OCI Partnership Accounting, Part IV

 The Work Order system as a tool for innovation

We are discussing the role that the Work Order system would have in clearing up the administrative minutiae of the accounting related issues of the Partnership Accounting module in the Preliminary Specification. I want to continue with that discussion and ask what it has to do with innovation? Let's look at the Work Order system from the perspective of a successful producer in the marketplace that has developed an earth science & engineering capability. The CEO is approached by one of their engineers who hears of several other producers who are conducting a study on something of interest to their firm. They are looking for other participants to join in and want the engineer that brought the news to join in the project. Assuming everyone of the producers is using the Work Order system they can pool the resources they have within the Work Order to manage the project. The firm committed to a 10% share of total costs and offset those costs with engineers' time, office space and computer resources. (Note all of these producers' costs are pre-approved and budgeted from other accounts.) With the Work Order producers could make these commitments subject to the other 90% being committed to.

We have here the means by which people working within the industry can commit to programs and projects in a manner that is natural to their business. This is the way systems should work today. What we have today is an impediment in the industry for producers who feel that participation in the study with other producers would be worthwhile. However, the accounting, approval and accountability nightmare will haunt them for the next three quarters. It will subject them to regulatory oversight that questions their moral integrity. So instead the project doesn’t get proposed, funded, participated in or done.

In Professor Dosi’s paper “The Sources, Procedures and Microeconomic Effects of Innovation” he discusses the role these administrative minutiae have on innovation.

The discussion will aim to identify (a) the main characteristics of the innovative process, (b) the factors that are conducive to or hinder the development of new processes of production and new products, and (c) the processes that determine the selection of particular innovations and their effects on industrial structures. p.1121.

There are financial resources available in our example. Motivation exists within the organization to do an outstanding job on the project. What happens is bureaucracy gets in the way and slows things down and makes it a task that requires superhuman effort to even try. And maybe one or two projects will get done each year out of sheer will. But what is needed is the ability to conduct a volume of projects far exceeding one or two, and that is beyond the scope of the organizational context as producers are organized today. Without ERP systems to define and support these innovative processes and ad hoc organizations, these processes will not spontaneously appear.

We discussed how one producer could participate in a study with other producers by setting up a Work Order to capture their involvement. Their contribution involved one engineer, office space and computer time. That they would contribute some cash is also a possibility as they signed on for 10% of the projected costs. I want to discuss the other producers' involvement and how the Work Order system, being a multi-organizational system, can capture the different ways in which each producer will participate and account for these differences within the People, Ideas & Objects Partnership Accounting module.

The emphasis remains on enhancing innovation among producers. Collaborations and interactions between producers and industry participants will lead to many innovations in the future. The impediment to doing these as a result of the bureaucracy and the current suite of accounting systems in use in the oil & gas industry is what I want to contrast in this scenario using the Work Order. It's time in this day and age that systems become as sophisticated and complex as what is described here. This is so that innovation in the earth science & engineering disciplines can occur. Professor Giovanni Dosi expands on this point further in the following quotation from “Sources, Procedures, and Microeconomic Effects of Innovation.”

Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.) p.1121.

The producers are interested in participating in the project. Some want to contribute a variety of different resources, some have specialized capabilities that are critical to the project and others are more or less along for the ride and are willing to participate by paying cash. Some have an AFE that has been approved that directs funds to pay for their participation. Some companies incur the costs as part of their annual engineering budget. Some companies have a working interest partner that is willing to share the costs over Joint Operating Committees. The combinations and permutations of how a Work Order gets financed and funded are unlimited when we consider the number of different ways producers can participate.

To begin, we must have a Work Order system that takes into account the information from these various parties and assimilates the understanding of the deal from the five or six people who met to initiate this project. Each must codify how their participation in the costs is funded and costed in their People, Ideas & Objects Partnership Accounting modules Work Order. All of the participants use one Work Order, or in this case an Accounting Voucher, that is shared across all of the producers. This agreement understanding must be captured within the Work Order system before approval by all producers. As with all Accounting Vouchers, the accounting details need to be coded, as well as the sources of funds. Within the Preliminary Specification we are moving away from traditional transaction recording. Automation is the focus and this can be completed through Designing Transactions accounting features. This way the system can process charges within the firm in an accurate and timely manner. For any charges that are above the threshold that a firm is willing to commit to, that implies that another firm's cash commitment would be provided to cover those costs. The Work Order should make these cash transactions or equalizations between these producers as a result of document approval. The point of the exercise is that once the Work Order is approved, the understanding of the deal, as captured by the interface, or the designed transaction, is executed.

As I indicated, an accountant's ability to follow on with the necessary accounting for these transactions requires significant recreation of the “deal” and the time of the parties who conceived of the deal in the first place. A bureaucratic waste of time. The Work Order interface should be sophisticated enough to capture the deal substance. I understand the myriad ways to do these and the difficulty in making an interface that captures them. That I don’t think is the difficult part. What I think would be the difficult part is designing an interface that provides these services intuitively. An interface that conveys the deal's substance. I, however, know it can be done. The reason it hasn’t been done is that the budget for software development like this has not been set out. It's at times like these that we should revisit our revenue model and rethink the People, Ideas & Objects approach. This is based on our projected budget.

We used the scenario in engineering, however it could just as easily be used in geology or any other area of oil & gas interest. Alternatively, it could include the supplier or vendor marketplace to form a working group. The importance of the Work Order is that the producer or participant can designate how they want to participate in the working group. As part of their approval process, they identify the source of the funds and where the costs will ultimately be allocated. This is according to their organization. Each participant or producer in the working group conducts this, all within the same interface for the same Work Order. 

One of the most obvious areas that this interface will interact with the other modules is the Security & Access Control module. Access to the Work Order will require a certain period to recruit participants. And then it will be closed to everyone but existing working group members. Only those who are within the working group, or are subsequently granted direct access can participate directly in the working group.

With the Security & Access Control module we also inherit Industrial Command & Control that allows people to impose a chain of command across the working group. This might be something they want to do if they have a difficult task or a large group of people. The opportunity to do so is available to them if they so desire as this will be part of the Security & Access Control modules core functionality.

The designation of the source of funds and where costs will be allocated is coded directly to those accounts. The Work Order incorporates Accounting Voucher elements into its operation. Each producer's accounting system will be charged, upon approval of the Work Order, according to how they coded the Work Order. As a result, it will inherit many Accounting Voucher module attributes.

I see these working groups, as we’ve called them here, as an essential element of how an innovative oil & gas industry identifies and solves its problems. Professor Dosi states “In very general terms, technological innovation involves or is the solution to problems.” Dosi defines this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and uncodified capabilities, or “tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.”

Therefore, how can oil & gas firms solve the technical and scientific problems of the future? How can a firm more effectively employ its capability to solve problems and encourage the discovery of other problems and the creation of their solutions? Clearly some companies are more effective at this process than others. However, this research in oil & gas asks, is there a means for an organization to increase its ability to innovate that leads to higher performance outcomes?

Having these working groups spawn at will without the bureaucratic, accountability and accounting logistical nightmare that they instill today will be a significant first step in making the industry more innovative.

The complexity of the relationships of these working groups must be captured and accounted for in the Partnership Accounting module of the Preliminary Specification. Whether we are talking about the various forms of contribution that a producer may make to the joint account, or how they may participate in a working group, the bureaucratic machinations of accounting for these transactions can’t stand in the way of producers' innovativeness.

