Plotting a Coup

That’s right a coup. Viva la revolution. The bureaucracy have shown that they are not interested in dealing constructively with People, Ideas & Objects therefore we need to throw the bums out of power. I have frequently mentioned that people should not openly discuss People, Ideas & Objects or the Preliminary Specification due to the consequences that may have to their careers. The bureaucracy sees us as a threat and they will overreact and the consequences to you would have been unnecessary and unfortunate. That warning is now being lifted and I would encourage everyone to openly engage in discussion of this project. Our second year objective is to get the word out and with a number of people openly discussing the initiative there will be a strength that the bureaucracy can’t act against. Besides you could always challenge the bureaucracy with the fact that you provide the oil and gas producers with the most profitable means of oil and gas operations. I would be interested in their response to that, seeing their current track record.

We are not working on the basis of someone's approval. We are authorized by our own self interest. People should be taking a long term perspective of how we can change the industry to the dynamic, innovative, proactive and profitable industry we desire. Engaging the bureaucracy at key times when they appear at their weakest will show them to be unable to compete with the community that is being generated here around People, Ideas & Objects and the Preliminary Specification. A like minded group of independent business people who are focused on bringing the oil and gas industry into the 21st century, despite the bureaucracy. That is our mission, and our posture should be aggressive and in your face in a polite and courteous, confident manner.

Due to the nature of our posture and our facts we may find that when we engage the bureaucracy there may be more conversions than there are confrontations. The long term perspective leaves something for everyone, even the bureaucrats. Remember in terms of annual G&A dollars spent in oil and gas today. The gross amount is in the $40 to 60 billion per year range for the North American producers. A large portion of that G&A will be reallocated to the service providers as revenues in the businesses that you will be developing in the next few years. Even bureaucrats have calculators these days. There is a substantial opportunity waiting for those that have the capabilities to provide the oil and gas producers with the most profitable means of oil and gas operations in this community.

We are about making this happen. We are not about knocking on doors asking for approval. The money will begin to flow when we have the situation under our control. It is within our power to seek and obtain the power to control the industry. For that is what we are after. To make the industry a dynamic, innovative, proactive and profitable oil and gas industry. This is a coup. It starts here in our second year with getting the word out about the Preliminary Specification. Organizing ourselves for the long run. Thinking about how the producer can achieve the most profitable means of oil and gas operations and maybe enjoying our work at the same time.

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

The Goal of Our Ten Year Plan

We have very briefly talked about our ten year plan and the fact that 2014 will be our second year of that plan. But what is that plan and what are the goals of that plan. The plan is very simple and one that provides all of the stakeholders with the ability to plan their own needs around what will happen here at People, Ideas & Objects.

The first year of our plan, 2013 in which we defined the product is now over. What we are striving for is that in 2022 we will close out the year with our first full year of operation of the systems defined in the Preliminary Specification, in the North American marketplace. This seems like a long ways away however it really isn’t. First it means that the system is operational January 1, 2022 which is only eight years from now. And as we know a lot will need to happen to make the system operational in that eight short years.

If we consider the needs of the largest producers, and we must because that is where the bulk of the financial resources will be coming from. They need these time frames in order to deal with their implementation issues. It is also logistically impossible for them, and hence for us, to do anything on a shorter time frame. Think of big tankers and their ability to execute a turn. If the CEO’s decided to make the changes to their organizations for 2022 in our third or fourth year then they would be able to participate in the user communities, the developments and implementations.

This brings me to the second years objective. And that is that we need to spread the word. The Preliminary Specification has been edited and updated and is ready to be reviewed by the greater population of the oil and gas community. We now need to get it out. The bureaucracy has been effective in shutting off any resources to People, Ideas & Objects so this must be a word of mouth operation. The product is here and I’ll be writing about how it is implemented and how that affects the people in the marketplace. The further we get the word out the better it will be for each of us.

These time frames also provide you with time to organize and prepare yourself for your involvement in this project over the next nine years. Whether that is as a user, a service provider, or an oil and gas producer. Think of the organizations that need to be developed to have that final year of the system operational. How will the producers be transitioned to the new software. How will their G&A be managed through the software. Who will own and operate these firms may very will be decided in the next few years. As someone with significant experience in oil and gas you would be of great value to the marketplace. Maybe now might be the time in which to take some courses to fill out your knowledge of the technologies that we are using to better understand the implementation. These are the opportunities and the issues that can be addressed at an individual level here in the second year of our plan.

