Showing posts with label Governance. Show all posts
Showing posts with label Governance. Show all posts

Tuesday, September 06, 2011

The Preliminary Specification Part XVIII (PA Part IV)


In yesterday’s post we discussed how the Joint Operating Committee was able to manage who was available to work for the property. The ability to pool the earth science and engineering resources from the partnership is something that is asserted as being a necessity in the future of the oil and gas industry. It should be stated here as well that the Military Command & Control Metaphor would not be limited to just the earth science and engineering disciplines, but would include everyone that is employed within the producer firms. So yesterday’s post would help us to deal with the who, now we need a mechanism to deal with what it is they will be doing.

The next part of the Partnership Accounting module deals with the operational side of how the field work within the Joint Operating Committee gets completed. Partnerships have always had AFE’s and operations budgets to deal with how much will be spent on an annual basis at a facility etc. And those continue in their traditional ways in the People, Ideas & Objects application. This post deals with how the Military Command Control & Metaphor can deploy the resources and authorize the spending of budgets in a manner that provides for the governance of the Joint Operating Committee. Simply we are talking about the Collaborative Work Order System that is part of the Partnership Accounting and other modules. (Compliance & Governance, Petroleum Lease Marketplace, Resource Marketplace modules).

Deployment of the people within the Joint Operating Committee, with the budgets that are agreed to are not enough to satisfy any interpretation of adequate governance. Proper authorization and responsibility needs to be assigned to ensure that plans and budgets are executed successfully. Without a work order system within the People, Ideas & Objects application the governance of the property would not be possible. The ways and means of successfully controlling costs and deploying the resources in a manner to complete the tasks at hand are what the work order system is designed to complete.

The manner in which the work order system will be deployed will be as follows. If someone asks you to work on a project, your first question should be is “what’s your work order number.” Then you immediately start charging your time to the code. It doesn’t matter if your an employee of the producer where the request came from, a partner in a Joint Operating Committee or a vendor or supplier. If they don’t have a work order number you hang up the phone. If they have a number, you key the work order number into your device or keyboard and continue talking. The work order system will aggregate and bill your time while working on that project. The details, chain of command, tasks and deliverables are all delivered within the work order system that was provided when you keyed the number.

Note that one of the benefits of this system is that no work gets done without a work order. Assigning budgets from either an AFE or from internally sourced overhead accounts will be a matter of selecting from budget accounts or from pre-approved allocations. The ability to approve a work order would therefore be at an appropriate level within the chain of command of the Joint Operating Committee designated through the Military Command & Control Metaphor (involving multiple producers). If a work order were to exceed its budget it is reasonable to assume that it was exceeding its AFE or account budget(s if it involved multiple producers) as well, which could trigger action from the Compliance & Governance module of the People, Ideas & Objects application, if that is what management desired or deemed necessary and established in that module.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Sunday, July 31, 2011

McKinsey on Governing Joint Ventures


As I promised yesterday, this McKinsey article on governing joint ventures has to reside in any one's top ten list of favorites. The work that we are doing in People, Ideas & Objects (PI&O) is moving the compliance and governance frameworks of the hierarchy into alignment with the Joint Operating Committee’s legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks. To do so provides us with greater speed and accountability from an organizational point of view. This has been difficult to tangibly quantify and qualify. That is until this McKinsey article.

Comparing the governance of both the standard corporate model and a generic joint venture. McKinsey provides a strong contrast of the opportunities and issues that we face in aligning the innovative oil and gas producers nine frameworks under the PI&O software. Noting in the paper that we not only attain greater speed and accountability but;

Despite the differences between wholly owned businesses and joint ventures, many of the basic tenets of good corporate governance can—and should—be applied to both. The principles discussed here might be seen as the minimum needed to promote accountability, speed, transparency, and, ultimately, performance.

The article recommends specific actions be taken to enhance the governance of joint ventures. These include;

  • Appoint at least one outside director.
  • Designate lead directors or a strong chairperson.
  • Review and reward the performance of board members.
  • Sponsor an external audit.
  • Create a real challenge process. (Rigorous reporting and review process.)
  • Let the ventures CEO run the business.

These are all excellent points of discussion on how the governance of the Joint Operating Committee could be handled in the Preliminary Specification. The community will need to take recommendations like these and determine what specific actions and processes need to be included in the specification. I could see the governance model being somewhat of a checklist of functionality and process management that the partners could agree upon. The PI&O software then providing that level of governance for the JOC. These are the decisions that the community has to make and why the producers are such a critical part of the discussion.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Please note what Google+ provides us is the opportunity to prove that People, Ideas & Objects are committed to developing this community. That this is user developed software, not change that is driven from the top down. Join me on the People, Ideas & Objects Google+ Circle and begin building the community for the development of the Preliminary Specification. Email me here if you need an invite.

Friday, January 14, 2011

McKinsey, When Failure is not an Option, Part 2

McKinsey have published the second part of this highly applicable series on Joint Ventures. Our review of the first part of this McKinsey series was published in September 2010. Part 2 of this article discusses several points that are in direct support for People, Ideas & Objects. A bold statement, however, one that will be proven valid through our review of this document. Specifically the three points that are verified in this post are.

  1. The need to have a third party provide the software development service that People, Ideas & Objects proposes. 
  2. The Military Command & Control Metaphor, that was developed in the Draft Specification, provides an industry wide governance model that is directly supported in this article. 
  3. Compliance, on an automated scale, is a necessary component of the governance and third party nature of the offering noted in 1) and 2). 