Today, participation is hindered by the difficulty of capturing and accounting for these unique business arrangements. What is needed is the ability to develop software that captures the substance of the manner in which contributions are made. This is followed by the manner in which they are accounted for. That is the purpose of the Partnership Accounting module, to support the innovative oil & gas producer in their innovative actions. Professor Giovanni Dosi in "Sources, Procedures, and Microeconomic Effects of Innovation," points to the need for business aspects to support technical aspects of the business.

Internalization and routinization in the face of the uncertainty and complexity of the innovative process also point to the importance of particular organizational arrangements for the success or failure of individual innovative attempts. This is what was found by the SAPPHO Project (cf. Science Policy Research Unit 1972 and Rothwell et al. 1974), possibly the most extensive investigation of the sources of commercial success or failure of innovation: Institutional traits, both internal to the firm - such as the nature of the organizational arrangements between technical and commercial people, or the hierarchical authority within the innovating firm - and between a firm and its external environment - such as good communication channels with users, universities, and so on - turn out to be very important. Moreover, it has been argued (Pavitt 1986; Robert Wilson, Peter Ashton and Thomas Egan 1984) that, for given incentives and innovative opportunities, the various forms of internal corporate organization (U form versus M form centralized versus decentralized, etc.) affect innovation and commercial success positively or negatively, according to the particular nature of each technological paradigm and its stage of development. p. 1135.

Capturing the context of the deals made in both the Joint Operating Committee and working groups as described here in the Preliminary Specification can’t be done after the fact. What is needed is for the software to be sophisticated enough for the dealmakers to use while formulating the deal, to capture the substance of the deal, so that understanding will be used to allocate the costs and charge their accounting systems for these costs when they're incurred. The process we’ve defined is Designing Transactions within the Preliminary Specification. Then and only then will accountants have a chance of keeping up with the speed and innovation of the industry as it is contemplated here. Technical people will be free to pursue their science and not be hounded by those looking to recreate what was history and dealt with long ago. 

This is a necessary part of the People, Ideas & Objects software development team and most importantly, our user community. It won’t be too difficult to capture the multiple and myriad ways a deal can be formulated. The algorithm will be complex but with time and money it can be done. The real challenge in making this critical part of the Partnership Accounting module work is the user interface. Being able to intuitively use the module to capture the user's understanding. This is to document it in the People, Ideas & Objects system and account for it on that basis. That is what makes innovation possible.

We discussed previously how producers collaborated on a project to conduct research. The Work Order system of the People, Ideas & Objects Partnership Accounting module enabled the producers, who may not have been affiliated in any form or fashion until this working group’s formation, to be able to form and contribute to the project. The Work Order system captures the meeting of minds. This is because it captures the manner of each producer's contribution and method of payment at the time the project is formed. This will enable them to avoid the bureaucratic difficulties associated with participating in these types of working groups. Working groups are avoided today because accountants can make participation more difficult than they are worth. The reason we have to cut through the bureaucracy and promote working groups is that participation in these types of activities is critical to an innovative oil & gas industry. 

The accounting interface for the Work Order will have two elements. The first will account for the costs. This will list the costs of the working group and your interest based on your participation rate. The second element is where problems occur. Participation can be funded from a variety of sources and contributions. Some will have a key piece of research that is the foundation of the project. Some will contribute time and some cash. Combinations and permutations are unlimited. The one constant in these contributions is that they all have budgets. In the second element, you will identify the source of funding or contributions supporting your participation. It will need to be determined if that means cash will be transferred from your firm to others by simply clicking on a box in the interface. Once all of the producers have completed their interfaces the balancing of the Work Order will be attempted with any variances worked out to determine who will make up any shortfalls. Once all shortfalls are resolved, work can begin.

OCI Partnership Accounting, Part III

 The Work Order system as a means of budgetary control

We discussed how the Joint Operating Committee manages who’s available to work on the property. The ability to pool earth science & engineering resources from the partnership is asserted as a necessity in the future of the oil & gas industry. It should be stated here that our Industrial Command & Control would not be limited to just earth science & engineering disciplines. Instead, it would include everyone employed by producer firms. So this would help us deal with who, now we need a mechanism to deal with what they'll do.

The next part of the Partnership Accounting module deals with the operational side of how field work within the Joint Operating Committee gets completed. Partnerships have always had AFE’s and operations budgets to manage how much is spent annually at a facility etc. Those will be handled by People, Ideas & Objects. This discussion deals with how Industrial Command & Control can deploy resources and authorize budget spending in a manner that provides for the governance of the Joint Operating Committee. Basically, we are talking about the collaborative aspect of the Work Order System in Partnership Accounting and its interaction with other modules. (Compliance & Governance, Petroleum Lease Marketplace, Resource Marketplace, Accounting Voucher modules).

Deployment of the people within the Joint Operating Committee, with the budgets agreed upon, is not enough to satisfy any interpretation of appropriate governance. Proper authorization and responsibility are needed to ensure plans and budgets are executed successfully. Without a Work Order system within the People, Ideas & Objects application, property governance would not be possible. The ways and means of successfully controlling costs and deploying resources to complete the tasks at hand are what the Work Order system is designed to accomplish.

The Work Order system will be deployed in the following manner. If someone asks you to work on a project, your first question should be “what’s your Work Order number?" Then your time will be charged to that code. It doesn’t matter if you're an employee of the producer where the request came from, a partner in a Joint Operating Committee, a vendor or supplier. If they don’t have a Work Order number you're not generating service-based revenues or working for free. If they have a number, you key the Work Order number into your device or keyboard and continue. The Work Order system aggregates and bills your time spent working on that project. The details of the Work Order, chain of command, tasks and deliverables are all delivered within the Work Order system provided when you key in the number. Your role, based on your capabilities, is populated with those parts of that Work Order.

Note that one of the benefits of this system is that no unauthorized work gets done without a Work Order. Assigning budgets to a Work Order from an AFE, Lease 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 Joint Operating Committee chain of command. This would be pre-authorized and designated through Industrial Command & Control (involving multiple producers) or a producer firm. If a Work Order were to exceed its budget it is reasonable to assume that it’s exceeding its AFE or account budget(s if it's involving multiple producers), 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 from that module.

Let's be clear, what People, Ideas & Objects propose in the Preliminary Specifications Partnership Accounting module is nothing like any other joint venture accounting system. When we consider the Joint Operating Committee as the key organizational construct of a dynamic, innovative, accountable and profitable oil & gas producer. Aligning the producers' compliance and governance with the seven frameworks of the Joint Operating Committee, we create speed, innovation, accountability and performance over the base case. Creating a performance and innovation-based culture through our seven Organizational Constructs. Producers and industry are reorganized dynamically and innovatively. As well as being open to the possibility of enhancing their capacities and capabilities through the ubiquity of the People, Ideas & Objects Work Order. Where everyone, Joint Operating Committee, producer and service industry firm employed in the industry has an account to manage revenues, billing and time spent on projects. This is for the various producers, Joint Operating Committees and facilities.  

Some processes described in the Preliminary Specification involve multiple organizations, over multiple accounting periods. Whether that’s the development of capabilities which begins in the Research & Capabilities module. It touches on the Resource Marketplace and Financial Marketplace modules, and passes to the Knowledge & Learning module. Some of these processes carry transactions that are as complex and difficult to quantify as the process. Some will be for the joint account, some will be for the producer to incur on their own. As we learned in the Financial Marketplace module some transactions may be the result of an investment by an investment group.

