Our Stakeholders

We have a number of stakeholders that we concern ourselves with here at People, Ideas & Objects. Our primary concern is the user community and their needs in the software that we develop for them in their interaction with the innovative and profitable oil and gas producers and Joint Operating Committees. Our second concern is to the oil and gas investor and to ensure that they are provided with the profitable means of oil and gas operations. We also depend on the oil and gas investor to direct the producer firms to financially support People, Ideas & Objects. We have been discussing the allocation of the user budgets and I thought we would take a short break to focus on the needs of the second community, the investors, and discuss how we provide them with our guarantee of the most profitable means of oil and gas operations.

Natural gas prices averaged $3.70 for the 2013 calendar year. That’s up a full $0.70 from the 2012 year and everyone’s prayers for a cold winter seem to have been answered. But is it enough? Far from it. The average prices needed for a healthy natural gas industry are estimated to be in the range of $6.70. A full $3.00 short of where it should be. If we take our same assumptions from last year. That it would require producers to shut-in 15% of their production to attain the $6.70 average price. And those shut-in production volumes were obtained by using our Preliminary Specifications decentralized production model. Then the opportunity costs in comparing our model to the bureaucracies current business model for 2013 was an additional $76 billion in incremental natural gas revenues. We add these to the 2012 opportunity costs for a running total of $170 billion in incremental revenue that the industry could of had and note that this might be one of the reasons the bureaucracy are not listed as a stakeholder of People, Ideas & Objects.

What we do know is that the bureaucracy is well aware of the value that they are destroying in not subscribing to the development of the Preliminary Specification. Their activities this past year in hiring Ernst & Young to conduct that study makes it obvious that they are aware of the value that they are destroying and chose to do something about it. What it is they chose to do about it is unknown however. I would suggest that they wanted to sit on it, or set up a committee to see if they could kill it. Such is the ways of these intellectually challenged and lazy behemoths we all know and love.

Nonetheless the word about the decentralized production model is getting out and the investor class will hear much more of it in the 2014 year. It is a logical, constructive and financially sound business model that the industry must move to for its survival. The North American natural gas producer has 200 years of natural gas reserves on hand. If they continue to provide all of those reserves to the marketplace at once the market prices will remain depressed. What is needed is production discipline that is focused around the profitability of the production. That is what the decentralized production model provides. Then and only then can the producer begin to think that the pricing of the commodity can return to some rational basis of heating value in comparison to oil.

What the decentralized production model does is strip the prototypical producer down to the C class executives, earth science and engineering resources, some land and legal, and support staff. The remainder of the resources are moved to service providers who are focused on a process, or part of a process, and use the entire industry as their client base. These service providers, such as production, revenue and royalty accountants will specialize on their tasks and divide their labor in more efficient ways. The production accountant may provide services to a number of gas plants that they are geographically located next too. The revenue accountant may focus on propane as a specialty. And the royalty accountant will focus on eligible capital for gas cost allowance purposes for the Texas Railroad Commission. Each of these service providers will conduct their tasks for the entire producer population and each month will send a bill for their services to the individual Joint Operating Committee.

It is here at this point when the property is not earning any profits that the Joint Operating Committee determines to shut it in until commodity prices return to a higher level. What happens as a result, under the decentralized production model, is that none of the administrative or accounting service providers are tasked with any work on the property for the months that the property is shut-in. As a result there are no billings for any of the administrative or overhead charges. The only charges that will be coming through for the property will be for the costs of capital. All of the operations, administration and overhead charges will have stopped.

The result of this is that the property records a null operation. No profit, however no loss either. The reserves are held for a time for when they can be produced profitably and the commodity is removed from the marketplace helping to place a floor under the price of the commodity. All that is needed is for all producers to adhere to this production discipline and the commodity prices will reach their appropriate equilibrium. That however requires that the decentralized production model be effective in the marketplace. Well it doesn’t require it, but the producers don’t seem to be able to do so without it.

The reason they don't shut-in production is that they are carrying too much overhead. Their overhead are fixed and there is nothing they can do about it. If they cut production their overheads look out of place and are forced to lay off staff in the long run. Hurting the firm in terms of its administrative and accounting capabilities. What the decentralized production model does is move the producer away from its reliance on its administrative and accounting capabilities and onto a reliance on the industries administrative and accounting capabilities.