We begin with a quotation that summarizes the state of affairs in the oil and gas industry.
As we discussed in the first article of this series, the scale, complexity and risk associated with the execution of large scale projects frequently leads to joint venture constructs as a way to introduce expertise, diversify risk and gain access to capital. We also observed that, up until recently, the majority of these partnerships consisted of a dominant, operating partner that provided the bulk of the resources and leadership, paired with one or more relatively silent partners in the background. Interestingly, this trend has shifted dramatically over the last decade, and project JVs are increasingly becoming a “partnerships of equals”, with shared governance, staffing and execution responsibilities distributed among the participants.
McKinsey use the example of a large refinery to show the difficulty in managing a large Joint Venture today. They detail the four major risk factors that are evident in the case example, and I would note that these are the issues, to a greater or lesser extent, that are pre-eminent in all oil and gas ventures;

  • Cross-cultural challenges associated with the introduction of sovereign nationals and international corporate employees
  • Inter-company incentive and strategic misalignment between two (or more) principle investors
  • Expertise, system and process friction between the various contractor and subcontractor teams, who may have alliances or other preferred relationships with one of the JV partners
  • Normal” start-up risks associated with the scale-up and development of a project “new-co”, the on-boarding of new JV employees, integrating staff from the partners who have been seconded to the JV, and greenfield development of new systems and processes, among others.

There’s no denying these are the issues that all oil and gas projects are facing. McKinsey offer a four step solution that dovetails with the Draft Specification. If we ask first hand, “what if” there were standard systems and procedures that were used for all Joint Operating Committees across the oil and gas industry? Where the ability to assign a generic template of assignable roles and responsibilities. Where the compliance and governance of each jurisdiction is embedded within the third party vendors (People, Ideas & Objects) software's policies and procedures. Where the generic management of the Joint Operating Committee was handled through software provided by a third party that represented all producers. Software that managed each of the producers compliance for the various jurisdictions in which they operated, to the governance of the people that were pooled by the various firms represented in the Joint Operating Committee. This brief vision of what People, Ideas & Objects is proposing in the Draft Specification is being mirrored in this discussion of McKinsey’s four steps. We begin.

Step 1 Define and Align

Alignment is difficult to attain within the oil and gas industry for the many reasons cited in the subsequent McKinsey quote. We need to begin by aligning the compliance and governance frameworks of the hierarchy, moving these two frameworks into alignment with the legal, financial, operational decision making, communication, cultural and innovation frameworks of the Joint Operating Committee. Talk of alignment with out building the software that identifies and supports the alignment of these eight frameworks, first and foremost, is just more talk. One of the key benefits of doing this is the alignment of compliance with operational decision making. The net benefit of which is greater accountability. But by combining all eight of these frameworks we are making the Joint Operating Committee capable of dealing with the all aspects of the producer(s) needs.

McKinsey note:
...project JVs often begin by bringing together unlikely allies whose goals, cultures, operating models, risk appetites, and financial strengths are apt to vary widely. Identifying the disparate goals, models and strengths and weaving them into a single, aligned and broadly-communicated vision is critical for an effective JV to function effectively. This vision supported by a number of underlying organizational themes and parameters creates a common language for the JV, and is a reinforcing mechanism for maintaining alignment across all partners.
What I am asserting here is the need to have the generic business aligned around the Joint Operating Committee so that the vision of the JV can become the focus of those working within the project / property.

Step 2 Build

I want to limit the discussion to the governance related points. I will therefore note the following McKinsey quote and refer to the related discussion in Step 3 Execute, below.
The process of building the team should start with recruiting the best people from each participating partner. This can be quite a challenge, as top talent often see joining the JV as a career- limiting move, putting them “out of sight, out of mind”, for years. And, since the JV’s priorities differ (by necessity) somewhat from those of the parent organization, even the successful achievement of those objectives by secondees may not be viewed as credible or be given the same merit by those in the parent organization.

Step 3 Execute

The Draft Specification developed the Military Command & Control Metaphor to replace the Governance of the hierarchy with a usable model within the Joint Operating Committee. A governance model that worked similar in fashion to that which the NATO forces use. One that has the various countries military forces used to deploy troops from various countries in many different theatres of war and other technically difficult operations. Looked at from both the micro and macro level, the oil and gas producer can attain the ability to deploy and redeploy resources as required across the various JOC’s they participate in. The ability to have the partnerships pool their resources, and these resources have a deemed chain of command that is recognized on an industry wide basis, with a defined roles and responsibilities that are agreed to, can provide a strong governance model to the issues that McKinsey ably addresses in the industry.

In addition to meeting these technical deliverables, team members must also

  • effectively scale the organization quickly 
  • establish a culture of self performance, and 
  • continuously adapt and evolve.

These are very different types of work, requiring a loose – tight governance model which provides the JV and project team with sufficient flexibility to grow while at the same time maintaining a rigid link to the parent companies’ governance and control mechanisms.
As the project team moves into execution, it must define a model for itself that allows it to be independent while continuing to deliver on parent companies’ needs. During execution, the leadership team also needs to think proactively about how to implement its newly constructed culture, processes and systems. Frequently complicated by a fragmented and globally disperse geographic footprint, the introduction of multiple new contractors and sub-contractors, and the fast pace at which the project evolves, it is easy to let the execution of these systems slip and to allow their effectiveness to wane. The JV leadership must establish a disciplined steering committee with direct accountability to the CEO to oversee successful implementation.

