The Preliminary Specification Part CXX (R&C Part XV)

Now we begin our third pass through the Research & Capabilities module of the Preliminary Specification. This will focus on innovation which involves the capabilities of the firm. In the fourth pass through the Preliminary Specification we will be focusing on capabilities. The Research & Capabilities application module is unique in that it provides the producer firm with the ability to document, develop, and deploy their earth science and engineering capabilities. We will be briefly touching on some of the capabilities areas in this the third pass, and will do a deep dive in the fourth.

It is through Professor Giovanni Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” that we will view this module, and if you have the time it might be worthwhile to review the Research & Capabilities module as background for these blog posts.

A couple of things that jump out at me in the Research & Capabilities module are the division of labor between computers and humans. Formulating ideas, making decisions and collaborating are the activities that are captured in this module. Leaving the mundane transaction and data management tasks to the computers. This I think an appropriate division of labor, I wonder at times what SAP’s thinking is on this. Another aspect that caught my eye was Professor Richard Langlois comment that we are “moving the knowledge to those with the decision rights” as being the primary process that the module captures. And lastly, that a user can right click at any time within the module and initiate any standard ERP type of action on anything in the module. This being an extension of Professor Carliss Baldwins research that notes “knowledge begets capabilities and capabilities beget actions”.

To the topic of innovation, Professor Dosi’s article discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. Professor Dosi note:

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

We discussed only a few days ago that the Accounting Voucher would enable the producer to charge the various joint accounts with the costs of their technical resources with the implicit assumption that they would generate a return on the investment in the firms capabilities. We also discussed the differences between what is acceptable practice today (with overhead allowances) and the different positions that some might take on the topic. However, I think Professor Dosi’s point here has to be taken as the key criteria as to the direction the industry takes on the issue. You are investing to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competitions. The ability to sustain the state of the art oil and gas capabilities on the basis of what a producer earns from oil and gas production is a direct result of those capabilities, however, shouldn’t the costs of those capabilities earn a return above and beyond what the oil and gas production provides?

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. 

The Preliminary Specification Part CXIX (AV Part XI)

One area that has been difficult for the oil and gas producer to deal with is the volatile energy prices. With the costs of production and reserve replacement increasing and the reserve depletion on such a rapid pace, the decline in energy prices can have a material effect on the value captured from a field. With every producer producing at capacity, this risk of price declines comes into play more frequently then maybe needs to be realized. This blog post asks the question, what if, there was agreement in the Petroleum Lease Marketplace and implementation in the Accounting Vouchers Material Balance Report of the Preliminary Specification, to limit the production at certain thresholds based on predetermined commodity prices?

We can accurately tell what the costs of reserves and production costs are and there are many times when these exceed the prices that are received in the marketplace. The North American natural gas marketplace is a very good example of this situation. Selling at a loss may fuel the short term cash flow situation however, it as at the long term expense of reserve replacements. In a highly innovative oil and gas marketplace, the costs of innovation are being funded by the commodity prices. However, these costs may exceed the temporary fluctuations in the market prices for the commodities. Is it wise for the producer to continue to produce at capacity?

What if the agreement that governs the Joint Operating Committee has the partnership agreeing to a reduction of production by 15% when the price of the commodity drops below x value. And what if the agreement also reduces the production by 25% when the production prices drop below y value. These situations would help to mitigate the loss of earnings on the reserves and not materially affect the cash flow of the operation. The global implications of many producers implementing this type of price based production profile would put a floor on the commodity prices. A floor based on the marginal costs of reserve replacement.

The implementation of the production decreases would be triggered in the Petroleum Lease Marketplace and signaled to the Material Balance Report. One area that we have not yet discussed in detail is the field data capture that is implicit in the Material Balance Report. This signal from the Petroleum Lease Marketplace module would then choke back the production to the 85% threshold when the prices realized are below the level set in the trigger.

Selling at a loss is a fools game. The political issues surrounding the choking back of production are something that might make some wince. However, the reality is that the costs of production and reserve replacement are escalating and the volatility in the commodity prices only seems to becoming more prevalent. With shale gas costs in North America being as high as they are, who would contemplate producing at these prices? In many ways we are our own worst enemies.

This scenario of price driven production adjustments will be part of the Preliminary Specification. If producers decide to use it, it will be there choice. I think it is necessary with the situation in the energy market that the producer has some protection of their investment from the volatility and political influences of the commodity marketplace.

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.

