Revisions to the Executive Summary Part 5

Analytics & Statistics and Performance Evaluation

The Performance Evaluation and Analytics & Statistics modules have similar interfaces, the Performance Evaluation is focused on the Joint Operating Committee and the Analytics & Statistics module is focused on the producer firm. Essentially these are user based tools that enable analytical and statistical calculations run against the data and information that are contained within the People, Ideas & Objects ERP systems and other unstructured data they either manage or wish to access. Providing their users with the ability to analyze data in new and innovative ways in seeking value for their firm or Joint Operating Committee. They will be used predominantly by the people who are in the oil & gas producers, the Joint Operating Committees and People, Ideas & Objects user communities service providers on a daily basis. Although the service providers will have access to a very small number of data attributes, only those data elements associated with the individual process they manage, they will have access to the entire industry's population of that data.

The types of data and information that are prepared and presented in these modules is dependent on the individual users and will in most instances be unique, based on their needs and interests, their scope of authority and the type of work they do. When it comes to who will come up with the next great innovation we should expect that it will come from anywhere. Part of the process of innovation is discovery of the problem and we all see the situation from different perspectives. Therefore the point of view and the innovation will depend to a large extent on those different perspectives. Someone working in the trenches may find innovations that affect their work materially, which may not interest others and vice-versa. This process of discovery should be assisted by the types of tools that include the Performance Evaluation and Analytics & Statistics modules. Professor Giovanni Dosi notes.

Thus, I shall discuss the sources of innovation opportunities, the role of markets in allocating resources to the exploration of these opportunities and in determining the rates and directions of technological advances, the characteristics of the processes of innovative search, and the nature of the incentives driving private agents to commit themselves to innovation.

Irrespective of the source of the innovation the fact that it materially affects someone's work should indicate that it should be followed through. These opportunities are hard to discover and we need to be able to evaluate them and assess them based on their impact and their ability to build value. What sometimes appears to be a good idea can also sometimes become an area where the firm could be exposed to unnecessary risk or loss. Having access to the historical data available is necessary, however, in the 21st century it is also necessary to have these advanced analytical tools available to analyze that data.

In the Preliminary Research Report, People Ideas & Objects determined two important findings. One was the process of innovation can be reduced to a quantifiable and replicable process. Analytical tools are part of that process. The Preliminary Specification sets the industry, producer firms and Joint Operating Committees on this foundation of a dynamic, innovative, accountable and profitable industry. And two, that the Joint Operating Committee is the key organizational framework for innovation in the oil & gas industry. Therefore having analytical tools in the Joint Operating Committee and producer firm are critical.

Within the Preliminary Specification we have also identified that many of the data elements within the Joint Operating Committee are public in nature. Production volumes and how wells were drilled are generally released into the market soon after they’re obtained. In terms of proprietary data there is less of an issue with respect to the data contained within the Joint Operating Committee. It is not to suggest that this removes the need to have the highest levels of security on all aspects of this data. Only to identify that the data within these two distinct organizations are fundamentally different. Within the producer itself there are many attributes that are unique and considered the proprietary technologies and understandings that make them what they are. The value discussed within the Preliminary Specification of the treatment of data and access builds significant value for all concerned. Participation is necessary throughout the industry. The issues and opportunities are not resolved here and won’t be resolved until such time as the user community studies and determines the manner in which it is handled. Today’s existing producers, should they survive their own self-inflicted destruction, may want to relate their concerns and also participate with the user community to ensure that their concerns are considered.

Work in the 21st Century will be different. The tools that people will use will need to be different as well. The Performance Evaluation and Analytics & Statistics modules are the beginning of these new era tools for the way in which people need to work. We frequently speak of specialization and the division of labor in the Preliminary Specification. There is also a specialization and division of labor between what the people and computers will be doing and that is reflected here in these two modules. Computers will be responsible for the storage and processing, and people will be responsible for the leadership, problem solving, issue identification, research, thinking, ideas, design, planning, decisions, creating, negotiating, compromising, collaborating, the innovation and the many other things we do well. Much of these things are generated based on the facts that will be determined through the use of the Performance Evaluation and Analytics & Statistics modules.

Compliance & Governance

Compliance & Governance, the module everyone loves to hate. It is my hypothesis that it is here, at compliance and governance, that everything went wrong. What I mean by that is in the 1960’s when the first computers were being introduced into oil & gas companies. The question was asked what we will do with them. And of course one of the answers was accounting. Then as they became ever more powerful and more capable they began to add more tasks to their duties and added the natural follow-on concerns of tax, royalty and compliance. Soon the culture became focused on those “compliance” requirements of the “firm” and the Joint Operating Committee became something that was used over there. Soon after this, engineers and geologists began speaking a different language to the “business” types. Divisions grew and the business of the business was focused on the corporation and its need to file the appropriate paperwork to the appropriate agency in the appropriate time frame on the appropriate colored form.

Anyway the real business of the business, the Joint Operating Committee somehow survived and if we align its legal, financial, operational decision making, cultural, communication, strategic and innovation frameworks to the compliance and governance frameworks of the hierarchy everyone can start speaking the same language as the engineers and geologists and start to get some real business done. And as People, Ideas & Objects research has shown this would provide the oil & gas producer with greater speed, innovation, accountability and profitability.

Compliance & Governance is the eleventh module in the thirteenth module Preliminary Specification. It’s also no accident that I added Compliance & Governance as one of the last, as the question that should be asked is. How are we going to ensure compliance to all the regulations for all the module specifications that we have discussed so far? And I would assert that is why these are user based developments. But seriously, one thing governments seem to be fond of today is regulations on oil & gas companies. With Information Technology enabling various governments to issue technical business rules, technical specifications, XBRL syntax’s and other technological frameworks for these regulations. The ability to write these “frameworks” only seems to have encouraged them to write even more regulations. The larger point is that these frameworks do provide software developers with distinct advantages in enabling the regulations within the software.

As we’ve indicated earlier regarding the user communities determination of the scope of the People, Ideas & Objects application. Part of that determination of scope will include which regulations it will need to be in compliance too. With so many jurisdictions requiring compliance, each transaction may need to be assured to be in compliance with multiple jurisdictions. Add to that the transaction may be generated through a Joint Operating Committee owned by a variety of producers. And those producers may be composed from an international background and the Compliance & Governance module takes on an enhanced importance.

From the point of view of a producer, maintaining the database and applications for all of the compliance frameworks that you have to be concerned with is a difficult task. The number of people you need to have to keep your applications up to date is significant. However, People, Ideas & Objects, as one software developer acting on behalf of the industry as a whole, the job becomes much more specialized and therefore manageable. Then again if we were building these applications with the purpose of serving an industry we would use the division of labor and specialization to manage these tasks in a way that would significantly lower the costs of compliance, and increase the quality of the producers compliance.