Step 4 Renew

I know I share with most people that have worked in oil and gas a feeling of frustration at the value that is occasionally lost in various Joint Operating Committees after phase changes or other transitions where people, teams, systems and procedures that were build up are left behind, dropped, shredded or forgotten. Very wasteful in the big scheme of things. Or how about the other situation that creates waste. That being the work done to manage the Joint Operating Committee, that was put together and was built as a one off installation of software and systems. Much of this work was done in recreating the wheel and as such it was “rebuilt” in order to address the unique characteristics of the property. McKinsey notes.
Perhaps the most overlooked success factor in constructing a successful project JV is to create clear opportunities for renewal. This renewal is both personal, for the individuals in the project team, as well as technical, for the systems and processes that we mentioned previously. While any project professional will readily acknowledge the dynamic and evolutionary nature of a project as it moves through its lifecycle, many frequently fail to recognize that people and systems need to evolve correspondingly. World class project JVs, on the other hand, establish clear breakpoints and formal evaluation steps, during which the leadership team evaluates the effectiveness of its people, tools and processes, and takes steps to inject fresh energy, capabilities and structure into the team where needed.
The purpose of People, Ideas & Objects is to provide a third party software development capability based on the Draft Specification. Using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. This provides a means for all producers to mitigate these losses of value. One in which the use of a third party software vendor providing the software to run the JOC is available to all the producers of the venture. Where the software vendor is independent of each producer. Where what is learned and developed is able to be used in the future, in not just the JOC but potentially elsewhere. And what is learned elsewhere could potentially benefit the JOC.

Compliance as a potential fifth step.

Lastly I want to comment about compliance which is not directly addressed in this McKinsey article, it is a related topic that falls in with the discussion of governance. And when we are talking about compliance we are talking about the compliance of the Joint Operating Committee and its operations in whatever jurisdictions that it may be operating within. This therefore also involves the partners compliance for these operations as well.

People, Ideas & Objects as software developers could assure thousands of producers who might provide us with the financial resources to develop a software development capability that is focused on maintaining the compliance of thousands of producers with the thousands of regulatory bodies those producers have, or may have, operations in. What plans do each of these individual producers have to ensure their operations will be in compliance with these jurisdictions where the compliance requirements continue to expand? The movement of the compliance framework to the Joint Operating Committee should be seen as an opportunity to address the automation of compliance and an opportunity to integrate compliance within the other frameworks of the JOC.

To what extent can this type of automation be implemented is the question that needs to be answered. With each piece of legislation that is contemplated these days, potentially totalling several thousand pages, where the ability for people to manually keep up with the demands of the regulatory process of governments and regulators being potentially past, full automation of the compliance framework is a necessity, in my opinion.

McKinsey note toward the end of the document these possibilities exist, if only.

While JVs and projects are both uniquely challenging to execute well, there are similarities that enable world-class project managers to effectively build world-class JVs, and vice versa.

It is now time for producers to act. Review of our Revenue Model will inform producers how they can participate in the development of People, Ideas & Objects Preliminary Specification. Producers can contact me here for further information, or to begin the process of their participation.

Wednesday, January 05, 2011

Solution Providers, not Change Agents

In our post yesterday we noted that change was what ultimately generated our revenues, and that is the case. However, that does not mean that People, Ideas & Objects are the change agent in the energy industry. Nothing could be further from the role that we will be assuming. For People, Ideas & Objects to be successful, we need to be the solution provider for the changes that industry implements. There is not enough energy in the universe for a third party to exercise change within the oil and gas industry and we will not be the ones to fall within the belief that we could exercise that change.

It is now time for producers to act. Review of our Revenue Model will inform producers how they can participate in the development of People, Ideas & Objects Preliminary Specification. Producers can contact me here for further information, or to begin the process of their participation.

Tuesday, November 23, 2010

McKinsey, Global Forces Shaping Business and Society

Once again McKinsey have impressed with a thorough summary of the situation in the global economy. This video presentation is very high level and only touches on individual points. However provides an overall summary and captures a spirit of the global economy and its future direction. To me these McKinsey partners are discussing the future economy and the ways and means of how and what of how people will earn there way in the world.

A fascinating and well presented discussion I highly recommend bookmarking the video.


Thursday, September 09, 2010

What is Structuration?

The Preliminary Research Report reviewed a variety of papers that fall under the topic of Structuration. What is this and why is it important to People, Ideas & Objects and the innovative oil and gas producer. Here are excerpts from the review and how they affect this project.

Professor Anthony Giddens initially published “The Constitution of Society: Outline of the Theory of Structure”, Berkeley, University of California Press and his theory is well articulated through the following excerpt from “Using the Structurational Model of Technology to Analyze an ERP Implementation” by Olga Volkoff, of the Richard Ivey School of Business.

From the perspective of structuration theory, adaptation is the joint effect of the actions of individuals and the institutional structures within which those actions take place. Structures such as business strategies, organizational culture, reward and control systems, patterns of communication, and professional norms both enable and constrain the daily activities of people, but do not wholly determine them. At the same time, while individuals can choose to act in ways that will either reinforce or alter those structures, their choices are not independent of the structures within which they take action. This “duality of structure” - the recursive (re)production of institutional structures through the ongoing daily social practices of individuals - allows change to emerge in ways that are not wholly predictable. 
I think within this quotation we see the reasoning why the oil and gas producers have such difficulty in meeting the demands of innovation. The Joint Operating Committee holds the “actions of individuals, and the institutional structures” that are not recognized by the ERP systems that are available in the marketplace. Therefore you have two disparate organizations, the JOC and the bureaucracy, operating in two different structures, creating conflict and contradicting one another.

Giddens’ theory of structuration is further define by Professor Wanda Orlikowski’s 1992 comments: “the duality of structure refers to the structure of social systems: human actions create a social systems institutional properties and these properties then serve to shape future human actions.” The notion of structuration has three aspects.

  • It refers to a social process that involves the reciprocal interaction of humans with the structural features of an organization. 
  • Human actions are enabled and constrained by structures, yet these same structures are the result of previous actions.
  • Structural properties mediate human action and, at the same time, are reaffirmed through human use. In other words, institutional properties are both the medium and the outcome of interaction.

