner. These equalized amounts will affect the cash balance in terms of the size of the payment and a producer could be compensated for the two components, the net proceeds of the property and their contribution through the pooling, through the joint venture billing process.

We have specified the Oracle Fusion Application Financial Management Suite as part of the Preliminary Specification. For purposes of these cash management activities we will be using the Oracle Suite for these cash management purposes. I would caution readers that the manner in which these accounts are cleared have not been worked out. That is the purpose of the Preliminary Specification. These are still early days and it is problems such as these that need to be resolved within the Preliminary Specifications budget. Today, the optimal method of dealing with clearing the balances in the joint account is through clearing accounts in the general ledger. There is no reason that we can’t modify that concept to allow for the contributions of all of the producers within a Joint Operating Committee to contribute to the joint account, be cleared as they are today, and then add the additional step of equalizing the contributions.

From another perspective, the interfaces to the variety of banks and producers accounts for deposits and withdrawals will be an area that will need to be worked through. Although this is not offering a technical issue, as all of this is being done today, the volume of transactions will be high in comparison to today’s traffic. Banks are well prepared for this. Producers not so much. Particularly in the area of Compliance & Governance. Having automation of this type and at this level will make many people wince. They can continue with the paper based systems if they choose, the practical solution is that we build these systems with the appropriate internal controls to ensure that the process is managed efficiently and effectively and without the risks associated with this type of activity. The end result at the end of the day is that in today’s systems the Joint Operating Committee is essentially cleared of any cash balance and that will be the case in the future under the Preliminary Specifications Financial Marketplace module.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

More on the "Gap Filling" Interface

We continue with our discussion of the “Gap-Filling Interface” in the Financial Marketplace module of the Preliminary Specification. And how a software development capability like that which is proposed by People, Ideas & Objects is necessary to support the changes that are instituted by the gap-filling process. But before we get to that I found these quotes from Professor Richard Langlois in his paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.” They detail exactly what the gap-filling process is.

As Harvey Leibenstein long ago pointed out, economic growth is always a process of “gap-filling,” that is, of supplying the missing links in the evolving chain of complementary inputs to production. Especially in a developed and well functioning economy, one with what I like to call market-supporting institutions (Langlois 2003), such gap-filling can often proceed in important part through the “spontaneous” action of more-or-less anonymous markets. In other times and places, notably in less-developed economies or in sectors of developed economies undergoing systemic change, gap-filling requires other forms of organization — more internalized and centrally coordinated forms. p. 6

and

Let’s take a closer look at the nature of the “gaps” involved. Adam Smith tells us in the first sentence of The Wealth of Nations that what accounts for “the greatest improvement in the productive power of labour” is the continual subdivision of that labor (Smith 1976, I.i.1). Growth in the extent of the market makes it economical to specialize labor to tasks and tools, which increases productivity – and productivity is the real wealth of nations. As the benefits of the resulting increases in per capita output find their way into the pockets of consumers, the extent of the market expands further, leading to additional division of labor – and so on in a self-reinforcing process of organizational change and learning (Richardson 1975; Young 1928). p. 7

As gaps are discovered they will be published by users in the “Gap-Filling Interface” of the People, Ideas & Objects Preliminary Specification. There they can be seen by the banks and investment houses that are providing the products and services to the producer firms and Joint Operating Committees. And in turn, develop a product or service to fill that gap in a manner that meets the need that was identified. The reverse is also the case, that the banks and investment houses may initiate the discovery of a gap and have the producer or JOC fill the gap. In either of these scenarios the division of labor and specialization doesn’t consider the fact that the 21st century organization requires software to identify and support the roles and responsibilities within it. If we are to have “gaps” filled, its not just a matter of having someone fill in the new position. It also requires that a dedicated software development team be available to prepare the software for the role to be productive and functioning within the greater system. This is the role that People, Ideas & Objects is providing in the Preliminary Specification. It is not a destination in terms of what the specification will be, but more a journey where the end result is a continuously improving system driven by its users needs.

