To: The Board of Directors, Our RFP Response (Markets), Part IX

 Although many may not have seen the overall vision of the Preliminary Specification before, this series is bringing a few more of the pieces into the picture for people. We could probably spend a few more posts just on the Joint Operating Committee as the move of the compliance and governance frameworks to its seven frameworks has a dramatic effect on everything that is done in the industry today. Is there a need for that level of change? It may be consolidated mega-corp would satisfy everyone with everything and always. That there’s excitement in the industry may be more attributable to the covid release from lockdown and economic freedom. What is not being realized is that the issues in oil and gas have been prevalent for many decades. The financial destruction was complete prior to the lockdowns. Our approach is to establish the necessary organizational structures that will support a dynamic, innovative, accountable and profitable oil and gas producer, industry and supporting service industries. What we’ve discussed in this series are the organizational structures recognized, defined and supported within the Preliminary Specification which include the expansion of specialization and division of labor, Intellectual Property, the Joint Operating Committee and today we’ll discuss the adoption of markets as a framework that defines and supports both the producer and secondary service industries. 

We have three modules in the Preliminary Specification that are “market” modules. The Petroleum Lease Marketplace, Resource Marketplace and Financial Marketplace modules. Each establishes marketplaces where producers can engage in the markets which they need to function. To suggest these are B2B’s or exchanges as have been the traditional “solution” would undermine their functionality and purpose. These marketplace modules emulate the markets that producers participate in and are designed to deal with the day to day activities of each of the producers, service industry and others. Supporting them with the contractual, transaction processing and other capabilities of our ERP system. Reading these modules definitions to capture their purpose and approach is necessary as it is impossible for me to do so in a simple post or two. Speaking generically we can discuss the larger issue of our approach vs consolidated mega-corp’s in terms of the reliance on markets vs firms. How we are using disintermediation, with its reliance on larger decentralized capabilities enabled by the Internet, establishes far greater opportunities, speed and performance in the organizations that adopt them. 

The economic principles of markets and price discovery are two of the mechanisms by which North America has advanced its overall quality of life. Adoption of these within the oil and gas industry are therefore a necessity and the Preliminary Specification has done so as part of the structures that define and support these industries. Our decentralized production models price maker strategy relies on the principle of oil and gas commodities being priced based on the price maker principle. The need for producers to produce only profitable production, after full consideration of all of their costs on a timely and accurate basis, is how they’ll operate under our ERP system and service provider offerings. Using all of the information contained within the commodity markets price, (production, inventory, consumption, reserves) to determine profitability and ultimately what will and will not be produced. It is the same mechanisms that are involved in every transaction involved in a free market. 

From the Preliminary Specifications Resource Marketplace module we quote from a paper written by Professors Richard Langlois and Nicholas J. Foss entitled “Capabilities and Governance: the Rebirth of Production in the Theory of Economic Organization.” they note.

The organizational question is whether new capabilities are best acquired through the market, through internal learning, or through some hybrid organizational form. And the answer will depend on (A) the already existing structure of capabilities and (B) the nature of the economic change involved. p. 21

And

If by contrast, the old configuration of capabilities lies within large vertically integrated organizations, creative destruction may well take the form of markets superseding firms. History offers many examples of both. p. 21”

And

Either way it boils down to the same common-sense recognition, namely that individuals - and organizations - are necessarily limited in what they know how to do well. Indeed, the main interest of capabilities view is to understand what is distinctive about firms as unitary, historical organizations of cooperating individuals. p. 17

We first need to discuss two components of how I see one of the marketplaces in oil and gas. The reliance on the field service industry providers to extend the producers capabilities and capacities into their regions of interest. To own and operate their field infrastructure would otherwise be an impossible impediment and constraint towards progress. The second component is the history of abuse and disrespect that producers have displayed and presented to the service industry over the past forty years. And particularly since 2015 when the producers recognized their financial difficulties were amplifying. The assumption that oil and gas is a boom / bust industry has been accepted over the long term by these producer bureaucrats. All other industries sought to work these issues out of their businesses and industries many years ago. It is this continuing acceptance that has left us with a legacy of maybe five good years out of the past thirty five. Bureaucrats don’t understand this point as they’ve experienced thirty five years of excellent compensation. Producers assumed the service industry would need to adjust to the boom / bust trend in lock step with the producers. There is an implied assumption that the service industry, like the oil and gas industry itself, enjoys revenues as a primary industry and therefore continues business as usual during the bust cycles. The diversity of the service industry offerings, and their coverage across the various regions of their operations throughout North America spreads them relatively thinly. As secondary industry participants they are not as resilient as the producers believe them to be. The collapse of their revenue streams into the low teens in terms of percentages has been devastating.

Now in 2021 the consequences of this downturn have destroyed much of the service industries capacities and capabilities that were once available to producers. This decline in support since 2015 on top of the cumulative difficulties administered by oil and gas producers has created the situation where it will be difficult for many of them to survive. The largest service industry providers have left the continent as a result of the abusive treatment they’ve received. Therefore working out the boom / bust cycle through our price maker strategy will go a long way to rectifying this issue in the long run by providing a stable environment, or constant level of demand for which the service industry can prosper. However, investors in the service industry have had it for the remainder of this millennium. They invested in good faith and were abused by the producer firms. They’ve witnessed the equipment they invested in being cut up for scrap metal to pay the light bill and taxes on the shop. This was primarily due to the producer bureaucrats determining they could get away with leveraging additional field activity by not paying their bills for 18 months after the jobs were completed. The dilemma today is who’s going to provide the financial resources for the service industry to recapitalize itself and reestablish the capacities and capabilities that will be necessary for a self-sufficient and profitable oil and gas industry?

This is what’s known and understood in the market today, it’s not news. Consolidated mega-corp will expect the service industry to dance for their dollars just as they’ve always done. If People, Ideas & Objects are correct and no one’s going to play that game, what would be the result. I would point to the example of the history of the ERP providers in oil and gas over the past thirty years. I can report there is still no consideration whatsoever of a second chance these first tier ERP providers will be riding to the rescue of the producer firms. Why, they feel the industry is too complex, too costly and there are not enough producers to be able to negotiate their sales prices fairly. The last two ERP providers left in 2000 and 2005, as documented on page 17 of our White Paper, due to the inability of producer bureaucrats to pay for their software development in advance. Producers have never paid for any ERP systems anyways, so why start? Producers have had eight years to invest in the Preliminary Specification to make their organizations profitable and to avoid this inevitable, predictable and disastrous outcome but didn’t do it. Not a penny has been spent on People, Ideas & Objects at any point. Therefore producers will be paying for all of the costs of the Preliminary Specifications development and user community in advance. The need for skin in the game is the apt approach when so many investors and vendors have been betrayed so comprehensively.

As the producers sit upon the primary industries revenues they so enjoy. (And mostly for enhanced, innovative, executive compensation. I do question what's in those capitalized overhead accounts we never see.) They will show a thumbs down to this idea as if People, Ideas & Objects is the only vendor they’ll be faced with who has this ludicrous idea. Bureaucratic actions have consequences which have been wholly detrimental to everyone else in the industry. Bureaucrats will no doubt argue, rightly, this does not remind them of what markets and price discovery should look like. Correct, it's what’s necessary after the destruction of the markets they’ve caused. These facts on the ground are what bureaucrats refuse to consider or admit. Until they do the industry will be plagued with problems. And they’ll never admit this, what they will do instead is they’ll just leave which is the historical action other bureaucrats have taken in other industries. These issues need to be dealt with and I am unaware of any other solution. The need to rebuild these industries brick by brick and stick by stick must be financed by the only means now available. The primary industry revenues of the oil and gas industry. Facilitated through the Preliminary Specifications decentralized production models price maker strategy. Granted there will be those within the service industry that will continue to scrounge for the pennies falling from the bureaucrats pockets. However, that does not create the dynamic, innovative, accountable, profitable and self-sufficient oil and gas industry that we need does it? 

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (JOC), Part VIII

 Doubling and tripling down on their failed vision is the method chosen to resolve the oil & gas industry and producer issues by the current bureaucrats. Raising the viable scapegoat that it's the small producers who are overproducing in order to meet their bank payments which has caused the disaster in the industry today. When bureaucrats raise this argument we see the source of their own future demise. For them to admit the overproduction issue is attributable to their own actions would never cross their minds. Everything is always someone else's fault. And therefore with their remedy of consolidation, they’ve already put in place the “fact they’ve acted in good faith to put the industry on the right path.” Subsequently recognizing that they would need to admit to their historical errors, or the need for them to conduct further corrective actions can already be seen to be unnecessary. The only thing they iterate upon is excuses.

