The Preliminary Specification Part CCCIV (PLM Part XLIII)

In yesterday’s post we used a simple example of how the costs were netted back to determine the price used for royalties. Today we are going to show how the Preliminary Specification handles Gas Cost Allowance (GCA) and the costs of operations. This example will apply when a producer has a financial interest in the gathering or processing facilities that are used to carry the gas they produce. The GCA allows for the costs of capital and operations of those facilities to be charged based on its annual throughput.

Operation of those assets whether they are a gas plant or a gathering system will have their own Joint Operating Committee. However, the first thing to determine is what is an eligible capital item for GCA purposes. Not all the capital is necessarily allowable to be charged as a deduction for GCA purposes. There needs to be within the accounts of a producer a way in which you can tag an AFE with the designation that these costs would be eligible for GCA. Either that or through the chart of accounts, globally select the accounts that are eligible. From there the costs of capital, both a return on investment and depreciation, can be calculated for the year.

The operating costs associated with those assets will have been aggregated under that Joint Operating Committees accounts as well. These costs are eligible to be deducted and are included in the total costs of the facility. Each facility has to be accounted for on its own. A gathering system will be calculated so that there is a cost factor for the gathering system alone. If there are separate functional units within a gas plant then each of the functional units should be accounted for as separate calculations for GCA purposes. Calculations for throughput need to be based on the gas or liquid equivalent value. If the functional unit in a gas plant is a deep cut facility then the output will be in liquids and a gathering system will be based on the gas volume. The results of these calculations provide you with an amount of GCA to deduct from the royalty price for any product that is processed or gathered through that facility in a month.

Automation of these calculations is the purpose in the Petroleum Lease Marketplace module. The calculations of royalties for the current year are based on estimates of GCA using last year's factors. However, that does not mean they are not a labor intensive activity. All of the factors that go into a calculation are already stored within the People, Ideas & Objects applications. The Material Balance Report being the key to providing the production volumes and throughput at each functional unit. What is needed is the “Gas Cost Allowance Worksheet Interface” that aggregates these variables for the Revenue and Royalty Accountant for them to prepare their calculations for actual GCA, equalizations and estimates.

The “Gas Cost Allowance Worksheet Interface” provides the accountant with the ability to look at each functional unit as a separate facility. The interface will pull in the the producers variables of the AFE’s and cost centres that are pertinent to that facility and the throughput information from the Material Balance Report. Then the accountant can organize the information in the manner that the calculation is automatically populated with the current information from the system. The accuracy and timeliness of this information, and the format of the data would be such that the production of GCA values for each month of the year would be possible. The outcome of the “Gas Cost Allowance Worksheet Interface” would be the value that is used to deduct for royalty purposes.

Now each producer's working interests in the various gathering and processing facilities are possibly different then their working interests in the producing property. Therefore these calculations are not done on a Joint Operating Committee basis but at the level of each producer. This will continue to be one of the areas where time is spent by the royalty accounting service providers. Having people who specialize in the administration of royalties will help to ensure that the producer pays the minimum correct royalties.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCIII (PLM Part XLII)

We continue on today with our discussion of royalties in the Petroleum Lease Marketplace of the Preliminary Specification. The prices that the royalties will be based on is what we will be discussing today. It is critical that the producer pays the royalty on the net price at the wellhead for all of the commodities that are produced. How these prices are calculated in the People, Ideas & Objects application is the point of discussion for today’s post.

The first point I should make is that some jurisdictions use their own pricing scenarios. Provinces in Canada calculate the average gas and NGL prices for each producer to pay royalties on. They also use standard costs for gas processing. These are excluded from this discussion as they are unique to the Canadian oil and gas producer and require substantial software development commitments from the Canadian producers that may preclude them from participating in the Preliminary Specification. Please review the July 28, 2011 blogpost “Budgets and Canadians”.

In most other jurisdictions it is the net realized price that is used for calculating the royalty. We’ll use a gas contract to describe the scenario that we are using here. For simplicity we will assume there are no liquids. Going back to the Material Balance Report we see that the gas that is sold under the contract is all of the gas that is produced by company A in the region that is serviced by gas plant B. This gas is aggregated from over 50 wells and is collected over, in some instances, a substantial distance. None of the gathering or facilities is owned by the producer and they pay custom processing and gathering fees for these services. The gas contract is to an industrial consumer who is situated across the state and the point of sale is the delivery into their facility.