The other aspect of this software development capability is that this is prospectively an innovative oil and gas industry. Currently, management operate on the basis of what is considered the acceptable norm in terms of operations. They will need to break this mindset and become the innovative producers we all know deep down they want the industry to be. Either that or the forces of creative destruction will be set upon them. Either way the need for a dedicated software development capability will be necessary. Professor Langlois notes the following.

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

To pursue this economic frontier, the innovative and profitable oil and gas producer must have the tools at which to develop their “institutions and capabilities.” It will be the “Gap Filling” interface in the Financial Marketplace module that provides for this.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Monday, October 07, 2013

The Process of Renewal

To provide for these market-supporting institutions and to bring in new services, when and if they are needed, I want to introduce the “Gap-Filling Interface” that has been introduced elsewhere within the Preliminary Specification. The further specialization and division of labor is achieved through the process of filling gaps. Jobs that were not done before are filled by new tasks and people who then expand the division of labor. This is the simple process of how it is done. The “Gap-Filling Interface” allows the producer firm or Joint Operating Committee who sees a Gap within the service industry offering, to publish their finding within the “Gap-Filling Interface” for those product or service providers to configure their organization to provide. The key is that with the time and distance that exists within the oil and gas industry, the demand for a service and its supply might never know of the others existence. With the “Gap-Filling Interface” there is a reduction in the time and space by using the Information Technologies that are available today. The “Gap-Filling Interface” can also be used from the other perspective of the service provider configuring a product or service that fills a gap, then publishing that to the producers and JOC’s. In addition the People, Ideas & Objects developers are able to join in the discussion and accommodate the changes from a software perspective.

As we continue to document the capabilities of the various financial communities. And how these capabilities will be sourced from the marketplace by the producer firm and Joint Operating Committees. We see that technology is a large part of the organization. Particularly in People, Ideas & Objects Financial Marketplace module where the “Marketplace Interface” brings everything together. We continue with our review of Professor Richard Langlois’ “Institution, Inertia and Changing Industrial Leadership.” And discuss whom it is that will find the “Marketplace Interface” the most valuable in their pursuit of oil and gas innovation.

If we look at the scope of the changes that are made as a result of Preliminary Specification they are substantial. The movement to the Joint Operating Committee has a remarkably significant impact on every aspect of an oil and gas concern. Added to that is the use of advanced technology and the innovative oil and gas producers operations are more in alignment with what an innovative oil and gas producers operations should be than ever before. Yet there is no support from the oil and gas companies. They remain trapped in concrete with their SAP installations. Living a bureaucratic life that is so far removed from the oil and gas business it is mind numbing. Adopting any change to People, Ideas & Objects is counter to the inertia that is built within the organization and something that will only happen through the forces of creative destruction.

And institutional change, we argue, can often take place through the more or less slow dying out of obsolete institutions in a population and their replacement by better-adapted institutions - rather than by the conscious adaptation of existing institutions in the face of change. p. 6

Therefore the people that will be attendant in the “Marketplace Interface” of the Financial Marketplace will be those that are able to accept the dynamics of industrial change and begin the process of renewal. Those looking for ways that are efficient and innovative in which to operate their oil and gas land and asset base, and deploy their earth science and engineering capabilities. Those that will be able to make a claim on their share of those $94 billion in annual opportunity costs that are currently being lost through doing business the “old way.”

Another aspect of capabilities that has recently received a great deal of attention is organizational culture. In practice, not all organizations may be equally able to cope with change, as existing patterns of behavior involving both executives and subordinates may be resistant to change. Organizations develop collective habits or ways of thinking that can be altered only gradually. To the extent that a given culture is either flexible or consistent with a proposed change in product or process technology, the transition to the new regime will be relatively easy. If, however, the culture is incompatible with the needs posed by the change and is inflexible, the viability of the change will be threatened (Robertson, 1990; Langlois 1991; Camerer and Vepsalainen, 1988). p. 9

Here we have the advantage of moving towards the industry culture. The Joint Operating Committee is the cultural framework of the industry. People, Ideas & Objects Preliminary Specifications use of the Joint Operating Committee aligns its legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks with the compliance and governance frameworks of the hierarchy. This alignment is toward the culture of the industry and therefore will be successful. The constrained, obscure and difficult systems that are in use today are in no ways aligned to any of the frameworks of the oil and gas industry.