The Preliminary Specification Part CXVIII (AV Part X)

The interactions between the Accounting Voucher and the Partnership Accounting modules of the Preliminary Specification are naturally quite significant. They both being accounting modules, it is natural that they have high levels of integration. The Accounting Voucher is unique in that it brings to the producer the ability to design transactions and the Material Balance Report. These are not innovations that the producer will use to become more innovative but are provided to ensure that the innovative producers processes are actively defined and supported through out the People, Ideas & Objects application modules.  When the business is a science, as it is in oil and gas, it would be in the producers interest to remain open and flexible in both its scientific and business approach. The Accounting Voucher and Partnership Accounting modules provide that organizational flexibility.

The manner in which these two modules operate is as follows. The Accounting Voucher captures the transactions. Partnership Accounting reports on the transactions. Accounting Vouchers remain open for one accounting period and are subject to the same closing process that is familiar and traditional in the accounting world.

We noted in the Partnership Accounting module how the Work Order enabled the producer with the ability to form and participate in working groups. This flexibility is what is sought in these accounting modules. Elimination of the bureaucratic inertia that impedes these activities today makes these modules critical to a producers innovation as much as the Research & Capabilities or Knowledge & Learning modules do.

Professor Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Professor Dosi introduces the theory of Schmookler (1966) and asked “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovate inputs. It is People, Ideas & Objects assertion that the “different incentive structures” and “different opportunities” are facilitated or constrained by the administrative ease in which the producer operates.

The same can be stated for the Material Balance Report. If the producer is confident that the deal that was conceived is accurately captured in the Accounting Voucher. And the operation is therefore also reporting a substantial profit. Then they know that their innovations are working, their systems are working and the alignment of the legal, financial, operational decision making, cultural, communication, innovation, strategic, compliance and governance frameworks is achieved.

This will be the last post on the Accounting Voucher during our third pass. We will be skipping over the Security & Access Control module as it is not directly involved in the producers innovation. Recall that our third pass is focused on innovation and therefore we will be moving to the Research & Capabilities module of the Preliminary Specification.

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.

The Preliminary Specification Part CXVII (AV Part IX)

Yesterday’s post detailed the ability for a producer to offset the costs of their capabilities and their development to the various Joint Operating Committees that they participate in. With the expected increase in the earth science and engineering effort in each barrel of oil produced. And the difficulty in increasing the supply of geologists and engineers to meet the demands of the business. The pooling concept has been developed within the People, Ideas & Objects application to deal with the supply and demand of these finite technical resources. It is within the Accounting Voucher of the Preliminary Specification that the automation of the charging for these resources, as detailed in yesterday’s post, enables the producer to earn a return on their investment in their earth science and engineering capabilities.

It comes down to the question of what business is it that the producer is in. Are they in the business of generating profits from producing oil and gas, or are they in the business of generating profits from providing geologists and engineers to the operations they have an interest in? If we look at the competitive advantages of the producer it is the land and asset base, and the earth science and engineering capabilities that they apply to that asset base. Clearly both production and capabilities development are within the scope of the business of the oil and gas producer. And to a large extent the costing of the technical resources in the manner mentioned in yesterdays post is not fundamentally different from what occurs today. In today’s market, the operator is provided with “overhead allowances” for the capture of some of these costs. The difference from today and what is proposed here is that the elimination of the concept of an operator by “pooling” the technical resources of the Joint Operating Committee participants to acquire the necessary capabilities.

To take this opportunity to charge the costs of the capabilities of the producer firm and earn a return on investment may be the issue that some people will have with the concept. In a world where the market for engineers and geologists is highly competitive. And you as a producer are assessed on your performance based on Revenue Per Employee. The acquisition of additional technical resources is a difficult process that has implications to your firm. The ability to offset the costs of your technical resources helps to mitigate these issues in the short term. This is the purpose for enabling the direct billing of technical resources to the joint account in the Accounting Voucher.

When we get to the review of the Research & Capabilities and Knowledge & Learning modules during this innovation review. We will see the development of these capabilities from an innovative point of view will take on a different perspective. The ability to capture this development of a firms technical resources as an investment, and have them as a source of revenue here in the Accounting Voucher is what I want to establish with today’s and yesterday’s posts. Looking at the development of the producer, it is somewhat of a paradox as to which is developed first, the land base or the capabilities. With the ability to have the capabilities generate their own revenue stream the paradox is resolved in the short term, in that capabilities development is expected to earn a return on investment.

Some may suggest that these costs offset the production revenues of the Joint Operating Committee that would have gone to the producer anyways. And that may be true. However, in a world where the demands for the technical resources are expected to be as significant as some suggest. The need to deal with the problem on a wholesale basis, as People, Ideas & Objects pooling concept does, is a requirement, and secondly, the assumption that everyone else will develop their technical capabilities might be false.