I foresee just the royalty compliance requirements of these applications potentially including many dozens of different jurisdictions. To approach this from a software engineering point of view as a sole producer is not cost effective in the least. To consider these costs are replicated across each producer firm, then we begin to see the costs of compliance escalating to the levels that they are today. There is another way, and that is what is being proposed here in People, Ideas & Objects and referenced earlier as Professor Paul Romer’s “Endogenous Technical Change” paper where he introduced non-rival services and sharing. Along with the many other innovative ways we’re proposing to deal with the issues of the oil & gas industry such as the service providers Cloud Administration & Accounting for oil & gas offering.

Here we have the beginnings of compliance and governance for the innovative oil & gas producer and Joint Operating Committee. What we need to do is to deal with the compliance of an innovative oil & gas producer with the tools of the 21st century. Those include automation, specialization and the division of labor. And in terms of governance, we can begin to provide the producer firm with the appropriate operational governance that is consistent with the demands of innovation. For we’ve learned that innovation does not arise from sloppy compliance and governance.

Blockchain Module

We were able to write our twelfth module into the Preliminary Specification in 2018. It is the first module that is technologically focused. All of the other modules, including the Security & Access Control are focused on the business of the oil & gas industry and producer, as viewed through the Joint Operating Committee. Therefore the Blockchain module provides the blockchain technology to all the other modules of the Preliminary Specification. Included within the Blockchain module itself there is detailed discussion of how each of the other modules is affected by this technology and how I expect it will be implemented. This will be in its initial implementation and it would be expected to become more robust as the years pass. I see blockchain as a must have Information Technology that will need to be the base of the ERP systems that industries will require. I also expect and anticipate throughout the development of the Preliminary Specification our user community will be able to define the use of the technology in a more effective and efficient way. This is due to the relatively “new” aspects of the technology and its current rapid developments and adoption.

In terms of understanding this new Information Technology Don Tapscott, who has been a leader in the field of businesses adoption of Information Technology. Has taken a leading role in the understanding and implementation of blockchain technology. He is a co-founder of the Blockchain Research Institute who’s participation includes most of the companies that are involved in business and Information Technology and has robust support from all industries. Here’s an introductory video that we used in the Preliminary Specifications Blockchain module.

See "Understand Blockchain in Under 7 Minutes: Don Tapscott" below.

The key takeaway from this video is the concept of a “shared network state.” Which accurately describes the perspective and point of view that People, Ideas & Objects have created with the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas industry and producer. As a result everything within the industry becomes a shared network state based on the glue that holds it all together, the Preliminary Specification ERP software. The producers themselves are stripped down versions of what they are today. Their earth science and engineering capabilities, and land and asset base are highlighted and focused upon as their key competitive advantages. Their working interests in the Joint Operating Committees are supported through the service industry through our three marketplace modules and have a far more involved and appropriate relationship with the producers and Joint Operating Committees. Bringing the service industry in as partners in terms of the development of how the field operations will develop from here. The administrative and accounting resources are reallocated to service providers that are established by the People, Ideas & Objects user community members, who have the power and control over how the Preliminary Specification’s software is developed, and are therefore also involved in the day-to-day of the service providers who provide our software and their services to the producers and Joint Operating Committees. Trust, transactions, agreements, vision and direction are understood and implemented throughout this “shared network state” and the industry is therefore able to move forward into what is unquestionably the most difficult future in a dynamic, innovative, accountable and profitable manner.

What we are finding is that the People, Ideas & Objects approach to the oil & gas marketplace is becoming the more common sense approach as each day passes. Our approach being that we provide the software and indirectly the administrative and accounting services to the entire industry with one solution, or as we’ve described it as Cloud Administration & Accounting for oil & gas. Our approach is to mitigate the software development costs that are incurred today by each and every producer to conduct the same non-competitive attributes of accounting and administrative tasks as the producer across the street. These costs are replicated across the industry to develop the same capabilities at each and every producer. Costs and capabilities that are not shared and are unshareable. These software development costs, in addition to the overhead incurred in accounting and administration, are a major detriment to the industries ability to be profitable and maintain some measure of control over their costs.

The difficulties that Information Technologies and their infrastructures are presenting are new challenges that each producer has to face. There are now business challenges, which the Preliminary Specification addresses, that are also presenting issues where the administrative, accounting and Information Technology costs are escalating further for each and every producer. Don Tapscott calls the “shared network state,” which is appropriate, that a producer as an island unto itself is no longer functional in a world where the future oil & gas industry needs to be. We had always argued that the costs of the Preliminary Specification would be lower than what the industry would incur collectively as individual producers. What we have to undertake from an industry point of view will increase our costs, however the base functionality of our applications would need to be put together and maintained by each and every producer. The push back from industry on our thinking here has been that the scope and scale of the application was too large to be successful. If that were the case, then how do they propose to build the same functionality within their organization with the budgets that a profitable producer can allocate? People, Ideas & Objects issues arise from scope and scale in terms of implementation. Administration, accounting and Information Technology may be claimed to be a competitive advantage of a few producers, but it shouldn’t.

Artificial Intelligence

There are those that demand we add a module to accommodate the new technologies around the initiatives of Machine Learning and Artificial Intelligence. I’m a proponent of Machine Learning as it has been applied throughout the Oracle product line to add value for their customers. People, Ideas & Objects et al will be a benefactor of those products and services as they are features of their core products such as the operating system and database. I am not enamored with the ideas around Artificial Intelligence and do not see much value being generated from it. However, it is early days and there will be innovations in both the technology and those that will employ it here in this module against the producers ERP systems, data and information. In that sense this module will provide the Security & Access Control features and functions for those that expect to build value from these areas. We will provide the frameworks and tools necessary for them to do their work and will have these develop in their natural fashion. 

One of the reasons that I have a negative perception about these technologies is another quote from Winston Churchill when he was asked in 1942 what he thought should be done in terms of post war planning. 

I hope these speculative studies will be entrusted to those on whose hands time hangs heavy, and that we shall not overlook Mrs. Glasse’s Cookery Book recipe for jugged hare -- ‘First catch your hare.’

We have much to do to rebuild the oil & gas industry brick by brick, and stick by stick. Focusing on that and ensuring the efforts that are necessary to do so are secured is our first priority. This module is therefore placed here to ensure that we will benefit from anything these technologies may offer during the rebuilding process.

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 Executive Summary Part 4

Accounting Voucher

We now shift our attention to the Accounting Voucher module. The interactions between the Accounting Voucher and the Partnership Accounting modules of the Preliminary Specification are naturally quite significant. Both being accounting modules, it’s natural that they have high levels of integration. The Accounting Voucher is unique in that it brings to the producer the ability to design transactions and the Material Balance Report. These are not innovations that the producer will use to become more innovative but are provided to ensure that the innovative producer's processes are actively defined and supported throughout the People, Ideas & Objects application modules. When the business is a science, as it is in oil & gas, it is in the producer's interest to remain open and flexible in both its scientific and business approach. The Accounting Voucher and Partnership Accounting modules provide that organizational flexibility. The manner in which these two modules operate is the Accounting Voucher captures the transactions. Partnership Accounting reports on the transactions. Accounting Vouchers remain open for one accounting period and are subject to the same closing process that is familiar and traditional in the accounting world. A Joint Operating Committee will have many Accounting Vouchers each month. Examples include both the Material Balance Report and Work Order. The Material Balance Report and others will also form templates for subsequent months with persistent memory of the prior months fixed variables.