Can anyone portray a vision of how the existing bureaucracy will survive and prosper in the coming decade? Have these bureaucracies taken any steps to deal with these issues? What is the future of the oil and gas industry? Do these bureaucracies even care? Many questions that can be answered by selecting and supporting the People, Ideas & Objects software development capability and Preliminary Specification.

Teece... fails to note that the inflexibility, or inertia, induced by routines and the capabilities that they generate can raise to prohibitive levels the cost of adopting a new technology or entering new fields. Such inertia can develop to the extent that existing rules are both hard to discard and inconsistent with types of change that might otherwise be profitable. p. 10

I may yet be surprised that one or two of these behemoths might be able to break these chains of their own mindset and self interest. I will be surprised if that happens. Until then our appeal is to the C class executives and investors in the industry to make the decision for the bureaucracy. And for the users who are tired of the ways and means of what can best be described as the “old ways.”

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Dynamic Transaction Costs and Market Coordination

We now want to discuss “Dynamic Transaction Costs” in the Financial Marketplace module of the Preliminary Specification. Dynamic Transaction Costs are the technological and organizational innovation costs that are incurred when capabilities are moved from the firm to the market or vice-verse. These are the costs that are incurred when we establish a “Marketplace Interface” like that which we are discussing for the Financial Marketplace module. But first in a paper entitled “Transaction Cost Economics in Real Time” Professor Richard Langlois provides us with this definition of capabilities.

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge” and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." For the most part, Richardson argues, firms will tend to specialize in activities requiring similar capabilities, that is, "in activities for which their capabilities offer some comparative advantage" (Richardson 1972, p. 888). p. 27

People, Ideas & Objects have also added “ideas” to “knowledge, experience and skills” for the definition of capabilities. The financial marketplace, that is the banking and investment communities, capabilities are currently accessed by the oil and gas industry through the marketplace. Therefore the changes and the Dynamic Transaction Costs will be as a result of adapting to the “Marketplace Interface” of the Financial Marketplace module, and will be minimal. This is in comparison to the Dynamic Transaction Costs that will be incurred in the Petroleum Lease Marketplace module where the marketplace currently doesn't exist and the capabilities are held within the producer firms. What Professor Langlois describes as Dynamic Transaction Costs is as follows.

Over time, capabilities change as firms and markets learn, which implies a kind of information or knowledge cost - the cost of transferring the firm's capabilities to the market or vice-verse. These "dynamic" governance costs are the costs of persuading, negotiating and coordinating with, and teaching others. They arise in the face of change, notably technological and organizational innovation. In effect, they are the costs of not having the capabilities you need when you need them. p. 99

What we therefore need is to record these technological and organizational innovation costs for both the producer firm and Joint Operating Committees. To have an account that clearly defines the Dynamic Transaction Costs, whatever they may be, within the chart of account of the firm or JOC. This would help to identify and control the costs. This would also be the case for the Resource and Petroleum Lease Marketplace modules. Although some of the producers costs for “change, notably technological and organizational innovation” would be associated with the fees that are paid to People, Ideas & Objects. There are other out of pocket expenses that the firms are incurring to make the changes to the “Marketplace Interfaces” and it is these costs that need to be captured in the accounts.

We are now going to discuss the manner in which the changes from the firm to the marketplace will occur and the importance of having a software development capability like that provided by People, Ideas & Objects. We will also be discussing some of the interfaces that were previously introduced in the Resource Marketplace module that will be needed here in the Financial Marketplace module. The quotations are from Professor Richard Langlois’ “The Vanishing Hand: the Changing Dynamics of Industrial Capitalism.” We begin by noting that although the marketplace for banking and investment dealers is well established, the coordination capabilities within the producer firms and the “Marketplace Interface” of the People, Ideas & Objects Financial Marketplace module are not currently available.