The need therefore is for this producer to pay for the transportation and processing of this gas to the point of sale, the consumers front door. The royalty price will be what the consumer pays less the costs of the processing and transportation to get it to them, netted back to the wellhead. Turning to the Material Balance Report each production stream must have a sales contract and transportation contract from the point of origin to the point of sale. This is a requirement of the system. Each of these contracts support the production stream within the Material Balance Report, without a contract the Material Balance Report will not balance, just like in the real world. Therefore all of the information that is needed to determine the royalty price is going to be available from the various Material Balance Reports, where they should be available.

Taking the production from a well by well perspective the prices that will be received at each wellhead might be slightly different since the distance that some of the wells gathering might be materially different and therefore would pay more in gathering. The royalties are going to take the calculations from the point of view of the wellhead and begin the royalty calculations on that basis. These prices are derived from the Material Balance Report based on the contracts that are necessary to make that document operate and balance. Changes in prices and volumes do occur and that will lead to an amendment process within the Material Balance Report. Recall that the Material Balance Report is part of the Accounting Voucher module in the People, Ideas & Objects application. Any changes in the material balance must also correspond to the changes within the Accounting Voucher, and an Accounting Voucher can be for a producer or a Joint Operating Committee. So a volumetric change will recalculate the total custom processing and revenue receipts and a change in custom processing fees will affect total custom processing and net pricing to all the producers in that system. Making a change in one of the systems has an effect in the other. To change the price the producer received in the month can’t be done in the general ledger, it can only be done through the gas sales, custom processing or gathering contracts.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCII (PLM Part XLI)

The act of paying royalties is an individual producer's responsibility. I believe this holds true in the majority of jurisdictions. Therefore the royalties are calculated on the producer's share and not on the Joint Operating Committee’s production. Nonetheless the production is derived from the Joint Operating Committee and that involves the Material Balance Report. Today’s post will deal with the production end of the royalty calculation and the tie in to the Accounting Voucher and Partnership Accounting modules Material Balance Report.

First let's revisit the manner in which production accounting is handled in the Preliminary Specification. It is through our favorite tools of specialization and the division of labor that we have looked to service providers to provide these production accounting services to the Joint Operating Committees. Being specialized in a geographical region the production accounting service provider is possibly located within the region to have a hands on interaction with the operation. Working for the many Joint Operating Committees that may be located in the region the service provider may as a result work indirectly on behalf of many producers production accounting.

Therefore looking at this situation from a reasonably large producers point of view. They may have upwards of a few hundred geographically based production accounting service providers and twenty to thirty royalty accounting service providers depending on the number of jurisdictions they operate in. The complexity in dealing with these many providers is not the issue as much as the size of the producer. It should be restated here that the basis of the billing of these services should be on some positive action based transaction. In the case of the production accounting service provider it would be on the completion of the filing of a report for the month. Then if there was no report for that month, then no charges would be incurred, etc. The same situation should hold for the royalty accounting service provider, however, you do not want it to depend on the calculation or payment of a royalty.

Within the Accounting Voucher and Partnership Accounting modules resides the Material Balance Report. It is a report to provide for the material balancing of any facility for oil and gas purposes. We have discussed in those modules how the volumetric information is reported and managed within the Preliminary Specification. To review the discussion to date please review the Material Balance Report label. Royalties is one of the areas that will be using the outputs of the information from the Material Balance Report. Production for each producer is allocated through the report as one of the outputs of the process. Therefore this is the input into the royalty calculations for the various jurisdictions that apply to that production. Taking note of any swaps or inventory this volume should be the final production volume for royalty purposes. Ha!, the endless process of amendments begins and will no doubt carry on for at least 30 - 60 days before everything settles down. The royalty calculation being a nature of revenue less costs times royalty rate equals royalty, these production volume changes do not require any human interaction until such time as the point the royalties are due.