We’ve noted in the summary of the Partnership Accounting module how the Work Order enabled producers to form and participate in working groups. Providing flexibility in participating and accounting for these working groups. This flexibility is what is being sought after in the rest of the producer firm and Joint Operating Committee from both of these accounting modules. Elimination of the bureaucratic inertia that impedes these activities today makes these modules critical to a producer's innovation as much as the Research & Capabilities or Knowledge & Learning modules will.

The People, Ideas & Objects Accounting Voucher Module will provide the means for the application to “manage the disparate inter-dependencies of modularity theory and Transaction Cost Economics.” That is a summary application of Professor Baldwin's comments and theories. And therefore this Accounting Voucher is one of the key cross roads to all other modules in the People, Ideas & Objects Preliminary Specification. What this means is that it's necessary for people to cease, by way of automation, in just processing and recording transactions and move toward the definition and design of transactions to optimize the business of the producer and Joint Operating Committees performance. Designing transactions is best described in the Preliminary Specification as coordinating the marketplace.

As a result of the pooling concept that is a basic assumption that was developed for People, Ideas & Objects Preliminary Specification. Some of the Accounting Vouchers will be open to charges from multiple producers represented in the Joint Operating Committees that a producer firm is a participant in. The revenue, capital and operations of each of the Joint Operating Committees accounts are open to the direct debit and credit charges of all of the participants in the Joint Operating Committee. The pooling concept has been developed as a replacement to the “operator” designation that currently exists. This is a necessity as a result of the ability for each producer, as a properties designated operator, to have the just-in-time capabilities available for all the properties they operate, demand that they have a surplus capacity, or as we describe them as unused and unusable earth science and engineering capabilities and capacity. The ability to pool these critical resources from participating producers of the Joint Operating Committee enables each producer to use specialization and the division of labor to expand the industries capabilities and throughput capacity and releases these hoarded unused and unusable capabilities. This pooling concept also implies that producers will provide resources to the property in disproportionate amounts to their working interests, with any over or under participation equalized monthly. 

Producers need to contribute the skills, knowledge, experience and ideas that they have in an innovative oil & gas industry. Each of these producers within a Joint Operating Committee will have the ability to charge their earth science and engineering capabilities to the joint account. Opening a secondary revenue stream for all producers, being the deployment of their earth science and engineering capabilities to their Joint Operating Committees and to other producers who may be looking to augment their specialized capabilities. All charges are subject to the AFE, lease, budget and cost control requirements which remain the domain of the producers participating in the Joint Operating Committees.

Professor Dosi (1988) states that profit motivated agents must involve both “the perception of some sort of opportunity and an effective set of incentives.” (p. 1135) Professor Dosi introduces the theory of Schmookler (1966) and asks “are the observed inter-sectoral differences in innovative investment the outcome of different incentive structures, different opportunities or both”? (p. 1135) Schmookler believed in differing degrees of economic activity derived from the same innovative inputs. It is People, Ideas & Objects assertion that the “different incentive structures” and “different opportunities” are facilitated or constrained by the administrative ease in which the producer operates. If the producer is confident that the deal that was conceived is accurately captured in the Accounting Voucher and associated modules of the Preliminary Specification. And the operation is subsequently reporting a substantial, actual profit. Then they know that their innovations are working, their systems are working and the alignment of the legal, financial, operational decision making, cultural, communication, innovation, strategic, compliance and governance frameworks is achieved. This is in addition to the other four Organizational Constructs inherent in the design of the Preliminary Specification. 

Research & Capabilities

The Research & Capabilities module enables the producer firm to structure a division of labor between those people that develop the research and innovations within the producer firm (Research & Capabilities), and those that will implement the innovations within the Joint Operating Committees (Knowledge & Learning). This is one of the major processes of innovation that are carried out in the Preliminary Specification. Another major process is that it provides the innovative oil & gas producer with the ability to move the knowledge and capabilities to where the decision rights are held. This module is at the core of the innovative oil & gas producer. Identifying and supporting the key elements of “what” and “how” innovation requires. The Research & Capabilities module is the focus of the producers' competitive advantages of how they are able to develop and deploy their earth science and engineering capabilities. What we’ve learned about capabilities is that they are the “knowledge, skills, experience and ideas.” And that “knowledge begets capabilities, and capabilities beget action.” This being part of the cure that People, Ideas & Objects, our user community and their service provider organizations are applying to resolve the producers chronic inaction.

There are a variety of interfaces in the Research & Capabilities module that enable and encourage innovation, and develop the capabilities of the producer firm. These capabilities are ultimately captured in the “Dynamic Capabilities Interface” which is the key to both the Research & Capabilities and Knowledge & Learning modules. What the “Dynamic Capabilities Interface” does is capture, document and enable the deployment of the capabilities of the producer firm. These are the knowledge, skills, experience and ideas of the firm. The deployment of these capabilities is by way of their pertinent geological zone, or geographical area, etc. and as a result these capabilities will be populated into the various Joint Operating Committees that meet that criteria in the Knowledge & Learning module. It will be each of the producers within the Joint Operating Committee that will be populating the Knowledge & Learning module in this manner. It is important to note that the information that is documented is the explicit knowledge that has been developed regarding that producer's capabilities and innovations. The tacit knowledge is the capabilities and capacities that are inherent in the producer's competitive advantage. 

The far more valuable tacit knowledge can not be captured by any medium. It is resident in the earth science and engineering resources of the producer firms that are referenced and documented through the explicit knowledge of their Research & Capabilities module and form the distinct competitive advantage of the producer. Just as our user community has the ability to capture the explicit knowledge of the oil & gas industry and codify that in the Preliminary Specifications ERP software. It is their tacit knowledge they’ll deploy through their service provider organizations. Offering People, Ideas & Objects software and their services as the comprehensive explicit and tacit knowledge solution that producers and Joint Operating Committees require. Ensuring the producer is dynamic, innovative, accountable and profitable everywhere and always on the North American continent.

An objective that we are fulfilling in the Research & Capabilities and Knowledge & Learning module is we are moving the knowledge to where the decision rights are held. The Joint Operating Committee is the operational decision making framework of the industry. With the current method of designating one of the producers in the Joint Operating Committee as the operator there is an attempt to move the decision rights of the Joint Operating Committee to where the knowledge resides. In the Preliminary Specification we have eliminated the concept of operator and replaced it with the pooling concept and therefore we are able to align the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the Joint Operating Committee with the compliance and governance framework of the producer firm. Providing us with a speed, accountability and profitability that is missing and unavailable in the current organizational structures. This therefore will require that we move the knowledge to where the decision rights are held. By doing so we eliminate a major point of conflict between the partnership represented in the Joint Operating Committee and the producer designated as operator.