The basic argument - the vanishing hand hypothesis - is as follows. Driven by increases in population and income and by the reduction of technological and legal barriers to trade, the Smithian process of the division of labor always tends to lead to finer specialization of function and increased coordination through markets, much as Allyn Young (1928) claimed long ago. But the components of that process - technology, organization, and institutions - change at different rates. p. 3

Part of the process of developing the Preliminary Specification will be to identify the various standards that affect the markets and firms within the industry. These standards are part of the market-supporting institutions. It may be through this process that it is determined that the market supporting institutions are inadequate for the producers and Joint Operating Committees needs. And it will be the responsibility of the user communities that are part of the People, Ideas & Objects software development to identify additional standards that are needed to ensure these markets are established and operating appropriately. It will also be necessary to ensure that this is a continuous process in which the evaluation of the market-supporting institutions are undertaken frequently to ensure that the producers and JOC’s needs are continually met and an iterative software development approach is taken.

As in Chandler, secular changes in relative prices attendant on "globalization" (driven by technology or politics) affect economic organization not only directly but also, and perhaps more importantly, indirectly through changes in technology. Production costs matter as much as transaction costs (Langlois and Foss 1999) Moreover, the kind of transaction costs that matter in history are often not those of the Williamson kind but those I have labeled dynamic transaction costs (Langlois 1992b). Costs of coordinating through markets may be high simply because existing markets - or more correctly, existing market-supporting institutions - are inadequate to the needs of new technology and of new profit opportunities. But when markets are given time and a larger extent, they tend to "catch up," and it starts to pay to delegate more and more activities rather than to direct them administratively within a corporate structure. p. 5

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.

Friday, October 04, 2013

The Marketplace Interface

The first thing we want to do in the Financial Marketplace is to start the “Marketplace Interface” for this module. Just as in the Petroleum Lease and Resource Marketplace modules, the Financial Marketplace will use the user vision to create a virtual instance of the financial marketplace that exists. This will be of the banking and investment communities that we have discussed in this module. Creating an environment where the marketplaces capabilities in terms of banking and investment dealing are made available to the producers and Joint Operating Committees through a “Marketplace Interface.”

(Please review the video below.)


Within the “Marketplace Interface” producers will be able to engage banks to conduct the banking that they do today. The interface will provide the medium of communication and transaction support that is currently available in two separate medium. With the user vision focused on your bank and their representatives, all of your banking documents that you have with the bank will be available to you in the tiles that populate your screen. The items that are outstanding or at issue with the bank will also be populated in other tiles and are a simple click away from your full attention. You are able to resolve the outstanding issues and transactions with the bank and move your focus onto the next group.

While still at your desk, the next area of your focus is the investment group that you have been working with on a financing in your firm. They have been undertaking a review of your firm and have some detailed questions for you and your representatives to answer. Those representatives are available and are brought into the virtual meeting and are recorded for the archives. It would seem that the investment group want to take your firms offering on speculation and would appreciate it if you would increase it by 30%. Such is the way for innovative producers.

The point of the “Marketplace Interface” is to provide a virtual environment that accelerates the pace of the producers financial capabilities. If the producer and Joint Operating Committee are to pursue the oil and gas marketplace in the future then the pace of their operations will most certainly have to accelerate. The demands for more energy will be insatiable. The prices realized by the producers will reflect this demand and those prices will be rewarding enhanced innovation. It is therefore necessary to ensure that the producer has the capabilities within the financial communities to finance this level of activity.

It would seem that the majority of the costs of transacting within the banking and investment community are fixed. That is there is little a producer can do to offset the costs associated with these services. And they are usually priced as a percentage of the transaction for loans and investments, or service fees based on banking practices that are global in terms of their competitive offering. Therefore the need to leverage these services should be the key to optimizing the value of these services.

Before we go any further we should note that the People, Ideas & Objects Preliminary Specification aligns the seven frameworks of the Joint Operating Committee with the compliance and governance frameworks of the hierarchy. This alignment includes the financial framework as we have discussed in this the Financial Marketplaces Preliminary Specification. Having the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks aligned with the compliance and governance frameworks permits the speed, accountability, innovativeness and profitability that we are seeking in the oil and gas industry. Therefore the probability that a Joint Operating Committee will be using the Financial Marketplaces “Marketplace Interface” is a certainty.