In terms of paying royalties on the appropriate volume of production, the Material Balance Report will be a key aspect of this control. Tomorrow we will discuss the Pricing, Gas Cost Allowance and other costs associated with royalty calculations.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCCI (PLM Part XL)

I thought that we would spend the next few days discussing the management of royalties in the Preliminary Specification. It is here in the Petroleum Lease Marketplace along with the Accounting Voucher and Partnership Accounting modules that the royalties are calculated, paid and processed. One of the key determinants of the Preliminary Specification will be the geographical scope of the application. That will determine which jurisdictions the People, Ideas & Objects application modules will calculate, pay and process royalties. If you participate in a remote area and you want all of your areas covered by the application then participation in the community is the manner in which you need to make this happen. If you have production or leases in Alaska then you should assert that Alaska be part of the scope. Don’t assume someone else will do this for you.

When we talk about royalties we have a myriad different ways in which they are calculated and processed. Although over time many have adopted what could be called generally accepted royalty principles, there are still differences that need to be accounted for. On top of these differences are the systems that are used to calculate the royalties themselves. And let’s be honest Excel does a pretty good job. But that is not the way in which many of these royalty frameworks were designed to be handled. Excel is very labor intensive. From a Gas Cost Allowance (GCA) point of view, no one has implemented an ERP process anywhere within any of the systems in the industry. These royalties are the producers largest cost items. With high commodity prices significant value can be attained by ensuring that the correct royalties are calculated and paid.

It is within the Petroleum Lease Marketplace that the Lease document is stored and therefore the royalty information is captured and stored. The jurisdiction, whether that is Crown, Federal, Freehold, Private or State will have its methods and procedures to calculate royalties on its lands. In most cases these are comprehensive and impose significant levels of Information Technologies be used. Some use the prices that were realized and some use their own pricing models. There are a variety of different ways a unit of production can attract a royalty. Nothing however that can not be handled by a software development capability like that proposed by People, Ideas & Objects. Lets also look at how that compliance is achieved.

Using the division of labor and specialization we will have within each royalty jurisdiction a royalty accounting service provider, or several providers, who specializes in the management of royalties for, in this example, the state of Texas. The only thing these people know is Texas production and Texas state royalties. They operate on behalf of the hundreds of producers that produce oil and gas in the state of Texas and pay royalties. Using specialized software developed specifically for the service provider by People, Ideas & Objects they are able to calculate the royalties and ensure that the producers pay their minimum correct royalty. The service provider is also able to keep up with the changes in the Texas royalty administration and ensure that these changes are reflected in the software at the appropriate time on behalf of their clients. Consider that there would be royalty specialist service providers located in each jurisdiction for each royalty that falls within the scope of the Preliminary and subsequent Specifications of the People, Ideas & Objects application modules.

We have certainly reduced the footprint size of the oil and gas producers square footage requirements for office space. Through the process of specialization and the division of labor we have handed off everything from an administrative basis to these service providers to increase the quality of the service, and reduce the overall costs. This is the only proven method of increasing the economic performance of the industry. The alternative is that we continue to build individual silo’s of fully capable oil and gas producers. A scenario in which only the managers will be happy, and more of a myth than reality.

Tomorrow we will continue on with the discussion of royalties and how the modules of the Preliminary Specification deals with the largest costs of the innovative oil and gas producer.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCC (PLM Part XXXIX)

This is our third post in our scenario regarding the farmin on 32,000 acres of shale formation with a 20 well drilling commitment. Today we want to discuss the AFE process and how the Petroleum Lease Marketplace of the Preliminary Specification handles the elements of that document. We will also discuss the Oracle Fusion Middleware frameworks that would be used to implement the processes, functionality and features that are discussed.

As we indicated at the beginning of this scenario, capital is king. And you have the resources available to complete the 20 well program within the next drilling season which is consistent with your partners capabilities. It's time to get to work and that involves reviewing the “Dynamic Capabilities Interface” in the Knowledge & Learning module. Which also involves the “Planning & Deployment Interface” which has as part of that interface the AFE. The variables that are used to populate the AFE are derived from the agreement and include the working interest distribution, the participants, the location and the contacts for execution. Other variables such as the budget, also prepared within the “Planning & Deployment Interface,” and are derived from the Partnership Accounting module. Preparation of an AFE therefore is the least problematic in terms of creating the document. The ability to select from pull down menus and options that automatically populate the form are necessary to make the user interface as intuitive as possible. Items such as selecting the well id should automatically populate the partners and the working interest distribution variables.

