Revisions to the Preamble Part 2

 Our Decentralized Production Model & Price Maker Strategy

What we've experienced over the past four decades in North American oil & gas is unique in all organizations and of all business history. Although we learned during the great depression the economic consequences of overproduction, and experienced its consequences in oil & gas since the 1980s, no one seems to have explained it to the North American producer. Oil & gas overproduction in North America has been systemic and chronic throughout the producer population and will continue to be without an effective means and method of production discipline being imposed. The history over this period is stark and clear. In the late 1970s the SEC imposed its Full Cost Accounting and associated Ceiling Test requirements on producers trading shares in the American market. These requirements allowed producers to record costs in property, plant and equipment as assets up to the limit of the present value of their independently evaluated petroleum reserves. This allowed an unnecessary flexibility in the financial statements that created distortions since that time. Simply, shifting the accounting from an evaluation of performance to one of value, hence the producer's foolish objective of “building balance sheets” etc came about. This is the mindset of our good friends, the producer bureaucrats who are the directors, CEO’s, CFO's and COO’s and any other officers. What we know of business is that overreported asset valuations lead to commensurate amounts of overreported profitability. Leading to investors rushing in to capture those profits and hence the process of overinvestment begins. Overinvestment in the productive capacity of the oil & gas producers leads to overproduction of commodities that are subject to the economic price maker principles and characteristics. Causing a collapse of commodity prices throughout this past four decade period. The first commodity price collapse that we can document was during the summer of 1986 when $10 oil prices decimated the industry for the better part of a decade. This is counter to the cultural and bureaucratic belief that oil & gas commodities are price takers. These definitions are from investopedia.com

Price maker

A price maker is a monopoly or a firm within monopolistic competition that has the power to influence the price it charges as the good it produces does not have perfect substitutes. A price maker that is a firm within monopolistic competition produces goods that are differentiated in some way from its competitors' products. This kind of price maker is also a profit-maximizer as it will increase output only as long as its marginal revenue is greater than its marginal cost, so in other words, as long as it's producing a profit.

Price taker

A price-taker is an individual or company that must accept prevailing prices in a market, lacking the market share to influence market price on its own. All economic participants are considered to be price-takers in a market of perfect competition, or one in which all companies sell an identical product, there are no barriers to entry or exit, every company has a relatively small market share, and all buyers have full information of the market. This holds true for producers and consumers of goods and services and for buyers and sellers in debt and equity markets.

As evidence supporting People, Ideas & Objects claim of price taker characteristics I make the following argument in our User Community Vision. Bureaucrats interpret substitutes to be; if they don’t produce others will, therefore substitution is everywhere. This is not what substitution means though. Does it mean that Elon Musk could make it to Mars if he replaced rocket fuel with a hydro dam? Or could we use wind energy to lubricate our crankcases? How about storing nuclear fuel rods in the convenience of a jerry can as you travel outdoors this weekend. And if you’d be able to return alive from your weekend adventure you might make it back to the office in that new solar panel, or pine bark suit you just bought. Alternatively if bottled water ceased to be produced people would switch to soft drinks, tap water, juice or other substitutes. Any overproduction of bottled water would see inventories swell and the price remain the same, as would the price of the last bottle of water found anywhere in the world.

The connotation of the economic term price maker has caused producer bureaucrats to conclude this is collusion. We argue otherwise when the Preliminary Specification uses the Joint Operating Committee and will produce detailed, actual, factual financial statements for each property. Producer firms will definitively know the “real” profitability of each of their properties. A task that is not done today and more importantly can not be done today. And therefore producers will independently decide to shut-in their unprofitable properties to ensure they attain the highest level of corporate profitability. Saving their petroleum reserves for a time when they can be produced profitably. Keeping their production and inventory costs lower by not incurring the costs of unnecessarily producing and storing unprofitable production. Ensure their reserves don’t have to recover the incremental costs of their losses as additional earned profits. And most importantly ensure that the marginal production is removed from the commodity markets allowing them to find their marginal price. While shut-in the producer can apply their innovativeness to return the property back to profitable production. People, Ideas & Objects and our user community are the appropriate business approach to the chronic and systemic overproduction of oil & gas and the persistent obtuseness of the producer bureaucrats, not collusion. Without “real” profitability there is only waste and deterioration as we’ve experienced these past decades. Without investors and bankers who were duped by these specious financial statements, there was no sustainable value generated.

The definition of collusion is provided by Wikipedia. 

In the study of economics and market competition, collusion takes place within an industry when rival companies cooperate for their mutual benefit. Collusion most often takes place within the market structure of oligopoly, where the decision of a few firms to collude can significantly impact the market as a whole. Cartels are a special case of explicit collusion. Collusion which is overt, on the other hand, is known as tacit collusion, and is legal. 

By definition then the Preliminary Specification price maker strategy may fall under the category of overt or tacit collusion. Which is legal. Each of the producer firms will be making the independent business decisions of whether or not to produce at each and every one of the many properties that they own. Those decisions will be made on the actual, factual accounting that provides the information for that decision. The decision is to make a profit, if the property is shut-in due to unprofitability it will incur a null operation, no profit but also no loss. Achieved when the Preliminary Specification has made all of the producers costs variable based on profitable production. The decision to avoid a loss of corporate financial resources and assets, in the form of petroleum reserves, when producing an unprofitable property at a price that does not cover the marginal cost, in the long term perspective of marginal cost, (as per Wikipedia “analysis is segregated into short and long-run cases, so that, over the longest run, all costs become marginal,”) is a rational business decision, not collusion. This also for the first time in the history of the industry enables the producer firm to indirectly control their overhead costs based on their profitable production profile.

The following graph was provided by Les Borodovsky from @SoberLook. What this graph is representing is the status quo perception of costs and how management of production is handled in oil & gas.

Looking at this from the perception of the producer bureaucrats. Their total costs of each barrel of oil produced in the various shale formations is in the range of $48 to $54. The operating and royalty cost of each barrel varies between $28 and $37. I would point out the $18 to $23 in capital costs are based on an allocation of their capital costs across the entire reserves of the property. We’ve argued that this allocation is unreasonable in a capital market where the demands for the performance of capital are far greater than what can be achieved when a producer is cycling their cash through their investments in a manner that retrieves their investment over several decades or more. This is further exacerbated when shale exposes prolific reserves, however demands additional capital to offset steep decline curves to maintain deliverability. 

As an alternative, People, Ideas & Objects recommend that producers retire their capital costs within the first 30 months of the properties life to provide for the reuse of the previously invested cash. In turn providing them with the means to meet their demands for future capital costs, shareholder dividends and bank debt repayments, and better match the rapid decline rates experienced in shale. This can only be done if the producer is selling their commodities at a price that is above their break even point which considers an appropriate accounting of the costs of operations and reasonable retirement of their capital.

This graph reflects the Well Break Even and Shut-in prices of the producers current position. At any point, and as long as the commodity price covered the operating costs, the property would continue to produce regardless of the impact on capital costs. If a dollar of capital costs was being returned, or one dollar above the shut-in price, that would enable the production of the property to continue. Only at the point in time where the commodity price dropped below the operating costs would the producer allegedly shut-in their production. This is a fundamental misinterpretation of the term break even, it is the reason the industry is in the difficulty that it’s in and why the producers have continued to lose money for the past four decades. Break even is not what is being interpreted here. What in fact the producer is assuming is that as long as there is cash flow above the operating costs then they’re making money and will continue to produce. What they’re stating is acceptable is they may not be breaking even, but they’re generating what they interpret to be cash flow.

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

To avoid the allegation of collusion bureaucrats would have us believe that they were operating the industry within the law today. Losses of catastrophic proportions have been realized, displacing the financial resources of each and every producer over the long term is normal business for the bureaucrat. Imposing the destruction of their firm's assets and the capacity and capabilities of the oil & gas and service industries is the price that therefore needs to be paid as it’s accepted as a “boom / bust” business. This is unnecessary and unacceptable when the Preliminary Specification is available to operate the business as a business.