Offsetting as much of the logistical and transaction related costs associated with the banking and investment management to the banks and investment managers will enable this marketplace to operate more efficiently. Imputing that the division of labor and specialization will fall within the domain of the bankers and investment managers, and the fee for their services will be one charge for that service. From a paper by Harvard Professor Carliss Baldwin.

The user and Producer need to deploy knowledgeable in their own domains, but each needs only a little knowledge about the other's. If labor is divided between two domains and most task-relevant information hidden with each one, then only a few, relatively simple transfers of material, energy and information need to pass between the domains. p. 17

and

Placing a transaction - a shared definition, a means of counting, and a means of payment - at the completed transfer point allows the decentralized magic of the price system to go to work. p.22

By leveraging the marketplace in this manner helps to mitigate the increased logistical load on a producer as a result of the many Joint Operating Committees undertaking their own banking and investment management needs. This leveraging, and the aid of Information Technology, make this a minor irritant when compared to the benefits achieved when the financial framework is aligned with the other six frameworks of the Joint Operating Committee and the governance and compliance frameworks are also aligned. (Speed, Accountability, Innovativeness and Profitability vs. a minor logistical irritant.)

The most significant fact about this system, is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information is passed on... Frederick Hayek (1945).

We have noted how the banking and investment dealers were providing their services to the oil and gas producers and Joint Operating Committees through what Professor Richard Langlois would call Transaction Cost Economics. The services were provided at a fixed service cost that was passed to the producer / JOC as a transaction on the completion of the service. The division of labor and specialization of the service was the responsibility of the bank or investment dealer and they were free to organize themselves in any fashion based on a competitive pricing of their services. We want to explore the “Marketplace Interface” a little further and how the transaction costs will impact the way in which the marketplace will operate for the producers and JOC’s.

The whole acts as one market, not because any of its members survey the whole field, but because their limited individual fields of vision sufficiently overlap so that through many intermediaries the relevant information is communicated to all. ...The most significant fact about this system is the economy of knowledge with which it operates, or how little the individual participants need to know in order to be able to take the right action. In abbreviated form, by a kind of symbol, only the most essential information passed on and passed on only to those concerned. It is more than a metaphor to describe the price system as a kind of machinery for registering change, or a system of telecommunications which enables individual producers to watch merely the movement of a few pointers, as an engineer might watch the hands of a few dials, in order to adjust their activities to changes of which they may never know more that is reflected in the price movement. (Hayek 1945, pp. 526 - 527)

With producers maintaining relationships with possibly each and every bank. This as a result of banks financing all of the Joint Operating Committees partners in a property. And possibly the same situation occurring with multiple investment dealers. The need for the marketplace to deal with the logistical aspects of the finances with each bank and investment house will be necessary. There is however not much of an issue with respect to this manner of handling the finances. The majority if not all of the payments and receipts of the banking can and should be managed in the People, Ideas & Objects Preliminary Specification electronically. The need to print checks or to make physical deposits is something that occurred last century. Another thing that happened last century was the need to manage the cash in the various accounts. The Financial Marketplace module will provide an “Advanced Cash Management Interface” to enable the appropriate cash management is applied to the producers cash resources.

One of the other aspects of this marketplace is the topic of discussion and type of transaction that can be undertaken in the marketplace. With so much activity in the oil and gas producers domain. (This as a result of the volume of work needed for each barrel of oil equivalent produced and the associated increased demands on everyone's time.) The amount of travel may be limited in the future with the reliance on the “Marketplace Interfaces” of the Preliminary Specification as a replacement for some of the face to face time that is done now. If a transaction can be done as efficiently virtually, and might I suggest even a closing, then the “Marketplace Interface” would be worthwhile building just for that purpose. Let alone for the day-to-day transactions of paying bills and depositing money. People, Ideas & Objects calls the “Marketplace Interface” the ultimate collaborative environment.