Now that the form of the AFE is complete the need to have the internal routing of the document for approval is necessary. The various departments need to sign off on all expenditures internally before the AFE is sent for external approval. The document is sent through the process of routing that is managed by the Oracle Middleware Business Process Management framework. There it is sent to the CEO, CFO, COO, Land and Legal department for digital approval. Once all approvals are complete the document will be rerouted back for external distribution. In this case it is only necessary to gain the approval of the partner that we have brought on for their capabilities as they are paying 20% of the costs. However, we are also routing the document to the farmor as the AFE will be used by them to document the 20 well commitment we have under the earning provision of the agreement. As we indicated these producers were miraculously using the same People, Ideas & Objects systems that you are using! And as such, this routing is similar to the internal routing and approval process. However, upon approval, verification of the signed AFE’s are circulated to the partners to inform them that the AFE is now a valid cost center and will begin the process of, in this case, drilling the well.

Due to the fact that you and the partner that is bringing in the shale capabilities are both actively involved in drilling these 20 wells. Both of you will be incurring costs on behalf of the joint account. This is consistent with the pooling concept that the People, Ideas & Objects software was built around. That no one producer would fulfill the operator role and that all producers would be drawn into participate in some form or fashion in order to make up for any potential resource shortfalls. Therefore each of you will be participating and incurring costs in unequal proportions to your working interests. What the People, Ideas & Objects system will do each month is conduct an equalization on the participants interests and participation rates to make each other whole during the Joint Venture Billing process. This requires that both producers in this case, however it could involve as many producers as a Joint Operating Committee has, post their costs to the AFE for the month in which they have incurred these costs. Then during the month end process the equalization will be run based on their participation and the total costs incurred by both partners that month, and either compensate them or bill them for the difference to their actual working interest share. This is of course on an AFE by AFE basis.

Lets not forget that part of the pooling concept involves the billing of a producers engineering and geological resources to the joint account. The concept of overhead allowances is eliminated with the operator. The ability of a producer to maintain a technical resource base, when that resource is in such high demand, requires that that base have its own source of revenue. And that is the ability to charge these resources to the joint account for services rendered. Under the terms of the agreement with these partners it is by agreement that the shale capabilities are billed by that partner in such a manner. That however, does not preclude you from doing so as well.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCXCIX (PLM Part XXXVIII)

We pick up with the discussion that we started yesterday regarding the scenario where you were with a firm that was farming in on a 32,000 acre parcel of land and a 20 well commitment to drill. Today we want to discuss the elements of the agreement that has been formed and how the People, Ideas & Objects Preliminary Specifications Petroleum Lease Marketplace module will use the Oracle Fusion Middleware layer to provide the services to the partners of this agreement.

What has been executed between the three parties to the agreement, the farmor, the farmee (you) and a partner with the capabilities in the shale formations is a traditional farmin agreement complete with accounting and operating procedures. All of the variables that are defined in the agreement and these procedures need to populate the various areas within the Petroleum Lease Marketplace module. A point of interest is that operating decisions require 60% approval for passage which leaves you with de facto control of the operations prior to the point of earning. Once earning has been achieved however, this will be a difficult threshold to cross as it will require almost full consensus amongst the partners on all operations.

The manner in which these operational decisions are made is through the collaborative elements of the “Planning & Deployment Interface” in the Knowledge & Learning module. When a decision is required from the Joint Operating Committee participants, using the Collaboration Framework of Oracle Fusion Middleware as the foundation we will be able to create the necessary collaborative environment to initiate, document, discuss and record the voting of these decisions.