The inverse situation is provided by the Preliminary Specifications decentralized production models price maker strategy during the times we find ourselves in during 2022 in North America. In an environment where the Preliminary Specification was operational, higher commodity prices would bring about higher production volumes that would meet the threshold of profitability and therefore incremental shut-in properties would be returned to production. Providing the dynamic, innovative, accountable and profitable North American producer with the most profitable means of oil & gas operations. The organizational objective is to satisfy the consumer demand for energy on the basis of abundant, affordable and profitable energy. The value proposition of a barrel of oil equivalent is in the range of 10 to 25 thousand man hours of equivalent effort. Going without is not possible in the most advanced society with the most productive economy. Yet, just as producers were forced to shut-in production as a result of almost negative $40 oil prices, they are required to bring on any previously unprofitable production that would have been shut-in under our system in order to satisfy demand. Who should we look to now to provide the oil & gas that’s needed? Apparently not the bureaucrats. Operating the industry profitably, everywhere and always, would have enabled them to maintain the capacities and capabilities of the greater oil & gas industrial economy. That People, Ideas & Objects were subjected to abuse and punishment for this and other content contained within the Preliminary Specification is evidence that bureaucrats knew better, that our alternative was available and it was a threat to the bureaucrats method of management. They will need to live with their legacy of inaction.

What bureaucrats were able to do was run the entire industrial complex into the ground over the past four decades and completely destroy large percentages of the service industries industrial capacity, eliminating their capital structures. Go find a willing drilling rig investor or banker of a few years ago who subsequently saw the drilling rig they invested in cut up for scrap metal while producer bureaucrats whistled their uncaring and inconsiderate tune of “muddle through.” It is now incumbent upon the producers to provide the financial resources to rebuild the service industry. The rule is “you broke it, you fix it.” Producers used and abused the service industry and now they’ll be needing to provide the money and backbone involved in the rebuilding effort, otherwise they’ll only use and abuse again, everyone else had their fun and don’t trust the producers. Maybe when they’ve had to rebuild it they’ll respect it. In 2022 producers not only don’t have any previously shut-in capable production, they haven’t the capacity or capability in terms of the means to meet the market's demand for energy. Whether it's a failure to make any real profitability or to meet the market's demand, we can certainly count on our North American oil & gas producer bureaucrat to fail. 

With the costs associated in exploration and production, and particularly shale reserves, it's no surprise that producers have reported losses on operations. What is surprising is that producers have done nothing over this period to mitigate the overproduction that has caused the decline in pricing, subsequent financial losses, destruction of the producers reserves and greater oil & gas industrial capacity. The reason for this chronic overproduction is the producers have to generate the revenues to cover the out of pocket costs of the overheads they incur in the “high throughput production” model they employ. This model has these overhead costs of the producer firm being incurred whether there is production or not, and as a result, makes their operation a high cost operation at any level of production. At lower production volumes, it skews their earnings and overhead costs appear out of place. Therefore this behavior of producing at capacity should be expected to continue on both the oil & gas sides of the business. Even in spite of significant financial loss or the inability to meet market demands. Although some producers report overhead costs of less than 2% in many instances this is not representative of the situation. We believe based on our experience that overhead costs range between 10% and 20% of revenues. These itemized amounts are never detailed or discussed in the financial statements of producers. Please see the section of this Preamble under our Value Proposition sub-heading regarding cash for more detail on overhead.

In the Preliminary Specification the decentralized production model is employed which enables the dynamic, innovative, accountable and profitable oil & gas producer to implement our price maker strategy. This decentralized production model has been defined by Professor Richard N. Langlois as:

In a world of decentralized production, most costs are variable costs; so, when variations or interruptions in product flow interfere with output, costs decline more or less in line with revenues. But when high-throughput production is accomplished by means of high-fixed-cost machinery and organization, variations and interruptions leave significant overheads uncovered. 

Production discipline is attained through this process when the producer realizes that their maximum profitability is obtained through producing only profitable production everywhere and always. Therefore producers are incentivized to adhere to the principles of the Preliminary Specifications decentralized production models price maker strategy. Just as all businesses in the capitalist system follow these principles since the great depression of 1929. The individual decisions of each oil & gas producer, based on an actual, factual accounting of the profitability of the property, will determine if the property produces. That is how the oil & gas industry needs to deal with the low commodity price situation that it occasionally finds itself in. The inverse of this is also relevant when commodity prices rise, producers will be raising production volumes by returning their shut-in properties to the market. Shale based reserves will always overwhelm the oil & gas commodity market with flush production and deliverability that are driven by its prolific nature. Production discipline based on profitability can only be achieved through the reorganization of the industry and producers based on the Preliminary Specifications decentralized production model and detailed in the Specialization & Division of Labor section above. Where overhead costs are made variable and producers are using the facility we’re building of Cloud Administration & Accounting. Which enables our price maker strategy to provide for the producers and industries profitability and in turn ensure the consumers are always provided with an abundant, affordable, reliable yet profitable source of their energy. 

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter @piobiz. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

Revisions to the Preamble Part 1

 People, Ideas & Objects, our user community and their service provider organizations competitive advantage and value proposition is that we provide the dynamic, innovative, accountable and profitable oil & gas producer with the most profitable means of oil & gas operations, everywhere and always. We suggest it is no longer adequate to just own the oil & gas asset but also have access to the ERP software in the form of our Preliminary Specification which makes the oil & gas asset profitable. Setting the foundation for the industry to obtain the objective of profitable energy independence on the North American continent. We do this by providing the Preliminary Specification, an oil & gas ERP software solution that supports a business model that defines the following characteristics of how our software defines and supports the dynamic, innovative, accountable and profitable North American oil & gas producers.

Adoption and integration of the Joint Operating Committee as one of the five Organization Constructs of People, Ideas & Objects and our user communities Preliminary Specification. It is the industry's legal, financial, operational decision making, cultural, communication, innovation and strategic framework of its operations. The Preliminary Specification moves the compliance and governance frameworks into alignment with the seven frameworks of the Joint Operating Committee enabling speed, innovativeness and profitability in the North American producer firms. The four other Organizational Constructs include specialization & the division of labor, markets, Intellectual Property and Information Technology. Each of these establish a legal, cultural or structural component of understanding and knowledge for our software developers, our user community and their service provider organizations, to the producers and the service industry to operate within and adapt. Aligning these Organizational Constructs within our Preliminary Specifications ERP software provides a resonance with the law, principles of economics and opportunities, particularly from the use of Information Technology such as we have done in extending the conceptual model of Cloud Computing to be offering North American oil and gas Cloud Administration & Accounting in the Preliminary Specification.

In addition to the commercial focus of profitable production everywhere and always. People, Ideas & Objects et al provide an overall vision of how the North American producer will face their most difficult and challenging period of the next 25 years. The demand for capital will be high due to the need to establish and maintain profitable energy independence on the continent. To deal with the rebuilding, refurbishing and reclamation of the infrastructure. Ensuring our energy consumers maintain the most powerful and efficient economy through the abundant, affordable and reliable oil & gas that is profitably produced. Ensuring they realize their full value proposition of the energy produced of 10 to 25 thousand man hours per barrel of oil equivalent.

Setting out tomorrow seeking to “muddle through” by “building balance sheets” and “putting cash in the ground” has turned out to be a financial catastrophe that was hidden by specious accounting over the past decades. A financial failure that has precipitated operational destruction throughout the secondary industries leading to an inability to meet the market's demands. However, the bureaucrats are fine and they thank you for asking. 

Specialization and the Division of Labor

Our focus on the areas of specialization and the division of labor and how these tools will move the producer firm to higher trajectories of productivity and performance, and therefore reduce the costs of exploration and production in the industry. The need to introduce new and innovative methods, business models and efficiency will be inherent in the culture of the industry, not something that should be resisted as People, Ideas & Objects Preliminary Specification has been forcibly resisted for more than a decade. An elementary, yet highly effective example of specialization and division of labor is provided through this quotation from On Liberty by Thomas Paine.