We’ve defined our alternative vision in the Preliminary Specification and would note that it’s in stark contrast to the consolidation vision that producers are implementing. Disintermediation is best defined as the removal of the bureaucracy and red tape that is rendered redundant through use of the Internet. Although the world is unaware of “how” and “what” the bureaucrats' vision will operate, or any details, we can only speculate as to why it’s being done when all other industries are, and not by choice, finding efficiency in the decentralized methods of organization. The old saying that the bigger they are the harder they fall may be the apt saying. Possibly, we should heed this as a warning and govern ourselves appropriately at this critical juncture. People, Ideas & Objects have repeatedly stated the fact that each boe provides 23,200 man hours of equivalent labor. Bureaucrats capitulation of shale resources should be seen as irresponsible when we understand that it’s the world's most powerful economy that is the largest consumer of energy. Why aren’t bureaucrats seeking to make shale profitable? It’s reasons such as these that the people who are elected to the boards of directors are given such responsibilities. Although it is not their job specifically, they also would not ignore such important criteria, after all profitable oil and gas production is what producers should be doing on behalf of their shareholders.

The dynamic demands in oil and gas make each Joint Operating Committee unique to one another. The conflict that can arise between an operator and the Joint Operating Committee may lead to compromises in operations and not always provide for the most profitable means of operations for each of the producers concerned in the Joint Operating Committee. Consideration therefore needs to determine when profitability was achieved at a property, or what is the appropriate level of profitability to determine if production should continue under the price maker strategy. The Preliminary Specifications determination will be at the Joint Operating Committee level and not at each producer's determination of profitability at that specific property. Leading some producers to remain producing and yet mildly unprofitable. This unfortunate situation will arise in the many scenarios where these conflicts exist. The most common would be in natural gas production where Joint Operating Committee members that were not members in the gathering and processing Joint Operating Committees, and therefore had to either pay custom processing and / or sell their by-products for prices that were fixed lower than the markets. Or the allocation of production back from the gas plant would be determined by contractual agreement as opposed to the chemical composition. In the Preliminary Specification the ability to conduct either the legal or the chemical production allocation is available with our Material Balance Report. Hedging is done at the corporate level and has nothing to do with the performance of any of the Joint Operating Committees or the impact on their determination to produce or not. 

Due to the demands for earth science and engineering resources in the near future. We’ve discussed how specialization and the division of labor are being used in the Preliminary Specification to deal with these associated resource demand issues. Conceptually we have implemented the pooling concept where the ability to have the Joint Operating Committee assigned with the available technical resources of each of the producer firms would be how the property was managed from an earth science and engineering perspective. The pooling concept being the replacement of the operator role. Establishing the second source of revenue for the producer and its supporting administrative infrastructure in the Preliminary Specification. We have also implemented the necessary governance model to support these resources with the appropriate organizational structure to ensure effective operations across the producer and each of their Joint Operating Committees. 

We have moved the focus of the administrative and accounting away from the “corporate” structure to the Joint Operating Committee. Where it will align with the work being done within the technical areas of the oil and gas producer firm. The Preliminary Specifications accounting assesses the profitability of the Joint Operating Committee on the whole property basis to determine if it is profitable. Each property is being furnished with full financial statements each and every month in the Preliminary Specification. This therefore needs to be done in order to determine the actual profitability or loss that’s incurred. The service providers will be charging each Joint Operating Committee the service fee for the service they rendered, if at all that month. Therefore each property will have detailed, actual, factual overhead charged to the Joint Operating Committee to ensure these costs can be recovered in the form of cash in the current month. 

The second difference that needs to be accounted for is a monthly allocation of the depletion of any remaining amount of undepleted property, plant and equipment of that producer's capital costs that has not been recovered. (Note each of the producers' capital costs may be different, and some substantially if they purchased an interest in the property, and amounts previously depleted were at different rates, therefore these are producer based calculations.) By identifying these costs each month, then determining the profitability the prices of the commodities will need to be adequate to cover these costs in order to continue to produce. Without the zeal to build balance sheets and hide overhead costs, depletion and overhead costs can be appropriately determined in the commodities price and therefore capture these costs in the prices being passed to the consumers. The cash consumed each month to operate the producer will then be returning to them each month. Hence this cash return provides the intrinsic motivation to accurately deplete their property, plant and equipment account. If after considering these costs the property is unprofitable it would be shut-in and put in the producers inventory of innovative works in progress. With all of the costs of the Joint Operating Committee being variable, there will be a null operation reported for shut-in production that reflects no loss or profit. When producers are focused on profitability the consequences on cash flow and performance will be substantially positive. When producers focus on cash flow, profitability and performance are disasters. 

This performance accounting is enabled through the reorganization of the administrative and accounting resources into the service providers affiliated with People, Ideas & Objects. In this marketing series focused on the directors we have not discussed the standardized and objective nature of the accounting that will be conducted as a result of this configuration. With service providers focusing on one process and applying it through the use of their application of the Preliminary Specification and their services to the entire industry as their client base. This demands that every scenario be defined and captured within our software in order to be able to account for it in the method that producers need. A lack of participation by a producer will lose this opportunity and subsequent capability to deal with their possibly unique situations. Any subsequent changes would need to be funded directly by that specific producer and not as a result of the annual assessment for software changes. The developed software processes will be invoked and supported by the service providers in standardized fashion. There will be no consideration to deal with any special situations that were not worked out beforehand during development. The standard application of the processes will be handled in this manner and any changes or modifications will need to be discussed with the user community member who is the principle in the service provider organization. They will be able to coordinate the subsequent development. The importance of producer participation in these software developments can not be stressed enough. Standardization is achieved across the industry in this manner and as these processes are dependent upon each other any changes will need to be made through the appropriate analysis, development, testing and deployment. 

It is important to note at this point that the competitive advantages of the user community and service providers includes automation. Any deviation from the system processes that haven’t been fully analyzed and implemented appropriately, primarily as a result of a lack of participation by producers. Can not be accommodated. Automation will be invoked at high levels to ensure that the most effective and efficient operations are provided to those producers participating in these developments. Relieving the administrative and accounting resources to pursue higher level value added opportunities. Reduction of costs in this sense is a worthwhile pursuit, not from the point of view of the reduction of the costs itself. Reduction of costs implies high levels of automation are in play. Automation does not just reduce cost directly it does so indirectly through the reduction of error. Reduction of errors reduces time. What admittedly is becoming a more critical resource as we proceed through this 21st century economy.

The need to have standardization is also necessary from the point of view of having industry rely on the outcome of these methods. Objectivity is achieved as the ability to deal with unique situations or “manage” some producer's data is counter productive due to the global dependence on the data. Consider the process of balancing the production data across the month, across a gas plant with 1 bcf / day processing. Consideration of the elements and needs of the industry and having them captured in the software is a necessity for this reason. The benefit of this strict interpretation is that when it’s reported that a property is not profitable according to the standard and objective accounting. The producers in each of the Joint Operating Committees will know it is in their best interest to shut-in the property for the short term. They’ll know the property was assessed on the same basis as all the other oil and gas properties throughout the continent and be satisfied with the understanding of the nature of that standard and objective accounting. They will know and be satisfied with the determination of profitability or loss, its impact on their organizations performance, and govern themselves accordingly. And therefore increase their organizations performance by only producing profitable properties. 