The Preliminary Research report looked at structuration from the perspective of how the current oil and gas organizational structure is defined through the social, legal and environmental influences that provide that structure, and of how the organization in turn provides structure to the social and human elements. People, Ideas & Objects are focused on building ERP systems that identify and support these organizations.

The JOC has explicit legal, ownership, financial and procedural authority and control of the field operations as the standard of operations and conduct in oil and gas, on an international basis. Financial investment in an oil and gas property qualifies for participation on the committee where the operational control is agreed to and implemented. This research asserted that this operational control has significant implications on the internal operations of the participating organization. The facility design, capital budget, legal agreements and the decision making processes are constrained, Giddens’ theory would suggest, by a variety of forms and structures that comprise the basis of operations for the entire industry.

As Thomas Davenport noted in his paper “The Strategy and Structure of Firms in the Attention Economy” 2002,
Strategy and structure are mental constructs, important not in themselves, but for their impact on the people in the organization. Strategy and structure are also the vehicles for focusing attention. 
Clearly stating that by moving the compliance and governance frameworks of the bureaucracy to be in alignment with the legal, financial, operational decision making, cultural and communication frameworks of the JOC. This realignment will eliminate the conflict and contradictions that occur between the two organizational constructs. This realignment will also increase the attention and focus of the individuals involved within the producer firm and the JOC, and by moving compliance to be in alignment with the operational decision making authority, accountability is enhanced. Lastly, as we will document as this review progresses, innovation is enabled.

Another key component of Giddens theory is that there is an inherent risk of failure if the progress of one element is out of step with the other two. Society, organizations and people need to move in lock step to avoid failure. This has been explicitly interpreted for the purpose of this research that the progress of society and people is either inhibited or facilitated through the actions that form the organizations. Currently individuals and society are dictating larger volumes of energy be sourced and provided by the market. If the bureaucracies that exist today, are unable to meet these demands then we will most certainly see failure.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Wednesday, September 01, 2010

Military Command & Control Metaphor - Innovative?

Last week in research question # 1 we asked if the hierarchy’s value had expired. Suggesting that elimination of the hierarchy would require an alternative governance framework to replace the tried and true hierarchy. Recall that the alternative framework we developed in the Draft Specification is what we call the Military Command & Control Metaphor (MCCM). It might seem a contradiction to suggest that the military chain of command enables innovation at the producer level. The military is known for its strict adherence to command and control, how is this going to assist the innovative producer? And isn’t the use of the MCCM going to cause the Joint Operating Committee to be less responsive as a result?

First is the fact that the strict level of adherence is a reflection of the command and control that is implemented. We are attempting to impose an organizational structure on to the various members of the producer firms that have been seconded to the specific Joint Operating Committee. These resources are being sourced from a multitude of organizations, they also continue to have responsibilities to the individual producer that they represent. Therefore imposing this structure allows them to interact, respecting the equivalent military chain of command used, in a manner that is expected of them in both the JOC and at the producer firm that employs them.

Second is the innovative footing that we are striving to provide to both the producer and the JOC. This innovative footing seems counter to the military command and control expectations. Victor Davis Hanson is a well known military historian. In this video at around the 33:00 minute mark, he makes the interesting comment noted just below the video.





I still can’t believe as a military historian that we came up with the idea that a flying fortress was going to go over daylight at about 200 miles an hour and supposedly at 30,000 feet knock out the strategic capability of Germany. And depend on a few 50 calibre machine guns to save this lumbering plane that had as few as nine crew members and they were going to be fighting against the finest fighter pilots in the world in ME-109’s and they think they can pull it off when the British had tried it and had already assumed that it was impossible. And we did that of course and we lost 25,000 Americans, six times more then in the Iraq war, on that flawed concept. But that's the nature of war, live and learn. And out of that we learned what. You could stack formations to increase fire power. You could create drop tanks and have Thunderbolts and Mustangs escort them. You could use radio signals, you could use chafe. And by that trial and error counter response, response, counter response by 1945 the B-17’s were taking a lethal toll on German society and industry. And that is what usually happens in war.
And at 1:01 minutes, based on his experiences Professor Hanson states;
There is more free speech in the military then there is in a university campus.
In this example I see two characteristics at play. The first is the ability of the higher command to maintain the focus on a difficult and costly job for the long term. Secondly, the ability to innovate in the use of the resources to achieve the long term goal, success in its mission. Compare this, or any other military operation, against the capabilities of the hierarchy and I think we can see the use of the Military Command & Control Metaphor will enhance the JOC’s and producers that use, prospectively, People, Ideas & Objects software applications.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Monday, August 30, 2010

Some Advantages of the JOC

Last week we began a comprehensive review of People, Ideas & Objects research and systems development. This review is focused around using the Joint Operating Committee (JOC) as the key organizational construct of the innovative oil and gas producer. It also appears, based on this blog’s analytics, that many of our readers may have been on vacation. I think this review provides substantial value to all our readers, and particularly for those that may have joined us in the past few years. To aggregate the posts that make up this review, please select the Review label on this blog. Last week we were able to summarize the four research questions that were answered in the Preliminary Research Report. Today’s post deals with the advantages of using the JOC.

The JOC is very much involved in the day to day activities of an oil and gas producer. What is surprising is that the ERP systems that are in use in oil and gas do not recognize the JOC. Not until such time as we develop the Draft Specification will we have the systems that align to the legal, financial, operational decision making, cultural and communication frameworks. All of the current ERP systems have been developed during the pre-Internet era. None of these vendors have approached the oil and gas industry from the point of view of the partnerships represented in the JOC, they only recognize the hierarchy of the individual producer. This prompted our assertion that SAP is the bureaucracy. The Preliminary Research Report noted the advantages of using the JOC are as follows.


