Change it, or Sustain it?

 It is here in the early spring of 2022 we find ourselves in the situation that People, Ideas & Objects have sought to avoid. Bold and pious claims however, our history is before you in this blog's consistency, dedication and concern for just this issue. Bureaucratic inaction has created a stalemate that is forcing oil & gas to make a decision, will we accept the status quo, or change it? Are we now at the point of that “jarring gong” as so eloquently spoken of by Winston Churchill?

Want of foresight, unwillingness to act when action would be simple and effective, lack of clear thinking, confusion of counsel until the emergency comes, until self-preservation strikes its jarring gong - these are the features which constitute the endless repetition of history.

Or as Thomas Paine stated in his pamphlet entitled “Common Sense” which was widely distributed and established much of the logic behind the need to develop the U.S. Constitution.

As Britain hath not manifested the least inclination towards a compromise, we may be assured that no terms can be obtained worthy the acceptance of the continent, or any ways equal to the expense of blood and treasure we have been already put to.

There has been no willingness to act, no compromise on the principles of the bureaucracy since the beginning of this issue as I documented in the prior post. The scale of damage and destruction has been tremendous. Over the course of these four decades how many trillions of dollars were lost, careers lost unnecessarily and the many businesses that would otherwise have been successful. From John Stuart Mill, On Liberty.

A person may cause evil to others not only by his actions but by his inaction, and in either case he is justly accountable to them for the injury.

The facts are in and they are devastating. Today’s service industry's inability to respond to the producer's demand to drill is understood in the following graph provided by @SoberLook. 1600 drilling rigs were active in mid 2014. By early 2016 there were 400. That was more or less seven years ago. Then a resurgence of drilling occurred to almost 1100 rigs in 2018. Showing signs of life in oil & gas however this we’ve learned subsequently was a false signal. We recall the expectation was that this activity would be paid for by producers on an 18 month basis. Producers were financing their field activity on the good graces of the service industries ability to grant them credit. “It was the only source of capital though!” After the destruction in the service industry, realizing finally there was no means of capital to support their organizations, producers began producing more to generate the necessary cash to pay the bills. Pushing the oil price to almost negative $40. Only to have the rig activity collapse to what appears to be 200 rigs in the third quarter of 2020. Expressing to any investors, entrepreneurs and people working in the service industry that they were the marks in the scam. We can reasonably ask today, maybe these rigs weren’t cut up for scrap metal due to the need for cash as much as they were cut up due to their rusting away? How could producers treat an industry that they’re solely dependent upon in this way? After seven years the expectations are that the producer bureaucrats are fine, where are the drilling rigs? How could anyone look at just this treatment of the service industry and state that the producer bureaucrats had any thought that ever occurred to them outside of their own skin? If the service industry fills the viable scapegoat role in the future oil and gas producer bureaucrats mind, then they’ll be happy with just that. 

Who could blame the service industry for being in the condition that it’s in. Drilling rigs are only part of that industry however they’re the leading indicator. If there’s been a seven year decline in drilling activity we know it has not been exclusively to that area of the industry. Therefore there is now a seven year lag time in terms of the producer firms responding to today’s market for more energy while the producers rebuild the capacities and capabilities to deal with today's demand. They’ll be needing many more excuses, people to blame and viable scapegoats. How this is ultimately resolved is with producer cash. They broke it, they get to fix it, there’s no one else and those are the rules. Oil & gas is a primary industry and were generating revenues throughout this period and as a result did not suffer other than at their own hands as a result of their obstinate and self centered deviance. Yet we see a lack of understanding and appreciation of the difficulties of others, much as what was expressed to the producers' investors demand for earnings since they began of their strike in 2015. And just as Britain showed no compromise towards America in their negotiations with the King. Thomas Paine reflects accurately in this next quote what our positions today need to be with our good friends the bureaucrats. 

But the most powerful of all arguments, is, that nothing but independence, i.e. a continental form of government, can keep the peace of the continent and preserve it inviolate from civil wars. I dread the event of a reconciliation with Britain now, as it is more than probable, that it will followed by a revolt somewhere or other, the consequences of which may be far more fatal than all the malice of Britain. 

And for us that form of “continental government” is a decentralized, disintermediated oil & gas  industry based upon the vision of the Preliminary Specification. Otherwise the question of where these bureaucrats are leading us can only be predicated by their history. As we’ve been aware these past decades we are unaware of any plan or direction of the oil and gas producers. They will “muddle through” as always. The consequence of this strategy demands that significant remedial action be taken by the producers in terms of rebuilding the capacity and capabilities of the greater oil and gas economy of North America. That Joe Biden inhibits them from this task is evidence of their continued direction of muddling through and viable scapegoating. Admitting to their current seven year lag time would be too honest.

The inability to act and respond to the demands of the market, which I would include their inability to listen to their investors, is the most remarkable characteristic of our good friends. They are set in their ways and know better than all others. To get where we are today demands they destroy everything that was built in the past, all of the subsequent investor stock issuances and all the revenues generated so that they can…? This is unknown and unknowable. The first question we may ask will it be a future where they’re accountable for their actions? And do so through the tier 1 ERP systems that investors demand are a requirement for their return? Will they respond to what is necessary to earn “real” profits? A point they do not understand, do not know how to do and will not listen to criticism of the quality of what they’ve reported or the implications of their ways. And most importantly, as Milton Friedman states.

The social responsibility of business is to make profits. 

The lack of real profitability in the oil and gas producers has been responsible for the lack of a prosperous and viable industry today. When people are asked to suffer through the boom and bust as if it’s a normal part of the business cycle then the bureaucrats come to rely upon that as their reasoning for their bad management and will never be motivated to change. All the while alternatives to the means of “muddle through” in the form of the Preliminary Specification which sets the foundation of a dynamic, innovative, accountable and profitable oil and gas producer and industry. Something we have nothing of today as a result of the lack of profits in the producers for so many decades. Relying on investors for a never ending supply of cash is like communism, it works until you run out of other people’s money. Operating an industry based on spending is a world less complex and difficult than an industry that demands profitability everywhere and always. And that is what is demanded in the Preliminary Specification and the primary reason that People, Ideas & Objects are so vilified.

One of the important lessons that we can learn today is that we now know the past inactions and behaviors of the producer bureaucrats. Even when they were in desperate difficulties themselves they did not listen to anyone, they did nothing. Therefore we can ask today what action and behavior should we expect when the business is reasonably healthy? Will the cash being received today be managed appropriately? There were commitments made for the loyalties that bureaucrats realized during their darkest days, and payback to those people are now due. And these commitments will be handsomely and willingly paid with all the other grift. 

Our choice is to sustain this failed industry or change it. I don’t know who’s decision this is to make, but it needs to be made. If this is acceptable action and behavior to others then we need to stand behind the bureaucrats' history and support it. There is this ugly quote in The Genealogy of Morals from Friedrich Nietzsche.

It is possible to conceive of a society blessed with so great a consciousness of its own power as to indulge in the most aristocratic luxury of letting its wrong-doers go scot-free. 

If it is not acceptable then someone needs to show the time has come and fund the development of the Preliminary Specification. If they too have determined it’s unsustainable then it must be changed. Putting off this difficult business of dealing with the bureaucrats has come to the point for someone needing to make this decision. They’ve earned our distrust as we watched them continue to destroy in such obvious ways. We’ve seen no leadership but more than that we've seen no commentary coming out of the producers. Their ability to articulate the role that producers should be fulfilling in the marketplace of supplying abundant, affordable energy to the consumers. And the importance of oil & gas has never occurred and is desperately needed from producers today. Tragically we've got elected government officials taking up the role of representing the industry and the direction that is needed. Therefore what's happening is the future is a complete capitulation of all leadership, accountability and responsibility by producer bureaucrats. This may have been their objective all along we’ll never know. If this is the future then we need to either accept it, or reject it now while it still remains an option. The forces of disintermediation have affected many industries already. And it is possible that all industries will eventually be disintermediated at some point. If it is the choice of the oil & gas industry to stand alone against this disintermediation by People, Ideas & Objects et al then that is what we need to deal with and accept. I am unaware of any other options for oil and gas. And this last quote from Winston S. Churchill, Volume 2: Young Statesman, 1901 - 1904. In his authorized biography written by Randolph Churchill and Martin Gilbert.

Are we to put aside great projects because they are debatable, or close the Empire to avoid friction in the House of Commons? Free criticism is the breath of our Constitution. To shrink from great tasks or newer enterprises because of the greater burden they impose upon representatives, and representative institutions, means simply shrinking from growth, and from the responsibilities of growth. 

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 VII

 Leadership is one of those aspects in life that you know when you see it. You need to trust and expect the leadership of any organization will do as it states and that it will avoid the pitfalls that life can throw at it. As difficult as it is to define, delivering the necessary leadership that is needed as we proceed during times such as we find ourselves in becomes paramount. Today we find that the speed, volume and complexity of our lives demand that leadership provide the understanding and direction necessary. Leadership is no longer expected just at the top either, its demands that it come from all areas of the organization on all aspects of what the organization is involved in. 

Issue

Leadership in the North American oil and gas industry is non-existent. Constrained by the bureaucracy and granted only to those who have the authorization and responsibility. Any natural leadership that resides in the organization is limited to their job description and the consequences of stepping outside of their well defined domain is forbidden and the consequences are well known. The archaic and mechanical process of being granted ad-hoc authority is difficult with this process familiar to all who have attempted that gauntlet before. No doubt some may have succeeded in doing so, however the process is designed to discourage initiative and is highly successful in that objective. The leadership with the authority and responsibility chose to blame and scapegoat others, and the natural leadership within the organization is stifled. 

Regulation of the corporation twists those with the authority and responsibility of any opportunity into a legal and political pretzel that turns men into mice in remarkably short periods of time. This is where we find ourselves in 2022. It’s primarily Joe Biden’s fault because he’s responsible for all the oil and gas production that was ever produced before. The question therefore that needs to be asked is this the failure of the hierarchical means of corporate organization? Has the failure to respond in today's fast paced world defined an environment that bureaucrats can no longer deal with or effectively participate in?

What I would call the excessive time in which the answer to this question has been deferred has been several decades. The passage of this time has eroded the integrity of those with the authority and responsibility to manage these organizations. It has led to the overall lack of trust in these organizations in terms of their words and actions on a wholesale basis to all of its constituents. First it was the investors, bankers, the people in oil and gas felt betrayed too, the service industry and those involved in the greater oil and gas economy. Not to stop at that achievement, there seems to be an effective campaign to eliminate any trust that governments and consumers have in North American producers to do just their basic job of providing the market with product. Such is the scope and scale of the damage and destruction that I see in the North American oil and gas industry. 

Our “Marshall Plans” Response

My readers know that I am good with the broad statements that support my cause. I however choose to back these claims with evidence as to the issue of how and when the industry became so distorted and what efforts have been taken to resolve them.

• Late 1970s SEC changes to adopt Full Cost accounting and Ceiling Test regulations. 
• Leading to accounting distortions that caused overcapitalization and its inverse of equal amounts of over reported profits, creating overinvestment and finally chronic overproduction or as we define it, unprofitable production. 
• Profits were always reported yet producers became wholly dependent on investors annual investments to just pay the bills.
• This led to the creation of the term “market rebalancing” and its foolishness of deliberately deprecating productive capacity as we experienced in 1986 when oil prices collapsed to $10 and all subsequent collapses in the commodity market price. 
• Arguments to blame OPEC as the responsible party, yet their production remained profitable in the real sense at $10. Subsequent repeated price collapses in the oil markets have occurred since that time. Natural gas has shown the same characteristic price collapses, primarily due to shale. Yet OPEC does not participate in this continent's natural gas markets. 
• People, Ideas & Objects published the Preliminary Specification in 2012 to deal with this chronic overproduction by ensuring all production is produced profitably, in the real sense, everywhere and always. 
• Initiative is wholly rejected by producers as “collusion” and “unworkable.” Specious arguments that we refuted as self serving and a continuation of the excuses, blaming and viable scapegoating by producer bureaucrats.
• July 4, 2019 People, Ideas & Objects publishes a White Paper entitled “Profitable North American Energy Independence -- Through the Commercialization of Shale.” Promoting the Preliminary Specification as the solution to industries chronic overproduction. 
• The White Paper achieves a wide distribution, yet met with the same rejection and resistance from producers as the Preliminary Specification did before. Excuses such as they “can’t shut-in production without damage to the formation. Is operationally difficult and requires significant costs to restart the well.” Are repeated throughout the industry for months.
• April 20, 2020, nine months after the publication of our White Paper the price of oil dropped to almost negative $40 due to chronic overproduction and collapsing demand due to virus related lockdowns. 
• Refineries stop accepting deliveries forcing producers to shut-in production. 25% of world oil production is consequently shut-in. Subsequently all production is resumed without any formation damage being realized by producers. Damaged formations due to shut-in production in response to our White Paper was a lie, of which they knew the truth all the time. 
• Decline in North American production is due to natural decline and the inability of producers to function in the field with the decline in the service industries capacity.
• 2021 “Shale is not and probably never will be commercial.” 
• Are the words spoken by the majority of the producers. Sales of premier shale properties to get out of shale begin. 
• 2021 “Clean energy is the future.” Shale property sales proceeds are diverted to clean energy investments. Unauthorized and unapproved changes to the corporate direction of the organizations, producers declare they are focusing on clean energy. 
• Taking with them the oil and gas revenues to do so. Exxon feigns a boardroom battle over some board seats to make the transition appear shareholder driven and “real.”
• For decades producers claimed they needed to make sure that oil and gas prices remained competitive so that alternative energy could never get a foothold. 
• Now it is the bureaucrats who are taking the cash and oil & gas revenues to fund their unaccountable activities in an industry that has never performed even with government subsidies. 
• Choosing an alternative direction shows they’ve lost the focus and drive to remediate and rehabilitate the oil and gas industry.
• 2022 Lockdowns are lifted and consumption is resumed leading to price increases at the pump. Consumers are concerned about their energy supply and producers tell them they “shouldn’t look to them for their oil and gas needs.”
• 2022 Joe Biden becomes the viable scapegoat that is causing producers not to be able to increase production. Imputing that Joe Biden has been the one responsible for all the oil and gas production we’ve ever seen before. 
• Although bureaucrats have regaled us with their spectacular innovative ways, we may have to suspend their innovativeness hypothesis to the specious category where most of their statements reside. 

The financial statements that were produced by producers during the “building balance sheet” and “putting cash in the ground” days have been proven to be of little value when they can’t support profitable operations in an industry that can’t support operations or its customers. This is the legacy of the bureaucracy, and here we’re satisfied in knowing that they’re doing well personally and they thank you for asking. 

We’ll never be able to trust these people again to do what we know needs to be done. It is to build the North American oil and gas industry to the prosperous, productive, energy independent and profitable one we need to provide us with the abundant and affordable energy necessary to secure our energy needs. The most powerful economy will be the economy that consumes the most energy. To take this sad, dilapidated state of affairs in oil and gas and achieve what is necessary is a task of monumental proportions and we have no opportunity for failure. Organizing ourselves based on a different approach of how the industry needs to operate in order to achieve these objectives is now required. I’m suggesting the Preliminary Specification, our user community and their service provider organizations are the means in which to do so. ERP Software such as the Preliminary Specification are the way that organizations are supported and defined in society today. To do otherwise is impossible in a specialized, global market where the scope of operations is the entire North American continent. Expectations and actions arising from somewhere else haven't happened. The time to evaluate options is limited to the time that we have available; however one cares to define that. The need for energy may have become clear to consumers. And if not, we are certainly headed towards a period where their awareness will be heightened. 

People, Ideas & Objects et al are certain that producer bureaucrats are not motivated to deal with the issues that they’ve created. They had every opportunity to do so and did nothing. It is suggested here too that they are conflicted by using oil and gas revenues to fund a competitive industry to oil and gas. More of their efforts have been sought to eliminate People, Ideas & Objects and if I were to give them the benefit of the doubt, maybe they just don’t understand what’s going on. Either way there is no prosperous future with the existing leadership. The question therefore is who will make the decisions that are necessary to deal with this industry and set it on its appropriate path?

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 VI

 It was all so easy before, you just picked up the phone or clicked on the InterWebs and that was that. If it’s good to live in interesting times, then I can’t think of many other times in history that have been more interesting than now.

Issue

The fragility of our global economy is being discovered each and every day as we proceed through the 2020s. Although we appeared to transition through the virus with relative ease from an economic point of view. That is to state here in North America it was not that severe of a recession. The consequences of the shutdown are now beginning to become apparent to most people. Scaling down an economy is the easy part, resuming the performance that was achieved in previous years seems to be creating extreme difficulties that are showing a high level of persistence. Many of these issues were evident prior to the virus however they were being dealt with by various work arounds and were being dealt with in a reasonable, manageable way. Now with this economic resurgence, an additional load of seemingly complex issues, the totality of our problems are growing exponentially and are creating, predominantly as I see them, material human resource shortfalls that are complex, interrelated and challenging in terms of their resolution. 

This shortage of resources is somewhat acute in the oil & gas and service industries due to the bureaucratic mismanagement that has occurred in the prior four decades. Shutdown of the service industries field level of drilling activity during 2015 to less than 25% of what it was at the beginning of that year. And since that time the bureaucratic throttle junkies have ramped it up and down repeatedly is not conducive to the health and prosperity of that industry. Cutting head office staff has also occurred during this period and people were forced to find work in other industries in order to put food on the table. The resolution to this of course is for producers to recommit and double down on their transitions to clean energy? Leaving those that left these industries with that longing to want to move back? What we’re able to assume is that wherever they are and whatever they’re doing they're busy and well entrenched in their new careers in their new industries with good prospects due to the shortages of human resources. 

The virus was the first disruption that upset the apple cart. What we’ve learned is that the global supply chain we all knew and understood very well was not that well understood after all. It has a fragility that is very difficult to predict overall and specifically. An issue in Los Angeles has follow-on consequences in areas and in unrelated matters across the globe, which ping pongs around to other industries for as long as anyone cares to research. Each setting off their own unique difficulty such as the originating Los Angeles issue. How and where this stops the difficulties we’re experiencing is unknown, and it is unknowable if it will stop or just degrade further? This has taught us an important lesson. That we are wholly dependent upon and require a reliable global system that is needed to support our existence. The reliability and ease of which we were lulled into assuming it was persistent and durable is possibly in need of some work. 

The second issue we’re now facing is the consequence of the war. We’ve had war before but never in a global system such as we have today with European, global nuclear powers involved. This war is for lack of a better argument, over oil and gas supply. Russians have it and Europe foolishly depends upon it. Are the lessons that we learned as a result of the virus’ implications on our global supply chain the same lessons that we should apply here? 

Let's put another log on the fire with the fact that oil and gas provides somewhere between 10,000 and 25,000 man hours of mechanical leverage per barrel of oil equivalent. In an era of shale resource abundance in North America we have nothing to concern ourselves with, right? Other than an industry leadership who really doesn't seem to know these things and admits they can’t produce shale commercially. They’re onto new horizons in other industries too, and they have the oil and gas revenues with them. We should always try to remember that they’re fine and they thank us for asking. 

Our “Marshall Plans” Response

People, Ideas & Objects believe society is at a crossroads. Information Technology has invaded all aspects of our lives and the level of productivity it has actually contributed is relatively minimal. This is due to the lack of maturity in the underlying technologies that have developed over the past half century. The introduction of the Internet has had the most dramatic effect on people’s exposure to day-to-day use of these technologies. And a demand for robustness and maturity in the underlying technologies. We achieved this some time earlier this century and have been benefiting from them, predominantly through smart phone technology and cloud computing. The areas where these technologies have been most effective are in removing redundant costs out of supply chains and increasing demand for goods and services on a global basis and scale. 

The phenomenon of disintermediation is resisted on a wholesale basis in terms of its adoption by industries. Disintermediation was easy to eliminate the record store, recording studio, producer, agent and distributor from the supply chain. Putting the artist in direct contact with the consumer. Where are Nokia and Motorola today? Disintermediation is violent and obstructive to the common cause of hierarchies derived from prior centuries paper based architectures whose efficiencies are incapable of responding to markets. Is this the reason for the flat-footed, blinking response of our good friends the bureaucrats to the difficulties they now realize they’re in. Difficulties that began in the 1970s and those at which I began seeking to resolve in the early 1990s and did, finally, in 2012? 

Supply chain disruptions are nothing more than the inability to get the people organized and to the location that they need to be when they’re needed to be there. The consumption of more oil and gas is very efficient in getting people to wherever they want to be and need to be. It is very effective in producing substantially more effort than what the human population could produce in a year, each and every day. Yet all of this is disorganized and inefficient in order for bureaucrats to maintain the power and control they’ve all known, loved and admired. To give that up is never going to happen. The fact the forces of disintermediation exist now, 20 years after Steve Jobs commercially reorganized the music industry, is disappointing to me. It shows that bureaucrats have studied and learned the disintermediation phenomenon and determined its weak spots and where they could put their sticks in the spokes of the wheels to slow it or stop it from eliminating them. If I could make the assumption that People, Ideas & Objects, our user community and their service provider organizations were the most effective means of disintermediating oil and gas. The bureaucrats' resistance to it has been remarkable and highly effective. Bureaucrats have learned how to fight these forces after decades of learning. 

What is People, Ideas & Objects Preliminary Specifications resolution for oil and gas specifically. What we address throughout our 13 modules is the focus on the one certain method of resolving the overall human resource shortfall issue. This is a particularly acute issue as the industry is a science and technology based industry and the lack of new engineers and geologists into the industry has been too low to replace the retiring brain trust of the business. “Muddle through” is the approach of how the bureaucrats are addressing it, however they’re leaving material shortfalls unaddressed. What we proposed in the Preliminary Specification as the solution for the issues in terms of the human resource shortfall difficulties. Is to use specialization and the division of labor as the means in which to increase the throughput of the industry from the same resource base. 

Specialization and the division of labor are one of the five organizational constructs that we have used and included as foundations in the Preliminary Specification. All economic value that has been generated since 1776 has been a result of reorganizations using specialization and the division of labor. What Adam Smith proved with the manufacture of pins was that the breaking down of the process of making pins yielded untold increases in output. What he was able to do was increase the pin makers productivity by 240 fold through the application of specialization and the division of labor. What performance increases would result from application of specialization and the division of labor in exploration and production? I don’t know, what I do know is that we published the Preliminary Specification in August 2012 and therefore this concept has been in the hands of the bureaucrats since then. Some might argue that it would have possibly been known centuries before that. Yet, nothing has been done to address the issue, resolve their difficulties or make any changes to it as their solution. Applying this knowledge to the “crisis” we find ourselves in today with the supply chain and war issues. I have to ask how much of these oil and gas issues are necessary and how much could have been avoided if we dealt with the existing and perpetual bureaucratic sloth that caused it, and refuses to do anything about it? 

Our user community will be responsible for defining the individual processes our ERP software will define and support in the administrative and accounting fields of the oil and gas industry. It is here that they will maintain that process they’re most familiar with, have access to the developers for any changes, own and operate the service provider organization that will deliver the software solution (explicit knowledge) and their services (tacit knowledge) to the industry. With the breakdown of the administrative and accounting processes in this manner we are reorganizing the industry to benefit from specialization and the division of labor in these two fields. These administrative and accounting processes have in time achieved their own significant output gains. And if these gains were equal to what was achieved in Adam Smith's pin factory, there implies a future infinite level of improvement in the fact that a 240 fold increase had been attained. Not all of the gains we’re seeking to achieve in the Preliminary Specification are purely performance related criteria. There is also a quality that needs to be improved and the question of “what more can be done” needs to be answered. 

It is in this process of reorganization that People, Ideas & Objects et al turn all of the producers' costs to variable costs, based on production. If a property is unprofitable based on the standard, objective accounting produced from the Preliminary Specification et al, then the producer will want to optimize their corporate profitability by shutting down that property and ensure their losing properties are not diluting their profitable ones. Put the unprofitable property in their inventory of shut-in properties where they can determine the innovative changes necessary to return it to profitable operations. Although bureaucrats will say today that of course they’re doing this. It’s only humiliating to them that they hadn’t been over the past four decades, and I can assure you still don’t today. They can’t. A number of questions to ask a producer who may claim this might include what’s the difference in actual overhead cost of a property between natural gas and oil. Natural gas takes much more administration and accounting to conduct. Actual and not overhead allowances. Second, review their specific properties financial statements to see if they include any capital cost in the determination of their “profit.” They can not do either of these, because the cost in terms of recording detailed actual overhead to the property would be more money than any of their properties generate in terms of revenues due to their method of accounting. The same would be the case for depletion, which is done at year end on the producers global reserves. Taking a depletion calculation to determine the cost of capital once each year, that is a global representation of all the properties would have a reasonably high level of probability of corporate profitability. And that does not include any of our other arguments in the bureaucrats' specious recording of their cost of capital. What bureaucrats fail to understand is that these profits are not “real” which a proper accounting would reflect an inadequate performance. The devil is in the details which is what scares them the most. It is these changes that are part of the Preliminary Specification, and can only be achieved by the methods defined in the reorganization to our user community and their service providers for the administrative and accounting of the oil and gas industry. Enabling the most profitable means of oil and gas operations, everywhere and always. 

I am unaware of the performance of the recording artists income as a result of the changes that were made to disintermediate that industry. I would assume they’re making more money, the excess or bureaucratic costs have been removed, the distribution of those revenues are more equitable in terms of where the music talent resides, the consumers are satisfied with the quality and quantity of their music purchases and in many ways are pleased they won’t be needing to purchase it again when the 8-Track format becomes fashionable again. 

We sit on a mountain top in a range of mountains that are much higher than the one we’re on. The bureaucrats have a number of boulders they’re kicking off this mountain with nothing better to do and with consequences that they don’t much care about. We could just straddle that ridge and begin climbing what appears to be the highest mountain in the range. Instead we’re involved with the bureaucrats and their self-destructive and childish actions. And I think to myself that maybe one day I’ll be able to say what it is I’m really thinking. 

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 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.