The Research & Capabilities module of the Preliminary Specification provides the means in which the producer is able to take their inventory of shut-in wells, which are those wells that have been shut-in as a result of their inability to produce a profit. And determine if there are means within the capabilities of the producers earth science and engineering resources to move the property back into profitable production. It is also a testing ground where the focus is on the issues at hand. Where the testing and application of new ideas can be developed and determined, if they are successful. Where those successful ideas can be developed fully within the producer's earth science and engineering resources capabilities in order to successfully replicate the new methods across the entire producer's production profile. Test, prove, develop then deploy. Making mistakes will always occur in an innovative process. And if the innovations were to have failed, which is the precursor to success, these will be documented in this interface so as to provide the organizational learning from that failure, not replicate it. The division of labor between the Research & Capabilities and Knowledge & Learning modules ensures that these new procedures are fully proven, documented and deployed successfully. And the producer doesn’t have everyone attempting to be innovative in an environment where things may be learned over and over again at great cost and disruption. It is these processes of innovation that are captured throughout the Preliminary Specification, based on the primary research of those listed in our bibliography, that will ensure that the costs of oil & gas exploration and production remain cost effective for consumers.

Please note the proprietary information contained within these documents is copyrightable and the process of putting them within the Research & Capabilities module is an act of publication. The Research & Capabilities module from a technical perspective is implemented using blockchain technology. It is in that way that the control of the information can be managed. Any additions or deletions to the information will be aggregated in the interface as a result of reading subsequent blocks in the chain that amend the information. 

Knowledge & Learning

We now move onto the Joint Operating Committee focused Knowledge & Learning module of the Preliminary Specification. This module shares many similarities to the Research & Capabilities module, and in fact is populated with the capabilities from the “Dynamic Capabilities Interface” as its base of information. Recall that one of the objectives that we’re working to achieve is to move the knowledge to where the decision rights are held, the Joint Operating Committee. As noted, the Research & Capabilities module organizes each of the producer's knowledge based on geologic zones, geographical areas, etc. This is so that the information that is pertinent to each zone can be separated into its own “packaging” within the Knowledge & Learning module. Additional ways in which data may be sorted in the Research & Capabilities module might include vendor geographical location, conventional or unconventional, drilling, completion, etc. 

With each Joint Operating Committee being concerned with one or a handful of geologic zones. The focus of the Joint Operating Committee can be limited to just those specific areas and or capabilities. What is particularly different about the Knowledge & Learning module, however, is that the information that is contained within the module is aggregated from multiple producers. Any of the producer participants within that Joint Operating Committee who have pertinent information contained within their Research & Capabilities module will have that data and information for those geologic zones, geographical regions etc, of that specific Joint Operating Committee populating the Knowledge & Learning module for that property.

With the potential to have multiple companies' contributions of research and capabilities about that zone. It is important to have the information organized within the Knowledge & Learning modules in a manner that when the multiple producers data is merged, use of the data is possible. Each capability contains the knowledge, skills, experience and ideas of the people who are part of that producer firm and the service industry representatives. People, Ideas & Objects have developed the football analogy where the operational decision makers are presented with a list of these capabilities in the "Dynamic Capabilities Interface" and can select and deploy them in much the same fashion as the head coach in a football game.

As we have learned “knowledge begets capability, and capability begets action." Quotes are from Professor Richard Langlois book “The Dynamics of Industrial Capitalism: Schumpeter, Chandler and the New Economy.”

Indeed, the job of the entrepreneur is precisely to introduce new knowledge. The “Circular Flow of Economic Life” is a state in which knowledge is not changing. Economic growth occurs at the hands of entrepreneurs, who bring into the system knowledge that is qualitatively new – knowledge not contained in the existing economic configuration. p. 27

Here we begin to see the role that people take in the makeup of the oil & gas industry. And to sum it up is to state that it’s everything. One also needs to consider the role of computers in these “actions” and that it amounts to not very much. People, Ideas & Objects divides the jobs between what people do well, the thinking, generation of ideas, leadership, collaborating, deciding learning, etc and leaves the memory and processing to computers.

There has to be a mechanism by which new knowledge enters the system. And that mechanism cannot be rational calculation, for as David Hume (1978, p. 164) long ago observed, “no kind of reasoning can give rise to a new idea.” p. 27

There is much to be done in the oil & gas industry and a lot of it involves blazing new trails. The hard work is what the people will need to be involved in doing. The challenges and opportunities are of historical significance and will require the dedication of a lot of people.

What has been done already has the sharp-edged reality of all things which we have seen and experienced; the new is only a figment of our imagination. Carrying out a new plan and acting according to a customary one are things as different as making a road and walking along it. p. 27

The Research & Capabilities and Knowledge & Learning modules work hand in hand to provide the producer firms and Joint Operating Committees with an innovative footing. One that does not replicate errors continuously and learn what was already learned last year, and the year before or just over there. Providing a structure that ensures that innovation is the focus and results of the activities that drive not only profitability across the continent, but ensures that costs are managed in a manner that provides consumers with the lowest possible costs of oil & gas exploration and production.

People, Ideas & Objects appreciate industries' concern with documenting, publishing and adopting this method of operation. The conclusion regarding the Research & Capabilities and Knowledge & Learning modules is that the producers “knowledge begets capability, and capability begets action.” It is in the successful implementation of the exploration and production processes upon their land and asset base that producers will be competitive. The point of operational excellence is the producer's focus and concern. Ownership of the recipe or music doesn’t make anyone a world class chef or conductor. Just as ownership of the methods and means of how and what the field, engineering or earth science vendors disciplines and offerings are does not provide for a profitable oil & gas producer. What is necessary is to be able to effectively, efficiently and successfully coordinate these resources in the manner that are necessary for the dynamic, innovative, accountable and profitable oil & gas producers to compete. The evidence of this is in the fact that the service industry extends the producer firms geographical and technical capabilities, using their latest innovations and dynamic resources and are active in their marketplace which provides for the oil & gas industry. Where those that provide producers with their products and services are from the most innovative and dynamic providers where there are thick and prosperous markets available for those providers to compete and satisfy their customers, the oil and gas producers. The choice is quite simple, producers can participate in these markets or extend their internal domain to provide for all that they need. This is not to suggest to the producer bureaucrats that would be a viable business model. 

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 Executive Summary Part 3

Petroleum Lease Marketplace

The Petroleum Lease Marketplaces objective is to replicate virtually what the physical oil & gas marketplace is. Which of course begins with Petroleum Leases. When we’re replicating the physical oil & gas marketplace, the Petroleum Lease is the source document that is the common denominator of all activity and ownership within the industry. This is also one of the critical components of the producers key competitive advantages that include their land and asset base, and their earth science and engineering capabilities. As such it should be considered a producer-facing module as its primary role. The Joint Operating Committee will also be used for the Petroleum Lease Marketplace, however, their land position may be static for long periods of time. Whereas the Resource Marketplace module is considered more of a Joint Operating Committee facing module where the market's resources are acquired. Any physical oil & gas asset will be attached to some lease, agreement, rights or concession granting the holders the rights and privileges of ownership, lease or rental. These are the things that are contained within a marketplace. They are what are purchased and sold, bargained and traded for, they are the things that people are recruited to provide services for. Generally a marketplace is a dynamic and evolving commercially oriented hub of activity. That is what we’re replicating in the Petroleum Lease Marketplace.