In order to gain a clear and just idea of the design and end of government, let us suppose a small number of persons settled in some sequestered part of the earth, unconnected with the rest, they will then represent the first peopling of any country, or of the world. In this state of natural liberty, society will be their first thought. A thousand motives will excite them thereto, the strength of one man is so unequal to his wants, and his mind so unfitted for perpetual solitude, that he is soon obliged to seek assistance and relief of another, who in his turn requires the same. Four or five united would be able to raise a tolerable dwelling in the midst of a wilderness, but ONE man might labour out the common period of life without accomplishing anything; when he had felled his timber he could not remove it, nor erect it after it was removed; hunger in the meantime would urge him from his work, and every different want call him a different way. Disease, nay even misfortune would be death, for though neither might be mortal, yet either would disable him from living, and reduce him to a state in which he might rather be said to perish than to die.

What we do know is that today we stand on the shoulders of giants and benefit from a very sophisticated and complex specialization and division of labor. Today everyone in oil & gas has attained skills from education and training, and gained experience from years of working within their chosen field to conduct specialized work. To disrupt this in any fashion without a full understanding of the global aspects of how specialized this work has become would cause failure. At the same time, with the current corporate model proving to be unsustainable, the focus has been on cutting costs. Cutting too deep could have greater implications than what was intended. The point is, to move to a higher level of specialization and division of labor will not be done, and can not be done, without significant and deliberate forethought. The principles of spontaneous order, serendipity and creative destruction have failed to provide any capacity increases in the past decades. We believe software is responsible, or more specifically, the lack of software development capabilities are responsible for constraining organizations. Oil & gas is at least a continental based economy. To organize this in a productive, profitable, specialized manner and divide the labor efficiently without the assistance of the Internet and deliberate forethought will limit our ability to progress.

Secondly we have to consider the role of software in society today. If we intend to move to a higher level of specialization and division of labor. Then the software that we use, and particularly the ERP software, is going to have to define and support those changes. Therefore we are not only going to have to deliberately plan the next level of specialization and division of labor, we will need to build the systems that define and support it first within the software, before the implementation of any changes or benefits will be seen. This is one of the defined benefits of having the software development capability of People, Ideas & Objects, our user community and their service provider organizations. To conduct any form of organizational change demands the software be changed first in order for it to support the revised process. Otherwise the organization will quickly regress back to the process that is defined in whatever software is used. What People, Ideas & Objects considers a modern day software bug. 

Review of the Preliminary Specification shows there is a defined restructuring that takes place throughout the modules based on a higher level of specialization and division of labor of the industry. The oil & gas producer is a stripped down version of itself that has the C class executives, earth science and engineering resources, land, legal and minor support staff. And that’s it. The rest of the producer's administrative and accounting needs are provided by our user communities service provider organizations. Moving the industry from a reliance on the producers fixed cost administrative and accounting capabilities to a reliance on the industries variable cost administrative and accounting capabilities. Variable based on profitable production. And each of these service provider organizations are focused on one process, or one element of a process, that is organized and specialized across the industry. So for example, there would be a royalty payment service provider organization that handles all of the industries Texas Railroad Commission royalty payments. Ensuring producers were always paying the lowest amount allowable of their royalty obligation. Where the cost of the royalties, and the incidental billing cost for the royalty service provider is billed directly to the appropriate Joint Operating Committee. Not the individual producer. Therefore eliminating the fixed nature of the operators administrative and accounting costs, and replacing them with the variable nature of the Joint Operating Committees administrative and accounting costs. As without production the variable royalty payment process would not be invoked, no service would be rendered, no costs incurred and no billing. Please note this demands the termination of the use of fixed overhead allowances as the variable, actual overhead will be known at each of the properties. Enabling an accurate accounting of the properties performance based on all of the actual costs of exploration and production. 

There are many advantages of moving to a system or methodology such as the Preliminary Specification. Cost and efficiency are just some of the reasons. The costs associated with the royalty payment service providers organization would be a small percentage of what is incurred by the industry today. By focusing on the most efficient way to process the industry's royalty payments, and only royalty payments, that specific service provider would become specialized and reduce their time and effort in doing so, yet increase the quality of administering these tasks to a small component of the costs today. In Adam Smith’s pin factory, his research yielded a 240 fold increase in productivity from the changes that he made in the process of making pins. Having the royalty payment and other administrative and accounting processes in the industry subject to this type of analysis, complete with the software development capability and our user community of People, Ideas & Objects, similar results in productivity could be attained and continue to develop. All economic growth that has been achieved anywhere in North America since 1776 is a result of the economic principles of specialization and the division of labor.

When we consider the current corporate models attempts to provide the producers administrative and accounting needs for all that falls within their domain. And the understanding that is necessary to support those administrative and accounting tasks. The ability to build and maintain that capability and capacity is costing each and every oil & gas producer their profitability. What will come to be seen as an archaic business model will be the way in which the industry is operated today. It has to because it is unsustainable and a more effective and efficient business model based on higher definitions of specialization and division of labor will become the norm through the adoption of the Preliminary Specification. The industry's survival requires it. What we are doing is moving from a reliance on each of the producers' fixed cost administrative and accounting capabilities to a reliance on the industries variable cost administrative and accounting capabilities. Eliminating the costs of each producer incurring these non competitive capacities and capabilities in house. This is our shared and shareable model that we are building on the conceptual model of Cloud Computing by providing what we are calling Cloud Administration & Accounting.

When we consider the next aspect of this change, our decentralized production model, this assures that we offer the most profitable means of oil & gas operation, everywhere and always. As without the software and development capabilities to define and support a higher level of specialization and division of labor, change will not happen. Software is sealing organizations in proverbial cement eliminating spontaneous order and serendipity’s effectiveness in today’s software driven organizations. This will need to be resolved by establishing the software development capability contained within the Preliminary Specification if the North American based producers are to be able to attain and then sustain profitable energy independence.

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter @piobiz. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

Revisions to the Abstract

 People, Ideas & Objects Preliminary Specification provides a comprehensive vision of the future oil & gas industry, producer and service industry provider. The Preliminary Specification is a cloud computing-based, thirteen module ERP software system that defines and supports the Joint Operating Committee, three marketplaces and three other organizational constructs of the dynamic, innovative, accountable and profitable oil & gas producer. Our solutions competitive advantage is that we provide the North American oil & gas producer with the most profitable means of oil and operations, everywhere and always. Establishing a foundation for future North American energy independence.

Our vision is comprehensive and is detailed in the approximate 200,000 words contained here within the modules of the Preliminary Specification. Our software defines and supports a structured reorganization of the industry and producer firm. Through our decentralized production model, we implement a price maker strategy that converts the industry from a cash flow focus to one of profitability everywhere and always. Once the industry is profitable we then deal with the resource constraints of the earth science and engineers through our Resource Marketplace and Research & Capabilities modules. It is through specialization and the division of labor that we are able to expand the throughput of the industry from our constrained resource base. Similarly the devastation realized in the service industry is a real constraint to production deliverability and needs to be purposely rebuilt by producers. Then and only then would we be able to approach the objective of achieving energy independence in oil & gas in the Canadian and U.S. marketplaces. Establishing the industry on the basis of profitably and removing the resource constraints of engineers & earth scientists, service industry capacities & capabilities that exist today are the necessary precursors to achieving energy independence. That vision is what the People, Ideas & Objects Preliminary Specification achieves.

For the record People, Ideas & Objects call the CEO, CFO & COO, their directors and any other officers of the producer firms bureaucrats.

It is reasonable to look to energy independence as an overall objective. The shale reserves provide for that. However, the way in which the industry is managed makes that objective unreasonable and unattainable. Bureaucrats have destroyed the financial, operational and political foundations of the industry. Today we see the producers have lost financial and operational control within their organizations but also within the service industry of which they are solely dependent upon. Who provide these producers with the geographical and technical diversity necessary to carry out their operations in the field. We now have producers who are unable to function operationally but also unable to meet the demands of their consumers. 

Without significant capital to restructure and increase industry throughput. The current bureaucracy is unable to achieve energy independence. They’ve never been concerned with earning profits and proven their inability and desire to catch the religion of real profitability. Without establishing the industry on a foothold of profitability first and foremost. There is not enough capital in the universe to achieve energy independence in North America while remaining in the hands of these bureaucrats. 