  • All participants are motivated equally. Financial opportunity drives consensus.


Attaining a consensus when everyone is motivated on the basis of financial incentives is the optimal situation. It is for this reason alone that the JOC provides such strong support for building the systems defined in the Draft Specification. Developing the systems to recognize the decision rights within the JOC will enable the decisions to be made more efficiently and effectively.

Subsequent to the publication of the Draft Specification, and around the time that the iPad was introduced. People, Ideas & Objects asserted that we could use the iPad or other device to have the JOC representatives video conference the meetings. Each representative being in attendance irrespective of when and where they may be. With the software development capability which is a fundamental element of the People, Ideas & Objects offering, these meetings would be supported with automated software that implements the processes and procedures that are decided on by the committee. When the decision was made to re-enter a well to complete another zone, the AFE’s would then be automatically issued and become effective within the system. Fast, high quality decision-making with full implementation of the necessary processes will be the result of producers funding People, Ideas & Objects software developments and Community of Independent Service Providers.


  • The JOC is the legal, financial, operational decision making, cultural and communication foundation of the oil and gas industry. All the internal processes tacitly support this fact.


Moving the compliance and governance frameworks from the hierarchy to be in line with the JOC puts all the frameworks of both the producer and the committee into alignment. As decisions are made by the JOC they are implemented in accordance with the strategy, compliance and governance needs of each individual producer. Each producer employs their own strategy based on the unique makeup of their assets. Just because the producer voted for the recompletion of the other zone, does not impute any element of their corporate strategy or financial metrics to any of the other participating producers.


  • The participants in the JOC hold significant technical and managerial capabilities.


The people that represent the producer firm in the JOC are usually of broad business experience and educational background. Usually sourced from the earth science and engineering disciplines, their focus is developing the oil and gas assets held within the JOC. In many of the smaller producers it is frequently the president that represents the producer. Building the software that identifies and supports these key individuals is the beginning of making the producer more innovative.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

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Monday, August 23, 2010

The Joint Operating Committee is Critical

Starting with today’s post we will begin a process of reviewing the data, information and ideas that makes up People, Ideas & Objects and the Draft Specification. This will provide readers with a thorough understanding of the elements that make up this project. These posts can be aggregated by selecting the Review label.

People, Ideas & Objects began with the Preliminary Research Report’s hypothesis asking “if the Joint Operating Committee (JOC), modified with today’s information technologies, provides an oil and gas concern with the opportunity for advanced innovativeness.” The critical breakthrough in the research’s conclusion is the “industry standard JOC is the “natural” form of organization for oil and gas where the participants of the committee are supported and augmented through the diversity and availability of the remaining organizations team members. A greater alignment to this conceptual model would facilitate the desired innovation.”

So if this is how the industry operates why does it need People, Ideas & Objects Draft Specification, its software development capability and associated user communities? The difficulty is that today’s ERP systems do not recognize the existence of the Joint Operating Committee. This stands in contrast to the fact that the JOC is the legal, financial, cultural, communication and operational decision making framework of the industry. Every internal and external process of a producer tacitly recognizes these frameworks. However, the organizational focus has become centered on the compliance and governance frameworks of the royalty, tax and SEC requirements of the producer firm. What the Preliminary Research Report determined, and the Draft Specification implements, is the movement of the compliance and governance frameworks into alignment with the five frameworks of the JOC.

For the industry to successfully provide for the consumers energy demands, it’s necessary to build the systems that identify and support the Joint Operating Committee. Building the Preliminary Specification is the focus of People, Ideas & Objects. Producers are encouraged to contact me in order to support our Revenue Model and begin their participation in these communities. Those individuals that are interested in joining People, Ideas & Objects can join me here and begin building the software necessary for the successful and innovative oil and gas industry.

Monday, August 09, 2010

S + B's Big Oil's Big Shift

We have today a remarkable article from Booz & Co’s “Strategy + Business” (S + B). Prospective users of People, Ideas & Objects software applications and members of the Community of Independent Service Providers need to see that the work that they can do at People, Ideas & Object is topical, and hence valuable. This S + B article entitled “Big Oil’s Big Shift” provides an understanding of some of the issues in oil and gas. Many of the points in the article are specifically addressed in the Draft Specification. Although S + B considers the majority of these issues arise as a result of the BP Gulf of Mexico spill, to many, these issues were evident irrespective of the spill.

The targeted market for the People, Ideas & Objects software applications is the entire oil and gas industry. This definition includes start up oil and gas companies, independents, International Oil Companies (IOC’s) and National Oil Companies (NOC’s). All of these firms use the Joint Operating Committee (JOC) systemically throughout their organizations.

Risk has always been inherent in the extraordinarily complex projects that extract oil from the ground or sea. During the past few years, industry trends have added to this risk. The most accessible and productive oil fields, including those in the Middle East and Russia, are now owned and operated solely by national oil companies (NOCs). Leading international oil companies (IOCs) such as BP, ExxonMobil, and Shell — also known as the oil majors — therefore find their access to “easy” reserves rapidly shrinking.
For the reasons noted in the above quotation, People, Ideas & Objects believes the four classes of producers will partner to approach the remaining technically difficult and demanding reserves. Therefore it is imperative that these JOC’s and partnerships are able to deal with any combination of producer classes, in as many geographical areas as necessary. Access to an ERP system that can identify and support these different producers business operations is therefore a necessity.

