People, Ideas & Objects Marshall Plans, Part V

 This post demands that I put my dual lined, tin foil hat on in order to speak in a manner that is truly off the wall. You don’t have to be crazy to do this job, but I do find it to be a distinct competitive advantage. Nonetheless I feel this is a discussion we should consider, even at this obscure and indefinable time, and it should be considered by those who are of the higher pay grades than we are. The other point I wanted to make before we get into today’s issue is that the bureaucrats from my experience of offering the Preliminary Specification to the market have been brilliant, dedicated, united and committed to the battle and the war against this initiative. They are an impressive, creative and resourceful adversary and we have been mindful of this in all of our writings and interactions. My writing is adversarial in terms of the tone that I take with the bureaucrats in order that I can define the line in which the differences exist between theirs and our proposed solution in the form of the Preliminary Specification. These writings seek to entertain our readers and increase the contrast of our two differing points of view. Besides, I find it more enjoyable. We should never make the mistake that they will be out of the fight, that they won’t avoid direct participation in the development of the Preliminary Specification. As individuals they are formidable and I would look forward to having many on the payroll at People, Ideas & Objects. I have never subscribed to the organizationally destructive concept of nepotism or hiring yes men, and I expect push back from all those that are involved. Our job is a difficult one and if we’re looking for more friends then this is probably not the place for you. We can push back on the performance of the bureaucrats, and always will, that doesn’t mean that we don’t respect them, or that they’ll cease to push back and probably more vigorously. 

Issue

The first layer of our tin foil hat is deployed to allow the understanding that our budget is needed to ensure that our user community is protected from career risk in committing their time and energy to the development of the Preliminary Specification. Users are able to do so and complete the tasks at hand and to do so without the unnecessary interference from the noise that they’ll be bombarded with. What we also know is that there will be no way in which we’ll be able to proceed on the basis of trust that industry will be providing the financial resources to complete this task on a pay as you go basis. Cutting us off financially midstream would be the end of the project's life and it would terminate any similar initiative from being considered in the future. Which only meets the needs of the bureaucrats. These are the requirements that we are living with. We “can not become blind sleepwalking agents of whomever will feed us.” We must complete this task on the basis of what is required of the task. 

Now for the second layer of the hat. We need to make the assumption for the purposes of this discussion that the financial resources to complete the Preliminary Specification have been secured. Based on the history between us and the bureaucrats we know that this transaction will not have been supported by them. What, how and why the transaction occurred is pure speculation at this point and not part of this discussion. What we can be assured of is that it will create an environment that is different than what has been experienced before. This period will not be the time when we will be able to look back upon, in the future, and think that it was a time of wine and roses. It will be the polar opposite and it will seem at times that the entire world has aligned against this initiative. And in contrast what will be difficult to understand is the unsolicited support and sympathy the bureaucrats will be receiving. 

Our Marshall Plan

I’m not attempting to create a hostile environment. Far from it. Disintermediation pits two separate groups of people against one another in a battle for the right to manage an industry. Many industries have gone through the process, and bureaucrats have learned very well from that history how best to interrupt the process. All industries will eventually be subject to the same forces and we’re probably half way through the reorganization of most industries. What was best described in prior generations as creative destruction, and accepted as such, is now opposed with rigor and turf wars. I’m speculating on what I believe will be the case for those that are involved in this initiative as we go forward. If this environment doesn’t suit you then we can not provide a more hospitable environment at this time. This will require hard work from everyone involved. Those that aspire to work hard need not apply. In our prior post we discussed the dynamic consequences of what occurred as a result of actions taken during WWII. Not to suggest our developments are of the same level of conflict but possibly an example that has significant learning value for us. 

In my dual lined world I think there’s something that we can do today that begins to deal with this environment and mitigates at least the effectiveness of the bureaucrats fighting against us. If we leave it to them to continue to define and execute the battle in the manner that they have over the past few decades, I’m not certain that we would be able to succeed in this overall change. Even though the demand for these changes in oil and gas have now progressed to the point where there is serious risk and jeopardy being realized on a societal level. If left to their own devices bureaucrats will be able to muddle through with the benefits of the resources of a primary industry, a continued lack of focus with their way of life secured and prosperous. We know what they’d do. Our expectations are therefore in line with the realities of what will probably be the case when we commence the development of the Preliminary Specification. However, if we’re able to guide the focus of the bureaucrats during this time on more productive, supportive and constructive tasks. Then maybe we’ll have a chance of at least coming out at the end without being too badly dismembered from the battle.

I’ve been candid that we have an abundance of work ahead of us in terms of delivering products to the market. Organizing an initiative of this size is not going to be done by one individual with their own resources. At 5,000 man years budgeted, we don’t even have the financial resources to do the detailed planning necessary to determine how many years that the overall project is going to take. Such is the nature of our battle and the bureaucrats' success. The state of affairs of the industry are at issue. Outside of the past few decades of specifically identifying the senior management of the producers of the responsibilities for the damage and destruction we are now seeing, I am the only one that is harping about their performance outside of the silent majority of investors and bankers. Yet everyone knows who in reality is at fault and responsible, bureaucrats have been able to blame, excuse and scapegoat everyone and everything else. One of the scenarios that we could see is they “cut and run” leaving the fault of the problem on our doorstep. Supporting the saying be careful what you wish for. That is not our job and is never going to be our responsibility and they would only be continuing in their “muddling along” and “doing nothing” methods of damage and destruction. The point is look how successful they’ve been!

Bureaucrats would therefore need to sustain the oil and gas industry as is until the Preliminary Specification is released commercially, the user community has established their service provider organizations to support the software and those that are ready and willing to operate a profitable industry are available otherwise. If we don’t identify this issue and the role that we expect them to have, their only pursuit will be to eliminate us through continued obstruction. The pressure would be on us to move mountains and deliver products sooner than possible so that industry could “get back to work.” And the bureaucrats will sit back and enjoy themselves as they have for these past many decades and do essentially nothing but promote their cause and gain significant public support for it. 

Whether we would be able to manage the situation as described is in the dual tinfoil hat arena. What I can do is prepare the ground for those in the user community who will be subject to this potential scenario should this come about. They will be the front lines of this initiative in terms of working with the producer firms in order to ensure the industries needs are being realized and included. This is the environment People, Ideas & Objects are experiencing today, it is the environment that we expect we’ll be entering once we’re fully funded and the expectation that things will be easy is anything but reality. The reality will be difficult for those that are involved in this initiative and we need to prepare ourselves for this, what I would call, inevitability. We can do so with the understanding that we are not responsible for what the producers have done in the past. We are not responsible for the damage that has been realized. And we are not responsible for any of their alleged failures the oil and gas producers continue to experience. We are working on providing a software and service solution. And that is the scope of what we are responsible for and will succeed in building our solution as described in the Preliminary Specification and provide a platform for industry to resolve these issues with the requisite flexibility and focus on profitability. We’re not going to be obstructed or distracted in our task by those who have caused these difficulties and only look to blame others for the damage and destruction they have authored. 

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

People, Ideas & Objects et al's Marshall Plan, Part IV

 Design, and implementation of the design, of the Preliminary Specification by our user community is an important attribute of what the community will be producing. I can not stress this enough. The need to fully comprehend the opportunity that stands before us and to rebuild the industry in new and innovative ways will be dependent upon the thoroughness and creativity of our user community members to solve the difficulties they’ll be facing. The comprehensive nature of the oil and gas industry and the specifics of accounting and administration has to be captured by the entire population of our user community. The specifics involved is well beyond the scope of what one individual can fully comprehend. The need to approach the specifics of the design is at the beginning of development. It is the best method of reducing costs when issues are easily fixed, possible, probable and iterative. Time spent in the product design stage will be critical to both its accuracy, the overall reduction in cost but also increase its quality. The publication of the Preliminary Specification almost a decade ago has helped people to see the dynamic nature of its implications. Finding out half way through the development process that the design was incorrect for some reason is not adequate for any development purposes. And certainly not for the purposes of rebuilding the oil and gas industry. Since the user community has had this model in their minds, the Preliminary Specification has been creating cognitive dissonance in identifying the need for change, where those changes need to be undertaken and how these changes need to be made.

Issue

Specious profitability has been the reason for the demise of the oil and gas producers over the past four decades. North American producers have failed in their primary task of providing their customers with safe, secure, abundant and affordable energy. This is a recent development and one we may expect to persist for the long term. Even in an environment of never before realized reserve abundance. Their incompetence is a deemed competitive advantage. Producers persisted in misdiagnosing and ignoring the fact they were not profitable for decades. Will they be able to continue without action on providing adequate supply, and for how long? The uncaring and inactive attitude is best represented in this recent statement by Occidental CEO Vicki Hollub. And in this article. 

The challenge is pretty significant here to get back to growth in the Permian, and that’s the only basin that’s going to grow U.S. oil production,” Ms. Hollub said at the CERAWeek by S&P Global energy conference in Houston earlier this month.

We should realize that North America from an energy supply point of view is all alone now. This issue is ours and ours alone. The alternative may be available and may be costly, mostly from the point of view of having our economy allocating energy and therefore diminishing its overall economic performance. This might be overstating the issue and inflammatory on my behalf. “I’m just selling my own product in a nightmare scenario.” Or, it could be that oil and natural gas on a single barrel of oil equivalent offsets at a minimum 10,000 man hours, and some believe it to be 25,000 man hours of mechanical leverage. However the number of man hours each barrel produces, without it we’re unable to sustain the modern economy that we enjoy today. And what if we only lost 20% of our supply? Would that be acceptable or better? Is energy the new conflict currency?

Our "Marshall Plan’s" Response

To be clear the design process will be based on the Preliminary Specifications business models, modules, markets and organizational constructs. It is a workable business model with the overall architecture and understanding of how these larger pieces fit together. The details of what is now needed will be determined by the user community. When determining how the system will implement this and that which is what is done today in the industry. Will it be needed in the future or is there a better way? What more could be done, and what would that look like ideally? Does that work, if not what would? This being a process done in a collaborative, iterative environment of like minds seeking out the conflicting attributes and contradictions in the design process. If anyone believed the user community members' job would be easy they’d been mistaken. They’ll also need to do this in an environment where they need to understand the technologies being implemented and what is possible there. When will the industry adopt the Internet of Things (IoT)? What would IoT require? Why not now? If not when? And if not, what can be done today to accommodate the integration tomorrow? How each of the user community members will need to establish a service provider offering in order to deliver that organizations tacit knowledge to support the software in order that they can integrate, implement and operate it on behalf of the industry. What will this involve? Are the tasks that are being done in the industry today in the administrative and accounting areas of the producer firms necessary? Or do they just scratch the surface?

For those who are wondering why am I discussing the product design phase? Well it needs to be done and hasn’t been done. The scope of knowledge contained in doing the work of all the administrative and accounting tasks in oil and gas is not contained in the mind of one person. Therefore the emphasis we’ve made on the development of our user community. Those that may have thought that the Preliminary Specification was running on my machine today need to get their head examined. Those in the know will wonder why we’re discussing product design when we haven’t completed the full development of the user community yet? And I would suggest that they’re right and that is why our user communities development is our focus and our priority. At this point I could probably blame our overall lack of progress on Joe Biden but I won’t.

An example of the design process was well described by Hoover Institute Senior Fellow Victor Davis Hanson’s “The Victor Davis Hanson Show” on his March 5, 2022 podcast at 22:08 entitled “Tanks in Ukraine and in History.” This describes the development of the design of the Sherman tank in WWII and the elements of thought that went into why it was designed the way that it was. At no point during the war would the Sherman tank be considered the best tank or the most powerful. That was determined for a variety of reasons not to be the objective. Hanson states at 45:28 

Remember, the way to understand tanks is very American. American’s were practical, they were pragmatic kids, they were taking apart Model “A’s” and Model “T’s” their entire lives. And the Sherman was designed to be simple, easily operated, easily maintained, easily fixed by people in the field. And you could have supply trucks with extra engines, extra transmissions. You didn’t have to have a German specialist from the factory, the Porsche factory, to instruct or put it on a train and send it back to Germany. Everybody understood the principles of transmissions and engines, and they fixed them, and it was reliable.”

The Sherman tank and Russian T-34 were however the victorious tanks and dismantled the German dominance in their tank technology through their sheer numbers manufactured. The Shermans designers were aware that the internal combustion engine (375 hp), although not as powerful as the German Tiger (700 hp) tanks diesel engine, offered two immediate advantages. The ability to share fuel with all other military equipment and the ready supply of American soldiers who were backyard mechanics well versed in keeping them running. Fuel and reliability were logistical difficulties that the Germans struggled with their tanks. The size of the Sherman tank (35 tons) was much smaller than the Tiger Tank (68 tons) as the ability to produce many and quickly was a necessity, and the ability to ship them to Europe was a major design criteria and with so much shipping being lost to U-boats. 

One of the first lessons the designers of the Sherman tank recognized was the lack of acknowledgement by both Germany and Japan of the concept of gigantism. Both Germany, with the Bismarck and Tirpitz, and Japan, with the Yamato and Musashi,  built massive Battleships that were ominous in their size in comparison to anything else. During the war, once the British became aware of the Bismarck’s location in the Atlantic, it fought with most of its premier class battleships, and lost many of them in pursuit of sinking the Bismarck. Ultimately the British succeeded and the Tirpitz was then mostly parked in dry-dock for the remainder of the war. The decision to build the Bismarck and Tirpitz was Hitlers and once realizing this error, chose then to develop his original alternative of 300 additional U-boats as quickly as possible. U-boats caused enormous damage and difficulty to the allied forces throughout the war. (From the start of the war to the end of 1943, 5,758 ships were sunk with 22.1 million tons of cargo.) These are what we can clearly see are the iterative consequences of war and its dynamic nature. 

Bureaucrats are at this time in their most dangerous environment and in greater jeopardy than ever before. There is more money on the table causing more attention to be placed on their untrustworthiness and they are not doing their job of supplying the market. The point of gigantism in the quote of the podcast, Hitler's decision to go with the Tirpitz and Bismarck was a failure, making the change to 300 U-boats was the consequence of acceptance of the failure, which made the life of the Allies far more difficult. Consequences are dynamic, this fight we’re in with the bureaucrats will be dynamic making things difficult to predict. The bureaucrats will not be giving up their war to avoid being disintermediated, I can assure everyone of that. They will be fighting harder, will engage PI&O, our user community or anyone else at every turn.

Our budget is a necessity for the user community's benefit alone. Their ability to complete their task and conduct the design as comprehensively as it demands will not be easy. User’s don’t need to be looking over their shoulder understanding the career jeopardy they’ve taken by “betraying the bureaucrats” as our good friends the bureaucrats will allege. Bureaucrats will be fighting in force as we described and all of the people associated with this initiative will need to have an assurance of protection from unnecessary risks in order to focus on these difficult tasks and know that they’re able to complete them. There will be no going back if they fail in their task, a failure in funding would not be a failure they would be responsible for. This for them is a business and they’re assessing it as such. Mitigating the business, technical and market risks appropriately. 

PI&O’s scope and scale has been well identified since we published our budget in the first quarter of 2014. It is expensive and this only justified the bureaucrats to fully disregard the Preliminary Specification. Ignoring the value proposition we were offering by showing the incremental profitability that was available as a result of managing the producers as businesses and eliminating bureaucratic incompetence and mistakes. Adding to that the incremental value that was available as a result of generating the cash necessary to fund the future capital expenditures in a capital intensive industry. These didn’t matter as the bureaucrats perused the Ferrari showroom. This has come to be their position today as they reap the benefits of their inaction, fueling their continued inaction. They laughed when we said profits, they said profits didn’t matter. They continued their inactivity when we indicated the capacity and capabilities of the industry were in jeopardy. And of course they don’t care that the lack of supply to an advanced economy is detrimental to the health of our advanced economy. Failing to provide the consumer with the product they're in business of providing. And evidently still don’t care. Or is it we should have believed them when they said they moved to the clean energy business. 

The question today therefore is not so much the cost of PI&O’s budget, we can justify it on the basis of our historical $25.7 to $45.7 trillion value proposition over the next 25 years for the two reason cited. Except it no longer can be quantified in terms of value anymore. What PI&O et al need to do is to add to this value over the next 25 years, the incremental value from the difference in the increased production volumes produced from the abundance of reserves we are endowed with as a result of the work we are doing over today’s base case. And, add to these 25 years the cost to our economy of deprecating its upside potential. What mechanical leverage could have done for us if we only had an abundant supply of available energy. It’s maybe easy to forget that at 10,000 man hours of labor / boe, the United States consumption of approximately 35mm boe of oil and gas per day provides the equivalent of 43.8 billion man days, or 120 million man years of mechanical leverage each and every day. The question is what happens if we don’t act at this point? Will we be able to live with ourselves wondering “what if we only?” Therefore from now on, instead of just quoting the piddly numbers of $25.7 to $45.7 trillion as our value proposition. We’re going to quote the famous saying “to infinity and beyond” or is that too much?  

On a more serious note I’ll end with this quote from Thucydides. 

It is a habit of mankind to entrust to careless hope what they long for, and to use sovereign reason to thrust aside what they do not desire.

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

Well Whose Fault is That?

 There is an element of truth to the producer bureaucrats' claim that the Biden administration is responsible for the lack of oil and gas production in North America. Just as there has been an element of truth in all of the producer bureaucrats blaming, excuses and viable scapegoats these past decades. And I would go out of my way to suggest that it will be the same Biden administration and all of the subsequent presidential administrations, as have all the presidential administrations always done before will be solely responsible for the future increases in production of oil and gas. Just as they have single handedly increased the production of oil from nothing over the past 100 years to the 12 mm boe / day today. We should all thank them. My argument is when will the litany of producer bureaucrat excuses cease? When will we see some responsibility take hold in these producer firms? There has been no accountability or responsibility for anything by them for any of the difficulties that they’ve created over these past four decades. Only their successes that we’ve all been repeatedly made aware of, no matter how specious their claims. 

At each and every occasion that I’ve raised the speciousness of producer bureaucrats' excuses and offered the viability of the Preliminary Specification as the alternative resolution to their issues. It is quickly responded to in the producer population with how they already do that / can’t / will not do so or don’t understand. For a clear and comprehensive example of this, please review this video of Mr. Carlos Pascual, Senior Vice President IHS Market and Mr. Mark Little, President and CEO of Suncor Energy Inc. discussion from 2021s CERAweek conference. As a precursor to the noted conversation Mr. Little stated @ 3:30 “When you stand back and look at it Canada and the U.S. are the two democratic nations globally that have significant oil resource. And so the path forward is a little bit different because competition law both in Canada and the U.S. prevents us from participating in a discussion about allocating resource or reducing production to drive up prices and those sorts of things. So if it does happen it has to be led by the governments.” and @ 4:30 “Normally, we would go with market forces, but we literally have to shut-in something like 25 to 30 mm boe / day of crude oil.” This being the requirement necessary to deal with the drop in demand from the virus. 

It is here we see the Preliminary Specifications price maker strategy being repeatedly, although indirectly, criticized by producers with this type of overall argument. People, Ideas & Objects position seeks to provide the most profitable means of oil and gas operations everywhere and always. After several decades I am unaware what objective producers are pursuing. We provide the capability to turn all of the costs of the producer variable, based on production. Implementing production allocation and discipline on the basis of profitability everywhere and always. Therefore unprofitable production is shut-in which incurs a null operation, no profit or loss, and this increases the producers overall profitability when their unprofitable properties no longer dilute profitable properties. Reserves are saved for the time when they can be produced profitably and the cost of those reserves are reduced when the cumulative losses that would otherwise have been incurred are not added to their total cost. And most importantly shut-in properties take the marginal production off the market allowing the market price to reflect the marginal cost. This is alleged by bureaucrats to be collusion, as this video implies, and also couldn’t be done due to the damage to the formation. These were the two reasons that producers put across in argument as to why the Preliminary Specification wouldn’t work. We in turn argued that if making independent business decisions at each property to stop losing money, based on the standardized, objective, actual, factual accounting information is collusion, it only shows the depth of misunderstanding of the bureaucrats business knowledge. Their second argument was a litany of reasons that the property couldn’t be shut-in due to this, that or the other thing destroying the future productive performance of the formation. Again, after shutting-in a quarter of the world's production due to the pandemic, and eventually returning those properties back on to production, the admission that none of the production that was shut-in was damaged in any way has finally been admitted to. Taken in context they won’t seek to be profitable, because of excuses that are knowingly wrong.

An additional point upon reading this, let's not be surprised that formation damage due to shut-in wells becomes the excuse, reason or viable scapegoat for the realized decline in production. Never acknowledging shale's steep decline curve. 

Therefore the pertinent interest we have in the following video is on the general topic of commodity markets. The time frame is about a year beyond the point where oil prices went negative $37.63. I found it easier to just state $40, on April 20, 2020 and this point was raised by the interviewer. 

At 5:35 

MR. PASCUAL: Indeed the market is going to have to be brutal in some cases, and on April 20th we saw negative prices for WTI, a shock or expected given what was happening?

MR. LITTLE: Well one of the things we saw in the weeks coming into the close of the contract was that the financial markets, with West Texas Intermediate in particular, was out of sync with the physical market. The physical market was trading well below what the financial market is trading and so we knew that a day of reconciliation was coming. We expected WTI to weaken significantly and maybe get to zero or slightly negative. We just did not expect that significant response getting down to minus $37 U.S. a barrel. But I think what you're seeing is the gap between the financial and the physical market was so significant. A lot of people were buying crude and taking it to Cushing to deliver against the financial contract and it does seem that some of the financial players might have got squeezed on that.  

This answer by a CEO of a $47 billion market cap producer is abhorrent. The number of mistruths here are individually disturbing, but the overall comment is about as off the wall as I could imagine anyone stating. He giggles a bit when he mentions that the “financial players might have got squeezed on that.” Did that include the shareholders of Suncor at the time? When I speak of shareholders I mean Suncor shareholders whose shares value was $50.4 billion at 12/31/2019 and $17.8 billion on 9/30/2020 a loss of $32.6 billion. This discussion of financial markets and physical markets, imputing that there’s a difference between them? Huh? Who was hauling crude to Cushing and were they using their pickups or U-hauls? These “people,” whoever they are, shifted 25 - 30 mm boe / day for months in the global markets to Cushing which is what caused the price to go negative, and is what Suncor sat back and watched, knew that WTI was therefore going to go negative for weeks and did nothing! Other than losing $4.4 billion in the second quarter of 2020. 

Commodity prices are higher today than they were on April 20, 2020, and that has bailed the bureaucrats out of the mess they created for themselves. A mess that began in 2009 with the shale induced decline in natural gas prices and the initial 1986 oil price collapse. A few good months of commodity prices lifting all the producer boats is evidence of their prudence and diligence? But now they can’t meet the market's demand because the government has made it so they can’t? Maybe they’re not as innovative as they claim? Obstacles just seem to get in their way.

If we are to look to the government continually for the answer to all of our difficulties it will be the government that will take the opportunity to steal another one of our freedoms. We need to stop expecting others to solve our problems when our problems are clearly solvable by ourselves with solutions on offer. Granted with a bit of effort and hard work. We have far too much government in our lives today and the fact that we continue to turn to them is the reason they continue to expand. I’m concerned that Biden is going to roll out Harris or Fauci as the new oil and gas czar and the future of the oil and gas bureaucrat will be sealed with the lot of them giggling and cackling in harmony for eternity.

The source of this dishonesty is possibly a study unto itself. Why has this happened, why it is chronic, systemic and ongoing is unknown to me. Is there a point in the near future where they’ll suddenly stop? I’m not telling anyone anything new here, I am only documenting a case that is as blatant as I’ve seen it. And reflect that the attacks on the Preliminary Specification have been as dishonest as any of their other lies. Reason and rationality have nothing to do with what they say or do, therefore attempting to reason with them is fruitless. In contrast People, Ideas & Objects have been writing about how the continued decline in producers' financial health would precipitate a decline in the greater oil and gas economies capabilities and capacities, leading to the eventual societal risk and damage of shortages of the critical energy that is needed for our advanced economy for more than the past decade on this blog. Or in other words where we are today. Producer bureaucrats haven’t done anything about the business itself other than tell stories in all of that time. Who can and who will rely upon them to do either the right thing or anything at this point. They can’t be trusted and need to be cast to the ash heap of history. And People, Ideas & Objects will continue to call for new leadership based on the vision of the Preliminary Specification. 

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

People, Ideas & Objects et al's Marshall Plan, Part III

 We have an organizational issue in oil and gas. The ability of the North American producer organizations which we rely upon are incapable of meeting the challenge demanded of them. Expectations in the marketplace are that the turn of a valve will provide all the energy that’s required. This contrasts with the comprehensive understanding that’s necessary for the depth of the issue to be realized by the consumer is limited. The depth of the issue is feigned to be unknown by those responsible for these producer organizations today. They prefer to blame the government. For the current bureaucrats to state they failed would be too honest and shorten their tenure, therefore they pretend that they can continue if only this, that or the other thing hadn’t messed up. That this is a comprehensive failure at the organizational level is the fact we need to deal with. What was designed and developed over a century ago, the structured hierarchy in a paper based world, is inadequate for the speed and efficiency of what the Internet could provide and is demanded in the market. Concentration and consolidation of the producer firms to apply the principle of centralization has been the method recently undertaken by the self-serving producer bureaucrats. Any further tinkering around the edges by them will be marginal in its effectiveness and at best temporary. With the societal risk level of inadequate supplies of energy being provided to the North American economy, is it not better to deal with the supply issue in the form of setting out to build “Profitable, North American Energy Independence -- Through the Commercialization of Shale” now before it becomes potentially much worse? When seeking to resolve any issue the first task is to efficiently organize oneself to the scope and scale of the solution that’s needed.

Issue

There is the issue of time in terms of what happens in the North American energy marketplace. We could be provided with all manner of good luck and have the crisis we’re finding ourselves in subside. I believe we’re now being shown the potential difficulties and risks we’ve been placed in by these producer bureaucrats and the depth of the damage and destruction that’s been brought about. Time is therefore the critical issue that needs to be considered at this point. Should we wait to confirm these general economic and societal risks and difficulties are valid? Ensuring that the producer's response continues to be constrained due to their financial destruction and the diminished capabilities and capacities of the service industry before remedial action is taken? “Muddle through” has been effective for the producer firms these past decades, why not let it prove itself again? Or do we act to begin a new era of profitability and prosperity, one of trust and reliability in the industry? A decision needs to be made on the direction of this critical issue. Does the failure of centralization and its ultimate capitulation of telling the consumer not to look to them for their oil and gas needs continue? Or do we undertake the inevitable process of rebuilding the industry in the decentralized method of disintermediation, and in so doing, eliminate the inefficient waste and performance drag of the industry?

Our “Marshall Plans” Response

We have a substantial amount of work to be done and the ability for this work to be undertaken can only be accomplished with the financial support of whomever it is that believes these issues demand the structure of the oil and gas industry must be rebuilt. People, Ideas & Objects, our user community and their service provider organizations are making this offer and we feel that it’s tangible and competitive. It has focused on the issues that have brought about the industry's somewhat permanent downward trajectory. The time necessary to fully research an alternative idea, such as using the Joint Operating Committee, would take a full decade to determine the “how, what and why” the industry and most specifically the producer firms would operate if we adopted that idea. These ten years are consumed in chasing solutions that in the end don’t work out and force you to backtrack to the point where it was last functional but incomplete. A viable business model therefore can’t be penciled out in an afternoon. Unless there are other viable alternatives that I am unaware of, that do not interfere with the copyright that’s been earned here, we have the choice between the bureaucracy and the ten years of research that went into the development, and that which is offered in People, Ideas & Objects Preliminary Specification, our user community and their service provider organizations. 

Producers bureaucrats are wont to say this in nothing but an idea. And they’re correct. They were also successful in convincing people in the past that the Preliminary Specification was too complex and it wouldn’t work. It is complex to a certain extent, as is the oil and gas industry. However the business model itself is quite simple. Don’t produce anything that isn’t profitable from the real sense of the word profitable. However the complexity the bureaucrats are intimating was the fact that it was well researched, developed and detailed. Confusing detail with complexity is an understandable bureaucratic misunderstanding. And one that is consistent with their “muddle through” school of thought and discipline. It is also self-serving as the bureaucracy is challenged by the disintermediation from the Preliminary Specification et al, as are all other industries by new decentralized business models based on the Internet. In terms of whether or not it is viable as a solution, it is a workable model which is a necessity for any proposal to contain. The alternative hasn’t been even thought of yet and would take a decade to develop to be viable, do we have that time? Or could we just “muddle through.” 

The Preliminary Specification tacks back to the culture of the industry in the form of the Joint Operating Committee. There have always been partnerships of producers for two primary reasons in oil and gas. The demand to accumulate the required land necessary to drill and the need to mitigate project risk. The means in which these partnerships were managed was the Joint Operating Committee which is the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the industry. Operationally this is how the producer is managed. The oil and gas corporation however has been diverted, occupied and distracted by the SEC, tax, royalty and any other corporate requirements. The operational concern of the Joint Operating Committee in terms of the accounting information is not relied upon in the exploration and development areas of the business. There they rely on the independent reserves report to determine the value of the asset, the future cost and determination of profitability. The Preliminary Specification integrates the administrative and accounting to be on the same basis of the operation as represented in the Joint Operating Committee. Enabling a better financial understanding and control over the producer's operations and its direction. For those who are vested in the officer and director roles of the producer firms it’s easy to see why this may be deemed to be too complex for them.  

The Joint Operating Committee is but one of five of the organizational constructs that the Preliminary Specification adheres to. The other four are markets, specialization and the division of labor, Intellectual Property and Information Technology and are detailed here in our wiki. Each of these have a defining role in the structure of a decentralized organization. To a lesser extent, the regulations and requirements of the corporations reporting are seen as an output of the system, not the defining attributes of the system. If we’re hooking into the constructs of what society has established as the means in which people, organizations and society understand and expect. Then these laws, expectations, guidelines and understandings of what to do and how to operate can be implied when the users of these systems operate within oil and gas. This is the objective of the Preliminary Specification and this is what is represented and integrated throughout its 13 modules. 

If we look at the organizational construct that is Intellectual Property in North America we see the highest levels of establishment of these rights and privileges being granted anywhere in the world. The Constitution itself is responsible for the establishment of copyright and is therefore the reason that the American economy has grown to dominate all others in the world in terms of its productive and innovative performance. There are significant benefits that are derived in the Preliminary Specification by accepting these laws and understandings. Oil and gas is one of the premier science, engineering and technological based industries. Innovation is unending and we have the need to solve these difficulties in a commercial environment that’s consistent with societal norms. What we’ve seen in the past few decades is the bureaucrats “muddle through” the business of oil and gas with little care, concern, effort or understanding of the damage and destruction of what it is they were doing. Making wild claims as to how their financial performance was actually far beyond reality. How their innovativeness was establishing new frontiers. Except now we see it is they who have done nothing but “muddle through.” Just as they had been telling us and continue to do in the most recent example of telling the consumer not to look to them for their energy needs. The innovation that has been undertaken in oil and gas has always been in the service industry and to claim otherwise is disingenuous. I have seen too many field innovations and their innovators pound the pavement trying to gain the attention of an unwilling producer population. The producer's condition placed on the innovator was they needed to show the “what, why and how” the technology worked and to release these innovators proprietary secrets before the producers would adopt them. It would be in that way the producers would gladly have this proprietary information available in the service industry for the innovators competitors to establish extensive and excessive price competition. 

For evidence of the innovativeness and dynamic nature of the producers, scroll back to 2005, or the beginning of this blog, and note the emphasis at People, Ideas & Objects has been consistent and we have not deviated from. We are focused on enhancing the profitability of the producers because bureaucrats never truly earned any. Which could only lead to the inevitable financial destruction of the producers, the loss of capabilities and capacities in the producer firms and service industry and then constrain society through a lack of energy in general. Producer bureaucrats would have none of this. Enhanced profitability is evidently unacceptable to them? And yet they have the audacity to claim they are the innovative ones in the industry? The innovations they’re responsible for are purely in the area of excuses, blaming, and as we call them, viable scapegoats. By telling consumers not to look to the producers for their increased oil and gas needs shows the depth of the bureaucratic depravity. It’s an honest statement, one in which they can’t tell the truth about however, the truth being they destroyed the industry to the point where it can’t respond.

This post only highlights how we’ve adopted two of the five of these organizational constructs. For more detailed information on each of these please consult the wiki. What we’re imputing is the means and methods of operating the industry on the basis of Intellectual Property is what will be needed to turn this ship around. The IP earned by the innovators will be respected and they will know that the market will respond appropriately towards it. That is how the oil and gas producers will be able to remain profitable and consumers will have access to abundant, affordable energy. For information on this please review the Resource Marketplace, Research & Capability and Knowledge & Learning modules of the Preliminary Specification. 

Another benefit is that IP ensures that innovations are building on the shoulders of giants that came before them. “Me too” price competition doesn’t foster the innovation that’s needed. The washing of IP by today’s producers that we detailed above is causing the industry to also make the same errors repeatedly in attempting to prove the same issues and opportunities that were resolved before by others in the last quarter, year or two floors below. Sponsoring the same ideas that were organizationally forgotten last year and four years ago and undergoing the same experiments being conducted throughout the industry. Intellectual Property is structured so that the underlying use of it recognizes those that developed it, motivating them to develop it further and containing the mistakes, experiments and issues into the hands of those that own the innovations by developing them and better deal with extending them. Eliminating the costly and redundant, and I want to say repeated duplication that occurs seemingly annually and dare I say repeatedly again. An efficient system is how the U.S. has developed their IP marketplace and one the producer bureaucrats felt they had the cash, which made whomever's IP irrelevant. For example, the place you go to get iOS is at Apple, the competitors in China don’t exist. The amount of money that is expended on iOS type development in the U.S. by Apple vs China by pirates is probably much higher in China. 

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

People, Ideas & Objects et al's Marshall Plan, Part II

 In Part I of this series we touched briefly on the Preliminary Specification and the questions of “what” it was and “why” we were offering it. In Part II I’ll be detailing the answer to the question of “how” we are delivering the Preliminary Specification into the North American market. How is it developed, implemented into the producer firms and the associated infrastructure involved in the secondary industries and how will it operate once implemented? 

Issue

There is a culture that exists in North American based producers of acceptance of the status quo failure. Nothing is ever the responsibility of the producers, who refuse to recognize they’re operating a primary industry, they’re always quick to point the finger at the most plausible, viable group for any of their failures. This has been effective in isolating and extracting them from the day to day of the business and their involvement in the business. It’s the OPECs, the government, their investors, bankers, the service industry and now even the consumers themselves who fall prey to their accusations. It’s an inability to critically accept the leadership role and responsibility that involves managing this primary industry for the purpose of profitable operations. 

Today’s culture involves the bullying of others to do what bureaucrats deem is necessary to earn a reward of a few dollars sprinkled in those areas that producers are wholly dependent upon. Sitting on top of the revenues of the industry, revenues that represent the efforts of the producers but also the service industry and all other tertiary industries. Doling out what they feel are cash prizes to those that follow along with the plan and agenda. This would be acceptable if the plan and agenda was focused on achieving profitable operations for all concerned. It is the bureaucrats' plan to feed those who will blindly follow them into whatever direction they dictate. How else can you account for this bureaucratic obstinance which has also been represented in refusing to listen to their investors since 2015?

This culture has comprehensively failed in the shale era of oil and gas development. The service industry has been run through due to the lack of care and concern from the producers. The service industry is no longer capable of providing the means in which to extend the producer organizations with the geographical and technical extension of the producer organizations in terms of field operations. The comprehensive capacity of the service industry no longer exists due to the difficulties the producers placed at their doorstep. Much as the traditional market incentives of investors and bankers have fled the oil and gas producers. It is the same unfortunate case in the service industry. There is however a much larger difficulty due to the major differences between the producers and the service industry representatives. The service industry's only revenue stream is from the producers. Of which producers sliced the demand for their services to 25% of what it was prior to their difficulties. They then negotiated the prices of the service industry by bullying them to accept half the price or the producer would shift their work elsewhere. Leaving the service industry with a drop in revenues in the range of 87.5%. And to add insult to injury they did not pay them for this work for 18 months. Now they’re one of the producers viable scapegoats as to why there’ll be no response to the demand for more energy, it is the service industries lack of capacities and capabilities that is the producers primary target. Never any admission of responsibility or offer to deal with problems. The major difference for the investors and bankers of the service industry is that it is more severe than what producers experienced, it is a cyclical behavior throughout the producer population, it is systemic, cultural and most of all highly abusive of the service industry.

We touched on the issue of the service industry in Part I of this series. I only discuss this in more detail in Part II as it is the easiest for everyone to understand and relate to the damage that’s been done. It is the most tragic, unnecessary and difficult area of the industry that needs to be purposely rebuilt. It is also symbolic of all other aspects of the greater oil and gas economy outside of the bureaucrats, who assure me they’re fine, and thank you for asking. The entrepreneurial class, investors, bankers and those that have chosen to pursue careers in any discipline of oil and gas have also been betrayed by the producer bureaucrats' desire to fill their own pockets at all of their expense. Trust, faith and belief in what is said and done isn’t worth much coming from an oil and gas officer or director. 

Therefore from a cultural perspective. From a leadership perspective. Who will lead the oil and gas industry out of the situation it finds itself in today? Will it be the current bureaucrat which we identify as these officers and directors of the producer firms? If we are looking to these people to solve the difficulties they’ve created and feign they don’t understand, then I can assure you that we will be disappointed and we will be betrayed. We will only have ourselves to blame if we do so. The current officers and directors of the producer firms will be needed to manage the producer firms in the interim until the rebuild is complete, then we can safely cast them to the ash heap of history. 

Looking simply at the scope and scale of our domain of what we are proposing in the Preliminary Specification we are dealing with ERP systems, accounting and administration. This however does not preclude us from demanding that all aspects of the greater oil and gas economy must be involved with the further development and filling out of the overall detail that is the Preliminary Specification. It is the means in which all of these other areas can be restructured around the vision that is put forward and commence their organizations rebuilding on the basis of that vision. We are not, and can not bring forward any attribute of this failed legacy. The quickest route to reestablishing the trust and integrity where people will once again commit to oil and gas is through the elimination of those and their structures that caused this loss of trust. They can never be resurrected. They can never be compromised with. We must hold to this vision as the fastest method of rebuilding and the most integral method of eliminating them. 

Our “Marshall Plans” Response

People, Ideas & Objects priority and focus is our user community. We began its development soon after the completion of the Preliminary Specification. During the first quarter of 2014 we identified the primary cost of quality, usable software is the development of a user community which demands significant time be expended in order to allow it to develop. The other difficulty is providing those who join with a viable and usable business model as a guide or vision in which to build from. Our user communities establishment in early 2014 has enabled them to assimilate the Preliminary Specification into their thinking. This is the value that will pay dividends in terms of the length of time necessary to deliver the first commercial release of our product. A value that is a comprehensive reduction in time to resurrect the North American oil and gas industry through quality, user driven software development. People, Ideas & Objects suggests to the bureaucrats fury, that it’s no longer enough to own the oil and gas asset, it’s also necessary to have access to the software that makes the oil and gas asset profitable. Any attempt to do so otherwise in a highly structured, sophisticated economy without the use of software is bureaucratic folly.

Upon initiation in March 2014 of the People, Ideas & Objects User Community Vision which guides the user community member and provides them with an understanding of their role in the development, implementation and operation of the ERP systems, accounting and administration of the North American oil and gas industry. This is not your grandfather's user community and is indeed a very powerful community endowed with the ability to meet the tasks and objectives of what we’ve identified in the Preliminary Specification and the issues and opportunities in oil and gas. The first was their Charter.

Our user community seeks to find the right solution for the most profitable means of oil and gas operations everywhere and always. We’ve now seen what happens when profits are ignored in the industry. What oil and gas is experiencing is unquestionably the most difficult issue they’ve ever faced. Our collaborations are not to build consensus or compromise. On the contrary, we have many issues to resolve and some of the most complex that have ever been approached. The resolution of issues lies at the point of conflict and contradiction. It’ll be our user community's job to find those conflicting attributes and contradictions, and resolve them to build the industry software for the next generation, to build the dynamic, innovative, accountable and profitable energy industry we now need in North America.

And these are the components of how their Charter is enabled to fulfill the vision of the Preliminary Specification and the needs of the industries.

• Only the user community is licensed to make changes to any of the underlying Intellectual Property of the Preliminary Specification and its derivative works.
• People, Ideas & Objects licensed developers will only look to the user community. We are blind, deaf and dumb to all others.
• Our user community has their own budget. They are independent business people. Not "blind sleep-walking agents of whomever will feed them."

It is therefore the user community member who has acquired through education, training and experience an intimate understanding of a specific domain of an oil and gas process that will be the key point of contact for anyone and everyone in the industry to have their input heard and included in the development of this software, its implementation and operation. It is the user community member who has with their license been granted the exclusive right to a specific process domain managements in a service provider organization they will own, operate and control. Bringing forward that which they have known for many years. It will be in the service providers where the administrative and accounting resources of the producers are reallocated in order for them to specialize on the basis of the specific process they manage. (Recall too this is how the producer's overhead is converted to a variable cost, based on production.) It will be there in the service provider that the implementation and operation of the software will be undertaken and managed on a day-to-day basis. All under the organization's principal being the user community member who has the exclusive ability to make the changes to the Intellectual Property the software is derived from, and on the basis of the issues and opportunities they see within their service provider organizations. They will also have the input from the industry and all other interested parties that may have changes or issues being raised. This is an effective change management mechanism that allows the software to change and evolve on the basis of the development of the oil and gas industry, the professions, regulations and competitive advantages of the service providers. 

An example of a process domain for a service provider may be the calculation of the propane royalty obligations, and it may even be just a sub-process of this, with other service providers being responsible for other aspects. These will be done to ensure that the producers are paying the absolute minimum royalty necessary under the contract / royalty regulations. It will be the domain of the service providers to undertake the process management for the entire North American continents producer population of properties. In this case the calculation of propane royalties. Using specialization and the division of labor at high levels to ensure the efficiency and effectiveness of their process and quality of service is attained. 

The competitive advantages of the service providers are comprehensive and provide real value to the dynamic, innovative, accountable and profitable oil and gas producer and industry. They include as a partial list: leadership, issue identification and resolution, decisions, creativity, collaboration, research, ideas, design, planning, thinking, negotiation, compromising, innovation, financing, conflict and contradictions, observation, reasoning, judgment, quality, automation and specialization and the division of labor. The service providers are granted exclusive rights over the process they operate. We do not use price as a competitive advantage as the means to do so is counter to the best interests of the producer's profitability. I am not of the opinion that a service provider and user community member who is focused on these competitive advantages and building value for the producer can then be concerned with a competitor jumping in to slash the price of the offering after doing none of the work of developing these ERP systems. The value proposition of People, Ideas & Objects Preliminary Specification is based on the holistic long term nature of the service provider reducing the producers costs through expanding their throughput by specialization, the division of labor and automation. Price competition does not have a role in enabling this work. It will be on the basis of competition between the service providers in the overall user community members that compete on the basis of a shared understanding of what is effective and innovative, not what is ripe territory to establish a competitive offering based on price. 

Software such as People, Ideas & Objects will be delivering the explicit knowledge that is captured by the user community members during development, that which can be captured and used to be included in the software. That is only half the job however. The tacit knowledge is the more difficult aspect of what is done and that cannot be captured in any medium whatsoever. That is the knowledge that is contained within the population of the service providers as they are deployed in delivering their tacit knowledge with the explicit knowledge of the software. The user community members service provider is a software and service offering responsible for the implementation of the software into the producer firms and the operation on a day to day basis. The deployment of tacit and implicit knowledge has to be part of a comprehensive solution and what is structured to be delivered through People, Ideas & Objects Preliminary Specification, its user community and their service provider organizations. 

Therefore, in terms of “how” the industry, the secondary and tertiary industries are able to rebuild in a manner that deals with the issues and opportunities that exist in 2022 this is what is proposed by People, Ideas & Objects. The Preliminary Specification is a comprehensive detailed plan that deals with the reality of the issues that began many decades ago and have manifested into absolute destruction. The loss of trust and integrity in the leadership that brought about this damage is absolute. And this needs to be addressed, ultimately abandoned and rebuilt in the vision of the Preliminary Specification that is uncompromising with what has brought us to this point. The focus of the greater oil and gas economy is therefore directed towards our user community in terms of this rebuilding. It is the greater oil and gas economy who will be using this vision as their base of understanding, and are the ones that will be able to take their focus, needs and desires and build them into this overall solution. Ours is the rational approach to resolve these issues. Organizing ourselves to resolve them has to be the logical first step in any solution.

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

People, Ideas & Objects et al "Marshall Plan," Part I

 Today we begin with what we are calling for lack of a better description a series entitled our “Marshall Plan” for the North American oil and gas industry. This plan is to begin dealing with the opportunities and issues producers and the service industry face as a result of the financial damage and destruction that has taken place. During the 21st century Houston was still considered the center of the global energy industry. Now it is where CEOs go to tell consumers not to look to them for their energy needs. It is now evident to most that the world is entering an era where energy is becoming a tool for political means. Something that we have not seen since the 1970s and something that can only be avoided through energy independence on this continent. Otherwise we are exposed to the issues of compromising our principles and values. And we are potentially having to allocate resources based on an energy supply that may be politically constrained, or face the consequences of having our economy operating at a level below its optimal performance due to the lack of oil and gas. A product which provides a minimum of 10,000 man hours of equivalent mechanical leverage in each and every barrel of oil. Providing that mechanical leverage through an infrastructure and energy source that can not be replaced. 

The success of this plan is wholly dependent on the efforts of the entire industry making it so. This must be a deliberate effort by everyone involved in the industry to ensure that success is achieved. There can be no failure when we have no second chances and there can be no blaming, excuses or viable scapegoats for failure now or in the future.

The Issue,

People, Ideas & Objects, our user community and their service provider organizations have no solution for the larger societal issues involving war or economic fallout associated with the shortages of energy. This is a poorly entitled series attempting to put the industries difficulties into context. We are focused on the issues and opportunities in the oil and gas industry. This “Marshall Plan” is to rebuild the oil and gas industry to provide for “Profitable, North American Energy Independence -- Through the Commercialization of Shale” in the vision of the Preliminary Specification. Today we see the implications of North American producers not tending to their business. The fallout of energy shortfalls and the societal consequences are beginning to be seen as a result of the Russian invasion of Ukraine. There is no greater warning of what society's difficulties are when oil and gas enters the political argument. That is why we need to focus on what the objective for the North American oil and gas producers and the service industry needs to be as we move forward. Our current supply difficulties may be temporary and subside, however we need to understand the risks that are now clear and present from the position we’ve found ourselves in and that these risks should be considered ever present in our advanced economy. We hold the following position.

Vision without action is merely a dream. Action without vision just passes the time. Vision with action can change the world.

Joel A. Barker

Recent history between People, Ideas & Objects and producer firms is abysmal, in terms of their participation in our constructive engagement. We published our White Paper entitled “Profitable, North American Energy Independence -- Through the Commercialization of Shale” a widely distributed paper, and we were summarily rejected by them. At which point they ran the price of oil down to negative $40 in just nine months of our White Papers publication. And then in 2021, in a chorus throughout the industry, producers stated that shale would never be commercial and directed their organizations towards clean energy. This is an abhorrent record in light of the current situation. What we’ve recently seen as a result of the potential demand increase from the war is the producers themselves stating they can’t meet the increased demand for a number of reasons that continue to be false and are in fact them deflecting their responsibility through blaming, excuses and viable scapegoats. We don’t doubt the inability to meet the demand, we feel the failure to do so is wholly attributable to the leadership of the producer firms. The need to now turn up the productive capacity of the continent is a dire necessity to secure our economy and way of life. And this leadership is more or less collectively saying “Well don’t look to us for help.”

Our “Marshall Plans” Response

The producers ultimate capitulation of responsibility is of no surprise to us. Past behavior is a good predictor of what can be expected. It is therefore incumbent upon us to detail the need for and the method of employing what we call the Preliminary Specification within the North American oil and gas industry. Disintermediation is the larger force that is working in all industries this century and the one that the producer bureaucrats are resisting People, Ideas & Objects et al so strongly for. Whether it is “muddle through,” “building balance sheets,” “putting cash in the ground,” or their capitulation of any responsibility to make North American energy independent through profitable shale production. And therefore “clean energy is their business.” It has been the mouthing of words, and words that soothe those that may have an issue with the producer bureaucrats at the time. Words that are spoken with absolutely no follow through with any action on any of them in the past four decades. Maybe we should start believing what it is they’re saying. Today they’re saying they can’t respond. I trust them to do exactly what they say as it doesn’t involve any oil and gas related action on their behalf. What are we waiting for then and why are we expecting anything from them? It’s time to rebuild the industry in the vision of the Preliminary Specification, brick by brick and stick by stick. 

The Preliminary Specification was published in August 2012 and consists today of an ERP systems definition of approximately 200,000 words, defined in 13 specific oil and gas related modules, incorporating 3 marketplaces and integrating 5 organizational constructs including the Joint Operating Committee which is the legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks of the oil and gas industry as its key organizational construct. Our focus and priority is on our user community as there is no quality, usable software developed today that hasn’t been driven by user involvement. It is the product of ten years of research into “what,” “how” and “why” a producer and industry needed to be configured as, and the processes that were necessary to achieve a dynamic, innovative, accountable and profitable producer and industry. Ensuring that North American producers attained the most profitable means of oil and gas operations everywhere and always. Based on a fully integrated development with Oracle Cloud ERP’s tier 1 application. The Preliminary Specification is a business focused vision that balances the needs of the oil and gas producers and the service industry between profitable production and facilitating and enabling innovation in the earth science and engineering disciplines throughout the greater oil and gas economy. 

Producer firms today, as they have for the past many decades have dealt with oil and gas commodities as scarce resources. Shales dynamics bring about an era of energy abundance where the commodities ability to overwhelm the market prices can be devastating throughout the greater oil and gas economy. The lack of production discipline by producers has caused untold unprofitability leading to the financial destruction we have witnessed in the past many decades and now a resource scarcity that is constraining the industry through the financial devastation that was realized throughout the producer population and service industry. A service industry that is not unwilling to do the work, it's that to a large extent they no longer exist. A protracted difficulty that is addressed specifically and resolved in the Preliminary Specification through the Resource Marketplace, Research & Capabilities and Knowledge & Learning modules. 

Our user community and service providers are the key enablers in turning the administration and accounting capabilities and capacities of the producers' fixed cost overhead into the administrative and accounting capabilities and capacities of the industries variable overhead costs. Variability based on production. These non-competitive overhead costs are incurred in each and every producer in an unshared and unshareable manner, are replicated in each and every producer and are the secondary reason for chronic unprofitability. If the property is not profitable, based on the standard, objective financial statements that are produced in the Preliminary Specification then it is shut-in and moved to the producers inventory of innovative works in progress to return it to profitable production as soon as possible. While shut-in the property incurs a null operation, no profit but also no loss, enabling the producer firm to enhance their corporate profitability by not producing unprofitable properties and diluting their profitable ones. A standardized and objective accounting provided by our user communities service providers is necessary in order for producers to know that the determination of unprofitability at their property was based on the same standard and objective criteria as all the properties in the industry. Only then will production discipline be accepted and instilled. A simple business solution however one which the industry has not operated on before due to the scarcity of the resource being the defining characteristic of the organizational structure. The following is a quote and graph from our White Paper “Profitable, Energy Independence in North America -- Through the Commercialization of Shale” p. 31.

What People, Ideas & Objects provide in our Preliminary Specification, if we could assume the accuracy of this graph's numbers, is the point at which the property would be shut-in would be at the breakeven point and below. The reason for this being the production discipline gained through knowing that producing any property unprofitably only dilutes the producers corporate profits. Producing below the breakeven point is the point where unprofitability begins. Producing below the breakeven point for one producer, in an industry who’s commodities are price makers, will have the effect where the price of the commodities will be dropped below the breakeven price for all producers. When all producers continue to produce below the breakeven price for four decades you have an exhaustion of the value from the industry on an annual and wholesale basis. Times were only “good” when investors were willing.

Just as profitability has been unattainable in the industry due to the chronic overproduction, or unprofitable production starting in the early 1980s. Innovation has been the domain of the service industry. This is a science and technology based industry and those in the service industry with their hands on the problem are the ones who are coming up with the innovations that have driven the industry forward. This innovation has stalled and needs to be rebuilt within the greater oil and gas economy in order that consumers can rely on a stable supply of energy at reasonable prices. Producers need to better understand their role in funding innovation in the lower tiered industries that they are the primary industry to. That is their job, it is the service industry that provides the geographic and technical diversity through the depth and scale of their offerings. They are extensions of the producers and have no other customers other than oil and gas. This has been lost in the past few decades in the producers bureaucratic culture and is now the impediment to forward progress and the ability for producers to increase their production deliverability in a time that would be otherwise profitable. Would any of that production produced during April 2020 be of value today at $120 prices when it was sold at negative $40 prices? The lack of any production allocation methodology or discipline has been the demise of the industry and it will return quickly once again in the hands of these producer bureaucrats. It is systemic, chronic and most of all culturally inherent in the organizational structure of producers and industry. It can not be compromised with and the fastest route to a high performing industry is to rebuild it in the vision of the Preliminary Specification. Today’s  abhorrent means and methods of overproduction will return at some point in the future as it has been the cause of every oil and gas price decline since 1986s oil price collapse. What the service industry also sees is the same thing that everyone sees. Producers setting a path to clean energy shows everyone that the producers are no longer serious about oil and gas, they’ve chosen another route.

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

These Are Not the Earnings We're Looking For, Part LXXVI

 Scrambling to find as many high quality viable scapegoats as possible seems to be the only strategy being deployed by our good friends the oil and gas producer bureaucrats. And their investors are the ones being offered up to the public for their looming failure to meet the markets demand for energy. Producer bureaucrats' flat footedness and lack of response to the need for additional oil and gas production can not be met and they’re very aware of the reason this is the case. To suggest they’re not capable of doing so would never be stated as that would be counter to their best interests. The fact is they’ve used and abused the industry for the past forty five years. Symptoms of their abuse have been evident since the 1986 oil price collapse and all of the subsequent boom / bust cycles since. The cultural response of the North American based producers developed in the late 1980s and 1990s to where the expectations were that outside investors would fuel all of their capital investment needs. To the point where this became their dependence as the business itself atrophied around their chronic mismanagement due to their chronic and systemic overproduction. We all remember the days when the producers that were viable were those that had abundant access to sources of capital. If they didn’t they wouldn’t be around long, and if they didn’t meet their production targets, investors abandoned them and they would quickly disappear due to their lack of financial viability. This is the dismal history of the North American producer up to the point of 2015.

After a decade of throwing additional and vast volumes of investment into shale, investors began to see clearly that their money was nothing more than fuel. Putting additional cash into the industry only created larger flashes that quickly died down with the only residual being the demand for more cash to put on to the next even larger flash. Not only was their investment being diluted and incinerated, the cumulative value of all the prior years industry “activity” wasn’t generating enough to keep the lights on at the head office. Investors felt it was time to stop this wasteful “activity” and instill some rational, inward thinking so that oil and gas producers would make the necessary changes. That was seven years ago, and the producers were given a list from the investment community of what was expected of them. One of those points is that the industry must become accountable and install tier 1 ERP systems such as the Preliminary Specifications use of Oracle Cloud ERP. Nothing on that list that the investors expected in 2015 has even been discussed in the industry. Nothing has been done but to invoke the holistic, catch-all strategy of “muddle through.” 

This leaves the industry in a dire position financially and from a base of value to leverage its position forward that is structurally too weak and probably non-existent in most of the producers. Highlighting the status of the service industry is the only necessity here as the capacities and capabilities of these firms have been deliberately run into the ground in order to subsidize the lifestyles of these producer bureaucrats. Any source of value in these past seven years has seen these bureaucrats attack it as if it was a hungry mosquito. When investors left it was the remaining credit available on their bank lines. Then they continued their field operations and paid the service industry after 18 months. When these expired it was onto increasing production until oil hit negative $40. The list continued as the bureaucrats' needs and hunger is insatiable. 

Where this leaves us today is with a seven year lead time with no work in progress. As in all industries there are lead times in which companies operate. Hitting the switch to increase production is what John Q. Public sees and expects but there are massive undertakings to get to that point. When investors and bankers are no longer willing, when cash and working capital has been as short, as we’ve documented in this series of seventy six posts, to non-existent. Which area is cut first, this year's drilling operations or the activities involved in year one of the seven year lead time needed to drill future wells. And in the second year of a lack of cash, what is the next decision regarding priorities: cut the first and second year of lead time or stop the drilling. We’re in our seventh year of no new investment and maybe the producers will begin to think about hiring those who were involved in the first through to the seventh year of the lead time needed to drill a well. If they can find them. It’s been a while since anyone has seen them of course. Have we ever discussed shale’s notorious decline curve before? We're not only behind in our lead times, we’re also behind in shale’s decline curve. 

This is all “Ok” however. Producer bureaucrats now have what they need in order to make these past forty five years easily forgotten and eliminate the history of never making any money. Rahm Emanuel said it best when he coined the phrase, “never let a crisis go to waste” to take political advantage of a crisis situation. We’ve consistently documented their desire to blame, and as we euphemistically call what they do their excuses, but most of all the growth in the population of their viable scapegoats. We’ve also chronicalled their aspirations to get as much couch / recliner time as possible. Doing nothing is an art and science for these people. Evidence of this is contained in the fact that oil and gas is a primary industry. Where all of its secondary and tertiary industries have been financially pancaked by these producer bureaucrats greed and lust for financial gain and power. So yes, let's not think of that now, we have a crisis on our hands. Convenient isn’t it. 

To quote another famous politician “At this point, what difference does it make?” We’re asserting the producer bureaucrats think it’s the windfall of all windfalls. They’ve proven to be incapable of managing an enterprise. Incapable of uttering anything close to the truth at any time and incapable of getting up off the couch other than to visit the Ferrari dealership. Although a crisis is a fantastic plan and one I’m sure will solve the problem for them, who else is it going to be good for? What right do these bureaucrats have to put us in this treacherous position, especially when People, Ideas & Objects, our user community and their service provider organizations have been actively warning about this as the ultimate outcome of their actions. Warning that societal damage is the outcome of the breakdown of such organizational dissonance and the minimum of 10,000 man hours / bbl of oil equivalent contained in each barrel consumed. Mechanical leverage is an issue that this blog has been actively discussing since July 11, 2008. They’ve had every opportunity since August 2012 to proceed with the development and implementation of the Preliminary Specification yet have chosen to do nothing but ostracize and vilify this opportunity since August 2003 when these ideas were first proposed. 

Recently they had the opportunity to pursue “Profitable, North American Energy Independence -- Through the Commercialization of Shale,” in the People, Ideas & Objects July 2019 white paper. Unfortunately that involved them getting involved in effort and hard work. Then in as little as nine months they chose to produce oil at negative $40 and in 2021 summarily abandoned the oil and gas business to pursue clean energy instead of accepting any idea there's an issue or their responsibility in creating it. Since they wanted to leave the business it’s time we said goodbye to them. If they can’t accept the fact they’ve never made any money in the North American oil and gas business, what is the probability this crisis will facilitate their transformation of their business to the dynamic, innovative, accountable and profitable industry we need? This crisis has precipitated the need to increase production, they’ve not articulated the need to make money in the process, just for the investors to send cash. And they’re telling the public it's the investors fault they don’t have the money to drill. What we can say about their administration over the past forty five years is they’ve always done the exact opposite of what should have been done. Adding to all these difficulties we’re now hearing nothing but a litany of viable scapegoats of why they can not respond to the increased demand for energy! If the consumers can’t rely upon them, is that not the ultimate failure? Most importantly none of the producers have reached out to People, Ideas & Objects to inquire about the Preliminary Specification ever, and I just checked, not in the past month either.

What we need to do is to begin with the development and implementation of the Preliminary Specification, our user community and their service provider organizations as the alternative to this madness. This will be the quickest route through our difficulties and the most effective financially, giving us a highly performative industry for at least the next 25 years. One in which the North American producer is provided with the most profitable means of oil and gas operations everywhere and always. What surprise will the crisis management focused bureaucrats spring for us next year or the year after that. Do we really believe that we can trust them to do the right thing during their current manufactured crisis?

Those interested in joining our user community are People, Ideas & Objects priority and focus. The Preliminary Specification, our user community and their service provider organizations 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, everywhere and always. An industry where it will be less important who you know, but what you know and what you're capable of delivering, what the value proposition is that you’re offering? We know we can, and we know how to make money in this business. In addition, our software organizes the Intellectual Property of the exploration and production processes owned by the engineers and geologists. Enabling them to monetize their IP for a new oil & gas industry to begin with a means to be dynamic, innovative and performance oriented. Providing a new investment opportunity for those who see a bright future in the industry. A place where their administrative, accounting, exploration and production can be handled for the 21st century. People, Ideas & Objects have joined TBD 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.