The “Marketplace Interface,” Standardization and the Division of Labor

When we talk about the capabilities that the producer firm or Joint Operating Committee acquire through the “Marketplace Interface” of the Financial Marketplace module. It is the full scope of the financial capabilities and money management that the banking and investment dealers provide. These are acquired through the simple process of paying a fee when necessary. These markets are “thick” and there are many standards that support them, the costs in terms of executing the transactions are negligible, or in other words, ideal for the “Marketplace Interface.”

When we think in terms of the boundaries of the firm and the markets, there is not much ambiguity as to which lays in which domain. Banking is banking and oil & gas is oil & gas. Would any producer attempt to provide the services of a bank as a value added process for its shareholders today? Why would it assume that it would be able to provide a better lease rental payment process than one that can be done on an industry wide basis as in the “Marketplace Interface” of the Petroleum Lease Marketplace?

Just as in the Petroleum Lease Marketplace in which the marketplace infrastructure, or standards and other market supporting institutions are already in existence. The marketplace in the Petroleum Lease Marketplace needs to be created, whereas here in the Financial Marketplace it already exists and in essence only needs the virtual interface, the “Marketplace Interface,” built to emulate the marketplace. In the Petroleum Lease Marketplace the entrepreneur’s need to establish the service offerings and provide the services to the producers and Joint Operating Committees, whereas in the Financial Marketplace that infrastructure, the banks and investment houses, already exist.

Acquiring the capabilities of a bank or a lease administrator through the marketplace is a choice that the 21st century oil and gas producers need to make. The People, Ideas & Objects Preliminary Specification have assumed that these processes are best left to the markets to provide for the producers and Joint Operating Committees. The producer and Joint Operating Committee are best left to focus on their land and asset base, and earth science and engineering capabilities as key competitive advantages and the majority of the processes that support those tasks can be provided by robust marketplaces.

This manner of operations is consistent with the means of how innovative organizations are able to operate in other industries. It is also wholly inconsistent with the current bureaucracies thinking of the oil and gas industry today. Theirs is an attitude that will maintain command and control of all aspects of the oil and gas producer firm to ensure that they maintain their “power” for a while longer. If not for the Internet these ideas from People, Ideas & Objects would not be communicated to like minded individuals, and the bureaucracy would remain unchallenged in their position. There are distinct advantages to relying on the marketplace for the administration of these administrative processes.

I think we have firmly established that by placing a virtual interface, the “Marketplace Interface” over the financial marketplace we would be able to provide the capabilities of that market to the innovative oil and gas producer and Joint Operating Committees. Having this marketplace would provide access to the skills, knowledge, experience and ideas of the banking and investment communities in an environment that is administratively more efficient, effective and timely. This is a critical aspect of the innovative oil and gas producer and therefore a critical aspect of the Financial Marketplace module of the Preliminary Specification.

The oil and gas industry is a capital intensive industry. The access to capital is a necessary and primary ingredient to any producers success. Without the needed access to capital, unfortunately, its just ideas. Unfortunately as well there are skills that are needed to access the capital markets that are not evenly distributed. These “access” privileges are holdouts of the last century. In the future the strength of the ideas and the potential of the deals will be what drive the frothing at the mouth of investment dealers. Therefore creating marketplaces where access is open to all parties is how things will get done.

By accessing the banking and investment community through the “Marketplace Interface” the innovative oil and gas producer and Joint Operating Committees acquire the financing and banking capabilities that they need. Allowing them to focus on their key competitive advantages of their land and asset base, and earth science and engineering capabilities. The scope of what is called for to succeed within their domain of competitive advantages is broad enough. To expand it unnecessarily into other areas is incomprehensible in today’s business environment.

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

And that would include areas that are part of the Resource Marketplace module. No producer would own their own drilling rigs as part of their competitive advantage, yet some Canadian producers like Encana Corp. think that is part of their competitiveness.

Industrial economists tend to think of competition as occurring between atomic units called "firms." Theorists of organization tend to think about the choice among various kinds of organizational structures - what Langlois and Robertson (1995) call "business institutions. But few have thought about the choice of business institution as a competitive weapon. p. 1

The “Marketplace Interface” in the Financial Marketplace module of the Preliminary Specification provides a window for the producer and Joint Operating Committee on the banking investment communities. A virtual world where the interactions and transactions are unlimited and undefined. Watching this video from Open Wonderland will provide you with an understanding of how the interface would operate.