Supporting the interactions between producers within a JOC is only the beginning. The ability to work closely with the service industries is also a necessity. The Draft Specifications Resource Marketplace module provides the ability for the producers represented in the JOC to deal more closely with service providers in the service industries, communities and contractors. The Draft Specification also provides a new governance model to facilitate these interactions through the Military Command & Control Metaphor. S + B states:
But the oil majors will have to manage their contractors differently, working more closely in teams with business partners that earn their trust over a long period of time, and in some cases taking stakes in third-party providers to better control their performance. This partnership model must be built on interdependence and mutual respect — a significant change from long- standing practices in some parts of the sector. The oil majors will also need to revise their operating models, sorting out a different mix of activities to outsource, and bringing some of the most critical oversight functions back in-house — so they can address quality issues and place employees on the front line to better oversee the growing situational risk in oil drilling.
To make this possible requires management to fall on their sword. As I have noted in each of this blogs recent closings, management are conflicted, and the executives at the producer firms need to make the decisions to financially support these developments.
Perhaps the biggest uncertainty in this new and challenging business environment is the ability of the major oil companies to change as conditions shift measurably. Most large oil companies — including both international oil majors and state-owned NOCs — have rigid management cultures and adversarial, penny- pinching relationships with suppliers and partners. Historically, they have tended to focus on short-term cost cutting without sufficient consideration for collaborative operations that could benefit themselves and their partners.
Lastly, S + B notes that the time for these changes to become effective is now. Prospective users and members of the Community of Independent Service Providers will be the ones at the forefront of these changes.
Many people in the oil industry have foreseen these types of changes, but they haven’t been forced to act. Now they will be. Those who figure out how to move beyond their past practices, troubled contractor relationships, and rigid management structures will lead the next generation in the oil sector — on land, in shallow waters, and in deep and remote locations. The time for these changes could come surprisingly soon. 
Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As economic development has proven, reorganization would achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Tuesday, July 13, 2010

The Marketplace Metaphor

The Draft Specification includes three modules that employ what we call the Marketplace Metaphor. The Petroleum Lease Marketplace, Resource Marketplace and the Financial Marketplace Modules. Each of these modules create an environment that is similar in many respects to a marketplace in the “real” world. A virtual representation, and means for people to interact in marketplaces. Definitions of a marketplace include;

market: the world of commercial activity where goods and services are bought and sold; "without competition there would be no market";
The Petroleum Lease Marketplace (PLM) is a virtual market where partners can interact with each other to post and bid on petroleum leases, negotiate and execute agreements, buy and sell properties to name just a few of the many activities that can be carried out in the PLM. The PLM is designed to facilitate and support these transactions and activities, and capture the data and information necessary to manage the assets for the producers involved. 


The PLM is in many ways the beginning or initiation of the JOC. Since the JOC is the communication framework of the industry, many of the partners communications will be held within the Petroleum Lease Marketplace module. Mail ballots, AFE’s and agreements are initiated by the user while using the PLM module. 

The Resource Marketplace module creates a virtual representation of vendors, suppliers and the people who work within the oil and gas and service industries. Working closely with the Knowledge & Learning and Research & Capabilities modules, the Resource Marketplace provides the producer or JOC with the ability to interact within the Resource Marketplace to engage with vendors for the products and services that producers and JOC’s need. These interactions will include the capacity to contract, seek bids, billing, accounts payable and e-commerce capabilities. 

Recall in a recent post we documented how the Draft Specification facilitated a greater level of specialization and division of labor. These two economic theories being the source of all economic growth. That post documents that the process of “gap-filling” is how the division of labor is expanded. This “gap-filling” is part of the Resource Marketplace where producers and suppliers find one another in an effort to expand the output of the industry. 

Finally the Financial Marketplace module provides a virtual representation of the financial marketplace. Using the perspective of the Joint Operating Committee presents a different view of the oil and gas assets. Traditionally each producer has maintained their own financing of their oil and gas assets. What the Financial Marketplace module does is change the perspective, of how oil and gas assets are financed, from the producer firm to the Joint Operating Committee.

Each of these marketplace modules employ the People, Ideas & Objects user vision. The point of this post is to reinforce the use of the marketplace metaphor in the development of these systems. When we adopt the Joint Operating Committee as the key organizational construct of the innovative producer, we gain the ability to create this kind of software and methods of interaction within real and virtual marketplaces. 

Society is put in peril when world oil production declines. There is evidence that the world's oil production has declined. Therefore the world needs to have the energy industry expand its production. To do so requires that we reorganize to enhance the division of labor and specialization within the industry. As has been proven, this reorganization could achieve far greater oil and gas production. Management of the industry is conflicted in expanding the output of the industry. The less they do, the higher the oil and gas prices and the better they appear to perform. This managerial conflict must be addressed and the performance of the industry unleashed. To do so requires the current management of the industry to fund People, Ideas & Objects and build the systems as defined in the Draft Specification. Please join me here.