In our scenario the service providers could be faced with at any time a decline of 15% of their service fees. And they can budget for that eventuality as a normal course of their business. The decentralized production model provides the producer and Joint Operating Committee variable administrative and overhead costs and the service provider the ability to actually control the G&A costs of the industry. A fundamentally different perspective on the way in which to operate the business in the environment where shale gas reserves exist.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Update on Some Industry Activities

It would seem that some people are pretty thick. This post is directed at those individuals who are continuing with their activities that are counter to our Intellectual Property interests. We discussed in late October some of the industry actions regarding a group hiring Ernst & Young to conduct a study. Since that time the E&Y study has been pulled, as far as I can tell. However, that doesn't seem to have stopped those that originally hired E&Y. In a separate blog post entitled “Copyright Notice” on October 29, 2013. I provided notice to the officers and directors of the oil and gas producers. And noted their futility in pursuing any efforts that violated my Intellectual Property. Specifically noting that these are the Intellectual Property of myself and that they are lawful corporations.

It would seem to me that it is necessary to spell out some of the other implications of continuing on the path they are without People, Ideas & Objects, its user community, and the service providers that are part of the solutions detailed here. And those implications are to do with the software companies that may be selected to work with these individuals on these ideas that are the property of myself. If these individuals should select Oracle or SAP without the Intellectual Property secured, would Oracle or SAP go along? Seeing the deficiencies in their claim of ownership of the ideas that they want to develop, and Oracle and SAP’s reliance on the Intellectual Property laws that these individuals so freely breach. Will Oracle or SAP so willingly go along with an effort that really only compromises their own assets. Compromises them in that a challenge to the Intellectual Property laws is a challenge to all who use those laws. And would Oracle or SAP be complicit in the breach by participating with these individuals developments?

Secondly if a local software provider were selected to avoid the above concerns would they be able to raise the capital necessary on the markets to fund the developments? If the local software developer was unable to rely on the Intellectual Property that they are developing then they would have no asset in which to leverage in the investor marketplace. They would be wholly dependent on the producers for their revenue stream. This is consistent with the revenue model that we have established in People, Ideas & Objects. Our revenue model establishes this method due to the fact that the oil and gas producers, as a market for ERP systems, is extremely small.

Lastly if these individuals were to continue with their current plans and defied the IP laws for the foreseeable future and produced a workable solution. What producer would use the application that glowed radioactive in terms of its use. Any use by any producer would subject them to litigation for the violation of the Intellectual Property that these individuals so carelessly refuse to recognize. In any scenario you must uphold the law. It is the 21st century and the Intellectual Property laws have matured. It is time to come out of the dark ages.

For the industry to have the IP that currently resides with me provides them with no strategic competitive advantage. It is however the competitive advantage that is used by People, Ideas & Objects, the user community and our service providers. Daily use of this Intellectual Property by these people is necessary to conduct their jobs in providing the software and services to the oil and gas producers. Providing the oil and gas producer with the most profitable means of oil and gas operations. People who wish to compete with us will be required to establish their own Intellectual Property. This community has its own property and will be mindful of any abuse by others.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don't forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part X

We get to the final module of the Joint Operating Committee User Budget category. The Compliance & Governance module is able to rely heavily on other budget allocations for the pooling of resources. First there is the extensive work that is done in Oracle Fusion Applications. Next there is significant, and I mean significant pooling of budget dollars that needs to be done between the Accounting Firms and Compliance (Tax, Royalty, SEC) budget categories. The Accounting Firms have a budget allocation of $56 - 113 million or 170 to 340 man years of effort. A significant budget that we will discuss later. What they have is a significant task. And that is that they sign off on the integrity of the compliance and governance systems on behalf of the oil and gas industry. The Compliance (Tax, Royalty, SEC) have a budget allocation of $40 to 80 million or 120 to 240 man years of effort. These are on top of the budget allocation for the Compliance & Governance module of $4 - 8 million or 12 to 24 man years of effort. It is clear that the role of the user community in this module is one of coordination.