If we look at the future of the oil and gas industry; will it be as it stands today with its bureaucratic ways and its standard operating procedure of muddling along? Or will we take control of the situation and adopt the vision of the Preliminary Specification and have the marketplace revolutionize the industry and allow the issues and opportunities that the industry face being addressed in a timely and effective manner. As its not just the administration issues that we resolve with the Preliminary Specification. It is the operational issues as well. Issues like the natural gas prices being handled by the decentralized production model. The Preliminary Specifications use of the Joint Operating Committee enables the industry to resolve any operational issue that might arise. No more muddling along. A dynamic, innovative industry that is proactive through the marketplaces that make up the industry. Marketplaces that include you. So lets start here and now with that vision and build that 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

A Unique Implemention

The implementation of the technologies that makeup the People, Ideas & Objects Preliminary Specification have a unique and one of a kind characteristic. One that I don’t think has been evident in any technology implementation in oil and gas before. And that is that they are being implemented by people who are actively participating in markets. This one characteristic will make the implementation successful and have the effect of making the transition to the Preliminary Specification easier than would otherwise be envisioned. Normally an implementation is driven by a project manager with a list of tasks. Here in People, Ideas & Objects case there are markets driving the stakeholders.

Consider that we have four particular stakeholder groups that are motivated to have these changes occur as quickly as possible. The first is the producers themselves, the second the oil and gas investor, the third is the user community and the final being the service providers. In each case there is a financial reward involved in the implementation. From each of these groups perspectives, the following would be the case.

From the oil and gas producers point of view the scope of their operations would be reduced to a highly focused earth science and engineering capable producer. Able to deal with their two competitive advantages of their land and asset base, and their earth science and engineering capabilities. And forget about the demands of building royalty and compliance accounting infrastructure, or the need to acquire more floor space for administration. The ability to lean out in the administrative and accounting areas to focus on the sciences, and to focus on their chosen specialization would orient them to what it is that makes them commercially relevant in the marketplace. A simpler domain in a world where the oil and gas producer has become too complex and too multi disciplined to be able to be agile and compete in the fast changing energy marketplace.

The producers are motivated to offload as much of the administration and overhead to the service providers as quickly as they possibly can. We certainly have to take into account a few difficult battles with the bureaucracy along the way but the pace will be quick. Moving to a small footprint will become a business model that appeals to the “mindset” of the marketplace and become the “thing to do.” This can’t happen fast enough as far as the CEO’s and like minded people within the organization are concerned. And once it begins, there is no turning back.

For the energy investor they can look forward to greater profits as a result of the decentralized production model delivering these through higher natural gas prices. Producers will be able to impose production discipline and enable the pricing to find its equilibrium and remain profitable for the foreseeable future. Providing a healthy and secure environment for the investment community to invest in oil and gas will help the industry to grow and compete with other industries on basic financial criteria. This will add to the pressure on the producer to make the changes to the service providers as quickly as can be done. The expectation and reality of this change will require significant communications as there were $170 billion in opportunity costs for 2012 and 2013 alone.

Users have been discussed in terms of their importance to systems development before. And in some systems we see the user input in substantial ways. Systems such as Google and Apple are very much oriented based on the user. When it comes to ERP systems the user is a bit of an anomaly. Systems such as SAP know they exist but don’t accommodate them in their prepackaged world. That is changing in People, Ideas & Objects Preliminary Specification as we take an approach that is user driven in terms of how our systems are developed. First of all the user community is paid for their contributions. Our rate is $185 U.S. per hour and we do not employ any users on our payroll. They are all service providers, employees of producers, service industry representatives or those that have a need within the oil and gas industry for better systems. The point is you could make a living being a user and become specialized in the discipline. Or you could be very specialized in your area of expertise and relate that to the developers so that the systems captured that special knowledge and understanding. Either way People, Ideas & Objects are open to the contributions of the user community and we have budgeted $667 million in the development of the Preliminary Specification to capture those user community contributions. Fully 2,000 man years of contributions.

Lastly there are the service providers who might I think double as users in many cases. Their job is going to be the most interesting and the most difficult. They will have to be the movers and shakers that make this bit of magic work to everyone's satisfaction. They’ll be needing to catch the people and tasks that are being offloaded from the producer firms and working with the user community to define the software to manage the processes they specialize on, on behalf of the industry. Their ability to turn the producers administrative and accounting capabilities into an industry wide administrative and accounting capability in as short a time as possible will be the expectation. They will also need to use specialization and the division of labor in defining their processes to optimize the oil and gas industries processes. Billions of dollars depends on it being done quickly and efficiently. The key bottleneck is having the People, Ideas & Objects developers in place to develop the software necessary for these people. And that is why we are looking for the resources in the fashion that we are. The more the industry participates in this project the more successful it will be. There are not just billions of dollars on the line for these stakeholders, there are billions on the line for the service providers as well. The gross G&A that is spent in the oil and gas industry. And that would be subject to the administrative and accounting changes that we are talking about here. Would total in the tens of billions of dollars on a North American basis. So the task that these people undertake would be large, but the businesses they would be establishing, and most of them would be new businesses, would be substantial new businesses.

To start this game of musical chairs requires the $2 to 4 billion needed for the software developments. With so many people motivated in the success of this implementation I truly do feel sorry for the bureaucracy. But it’ll be time for them to go.

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

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