Discussing the Work Order system that controls the costs associated with a project. The projects contained within a Work Order might be funded by multiple producers, AFE’s or budgeted accounts, and as a result producers will be able to control the costs of the project, monitor them and maintain governance through the Industrial Command & Control of People, Ideas & Objects system. Producers using the Work Order system will be able to charge the costs to the appropriate owners of the projects. This will be done at Work Order initialization. Since the Work Order is a multi-organizational system, members of a Joint Operating Committee or members of the field services industries can participate in a Work Order. This means they can pre-approve their participation in specific costs in the project. The accountant working within the Partnership Accounting module won't be running around trying to seek approval from partners to authorize individual expenditures on projects that weren’t planned or budgeted properly. If everyone within the industry works to chargeable Work Orders, and all Work Orders are approved by those who will be financially responsible for the charges, then the accountant's job in chasing their tail and aggravating people is over.

The point of the Work Order system is hopefully not lost on others in the industry. Some may feel that the Work Order duplicates the AFE attributes, and I would argue that they are fundamentally different. The AFE approves spending for field level and construction projects of a capital nature. The Work Order system is a means to deploy the producer's or Joint Operating Committee's capabilities in an authorized and ad-hoc manner. When we extend the Work Order system across multiple producers, Joint Operating Committees and suppliers, the ability to deploy the capabilities of multiple organizations will enable the innovation we seek in the oil & gas industry. The Work Order may take budget dollars from a number of AFE’s and assign them to a team of engineers that are asked to develop the process necessary to make their firm more capable. Two producers may contribute budget dollars to a Work Order for their Geologists. They will be able to attend a conference and conduct research on some promising developments as a result. The point being that no one works without a Work Order to charge their time for. No Work Order can collect charges without a budget pre-authorized and approved.

This will make the Partnership Accounting module workable from the point of view of controlling the costs of the multitude of different arrangements being made within the organization. If the accountants are tasked with putting together the costs and determining who is to be charged after the fact, this is how they become the annoying and bothersome people they can / have become and accountability is less onerous. By imposing the Work Order system in this fashion, within the Partnership Accounting module, the arrangements are pre-made and authorizations are required before charges can be incurred. Making accounting for capabilities deployment systematic instead of problematic, resolved before the fact and automated. This is not about accountants hounding people trying to understand why such and such was done.

OCI Partnership Accounting, Part II

 The Beginning of Automation and the Material Balance Report

The Material Balance Report is an Accounting Voucher that is unique and has the following characteristics. It automates producer firms' and Joint Operating Committees' production, revenue, royalties, marketing and other processes. It is this type of specialized use of an Accounting Voucher that our user community will consider applying to other situations when contributing to the Preliminary Specifications development.

What is proposed in the People, Ideas & Objects Material Balance Report is that for an Accounting Voucher to close it must balance the financial debits and credits. However, it must also, from a volumetric perspective, be material, system and partnership balanced. Each of these three volumetric perspectives is accessed through a different “mode” within the voucher. This is to make the necessary changes to correct any volumetric imbalances or errors in that specific perspective.

The Joint Operating Committee exists due to legal agreements and in oil men and women's minds. It therefore doesn’t “own” anything or incur costs. The joint account charges must clear in the month they are incurred. It is the same with volumetric information. The Joint Operating Committee "Accounting Voucher" balances to zero in terms of costs and volumes each month by clearing charges to the partnership and royalty owners of the property. Clearings are done after the balance is determined. That does not guarantee the facility will remain balanced. Adjustments and amendments during a production month will trigger changes to the Material Balance Report. These may happen and they can be balanced and cleared to partnership accounts in the same manner as before, which is automated. The exercise ensures that the Joint Operating Committee's business is captured in the Material Balance Report. This is an integral part of the Accounting Voucher. Essentially all three are the same thing, the Joint Operating Committee, Accounting Voucher, and Material Balance Report. An integrity of reporting that is embedded within the accounting systems that are as rigid as the overall accounting requirement of debits must equal credits.

We now want to discuss the contracts associated with that Joint Operating Committee. Gas, oil, and natural gas liquid marketing contracts, as well as gathering, processing contracts. I don’t know the correct term to use, but stream seems most intuitive. If a stream of product flows through a facility, then a contract for processing or sale would be attached to it. The ability to attach the contract to a stream would enable the Material Balance Report to establish the billing of gathering or processing charges / sales for that stream. These charges (invoices) or sales (receipts) are generated by People, Ideas & Objects software automation of the process. Amendments and adjustments would generate similar documents to the initial product flows, and on an automated basis. 

The Accounting Voucher is for lack of a better term a template that is built upon as time passes. Each month as the property changes, these changes are recorded within each Accounting Voucher. The template is renewed each month with the accumulation of the property's history and any changes in variables derived from other modules. For example, the Petroleum Lease Marketplace. If an additional contract is added for production from a newly discovered well, that contract stream and the newly discovered well would be represented in next month's Material Balance Report. The Accounting Voucher template documents property changes over time.

Critical to the “definition and design” of transactions is their balance. If the debits and credits were not in balance at the end of the day, the systems automation and the accountants would not be doing their jobs. Volumetric reporting would be the same issue. If in the Material Balance Reports, they were out of balance (call this material balance), or were not balancing the inputs and outputs to other Material Balance Reports (call this system balance), or the internal accounting of those volumes to the partners, royalty holders and others were out of balance (refer to this as partnership balance) the accountants and systems would not be doing their jobs. Closing a Material Balance Report requires more than balancing debits and credits financially. They will also need to ensure that the material, system and partnership volumes reported in the Material Balance Report are balanced. Without these systems in balance, the Accounting Voucher will not close or clear.

This imposes another rather strict condition on the quality of the information accepted into the People, Ideas & Objects Accounting Voucher module. Precluding the acceptance of a voucher due to the inability to balance a volumetric requirement holds the system up for common occurrences. What if volumetric information is unavailable? What if the information is part of the normal amendment process? Traditional accounting methods are left for these issues. An accrual of the volumes necessary to achieve the balance would be processed in the current month. Most production processes are amended for up to 90 days. These accruals would then be automatically reversed in the following month. What is different from existing systems is that we force them to be volumetrically balanced. Not just inputting key variables but imposing and enforcing the facts of what actually happened at the Joint Operating Committee. In the case of a Construction, Ownership and Operation (CO&O) agreement, what is to be accounted for before the Accounting Voucher is closed.

The difference may be subtle but the implications are significant. A system that locks volumetric balancing into the Accounting Voucher itself enforces compliance with volume production and processing. Obtaining a system balance where each Joint Operating Committee activity reconciles with all other facilities and Joint Operating Committees. In this way, an unquestionable level of integrity can be achieved. Detailed processes based on data and information captured in other modules can be fully automated based on those facts. Please see the Operations Management module in the Preliminary Specification for further expansion through the Internet of Things (IoT), SpaceX's Swarm network and other technologies that automate field data capture.

There are many aspects of this system's process management that are unique and necessary. The reason they have not been undertaken is that the broad scope and scale of the development undertaking is comprehensive and beyond what the technology could have provided even a decade ago. It is from a budgetary perspective beyond the scale of what one major producer could undertake as the value gained may not necessarily be there for the individual producer to incur the entire cost, and most certainly well beyond the speculative approach of an oil & gas ERP software development solution provider. People, Ideas & Objects seeks to aggregate North American producer ERP budgets to bring these software and services to the market. Turning the cost of oil & gas administration and accounting, which includes continuous ERP systems development, into the variable cost of Cloud Administration & Accounting for Oil & Gas software and services for North American producers. Those with a comprehensive understanding of these processes will fully appreciate the points I make and the implications involved. My understanding of these processes is comprehensive and I know it can be done correctly. That this undertaking may be the single largest feature of the Preliminary Specification. Therefore, development costs are shared and shareable across the North American producer population. Driven by our user community's vision. From the perspective of dealing with contractual arrangements and governing agreements determining the production allocation method. Or if the agreement refers to an adherence to chemical composition as the basis of production allocation, both of these methods will be available in the Material Balance Report of the Accounting Voucher in an either, or and mixed environment. 