It is critical to note here that the basis of the Preliminary Specifications development is user community based developments as they are the only means in which to develop quality software. Our user community is our customer, the only people that the People, Ideas & Objects developers understand to exist in the world. They are the only people that have an influence over the software developed by us. And, our user community is there as an industry based resource to deal with the issues and opportunities that people are having in oil and gas. For bureaucrats to be discarding the development of the Preliminary Specification because it doesn’t suit the 1% criteria of what is perceived as necessary for the industry to operate effectively is disingenuous. It will be a producer's lack of involvement that will precede the inability for that organization to effectively use the software derived from the Preliminary Specification. We suggest that to catch up after initial developments are complete will not be possible as the system will be subsequently developing and iterating on concepts that are foreign and potentially a renewed industry standard. To let some of the producers carry the freight so that other producers can catch a free ride after it's been built will be dealt with. There will be no free lunches, and if a producer decides to wait there will be consequences in terms of performance, their ability to catch up the performance of the rest of the industry and these costs are guaranteed to be much higher through a non-participation penalty. Recall it's not enough to own the oil and gas assets anymore. It’s also necessary to have access to the software in the form of the Preliminary Specification which makes the oil and gas assets profitable. We are configuring an industry of successful producer and service industry organizations based on the issues that have caused the systemic failures that will also dictate future difficulties. Will boards of directors be telling their shareholders they’ve opted out of an investment being made in their organizations profitability and performance? If directors don’t like the changes then their future will have been written through non participation. If they share our vision, have some questions and concerns, sitting back and remaining moot is the last thing the boards of directors need to be doing. It’s a different world in the 21st century. Bureaucrats chose to sit back and dictate their far reaching vision. That has now failed spectacularly, doubling and tripling down will too, which to me is quite obvious.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (JOC), Part VII

 We’ve been discussing the organizational structures that are defined and supported in the Preliminary Specification, our user community and their service provider organizations. To this point we’ve identified how we’re advancing the use of specialization and the division of labor throughout our community to turn all of the producers' costs variable. Enabling the use of the decentralized production models price maker strategy to ensure that all of the producers production is produced profitably everywhere and always. And to deal with the constraints of the diminishing science and engineering resources identified long ago. Moving the performance trajectory of the industry through specialization and the division of labor to meet the market demands of profitable energy independence in the North American market. We then discussed Intellectual Property laws and how our modules of the Preliminary Specification enable the producer firms to exploit those to their benefit and establish the much higher levels of innovation necessary in a scientific and technologically based industry. 

Today we’ll be discussing the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer. The Joint Operating Committee is the industry's legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. When we move compliance and governance of the producer firm away from the bureaucracy and into alignment with the seven frameworks of the Joint Operating Committee, we achieve an increase in organizational speed, innovativeness and accountability in producer organizations. Continuing on with the theme of this series of what, how and why we do that, let's begin.

Adoption of the culture of the oil and gas industry in the Joint Operating Committee is one of the fundamental changes that we’ve made in our ERP system. By doing so we’ve changed everything that is currently done in oil and gas and recognifigured it around what is unquestionably its cultural method of operation. We hypothesize that the current “corporate model,” as we describe it, developed as a result of the 1960s introduction of computers. When asked what would be done with the computers; accounting was one of the more natural responses. From there it was a simple evolution to the tax, regulator and compliance of the corporation and soon what was being done in the administrative and accounting part of the corporation had little to do with what was happening in the rest of the producer firm with the Joint Operating Committees operations. These divisions grew to the point where neither side was truly aware or appreciative of the other's concerns. With the forces of creative destruction in play and disintermediation introducing far more effective business models to each and every industry. People, Ideas & Objects et al believed the level of disruption in the oil and gas market would be horrific without any consideration of what we were doing or would introduce. Creating an opportunity to provide a solution to these issues and take this once in an industries lifetime opportunity to move back to the more natural flow of the business, focused around the seven frameworks of the Joint Operating Committee.

Research taught us that when you align compliance and governance with operational decision making, accountability is the result. This is intuitively understood. We believe this to be a source of conflict throughout the oil and gas industry today which creates an atmosphere and culture of unaccountable decision making. Operators assume the responsibility of managing the Joint Operating Committee based on the need to have the requisite capabilities available to conduct the necessary field operations. Operational decision making authority is held by the Joint Operating Committee and is delegated in the operating procedure to the operator based on the results of voting by the participants. A threshold percentage is established for any decision to be passed. Let's assume 60% is the required percentage for approval and the operator has a 33% interest. Decisions are then made on this basis, AFE’s are issued, funds are spent and the initiative fails. Who’s responsible and who needs to be accountable for the difficulties experienced? We believe this to be the root cause of the issue we identified in Part III of this series. Where we discussed the unaccountable nature of the bureaucrats just sauntering off from the shale fields to pursue clean energy without a whisper of effort to make them profitable. If they’ve never been held accountable for the day to day individual field decisions that were made, during any period of their tenure at the producer, why would they then be held accountable for any decisions when they’ve assumed the officer roles in the firm? It is the culture of the industry which developed over the past six decades that dictates this unaccountability. Assuaged by the viable scapegoats such as “it's a difficult business.” To resolve this the Preliminary Specification aligns and implements the Compliance & Governance module at the Joint Operating Committee level to establish a new culture of accountability for the decisions that are made. 

The next point is related to the accountability issue and to some of the previously discussed issues around the resource restrictions that are looming in the earth science and engineering resource supply. Professor Richard Langlois was another extensive source of primary research we used throughout the Preliminary Specification. His research is in the area of Industrial Economics and the Economics of Innovation. He raises what he calls the agency issue or rights assignment problem in his working paper “The Austrian Theory of the Firm: Retrospect and Prospect.”

The question then becomes: why are capabilities sometimes organized within firms, sometimes decentralized in markets, and sometimes coordinated by a myriad contractual and ownership arrangements like joint ventures, franchisees, and networks? Explicitly echoing Hayek, Jensen and Meckling (1992, p.251) who point out that economic organization must solve two different kinds of problems: "the rights assignment problem (determining who should exercise a decision right) and the control or agency problem (how to ensure that self-interested decision agents exercise their rights in a way that contributes to the organizational objective)." There are basically two ways to ensure such a "collocation" of knowledge and decision making: "One is by moving the knowledge to those with the decision rights; the other is by moving the decision rights to those with the knowledge." (Jensen and Meckling 1992 p. 253). p. 6

People, Ideas & Objects therefore questioned whether the ability of each producer firm would be able to continue to establish their in-house earth science and engineering capabilities and capacities at the level necessary to meet all of their needs, just-in-time, on a go forward commercial basis. On this basis, the anticipated resource constraints dictated the necessity of unused and unusable technical resources, or surplus capacity, in each producer firm was a luxury that was no longer available commercially or a viable commercial alternative due to the demands of a further specialization and division of labor. And therefore concluded the control or agency problem would need to be resolved on the basis of the knowledge being transferred to where the decision rights were held. It is specifically in the Research & Capabilities, Knowledge & Learning and Resource Marketplace, but also throughout all of the modules of the Preliminary Specification that we’ve moved the knowledge to the location of the operational decision rights in the Joint Operating Committee. 

A secondary point I would raise is the definition of capabilities. Professor Langlois has provided the following definition from his paper “Modularity in Organization, Technology and Society”. 

This is the basic modularization of the market economy. It accords well with the modularization G. B. Richardson (1972) suggested in offering the concept of economic capabilities. By capabilities Richardson means "knowledge, experience, and skills" (1972, p. 888), a notion related to what Jensen and Meckling (1992) call "specific knowledge and to what Hayek (1945) called "knowledge of the particular circumstances of time and place." p. 27

To which we’ve humbly suggested that “ideas” be added to that list. We also have Professor Carliss Baldwin noting that “knowledge begets capability and capability begets action.” What will become of the oil and gas earth science and engineering related capabilities and capacities now that bureaucrats have cast their future on clean energy. Renouncing shale and casting it to the back seat of the bus where no one will see or hear from it again. Shale being what can unquestionably be the most advanced science the industry has ever seen or developed. Shale technologies will at best develop no further, atrophy or be cast to the four winds. I’ll reiterate that People, Ideas & Objects have a plan to make shale commercial in the energy independent North American market. Shale is a critical and highly necessary element of our energy independence. Those that have graduated elementary school understand that clean energy is not and can not be relied upon. Energy independence will require effort and hard work on behalf of all concerned however it can be done. It will not be done with the means and methods of those who have never had their hearts or minds in the business for anything other than what it would do for them financially. Bureaucrats are responsible and should be held accountable for the destruction that we’re witnessing in the industry today. Will we see the producers board of directors begin to establish the necessary accountability frameworks that have been missing for the past four decades? By finally holding the producer firms' officers accountable for their actions and failures and setting a new culture of accountability throughout their firms by funding the Preliminary Specification? 