It may appear that these numbers are skewed toward the accounting firms and away from the focus of the producers themselves. And I would agree that it appears that way. It should also be remembered that the legislation that defines the regulations for taxes, royalties and SEC requirements have developed frameworks that are robust and include XBRL syntaxes and other technical frameworks already developed for the user community to adopt. The task isn't so much defining what it is the compliance and governance requirements are but integrating the Compliance & Governance module within the Preliminary Specification in an integrated and innovative manner. And it is in this latter point that we have good news in that the development budgets will closely map what the user budgets are. Therefore the developers will have close to $100 to 200 million and 300 to 600 man years in development time to dedicate to these areas.

When we look at the scope and scale of the undertaking of what is being done in the Compliance & Governance module, and the global scope of the budgets that are available. Then with the type of resources that are available to us, particularly the Oracle Fusion Applications and the work done by the regulators, I think that what is set out here is reasonable in terms of what needs to occur. The objective has to remain however, that we look to integrate these compliance and governance requirements in a manner that they are not second nature to the other modules of the Preliminary Specification. They must be integrated and an inherent part of the product.

With that we come to the end of the allocation of the Joint Operating Committee User Budget category. It is with these resources that we have covered off the requirements of the producer firm and Joint Operating Committee. What appears to be a large project when you speak in terms of $2 to 4 billion in total. Begins to come into focus in terms of how those dollars will be spent and the tasks that need to be completed. There is much to be done. I have only highlighted the key points here in our initial discussion. We will go into greater detail in the future.

The point should also be clear that there are significant business opportunities for those within the oil and gas industry. The Preliminary Specification materially affects everyone in the industry. This level of change means there are business opportunities that start with participation as a user in the developments of the Preliminary Specification. And then maybe moving on to the development of your own service provider firm offering the management of a process for the innovative and profitable oil and gas producers.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part IX

Working on the Performance Evaluation and Analytics & Statistics modules the user communities will have User Budget allocations of $3 - 6 million or 9 to 18 man years of time for each module. These will be stand alone budgets as there is little crossover in terms of the budgets with other user groups. There will however be some resources that are available from the Oracle Fusion Applications and Oracle Fusion Middleware areas that are of substantial value. Oracle and People, Ideas & Objects have similar thoughts on the future of these types of tools and that is why we have allocated what initially appears to be a high budget amount to these modules.

If I had to pick one element of these modules that will provide the greatest level of difficulty. And at the same time creates the greatest value for the end user community. It would be the collaborative nature of these tools that need to be developed into both modules. Having stand alone tools is one thing, having them operate in a collaborative environment brings them to a new level.

A little off topic but pertinent to the user community is the sources of revenue that the user community will have when these application modules have been built. Once the User Budget allocations have been expended, to a large extent they will not be recurring on such a scale. These budgets that we are discussing here are over the course of our initial development and during the multiple years that we are in development before the first commercial release of the software. There will however be additional budgets for further development after that. The continuous improvement of the software at the direction of the user community is a priority of People, Ideas & Objects. It is reasonable to assume that the scope and scale of the involvement of the user community will not be as large as what is described in these budgets, however it will be significant.

There is also the fact that the user community will be comprised of other groups. With the largest being the Service Providers that will be forming as a result of the decentralized production model that is used in the Preliminary Specification. It is important to recall that the revenues of the Service Providers are not as a result of the budgets that we are discussing here but are the current G&A costs of the producer firms. As the resources that are focused on the administrative and accounting tasks of the producer are moved from the producers themselves to the Service Providers, the G&A that is currently paid to these people will become the revenues of the Service Providers. Making the Service Providers as a sub-industry substantial in its size with revenues in the tens of billions of dollars.

It is these initial User Budget allocations that will lead to how the development of the Service Provider sub-industry is developed, structured and operated. It will be these members of the user community who may move on to become Service Providers that define what it is that they need in the People, Ideas & Objects software to make the producers the most innovative and profitable.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part VIII

The Knowledge & Learning module picks up from the Research & Capabilities module and continues with the objective of getting the right information to the right people at the right time. I have assigned a User Budget allocation of $5 - 10 million or 15 to 30 man years of effort to the module. As with the Research & Capabilities module, pooling of some of the User Budgets with the Service Industry, Service Providers, Engineering and Earth Science allocations will help to offset some of the requirements of the module.

In addition to the ability to move the knowledge to where the operational decision rights reside. The Knowledge & Learning module provides the ability to focus the users on the capabilities that are pertinent to the property held by the Joint Operating Committee. Only those capabilities from the Research & Capabilities module that are pertinent to the Joint Operating Committee are being published. And that relates to each of the producer firms that are participants in the Joint Operating Committee. Therefore the user will be provided with a focused view of the capabilities that are available from all of the participating producers. And will be able to choose based on which capabilities provide the best opportunity for innovativeness and profitability.

This interdependency between the producers is necessary as the Preliminary Specification implements the pooling concept. Where the earth science and engineering resources of the producers are specialized and the division of labor between the producers is relied upon. Therefore the ability to pool the technical capabilities of disparate producers to cover off all of the needed capabilities of the operation are a given in these modules.

The user community involved in both the Research & Capabilities and Knowledge & Learning modules will be heavily populated with earth science and engineering resources. This is to be expected as this is predominantly a module that they will use. It is however a module that will rely heavily on the ERP elements as well. As when they are working within a Joint Operating Committee and find a capability that meets their needs we want to be able to provide them with the full suite of ERP capabilities at that point. That is to have them raise an AFE, or Work Order, or process some payment, issue a Purchase Order or some other commercial operation that is the generic capabilities of an ERP system such as People, Ideas & Objects. To have these capabilities invoked with a simple right click of the mouse and then have a reasonably populated AFE form appear to invoke the capability within the property.

There are certainly more to these two modules than what has been discussed here in the past two days. I think however that the user community, with the budgets that are established here, can develop these modules into the components that make the producer and Joint Operating Committee the innovative and profitable entities that they should be. It is capabilities that are the defining act that make the oil and gas industry what it is. It is not supply chains or cross docks as in other industries. It is the capabilities development and deployment that make or break the oil and gas entities. It is fully one half of the producers competitive advantage and these reside in the difficult science of geology and geophysics and the applied science of engineering. Making oil and gas one of the most technically demanding of all industries. It is here, I think, that the user community can make such a difference in the future of the oil and gas producer. To underestimate the potential value and significance of these two modules is easy. Lets make sure that doesn’t happen.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part VII

We move on to the implementation of the Research & Capabilities module. I have allocated a User Budget for this category of $7 - 14 million or 21 to 42 man years of effort. The Research & Capabilities module shares many characteristics with the Knowledge & Learning module however I have considered these in the allocations of their budgets and as a result there is no real crossover in terms of any opportunities for pooling of funds. That is to say that pooling of the budgets is expected and any savings that might have occurred have been reallocated to other areas. There will be some synergies however with the Service Industry, Earth Science and Engineering user group budgets to help defer some of the costs of the developments here.

One of the key objectives of the Research & Capabilities and Knowledge & Learning modules is to move the knowledge to where the decision rights are held. The operational decision rights are held with the Joint Operating Committee and the knowledge is held within the producer firm. We therefore have to move the knowledge to the Joint Operating Committee. This reverses the flow that is currently in place as the industry is moving the operational decision rights to where the knowledge is held. This current practice is in conflict with the culture of the industry and leads to a variety of issues that are inconsistent with the needs of an innovative and profitable oil and gas producer.

The actual process of capturing the capabilities and populating them within the various Joint Operating Committees seems to be rather simple when it is first introduced. However, it becomes incredibly complex when the proprietary nature of the capabilities contained within the module, and their security, are taken into account. This contrasts with the need to have the right information to the right people at the right time in order for it to have value. And that precision in the informations deployment is what we are seeking to attain in these modules.

If an engineer updates a capability within the Research & Capabilities module that is specific to their proprietary knowledge about fracing. And they know that the capability provides value to the firm when it is used. It is imperative that that capability is populated to the pertinent Joint Operating Committees that they are participating in that have a demand for that fracing capability. That it is released to those Joint Operating Committees and to only those Joint Operating Committees. Understanding also that there are partners within those Joint Operating Committees who will have access to those capabilities and will be able to vote to deploy those capabilities for that property.

This does not lead to any proprietary leakage of capabilities to the partnership. The capabilities that are developed within the firm are proprietary to the firm and are for its exclusive domain. Others can attempt to copy the capability from your firm however they will find that it is as costly and as difficult as it would be to develop the capability on their own. Capabilities are not transferable from one firm to another on the basis of copying. If you watch a surgeon conduct open heart surgery, or read his procedure, does that make you a heart surgeon? Having the knowledge within the Joint Operating Committee that one of your partners is capable of conducting extensive multilateral fracing, and the ability to review that capability through the Knowledge & Learning module opens up the “opportunity” to expand the horizon of what is possible.

In the hands of the user community we can achieve the precision that this module demands. Maintain the security and proprietary nature of the capabilities of the producer firm. Yet expose these capabilities to the properties that it owns to let it fully understand and appreciate what is possible and probable. And that is just one aspect of the module. There is also the research area where there are a variety of interfaces that lead to the further development of capabilities in the innovative and profitable oil and gas producer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part VI

The Accounting Voucher, like the Partnership Accounting module introduces some new concepts as a result of using the Joint Operating Committee as the key organizational construct of the innovative and profitable oil and gas producer. Key among those concepts is that an Accounting Voucher is open to the participants in the Joint Operating Committee during the time the voucher is open in the system. This is as a result of the pooling concept that is introduced in the Preliminary Specification. It is as a result of these new concepts and the fact that the Accounting Voucher is such a critical accounting module that I have assigned a $12 - 24 million or 36 to 72 man years of effort to it. There will be some crossover, or joint development efforts with user groups in the Compliance (Tax, Royalty, SEC), Service Provider, Service Industry, Accounting Firm, Engineering and Earth Science groups. There is also some joint development work on the Material Balance Report with the Partnership Accounting module and various odds and ends here and there.

If we look at the service providers as a group we need to understand that their revenues are the current oil and gas firms General & Administrative costs. And will continue to be the oil and gas producers G & A costs. And not the net G & A costs that are reported on the Financial Statements in annual reports. It will be the Gross G & A costs that are incurred by the firms. Some of these costs are capitalized, some are offset by revenues and the net that are reported can be as low as 25% of what is actually incurred by the firm. It is the Gross G & A costs that will be the service providers revenue stream.

Management of the various processes that make up the administrative tasks in oil and gas will be how the service providers earn those Gross G & A revenues. How they manage those processes will be primarily through automation presented through the Accounting Voucher. In the way that the Material Balance Report is able to encapsulate the reporting entity of a facility within a voucher for material, system and partner balancing. Or it could be used to capture the royalty process for a producers interest within a Joint Operating Committee. The ability to structure an Accounting Voucher for re-use, and build the capabilities of the voucher over time, as the asset matures is one of the features. The Accounting Voucher is a base tool for process automation. It will be used by the service providers to manage the capital, operating and administrative costs of the innovative and profitable oil and gas producer.

Where are we going in the future of the administration of oil and gas. Are we to spend the next century huddled in the backroom processing transactions ever faster than the year before? Our ability to continually automate the processes that are involved in oil and gas will be necessary. That is handled by the Accounting Voucher in the previous discussion. And secondly we need to be involved in designing transactions for their efficiency. Or the best description of what designing transactions means is “coordinating markets.”

To better understand the role of the service provider in designing transactions we turn to the ways in which we build value for the innovative and profitable oil and gas producer. Through the decentralized production model we can affect change in the commodity marketplace and create the ability to seize the opportunity costs that total $170 billion for 2012 and 2013. Secondly, with the alignment of the compliance and governance framework to the legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the Joint Operating Committee we gain a speed, innovativeness, accountability and profitability in the producer firm. And third, through a specialization and division of labor that is above and beyond what is possible through the current bureaucracy, we are able to achieve a greater throughput of economic output from the same resource base. It is this last point of our value accretion that is the role of the service provider in designing transactions. By defining and implementing constantly higher levels of specialization and division of labor through coordination of the markets, or transaction design, you will affect a greater economic output from the same resource base.

These are the concepts that will be implemented in the Accounting Voucher by the user community. The process automation tools are more tangible than the latter in most people’s minds. Most will be surprised at the extent of the work done in the area of transaction design. These tools will add significant value to the producer and Joint Operating Committee in any field operation that is undertaken.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part V

You would think that the last thing anyone would want to discuss would be the boring accounting modules. However, nothing could be further from the truth. According to the visitor logs of the Preliminary Specification its the Partnership Accounting and Accounting Voucher modules that are the two most visited modules. Accounting being at the heart of an ERP system being the probable source of this interest. It is in the Partnership Accounting module that a significant volume of activity is occurring. Therefore I have allocated a User Budget of $13 - 26 million or 39 to 78 man years of time. There are areas where these funds can be pooled with other User Budgets and that includes Compliance (Tax, Royalty, SEC), Service Providers, Service Industry, Accounting Firms, Engineering and Earth Science. Therefore the scale of these funds could be far greater than what they initially appear. Also, we are building upon the Oracle Fusion Middleware and Oracle Fusion Applications. Much of the “generic” accounting functionality already exists and only needs to be implemented in innovative ways. The Oracle Budget Allocation is also $333 - 666 million and includes hardware, software and services. It is these Oracle services that I know the user community would be of keen interest in the Partnership Accounting module.

It is in the Partnership Accounting and Accounting Voucher modules that some difficult issues are presented. These issues are unique to the Preliminary Specification and are as a result of using the Joint Operating Committee as the key organizational construct of the innovative oil and gas producer. Within the Partnership Accounting module these issues include the Pooling of the technical resources, the Work Order, the decentralized production model, and the Material Balance Report. And these are just the large ones that I am aware of today. These will require significant effort in terms of their resolution. One thing that I have not mentioned to date and is of importance to the user community. Is that People, Ideas & Objects is a research and software development company. We will have a group set up for the continued research into areas of innovation and the Joint Operating Committee. Much the same as what we have done over the past ten years. These resources are also available to the user community to aid in resolving these larger issues and their implementation.

The Pooling concept is a strictly mechanical implementation of the Joint Operating Committee. There are a few additional twists that are above the manner in which accounting is done today, and those dovetail with the Accounting Vouchers ability to have multiple producers charging costs / revenues to an open voucher. This can be done simply, or it can be done extensively. As it is conceived in the Preliminary Specification it is done extensively with the costing of the earth science and engineering resources, the ability to budget the departments revenues from commitments to the Joint Operating Committees etc. This is a second source of revenue for the innovative and profitable oil and gas producer and it is a means to source the appropriate technical resources for any properties operation. The ability of this system to accommodate those two needs should be an administrative capability that defines and supports these critical processes.

The Work Order is technically and mechanically complex. If we only had to concern ourselves with the needs of one firm than we could implement this type of Work Order very easily. However the system needs to operate initially at the industry wide level. And then once it has received the subscriptions from the producers who are participating within the Work Order then it can operate within those producer firms. Then it is simply a matter of aggregating costs and distributing them based on a working interest distribution that will be unique unto itself. That is the first phase of the Work Order. The second phase is that it controls the costs and efforts of the producer firm and Joint Operating Committee in any operation that is undertaken. If you have an element of an AFE that you want to be completed by someone, set up a Work Order to have them collect their time and costs to. If you have an internal program that you want to control the costs on, set up a Work Order and collect the time and costs of the people who work on it. Everything that is done in an oil and gas producer should have a Work Order, and everyone should be charging their time to a Work Order.

In terms of the value that the user community can bring to the innovative oil and gas producer, the decentralized production model is the best there is. With over $170 billion in opportunity costs for 2012 and 2013 it is the dominant justification to proceed with the development of the Preliminary Specification. The decentralized production model is simple in its implementation and requires little in terms of technical complexity to overcome. The difficulty is in the level of change that is implemented in the people’s lives that are disrupted as a result of the introduction of the model. As with any change there will be winners and losers and with the level of disruption it is reasonable to assume that there will be big winners and big losers. It is my assumption that I am speaking to the potential winners. In that they can form the requisite organizations that can become the users and service providers that form the sub-industry that we will come to know as a result of the decentralized production model.

What the decentralized production model does is take the prototypical producer and reduces them to the C class executives, the earth science and engineering resources, the land, legal and support staff with the remainder of the resources moved to service providers that will be focused on a process, or part of a process. They will use the entire oil and gas industry as their client base for the one process that they manage. And they will bill the Joint Operating Committees for the services that they render. So that when a production accounting service provider located in an area where production was shut-in for the month doesn’t send a bill to the Joint Operating Committee. They will not be the only ones. As all the service providers for that area will have incurred no services for those properties and as a result have not charged those Joint Operating Committees for any of the administrative or accounting charges that they would normally charge during months of production. Therefore the Joint Operating Committee reports a null operation where only the costs of capital are uncovered. The operating costs, administrative, overhead and accounting costs are not incurred and as such the reserves are left for a time when they can be produced profitably, the commodity is removed from the marketplace and effectively places a floor on the commodities pricing and the producer doesn’t lose any money on their operations.

This requires that the service providers will have accounting and administrative process management capabilities that are consistent with the producer needs. Therefore they are part of the Preliminary Specification and indeed are using People, Ideas & Objects software to manage those processes. The User Budget allocation for the Service Providers is $83 - 166 or 250 to 500 man years of effort. These budget dollars will be implemented under the coordination of the user group that is participating in the Partnership Accounting and Accounting Voucher modules.

With little budget help from any of the other user groups. And little to no help from Oracle Fusion Applications. However, Oracle Fusion Middleware makes this next project doable. The Material Balance Report is reliant on the User Budget that begins and ends here. The Material Balance Report is something that should have been undertaken by industry years ago. The scope is however beyond what can be tackled by a single producer, even Exxonmobil. Since we are aggregating the resources of the industry we will be able to approach a technically complex problem such as the Material Balance Report. Tracking the source and disposition of product from its origin to its point of sale in an unimpeachable manner is a necessary requirement for the innovative and profitable oil and gas producer. It is the foundation of which they we build, which is also part of the budget requirements here, the processes that depend on that volumetric reporting.

One of the broader things that is happening here may not be too evident at this point in the discussion of the implementation. And that is the impact on the producer firm in terms of their staffs capabilities and requirements in use of the People, Ideas & Objects software. How will they be trained in the use of the software. How will the software be implemented in the producer firm. These are the traditional issues that cause the kind of complexity that we are talking about to fall apart. What works in the lab in the hands of the developers can fall apart immediately in the hands of the actual users. Its important to remember that People, Ideas & Objects are cloud computing provided software services. All of the software will be available anywhere on any device. And that the service providers will be the ones that are “replacing” the usual “in-house” accounting, administrative and overhead personnel. It won’t be the individual producers focus or responsibility to acquire the capabilities to understand or operate the software. It is the service providers who are focused on the individual process or subprocess that will be providing the capability to potentially Exxonmobil or the startup oil and gas firm. The administrative or accounting capability exists irrespective of the level of need within the producer firm or Joint Operating Committee. And that level of capability is state of the art in terms of the software, driven by the user community who may be active participants in the service providers. All operating as a sub-industry of the oil and gas industry.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part IV

The key aspects of the Financial Marketplace module is to align the financial framework with the Joint Operating Committee and to have the producers capital structures perform beyond market expectations. To do this I have allocated the user community a budget of $5 - 10 million, or 15 to 30 man years. There are few areas where these budgets can be augmented by pooling them with other development efforts. There is the “marketplace interface” with the Petroleum Lease and Resource Marketplace modules, however that is probably all that there is.

The speed that the producer is able to attain over their investments in oil and gas properties will need to accelerate. That is, the expectation that the producer will be able to accelerate their investments in oil and gas with less time and investment will increase. This performance will be difficult to attain and will require the producer to have the systems and procedures within their own organizations, the capabilities, to be able to compete within the broader business environment and within oil and gas. The user community will have to define what is required beyond the Preliminary Specification in order to support this critical producer capability. This is the type of area where the user community will be able to differentiate itself from the other systems and organizations that it, the user community, will compete with. It can tackle an issue such as this and resolve it in a way that would materially affect the outcome of the producer firm.

And speed is nothing without control. The producers ability to maintain their capital discipline in an environment as discussed above will be of critical importance. How they do that is detailed to some extent in the Preliminary Specification but it is here again that the user community will need to determine “how” the producer firm can maintain control of the higher throughput in terms of investment capital.

It is these tasks and budgets that the user community will undertake during the development of the system. Users who have special knowledge of what is required and how to implement the Preliminary Specification will organize themselves to define what is required. These budgets are healthy but the scope of the problems that are being addressed are the ones that need to be addressed in the industry. The budgets are primarily composed of user participant fees. There are other costs associated with the budgets but I expect that approximately 85% of any of the User Budget allocations are for the hourly fees that we have established. These fees are the $185 U.S. per hour that we have established as our rate for user participation. And these are not “employees” of People, Ideas & Objects. Our developers are employees and though we have costed them at $185 as well, there are elements of overhead and other costs in the rate which are needed to support the developers and the users. The users are paid directly $185 U.S. per hour as third party businesses that have a close relationship with People, Ideas & Objects.

It is that close relationship that the user community has with People, Ideas & Objects that brings them to the user community. Some of the user community participants may be involved in the service provider sub-industry that we note will be created as a result of the decentralized production model. This requires the prototypical producer to be stripped down to the C class executives, the earth science and engineering resources, some land, legal and support staff. The remainder are moved to service providers who are focused on the process and use the entire industry as their client base. These service providers will be a large part of the user community as they are using the software in their day to day management of the processes of the oil and gas industry. Other members of the user community will come from the producers themselves, whether that is from a producer or a Joint Operating Committee both will be required. And some will need to be provided from the service industry. Lastly there will be some who are specialized in the needs of the user community itself and are exclusively employed in the community.

It may not be rare in the future that you will have multiple sources of revenue from different types of clients and the user community should be considered one of your roles in the future. Once we secure the funding for development and proceed with these developments the work of this community will be the critical element of success for the profitable oil and gas producer.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz

Joint Operating Committee User Budget Category Part III

The Petroleum Lease Marketplace is where the innovative and profitable oil and gas producer manages half of their competitive advantages. Those being their land and asset base. It is in the Research & Capabilities and Knowledge & Learning modules that they manage the other half of their competitive advantages, their earth science and engineering capabilities. As a result of this the Joint Operating Committee User Budget allocation will be material to deal with the nature of the Petroleum Lease Marketplace module. There are few User Budget allocations to other areas that can be pooled within the Petroleum Lease Marketplace. Other than the “marketplace interface” and some small dependencies here and there the Petroleum Lease Marketplace is a stand alone module. However it is also one of the key modules in terms of the critical data that will be sourced by other modules. It is with that important role within both the producer firm and Joint Operating Committee that I have allocated a range of $8 - 16 million in User Budget, or 24 to 48 man years to the module.

It is with that in mind that we should note that certain processes will be moved to the service providers with use of the decentralized production model. Lease rental payments, surface rights payments and other processes that were the usual domain of the land and legal department are best removed from the producer and Joint Operating Committee and handed to the service providers. As with the Resource Marketplace module the users within the Petroleum Lease Marketplace module can involve themselves more in coordination of the users in the Service Providers User Budget allocation than a direct hands on development of those processes.

One area that is new is the Material Balance Report that also falls within the domain of the Partnership Accounting and Accounting Voucher modules. This is a critical document that leads to significant automation of the processes within the producer firm and Joint Operating Committee. It will be heavily reliant on clean data elements regarding the partnerships and commercial arrangements of the producer and Joint Operating Committee. These data elements reside in the Petroleum Lease Marketplace and will be managed there. And these data elements will not just be at the boundary of the property. It will require a coordination of the data from the boundary of the producing property to the ultimate point of sale. A clean, clear and unimpeachable data set of all of the variables that are associated with anything and everything involved in the movement of the commodities. This data will need to be organized, captured, coordinated, scrubbed, polished and stored electronically. All with the associated processes to ensure the data elements are kept up to date. And done so from a global industry perspective. A task that I think we all can agree can and should be done. The issue that has held us back from this approach is that we have not had the time or resources to do this type of work. Reflecting on the importance of having the producers subscribe to the People, Ideas & Objects Preliminary Specification and make this real.

The Preliminary Specification provides the oil and gas producer with the most profitable means of oil and gas operations. People, Ideas & Objects Revenue Model specifies the means in which investors can participate in these user defined software developments. Users are welcome to join me here. Together we can begin to meet the future demands for energy. And don’t forget to join our network on Twitter @piobiz