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Thursday, May 20, 2010

Langlois, Economic Institutions Part IV

This will be our last post on Professor Richard Langlois July 2009 paper "Economic Institutions and the Boundaries of the Firm: The Case of Business Groups." Langlois analysis of Business Groups (BG) follows on our review of his work on Industrial Districts (ID's), Professor Carlota Perez' Small Knowledge Intensive Enterprises (SKIE) and People, Ideas & Objects Community of Independent Service Providers (CISP). What ever we may call these "institutions", they all seek to build the "market-supporting" infrastructure of an industry. Although there is a strong service sector supporting the oil and gas industry, it does not have the market-supporting institutions necessary for it to qualify as a BG, SKIE, ID or CISP. What is needed, critically, is an ERP styled software development capability that supports these communities. A capability that supports the innovation that is occurring in these communities. Langlois helps to further define the decentralized nature of the concept that I am referring to: (For the remainder of this post I will use communities to describe ID, SKIE, BG or CISP.)
So far I have talked generally about vertical integration and disintegration, not specifically about business groups. And I have yet to engage the third level of contingent facts, political institutions. I now propose to argue that business groups and political institutions are closely related; indeed, in some of their forms, they are the same thing.
Scholars generally distinguish business groups from more loosely arranged structures like business networks. “When ownership and control are more centralized and organizational subunits enjoy limited autonomy, the commonly used term is business groups. When subunits enjoy more autonomy with respect to ownership, control, and operations, interfirm network is the correct term. In other words, business groups are more centralized and closely held, while interfirm networks are more decentralized and loosely held” (Fruin 2008). Indeed, in some eyes, the “groupness” of a business group is orthogonal to its structure of corporate governance. Mark Granovetter (1995, p. 95) considers business groups to be “collections of firms bound together in some formal and/or informal ways, characterized by an ‘intermediate’ level of binding.” Purely anonymous market relations don't qualify in Granovetters definition; but neither do American-style conglomerates, whose wholly owned divisions have little connection with one another and are but modular pieces on the financial chessboard. But a variety of governance structures, from hierarchical and structured chaebols on the one hand to Marshallian industrial districts (Marshall 1920, IV.x.3) on the other, would qualify as business groups in Granovetter’s sense. p. 21
Therefore, providing a governance model is a necessity for these communities. The Draft Specification implements the Military Command & Control Metaphor (MCCM) to provide a governance structure. Originally conceived to provide a pooling of the resources of each producer within a Joint Operating Committee, the definition was expanded to include the necessary technical resources that can be sourced from the communities as reflected in the Resource Marketplace Module. This enables a JOC to cobble together the necessary people to implement their plans. Each of these people are able to quickly determine theirs and others qualifications in terms of their experience, training and skills. Once assigned their role in completing the tasks, they can also see how others are able to interact within the process. Gaps will begin to show. And the innovative solutions necessary to fill those gaps will begin. Without a global industry wide governance model as contemplated in the Draft Specification, innovation will remain the domain of the bureaucracy.
Explaining the existence of business groups in Granovetter’s sense is arguably easier than explaining the mantle of ownership and governance those groups take on. “Intermediate” linkages are essential to the process of gap-filling. Links among entrepreneurs, whether formal or informal, permit the sharing of information about gaps and encourage the coordination of necessary complements (Kock and Guillén 2001). p. 22
As a result of implementing this governance structure, there is an increased potential of innovation within the community! I am making the connection that the market-supporting institutions the oil and gas industry needs are the MCCM and the Draft Specification.
There may yet be another explanation. Even in developed open-access societies, pyramidal business groups may exist because they play a gap-filling role. In this case, the issue is not vertical integration but governance. In developed economies – which increasingly means one integrated global economy – markets are relatively thick and market-supporting institutions relatively abundant, making it possible to coordinate complementary activities in a decentralized way. But there are still gaps: new products, new processes, new ways of organizing, new profit opportunities to seize. p. 27
The gap's that need to be filled become more obvious as a result of implementing the MCCM governance structure over the community. As gaps are filled, more gaps become noticeable. The capacity to change is highly dependent on the software that these communities will use. If that software is static, then their will be only one iteration of gap filing. What the industry needs to do is to iterate on the earth sciences and engineering disciplines, and innovations based on those sciences.
But even in “developed” economies, novelty and change creates the sorts of gaps that call for business groups, including less-formal sets of “intermediate” relationships, as, for example, in geographic (or, increasingly, “virtual”) industrial districts. In this sense, the economics of organization generally can learn from the literature on business groups outside the developed world. The problem of gap-filling in highly developed economies differs from that in less-developed economies because the path ahead is cloudier, which suggests that more-decentralized organizational structures may be more successful at the cutting-edge of technology. p. 29
In today's energy marketplace we see many examples of how the industry is failing. I believe the expectation that today's oil and gas company can transform themselves into these communities is unreasonable. An expectation that will lead to disappointment. With the debt crisis about to play out across the global economy, I expect those producers that are carrying even reasonable amounts of debt to be severely constrained in the short to mid-term. This during a time when the industry needs to be as innovative as it can just to keep its costs under control. Whether the industry as it stands today will look the same in ten years isn't the point. The point is that we need to enable these types of capabilities within the industry irrespective of the oil and gas companies actions. The industry will need to be built brick-by-brick and stick-by-stick to enable these types of attributes to become the norm. The bureaucracies have chosen not to participate. It's now up to these communities to begin this process by starting with People, Ideas & Objects.

Our appeal should be based on these eight "Focused on" priorities and values of how better the oil and gas industry and its operations could be handled. They may not initially be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are. If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Thursday, March 18, 2010

McKinsey Behavioral Strategy

McKinsey have published an interesting document that analyzes the ways and means that organizations make decisions. This is particularly relevant to the work at People, Ideas & Objects as we are first of all, asking the investment community to fund these developments, and secondly setting up how users will be able to build the systems that they want. Both requiring what McKinsey calls "bet the company" type of decisions.

The larger point that the document asks and suggests, is what are the best ways for companies to make decisions? Noting a series of biases that are part of behavioral psychology, McKinsey documents that process is the most important element in making decisions. No news here as People, Ideas & Objects is user based developments where the users, using only the Draft Specification, determine their best ways to proceed. The only other constraint that is placed upon the user community, and particularly the Community of Independent Service Providers, is that they fulfill the objective of provide the innovative producer with the most profitable means of oil and gas operations.

I would highly recommend to the user communities they read the McKinsey document. This is the type of value that can be added to People, Ideas & Objects, and hence the greater oil and gas community through user research into the best ways and means of proceeding with this important and quite exciting task.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 30 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Thursday, March 11, 2010

Three weeks left...