When we look at the types of work that will be carried out in the Petroleum Lease Marketplace we see a large group of administrators working within different areas of a producer firm. Whether it be the Land or Legal department, Production or Exploration Operations staff or Administrative and Accounting people; all of these groups have an interest in the information, people, assets, documents, processes and functionality contained within the Petroleum Lease Marketplace. The primary concern of the people in these groups is the information and data contained within the module. Its accuracy, access, and use by those within their firm, but also within the Joint Operating Committees that their firms have interests in. Most of this data will be similar to the data that is currently held by their firm's partners, and much of this data will have been generated in a cooperative and collaborative manner by those firms in those partnerships. 

It should be noted that much of today's unintegrated ERP systems approach seeks to independently source and replicate the data of these processes repeatedly through independent and disparate systems throughout each producer firm. Therefore it should be asked what impact would theories such as Professor Paul Romer’s Endogenous Technical Change and its non-rival or shared approach such as the Preliminary Specification is conducting in this and other modules have? Where the original source of the data was acquired, authenticated, maintained and used once, not only internally throughout the producer firms but also within the specific properties data being shared externally through their partnership as represented in the various Joint Operating Committees? 

One of the greatest opportunities that we have in developing this system is to address the division of labor and specialization. To take people’s work and to reorganize it across the industry, so that it is focused on the needs of the producer and Joint Operating Committee and very specialized in terms of the tasks that they conduct. To apply those skills across the entire industry, a geographical region, or some other classification. Which is something that would provide significant increases in oil & gas industry productivity, overall cost savings and value. That is to say that a user communities service provider organization would be responsible for an individual process that is billed to 1,000 Joint Operating Committees that might represent 100 oil & gas producers within a specific region that focuses on Shale and is geographically constrained. Expansion and productivity are increased through specialization and the division of labor by identifying and filling gaps. However, the natural process of gap filling in today’s business environment is constrained due to the strict and unchanging structures that are imposed by today’s ERP systems. In order to make changes, to fill gaps, the producers will need the software development capabilities, user community and service providers to make the changes in the software first, then the changes in the organization can follow. These are what People, Ideas & Objects Preliminary Specification are building and will provide.

In this process we are moving towards an enhanced level of competitive advantages for our user community and their service providers. These include leadership, issue identification, problem solving, decision making, creativity, collaboration, research, ideas, design, planning, thinking, negotiating, compromise, innovations, finance, observation, reasoning, judgment and identification of conflict and contradictions. Service providers are employed in the act of delivering the explicit knowledge that has been captured in the People, Ideas & Objects software, supported by their tacit knowledge of knowing how to do the work. Please note we will be deferring the storage and processing of data to the computer’s as a result. 

The types of documents and the associated processes that are managed within the Petroleum Lease Marketplace are somewhat self-evident. (Recall we are including Land, Legal, Production Admin, Exploration Admin, Accounting and Others in the classifications.) Most of them are created in collaboration with the participants of the Joint Operating Committee and include: Authority for Expenditures (AFE’s), Capital Budgeting (Firm and JOC), Construction Ownership and Operating Agreements, Mail Ballots, Daily Drilling Reports, management of the lease bidding process, Lease Bonus, Lease Rental, Lease Taxes, Areas of Mutual Interest are some of the forms, processes and attributes of the Petroleum Lease Marketplace module. A more detailed specification will be the result of our user communities contributions.

In Professor Giovanni Dosi’s paper “Sources, Procedures and Microeconomic Effects of Innovation” he notes the following three factors involved in the development of innovation.

The search, development and adoption of new processes and products in market economies are the outcome of the interaction between:

• Capabilities and stimuli generated with each firm and within the industry in which they compete.
• Broader causes external to the individual industries, such as the state of science in different branches, the facilities for the communication of knowledge, the supply of technical capabilities, skills, engineers etc.
• Additional issues include the conditions controlling occupational and geographical mobility and or consumer promptness / resistance to change, market conditions, financial facilities and capabilities and the criteria used to allocate funds. Microeconomic trends in the effects on changes in relative prices of inputs and outputs, including public policy. (regulation, tax codes, patent and trademark laws and public procurement.)

The innovative oil & gas producer relies on their competitive advantages of their land and asset base, and their earth science and engineering capabilities. The Petroleum Lease Marketplace is the module that provides the producers and Joint Operating Committees with the tools needed to build and manage their land and asset base. But there’s more, using our Marketplace Interface and our user communities service providers that support the innovative producers and Joint Operating Committees the Petroleum Lease Marketplace provides the profitable and innovative producer with the competitive advantages that are necessary to compete in the 21st century.

Financial Marketplace

The capital and debt markets have been very negative towards the oil & gas industry with many of the producers being shut out of those markets since 2015. Capital structures are close to nonexistent. Consolidation has been the choice of the current administration’s method to deal with the consequences of their self-inflicted cash crisis. What was a multi-decade period of extremely low interest rates appears to be ending with higher performance levels being the expectation. Creating a threat to producers due to their chronic lack of performance, inordinate levels of debt acquired during this period of unconstrained, debt fueled spending. Financial statements with inordinately bloated balances of property, plant and equipment, fueled by the “building balance sheet” craze are therefore carrying excessive levels of bank debt. And are well beyond any criteria of reasonable or healthy just based on these two elements. Debt leveraging is now eroded further when their equity has been decimated by chronic and continuous losses. Leaving producers unable to weather the storm of any increase in interest costs, or forced deleveraging. 

Issues as a result of the financial crisis of 2008, the destruction of natural gas prices in 2010, the beginning of the destruction of oil prices in 2014, the oil & gas investors strike that continues since 2015 and 2022s realization that industry wide capacities and capabilities are diminished and degraded. The demand for capital in a capital intensive industry will continue to be strong, and as a result of its history its supply will continue to be tight. There has been a serious cash and working capital crisis in the industry as a result of the bureaucrats' method of management. Making the situation the producers face untenable and most certain to lead to further wholesale destruction for all involved. The future also requires that we’re able to provide for the market's demands for energy, demanding even more capital than before. This therefore demands that new capital structures will be necessary to lead to the overall performance of the producer and the Joint Operating Committees they participate in. Strategically muddling through just seems to be too much of a risk. Therefore creating a physical financial marketplace based on profitability, performance and throughput is necessary in order to realize this future. And profitability today, every day and everywhere throughout the industry during this time. Oil & gas is a mature industry, expectations that “building balance sheets,” whatever that means, has to shift to real, tangible and actual profitability. It is estimated that the capital demands for energy over the next 25 years will require investments of $20 to $40 trillion. Based on today’s producers actions and behaviors we can see that their assumption is that the oil & gas investors and bankers will continue to provide those resources. This being a continuation of their currently employed business model that capitalizes every possible cost down to the receptionists Post-it-Notes, phone service and their time which subsequently recognizes these costs over several decades, and to have them supported by debt. The producers current business model and assumptions of it continuing are unreasonable. 