An element of the Material Balance Report is the clearing of both financial and volumetric information for the appropriate working and royalty interests. It is here where we find two critical points of interest in the differences between the Preliminary Specification and the status quo accounting methods. People, Ideas & Objects, our user community and their service providers provide standard and objective accounting information across North America. The Material Balance Report is an appropriate example of this. It will be the service providers managing the processes involved in the production, revenue and royalty aspects of the producer firms and Joint Operating Committees. We noted that in the Accounting Voucher module itself the Accounting Voucher could be generated based on either the producer firm or the Joint Operating Committee. The Material Balance Report cleared monthly is a Joint Operating Committee Accounting Voucher. Where the processes are automated and cleared based on the property's ownership and royalty interests. 

The Work Order System

In oil & gas there are two methods to capture costs. The first is the AFE for capital, and the second is the Lease for revenue and operating expenses. Incidental costs may also be incurred in departmental or Joint Operating Committee overhead accounts. These have been the standard methods used throughout the industry for decades. They have served the industry well, particularly from the point of view of distributing costs and revenues to other working interest partners. People, Ideas & Objects are introducing an additional document to augment the AFE and Lease to improve cost control in the industry. It is what People, Ideas & Objects call a Work Order. It has two distinct roles and captures costs in ways not captured today. The overall objective is to enable innovation throughout the industry, the producer firms and Joint Operating Committees. And to do so on the basis of the distinct science and technology of oil & gas exploration and production.

The Work Order is an implementation of our Accounting Voucher. A feature that we introduced as a separate module in the Preliminary Specification and a reflection of the capabilities of the Accounting Vouchers template characteristic. The Work Order is designed to capture costs in producer firms, Joint Operating Committees or other organizational structures that may or may not have a defined structure in terms of a formal agreement supporting the project or Joint Operating Committee. In the Work Order, costs and revenues could be assigned and authorized as the document that outlines the necessary details for these ad hoc organizations. These are not generally material costs, but they involve other complicating factors. This is not a license to spend funds in unauthorized areas. It is a feature of the Preliminary Specification that enables innovativeness to expand by allowing informal collaborative research and development work, or Working Groups, to be conducted throughout the industry. This is on the basis of its sciences and applied sciences. A means to benefit those participating in the research and development project. 

Today these types of costs fall outside the scope of the authority and responsibility of the producers' management. The AFE and Lease currently constrain producers to existing agreements as methods to capture costs. These Working Groups costs are therefore accountability and accounting nightmares that have proven to be more onerous for those that have attempted to benefit from conducting this type of research and development or even ventured to suggest them. Accounting for them is usually manual in nature as necessary to capture the distinct understanding of each effort and reflect it appropriately from a business perspective. 

Examples of these costs may include a geologic study of the producer shale gas characteristics of the Permian vs those in Pennsylvania's Marcellus formations. A study may examine the effectiveness of fracing in multilateral sections of shale gas wells with respect to longitudinal versus latitudinal orientation. They are necessary to advance the industries underlying science and technology, costly for one producer to undertake and of potentially limited value to the one producer that undertakes them, and therefore mitigation of risk through participation is the appropriate strategy. If costs can be mitigated through a shared model the results become more valuable, and it is this distribution of knowledge that is the basis of what we learned in our research from Professor Giovanni Dosi’s “Sources, Procedures, and Microeconomic Effects of Innovation.” That would be of benefit to any of the producers who participated in the study. Contributions from the producers could include financial or technical resources, computer simulations and other data, assets or value that a producer could contribute to the study. All participating producers would be entitled to the findings if their contributions were deemed equitable and other criteria for how long the study would take etc were defined. From this a Working Group of producers would gain a better understanding of whatever they were studying. It is helpful to remember that innovation isn’t always due to these successes but also the failures that prove what science is not. 

The other method in which the Work Order is employed is in the process necessary for a dynamic, innovative industry to broaden science and applied science resource availability. This is done through specialization and division of labor of earth science & engineering capabilities of each producer firm and the overall oil & gas industry. What People, Ideas & Objects define as one of the producers' competitive advantages. The other being their land & asset base. 

In order to unleash the unshared and unshareable aspects of these critical, competitive and soon to be constrained resources to the broader market based on their specialization. This is done through the elimination of today’s operator role in the Joint Operating Committee and implementing the Preliminary Specifications pooling concept. The “pooling concept" is in which those with the required specializations are sourced from the participating producer firms making up the properties Joint Operating Committee, or the market of earth science & engineering capabilities available from the marketplace to fill the needed role demanded of the property. The pooling concept is designed to introduce advanced specialization and division of labor to these resources. And to release what we’ve described as the hoarding of these resources in each producer firm. The need to have just-in-time capabilities available to meet the demands of the producer's operated properties requires that a surplus capacity of engineers and earth scientists be available to deal with the cyclical nature of the internal demand for these resources. This hoarding consumes large amounts of these resources in terms of the industry population of engineers and geologists. 

To make my point clear, let's break down a process that may be provided as a better service. This is in terms of the type of earth science or engineering resources that could be reorganized based on specialization. When drilling a well, well control is necessary. This can be achieved when the well is drilled on a known seismic line that reflects the targeted zones' geological features. It can then be compared with a variety of well logs from similar wells in the area. These wells are produced in the target zone. It is at this point that sea levels could be determined, and the depth at which the well should be drilled could be determined. This could be done in the future by an outside service that specializes in a variety of these different processes of analyzing the logs. This could include using seismic to choose the well location and picking the tops. These technical specialists could manage machine learning, Artificial Intelligence and have human determination in the selection of the tops. This would enable quicker turnaround, at a much lower cost without sacrificing higher quality. Releasing the vast numbers of technical resources burdened by these tasks by each producer today. The service provider's results are available for the producer to verify. Much of this is done in software today, however by the producer firm with the resources of the firm being dedicated to it in an unshared, unshareable and unspecialized manner which is costing the industry and producers due to the inefficient use of engineering and geological resources consumed within each producer. With less specialized equipment and constantly switching between tasks unnecessarily and inefficiently. These technical tasks within the producer firm are valuable in establishing well control. In turn the engineering and earth science resources of the producers would be focused on the higher level, value generating methods of dealing with the firms and Joint Operating Committee assets. While the geological service provider specializes in highly sophisticated ways to ensure service delivery is of the highest quality, lowest cost, precision and effectiveness. 

The other example of the Work Order is the one we identified in Organizational Constructs that changed the start-up and small oil & gas producers competitive advantages to Intellectual Property, earth science & engineering capabilities and land & asset base. Essentially the other side of the prior example transaction. It involves the ability to generate initial revenues using the Work Order from the services provided. This involves marketing the start-up's Intellectual Property and earth science & engineering capabilities to other producers and Joint Operating Committees. These revenues would help offset the difficulties of the start-up oil & gas process and defer much of the overhead burden today. Moving the success or failure of the start-up oil & gas firm from its ability to access capital to its technical capabilities. It won't be an industry based on who you know in the future, but on what you know, and what value you bring. These will be the determining factors of success and failure in the future oil & gas industry. 