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.

The Preliminary Specification Part CXVI (AV Part VIII)

We return to the Accounting Voucher module of the Preliminary Specification for our focus on innovation. This module works closely with the Partnership Accounting module to capture the accounting for the Joint Operating Committee and the producer firm. If you recall we are introducing many new and innovative concepts to the Accounting Voucher, concepts such as the design of transactions, the comprehensive nature of the Material Balance Report, and the ability for all of the producers within a Joint Operating Committee to post to an open Accounting Voucher.

In this third pass through the Preliminary Specification we are focusing on innovation. And when we get to the Research & Capabilities and Knowledge & Learning modules we will be focusing heavily on the capabilities elements of those modules. With that understanding, and the knowledge that the producer firm is building a substantial technical earth science and engineering capability, we turn to Professor Giovanni Dosi.

Professor Dosi’s paper discusses the role of innovation in the market economy and assumes companies in a free market are willing to invest in science and technologies to advance the competitive nature of their product offering or internal processes. The key aspects of Professor Dosi’s theories that make them directly applicable to oil and gas are the innovation theories application to earth science and engineering disciplines. These disciplines are key to the capability and success of oil and gas firms search, and production of, hydrocarbons. The investment in science and technologies is with the implicit expectation of a return on these investments, but also, to provide the firm with additional structural competitive advantages by moving their products costs and / or capabilities beyond that of the competition. Professor Dosi notes:

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

The producer firm is committing to developing their capabilities with the understanding that they advance their competitive advantages, and, earn a return on their investment. How within the People, Ideas & Objects application does the producer earn a return on their investment in their capabilities? The most obvious answer is through direct charges to the joint account. That is to say that the people (representing the producers capabilities) who are pooled into a Joint Operating Committee, have been assigned a role within the Military Command & Control Metaphor and who’s costs are captured in the Partnership Accounting module are recovering a “revenue” stream for the producers capabilities.

The question then becomes what is the charge for the individual during the time that they are working in the Joint Operating Committee. It will be easy to determine the hours that are worked in the various JOC’s of the technical resources. Whether through the Work Order or through other means, the ability to capture the time spent will be available and accurate in the People, Ideas & Objects system. The hourly rate would need to include a number of factors. The skills of the individual. The technical resources of the producer firm that is at the disposal of the individual. And also a measure of the level of innovativeness of the producer firm, say something like Revenue Per Employee that reflects the overall productivity of the firm.

Once they have factored these elements in they could then assign an hourly rate to each individual in their firm and ensure that so many hours of their year are charged to the various joint accounts that they have an interest in. With the advanced level of systems automation that we are using, we can charge the joint accounts based on the hours worked each month based on the charge out rate of each individual in the producer firm.

The net result of this is that the revenues should exceed the costs and the producer will have captured a return on their investment in the capabilities that they have developed within their firm. To proceed on any other basis would be, I think, unreasonable.

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.

The Preliminary Specification Part CXV (PA Part XIX)

In this third pass through the Partnership Accounting module of the Preliminary Specification we have focused on just the elements that support innovation within the oil and gas producer. That should not take away from the comprehensive nature of the module. Today I want to extend that understanding of innovativeness across the whole spectrum of functionality and process management within the module. And provide a sense of where the focus for the user community should reside.

If we go back to the Draft Specifications list of standard reporting output for the Partnership Accounting module we come up with a good understanding of the overall scope of the module. The community of course is uninhibited or constrained in any way by any list or requirement that I have stated here in the Preliminary or Draft Specifications. They are encouraged to add what they feel are necessary functionality, processes or modules.

Where I see a lot of changes occurring is in the level of activity that happens between producers. As the capabilities of the producers are developed, the need to interact will expand and the systems the firms use will need to support these transactions. The ability to support them will have to be done on an “as they happen” basis, as the historical accounting approach will be too costly and disruptive. The need to have the interfaces to the People, Ideas & Objects application modules will need to be developed with the user in mind. Think about iPhone and iPad type of applications and interfaces that are part of the Partnership Accounting module.

Innovation is the objective that we are seeking to develop in the producer firm. It is the difficult and costly element that will drive the organizations focus. The accounting and systems need to be a critical part of that, and be active in supporting this innovation in the Partnership Accounting and other modules.