What will be needed for the producers is to turn their capital over repeatedly on a basis that is competitive with other industries and what the capital markets demand. That means they’ll need to recognize their capital costs on a very short time horizon in order to recover that previously invested cash as possibly the only source of cash for future capital investments. Passing the capital costs in a capital intensive industry on to the consumers. Having investors endlessly pay every bill while producers achieve no performance compared to what capital markets provide investors elsewhere, is over. What we seek to prove in the Financial Marketplace module, is that through its use we can provide the innovative oil & gas producer and the Joint Operating Committee with the ability to ensure that their capital structures are more efficient than what can be attained in any other system. 

My criticisms of the management are that the velocity at which the management operates is too slow, its innovativeness is non-existent, profitability has been non-existent for over four decades and cash is only ever incinerated, never returned. In the physical financial marketplace the pace of field activity will need to accelerate in order to address the increased demands from energy independence and other related issues regarding our future. I think People, Ideas & Objects have identified and addressed the associated issues and opportunities with these changes in the Financial Marketplace module of the Preliminary Specification.

A note about our Marketplace Interface that is a critical component of the Resource, Petroleum Lease and Financial Marketplace modules. The Marketplace Interface is a virtual representation that the user has of each of these marketplace modules. It uses avatars where firms and producers establish virtual representations of their firm's offerings. This provides a means in which people have to conduct their business virtually as well as through traditional means. These avatars will be supported through the People, Ideas & Objects ERP system that provides them with the ability to conduct any and all operations that they’re able to conduct in any of these Preliminary Specification modules. It should be seen as the ultimate collaborative interface. Recently Meta announced similar facilities to these. 

Partnership Accounting 

The Partnership Accounting module is a pure accounting module from the traditional sense, however, I think there are many attributes and concepts in this module that make it unique and of interest to everyone in the industry. The standard list of output from an accounting system is provided and this is standard fare of any software provider in oil & gas. Our user community will provide the details, data, reporting and process management that producers and others demand from their system. As we see in the Partnership Accounting module the difference in the People, Ideas & Objects software application is substantial in that the Joint Operating Committee is managed as the partnership that it is. Each Joint Operating Committee will be provided with full financial statements, complete with depletion calculations and actual overhead, not estimates, in order to evaluate its actual, factual, detailed performance to ensure that only profitable production is produced everywhere and always. It also recognizes that the capital costs of the property for each of the producers within a Joint Operating Committee are as unique as the strategies that are employed by those producers.

The scope of operations that will be managed under the Partnership Accounting module includes everything in upstream oil & gas. Simply the cut-off would be the inlet to any refinery and point of sale for natural gas. To be more specific from the point of view of geography and type of operation managed by the People, Ideas & Objects application. If we look at the North American oil & gas infrastructure we see a variety of oil & gas installations designed to serve both producers and consumers of oil & gas. Wells, gathering systems, gas plants, pipelines, storage facilities etc. At each point along these systems there may be additional deliveries of product, or sales of product or products inventoried. What seems to be an obvious and simple business becomes incredibly complex when it's realized that each asset may be owned by a Joint Operating Committee itself and hold the different product on behalf of the owners of other Joint Operating Committees. This summary glosses over the incredible complexity of this business when the volume of transactions that occur in these businesses make it an important part of oil & gas operations.

Critical to controlling this business is our Material Balance Report which we’ve made a key part of the Partnership Accounting module of the Preliminary Specification. It is the central document that so much of the subsequent process activity is based upon. It acquires from the source documents the volume, contract or spot price, allocations and other data for the Joint Operating Committee and its integrity can not be questioned. If someone is to be charged for storage of butane for example, or if someone is to be charged a marketing fee for delivery of product to a customer. Or simply if a sale of a raw gas stream at the wellhead is deemed to have occurred. The Material Balance Report captures these transactions and initiates the flow of documents that need to be generated. Once this data is captured, its integrity secured and balanced, the automation of these processes can begin. It is the scope of the Partnership Accounting module that captures all of these data and activities for all of these North American facilities as its purpose. Each Material Balance Report must balance, and each reports inputs and outputs balance to other Material Balance Reports. The key to the Material Balance Report is that it provides a means to ensure that the volumes and prices etc. that are reported are factual. Which is the necessary requirement for much of the subsequent process automation, including amendments.

Reviewing the Partnership Accounting module further will provide an understanding of the reasons why we are taking such a broad scope of operations into considerations. It would be an understatement to state that the Material Balance Report has been poorly served by IT. To approach it from a global perspective that includes production operations, accounting and the other areas that depend on this information would be ideal, however, the complexity of the business has always been in the way. The budget and engineering of software has never been available, affordable or valuable enough for any one producer to approach the type of problem that this area presents. It exists now with the Preliminary Specification and People, Ideas & Objects. And the Partnership Accounting and Accounting Voucher modules of the Preliminary Specification provides the vision of how this engineering solution solves this problem.

We also introduce the Work Order in the Partnership Accounting module. The Work Order enables producer firms to participate in informal and ad-hoc working groups to conduct studies and research. These informal groups are able to be established and formed without the traditional accounting nightmare that they’ve normally created, which are an impediment to their formation. An innovative oil & gas industry needs to have these studies and research working groups form and develop on an exponential scale in order to expand the overall science of the industry. The Work Order is also an internal cost control mechanism that producers and Joint Operating Committees can rely on to manage the costs, and recovery of those costs, of the producers internal earth science and engineering resources being charged directly to the Joint Operating Committees.

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 Executive Summary Part 2

What’s in a Name?

The naming of this initiative as People, Ideas & Objects is a derivative twist on Professor Paul Romer’s “Endogenous Technical Change” paper that he published in October 1990. (And subsequently earned him the Nobel Prize in Economics in 2018.) A paper that was published in The Journal of Political Economy Vol. 98, No. 5, Part 2: The Problem of Development: A Conference of the Institute for the Study of Free Enterprise Systems Oct. 1990, pp. S71 - S102, and downloadable here.

And best understood through this Reason Magazine article. Accessed January 25, 2003.

Endogenous technical change or new growth theory suggests that economic growth from investments in transportation, communications and financial services was diminishing in its impact. That it was being replaced by a new dynamic in terms of how economic growth was or would be achieved. Summarized in this Reason Magazine article by Professor Romer as people, ideas and things we amended his summary to reflect that we are object based developers to come up with our name.

From the interview in Reason Magazine.