Facilitating these changes is the Work Order, and this is our solution to the constraint of these resources in the foreseeable future. What is agreed upon by industry is the lack of replacements and the retirement of the braintrust of the industry. What we know is that the North American economy is the most powerful economy in the world and will continue to be so. For the oil & gas industry to attain and maintain profitable energy independence, it will demand much more of this existing scientific and technological resource base that may be static in terms of its population for some time. This shortage may be further aggravated as we also know that each barrel of oil produced will continue to be more difficult from an earth science & engineering point of view. We resolve this shortage by using specialization and division of labor principles to maximize throughput from the same resources. These are some of the details of our Work Order.

OCI Partnership Accounting, Part I

 Introduction

The Partnership Accounting module is a pure “accounting” module in the traditional sense. However, I think there are many attributes and concepts in this module that make it unique and of interest to everyone in the industry.

The following is a summary of what a statutory list of required functionality and output requires. We’ll then discuss some of the novel concepts and differences of the Joint Operating Committee. This is the key Organizational Construct of a dynamic, innovative, accountable and profitable oil & gas producer.

• General Ledger
• Account Payable and Receivable Detail
• Payments
• Revenues and Royalties (Gross & Net)
• Capital and Operating (Gross & Net)
• Statement of Operations
• Statement of Expenditures 
• Gas Cost Allowance (Unique to each Joint Operating Committee participant)
• Trial Balance
• Balance Sheet
• Income Statement
• Statement of changes in financial position.
• Field data capture.
• Material balance c/w inventory control. 
• Nomination and contract fulfillment.
• And many, many more

This is the standard fare for oil & gas software providers. And our user community will fill this list with many more. Oracle Cloud ERP provides many of the accounting features and functionality used in these processes. And there are several processes and features that are standalone Oracle products and services that will be delivered to producers. As we will see in subsequent discussions the value proposition from the People, Ideas & Objects software application is substantial in the use of the Joint Operating Committee as the key Organizational Construct of the Preliminary Specification and is treated as the partnership that it is. It also recognizes that the costs of the property for each producer within a Joint Operating Committee are as unique as individual producers' strategies.

When we talk about the scope of operations managed under Partnership Accounting, we find that it includes everything necessary to support North American producers' accounting needs. The cut-off would be at the refinery inlet. Therefore the total scope of any upstream oil & gas operation. Let me be more specific about that from the point of view of geography and the type of operation managed by the People, Ideas & Objects application.

If we look at the North American oil & gas infrastructure we see a variety of oil & gas installations designed to serve both producers and consumers of oil & gas. Wells, gathering systems, gas plants, pipelines, storage facilities etc. At each point along these systems there may be additional deliveries of product, or sales of product or products inventoried. What seems to be an obvious and straightforward business becomes incredibly complex when it's realized that each asset may be owned by a Joint Operating Committee itself. It may also hold products on behalf of other Joint Operating Committees. This summary glosses over the incredible complexity of this business when the volume of transactions that occur in these businesses makes it a significant part of the oil & gas operation.

Critical to controlling the business is the Material Balance Report, part of the Preliminary Specification. It is the central document that so much of the subsequent process activity is based upon. If someone is to be charged for storage of butane for example, or if someone is to be charged a marketing fee for delivery of product to a customer. Or simply if a sale of a raw gas stream is deemed to have occurred at the wellhead. The Material Balance Report captures these transactions and initiates the flow of generated documents. These documents also need to be fully automated through the Material Balance Report. They are generated from the People, Ideas & Objects Preliminary Specification. To state this as simply as possible, the Partnership Accounting module includes all of these activities for all of these facilities as its purpose. Each Material Balance Report must balance. Reporting inputs and outputs balances to other Material Balance Reports. Material Balance Reports are inter-industry and continent-wide balanced.

As we explore the Partnership Accounting module further we see the reasons why we take such a broad scope of operations into consideration. It would be an understatement to state that these areas are poorly served by IT. To approach it from a global perspective that includes production operations, accounting and the other areas that depend on this information would be "ideal." However, the complexity of the business has always been in the way. Software engineering has never been available to approach the type of problem this area presents. The cost would be unreasonable and of limited value for one producer. And no software vendor could justify the work on speculation. I think it exists now in the form of mature technologies represented in Oracle products and services. Our seven Organization Constructs include the Joint Operating Committee, Professor Paul Romer’s “New Growth Theory,” specialization and the division of labor, markets, Intellectual Property, Information Technology and Innovation. People, Ideas & Objects aggregates the industry's resources. Making this process cost effective and valuable across the industry. And I think that the Partnership Accounting and Accounting Voucher modules of People, Ideas & Objects provide the vision and opportunity of how this software engineering solution solves these issues to ensure we provide the most profitable means of oil & gas operations, everywhere and always.

Pooling of Technical Resources

The first Partnership Accounting issue addressed in this module is related to earth science & engineering resources being finite. It is asserted here in People, Ideas & Objects that the “operator” classification may become a thing of the past as firms will find it difficult, and in fact no longer commercially viable, to staff the engineering and earth science capabilities necessary to meet all of their firm's needs. People, Ideas & Objects enables producers on a Joint Operating Committee to pool their earth science & engineering resources. This is to ensure they have the required engineering and geological needs. Pooling won't be a convenience or desirable addition to the Joint Operating Committee. Partners within a property will need to ensure adequate staffing of technical resources. That it will become commonplace that each partner contributes technical resources to the property.

People, Ideas & Objects use specialization and division of labor to address the mid- to long-term shortfall in these resources. Specialization and division of labor are the only tools that will enhance industry throughput from the same volume of resources. If a producer wanted to maintain “operator” classification the scale of their operation would demand such technical diversity that the burden would overwhelm any performance their team could attain. We believe that producer firms have unused and unusable surplus capacity today and that it cannot be deployed due to organizational constraints. Therefore, every producer should focus on high-level, value-added geotechnical and engineering capabilities. Each producer contributes their specialized skills to their Joint Operating Committees when and where they can. Lower level, or standard-fare engineering and geology can be conducted through service providers.

If partners are contributing human resources to the Joint Operating Committee then the systems that the partners use should be able to cost these resources, charge them to the joint account, and have their costs recovered by the Joint Operating Committee the resource was provided to. In addition, if the operator classification has disappeared, operator overhead charges should also cease to exist. If three different producers are providing engineers and geologists to the Joint Operating Committee each should be able to recover the direct or standard costs of these individuals for the time they spent working on the property.

Within the Preliminary Specification, Industrial Command & Control (ICC) provides a means in which the resources within the producer companies represented within the Joint Operating Committee, can organize a chain of command through these pooled resources to deal with property governance. In addition to this governance, producers can allocate finite earth science & engineering resources more efficiently. This assumes that during the building of the Preliminary Specification, our user community can determine a somewhat standard chain of command for all members of the industry, standard rates for the people in the industry, and detailed job descriptions for the work that each role within that chain of command is responsible for. Please also see the Research & Capabilities and Knowledge & Learning modules for the development and deployment of the firm's and Joint Operating Committee capabilities.