The development of the Community of Independent Service Providers is also an area that should be kept in mind when considering these software developments requirements in the Preliminary Specification. Is there a better way to develop the interface for a service provider for conducting production accounting on a wholesale basis? These types of opportunities are also the key considerations of the user community during the development of the Preliminary Specification. The division of labor and specialization are keys to a more productive oil and gas industry. And software will both enable and constrain the division of labor and specialization.

Tomorrow we will begin our third pass through the related Accounting Voucher 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. 

The Preliminary Specification Part CXIV (PA Part XVIII)

The complexity of the relationships within the Joint Operating Committees has to 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 the accounting for these transactions can’t stand in the way of innovativeness of the producers.

The freedom to participate is inhibited by the fact that the business arrangements are difficult to capture and account for. What is needed is the ability to develop software that captures the substance of the manner in which the contributions are being made, and then the manner in which they are accounted for. That is the purpose of the Partnership Accounting module, to support the innovative oil and gas producer in the innovative actions they need to participate in. Once again Professor Giovanni Dosi points out specifically the need for the business aspects to support the 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 on an historical basis. What is needed is for the software to be sophisticated enough for the deal makers to be using while formulating the deal, to capture the substance of the deal, so that it will be used to allocate the costs and charge their accounting systems for these costs when they are incurred. Then and only then will the accountants have a chance of keeping up with the speed and innovativeness of the industry as it is contemplated here.

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

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. 

The Preliminary Specification Part CXIII (PA Part XVII)

It is here in the Partnership Accounting module of the Preliminary Specification that we find the competitive advantage of the People, Ideas & Objects application modules. We have discussed in this third pass through the Partnership Accounting module the Work Order system and briefly the division of labor and specialization. Today I want to highlight these two points and show how they relate to the innovativeness of the oil and gas producer, People, Ideas & Objects value proposition and the competitive advantages we offer the oil and gas industry.

As a producer, your competitive advantages reside in your land and asset base. They also reside in your earth science and engineering capabilities that you can apply to your land and asset base. In terms of the capabilities that you have developed in handling the accounting nuances of foreign currencies. Capabilities such as these don’t provide too much in terms of your competitive advantage or overall value to the firm. They are however, a necessity and a cost of doing business, but not a core capability. They can best be attained through the Community of Independent Service Providers that are affiliated with People, Ideas & Objects. And in that sense these accounting services provide an enhancement to the competitive advantages of the oil and gas producer.

It is through the enhanced division of labor and specialization that is at the core of People, Ideas & Objects software modules that we find the realization of the producer firms competitive advantages. Without the enhanced division of labor, that requires the software to identify and support the processes, the producer would not be able to approach the larger volumes of oil and gas production. In addition to providing this strong competitive advantage to the producer firms, use of People, Ideas & Objects software applications also provides the most profitable means of oil and gas operations. The most profitable means of oil and gas operations is achieved through our value proposition of allocating the costs of the software development across the subscribing base of producers, once. Therefore, being the lowest cost software provider, enabling each producer with the highest probable production output; lays the foundation to our claim that we provide the most profitable means of oil and gas operations.

But there’s more. In addition to the controversial claims that I have already made. The way that the eleven module Preliminary Specification enables and unleashes the innovativeness in producer firms is evident in many ways. Here in the Partnership Accounting module, in the Work Order system we see how it provides producers with the ability to collaborate and seek knowledge. These, as you may recall, are what Professor Giovanni Dosi calls technical trade-offs. And these trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs the change and is usually abundant and available at low costs. For innovation to occur in oil and gas, People, Ideas & Objects asserts that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers for a number of technical paradigms which will provide companies with fundamental innovations. The Work Order system as described in the past few days eliminates the bureaucracy as an impediment in making these working groups form. Unleashing the collaborations and seeking of knowledge.

This blog post is a hard sell of the attributes of the Preliminary Specification. What so much of our organizations and the people that work within them do from now on is defined and determined by the software that is used. We need to take control of the production of the software, to take control of the means of production. That is what People, Ideas & Objects is about.

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. 

The Preliminary Specification Part CXII (PA Part XVI)

When we last discussed the division of labor and specialization in the Partnership Accounting module of the Preliminary Specification. It was with respect to the pooling of the technical resources of the Joint Operating Committees. This pooling was necessary in order to attain the necessary technical capabilities for the operations that the properties required. Today I want to talk about the division of labor and specialization that can occur in the Partnership Accounting module from the point of view of the accounting that can take place through the Community of Independent Service Providers and other means.

Our third pass through the Preliminary Specification focuses on innovation specifically. Our last few days concentration on the Work Order provides an understanding of how the Work Order provides the innovative oil and gas producer with the ability to increase their capabilities by participation in small working groups on an ad-hoc basis. Recall too, our past discussions on the Material Balance Report and the way it encapsulates the production and accounting information for a property within an Accounting Voucher, which for its purposes is the same as a Joint Operating Committee.

We have also discussed the many other aspects of the Partnership Accounting module. From accounting cut-offs to currencies, the scope of the application to the standard list of accounting output. However, we have never discussed how the division of labor and specialization may affect the Partnership Accounting module specifically. We have discussed in other modules like the Petroleum Lease module, with the scenario of using the lease rental process. And the specialization that an accounting provider could bring the producer by focusing on royalty compliance in the Compliance & Governance module.

If we now think how the industry could be organized in a manner to specialize the accounting to better handle the accounting requirements in the Partnership Accounting module we see many opportunities. The Material Balance Report requires seriously advanced accounting skills. The understanding of the industry, and the understanding of the property has to be well understood to correctly account for all of the aspects of the property. Another element that makes this accounting perspective differ is that there is no real operator designation in the future. With each producer contributing what they can to the joint account, the ability for one company to be designated operator, particularly from an accounting overhead point of view, may be to onerous to consider. Instead, the more reasonable approach might be for the Joint Operating Committee to hire a service provider to conduct the accounting on behalf of the partners in the JOC. This service provider could be organized to manage the Material Balance Report for a variety of producers who have interests in a certain geographical region.

Within that service provider they may have people organized in a manner that focuses on the process and prepares the accounting in a fundamentally different manner then it would be done if it were done at one producer firm. Other specialized accounting firms may specialize in accounting for the Work Order process, or even just accounting for currencies. The point being that the specialization necessary to have the accounting requirements “on staff” at each producer firm will also be seen as to great of a luxury for any one producer. The ability to access these talents through other means will have to be provided. And the demand for these talents will grow as the volume of activity in the industry accelerates as it is expected to do. Therefore the need to expand the supply, with the somewhat fixed resources that we have today, and to provide a better quality of service, can only be provided through the further division of labor and specialization.

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. 

The Preliminary Specification Part CXI (PA Part XV)

I’m going to continue on one more day with the scenario of using the Work Order system across multiple producers. Today I will use this scenario to show how the Partnership Accounting module’s integrated nature with the other modules of the Preliminary Specification provides value to these ad-hoc working groups. Also why they are such an important element of innovation in oil and gas.

We used the scenario in the context of engineering, however it could just as easily be used in the area of geology or any other area of oil and gas interest. It could also include the supplier or vendor marketplace to form a working group in that area. The importance of the way the Work Order works is that the producer or participant is able to designate how they are going to participate in the working group. Prior to their approval they are to allocate the source of the funds and where the costs will ultimately go as a result of their participation. This being conducted by each participant or producer in the working group, all within the same interface for the same Work Order in the People, Ideas & Objects Partnership Accounting module.

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 need to be unlimited for a certain point in time and then need to be closed to the existing members of the working group. This will need to be an interesting point in time when the search for participants reaches a threshold and the people feel the substance for a working group exists. Then only those who are within the working group, or are subsequently granted direct access are able to participate directly in the working group.

With the Security & Access Control module we also inherit the Military Command & Control Metaphor that allows the people to impose a chain of command across the working group. This might be something that 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 is part of the Security & Access Control modules core functionality.

The designation of the source of the funds and where the costs will go is coded directly to those accounts. This has the Work Order taking on elements of the Accounting Voucher module in terms of how it operates. Each producers accounting system will be charged, upon approval of the Work Order, according to the way in which they have coded the Work Order. Therefore in that instance it will take on many of the attributes of the Accounting Voucher module.

I see these working groups, as we have called them here, as an important element of how an innovative oil and gas industry identifies and solve the problems that it faces. Professor Dosi states “In very general terms, technological innovation involves or is the solution to problems.” Dosi goes on to further define 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 un-codified capabilities, or “tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.”

It is therefore asked specifically, how can the knowledge, information and capability of oil and gas firms solve the technical and scientific problems of the future? How can a firm more effectively employ its capability to solve problems and facilitate the discovery of new problems and creation of their solutions? Clearly some companies are more effective at this process then others, but this research in oil and gas asks, is there a means for an organization to provide a quantum increase in its ability to innovate that leads to higher trajectories of performance based on production revenue per employee?

Having these working groups spawn at will without the bureaucratic and accounting logistical nightmare that they instill today will be an important first step in making the industry 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.

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.