As one of the chief architects of "New Growth Theory," Paul Romer has had a massive and profound impact on modern economic thinking and policymaking. New Growth Theory shows that economic growth doesn't arise just from adding more labor to more capital, but from new and better ideas expressed as technological progress. Along the way, it transforms economics from a "dismal science" that describes a world of scarcity and diminishing returns into a discipline that reveals a path toward constant improvement and unlimited potential. Ideas, in Romer's formulation, really do have consequences. Big ones.

In the Reason article Professor Romer applies his theory to the simple example of standardizing the lid of a small, medium and large coffee cup. Instead of producing, inventorying and handling three different sizes the efficiency of sharing one size is intuitive, inherent and most of all substantial in terms of its cost savings over the long term. Through the Preliminary Specification we have applied this principle in a number of different ways and will be seeing this expand through the use of our user community and their service provider organizations.

Criticism of Professor Romer's theory is that it is unquantifiable. And in a way that is valid if you see the economics profession as a science. Of which I no longer do as a result of the 2008 financial crisis. If it were a science then it would have been forewarned that the difficulties were present and steps taken to remedy it. Only Nouriel Roubini was raising any warning. All the others were too busy checking the dials on the dashboard to have noticed the brick wall they were heading into at high speed.

One example that can be highlighted from our discussion in the Specialization and Division of Labor section above is the massive cost savings oil & gas will realize from the Preliminary Specification. Specifically the reallocation, identification and support of the administrative and accounting resources of the producers to the service provider firms. This value is incremental and is attributable to both specialization and Professor Romers New Growth Theory. Cloud computing introduces a paradigm based on the principle of sharing the large capital costs of building and maintaining a large, fixed capacity, technical infrastructure necessary to meet their customers' needs. And replace it with unlimited capacity that’s available as an all in variable cost based on use. Key to the paradigm is the associated reduction in a firm's demand to have the technical capacity and capabilities for non-competitive attributes such as database, network and operating system specialists with the skills to maintain operations. A relief of not only their customers’ budget but an ability for them to refocus on productive and competitive activities. The two attributes of specialization and division of labor.

It is the sharing of this technical infrastructure that creates incremental value from Cloud Computing. Professor Romers principle theory lies in endogenous growth however the sharing of these costs is what he calls non-rival. From the Journal of Political Economy pp. S73 - S74.

A purely rival good has the property that its use by one firm or person precludes its use by an-other; a purely nonrival good has the property that its use by one firm or person in no way limits its use by another. 

And it is here that People, Ideas & Objects Preliminary Specifications user community service provider organizations implement the feature we are calling oil & gas Cloud Administration & Accounting. The elements of the capabilities and capacities of our user community and permanent ERP software development capability proposed in the reallocation of these resources are shared as a non-rival throughout the North American producer production profile. Alleviating each producer firm from having to maintain the specific skills and attributes necessary to achieve these requirements. Accessing them on a highly specialized and shared basis will provide them with higher quality products and services at lower variable cost based on profitable production.

Security & Access Control

Once we’ve adopted the Joint Operating Committee (JOC) as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer. We're involved in the interactions of many producers and suppliers involved in the day to day commercial and strategic concerns of a Joint Operating Committee. What we need to concern ourselves with in the Security & Access Control module is that the right people have the right access to the right information and data with the right authority at the right time and at the right place. And do so securely, where Compliance & Governance is maintained and there is no unauthorized use of any information in any form.

Throughout the Preliminary Specification we discuss and resolve the many premier issues of the oil & gas industry. One of our concerns here is the demand for the earth science and engineering effort within each barrel of oil equivalent produced has always and will continue to increase. This is best represented in the steep and never ending escalation of exploration and production costs involved in oil & gas. At the same time the critical earth science and engineering resources are somewhat fixed and difficult to expand in the short to medium term. Add to that an anticipated retirement of this brain trust in the next twenty years, the oil & gas related depression we are experiencing which is stalling the careers of recent university graduates, the expected production profile of the North American continent and particularly in terms of providing profitable energy independence, and the problem becomes a critical concern. New means and methods for these resources within the industry to work together will be necessary. People, Ideas & Objects have chosen specialization and the division of labor as that method to resolve it. Demanding a far greater level of collaboration be enabled through the use of the Internet and the available Information Technologies. Enabling interaction within a Joint Operating Committee that spans many producers with the appropriate governance and chain of command for each of those producers and their agents being represented. Introducing substantial new opportunities and risks such as what the Security & Access Control module addresses. 

The concept of specialization and division of labor is well known as a principle of economics that brings about greater amounts of economic productivity from the same volume of resources. Given that the volume of earth science and engineering resources are known for the foreseeable future, specialization and the division of labor will provide us with a tangible means in which to deal with the productivity of the oil & gas industry. In today’s North American oil & gas marketplace, to approach a heightened level of specialization and division of labor from a scope and scale point of view, without the use of software to define and support it would be a failure.

The pooling concept is our solution to the current necessity that each producer firm acquires the earth science and engineering capabilities to deal with all the needs of their operated properties. This creates unneeded “just-in-time” capacities and capabilities for these scarce scientific resources. When each producer pursues this same strategy, substantial surplus capacity is built into their overall capabilities creating industry wide unshared and unshareable resources. Redundancies built within each of the producer firms are otherwise inaccessible and are therefore left unused and unusable. What is proposed through the People, Ideas & Objects Preliminary Specification is that the producer's operational strategy avoids and eliminates the operator concept and begins pooling their technical resources through the partnership represented in each of their Joint Operating Committees. That way the surplus capacity of otherwise unused and unusable technical resources in the industry can be made available to the Joint Operating Committees and employed by the producers through their advanced, organizational specializations and division of labor.

Oracle’s products provide a strong layer of mission critical capabilities in the Security & Access Control module. Although this comes with additional costs, I am certain that no one will argue with the quality and secure knowledge that their products bring. By using Oracle Cloud ERP in the configuration for the delivery of People, Ideas & Objects products we gain advantages from a Security & Access Control point of view. Our user communities service provider organizations will deliver these Oracle product software features and functions in concert with People, Ideas & Objects Preliminary Specification and provide the support and services necessary to ensure the producer's needs are fulfilled. Establishing their role as an industry wide oil & gas Cloud Administration & Accounting software and service offering.

Resource Marketplace

What we set out to accomplish in the Resource Marketplace module is captured in this quotation from one of the primary research sources. Professors Richard N. Langlois and Giovanni Dosi, as were many others, were used extensively for the research that was conducted in the development of the Preliminary Specification. In this quote from Professor Langlois we learn the direction that we are headed.

[I]t seems to me that we cannot hope to construct an adequate theory of industrial organization and in particular to answer our question about the division of labor between firm and market, unless the elements of organization, knowledge, experience and skills are brought back to the foreground of our vision (Richardson 1972, p. 888).