The bureaucrats' capitulation of their oil and gas operations in exchange for clean energy is what I believe to be the case we’re experiencing. We’ve seen a history and litany of lying, blaming and viable scapegoats that have provided all manner to suggest this is just more of the same. I think it’s different this time. With the inability to make shale profitable. Their incapacity, lack of motivation and unaccountable nature to even try. Their public shale denouncements to satisfy what they believe their investors need to hear. Bureaucrats have to stop reading the tea leaves as to what they believe investors want. Investors want profits, everywhere and always, and that is all. With their contrived positioning of clean energy and environmental concerns I would ask what is it in oil and gas that will be the new frontier if it is not clean energy? Offshore, the arctic or conventional, maybe heavy oil? It is this focus on clean energy that will do more damage to the industry and seal the fate of the existing producers. What message is being conveyed to the investors in oil and gas or its related service industries. Let’s assume they’re looking for capital for the producer to purchase land or a driller to build a new rig. As if they would ever be so foolish to do so. The investor’s first question would be why? Producers aren’t focused on oil and gas, its clean energy. 

The Biden administration provides cover for the inaction by oil and gas leading to a probable decline in American deliverability. So be it say the bureaucrats, it would be the higher commodity prices they would be able to enjoy as a result and to do so without lifting a finger. I sincerely doubt that any of the directors of any of the producer firms would act and behave in such irresponsible and inappropriate ways. These directors would be able to prove themselves were not party to this unaccountable nonsense, and besides, they know this Biden induced downtime would be the appropriate time to be developing alternatives such as the Preliminary Specification for the future of a dynamic, innovative, accountable and profitable oil and gas producer firm. I don’t believe they’re part of this overall drive towards environmentally focused clean energy. They have a fiduciary duty to their shareholders who invested in good faith to build the oil and gas business and develop a profitable operation from the revenues generated today. Not to divert those, or allow those revenues to flow into new, unrelated businesses that are unauthorized and unproven. What I also know is that the directors now have a larger source of overall revenues to initiate the development of the Preliminary Specification and associated user community. In a related manner, if investors don't see any effort by the bureaucrats' to make shale commercial, and don’t see producers investing in their organizations profitability, what message does that send? Let’s get on with the oil and gas business and cut out all this other nonsense.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (IP), Part VI

 We’ve been discussing attributes of the Preliminary Specification and the role that software plays in society. Stating that it’s no longer enough to just own the oil and gas asset, you must also have access to the software that makes the asset profitable. Producer bureaucrats have found themselves at the point in their lives where they believe to their core that their only means of survival is to all get together and sing kumbaya. With covid lockdowns waning and commodity prices looking high to them, times never looked better than now to say the word “Boom.” And just like that everyone drops into line and everything is once again ok. I’m not there yet, in fact I’m far away, primarily because I’m having difficulty remembering what bureaucrats did to change their behaviors and methods to bring about this boom. People, Ideas & Objects recently identified seven crises that should concern the bureaucrats that include the following. #1, Chronic and systemic overproduction, #2, Consequences of the virus, #3, A looming producer debt crisis, #4, OPEC and others spare capacity, #5, Deterioration of the greater oil and gas economic systems capacities and capabilities, #6, Fiduciary risks of officers and directors, #7, “Good old Joe from Scranton.” We also identified a wall of incremental “new” cost categories that will need to be paid by someone somehow. Investors aren’t buying it. I recently hypothesised a “managed industry” scenario where this boom is a facade designed to facilitate the mass exit of the bureaucracy and ultimate capitulation from their posts. Enabling them to state they left when “things were good and there were no issues when they left.” Other than that I fail to see or understand their optimism.

In the process of writing this RFP I’ve been detailing the what, how and why the Preliminary Specification is the choice for the North American producers directors to take the future of the industry. We continue today with further discussion of Intellectual Property in the industry. Bureaucrats have abused Intellectual Property in the industry for many decades. The importance of IP in the industry is it will organize innovation. The most productive innovation is when it’s organized under a structure that provides for the market to focus on its development. The North American marketplace established IP centuries ago and we have reaped its benefits. The United States included copyright in something called the Constitution. Copyright has to be published in order to earn the copyright. Exposing it to the market where it can be built upon and enhanced by others. It reduces the “me-too” phenomenon that the bureaucrats created to generate price competition in the service industry and elsewhere and ensure everyone was rendered “blind sleepwalking agents of whomever would feed them.” Is this how an innovative industry is going to be built, with bureaucrats sitting on top of a primary industry and using its revenues to endow their favors with the rewards of a penny or two here and there? The organizational structure of the new oil and gas industry People, Ideas & Objects et al will be building has innovation structured and based on the laws of the land. It will be these laws that define what innovation is undertaken and what is not. The violation of another's copyright is not allowable under the law so there would be no violators. A self policing mechanism reducing the overall costs of unnecessary duplication of innovation in the industry. Providing the incentive for those with a few ideas of their own, and as a result, the inherent motivation to do the subsequent hard work that is necessary. Fully protected from the IP poaching that’s occurred so often under the bureaucrats and is culturally ingrained today. To do so not just for today, but for always and everywhere. These copyrighted publications also enable an understanding of how things are done. Building upon that understanding with additional innovations. Intellectual Property therefore provides us with a strong legal structure that encourages innovation, eliminates the costly redundancy of duplication of efforts, educates and provides the motivation to do the difficult and challenging work we can all agree is the foundation of the industry. This applies across the greater oil and gas economic structure and includes the secondary and tertiary industries. The 21st century will be known for the leverage of Intellectual Property, or intelligence. Much as last century has been the leverage of mechanical work. Avoiding this or attempting to opt out is foolhardy in the extreme.

What is the motivation for people to develop these “ideas” of theirs? Are they not, just as the bureaucrats, in it for themselves and looking to siphon off what they can from the industry? Self interest is a part of every human endeavor. It comes down to whether or not it builds value. Bureaucrats have been well compensated and the industry has been destroyed. A great contrast due to the fact they have not been motivated by the discovery of ways in which they can build value through the myriad of ways it can be done? Intellectual Property is therefore not only a structural organizational component that can enable the means to control the innovation process throughout the industry. The motivation behind the participants is purely from the point of view of building value through the establishment of incremental profitability, reduction of cost, enhanced production deliverability or the expansion of reserves. It is the law, and most importantly of all, proven. The reason the United States dominates in the manner that it does is due to the fact the Intellectual Property laws provide the motivational and organizational principles of how their economy and society operate. It assumes people are Intelligent beings, not serfs like the bureaucrats. It is productive, constructive, focused on generating value and is an overall benefit to society. Otherwise why would you do the hard work that’s necessary? As a science and technology business, that is refuted to be second only to the space industry in terms of complexity. What has and what have these bureaucracies been doing under their business model?

The business model of the bureaucrats, I believe, was and is to have a pool of knowledge freely available to them when and where they want it and need it at its lowest possible costs of nothing. Therefore they couldn’t have anything published in this environment as it would be counter to their best interests in terms of any of their availability and access to this pool of Intellectual Property. And therefore nothing has been documented in the industry from the point of view of the science and technology of earth science and engineering. Leaving themselves fully exposed at this time through the simple publication of this IP by any author, say in a blog. I am not a lawyer and am not recommending any action other than to speak to a lawyer. I am certain upon reading this bureaucrats will begin the process of delegating the documentation of these specific subjects into materials that can be published. Asking the geologists and engineers, who are already overworked and exhausted, to put it on their list of things to do quickly. Which of course they’ll do. ;)

Two other interesting aspects of Intellectual Property are first, what’s known as the safe harbor provisions. Why doesn’t consolidated mega-corp just turn around and launch a lawsuit against copyright holders? This would be an unfortunate world where “big” ruled the earth and we serfs would be the drones who were forced to cooperate with their every command. The safe harbor provision states that you can not launch a lawsuit against the copyright holder. Which is really too bad isn’t it? Again. ;) Secondly, the division of tacit and explicit knowledge. Tacit knowledge can not be captured or written down. Only the explicit knowledge. Therefore it is up to people to take the explicit knowledge they have and apply their tacit knowledge to generate the value. The services associated with Intellectual Property are as important as the IP itself. Just as People, Ideas & Objects have our user community heading up the service providers that are delivering our software and their services to the producer firms. Therefore fulfilling our need to have the effective and efficient delivery of the tacit and explicit knowledge underlying the Preliminary Specification. The ability to manage that second revenue stream that we’ve identified in the earlier part of this series should be raised and brought back into focus. 