Today the bureaucracy builds silos of engineering and earth science capabilities that can deal with any and all contingencies their operated properties demand. This is a reasonable approach to a difficult business. With the inherent risk profile of oil & gas, safety is a priority that can be handled in this manner. The problem arises from each and every producer replicating the same capabilities within their organizations. As a result the industry has developed unused capacity that is unavailable for use at any time and at any place in the industry. At a time when engineering and earth science talent is at a premium in demand. Accessing this unused capacity, reorganizing the manner in which resources are used, and taking advantage of specialization and the division of labor are the ways that People, Ideas & Objects Preliminary Specification has solved this problem. 

To approach the mountains of earth science & engineering work that needs to be done. Demands such as the ever increasing volume of science required for each incremental barrel of oil produced. The need to obtain and sustain true energy independence etc. These require an innovative approach based on the tried and true division of labor and specialization principles. By breaking down the work into smaller more specialized components the process can be managed in a way that is faster and more efficient. The productivity of this process would be an order of magnitude more efficient than what is done today. The business management of this process would be managed through the Partnership Accounting module. Industrial Command & Control maintains the chain of command and authority from the producer firms. What took 6 engineers and geologists full time may now be done by 35 specialized engineers and geologists. These engineers and geologists may be assigned to over 100 properties or Joint Operating Committees. As shown in People, Ideas & Objects et al Cloud Administration & Accounting for Oil & Gas, management of the process falls to the software.

And there is another issue. If we use division of labor as the solution to today's limited technical resources. Without the Partnership Accounting module pooling or specialization. The enhanced productivity from the division of labor being the objective of the exercise would require that each producer hoard even more earth science & engineering resources in order to cover the entire scope of earth science & engineering effort. Causing the market for these finite resources to skew the industry's economics. This point is critical in any solution to this problem.

If we pooled the technical resources of each producer representing the Joint Operating Committee. Then we break down individual silos and technical hoarding. One of the key advantages of using the Joint Operating Committee is that all partners are financially motivated. Consensus is easily achieved because of this, and it will continue to be so.

The perception that “our” capabilities are better than “theirs” type of comparison. The problem, however, comes down to the fact that, in a hoarding situation, no one is left to do basic engineering. This should have been done two weeks ago. Life is one percent inspiration, ninety nine percent perspiration. Engineering and geological tasks need to be handled. How this work gets done is the focus.

The solution to enhanced engineering and geological throughput comes from division of labor and specialization. But first let me reiterate that in this day and age, managing a process, or changing a process requires that the software to manage that process be built first. People, Ideas & Objects Preliminary Specification builds these processes for the industry so that these changes can be made and altered as the industry requires. 

We’ve discussed the way the division of labor and specialization could increase the throughput of the engineering and geological capabilities of the oil & gas industry. How the mountains of this type of work could be approached by pooling the technical resources of the producers represented in the Joint Operating Committee. We now want to discuss how the cost of those resources would be recognized and recovered in the Partnership Accounting module of the Preliminary Specification. This discussion is also about the multitude of equalizations each month for each producer. This is to calculate their working interest share in the property. And how the Joint Operating Committee authorizes these funding requirements.

We need to determine who charges for work done at a Joint Operating Committee and why? For that we need to revisit the Work-Order system part of the People, Ideas & Objects application modules. Work-Order charges are based on the AFE, partnership lease or overhead accounts of the producer and are therefore pre-approved, tried and tested methods of controlling costs. Without an authorized Work Order, no one can charge any work to an AFE, lease or overhead account. And with a Work Order, only work authorized through an AFE, lease or overhead account will be completed, approved and charged to the joint account.

Charges for individual engineers and geologists will be based on a factor of the Revenue Per Employee of their producer firm. Discussion regarding Revenue Per Employee can be found in the Background section of this wiki. Revenue Per Employee establishes the approximate level of capability the producer firm has taken their earth science & engineering capacities and capabilities to. It reflects their organization's value. Therefore a factor, based upon agreed upon industry standards of what percentage of Revenue Per Employee a Senior Engineer should be charged to the Joint Operating Committee at etc. Revenue Per Employee is an objective criteria calculated in the Preliminary Specification and is directly comparable among peers. 

The combination of the Work Order and Pooling of Technical Resources within the Joint Operating Committees allows industry to deal with resource constraints. Specialization and the division of labor are the only tools that can materially increase organizational productivity. It will need to be the solution. Applying this solution to the organization employed in the industry will only cause more serious consequences in terms of the economic viability of North American producers. There are many other aspects to these tools and we will discuss them here in the Partnership Accounting Module and throughout the Preliminary Specification.

The Preliminary Specification Part CCCXIX(a) (PA Part XL)

I am pleased to announce a revision to the Preliminary Specification. It involves the Partnership Accounting and Accounting Voucher Modules and more specifically our implementation of our Material Balance Report. One of the features of the Partnership Accounting module in combination with our Accounting Voucher is that we have undertaken the objective of automating the production process from field data capture to the financial statements. We were limited in how we were going to achieve this lofty objective outside of detailing the Material Balance Report in our two modules. Our user community will show the way. Today we have a development in this area that I think will provide our user community with the means to implement an effective and innovative solution for producers and industry for the 21st century. It will involve the real time capture and use of the field data, in the many forms that it can take. What we are noting here is defining more of the physical infrastructure and overall vision of how we resolve this difficult area of the industry. And make it a contributing factor to how a producer achieves their most profitable means of oil and gas operations, everywhere and always.

This has now become an area where People, Ideas & Objects overall vision will be able to achieve the significant innovations we’ve set out for ourselves and our user community. The ability to approach this area has been beyond the scope and scale of individual producers IT capability and budget. It will continue to be well beyond the resources of any individual producer. However, our approach of engineering this solution on behalf of the entire industry, to develop, implement and manage, by way of our user community and their associated service provider organizations, makes the possibility not only real, but a definitive task that we must complete successfully. Significant value can be generated in this area of the industry by eliminating highly redundant and excessive costs associated with what are current borderline manual systems in place today.

So what’s changing in the Material Balance Report, the Partnership Accounting and Accounting Voucher Modules and the Preliminary Specification that makes the opportunity all the more real. One word, Starlink. Starlink is in essence Elon Musk’s plan to make all his SpaceX dreams come true. It will be the source of the funds he needs to make reusable rockets, voyages to Mars and so many other ideas of his commercially viable. So what does this have to do with oil and gas? Starlink is a network of 30,000 satellites, almost 500 have already been deployed, that provide an always on and available anywhere Internet service. Situated in low orbit across the globe they will provide Internet availability almost everywhere. The limit is the southern and northern pole regions which cannot be well serviced. The service area extends to the top of the Canadian provinces such as Alberta. Therefore anything that is situated anywhere in Alberta, or the lower 49 states will be able to be serviced by Starlinks satellite Internet service.

General availability of the Internet everywhere and always will be a substantial increase in the viability of the commercial Internet of Things (IoT). Monitoring and controlling the industry's facilities will be enabled in a matter that is far more integrated and comprehensive than what is available today. All oil and gas facilities will be able to be connected, except for those in the Arctic, Northern Territories and Alaska. The physical requirement will be a “pizza box” sized receiver that will communicate with the satellites. What will the role of SCADA in the future of the Internet of Things be? Our user community will be provided with a blank slate in which the vision of these two modules will guide them as to what they are to achieve. The possibility is significant and could resolve many of the issues that are inherent in these processes. Working these out and engineering a solution for the 21st century is the opportunity here and we should look at this in that manner.

People, Ideas & Objects and our user communities solution will need to be engineered from the ground up. I mean that from both perspectives. Sticking with what drives the industry today is inadequate when the costs of the system as conceived here in the Preliminary Specification will reduce much of the producers and industries high monthly incurred costs. Our user community will be able to undertake the design of the systems, develop the software based on the needs of the industry and producers, integrate and implement them with their service provider organizations and support them throughout the various product life cycles involved in the overall solution. This is the future and where the industry needs to go. The current producers are stuck in their self inflicted financial destruction and therefore the need to rebuild the industry is upon us. Our user community will lead us through this difficult time and task. If as a potential user community member you’re interested in this specific area, or in other areas of the Preliminary Specification, and you’re not working on your application to the community, I think the state of the industry should inform your sense of urgency.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. 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.

Our Solution Part VIII

We have been highlighting the major points of difference between the Preliminary Specification and the status quo bureaucracy in a series entitled “Our Solution.” Today I want to have a look at the Partnership Accounting and Accounting Voucher modules Material Balance Report which is a critical process / document within the specification. The purpose of the Material Balance Report is to balance the production and flow of products within a Joint Operating Committee. It is also designed to balance the production of the industry by using the information within each Joint Operating Committee as the inputs for an overall industry wide balancing. By doing so, the information that is contained within each Joint Operating Committee will become unimpeachable in terms of its accuracy. This system balance, as we call it, will provide each producer with the understanding that their production is accounted for accurately.

There are many sub-processes that are derived from the information that is contained within the Material Balance Report. These include all of the production accounting, revenue and royalty accounting, nominations, marketing data, inventory and many others. Since we will have balanced the Joint Operating Committee with the “system balance” across the industry. We will have also balanced the production, inventory and sales volumes across the partnership with the “partnership balance.” And have balanced the material with the “material balance” that deals with the allocation of production of by-products back to the individual Joint Operating Committees. This will provide an integrity in the value of the information contained within the Material Balance Report. This integrity enables the next step of the module, automation of the follow on business processes.

First, everyone knows that these volumetric values are subject to what seem to be an endless stream of amendments. And there is little that can be done to change the number of amendments throughout the process. What we can do however, is automate the processes based on the volumetric values that are processed at any time. Understanding that at the ultimate end of the process the accuracy of the volumetric information will be there, all of the information that was processed up to that point in time can be automated. Therefore all of the processes that use volumetric information within the Joint Operating Committee, producer firm and the industry can be developed with the understanding that they are automated based on these assumptions.

What we will be doing is removing the work that people are currently doing that is best suited to being done by computers. Now everyone fears that computers will be taking over, and that fear has been proven false many times over in our history. The fact that so many man hours are consumed in the processes that are involved in the Material Balance Report. This time could be better used elsewhere which is part of the larger point that we are undertaking in People, Ideas & Objects. We are leaving the work that is best suited to computers, the storage and processing. And enabling the people to do the value added work that involves the leadership, issue resolution, decision making, creative, collaborative, research, idea creation, design, planning and thinking. In essence we are making the computers work for us as opposed to the current situation where we are working for the computers.

Automation of these key business processes will eliminate a large and difficult franchise of the bureaucracy. Those that are part of the bureaucracy will probably leave the industry through retirement or other means. Those that find this to be the appropriate direction to be taking in the industry will join People, Ideas & Objects user community and establish themselves as a future service provider in one of these many processes. Does anyone believe in this day and age that these processes should be managed in the manner that they are today? Is this how we move forward in this industry? We all know there is a better way. And the moment we are freed from this cumbersome and time consuming burden, then we can begin to develop the potential of what this industry can do.

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. 

What it Would be Like to Participate in the Developments Part II

In our prior post we were discussing the user community participants involvement in the software development of the Material Balance Report of the Partnership Accounting Module of the Preliminary Specification. Today I want to discuss that further and talk more in detail about some of the things that user community participants will be involved in during these software developments. If we look at a production volume it is a pretty simple thing. That is until we qualify it. Is it a daily or monthly, gross or net, partners share, royalty share, inventory, fuel or meter loss, or any number of the possibilities in the oil and gas domain. You have products in various stages of process. A variety of different interested parties that all have some need for the data whether that is regulatory or ownership related. And finally you have the science of engineering being applied to the chemistry of the petroleum products in the development of the plants that process the production. I am certain that we have not determined the full scope of every permutation and combination that these variables provide in the industry at this time. However one day we will. To say that any production is the same shows the lack of understanding of the unique nature of the oil and gas industry.

The Material Balance Report is designed to report on the process of production and distribution of the products from the point of production to their disposition within the various systems. It is the report that has been used in the oil and gas industry, from the operational side since the beginning. Accounting rarely involves themselves in the report. What is different about the Preliminary Specification and the Material Balance Report is that the accounting for production, revenue and royalties as well as all of the production administration processes, marketing and other processes that depend on the Material Balance Report for their information are automated based on the data within the report. By tying the accounting information into the production data we are imputing the integrity of the production data to be consistent with the integrity of the accounting data. Subject to the usual amendment process of course.

Understanding these two principles in the Material Balance Report is the role of the user community participant to define the population of possibilities that could occur under the above scenarios. Once those possibilities are defined, ensure that the Material Balance Report has an effective user interface designed to deal with each instance of that population of possibilities. Then they will go about the process of developing the process management software that will be used to manage those processes, in an automated fashion, for the service providers to use for their oil and gas clients.

I know enough about this process that I know this can be done. I also know it can't be done in the current environment where every producer firm is an island of accounting capabilities on their own. Each Material Balance Report must balance to the accounting system. And each Material Balance Report must balance to the next Material Balance Report up the system that the producer may have nothing to do with. And that Material Balance Report will have to balance to the accounting of the producers who own those facilities, who are dependent on the volumes in the predecessor Material Balance Report. This dependency can be dealt with through our proposed service providers who are focused on one individual process and are representing the industry for that one process. It is in that way that we can bring the integrity of the accounting that we are providing the producer firms to a much higher level than what is attainable in the current bureaucratic nightmare of fudged accounting. I’m sure everyone in that area knows what I mean when I say that.

We have the budget designated for the development of this system. It is well beyond what has been attempted before. We will also keep developing the system over the 20 to 30 years that People, Ideas & Objects are operational in oil and gas. What is key to its development are the users within the user community. They are the ones that are defining what the system will do and how it will operate. They are the ones that know and operate the industry and it will be they in the People, Ideas & Objects user community who determine what their systems need to be to do their jobs.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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 anyone can contact me at 403-200-2302 or email here. 

What it Would be Like to Participate in the Developments

Lets assume for a moment that you are a user community participant that has an interest in the Material Balance Report of the Partnership Accounting Module of the Preliminary Specification. Your participation in the user community is oriented around the opportunity to take the Material Balance Report and automate many of the accounting and administrative processes that are dependent on the data in that report. Data and information that is used in the revenue, royalty and production accounting areas. Also in the product marketing and nominations of the products for delivery into pipelines. And determining the product balance in inventories of the commodities. There are many processes that are derived from this data. The Material Balance Report in the Partnership Accounting module holds a special significance to all of these subsequent processes in that the integrity of the data that is published in the report is unimpeachable and therefore the appropriate input for any and all of these subsequent processes. And of course we say unimpeachable from the point of view that these data elements may be subject to amendment, and these amendments would also be automated in the processes.

As a user who has worked within this area for many years you have always marvelled at the physical effort necessary to process the data and information within this domain. Seeing the broad scope of operations in terms of the number of people involved in the accounting and administration of these processes, and the never ending but necessary amendment process, you have always thought that there must be a better way. You knew that it always could be done however the costs and the time commitment necessary for someone to map out all of these processes and make a system work that deals with these is well beyond the scope of what is possible for any one individual oil and gas producer. And that will remain the case for the foreseeable future. However, People, Ideas & Objects are aggregating the resources of the industry in order to apply the solution industry wide, and therefore the scope and scale of this issue are addressable. As a result you have joined the user community and are involved in the developments of these systems.