(Please review the video below)


The “Marketplace Interface,” and Modularity

What we have described so far in the Financial Marketplace is a comprehensive area where the banking and investment communities conduct all of their business with the producer firms and Joint Operating Committees. This would involve not only the day to day payment of bills but also the closing of a major financing. We have also discussed this would enable the alignment of the seven frameworks of the Joint Operating Committee, which includes the financial framework, with the compliance and governance of the firm. The “Marketplace Interface” being a place where people would go to have their financial “things” taken care of. From Professor Richard Langlois’ “Modularity in Technology, Organization and Society.”

What is new is the application of the idea of modularity not only to technological design but also to organizational design. Sanchez and Mahoney (1996) go so far as to assert that modularity in the design of products leads to - or at least ought to lead to modularity in the design of the organizations that produce such products. p. 1

and

Why are some (modular) social units governed by the architecture of the organization and some governed by the larger architecture of the market? p. 2

What we have learned from Professor Langlois is that modularity depends on interdependency and standards. If we include compliance and governance within the standards definition, then the Financial Marketplace, with banking and investment capital standards, are ripe with standards. Interdependency reduces the focus of the user to just banking. If the user wants to find a P&NG Lease then they go to the Petroleum Lease Marketplace, the Financial Marketplace has nothing for them. Interdependency reduces the interactions between the elements within the modules to simplify the systems within each module. If everything was contained within one module the interdependency would be so high that the system would not function as effectively.

In organizational and social systems - and perhaps even in mechanical ones as well - it is possible to think of interdependency and interaction among the parts as a matter of information transmission or communication. p. 5

Lastly Professor Langlois provides us with a clear understanding of what is required within a modular system design. These are some of the guiding principles that I am using to write the Preliminary Specification.

  • An architecture specifies what modules will be part of the system and what their function will be.
  • Interfaces describe in detail how the modules will interact, including how they fit together and communicate.
  • And standards test a modules conformity to design rules and measure the modules performance relative to other modules.

I now want to take the opportunity to discuss the videos that were presented. Specifically the one which is reposted below. It has the commentator highlighting the different buildings that he has built, and the terrain that he has set out in his virtual world. Here is how the “Marketplace Interface” will start out. Banks or investment houses will set up a building and their people will be able to set up demonstrations and marketing presentations to those who may be just walking around to the various buildings within the “Marketplace Interface.” When they see something of interest they will be able to engage one of the bank or investment house representatives and begin a discussion of how they could help their producer firm or Joint Operating Committee. Once the relationship has begun the producer / JOC could return and have their needs met virtually by the firm represented in the “Marketplace Interface.”

(Please review the video below.)


The advantage of this is obvious to me, however, it may not be obvious to everyone. This is not technology for technology's sake. This is a marketplace for business purposes. A completely different situation to the current social media experiments which appear to have no business purposes behind the interactions. Within the “Marketplace Interface,” which is full of interactions the People, Ideas & Objects ERP systems are available for use by the parties within the virtual world. If they conduct a transaction then it can be handled virtually. If they close a deal that can be handled virtually within the “Marketplace Interface.” The transaction management is what makes this video transform from a useless technological experiment to a potential for so much more.

The “Marketplace Interface,” a Scenario

By way of a scenario I want to impart an understanding of how I see the Financial Marketplace modules “Marketplace Interface” providing the innovative oil and gas producer, and Joint Operating Committee with banking and investment dealing products and services.

You are the Chairman of the Joint Operating Committee for an area where you have a mutual interest with five other companies to conduct exploration in some shale gas. After many years of acquiring land and drilling to identify the scope of the reserves your companies have announced a major discovery of significant reserves. A vote was passed by 80% of the participating companies to undertake bank financing by a general assignment of those reserves to fund the gathering, compression and tie-in to a company owned gas plant. It was approved that these funds can be sourced from any bank that is willing to competitively bid for the business.