What I do know is that oil and gas in North America needs to be moving forward quickly, efficiently and effectively. The preparation People, Ideas & Objects et al have completed can be leveraged by the industry at this critical time. We have prepared the Preliminary Specification and our organization of our user community and their service providers. Since its December 2013 publication and the beginning of our efforts in organizing our user community since the first quarter of 2014. The means and methods of dealing with the specific issues of overproduction, overcapitalization and collapsed commodity markets that have been rendered obtuse through the specious accounting conducted across the industry since the late 1970s. 

These efforts of ours to use the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil and gas producer began in August of 2003 with a research proposal to industry. People, Ideas & Objects subsequently conducted that research ourselves which was completed with the publication of the Preliminary Specification. A full decade of intense research that is reflected and absorbed throughout this blog and elsewhere. And now that the obvious need in the market for this ERP system has come about, Boards should be aware that the time taken by People, Ideas & Objects to conduct this research, to effectively deal with these issues and resolve them has offset what would be industries largest cost of all. The time needed to generate a viable, workable business model. We enable them to yield untold value creation in the short term and not have to undertake that ten years of research themselves. In addition, the Intellectual Property contained throughout this community of ours, just as it will be for the small producer sector, and all sectors and industries in oil and gas, is what we list as one of our three strategic competitive advantages. They are, our user community, research and Intellectual Property in reverse alphabetical order. Anyone offering similar aspects to the Preliminary Specification in their ERP software would be violating our Intellectual Property and we would expect, as law abiding citizens, the oil and gas producers would adhere to these principles of law, recognize that and refuse to use their software. 

People, Ideas & Objects et al fully understands and appreciates the difficulties and risks associated with today’s North American oil and gas producer. We have engaged the bureaucracy in the classic battle of creative destruction and today’s disintermediation through Information Technology. The battle is well documented in the pages of this blog. We are here to make the industry dynamic, innovative, accountable and profitable in order to achieve energy independence on the North American continent, everywhere and always. Profits from the real perspective of recognizing all of the costs of oil and gas exploration and production on a timely and accurate basis. We provide a value proposition that differentiates us from the marketplace to the tune of $25.7 to $45.7 trillion dollars over the next 25 years. Those who do not understand how that value could be generated are unaware of the damage and destruction that has been levelled across the industry, its sub industries and the greater oil and gas economy. And therefore I will note in terms of our value proposition it is key to remember that oil and gas is a primary industry.

Our value proposition is defined by two components. The first is the incremental profitability that was not being generated and most probably never would under the bureaucrats current business model. These incremental profits total $5.7 trillion. The second element involves others' estimates of what the expectation for future capital expenditures will be in the next 25 years. These total $20 to $40 trillion. Bureaucratic expectations are that these capital expenditures would continue to be sourced through investors and bankers. That is now proven to be a false understanding on behalf of the bureaucrats. A failure of their understanding of business. These capital costs, including those already listed as property, plant and equipment on the bloated balance sheets of the producers will need to be recaptured from the only source with an adequate amount of cash to fund the industry on a prospective basis. The consumer will have to pay the costs of the energy they consume, the investors are refusing to subsidize them further. We believe that the amounts sitting in property, plant and equipment of the producers balance sheets today better represent the unrecognized capital costs of past production. Are in fact a reflection of the subsidy that investors have granted the consumers as these costs have not been realized appropriately due to bureaucrats' specious accounting and their desire to “build balance sheets.” Passing these capital costs, in a capital intensive industry, to the consumer in a timely and accurate manner is the only method in which this industry will be able to proceed profitably. This also being the only source of funding that the producers could ever generate. Investors will need at least a decade of proven “real” profitability before they’ll come back into the industry on a wholesale basis. The costs of this future will be fundamentally more complex with new categories such as reclamation, refurbishing and rebuilding the infrastructure being added. These costs have been incurred on behalf of the producers, as a result of providing for the consumers energy needs. Without a means of passing these costs on to the consumers, such as the Preliminary Specification does, they’ll continue to bankrupt the industry, or their investors under the bureaucrats' proven method of mismanagement. 

It is People, Ideas & Objects, our user community and their service providers that are channeling these organizational structures towards innovation, productivity and profitability through software. It is software that defines and supports the organization. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (IP), Part V

 People, Ideas & Objects, our user community and their service provider organizations focus on the startup, small and junior oil and gas producers to ensure they’re provided with the full capacities and capabilities of the Preliminary Specification. Is due to the critical role and nature of their existence, as without them it would otherwise soon be over. Currently we have a market in oil and gas where the bureaucrats happily point to the fact that startup to junior producers are unable to compete and blame them for causing the difficulties we’ve seen in the industry. In fact they may have become the bureaucrats most recent, viable scapegoat! Our focus is appropriate, and we’re able to ensure these producers are able to enter the industry with far less barriers to entry by establishing them with the means to generate their second source of permanent revenues from day one. A ready market where the demand for those earth science and engineering resources will be made available through the Preliminary Specifications Resource Marketplace module. Startups, small and junior producers will also have the ability to interact with producers in the Work Order, Resource Marketplace, Research & Capabilities and Knowledge & Learning modules. Providing them with the cash necessary to pay the mortgage, the Internet, to work from home and skip past the dog food aisle for their families nutrition. Introducing them and their experience, skills, knowledge, and ideas that form their capabilities to the broader marketplace. We also eliminate that impossible wall of never ending overhead costs that consumed investors dollars year after year as the fixed, base overhead of a small to junior producer. Which is the cause of their demise today. It didn’t matter how good their technical skills were, that’s not what determined their success or failure as a startup, it was if they could get past that wall of base overhead costs. We’re going through a process of identifying the what, how and why People, Ideas & Objects et al provide these producers with a fresh start. Let's add another brick to the “how” variable. I think we’ve accurately described a different world for the future of the industry in terms of the need to begin to rebuild the industry brick by brick, and stick by stick. That’s not a top down consolidated mega-corp solution in my mind.

So why are we focused on this allegedly obscure sector of the industry? It should be the number one priority of everyone in the industry today. If we believe that consolidated mega-corp is going to fix these difficulties it would be a surprise. I’m not speculating here, I’m the only one that truly knows in my self deluded ways. And I’ll tell you why that is, none of the bureaucrats are calling me. It’s either their not interested in ERP, doing something on their own or planning to build the Preliminary Specification without me. Thinking that “big” will squash that bug formerly known as People, Ideas & Objects. First it’s no longer the wild west in terms of Intellectual Property. Second, the world doesn’t work that way anymore, copyright and Intellectual Property are respected at the highest levels everywhere and always. When Oracle and the majority of the Information Technology world depend on their own IP it’s not wise for them to go about diminishing others IP. It also doesn’t work from the point of view of having a first tiered vendor working with an industry that is trying to do the same. If consolidated mega-corp were attempting that. Why would Oracle work with any such scum when they’ll only turn around and do it to them once they're done. Therefore the board of directors of all of the producers are hereby advised don’t think they can use any of People, Ideas & Objects Intellectual Property. If People, Ideas & Objects finds that someone is using it we’ll have it stopped. Rendering any similar alternative ERP investments futile. Come to think of it, this little dissertation on the use of IP may be an interesting point when understood from a scientific and prospectively innovative industry. And that is how the underlying Intellectual Property of the oil and gas industry is managed within the Preliminary Specification. 

On a current basis the bureaucrats have known the Preliminary Specification establishes a strong foundation for which the Intellectual Property of those individuals within the industry becomes available to those original authors, innovators and entrepreneurs. This is provided through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules that were published in final form by December 2013. From the Resource Marketplace module I summarized the point as.

Another key point is the tearing down of the basis of Intellectual Property (IP). An industry such as oil and gas which is based on its earth science and engineering needs. After all, it is a business based on science. If we are to expand the capabilities in the science and innovation in the industry. We are going to need to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there is no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling the people to earn the rights to the Intellectual Property within the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. This therefore turning the oil and gas industry into a far more dynamic business.

With all of the industry fundamentally destroyed as it is, its IP is in disarray as far as I can tell. The capabilities and capacities that are derived from it are deteriorating as we speak. Making this somewhat of an IP gold rush in the industry, just to save it from the bureaucrats. However, check your employment contracts they may have clauses that state while working for them all of yours is all of theirs. Consolidated mega-corps difficulty is that none of this is published and the act of publishing is how the copyright is earned. Let me pass on one more important fact that I’ve determined since I’ve been so reliant on copyright. Patents and trademarks are defensive, in that they protect what is known of your IP. Copyright is offensive and allows expansion of one's Intellectual Property. Copyright does not secure for you the rights to an idea. It only provides you with the monopoly rights to the expression of that idea. Implying it must also be pursued and maintained much in the manner that I do here. So until the Resource Marketplace and other modules of the Preliminary Specification are built. Ladies and gentlemen start your blogs! The first thing we must do for the startup, small and junior producers in the oil and gas industry is change their competitive advantages. To read now: Intellectual Property, earth science and engineering capabilities and capacities, their land and asset base. Done. One of the greatest forms of IP today is software and algorithms, Artificial Intelligence and Machine Learning. What if these were also the foundation of the producer firm as competitive advantages? Consolidated mega-corp is looking awfully unattractive right now. Bureaucratic brains exploding. 