While in the user community you will be working with other user community participants who have similar skills and understanding of the oil and gas industry. What is interesting is the different perspectives, focus and areas of issue between the users. Everyone has a different history in terms of their understanding and experience in working in the industry. And although that understanding and experience is in many ways the same, the differences can be either enlightening or create tension. Luckily we are all made aware that conflict is the source of creative breakthroughs in terms of solving the difficult issues that we face. And we can see that the Material Balance Report will be a creative and lively environment.

Everyone is well aware of the issues involved in the development of this area of the Partnership Accounting module. We can all agree on what the issues are and to a large part how to solve them. However the devil is in the details and that is where we need to get to and spend the time and energy necessary to make the Material Balance Report of the Partnership Accounting module the system that we know is possible. There are few opportunities in ones career to make the kind of difference that we have here with the People, Ideas & Objects software developments. This will make a significant difference in the lives of those that work in the oil and gas industry. No more of the tedious filing of amendments and chasing data. Instead people will be focused on solving problems, providing leadership, collaborating, being creative, doing research, generating ideas, designing and planning. Things that we need to be doing in order to ensure that we provide the oil and gas producer with the most dynamic, innovative and profitable means of oil and gas operations.

The Preliminary Specification and user community provides the oil and gas producer with the most dynamic, innovative and 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 anyone can contact me at 403-200-2302 or email here. 

A View From the Prototypical User Community Participant

Just as in the previous two posts, this discussion will be from the point of view of the future looking back on the developments from the perspective of a user community participant. In this case someone who has extensive knowledge in oil and gas with a strong aptitude in Information Technology. This individual is a member of the user community and choses to work within the community and the service providers as their area of expertise.

Its been a few years that the People, Ideas & Objects systems have been operational in the oil and gas industry and there seems to be more work than ever. Using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer has been dramatic in terms of its impact on the industry. Certainly there is the performance that was expected however this new business model has so many areas to explore and develop. What we know today is only the beginning of what we can do with these systems, the user community and the software development capability available to us.

Adding to that we have only begun to understand what is possible in terms of how to automate the process, how to further divide the labor and of course specialize. These tools that we use in the user community are powerful in terms of how they can ensure that we provide the oil and gas producer with the most profitable means of oil and gas operations. For example we had a recent breakthrough in the Material Balance Report that “Margaret Thatcher” came up with that reduces the overall process by 15 days. Brilliant. We had it implemented industry wide within one week of her breakthrough. This one change is being reviewed to see what impact it will have on the rest of the process in terms of further improvements. As I said there is just no end to the work to be done.

I have worked on the Material Balance Report since the beginning, starting back in 2015. I have always worked in the production and revenue accounting process of the oil and gas industry and was frustrated, like so many others, with the archaic paper processes. The difficulties in automating those processes were beyond the scope of what one firm could undertake on their own. So when People, Ideas & Objects were organizing the industry to do the Material Balance Report and automation of the production and revenue accounting processes, I was hooked. This whole area has been a difficulty in industry. It needs to have the appropriate approach to make the solution real. We've now had that for the past few years and the current system is operational based on the Preliminary Specification. But it only shows what is really possible. There is so much more.

As a user community participant I am a member of the user community and participate with other members of the Material Balance Report and automation team. I also have a few service providers who are clients of mine that discuss with me their needs and concerns. However, I keep my ear to the ground through the user community to learn what is going on in the broader industry. I also have a strong relationship with the members of the development team for the Material Balance Report and work with them frequently to ensure that they fully understand our needs. I do all of this work by myself with my fees being covered by the user community and my service provider clients. I don’t ever imagine going back to anything else, this work is significant in terms of the value that it provides the oil and gas producers, the service providers who are providing the services to the producers and everyone else that I have contact with. The accounting and administrative processes associated with the Material Balance Report will eventually all be automated. Until that time there is much to do and producer profits to make.

The Preliminary Specification and user community 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 anyone can contact me at 403-200-2302 or email here.

Pooling of Technical Resources in the Partnership Accounting Module

A few weeks have passed and its time to revisit some element of the Preliminary Specification to keep it fresh in everyone’s mind. Staying within the Partnership Accounting module and continuing on with the theme that we have been discussing regarding the technical resources of a producer firm. Today I want to discuss the pooling and charging of these technical resources to the Joint Operating Committee.

Recently we discussed the need for the members of the Joint Operating Committee to pool the earth science and engineering resources to make up the capabilities necessary for the property. This will be done due to the ability of each and every oil and gas producer to build the capabilities within their own producer firm. This will soon create excessive demand on the earth science and engineering professions that will extend beyond the existing industry resource base. With shortages in the numbers of earth scientists and engineers in the mid to long term. Alternative methods of organization, specialization and the division of labor are the means in which People, Ideas & Objects have chosen to deal with this issue.

When each producer is building the internal capabilities that are needed for their operated properties. They are required to build for every contingency for all of their properties. In doing so they are building capabilities that are unused and unusable when looked at from the industry perspective. These unused and unusable resources are trapped in the producer firm and are otherwise irretrievable. This current method will also discover difficulties as the underlying sciences continue to expand and demand that further specialization of the profession is necessary. Any further specialization, without the ability to reorganize these resources will cause the scope of what a producer needs to have on staff to expand further. Making the financial viability of the producer questionable at any production profile.

What People, Ideas & Objects Research & Capabilities and Knowledge & Learning module enable the producer firm to do is to specialize in their earth science and engineering capabilities. It will be in this way that the producer firm is able reduce the global scope of earth science and engineering capabilities within their firm. And take on a highly specialized capability. Something that the industry demands of the dynamic, innovative and profitable producer of the 21st century. Producers throughout the industry will be doing the same in terms of pursuing their unique specializations and capabilities.

As a result, the abilities and capabilities of the producers that make up the Joint Operating Committee will be diverse and quite probable to include what is required in order to cover off the global scope of the properties needs. A pooling of these capabilities will be enabled through the Knowledge & Learning module as its prime functionality. Additional capabilities, if required, can be made up from the marketplace of other earth science and engineering providers or producers.

Within the People, Ideas & Objects Preliminary Specification it is assumed that the earth science and engineering resources of the firm are not a cost centre but a source of revenue. Whether that revenue is derived as a result of direct charges to the Joint Operating Committee or to, lets call them customer Joint Operating Committees. The dynamic, innovative and profitable oil and gas producer has two separate and distinct revenue streams and lines of business within the lightweight footprint provided through the decentralized production model. This enables the producer firm to develop their earth science and engineering capabilities somewhat independently of their production profile.

The issue that is being resolved through the use of the Preliminary Specification here is the resource limitation of these critical professions. Using organizational methods, specialization and the division of labor are the appropriate means in which to approach the issue. The constraints of the Joint Operating Committee becomes an opportunity as it is the culture of the industry and therefore we are able to release the unused and unusable resources for use into the marketplace. Capturing this surplus capacity and employing it within the producer firms. Creating a second line of business within the producer firm helps to offset the costs of developing these highly specialized resources. Issues and opportunities that the dynamic, innovative and profitable oil and gas producer will need to address in the 21st century.

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 anyone can contact me at 403-200-2302 or email here.