One area that will be new will be the area where the capabilities of the partner who was brought on to provide the experience in the shale area has to be documented. These are listed in the “Capabilities & Commitments Interface” of the Petroleum Lease Marketplace. Before the agreement was signed you had the opportunity to review with their team and look at their Research & Capabilities “Dynamic Capabilities Interface” for the shale capabilities they had and were satisfied, that when those capabilities were available to you in the Knowledge & Learning module through the Joint Operating Committee; they would be more than adequate for the farmin. It was documented in the agreement that these were being made available and that the capabilities would be part of the consideration that is paid to the producer. Some of that consideration is paid in the form of a higher working interest through earning, and established day rates for their engineering and geological staff members. It will be incumbent on the producer who is providing the capabilities to note in their “Capabilities & Commitments Interface” that they are providing these resources to the farmin and what consideration they are earning in exchange for this. These will help both producers in balancing the costs and revenues of developing their capabilities and ensure that they are not over committing their resource base in the years to come.

The agreement itself is not a static document. It might have been that the “Marketplace Interface” was used extensively during the development of the agreement. Changes to the agreement could be done using that forum again. Expanding the scope of the lands or including some equipment to deal with the production from the lands. These are all elements of how the agreement could evolve during the life of the assets. The variables that are stored within the system would change, of course, and provide raw data to most of the modules that operate in the Preliminary Specification. As the agreements are the place of origin of most of the critical data that is used within the oil and gas industry. From working interest distribution scenarios, to methods of accounting, to land and procedural requirements this is where its at.

Tomorrow we will look at the way in which AFE’s are raised and approved in 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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCXCVIII (PLM Part XXXVII)

It is within the Petroleum Lease Marketplace that we find some of the data elements and characteristics that form the unique culture of the oil and gas industry. Things like the AFE and the working interest distribution, and many others, are a result of the culture of the Joint Operating Committee and these are stored and originated within the Petroleum Lease Marketplace module of the Preliminary Specification. The unique nature of these attributes requires that they are not dealt with by generic accounting classifications for application modules. They require specific modules like the Petroleum Lease Marketplace to be built and for that we need to drop down from the Oracle Fusion Applications to the Oracle Fusion Middleware layer.

What we should do therefore is start with the beginning of the process, a sort of asset life cycle, in the next few posts, starting with the acquisition of a petroleum lease, the development of partners and forming of an agreement, to the raising of an AFE to drill a well or some other operation to show how the People, Ideas & Objects application is different from other ERP systems.

Capital is king, the 2008 financial crisis is still felt throughout the markets. Many producers are readily available to make a deal to farmout large blocks of land in their shale positions. You negotiate a 32,000 acre 20 well deal to participate in a promising area where the farmor has shot extensive seismic. Participation is at 100% and the farmor has input as to the drilling locations. You will earn an undivided 50% working interest upon completion of the drilling of the 20 well program. You have limited shale capabilities to take on a 20 well program and have promoted another producer to join you who has extensive capabilities in the region. They will participate at 20% to earn a 12.5% interest and provide these capabilities by agreement.

Looking at this scenario from the point of view of the producers who just happen to all be using the People, Ideas & Objects application modules! The leases that are part of the deal that are with the farmor can now be, as a result of the agreement, listed in the companies that are party to the agreement, the farmees. By way of the agreement they would have registered an encumbrance against the leases and lets assume for these purposes that happens coincidental with the agreement. Under the agreement, the costs associated with the lease rentals falls to the farmees. Therefore these leases are copied from one system to the other in a data download. The service provider that we talked about yesterday who provides the lease administration services on behalf of the farmee then uploads the lease data to the farmees system and begins the process of managing those leases as part of their administration. As soon as those leases require payment of lease rentals they will be paid, and the billing for the annual services provided by the lease administration service provider will be billed. A similar process will happen for the other farmee in terms of their lease data download however, there will be no lease rental payments made and no lease administration service fees. Those will be both billed, at 20% of the total, through the joint venture billing, from the other farmee, the you in this scenario.

Within the Oracle Fusion Middleware suite of tools there are a variety of frameworks that will be used to make this happen. To name just the obvious ones in this the fifth pass through the Preliminary Specification might be the most efficient. And then if there is a sixth pass focused on more detailed Oracle technologies we can go deeper into these technologies then. The frameworks that we would use as a minimum for what is discussed above would include, Business Intelligence, Business Process Management, Collaboration, Content Management, Cloud Application Foundation, Data Integration, Oracle Fusion Middleware for Applications, Service Oriented Architecture, SOA Governance, and Transaction Processing.

So one can see even when we step out from the Oracle Fusion Applications we are still able to inherit substantial capabilities in terms of infrastructure from Oracle Fusion Middleware. And that is the promise of Java, building on previous efforts. Oracle has expended great effort in developing Oracle Fusion Middleware. If fact all of Oracle Fusion Applications are derivative from it.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects. 

The Preliminary Specification Part CCXCVII (PLM Part XXXVI)

If we look at the innovative oil and gas producer from the scenario of using the People, Ideas & Objects Preliminary Specification. Within the Petroleum Lease Marketplace, yesterday we noted that the focus of the producer was on building their land and asset base and having accounting, land administration and other service providers taking care of the administrative and accounting aspects of their firm. This requires the access of the People, Ideas & Objects application to be specifically developed to meet the needs of these highly specialized service providers and for very limited access to the producers data. Today, we want to talk about the billing process and how the service provider is able to earn their service fees from the producers that are their customers.

Part of the specialization and division of labor process requires that the customer and service provider are able to come to terms on price for the service. Since the service provider is able to process larger volumes, lets use the example of lease rentals for today’s purposes, of lease rentals with a fixed number of resources they are able to pass these savings on to the customer. This in turn makes it economical for the producer to use the service provider as the cost is lower and the service is higher than they can achieve on their own.

One thing the service provider doesn’t want to be doing is to going through reams of data to prepare a thousand invoices each month. And the producer doesn’t want to reward the service provider if the lease rentals are not paid. So it is agreed that the billing for the service will be automated based on the successful payment of any and all lease rentals on behalf of the producer. When a lease rental payment is processed by the service provider the billing for that service will be sent through the People, Ideas & Objects systems, which both the producer and the service provider are using for these purposes, creating an account payable for the producer and an account receivable for the service provider.

In many oil and gas producers you might have needed a whole department to process the accounts payable service fees from the service provider for lease rental payments because of the volume of lease rentals. However, with highly automated systems, and the billing being dependent on just a successful lease rental payments being made, and verified that there are no duplicates, we can be assured that the costs to maintain such a system are minimal. The efficiencies are gained by the producers, the service provider and society itself as the people are involved in more productive use of their time, like building their land and asset base.

This is also a step further then what we discussed yesterday in terms of what the service provider was using the People, Ideas & Objects applications for. Yesterday we discussed that they were being used on behalf of the producer and today we are discussing that they are being used for their own purpose. Oracle Fusion Applications and particularly Oracle Financial Management suite are designed to be used in a cloud computing configuration. Whether the service provider would also have their own accounting system is not relevant to this discussion, what is pertinent is that the billing process for the producer remains as efficient as possible and that imputes that these processes have the Oracle Financial Management suite available to the service providers.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCXCVI (PLM Part XXXV)

There are many things that require transaction support in the Petroleum Lease Marketplace of the Preliminary Specification. Transactions such as lease rentals, surface rentals and bonus payments all would fall within the modules domain. In this post I want to look at the Oracle Fusion Applications Financial Management module to determine what services are available to assist in the processing of these transactions.

We once again should look to the service providers in terms of the expanded division of labor and specialization that has been enabled through the Preliminary Specification. The focus of the innovative oil and gas producer and Joint Operating Committees are on their land and asset base, and their earth science and engineering capabilities. The Research & Capabilities and Knowledge & Learning modules focus on the development and deployment of capabilities and the Petroleum Lease Marketplace module is focused on the land and asset base of the producer. Therefore to focus on those assets would require that the administrative minutiae of land administration, production and exploration administration and the accounting associated with land and assets be outsourced to specialized service providers. Enabling the producer to focus exclusively on building and maintaining the competitive and strategic land and asset base of their firm. A task that is the key to building value for the producer, and a task that is unlimited in terms of the amount of energy they could expend in pursuit of that base.

Here we have a scenario where the producer has selected the People, Ideas & Objects application modules as their ERP system. Which includes the Oracle Financials and imputes that high levels of specialization and division of labor are incorporated. Meaning that these accounting applications are primarily used by individuals who reside outside the producer firm. There will be members of the producer firm who use them as well, however, the majority will reside within the service provider firms. Thankfully we are using a cloud computing model of delivery of the systems to enable the use of these systems to be used by these other organizations. Now let's assume for a moment that there are service providers for lease payments who guarantee your surface and lease rentals will be paid on time, lawyers for maintenance of agreements and one for Crown / Federal lands, to name just a few. Each of these service providers are representing many producers with a large market share of the industry. Each have highly organized and efficient processes that require specialized software systems to meet their specific needs. People, Ideas & Objects, on behalf of the producers represented in our subscription model would need to provide access to the producers data and the development of these highly automated systems.

What processes would be adequate for one producer would be fairly simple and straightforward. In terms of a highly organized process, the ability of one producer firm to have the volume of activity to justify the systems to build the highly automated systems wouldn’t exist. In a scenario where the industry is being represented by highly specialized service providers the need for highly automated systems however is necessary. And these systems have to be an integral part of the producers system in terms of their Security & Access Control. For instance the lease rental service provider would be able to access only the tables relating to the lease rental data. Without this level of access the ability of the service provider to do their job would not exist.

In terms of the Oracle Fusion Applications we will need to adopt the full suite of Financial Management modules. These include the General Ledger, Accounts Payable, Accounts Receivable, Asset Management, Payments & Collections and Cash & Expense Management. We had already adopted these in the Resource Marketplace module and therefore only have to access the specific services within those modules that we need. Such is the advantages of modularity.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.

The Preliminary Specification Part CCXCV (PLM Part XXXIV)

Before we forget we need to pick up an important piece of technology that will work with all of the technologies in the Preliminary Specification. It's important to mention it here in the Petroleum Lease Marketplace as so many of the unique oil and gas attributes are stored within this module. The technology of course is the data model. And the data model that we are including in the Preliminary Specification is the industry standard PPDM (Professional Petroleum Data Management Association). This will provide a solid foundation for the innovative producer to base their ERP, engineering and geotechnical applications upon.

The PPDM Association defines and creates standards to help oil and gas companies manage exploration and production data. Included within the scope of their data model is the following data; general well header information, digital well log data, seismic location information, seismic data, land parcel information, reservoir field / pool information, faults and formations, geographical information, and surface grids. Although many of these data elements may seem outside of the ERP scope only seismic location information, seismic data, and faults and formations are outside. Particularly the land information, since we are in the Petroleum Lease Marketplace module, will be of significant value within an industry wide collaborative application.

The data model is currently quite large in the last upgrade PPDM suggest that just the upgrade is an addition of 500 tables. I am not a member of the association and am therefore not able to download the model and can’t tell what level of normalization the data model conforms to. Looking in the wiki however I see a number of tables with similar first names that have different second names. It would appear to me that the first name should be the table and the second name should be an attribute within that table. Therefore instead of 10 or 15 tables they would only need one table. However data models being data models it is difficult to understand them without a comprehensive look into them.

Many of the innovative oil and gas producers will already be using applications that access the PPDM data model. These would be for earth science and engineering applications primarily, and as a result we are building on the producers current infrastructure of technologies. In addition we are adding to the scope of applications that the technical staff are able to access and use their data for. Having well header information for engineering information that also references the accounting information provides real value for the engineer. I would suggest it is also something that is necessary as we get into some of the more complex accounting that we do in the Material Balance Report of the Accounting Voucher.

Data models are sophisticated architectures that reside within the Oracle database and provide a structure for the data to be stored and retrieved. The database ensures that the rules and requirements of the data are enforced so that elements of the database remain in balance and harmony. Database technology provides this value through the Oracle database and the data models that are developed. We will use the PPDM data model. Oracle will have developed their own data models for their Oracle Fusion Middleware Applications. And we will be developing our own data models for the data that is unique to the needs of the People, Ideas & Objects application modules. All of these data models will be employed by the same RDBMS (Relational Database Management System) that being the Oracle database. The size of these databases will be enormous.

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 (private circle, accessible by members only) and begin building the community for the development of the Preliminary Specification.

The Preliminary Specification is intended to outline our general product direction. It is intended for information purposes only, and may not be incorporated into any contract. It is not a commitment to deliver any material, code, or functionality, and should not be relied upon in making purchasing decisions. The development, release, and timing of any features or functionality described for People, Ideas & Objects products remains at the sole discretion of People, Ideas & Objects.