The reason that everyone should be concerned about the startup to junior sector is purely for the fact that all of the industry rebuilding will be done on an innovative basis. This will not be your grandfather's oil and gas industry. I know it should say father but I struck a compromise between father and great, great grandfather's oil and gas business. It’s the 21st century and we can skip not just a few steps, but everything. Since we're rebuilding, why do it in any other manner? Innovation is the basis of the Preliminary Specification. It is one of the two People, Ideas & Objects, our user community and their service providers core purpose to provide all oil and gas producers with the most profitable means of oil and gas production everywhere and always. And to provide the consumer with the lowest possible cost of an abundant energy supply. We do this with the decentralized production models price maker strategy ensuring that all production is produced profitably. And innovatively to ensure that the costs remain affordable to the consumers and the commodities deliverability and reserves continue to expand. 

Business is changing quickly. Intels dominance in the market is now a constraint that is causing them to lag the market in consequential ways. As the dominant manufacturer of processors, theirs has been deemed a redundant business model. The business value is no longer in the manufacture of processors, it's in the design of them. Contract manufacturing is a commodity business where others are finding profits and opportunities in that area where Intel can not compete. In terms of design being the value, that is now the case and you should read the summary of Ampere Computing’s Leadership Team that now has one of the most powerful processors available in commercial volumes. Oracle has declared they’re moving their cloud offering to Ampere processors, which Oracle’s Cloud is offering today, and People, Ideas & Objects will be running the Preliminary Specification exclusively on Ampere which will be far better due to the higher cost / performance than the Intel cloud offers. 

I wonder why Intel didn’t merge and become a member of the consolidated mega-corp themselves which promises so much in today's business world? This is the new business world and there are new business models. It comes down to one word, the individual. If you don’t see what the rebels at Intel did when they established Ampere your opportunities remain with the last few days of consolidated mega-corp. The individual is facilitated by that great innovation known as the door. It is also facilitated by what the Internet was really meant to be, FaceBook and such are just useless distractions. The Internet demands one thing and one thing that is difficult to attain however. The software to organize. To organize society today, with its global reach, can not be done in a spontaneous manner. There is no serendipity when individual A meets individual B 2,000 miles away on the Internet through software providing them the means to conduct their business. Software defines and supports the organization. Without People, Ideas & Objects none of this oil and gas vision will come about by sitting and waiting for the phone to ring. At least it hasn’t happened yet.

The question also needs to be asked: why is it that Apple continues to innovate consistently? Although their products are more costly, they bring incremental value to their customers through the innovativeness they provide. They too rely on Intellectual Property as the basis of their value. They in fact consider themselves a software company that sells hardware in order to bring about that customer value. Again, software defines and supports their organization. What fool would run a company that sources their handful of products from a number of countries that total in excess of 3.5 billion in population? And then have the gall to snap their fingers and say “now innovate.” It doesn’t happen without software.

Please note that many have identified the Chinese as an issue that we should be concerned about. They are a formidable competitor of the class that North America has never faced before. For that there is no doubt. We do not have an issue with the Chinese people in any way. They’re good people and we are confident in our ability to compete. What we have however is serious concerns about the Chinese Communist Party. Extract the CCP out of the equation and we’ll be on a landscape that is more reasonable, fair and equitable. This is an apt metaphor for why we need to take the oil and gas industries' command and control out of the hands of the oil and gas bureaucrats.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (S&DOL), Part IV

 We’ve been discussing the marketing phase that People, Ideas & Objects have now undertaken. How the directors of the producer firms are our target audience to ensure the Preliminary Specification is chosen as their ERP system. In the prior post we noted the use of specialization and the division of labor was to be used to enhance the performance of the producers administrative and accounting functions and to provide the organizational foundation to implement our decentralized production models price maker strategy. We noted how the service providers that were affiliated with People, Ideas & Objects user community would be providing the ERP software and their services to industry as their clients. This involved the delivery of the explicit knowledge that had been captured in the ERP software and the tacit knowledge of the individuals within each of the service provider firms. Fulfilling the role of the accounting and administrative needs of the producers with a variable, industry based accounting and administrative capacity and capability. What we wanted to discuss today is the opportunity for all concerned that the consolidated mega-corp vision being pursued by our good friends the bureaucrats provides in contrast to our Preliminary Specification, and most particularly the start up and junior oil and gas producers.

With the clear objective of rebuilding the industry brick by brick, and stick by stick the consolidation route is contrary to every possible reality on the ground in the business world today. More of the same bureaucratic nonsense is not going to resolve what has afflicted the industry for the past four decades. Which can best be summarized as the bureaucracy. Rebuilding will involve a dynamic industry that can be based on a decentralized, connected environment such as the Internet provides. Hierarchical strata of advanced paper shufflers is a future failure, best defined. To bring about an ERP system for the industry such as the Preliminary Specification provides; must consider the opportunity of what is commonly referred to as disintermediation. And People, Ideas & Objects, our user community and their service provider organizations abide. However, bringing one of the most complex systems into one of the most complex industries into the environment of the small and startup producer is foolhardy to consider. How could that ever be a commercial software product? Or be provided to a commercially viable small or junior oil and gas producer? And that is the fact of the issue we stand with today as a result of the “consolidation as a solution.” We need to ensure the future of the industry is in the hands of the oil and gas men and women who will knock down the barriers that stand in their way, just as so many have done before. The constraints and reality of the regulatory, compliance and investment demands are real and an impediment to these needs. That is, if they could not access the kind of systems necessary to operate in that environment, no matter their size, the capital markets will remain forever closed to them. An untenable barrier today that will be even more so in the near future. 

Under the Preliminary Specification a startup or junior producer would no longer need to establish the point where they’ll have to generate in excess of $3 to $5 million of free cash flow necessary to offset the annual base overhead of the firm. For the administrative and accounting they’ll only be incurring the variable overhead costs of the service providers fees that they use and the costs of the software development assessment by People, Ideas & Objects each year. Recall we noted recently that not only are these overhead costs variable, but if they’re incurred that denotes profitable production, indicating these costs are covered, or the property is not producing and as a result not generating any costs. And there are more attributes of our system that provide benefits for this new oil and gas industry. 

Enter two variables that were not available in prior decades and centuries. The cloud computing era with the maturation of the overall technological infrastructure that is best represented by the Internet. I believe people are mistaken if they think the Internet was conceived and developed in order to facilitate FaceBook, to me they are a generational fad. We are at the infancy of what the Internet can provide. And the second variable being the “service” aspect of our user communities service providers. It was discovered in our research that the level of innovation that is attributable to the small and medium sectors of an industry were as substantial as what the larger sectors contributed. Although the larger sectors contributed large amounts in total spend it was no greater than the effect of what the other sectors contributed. Professor Dosi was one of the key sources of research that I used in determining the framework necessary for an innovative oil and gas industry. There are 134 blog posts in this blog in which we wrote about his work during our 10 year research into building oil and gas ERP systems based on the Joint Operating Committee. Our Preliminary Specification, user community and service providers provide all oil and gas producers with the most profitable means of oil and gas operations, everywhere and always. However at the same time ensure that the consumers are provided with an abundant energy supply and the lowest possible cost of their energy consumption. Innovation within a science and engineering based business is therefore an inherent part of both these demands. 

Bureaucrats are great at citing what they’re going to do in their consolidation vision. They never follow up with how or why they’ll do it, and when it ultimately fails we’ll see that no thought went into their talking points beyond the distribution of their talking points memo. They say consolidation will cut overhead costs which is an inherently simple concept to grasp. Except, this also falls under the “growth industry” mentality that is prevalent and is a distraction in oil and gas. Growth businesses in other industries claim “they'll make it up on volume” is the familiar saying. What we do know is that few achieve that. The question we need to ask these bureaucrats is, if the reduction of overhead is the objective, why pursue that if only People, Ideas & Objects say that overhead is disproportionately out of place? Most of the industries overhead, 85% on average, is capitalized. Therefore excessive overhead costs must have been an issue they’ve been denying all these years. Is the reduction in overhead they’re seeking designed to enhance “real” profitability? Or, alternatively is it so they can bury their personal “take” that much deeper into the obtuse malaise of overhead sludge? So let's cut the chit chat and get to the point of what, how and why People, Ideas & Objects et al are going to provide these miracles. 

Let's set the tone from the point of view of what will be the demands in terms of engineering and geological needs. People, Ideas & Objects have identified new cost structures that include the costs of:

• Recovering the past property, plant and equipment account balances, or as we describe them, the unrecognized capital cost of prior production. Whereas if recognized today and passed to the consumer it would provide incremental cash flow to provide dividends in compensation for the past excessive reliance on investors.
• The refurbishment of the infrastructure as it stands today. 
• The rebuilding and expansion of the infrastructure. 
• And finally the looming and escalating reclamation costs of the industries past. 

These costs have been incurred by the producers as a result of providing for the consumers energy needs. Without a means of passing these costs on to the consumers, such as the Preliminary Specification does, they will bankrupt the industry, or their investors under the bureaucrats current and / or consolidated business model. These form the legacy of the bureaucrats in terms of the property, plant and equipment balances which we’ve determined are not transferable out of the corporation. And as much as they’ve tried, either are their reclamation cost obligations. Taking on the expansion of the infrastructure may be the largest of these costs, and I would suggest the greatest opportunity for all concerned in a dynamic, innovative, accountable and profitable primary oil and gas industry, and most specifically the secondary and tertiary industries. 

The Preliminary Specification also implements specialization and the division of labor across the producer firm and most particularly in the earth science and engineering capabilities and capacities of the producer firms. We list this as the first step in our solution for the startup and junior producers. These capacities and capabilities are becoming increasingly burdensome to each of the producer firms due to their unshared and unshareable nature, but for different reasons from the administrative and accounting difficulties mentioned in our last post. The costs incurred to maintain these capabilities are growing as a result of the advancement of their science and technological development which demands further specializations be undertaken within each of the producer's capabilities, and critical competitive advantages. We believe that all producers have reached the point where the demands to maintain these capacities and capabilities have expanded beyond the usable population of these technical resources. Or will soon. With the retirement of the brain trust of the industry, and the universities not producing anywhere near the replacement number necessary, a critical shortage will soon demand that these technical resources will become too rare, too costly and too unavailable to maintain, not to mention, expand the deliverability of the North America based industry. Consolidated mega-corp will have particular difficulty managing this technical resource when entrepreneurs see the startup opportunities we’re defining here. That is, if only there were an ERP system that provided a solution for the startup to deal with the compliance, governance and regulatory environment and be able to access funding! In addition to this limited technical resource supply we also believe that the producers' firms are at a point now where the costs of their scientific engineering and geology needs are beyond their commercial grasp as it is. Nonetheless, a decidedly higher level of specialization and division of labor will be needed in the areas of earth science and engineering. It is the unshared and unshareable makeup of these capabilities that we find the difficulties once again. Producers need these technical resources for a variety of just-in-time purposes, as operators, for their highly technical areas. If we assume that across the industry the utilization rate of these technical resources are at 75% due to their organizational inefficiencies. Then by releasing that other 25% and deploying that unused and unusable capability more effectively we’ll have what I believe to be the second aspect of the solution of these pending and most certainly future difficulties. A one third increase in the capacity with higher output from enhanced specialization and division of labor, providing us a good start to solving this difficulty.

Instead of letting another issue manifest itself into a crisis level issue. People, Ideas & Objects et al have implemented a variety of changes within the Preliminary Specification. The first is to consider the producer firm from the time the Preliminary Specification is operational, to have two sources of continuing revenues. The oil and gas sales and the revenues earned by all of their earth science and engineering capacities and capabilities being deployed and employed in the form of a revenue generating capacity. Whether that be to one of the producers own Joint Operating Committees, or in the consulting of the individual to other producers / Joint Operating Committees, as a client, of which they may / may not have an interest in. Due to the specialization and division of labor demands producers will need to have chosen to specialize or acquire a specific capability on the basis of the distinct specializations and competitive advantages they hold or desire. These producer revenues will then offset these engineering and geological costs incurred and charged to either their Joint Operating Committees or other producer clients. 

In terms of an opportunity in this new oil and gas industry, in which we are building brick by brick, and stick by stick, this second source of revenue should be seen as the initiation of the start up oil and gas producer firms' startup revenues. More than that they offset the additional costs of the head office burden not considered part of the administrative and accounting category. And this will apply to all producers no matter their production profile. When producers are specializing on their distinct competitive advantages, and all producers including Exxon, Shell and Chevron will need to do so, the demand for outside technical resources will be required to augment their needs.

In a world where software has to define and support the organizations that exist. This is some of the what, how and why we’re able to provide when the Preliminary Specification is delivered. Instead of being mere serfs as the bureaucrats wish to continue treating the engineers and geologists, they’ll be able to take control of their careers from this point forward. The facility most responsible for this capability of making direct labor charges to the Joint Operating Committee is what we are implementing in the industry is our Work Order. It can be reviewed in detail at this link. Bureaucrats may claim that charging labor directly is already available through the systems they use. Which is true they are able to allocate their labor costs to the field. However not with the necessary features of raising it to the point of making it a defined revenue stream of the firm. And the feature of making it a system that interacts throughout the industry. Allowing for the interactions between the resources they need and where they need them. Subject to the appropriate approvals and governance of course. Or enabling the second purpose of the Work Order system that we’ve defined in order to enhance the industry wide innovativeness through the establishment of working groups etc. Our Work Order system is able to bill its costs at all times to either corporate overhead, Joint Operating Committee overhead, an AFE or to a lease. Therefore the billable time of the individual engineer or geologist should be deployed within the producer at 100% of the time or not be working for the producer. And this is an inherent part of these people beginning the establishment of their own producer firms which rely on their talents of their much needed earth science and engineering capacities and capabilities. We’re not finished with the what, how, and why the Preliminary Specification facilitates the robust startup and junior oil and gas producers. We’ll continue this discussion on July 12, 2021.

The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here. 

To: The Board of Directors, Our RFP Response (S&DOL), Part III

 It can go by any number of different descriptions. “Cut and run,” “bail” or “cut your losses.” The one consistency in all of these is the fact they define failure. Shale oil and gas has now been deemed a failure by our good friends the bureaucrats. They’re getting out, selling properties and writing down those assets that held such promise in all of those investment offerings. These Keystone Cops are on to the real thing now with clean energy and are making the transition with the revenues established by prior investors in an unauthorized fashion. Remember it’s cut and run. Our white paper published on July 4, 2019 entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” suggests a means and method in which the industry could turn shale profitable. Granted it’s self serving as it involved developing the Preliminary Specification and demanded the bureaucrats conduct some serious effort, or work! After two years of this paper's publication; is it now acceptable to just walk away from the catastrophe they've created and venture off into territory that has proven never to be profitable? Or do they have a plan to make clean energy profitable? If so they should have submitted that in the business plan they needed to seek authorization for such a radical change in the underlying business. Why is it acceptable to let the bureaucrats saunter off now and forget about the failure they’ve created? Who will hold them responsible and accountable, it should be the boards of directors. And why is this method of failure the consistent behavior of these bureaucrats over the past four decades? Or am I mistaken about this and am unaware of some amendments to the Directors and Officers Insurance contracts? This behavior is unacceptable and reflects their moral and ethical depravity. And why would they do anything about this if they’re never held to account?

With this post we begin a series within a series where we’re describing the number of organizational structures in the Preliminary Specification that support the dynamic, innovative, accountable and profitable oil and gas producers. These define the “what,” “how” and “why” of the Preliminary Specification. But most of all adopting a serious approach to the business focused on profitability everywhere and always. What would commonly be considered the behavior and culture of a successful business. 

I have to admit I’m quite excited about this marketing phase People, Ideas & Objects are in now. I no longer have to concern myself with the bureaucrats and their activities, they’ve left a legacy they need to live with and I’m sure there will be more to talk about. I’ll find no argument anywhere that they’re the ones responsible for the industry wide damage that’s been done, no one is listening to them anymore and they’re probably on their way out anyways. The untenable nature of the producer firms is reflected in the downward trajectory of these organizations. The extent of the damage is so severe they are beyond remediation and the economic principles of creative destruction and disintermediation are fully in play. The situation on the ground is therefore ripe for a solution such as the Preliminary Specification, our user community and their service provider organizations. Marketing is a much more enjoyable situation for me as I do not need to be the grumpy guy in that far off distant corner of the Internet anymore. Our appeal to the directors of the producer corporation is simple. They decide which ERP software to implement within the organization. People, Ideas & Objects know that the directors are just as concerned with continental self-sufficient deliverability of profitable oil and gas operations and providing abundant, affordable energy to the consumers. People, Ideas & Objects assert, as in every business today, it’s not enough to just own the oil and gas asset anymore. It’s also necessary to have access to the ERP software that makes the oil and gas asset profitable. Without ERP software focused on delivering profitability everywhere and always there is no way in which to organize today’s society in a profitable direction. This is proven through the quality of the ERP systems used in oil and gas today and the systemic lack of profitability throughout the industry. It is what we refer to as a “modern day software bug.”

The creative destruction being undertaken provides opportunities for everyone, except the bureaucrats, and these opportunities would definitely include the directors. The new producers may be the best opportunity we’ve seen for a long time in the industry and what these companies could use more than anything is a steady hand to help navigate this road ahead. The advantages that People, Ideas & Objects Preliminary Specification brings for all producers is significant. Whether that is Exxon or the producer firm that was started at the breakfast table this morning. This also applies to any and all other types of secondary and tertiary industry firms involved in the greater oil and gas economy, no matter their size. However, in the categories of the junior and startup oil and gas producers, the advantages we provide put their organizations in the driver's seat in terms of how they’ll prosper and grow. They’ll have distinct competitive advantages over the methods of organization provided under the bureaucrats' business model. This will begin being detailed in our next post. 

The producer organization that we define and support in the Preliminary Specification sets out to employ and deploy much higher levels of specialization and division of labor. We feel the overhead costs of the producers demand these be dealt with by making these organizations more efficient through the application of an advanced, and continually advancing, specialization and division of labor. We also turn their overhead costs from a fixed producer based capacity and capability, into a variable industry based capacity and capability, their variable behavior being based on a Joint Operating Committees ability to produce profitable production. Another reason for the high overhead costs of each producer is that all of their capacities and capabilities are replicated within each producer firm in an unshared and unshareable form. Today these accounting and administrative capabilities and capacities are purpose built within each producer organization to meet the demands of the various stakeholders and these overhead costs are the secondary cause to the lack of profitability throughout oil and gas. These costs do not form part of any of the producer's distinct competitive advantages.

What the Preliminary Specification defines and supports is a reallocation of the producers administrative and accounting resources into the service providers who are headed by one of the People, Ideas & Objects user community members. Our user community and their service providers are independent businesses that are specialized on one administrative or accounting process and conduct that process on behalf of the entire industry as their client base. Whereas if that Joint Operating Committee was producing for that month, under our decentralized production models price maker strategy, we can reasonably assume it’s profitable. Then the processes that are specifically administered by each of the service providers will be invoked and their associated billings for each process will be charged directly to their Joint Operating Committees. If it’s not profitable then the property will be shut-in and none of the service providers will therefore receive any data from our task and transfer network and therefore no processes will be conducted and subsequently no service provider billings will be rendered. The shut-in property does not incur a profit or a loss, but a null operation. In either scenario overhead costs are covered in the current period through either profitable operations or the fact the cost behavior is variable under the Preliminary Specification, and as a result not incurred. 

There are many benefits for producers to begin their operations in this manner. First they will reach their optimum profitability when losses are no longer diluting profitable properties. Whether that is at 25% or at 100% of the producer's capacity. When all costs are variable, production will be profitable at any volume of their production profile. This will preserve their oil and gas reserves for a time when they can be produced profitably. Those reserves no longer have to carry the incremental costs of the losses that would otherwise have occurred if they continued to produce unprofitably. The commodity markets will find the marginal price when the unprofitable production is removed from the marketplace. Increasing the value of all the producers' production. Keeping the commodity as reserves can be seen as an affordable means of storage where the costs of production and storage are zero. Producer bureaucrats assert this is collusion. If making independent business decisions based on detailed actual, factual, standard and objective accounting information that is determining profitability is collusion, then? Once the bureaucrats realized their collusion claims were moot they stated unequivocally that they could never shut-in any production, it would cause the formation to “fold over on itself” or other such nonsense. That is until they ran the oil price down to negative $40. The refineries had to tell them they wouldn’t take anymore, forcing production to be shut-in. Upon resumption of production the reserves reflected there was no damage whatsoever. These are just some of the many reasons for the Preliminary Specifications implementation. Oil and gas commodities are price makers, not the price takers the bureaucrats assumed they were for all these decades. One critical aspect of a price maker is that they only bring on new production when it’s profitable. The method we’ve developed is detailed further in the Preliminary Specifications Preamble. 

Overall our decentralized production models price maker strategy invokes a high level of production discipline within the North American oil and gas industry. Achieving maximum profitability can only be gained through the fact that unprofitable properties dilute corporate earnings. Therefore the need to ensure they are fulfilling their primary task of maximizing profitability becomes the predominant method of production discipline. In order to compete in the capital markets of the 21st century will be much different than what it was in previous years. With technology and other industries providing growth opportunities, for oil and gas companies to assert they are in a growth mode precludes them from that competition. They are a primary industry with commodities that are subject to the price maker principles of economics. This will also affect the producers capital allocation and capital discipline too. Capital investments will only be made with the assumption or demand that they be immediately profitable, and why would they invest in them if they can’t achieve that criteria. This invokes a far different criteria as to what is done in the industry and we can cast the foolishness of “building balance sheets” and the like to the scrap heap. 

Cash demands in the industry are currently one of the producer's pressing difficulties. This is due to all of the producer's costs outside of operations being more or less capitalized and then recognized as depletion over the course of several decades. Including the capitalization of large percentages of overhead and interest. By not recognizing overhead costs in the current period producers are able to more easily declare their specious profitability. However, the cash that was consumed in those overhead costs is not returned in the current period in the prices of the commodity charged to the consumer. These overhead costs then sit as assets on the balance sheet in property, plant and equipment, or as we call them “the unrecognized capital costs of prior production,” for the next few decades. Therefore the search for new cash each month to replenish the cash float has been the issue for the past number of decades. When investors were willing, this was not an issue with the annual top up of investors dollars. Now the reality of their specious accounting haunts them daily as they try to find this new cash to cover the basic costs of their operation. Working capital has been and will continue to be a crisis in the industry under the current business model. No matter what commodity price is attained. Basic cash management would have indicated this to the bureaucrats many decades ago. (I wonder why they never changed these methods? I’m sure they must have had their reasons!) With the Preliminary Specification recognizing overhead in the current period as part of the operation, capturing that in the price charged to the consumer, return of the cash to the producer will occur within that production month. That however assumes profitable operations are conducted and all costs are accounted for appropriately. I’m on record, and allege that hasn’t happened. Calling the producers accounting specious and deliberately deceptive. I do at times wonder what costs are in that capitalized overhead that no one is aware of. Both in terms of its size and its composition. 

As a director of an otherwise terminal organization this might appeal as a more exciting type of work. With a directors experience, skills, knowledge and ideas, or what form the basis of an individual's capabilities. The directors would be valuable and rewarded throughout the industry. Don’t count yourselves out. The only solution as it stands today, from a creative destruction and disintermediation point of view, is People, Ideas & Objects, our user community and their service provider organizations implementation of the Preliminary Specification. The natural forces of disintermediation and creative destruction are being obstructed through the diversion of industry revenues away from the development of initiatives such as the Preliminary Specification. And therefore are unnecessarily directly supporting the status quo behaviors that have been proven to be disastrous.

The Preliminary Specification, our user community and service providers provide for a dynamic, innovative, accountable and profitable oil and gas industry with the most profitable means of oil and gas operations, everywhere and always. Setting the foundation for profitable North American energy independence. People, Ideas & Objects have published a white paper “Profitable, North American Energy Independence -- Through the Commercialization of Shale.” that captures the vision of the Preliminary Specification and our actions. Users are welcome to join me here. Together we can begin to meet the future demands for energy. We’ve joined GETTR and can be reached there. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.