That is we have three weeks left in our 2010 budget drive. We still have no commitments, funding or support of any kind. It was an objective of this funding drive to provide evidence to the directors, shareholders and investors of oil and gas that the management are too conflicted to support these developments. Again, the evidence is in. Management have done everything in their power to ensure these development don't happen.

Our appeal to the shareholders and investors is to bring about a competitive means of organizing the oil and gas industry. Just as Bear Stearns and Lehman Brother's managements didn't provide an alternative for their shareholders, I hope to appeal to the shareholders in oil and gas firms.

I believe there is a far bigger issue at play in the oil and gas industry in comparison to the banking industry. No one is missing either Bear Stearns or Lehman. Other then the shareholders that is. In oil and gas the economy is the direct benefactor of the energy the industry produces. We have documented here many times the calculation of 18,000 man hours of effort that is offset by each barrel of oil. By not having those barrels freely available to the consumer denies the full potential of our market economies.

This isn't the role or responsibility of the management of the oil and gas firms. At least that is what they suggest is the case in their version of the market economy. Who's responsibility is it to ensure that markets are well supplied? If the oil and gas producer's are not responsible, who is? At some point the issue of a lack of supply will require an answer. What will the oil and gas industry say at that point?

Last Tuesday I wrote about the use of some of the new mobile devices in making and implementing decisions at the Joint Operating Committee level. I also indicated that Exxon could not provide the marketplace with that type of software offering. If Exxon or any single producer were to provide a software solution like People, Ideas & Objects, it would cede too much information to Exxon or the producer. There are two other points to consider. One is the ability to have all the producers on the same technical capability, and the need to have one software supplier.

The ability to have all the producers representing the JOC using the same software denotes some of the value of using the Cloud Computing model. Accessing the most current version of the software and knowing that everyone else is using the same tools facilitates and enables collaboration and communication. When the application's are also transaction aware and able to manage the business based on the decisions of the JOC, then it can truly begin to optimize the science and engineering innovations.

The second point is how the industry is run today. Multiple vendors each providing one slice of the functionality to some of the producers to the JOC. Others are using other systems that are provided by other vendors who have different technologies and perspectives. Having the virtual meeting that I mentioned, with all of the potential described in Tuesday's blog post, will have to come with 15 IT personnel supporting the interactions and protocols. Good luck.

The need for one software development capability should be clear to readers of this blog. I have used the Intellectual Property developed in my research and this blog to concentrate these software developments to mitigate the issues in the energy industry. The use of Cloud Computing and the potential ease-of-use between producer firms requires one ERP solution provider.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 26 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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Monday, March 01, 2010

Two Down, One To Go

Two months have now passed in our first quarter 2010 budget drive. The month of March is here and our deadline of the 31st is only weeks away. To date I have received no expression of interest, inquiry, commitment or cash. I get the sense that everyone is waiting for someone else to initiate the process.

The probability of a funding failure occurring March 31, 2010 is very real. As I have indicated, every attempt will be made to keep the project moving forward, however, without financial support this may become extremely difficult and in my opinion, unnecessary. What will be the cost of any funding failure? The users deserve the financial support of the industry.

The methods used to fund software development in the past have failed. Methods that have been successful for the SAP's and other large vendors. If software for oil and gas was a lucrative business. Where producers were presented with new and innovative software products, there would be no demand for this blog's research. Raising capital to fund software development in oil and gas ceased decades ago. There is a problem with the expectation that venture capitalists will fund the innovative software developer. The problem is the funding doesn't exist, particularly if the software developer doesn't have industry support of any bottom-up initiative.

The venture capital and bank funding avenues are closed. With the structure of this development, of providing a software development capability, with the source code being available for review, there are no assets in which to pledge to the capital markets for funding. This is a licensing model of Intellectual Property for revenue generation. Where the licensing of the Intellectual Property to the industry is how the software development revenues are generated. To suggest that the investment or banking community will be involved at any time during this project is incorrect.

Recall that one of the objectives of this budget drive is to prove the bureaucracy will not fund People, Ideas & Objects. Our appeal is to the directors, shareholders and investors of the oil and gas producers. Our research shows the use of the Joint Operating Committee is the direction in which the industry should move toward. That this transition is supported by strong, top level academic research. What alternatives have the bureaucracies proposed to deal with the issues of the industry? Within the transition to the Joint Operating Committee, the ownership class have an opportunity to increase their governance over their assets. That is the basis of this budget appeal.

I have also argued the bureaucracies are currently the beneficiaries of 100% of the proceeds of oil and gas sales. At today's prices, annual global oil and gas revenues are $3.4 trillion. Why is it expected that venture capital would be needed for these software developments, or for that matter, any oil and gas innovation? The parsing of financial resources to "appropriate" providers establishes the oil and gas bureaucracies control and influence over every aspect of the industry. The problem should be clear, they have done nothing in the area of software. When bureaucracies control the competition to themselves (the software) it is not in their best interests to sponsor People, Ideas & Objects.

March 31, 2010 is the deadline for raising our 2010 operating budget. After which a variety of consequences, such as financial penalties and a loss of one years time will occur. Our appeal should be based on the 21 compelling reasons of how better the oil and gas industry and its operations could be handled. They may not be the right way to go, but we are committed to working with the various communities to discover and ensure the right ones are.

If your an enlightened producer, an oil and gas director, investor or shareholder, who would be interested in funding these software developments and communities, please follow our Funding Policies & Procedures, and our Hardware Policies & Procedures. If your a government that collects royalties from oil and gas producers, and are concerned about the accuracy of your royalty income, please review our Royalty Policies & Procedures and email me. And if your a potential user of this software, and possibly as a member of the Community of Independent Service Providers, please join us here.

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