The next twenty-five years in oil & gas will be the most dramatic in its history. The demand for energy will ensure that prices remain high. Yet with the abundance of shale reserves ensures the costs of providing that energy is much higher than the costs of conventional reserves. And with many people joining the middle class we need to consider how the industry approaches this new energy era. Does anyone believe the current bureaucracy, with the financial destruction they’ve caused in the marketplace today, will be the solution? Does that future involve an Information Technology perspective that is just a cost, or should it be a vision such as the Preliminary Specification provides today?

The key to providing this solution is that the Preliminary Specification is based on five organizational constructs that include the industry-standard Joint Operating Committee. The legal, financial, operational decision-making, cultural, communication, innovation, and strategic framework of the industry. When we take the compliance and governance frameworks of the hierarchy and align them with the frameworks of the Joint Operating Committee we attain a speed, innovativeness, accountability and profitability that is desired in our oil & gas organizations. The other Organizational Constructs include the reintroduction of specialization & the division of labor, establishment of markets, use of Intellectual Property laws, and Information Technology as foundational to the producer firms and industry operation. 

After all, as you will see, we are not talking about minor changes to the floor plan of accounting. We are exercising wholesale changes to the oil & gas industry by adopting the Preliminary Specification, and fully utilizing the Joint Operating Committee and the other Organizational Constructs. Change that is as significant as that which is represented by the changes in energy prices, the global energy demand structure, shale reserves and IT leveraged change or disintermediation. Based on the research of Professor Giovanni Dosi and as People, Ideas & Objects have applied to the oil & gas industry, he asserts that the makeup of industries and companies is attributable not only to the endogenous force of competition. Innovation and imitation also make up the fundamental structure of an industry. “Market structure and technological performance are exogenously generated by three underlying sets of determinants.”

Each of the following three determinants are evident in the marketplace of an oil & gas producer today, as reflected in:

• The structure of demand.

Satisfying the demand of the global energy marketplace is critical to the advancement of all societies. American, western, Chinese and developing societies face real challenges in sourcing adequate long-term sources of energy. The long-term demands on the energy producer over the next 25 years have never been greater.

• The nature and strength of opportunities for technological advancement.

The nature and opportunities for technological advancement lead one to believe mankind has never faced the level of opportunity and acceleration that is possible today. The industrial mechanization of the past 100 years combined with the prospective mechanization of intellectual pursuits combines to markedly appreciate the value of human life. The availability of abundant, affordable, reliable and profitable energy will be critical elements of this advancement.

• The ability of firms to appropriate the returns from private investment in research and development.

The oil & gas industry is moving closer to its earth science and engineering principles. Innovation, research and development in both the producer firm and the service industry are and will become more commercial in nature. It is on the basis of the success or failure of these factors that will determine the success or failure of the producer firm within the industry.

The role of software in society is becoming more pronounced. Today we are still in the beginning stages of what can be done. For an industry such as oil & gas to continue without the software development capabilities that People, Ideas & Objects are proposing, and the organizational structure focused on the Joint Operating Committee, North American based producer prospects look dim. People, Ideas & Objects claim that we provide the innovative oil & gas producer with the most profitable means of oil & gas operations, everywhere and always. And we do. First by providing our software in the most cost effective manner. That is, charging our subscriber base for the one-time costs of our software developments on a shared and shareable basis. A fundamentally different value proposition coincidental with the value of Cloud Computing. To the assertion that we are establishing a Cloud Administration & Accounting software and services capabilities and capacities in North American oil & gas. And secondly, that in order to attain a higher level of economic output requires that the oil & gas industry employ higher levels of specialization and division of labor. To organize that specialization and division of labor in a continental economy requires the use of the software specified in the Preliminary Specification. There are no other means by which to organize a higher level of specialization and division of labor. Serendipity, spontaneous order and in many ways creative destruction have ceased to function. The bureaucracy has now proven its inability to change or accommodate the speed of the marketplace. Therefore our claim to be the most profitable means of operations is valid. The only manner in which to move from the high levels of organizational methodology we currently enjoy is to design and support a more sophisticated specialization and division of labor. And that is detailed in the Preliminary Specification. We need to take control of the production of the software in order to take control of the means of energy production. That is what People, Ideas & Objects user community-based software developments are about. Thirdly, our development of the decentralized production model, as detailed in the Preamble, provides the oil & gas industry with the capability to allocate oil & gas production on the basis of profitability throughout the industry and obtain “price-maker” strategies. For producers bureaucrats to continue to assert that oil & gas commodities are subject to the economic principles of “price takers” is a continuation of their foolishness and sloth. Production discipline provided from the Preliminary Specification is the necessary mechanism in the prolific and costly era of shale-based reserves. Otherwise, the industry and producers will continue to lose money due to their many decades-long behavior of chronic overproduction and oversupply in both oil and natural gas.

When it comes to undertaking a large project such as People, Ideas & Objects Preliminary Specification. And we have budgeted the project at $15 billion in its initial commercial release. Is a need to maintain a sense of urgency for the people involved through to the end of the project. As we know, most people will remain motivated as long as the money keeps flowing. So how do we ensure that the money keeps flowing? It is through the fact that we provide the most profitable means of oil & gas operations that we can motivate the producers to maintain their sense of urgency in keeping this project funded and moving forward to its conclusion. The alternative is the current bureaucracy who have effectively eliminated themselves from consideration. In the future, it may not be enough to own the oil & gas assets. It will also be required to access the software that makes the oil & gas asset profitable, that is the importance of software in today’s society. Our value propositions monetary value over the current bureaucratic offering is valued in trillions of dollars for the next 25 years and provides the greatest return over any other investment industry could choose. 

From the thirteen module Preliminary Specification, there is an overall vision of how the innovative oil & gas producer and the Joint Operating Committee would function in this new energy era. I had two comments made to me when I wrote the Preliminary Research Report. The comments were that “this solves every administrative issue in oil & gas for the past fifty years” and “it's an entirely new discipline.” Both were related to the significance of using the Joint Operating Committee as the key organizational construct of the innovative oil & gas producer. What I think that we can say as a result of completing the Preliminary Specification is that both of these comments underestimate the significance of using the Joint Operating Committee. What we’ve discovered is that the Preliminary Specification certainly resolves the administrative and accounting issues when the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks are aligned with the compliance and governance frameworks. However, when it comes to the operational concerns of the oil & gas industry, it also provides the frameworks and means to solve those problems too. And although People, Ideas & Objects have used them to highlight today's operational issues they will also provide solutions for tomorrow's issues and opportunities.

Changing the innovative behavior of one producer carries a scope of change that is as broad and as diverse as is contemplated in the business world. Change at this scale in many instances can not be managed within the organization but needs to be managed through the forces of creative destruction in the greater economy. Producing natural gas at a loss was the beginning of this process. We have now seen natural gas producers continue to lose money for more than a decade. Yet nothing was done to address this issue. At the height of the issue, we saw the bureaucracy pray for a cold winter. Solutions to the problem have not been discussed or provided, outside of People, Ideas & Objects, and the low natural gas price issues remain unaddressed in late 2020. The fact is bureaucracies can’t, won’t and will not ever change. Over the early years of the natural gas price declines the relatively higher oil prices were able to cover many of the sins in the natural gas marketplace. For the past seven years, low oil & gas prices have put the industry and many of the producers in financial jeopardy due to both sides of the business's poor performance. An anomaly that hasn’t happened before. We believe these are the beginning stages of the forces of creative destruction. People, Ideas & Objects offers the Preliminary Specification, our software development capabilities, user community and service providers as an alternative organizational structure for the oil & gas investor to instrumentally rebuild the industry. 

A time of dynamic change driven by the organizational changes focused around the innovative Joint Operating Committee. How can a firm that has been developed in an era of cost control transform itself into a dynamic, innovative, accountable, profitable and earth science & engineering capability-focused producer? In many cases the will to do so might exist, however, with the speed and unforgiving nature of the business cycle not much time will be provided to those that attempt the transformation. We see in this world the capital markets reflecting many interesting phenomena since the financial crisis of 2008. To suggest any trend or definitive result from these would be premature. It's just a different world in terms of being an oil & gas CEO or CFO than it was before 2008.

The Preliminary Specification includes in its definition Oracle Corporation’s technologies. If you read or review any of their material it has a decidedly technological and engineering focus. If you mention the Joint Operating Committee within their organization you can hear it echo for a week and a half. They really have no fundamental understanding of oil & gas, and only a basic understanding of business. They have become very specialized in what they do and the products they sell. Such is the nature of the division of labor and specialization. What People, Ideas & Objects are therefore doing is filling a “gap” or creating a sub-industry in providing the business understanding of the oil & gas industry to the technologies of Oracle Corporation. This “gap” or sub-industry between the oil & gas industry and Oracle is something that is needed because the two are unable to speak coherently to each other, they need an interpreter, and that is People, Ideas & Objects, our user community and their service provider organizations and the Preliminary Specification.

McKinsey Consulting suggests that large populations will be joining the middle class in the next 25 years. This will have a dramatic effect on the levels of demand for energy. If the oil & gas industry fails to respond to these demands due to the bureaucracy's lethargic ways, will anyone note that there were alternatives proposed?

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter @piobiz. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

Revisions to our Material Balance Report

 As the Material Balance Report is contained within both the Partnership Accounting and Accounting Voucher modules they are part of a much larger system. Which of course these two modules are parts of an even larger system. Therefore the overall context of the environment in which the Material Balance Report operates in is unavailable if this is the first exposure by the reader to any part of the Preliminary Specification. Those who may be unfamiliar with the production, marketing, revenue and royalty processes involved in the oil & gas producer firms may not appreciate the subtlety of our Material Balance Report. 

The next post on editing and rewriting will be the Abstract.

The Material Balance Report

The Material Balance Report is an Accounting Voucher that is unique and has the following characteristics. It is designed to provide automation to the production, revenue, royalties, marketing and other processes of the producer firms and Joint Operating Committees. It is this type of specialized use of an Accounting Voucher that our user community should consider applying to other situations when contributing to the Preliminary Specification.

What is proposed in People, Ideas & Objects Material Balance Report is that for an Accounting Voucher to close it must balance the financial debits and credits, but must also from a volumetric perspective material balance, system balance and partnership balance. Each of these volumetric perspectives are accessed through a different “mode” within the voucher to make the necessary changes to correct any volumetric imbalances or errors from that specific perspective.

The Joint Operating Committee is a thing that exists as a result of legal agreements and in the minds of oil men and women. It therefore doesn’t “own” anything or incur any costs. All of the charges to the joint account must clear in the month they’re incurred to the producers involved. It is the same situation for the volumetric information. The Joint Operating Committee "Accounting Voucher" balances to zero in terms of costs and volumes each month by clearing its charges to the partnership and royalty owners of the property. Clearings are done after the balance. That does not guarantee that the facility will remain in balance. Adjustments and amendments to the Accounting Voucher may occur. These may happen and they can be subsequently balanced and cleared to the partnership accounts in the same manner as before. And that is on an automated basis. The point of the exercise is that you have the business of the Joint Operating Committee captured in the Material Balance Report which is an integral part of the Accounting Voucher. Essentially all three are the same thing, the Joint Operating Committee, Accounting Voucher, and Material Balance Report. An integrity of reporting that is embedded within the accounting systems that are as rigid as debits must equal credits.

We now discuss the contracts regarding the petroleum products produced from a specific Joint Operating Committee. Contracts that would include marketing for gas, oil, natural gas liquids, or contracts for charges for gathering, processing etc. If a stream of product was flowing through a facility, then a contract for processing or sale would be attached to it. The ability to attach the contract to the stream would enable the Accounting Voucher to establish the associated accounting for the gathering or processing of charges / sales for that stream. These charges (invoices) or sales (receipts) are generated in automated fashion by the Preliminary Specification.

The Accounting Voucher is for lack of a better term a template that is built upon as time passes. Each month as the property changes, these changes are captured within each Accounting Voucher and the template is renewed each month with the accumulation of the properties history, the data from the Petroleum Lease Marketplace and other modules. If a new contract was added for the production from a new well, then that contract stream and the new well would be represented in the next and every month's Accounting Vouchers. The Accounting Voucher template documents the changes in the property over time. Providing the base for the subsequent automation of the business processes to be established, tested, debugged and deployed.

Critical to the “definition and design” of transactions is the fact that these transactions are balancing themselves out. If the debits and credits were not in balance at the end of the day, then the automation of the systems and the accountants would not be doing their jobs. The same could be said for the volumetric reporting. If in the Material Balance Reports was out of balance (call this material balance), or were not balancing the inputs and outputs to other Material Balance Reports (call this system balance), or the internal accounting of those volumes to the partners, royalty holders and others were out of balance (call this partnership balance) the accountants and systems would not be doing their jobs. Simply the process of closing the Accounting Voucher will need to consider not only the balancing of the debits and credits from a financial point of view. They will also need to ensure that the material, system and partnership volumes reported in the Material Balance Report are also in balance. Without these systems in balance, the Accounting Voucher will not clear or close.

This imposes another rather strict provision on the quality of the information that is accepted into the People, Ideas & Objects Accounting Voucher module. Precluding the acceptance of a voucher due to the inability to balance a volumetric requirement holds the system up for what is a common occurrence. What if the volumetric information is unavailable in a timely fashion? What if the information is part of the normal amendment process? Then we are left with the traditional accounting methods of dealing with these types of issues. An accrual of the volumes in order to achieve the balancing necessary should be able to be processed in the current month. Most production processes are amended for up to 90 days. These accruals would then be automatically reversed in the following accounting months Material Balance Report. What is different from existing systems is that we are enforcing the systems to volumetrically balance. Not just inputting key variables but imposing and enforcing the facts of what actually happened at the Joint Operating Committee, and if it is subject to a comprehensive Construction, Ownership and Operation agreement, what is agreed to be accounted for before the close of the Accounting Voucher. And by that I mean specifically, from the point of view of either dealing with the contractual arrangement as dictated by the governing agreements as the determining factor for the means of production allocation. Or if the agreement refers to the chemical composition as the basis of production allocation, both of these methods will be available in the Material Balance Report of the Accounting Voucher in an either, or and mixed environment.

The difference may be subtle but the implication is significant. Locking the volumetric balancing, over the long term, into the Accounting Voucher itself enforces the system to follow the volumes as produced and processed. Once this is achieved a certain level of unimpeachable integrity is achieved regarding the production data and the automation of detailed processes based on those volumes can begin and be assured to be based on the facts of the facilities and assets data and information captured in other modules. Any subsequent amendments will correct the record.

There are many aspects of this system's management of these processes that are unique and necessary. The reason they have not been undertaken has been the broad scope and scale of the development undertaken is comprehensive and beyond what the technology could have provided. It is certainly from a budgetary perspective beyond the scale of what any individual major producer would undertake as the value gained would not be there for the individual producer to incur the entire cost, and most certainly well beyond the standard approach of an oil & gas ERP software development solution provider. People, Ideas & Objects are aggregating the North American producers budgets to make these available through our ERP software and the service provider organizations. Turning the cost of oil & gas administration and accounting, which includes the ERP systems development, into a Cloud Administration & Accounting capability for North American based producers. Those with a comprehensive understanding of these processes will fully appreciate the points that I’m making and the implications involved. My understanding of these processes is comprehensive, I know it can be done and we’ll do this correctly. That this undertaking may be one of the most comprehensive features of the Preliminary Specification. Therefore it is done on the basis where the costs of development are shared and shareable, or non-rival, and driven by a user community vision such as we have. Therefore there is substantial value in terms of cost savings to each producer with untold value through application of the specific attributes of People, Ideas & Objects value proposition. 

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

User Community Vision Edits Part 5 of 5

 We finish up today with the last installment of our user community vision. We’ll be moving on to the Material Balance Report on Tuesday May 3, 2022 in terms of our editing and review of the Preliminary Specification for its August 9, 2022 10th anniversary. 

Our User Community Tasks

As a group, our user community has specific tasks that need to be completed in the first iteration of our development. These only apply to our initial development and will change once the software is operational in the marketplace. If we look at these tasks from a global perspective we are taking Oracle Cloud ERP, applying the vision of the Preliminary Specification, developing and integrating that across oil & gas. In terms of technical risk, I assess the project as moderate, we are using proven technologies on a large scope and scale. In terms of business risk we see the North American producers failing in their primary objective of supplying abundant supplies of affordable energy to the consumer. A failure on many levels and therefore our level of business risk has to be none. We must have this completed successfully, in my opinion. Ditto for the market risk. Our vision within the Preliminary Specification is comprehensive and has the benefit of unifying our user community in the appropriate direction for successful implementation. And most importantly we are user community driven and therefore quality software.

The first step in this initial development phase is therefore to implement the model that is the Preliminary Specification. This vision provides the broad outline of what and how the applications need in order to operate. The details of how each individual's work needs to be handled is the work of our user community to fill in, define and ensure that our developers provide you with the systems that you want and need. For example, if you are working in an area where the Material Balance Report is part of the domain of your work. You will collaborate with others to determine what is required, ensure that it’s correct and iteratively, and innovatively develop the functions and processes in ways that meet the overall vision that will be managed by the software and your service provider organization. We are capturing the manner in which the industry needs to operate profitably everywhere and always which includes everything that is on the table, exception noted below. Ensuring it is the operational, administrative and accounting manner for the future we’ll need and redefining it around the Joint Operating Committee, the other four Organizational Constructs and the vision of the Preliminary Specification. 

What we don’t need in this first iteration of the Preliminary Specifications software is to have any innovation on its business model completed by our user community. What exists today in the vision works in terms of its global perspective. It may appear that in some small areas it might be better to change an element of the business model to accommodate some other condition. What we will not know is if this change upsets the global perspective and puts the overall vision out of sync in terms of its operational capabilities in other areas. The first iteration is not a time in which to innovate on the business models contained within the Preliminary Specification. This may be introduced in the second phase of the developments, when the software is operational in the market. There will be so much else that needs to be done that is incremental to the traditional software development process that we need to ensure we don’t bite off too much of a task to begin with. I would point out that our initial needs will include such one time events as a familiarity with Oracle Cloud ERP and the other people involved in this user community and initiative which would be demanding much of our time and energy. Focusing on what works from a business model point of view would provide a consistency in terms of the understanding throughout the industry.

Once we have the software fully operational in the marketplace then we’ll be able to innovate on the model, and determine further interactions and implications within the various domains of our operation. We are focused on providing the oil & gas industry with a dynamic, innovative, accountable and profitable oil & gas producer everywhere and always. This requires that constant change will be part of our developers, user community and service providers operations. People, Ideas & Objects Revenue Model is structured to generate revenues based on changes in the software we provide to oil & gas. Services revenues fall under the domain of the service provider organizations individually which are managed by our user community members who own and operate those concerns. That is the dynamic that keeps this community moving forward. Otherwise software has the effect of becoming concrete to an organization as it has done today. Turning it into an unchangeable beast. If an organization needs to change, it is the software that needs to change first. And in order for the software to change, our user community or producer firms have to initiate the changes through these mechanisms we provide to affect that change. And in People, Ideas & Objects our user community has obtained that power through this user community vision.

What we can do, and what brings about the greatest value from the model is exploring, innovating and implementing on the interactions and implications of our model. When we move to the Joint Operating Committee and the other Organizational Constructs of the producer and industry we are changing every aspect of their operation, administration and accounting. Including within the service industry. Not much will be left unchanged in terms of the effects of implementing the Preliminary Specification. The interactions and implications are where the dramatic value will be generated for the various stakeholders in our targeted market. It is here that I expect to see the value of the model be in the forefront of our user community's search for delivering tangible value. Upon commercial release we’ll have a solid foundation in which to innovate on a known known in terms of the Preliminary Specifications business models.

Who Will Work Within Our User Community

It's true that not everyone qualifies to work within our user community. This applies to both their leadership team and the general community. We’ll be looking for certain individuals that are unique in their skills and knowledge of the oil & gas industry. That is a given. And the diversity of those skills will make up the entire scope of the oil & gas industries administrative and accounting needs. It is these skills and understanding that are the primary concern that need to be addressed in the work that is done by our user community. The ability to analytically break down the processes and design new innovative and effective ones that are consistent with the Preliminary Specification is not something that will be easily done. That is why we have costed this work in our budget at the $345 / hour rate for our user communities participants. We are looking for people of that caliber. Recently Mr. Tom Hood, CEO, Maryland Association of CPA's published a list of 7 skills that clearly identify what is required.

As I noted the primary concern is that our user community participants be trained and experienced in the disciplines that fall within the administrative and accounting areas and their work experience fall under the greater oil & gas economy. However, we expect that there will be a strong element of Information Technology aptitude that will be inherent in their skill set. Particularly in the two areas we have mentioned before of relational databases and Java. Having a good working knowledge of these two specific technologies, on top of your current skills, will make the design and development of the software, which will be your job as a user community member and service provider, that much easier and better. The importance of this IT aptitude will make a significant difference in the quality of the People, Ideas & Objects Preliminary Specification in many different ways. Today Oracle provides an "Always Free" tier of their Oracle Cloud Infrastructure (OCI). This is available to everyone and anyone and I would encourage user community members and prospective members to sign up to be familiar with the basic structure of our systems offering. 

First it will permit you to better understand the issues and opportunities that the technology provides. What is possible to you as a result of the Oracle database, its deployment in a cloud computing environment and Java from a conceptual level offer interesting new perspectives and dimensions in ERP software. To add these to your tool kit and be able to employ them, either to use them as a service provider, or to ensure that the producers who use them are provided with the most dynamic, innovative, accountable and profitable means of oil & gas operations, should be of concern to all within the community. There is no demand here to write code at any time, that is not what we are specifying. It is the conceptual framework of these technologies that need to be addressed.

Secondly your ability to communicate with the People, Ideas & Objects developers in their primary skill set will be necessary to enhance the communications between yourself and them. It is easier for you to understand the basic elements of these concepts in relational theory and Java than it is for them to comprehend the full understanding of the oil & gas industry as represented in the entire user community. Therefore to enhance the communications between the developers and our user community it is by far the easiest for our user community to speak an elementary level of the language of the developers. As there is no way in which each developer is ever going to fully comprehend the scope and scale of the oil & gas industry contained in our user community. Particularly since no one else carries that body of knowledge around individually.

This understanding of the technology may take four or five university level courses in order to acquire the type of understanding that I think is necessary. We are seeking to communicate effectively with developers. Think of it as an investment in order to earn those handsome hourly rates. The thing about providing the oil & gas producers with the most dynamic, innovative, accountable and profitable means of oil & gas operations. Is that you are able to prove substantial value propositions such as what we have. And therefore, as a result everyone benefits monetarily.

Some Technical Points of Interest

Now for the relational database geek in all of us, I provide you with the videos of the last number of keynote presentations by Larry Ellison founder of Oracle Corporation. These are very technical. And if you don’t understand what it is that he is talking about I suggest you take some time to learn what it is that he’s discussing. Understanding the basis of relational databases and the Java Programming Language from a high level will provide any participant in our user community with a better knowledge and understanding of how the system is put together. It should almost be mandatory understanding. And the best place to get that understanding is from C. J. Date, An Introduction to Database Systems

Here are Larry Ellison’s last number of keynote addresses, all are must see viewing for members of our user community.

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

User Community Vision Edits Part 4 of 5

 Two items of discussion before the text of our User Community Vision. First we’ll be promoting our use of Twitter once again now that it’s been placed in responsible hands. That at times even this blog’s posts were deemed unacceptable shows the sewer of authoritarianism that overtook that firm. 

Discussion in the industry has regressed once again to oil & gas being price takers. This is nothing but the sloppy and lazy thinking that bureaucrats want to pass off as fact for not doing anything. Organizational memory doesn’t exist beyond a fiscal quarter therefore the inability to recall negative $40 prices will probably be horrifying news to them once again. Price makers will only increase production when it’s profitable. North American oil & gas producers don’t have the ERP systems necessary to determine what property is profitable. If they deny this fact then ask them what was the actual overhead incurred at a property. Make sure it's the actual overhead and not overhead allowances. Second, ask them what’s the difference in overhead between the cost of accounting and administration of oil vs gas. Price makers do not have substitutes. Bureaucrats interpret substitutes to be; if they don’t produce others will, therefore substitution is everywhere. This is not what substitution means though. Does it mean that Elon Musk could make it to Mars if he replaced rocket fuel with hydro power? Or could we use wind energy to lubricate our crankcases? How about storing nuclear fuel rods in the convenience of a jerry can as you travel outdoors this weekend. And when you return from your weekend adventure you could make it back to the office in that new solar panel, or pine bark suit you just bought. Ridiculous but sometimes you have to spell it out to these bureaucrats. 

Maybe what they’re really saying is they’re experts at industries involved with price taker characteristics. Since that’s the case their craft would best be plied in the bottled water industry. Then if they overproduced the price would still be what a bottle of water costs today, they’d just have more inventory. And if none of the water bottlers bottled water then we’d have to regress to soda or juice as substitutes. An inability to think is a featured attribute of the oil & gas bureaucrat. It’s good to know that in 2022 bureaucrats still command my respect. 

Intellectual Property

Back in the late 1990s I was trying to determine what asset would be the most valuable in the future. I’d always put my efforts into software and was asking if that was adequate for the future or was there something more. While contemplating the next stage of this adventure I realized that Intellectual Property was the only real asset that would exist in the 21st century and the only real asset that would provide owners of any asset with any value. Today the economic environment that exists doesn’t offer anything of the type of reward that Intellectual Property does, in my opinion, and most particularly one that is inflation and or interest rate desensitized. 

At People, Ideas & Objects we believe that in order to obtain gainful employment people will need to have some form of Intellectual Property in order to do their work, or to better define this, have the right to do their work. This can begin to be acquired through the education and experience one has obtained, however they’ll also have to have one of three levels of access to IP. The first is the outright ownership of the Intellectual Property which are commonly known as copyrights, trademarks, patents and to a lesser extent trade secrets. The second is a contractual arrangement where access to others Intellectual Property is licensed to the individual or firm they’re responsible for. And the last will be as an employee of the firm that either has the IP or is licensed to use the IP. These three tiers of IP are distributed throughout People, Ideas & Objects, our user community and their service providers in the following ways. 

I myself am the beneficial owner of the underlying copyright of the Preliminary Specification and its derivative works. I have licensed People, Ideas & Objects to commercially develop the ERP application, communities and all its associated needs. Our user community members are direct license holders from People, Ideas & Objects, as either individuals or as representatives of their service providers and are licensed to prepare derivative works. They also sub-license on a run-time, read only basis the Intellectual Property that our user community member has licensed access to, which is unencumbered, to the staff they employ in their service provider organization. 

Simple so far and here is where we ensure that this IP is held and developed in pristine condition. Our user community members are paid by People, Ideas & Objects for their contributions in the development of the Preliminary Specification and other derivative works such as the software code and binaries. It is in the process of this payment that we are purchasing the IP from each of our user community members in order to ensure that the entirety of it remains whole, and most importantly, available to our user community to prepare derivative works. If this was not done we would end up with an unworkable model due to the claims of individuals and trolls who would hold up the profitability of the oil & gas producers for their own monetary purposes. If it is that you have your own Intellectual Property and feel that it should be recognized then the market is available for you to do so. 

There are a number of conditions that will need to be met in order to participate in People, Ideas & Objects user community. First we are seeking to provide the North American oil & gas producers with the most profitable means of oil & gas operations everywhere and always. That is our objective. We are not in any way providing producers with anything to do with clean energy. The revenues of our user community and their service providers are derived from the oil & gas production. Therefore the license precludes user community members and their service providers from operations outside of the oil & gas realm. It will also preclude them from working in any area other than the domain of oil & gas ERP systems of People, Ideas & Objects, our user community and their service provider organizations. Our user community is our primary competitive advantage and is therefore not accessible to our competitors or others in the greater oil & gas, software industries or elsewhere. Our focus is exclusively on the ERP product licensed for the oil & gas producers to maximize profitability. Maximizing producer profitability is seen as an unending task. 

We need to consider the possible contamination of this IP in a scenario that would disrupt this community. If a user community member or its service provider was using this IP, or augmenting their efforts with other software providers or vendors products from outside of our community. This would be a can of worms that would demand People, Ideas & Objects terminate our user community license in order to protect ourselves from any allegation or potential claim of contamination. In a world where Intellectual Property is the domain where all value is generated. In situations such as we have, where it’s not enough to own the oil & gas asset anymore, it’s also necessary to have access to the software and services that make the oil & gas asset profitable. The basis of this industry wide profitability is sourced from the Intellectual Property that is produced through this community. Value of this magnitude needs to be protected from the potential of incidental and minor actions that would appear to be non-consequential. However could be based on the actions of others outside the community who were looking to leverage the work of the community in a manner that was unproductive. Our safeguard here is to state the risk to the community of a participant that may innocently fall prey to these actions by advising them of the consequences in advance. That the loss of the license is something that could be communicated to our user community members staff within their service provider organization and those within that organization would be wise to the risk and consequences and ensure they and their service provider did not fall down that path. Sabotage by an employee is a different, criminal act that has its own remedies and would not fall under these provisions. 

Membership in our user community will be maintained in the initial development period on the basis that it’s a privilege and not a right. We need to have an environment within the community where the performance of the community is maintained at the highest levels. If we have the solution for the greater oil & gas economy, a matter of opinion, then we have a commensurate obligation and hence the need to build a highly performative community. We therefore need to start by establishing the means in which our user community's performance is the overriding requirement. Methods will therefore be implemented to ensure that the lack of contributions, free riding, trolling etc are to be dealt with effectively. What I am suggesting is, that in either of these or other possible scenarios the licensing and management of the IP in the structure of this user community ensures that the community’s leadership can manage who contributes. If the community member is not able, free riding or implementing a value proposition inconsistent with the overall objective, our user community leadership, under the license provisions will have the means in which to terminate the license. The right to cull the herd will be a method that our user community will be able to ensure that quality and performance is achieved and obtained in each and every corner of the work they’re doing. Vetting is not always able to determine the best candidates. A successful implementation of the IP and software in the industry is necessary in order for our user community and their service provider organizations to succeed as organizations.

Those that contribute are compensated appropriately and will need to perform to ensure producers are able to rely on quality ERP systems. Members of the community themselves will be able to know reliably they will not have to tolerate the inappropriate behaviors and antics of those that haven’t fully participated. They’ll also not have to carry any “dead weight” with them. If you want to belong to a high performance community, these are the methods that have been used to establish other high performing organizations. Success must be obtained when the stakes are this high and the dependence is wholly upon this user community's performance. The mitigating strategy for our user community members is its part time participation. We are building upon the depth of industry knowledge necessary to ensure the full scope and scale of the application is conducted correctly and in innovative ways. There is an opportunity to determine if you qualify, can participate, if this arena is your calling where you're able to make a contribution and a difference. There are risks, and I have worked to ensure that none of these are incurred unnecessarily, however we should all agree the responsibility we have is substantial and the role our user community members have in this task is critical. 

This is a challenging and difficult environment where the task appears to be impossible for many. And then it will attract exactly the kind of people that will perform in an environment such as this. One of People, Ideas & Objects first tasks is to establish the leadership group, which are full time positions. Then they’ll be able to take our user community members we have and recruit the many, many more that will be needed to cover the full needs of the applications scope and scale. 

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 & gas industry with the most profitable means of oil & 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. Please join our community on Twitter. Anyone can contact me at 713-965-6720 in Houston or 587-735-2302 in Calgary, or email me here.

User Community Vision Edits Part 3 of ?

 User Community Business Leadership of the North American Oil & Gas Industry

The questions that need to be asked is how does the North American oil & gas industry avoid the disaster it has become from recurring? Why did the business leadership fail? Why hasn’t it been corrected? Did producer firms adopt the cultural, Information Technology and organizational changes demanded of it? If not why not, and what motivation stopped these changes from happening? Has the dynamic of business leadership in oil & gas itself changed? Has it taken on a broader, industry focus and away from the individual organization? Or is it that producers today have just lost the script in terms of business performance? What is the meaning of business leadership and why has the loss of it been so devastating for all concerned? Why hasn’t the science and technological leadership of the industry expressed their dissatisfaction with all the others? Or are they satisfied with just doing enough to get by?

A quotation from one of my favorite authors Victor Davis Hanson in his recent book The Second World Wars.

Thucydides’s ancient warning that “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.”

Nonetheless I don’t think I’ve been able to get to the beginning of the discussion that needs to be undertaken on the difficult topic of leadership. What I do know is that the miracle of Information Technology has made oil & gas organizations sink into a comfortable, fixed configuration that works for one small group of people at the expense of everyone else. These producers' decision makers are conflicted and self-absorbed to the point of caricatures of responsible, accountable and authoritative business leaders. Unable to make the necessary changes due to the conspiracy of the Greta Thunbergs, their investors, Joe Biden's and the monsters under the bed… They’ll “muddle through” as they always have, which has proven to be lucrative, for themselves, and somehow acceptable in the past. There is no demand for change as there are no issues.

Will our user community as configured be the means in which to provide the business leadership in terms of the governing business model for North American oil & gas? We’re suggesting here that the difficulties in organizations making changes to deal with their environment are catastrophically constrained by ERP software. When ERP software defines the process management the only method to make changes is to change the software first. This knowledge has been used in the current producer firms to ensure that nothing can challenge their methods of management and ensure their positions remain secure. Therefore a method is necessary to change the software that is used in the industry to deal with the business issues and opportunities as they arise. What People, Ideas & Objects are recommending in the Preliminary Specification is a permanent software development capability be established for our ERP system in addition to our permanent user community and their service provider organizations. Our business model is based on change and has discarded the traditional means and methods of ERP software firms to generate their revenues. Post commercial release of our Preliminary Specification will see People, Ideas & Objects generate the revenues necessary to support our developers and our user community through the changes that we make to these systems. These will be funded through an assessment made to the producers based on the prior quarters costs etc.

This change in funding brings about a number of fundamental differences between our offering and what is traditionally undertaken. The first is that our user community remains wholly independent. They will not, and never will be “blind, sleep-walking agents of whomever will feed them.” They will be driven by what is necessary in order to ensure that the industry and all of its secondary and tertiary industries are provided with the most profitable means of oil & gas operations everywhere and always. The capital markets will then be able to assess the producer's performance on the basis of its understanding and implementation of their science and technology of engineering and geology. Those producers who are unable to perform financially will be unable to succeed, unlike today’s bureaucracy. Secondly, People, Ideas & Objects itself will not be constrained by what we believe to be the two major ERP software providers funding constraints of code and customers. As the customer base becomes larger over time scale becomes more of an issue, software code therefore also becomes exponentially more complex and difficult to manage. Neither of these costs are fully covered in the Service Level Agreement from the point of view of support costs. And they leave nothing in terms of financial resources for changes, and certainly nothing for innovation or improvements. If our user community determines that some software process is redundant through a higher level of specialization then they’ll have little to no vested interest in supporting it and therefore will make the change. The producers will generally be unaware and rightly unconcerned for any of these transactions. People, Ideas & Objects cost model distributes these costs across the producer population based on the North American production profile that participates in the development. Otherwise, as they do today, each of the producer firms will face these same costs of changes themselves, individually within each of their own empires. Each producer's independently replicated, unshared and unshareable overhead costs is the secondary reason for their lack of profitability. Our solution to that is we are enhancing the cloud computing paradigm by establishing oil & gas Cloud Administration & Accounting. Taking a highly complex and difficult process, that is capital intensive to build and maintain, that is very costly to operate, is not in any way a competitive advantage and turning it into a shared and shareable variable cost. Variable based on production.

We have been fortunate at People, Ideas & Objects to be able to quantify the differences between our method of organization and the current bureaucracies. Documenting the $25.7 to $45.7 trillion in our value proposition over the next 25 years goes a long way to making our case for change. These differences are made up by having the $20 - $40 trillion in capital expenditures funded internally through an appropriate business model instead of the expectations that investors will be available to foot the bill, which is the bureaucrats method. The $5.7 trillion is the differential between our determination of “real” profitability and the definition of profits used in the base case. The ongoing, never ending cash crisis, which will be resolved in our model, is included in those figures. Another area that is just as material in terms of the scope of change that we’re unable to quantify or qualify. Are the differences that are attributable to the toolset that we employ within the Preliminary Specification our user community and their service provider organizations of automation, specialization and the division of labor. These will be material in their value to the dynamic, innovative, accountable and profitable oil & gas producer. Possibly of greater value than those benefits that we are able to quantify today. Lastly, what is the monetary value of establishing Cloud Administration & Accounting in oil & gas? It's interesting that producer bureaucrats expect investors to invest in them when they themselves can't invest in their own organizations in order to enhance their own profitability. This being the case after the disaster that stands from the past few decades of the producers financial record. And their leadership has suggested what to remedy this?

To suggest that administration and accounting as the underlying attributes of the oil & gas industry are static is disrespectful to the word static. These are the foundation of the business which is where the business leadership is derived and exercised and is therefore static too. People, Ideas & Objects do not understand engineering or geology and don’t pretend to. The leadership in these areas as far as we know is constrained by the lack of effective business leadership in these producer firms and the industry. If effective business leadership was enabled and permitted to flourish, where would the industries science and technology be today? What would North America’s production profile be? Would they be looking behind them as they seem to always be doing now? Why is this acceptable to them when it is so destructive of what they’ve built and provides them with inadequate resources to do what is necessary? 

Lets add a bit more of the dynamic nature to our user community and their service providers overall structure that differentiates them from the static business environment that has become so acceptable. We believe, and it is our opinion, that the lack of investment in ERP systems over the past decades has left oil & gas companies with very poor systems today. And this has nothing to do with those ERP providers who have worked miracles in impossible financial conditions as bureaucrats felt the need to ensure nothing threatened their status quo franchise. With IT developments over the past decades unrealized we can imagine how it stands today, however the best description that I can describe it is the people are busy working for the computers. We believe the shoe should be on the other foot and the computers should be deployed to manage the storage and processing. Leaving the distinct competitive advantages of our user community and their service providers to what humans do best.

• Leadership, Issue Identification & Resolution, Creativity, Collaboration,
• Research, Ideas, Design, Planning, Specialization & Division of Labor
• Thinking, Conflict & Contradictions,  Observation, Reasoning, Judgment
• Application of Implicit & Tacit Knowledge, Quality, Automation, Innovation
•  and all aspect of Integration,

And I’m certain there would be many more. It will be up to our user community to ensure that we employ this advanced toolset in the development of the Preliminary Specification and through to their service providers. This will be a challenging aspect of their work in terms of how it’s undertaken. With the reorganization of the industry and reduction in size of the prototypical producer. The service provider becomes a specialized provider who uses their division of labor to approach the entire oil & gas industry as their client base. This of course is an entire new way of organization and perspective of how things are done. The scope of the change is tremendous. The size of the G&A resources that are being shifted in this reorganization are quantified in the region of $40 to 60 billion per annum in terms of producer overhead costs. 

So it is these topics and areas of focus that will be the domain of the business leadership within our user community. Very high level, once in a century type of work that will be something an individual can highlight their career and establish a business in. The changes we are making are dramatic and will have a material effect on the performance, makeup and manner of how North American oil & gas operates for the next 20 to 30 years. Foundational work that is material to how the producer performs financially, and since our organizations are a critical part of our society, healthy organizations lead to healthy societies which lead to healthy individuals. 

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.