A specification and a detailed cost proposal has been developed to support the application for funds. Two individuals from the other companies who have participated in the Joint Operating Committee will be joining you in making the proposal to the banks. You have arranged to make the proposal to 16 banks located in New York, London and Hong Kong next Tuesday through the “Marketplace Interface” of the Financial Marketplace module. Three of the banks have relationships with two of the producers that are represented in the proposal.

It quickly becomes evident that there are technical questions regarding the nature of shale gas and the financial situation of company B. You are able to call upon the geologist for the project and the CFO of company B within the “Marketplace Interface” to answer these questions. This however causes you to overrun your time limit and you send the other two participants to the next meeting without you for now. Eventually bank A is satisfied and you return to the second meeting to find that the same questions have arisen. You quickly contact the CFO and geologist and ask them to edit video excerpts from the previous meetings answers, and include them with the proposal to satisfy bank B, and move on in time to bank C and so on.

Days later you have received offers from 4 of the banks that you visited virtually. However, one of the banks offer stands out to the other three banks, and is accepted by those 80% of the participants in the Joint Operating Committee. The CFO’s, Lawyers, accountants and bankers of all of the participating companies of the Joint Operating Committee are informed of a closing weeks from today. The closing will be held within the “Marketplace Interface” of the Financial Marketplace module. You have also scheduled the virtual signing of the AFE’s for the project to commence once the closing is complete.

What this scenario shows is the alignment of the financial framework is consistent with the legal and operational decision making frameworks. The decision to leverage the property with debt is the appropriate one from a business point of view. What the scenario also shows is the time required to make this bank debt happen. Even though there are more people involved in the decision making process, because of the number of companies in the Joint Operating Committee, the time needed to deal with everything is compressed and the exposure to the best deal was obtained with minimal administrative time incurred.

Another Scenario

We invoke the “Marketplace Interface” with the technologies that are provided to us from Open Wonderland. The open source Java toolkit that creates the collaborative environment we call the “Marketplace Interface.” Sitting on the Oracle Fusion Middleware layer, this toolkit provides our users with simultaneous interaction for the Resource, Petroleum Lease and Financial Marketplace modules. The “Marketplace Interface” simulates a market where buyers and sellers engage, buy, sell and trade products and services. It is the ultimate collaborative environment. The user will have at any time the opportunity to option click to create a transaction, an AFE or some other form of business based on the interaction they are simulating in the marketplace. This discussion is to detail some of the activities that will be carried out within the Financial Marketplace module of the Preliminary Specification.

We fast forward a few years to where the demand for energy is very strong. Therefore the demand for capital in a capital intensive business is even more difficult. The need to promote the performance and speed of your company's capabilities is one of the necessary elements of the innovative oil and gas producers toolkit. What you want to do is engage the investment community in a discussion around the various elements of your performance. To do that you turn to your location within the “Marketplace Interface” that you have set up for selling / promoting oil and gas assets and the producer firm itself. It is here within the oil and gas property district that you have acquired some virtual real estate to house the distribution and promotion of your properties and company.

(Please review the video below.)


When you have engaged a qualified and interested buyer you are able to provide them with and execute a confidentiality agreement. Then you begin the presentation of the properties that you have in the package without leaving your desk or travelling anywhere. Next, an investor wants to know more about your team and what is the performance over the past three years and their current capabilities. All of this information can be easily compiled from within the “Marketplace Interface” as they are all part of the People, Ideas & Objects ERP system. Whether it be from the Oracle Fusion Middleware, Oracle Fusion Application Financial Management Suite or the People, Ideas & Objects application modules themselves, all of these application features interact and operate as one.

Or maybe the shoe is on the other foot, sort of speak, and you're in the market to acquire some properties. The ability to shop around the oil and gas property district in the “Marketplace Interface” gives you the opportunity to find the right property with a lot less time and cost involved. Having producers from around the world located in the district enables you to search globally as well as locally on all the criteria that meet your needs. Reviewing hundreds of reserve reports and evaluating the porosity of every formation has its rewards, but sometimes in a marketplace, it's something that someone says that piques your interest in a property. Having this marketplace open on your desktop and available all day would open a new world of opportunity to the innovative oil and gas producer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy.