The Preliminary Specification Part CCCXXVII (C&G Part XXV)

Where to begin, lets start off with a high level summary of the Oracle Governance, Risk & Compliance Management Suite of modules. There are three groupings in which the modules are organized, they are Risk & Financial Governance, Performance & Financial Controls and Access & Segregation of Duties Controls. Within these three groups you will find the modules that Oracle has developed in the Oracle Fusion Applications, Oracle Governance, Risk & Compliance Management Suite. Today we will be discussing the Risk & Financial Governance module with the Performance & Financial Controls being discussed tomorrow and Access & Segregation the next day. Needless to say these modules have all been adopted within the Compliance & Governance module of the Preliminary Specification.

To the larger issue of compliance and governance and how a firm gets a firm handle on the growing demand for more regulation. Oracle and People, Ideas & Objects have similar ideas as to how to keep ahead in this difficult area. Oracle asks the following.

No one expects that this is the end of new industry and legislative requirements, so business executives continue to struggle with questions such as: How can we stay on top of regulatory demands while controlling costs? Can we better manage risk to prevent business and compliance failures? How do we achieve better performance while ensuring accountability and integrity?

And it is through automation, Information Technologies and the use of standardization and the division of labor that the innovative oil and gas producer can achieve these objectives of getting ahead of the regulations. As we have proposed in the Preliminary Specification, the producer that participates in the user community has the opportunity to shape the software that they will use. People, Ideas & Objects is user defined software based on the Joint Operating Committee. Giving the producer the ability to remake their organization into an innovative, profitable and performance oriented oil and gas producer.

In terms of Oracle’s Risk & Financial Governance module producers will be able to increase the efficiency of compliance processes, improve the reliability of the financial reporting and anticipate and respond to risk. We discussed the element of risk in the Financial Marketplace module and the assessment of all of the investments based on their anticipated returns. Each of the potential investments have to be “risked” in order to bring the return on to comparable terms that considers the risk. It is here that the the two modules, the Oracle Risk & Financial Governance, and the Financial Marketplace modules will have some cross over. It is also at this point that our two firms have similar attitudes, again, with respect to how the producer attains value. Oracle states.

KPMG's Assurance & Advisory Service Center understood early that value and risk go hand in hand and that performance and risk management should converge to create, enhance and protect stakeholder value. In May 2007, the Institute of Management Accounting further characterized Enterprise Risk Management as aligning strategy, processes, technology, and knowledge with the purpose of evaluating and managing the uncertainties the enterprise faces as it creates value. It considers ERM to be a truly holistic, integrated, forward-looking, and process oriented approach to managing all key business risks and opportunities—not just financial ones—with the intent of maximizing stakeholder value as a whole.  

This will be a key insight that the user community will be able to build off of the People, Ideas & Objects Financial Marketplace and Oracle’s Risk & Financial Governance modules.

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 CCCXXVI (C&G Part XXIV)

We’ve made it to the fifth or Oracle pass through to the Compliance & Governance module of Preliminary Specification. It is here that we will find a substantial amount of material to add to the specification. Two things are noticeable when you read the twenty three parts of the module so far. And that is the embedded nature of the compliance functionality and the high levels of automation of the compliance process. You will notice that these are two characteristics of the Oracle compliance and governance as well. There is a large symmetry between People, Ideas & Objects and Oracle with respect to how we perceive the topic of compliance, and the innovative oil and gas producer will be the beneficiary.

We know that innovation does not arise from firms or Joint Operating Committees that have sloppy compliance and governance. Although innovation seems to be as far removed from compliance and governance. It’s companies like Apple that prove that innovation comes from firms that run a tight ship. And it is in the Compliance & Governance module that we introduce high levels of what we call “operational governance”. Ensuring that the firm stays on course and delivers on the objectives of the firm.

In the twenty three parts of the Compliance & Governance module we also discuss the centralized nature of software development and its impact on compliance. How the impact of standardization and the division of labor can be used to make compliance for all producers increase in quality through better organization. The time when each producer can have the necessary staff that knows all of the compliance requirements is quickly diminishing. The need to use specialized service providers to provide for the producers with their compliance needs is how the software will assist the producer in meeting these requirements. Having specialized service providers who are focused in only one area of compliance, and familiar with People, Ideas & Objects, and working with many producers, will reduce the costs of compliance and increase the quality of that compliance.

Oracle has many compliance and governance tools that we will discuss in the next few days. Under their Oracle Fusion Applications they have a suite called Governance, Risk and Compliance. Included in that suite are the following modules. Financial Compliance, Issue & Risk Manager, Access Controls, Transaction Controls and Configuration Controls. We will look into these modules in the next few days and get a better understanding of how they fit into the Compliance & Governance 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 (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 CCCXXV (A&S Part XVI)

For the third straight module we are going to pass over any real discussion of the Oracle products in the Performance Evaluation and Analytics & Statistics modules. It would require us to discuss too much about the overall technologies and that is inconsistent with the objectives of the Preliminary Specification. We are attempting to focus on the modules, functionality and process management that the Oracle product suites provide us, not the detailed technological attributes of their products. Starting tomorrow there will be an extensive list of things to discuss as Oracle has an entire suite of modules called Oracle Fusion Application, Governance, Risk and Compliance which will be adopted in the Compliance & Governance 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 (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 CCCXXIV (K&L Part XXXIX)

As with the Research & Capabilities module, I am very satisfied with the content of the Knowledge & Learning module of the Preliminary Specification. It is through this module that we are moving the knowledge to where the decision rights reside, the Joint Operating Committee. In the latter part of the modules specification we take the opportunity to isolate and berate the management of the current oil and gas companies. The bureaucracy have a unique characteristic that is easily identified and criticized. I for one am only happy to be the one that offers up the discussion. But the larger point of discussion is the war that rages between the bureaucracy that exists in every industry and the Information Technologies as represented by the Internet. As I have stated I’ve placed my bet on who will win this war, as I would suggest everyone else should determine which side they are on.

The role of software in society is becoming more pronounced. Today we are still in the beginning stages of what can be done. For an industry such as oil and gas to continue on without the software development capabilities that People, Ideas & Objects is proposing, and the organizational structure focused on the Joint Operating Committee, the prospects look dim. It is our claim that we provide the oil and gas producer with the most profitable means of oil and gas production. And we do. First by providing our software through the most cost effective manner. That is charging our subscriber base for the costs of developments once. And secondly, that in order to attain a higher level of economic output requires that the industry employ higher levels of specialization and division of labor. In order to organize that specialization and division of labor requires the use of the software specified in the Preliminary Specification. There is no other means in which to organize a higher level of specialization and division of labor. The bureaucracy is tapped out. Therefore our claim is valid.

When it comes to undertaking a large project such as People, Ideas & Objects Preliminary Specification. And we have costed the project in the area of $1 to 2 billion in its first commercial release. Is the need to maintain a sense of urgency for the people involved through to the end of the project. As we know, most of the people will remain motivated as long as the money keeps flowing. So how do we ensure that the money keeps flowing. It is through the fact that the we provide the most profitable means of oil and gas production that we can motivate the producers to maintain their sense of urgency in keeping this project funded and moving forward to its conclusion. Their alternative is the bureaucracy and we see how well they’re doing. In the future it may not be enough to own the oil and gas asset. It will also be required to access the software that makes the oil and gas asset profitable, that is the importance of software in tomorrow’s society.

Tomorrow we will look at the Performance Evaluation and Analytics & Statistics modules 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 (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 CCCXXIII (R&C Part LII)

I have read through the fifty one posts of the Research & Capabilities module of the Preliminary Specification. And have to say that I am satisfied that I have captured the substance of what the module should be. That is to say at this point in time I have nothing more to add. And I am certain that the user community will have a lot to add. With regard to the Research & Capabilities module it can be stated that it will be built with the Oracle Fusion Middleware’s Business Process Management Suite.

So it is with that being said, that I recommend that everyone sit down and read the Research & Capabilities module in its entirety. I hope you’ll appreciate it as much as I do. Tomorrow we will begin the fifth pass of the Knowledge & Learning module. However, I don’t expect much in the way of discussion from an Oracle point of view there either.

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 CCCXXII (AV Part XVIII)

We discussed the Material Balance Report in the Partnership Accounting module a few days ago. The overall discussion regarding the Material Balance Report can be aggregated by selecting its label. What we want to discuss today is the specific attributes of the Material Balance Report in the Accounting Voucher of the Preliminary Specification.

Simply the process of closing the Accounting Voucher will need to consider not only the balancing of the debits and credits from a financial point of view. They will also need to ensure that the material, system and partnership volumes reported in the Material Balance Report are also in balance. Without these systems in balance, the Accounting Voucher will not close.

This imposes another rather strict provision on the quality of the information that is accepted into the People, Ideas & Objects Accounting Voucher module. Precluding the acceptance of a voucher due to the inability to balance a volumetric requirement holds the system up for what could be a fairly common occurrence. What if the volumetric information is unavailable in a timely fashion? What if the information is part of the normal amendment process? Then we are left with the traditional accounting methods of dealing with these types of issues. An accrual of the volumes in order to achieve the balancing necessary should be able to be processed in the current month. These accruals would then be automatically reversed in the following months Material Balance Report. What is different from existing systems is that we are enforcing the systems to balance. Not just inputting key variables, imposing the facts of what actually happened at the facility, or if the facility is subject to a comprehensive Construction, Ownership and Operation agreement, what is agreed to.

The difference may be subtle but the implication is significant. Locking the volumetric balancing, over the long term, into the Accounting Voucher itself enforces the system to follow the volumes as produced and processed. Once this is achieved a certain level of integrity is achieved and then the automation of detailed processes based on those volumes can begin.

Tomorrow we will begin with our fifth pass through the Research & Capabilities 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 (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 CCCXXI (AV Part XVII)

One thing that we have not been able to discuss regarding the Accounting Voucher module of the Preliminary Specification, is the module is used for entry of all transactions for accounting purposes. Whether it is through the Material Balance Report, which is encapsulated within its own voucher, or a simple accounts payable voucher, everything that will be entered into the People, Ideas & Objects system is through an Accounting Voucher. And there will be different types of vouchers for different types of charges. Each with their own voucher series numbering. (For example all Material Balance Reports will be 200,000 series.) This also imposing somewhat of a strict Prepared By and Approved By process where everything that is entered into the system has high levels of accuracy, timeliness and authorization. This is somewhat contrary to the open and freewheeling style of data entry in Oracle Fusion Applications Financial Management Suite of modules. We will need to enhance their applications methods of accepting our view of Accounting Vouchers and the way they work.

Business is also in many cases, repetitive. The ability to reuse an Accounting Voucher as a template for subsequent months should be a feature of the People, Ideas & Objects Preliminary Specification. This could include the use of firm wide forms such as expense accounts and petty cash. What is being intimated here is that the user interface of the Accounting Voucher needs to be highly user friendly. With high levels of intelligence and multiple ways of interacting with it.

Some of the Accounting Vouchers will be open to charges from multiple producers represented in the Joint Operating Committees that your producer firm is a participant in. We have discussed this in other posts that the revenue, capital and operations of each of the Joint Operating Committees accounts are open to the direct debit and credit charges of all of the participants in the JOC. This is a result of the pooling concept that is a basic assumption of the People, Ideas & Objects Preliminary Specification.

The pooling concept has been developed as a replacement to the “operator” designation that currently exists. The ability for each producer to have the just-in-time capabilities available for all the properties they manage requires, on an industry wide basis, to have unused and unusable earth science and engineering capabilities. The ability to pool these critical resources from participating producers into the Joint Operating Committee releases these unused and unusable capabilities. The pooling concept also implies that some producers will provide other resources to the property in disproportionate amounts to their working interests. All producers need to contribute the skills, knowledge, experience and ideas that they have in an innovative oil and gas industry. Therefore for each of these producers the need to have the ability to charge for these resources to the joint account in the current month for administrative ease and to unleash these capabilities is necessary. All charges are subject to the AFE or Work Orders budget requirements and cost control remains the domain of the Joint Operating Committees.

There is also the producers need to earn a return on their investment in their capabilities which is an aspect regarding the pooling concept. We have detailed the ability for a producer to offset the costs of their earth science and engineering 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 was also 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 to the joint account enables the producer to earn a return on their investment in their earth science and engineering capabilities.

Needless to say we will be relying heavily on the Oracle Fusion Middleware layers Business Process Management Suite to provide us with this functionality in the Accounting Voucher. The base level General Ledger, Accounts Payable and Accounts Receivable are there and we need to build these specific functions within the 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 (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 CCCXX (AV Part XVI)

The Accounting Voucher presents some difficult conceptual problems that I think I have begun to identify. The most difficult is the concept of designing transactions and what purpose it fills in the Preliminary Specification. This post will be a summary of designing transactions that will hopefully clarify what it is that we are trying to accomplish in the Accounting Voucher.

Essentially we have discussed the detailed information that the service industry providers will provide in the “Vendor / Supplier Contact Database”. This will include general contact information that everyone is familiar with however there are three important distinctions regarding this information. One is it’s maintained by the vendor / supplier themselves. Two it is located in the People, Ideas & Objects Preliminary Specification. And three it contains details which includes their banking information, their field staff and representatives and their calendars, which are able to be committed to projects of specific producers. Producers understand that having the field staff committed to their projects reflects quality, and in turn reflects additional costs for that commitment.

Now this situation provides the opportunity to define some service industry systems integration that would be complementary to the Accounting Voucher of the People, Ideas & Objects application. The service industry provider could have their people populated into the Work Order system that we discussed earlier. Or, the Purchase Order system could also be used as a means of direct communication between the producers represented in the Joint Operating Committee in the Accounting Voucher, and the service industry providers. As well as other interfaces.

Therefore, according to the research of Professor Richard Langlois the transaction costs will be an immaterial item in comparison between suppliers and producers or Joint Operating Committees. That is to say the cost of processing these transactions will be the same in all instances. And People, Ideas & Objects have asserted that they will be immaterial due to the application of Information Technologies. However the differentiating costs between suppliers and producers and JOC’s will be the costs of coordinating the market. Making the Accounting Voucher module a critical tool in the ability to offer the producer firm and JOC the most profitable means of oil and gas operations.

... while transaction cost consideration undoubtedly explain why firms come into existence, once most production is carried out within firms and most transactions are firm-firm transactions and not factor-factor transactions, the level of transaction costs will be greatly reduced and the dominant factor determining the institutional structure of production will in general no longer be transaction costs but the relative costs of different firms in organizing particular activities. p 19

and

Here again, I think the problem is one of conceptual imprecision. It is perfectly common, and often unobjectionable, to contrast a market and an organization, that is, to contrast the institution called a market and the institution called an organization (such as, notably, a firm). But the opposite of “organization” in the abstract sense is not “market” but disorganization. More helpfully, the opposite of conscious organization is unplanned or spontaneous coordination. In this sense the market-organization spectrum (and similar spectra one could imagine) are arguably orthogonal to the planned-spontaneous spectrum. One could well wonder, as I have (Langlois 1995), whether large organizations do not in fact grow far more as the unplanned consequence of many individual decisions than as the result of the conscious planning of any individual or small group of individuals. And it is certainly the case that, as Alfred Marshall understood, both firms and markets “are structures for promoting the growth of knowledge, and both require conscious organization” (Loasby 1990, p. 120).

In this day and age, with such large distances, geographic, size, language and other, between vendors and producers leaving the coordination of the markets to “spontaneous order” is asking too much of human ingenuity. Particularly with the focus of the industry to a further division of labor and specialization, where the risk and reward of oil and gas operations are so great, market coordination or transaction design will be a critical and necessary task to be carried out. Each operation may be the result of more people being involved. Once again it is not from an operations point of view that we are attempting to influence the operation, it is from the business point of view. How will the transactions and business be captured in such a manner that the firm and Joint Operating Committee are incurring the lowest possible costs of the most efficient methods of these business transactions. That is what is intended when we talk about “transaction design” in the Accounting Voucher.

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 CCCXIX (PA Part XXXIX)

One of the key differences in the use of the Joint Operating Committee is the ability to use the “Decentralized Production” model and discard the “High Throughput Production” model that has been traditionally used throughout the industry. When the partnership represented in the Joint Operating Committee is able to agree, and subsequently decides to implement the plans to scale back production due to commodity price declines. Having the production and overhead costs associated with that production to also decline is a necessary part of the innovative oil and gas producers capabilities. People, Ideas & Objects Preliminary Specification provides this opportunity to remove the marginal production from the market until market prices recover. Allowing the producer to limit their losses and indirectly control the prices that the markets attain.

Managing price declines through reductions in capital expenditures is a very blunt instrument. The impact of reducing your spending plans on the natural gas prices might make changes years from now, however, the need to change the natural gas prices in the current market is sometimes necessary. Having the ability to agree and curtail production through the Joint Operating Committee is something that is possible today, yet it is not done due to the bureaucratic ways within the “operator”. Who is going to make the decision. Let me be clear that the need to reduce capital expenditures in a market that is similar to the current natural gas marketplace is sometimes necessary. What is also required is the need to have the ability to curtail the production. And to have this done on an industry wide basis.

Through the specialization and division of labor that we discussed yesterday. The costs associated with the production and royalty accounting service providers, as with all the service providers, is dependent on there being production. Without any production the overhead costs of production and royalty accounting costs are not incurred. Leaving the costs of capital as the only cost that is incurred during times of shut-in production for the innovative oil and gas producer. And if it can be found that there are ways in which the Joint Operating Committee can apply new capabilities through the Knowledge & Learning module, to reduce the overall costs of production, then the shut-in production might be able to return to production sooner due to having the lower costs of production.

The Partnership Accounting module has a role in this process. First to determine if the production has become nominal and should be a candidate to be shut-in until market prices return to a higher level. Operational decisions of this nature are made at the Joint Operating Committee and each partner will be receiving the same bad news regarding their property from their statements in the Partnership Accounting module. Included in the monthly reporting for each Joint Operating Committee is a complete set of financial statements of the property. These include Balance Sheet, Income Statement and Statement of Changes. Recall that banking may be represented as a claim against a specific property. And please note that because the royalties are unique to each producer only the partners share of these reports are calculated. These financial statements will include the detailed overhead charges and other accounts that were once charged as overhead items. In all, the Joint Operating Committee looks more like a stand alone enterprise, which is what it truly is.

When these reports show that the property is marginal the decision can be made through the “Marginal Production Threshold Interface” of the Petroleum Lease Marketplace module. There the partners in the Joint Operating Committee can make the decision to curtail the production. The subsequent reports through the Partnership Accounting module would show what would be required in terms of commodity prices and volumes of production to make the property profitable again. Looking at this situation in terms of what new capabilities were available through the various working interest partners, as represented in the Knowledge & Learning module of the Preliminary Specification, could trigger some additional work be done in the Joint Operating Committee to enhance its profitability and return it to production sooner.

Tomorrow we will start our fifth pass through the 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 (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 CCCXVIII (PA Part XXXVIII)

Today’s topic of discussion is about one of our favorite tools, specialization and the division of labor. We have used these to carve up the traditional oil and gas producer to a slimmed down earth science and engineering focused team. It is here in the Partnership Accounting module that the implications of many of these changes are managed and dealt with. It is also here where we have the Oracle Financial Management Suite of modules open to providing accounting service providers access to the producers and Joint Operating Committees systems to process their data.

The reason we are using specialization and the division of labor so extensively in the Preliminary Specification is that it is the one proven method of expanding the economic output of a given resource base. By reorganizing the accounting, land, production and exploration administration functions. And by enabling the producer to specialize on their earth science and engineering capabilities, more can be done from the same resources. And we are not talking about small changes, we are talking about very large volumes of increases that are possible as a result of relying on these tools.

We have discussed the need to have a variety of accounting service providers who replace the traditional accounting department in the oil and gas concern. Having all of the capabilities, from an accounting point of view, necessary to meet the needs of the producer is difficult to do. Possibly Exxon can achieve this scale. The rest of the industry needs to make do with what they have and in the complex accounting regulatory environment that exists, that may be an unwise strategy. The ability to hire accounting service providers who specialize in certain domains to undertake the specific tasks of the producers is the manner that specialization and the division of labor suggests that we approach the problem. The two examples we have used are the production accounting service provider who is located at the gas plant, and the royalty accounting service provider who has specialized in Texas state royalty administration. Other examples could include tax administration, accounts payable processing, accounts receivable collection, SEC regulations and many more. The volume in the number of service providers generally offsetting the need to source these services within the firm at some point. Assuming healthy markets for these service providers, a reasonable assumption given that producers are no longer directly employing accountants, an abundance of service providers would be available to meet the demands of the producer.

There is another assumption that is made in the People, Ideas & Objects Preliminary Specification regarding specialization and the division of labor. And that is the division of labor between computers and humans. I suggest we cease operating in large part, from an accounting point of view, as quasi computers and let the computers handle the work that computers do best. Storage and process management are their domain and the sooner we leave these tasks to computers I think the better off we will be. The things that we are better at are the decisions, the ideas, the innovations, the change management, the planning, the creative process among many other things. These are the elements of our work that we should be focusing on and leave the computers to do the work that they do best.

Access privileges regarding these service providers is therefore a must have in order to make this situation productive and worthwhile for the producer and the service provider. The Security & Access Control module considers these remote access considerations and the user community should be involved in making certain that this need becomes reality. Don’t come to me after the Preliminary Specification and say the security system is not strong enough, this is your system and you have to make it what you need for it to be. The access requirements of the service provider would be limited to their domain of specialization. For example if the royalty accounting service provider was working only in Texas then they could be limited to those accounts and Joint Operating Committees that are pertinent to their domain. The CFO of the producer firm, in the process of hiring the service providers, would enable the access to the service provider. This contract could then be managed on the basis of a service level agreement and provide both parties with a clear understanding of what is required.

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.