To deal effectively with the Resource Marketplace in oil & gas, the producer will need tools to effectively engage with the suppliers and others for the resources they need. The Resource Marketplace Module provides a window on the “Resource Marketplace” for Joint Operating Committees and producers. Anything of value that is contracted between “actors” in the oil & gas, service, service provider, software and user community generated businesses will be found, contracted, managed, transacted and developed through this module. It's simply a virtual representation of these marketplaces. Enhanced with the full capabilities of a tier 1 ERP system in the form of Oracle Cloud ERP. Therefore the transaction processing, negotiation, determination of available resources, determination of transaction costs, contract execution, effective software tools to monitor and verify compliance to the contract with the full support of our Resource Marketplace module and its interfaces to other modules of the Preliminary Specification.

Similar interfaces will be provided for use by the service industries. Transactions have two parties, the efficiencies of the producers would inherently include the efficiencies to the service provider. Since we are an accounting system, then certainly offering similar services to the suppliers would only make sense. It is not just producers in the Resource Marketplace. Key to the efficiencies in the Resource Marketplace are the mitigation of transaction cost friction. Friction on both sides of the transaction, due to the fact that transaction costs in the Resource Marketplace are costs that will ultimately be borne initially by the Joint Operating Committee and eventually by the producer itself.

Contained within this marketplace will be all of the producers and suppliers who will be able to define, create and conduct business in the actual marketplace that exists today. The scope and size of the Resource Marketplace, our user community and their service provider organizations will accommodate the needs of Exxonmobil and their costs down to the single entrepreneur starting out in the oil & gas business. To preclude any group, profession, organization, or person from the Resource Marketplace would limit the value available to the industry. Whatever service, product or solution is provided to the energy industry, from either individuals, those employed by producers or Joint Operating Committees, or companies providing services to the producers which should include Schlumberger and anyone directly or indirectly employed in the energy industry. Therefore acquiring as Professor Langlois suggest “the elements of organization, knowledge, experience and skills” and we include ideas in that list.

It is the use of the Joint Operating Committee and the Resource Marketplace that provides value to the profitable and innovative oil & gas producer. Enabling the service industry to grow thick markets for their products and services. Where a diversity of offerings from new competitors, with new products or innovations on the products provided by existing suppliers. Producers have a role in defining and supporting a dynamic, competitive and healthy service industry. However, before that happens, the need for the software and services that are defined here in the Resource Marketplace has to be built for the producer, the Joint Operating Committee and the service sector to support these markets. From Professor Richard Langlois paper “Economic Institutions and the Boundaries of the Firm: The Case of Business Groups.”

The second hypothesis, which has resonances at least as far back as Gerschenkron’s famous “backwardness” thesis (Gerschenkron 1962), is that the way an economy responds to the problems of coordinating economic development depends not only on its own institutions and capabilities but also on institutions and capabilities elsewhere. It depends not only on an economy’s own history but on the history of other economies as well. The force of this observation is that an economy at the frontier of economic development (however we care to define that) is likely to respond to the coordination problem differently than an economy lagging behind that frontier. Specifically, an economy at the frontier is arguably more likely to rely on decentralized modes of coordination. This is so because uncertainty is greater at the frontier — uncertainty about technology, organizational form, market direction. p. 18

It is here we find the reason for what plagues the North American oil & gas economy. Producers have chosen centralization as their theme to deal with the situation they’ve created. Issues remain unaddressed and solutions to those issues remain limited to People, Ideas & Objects et al. In 2022 similar answers have been successfully implemented in many other industries through the form of disintermediation or decentralized organizational business models and structures facilitated through the use of Information Technologies and most specifically the Internet. Issues in the producer firms have now manifested themselves to the point where their capabilities and capacities through the service industry are highly deprecated. An industry established exclusively to provide producers with the geographical and technical diversity they need to function. To the point where the capital structure of the service industry is non-existent due to the destruction authored by producer firms. At the same time producers are standing on oil & gas production deliverability volumes that haven’t been maintained over the past seven years and may collapse due to their neglect and this incapacity. An uncertain situation best encapsulated as I see it as, oil & gas everywhere, but not a molecule left to burn.

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 Executive Summary Part 1

 People, Ideas & Objects Preliminary Specification has the dual, opposing and conflicting objectives of ensuring profitable oil & gas operations everywhere and always, while at the same time ensuring consumers are provided with abundant, secure, reliable and affordable energy. Today our advanced society mechanically leverages each barrel of oil produced by 10 to 25 thousand man hours of equivalent labor. A value proposition that consumers can not live without. However, we see the responsibility and accountability for these dual roles of profitability and innovation to ensure the consumers are adequately supplied are summarily ignored by the North American based producer firms. Their irresponsibility is now reflected in the financial destruction they’ve caused to their own firms, the industry itself and most importantly the service industry they’re wholly reliant upon as the source of their capabilities and capacities. It is as we state however, the producer bureaucrats are fine and they thank you for asking.

There are five Organizational Constructs that define the overall architecture of how the profitability and innovation is structurally and organizationally defined in our Preliminary Specification and supported through our user community and their service provider organizations. These five include specialization and the division of labor, Intellectual Property, Information Technology, markets and the key Organizational Construct is the Joint Operating Committee. Which is the legal, financial, operational decision making, cultural, communication, innovation and strategic frameworks of the oil & gas industry. By moving the compliance and governance frameworks of the hierarchy into alignment with these seven frameworks of the Joint Operating Committee we achieve a speed, innovativeness, accountability and profitability that is necessary for at least the next twenty five years.

What People, Ideas & Objects can state unequivocally, and would obtain resonance throughout the greater oil & gas economy, is that nothing will exist for the long term without profitable operations. And profitable operations from a real perspective, not the specious claims made by producers over the past four decades and detailed elsewhere throughout the Preliminary Specification. We offer a value proposition that contrasts with the status quo and quantifies our claims as high as $45.7 trillion dollars over the next 25 years of operation of the Preliminary Specification over the base case. This is not a magic elixir as much as it is a measure of the structural incompetence and mismanagement of the officers and directors that have plagued North American producer firms. Theirs has become an industry wide culture of a self-serving, lucrative administration that hasn’t concerned itself with the business of the business.

One aspect of their culture is their fundamental belief that oil & gas are price takers for economic definition purposes. The Preliminary Specification contains our decentralized production models price maker strategy that ensure profitable production is the only production that is produced. The original publication of this document was on August 9, 2012. A period of time that will soon exceed a decade and all that we’ve seen from said bureaucrats is the blank stares from their lofty couch positions. What could have been is a reasonable question when both oil & gas commodities were pushed by producers into negative pricing situations. What could have been if they had listened to their investors' demands for change beginning in 2015. They’ve had the opportunity to make the necessary changes by adopting the Preliminary Specification yet chose to silence and ridicule our solution. They’ve had the demand from their investors, and more importantly, the destruction which we’ve consistently pointed out to them during this decade has been obvious and evident everywhere in the North American producer population, yet not one productive thing was done to deal with it during this decade? 

There are other developments that are evident throughout the global economy that are reflected and instituted in the Preliminary Specification. Specifically disintermediation has been a force that has and will continue to offer all industries business models that compete directly with the inefficiencies of the hierarchical form of organizations. People, Ideas & Objects et al are disintermediating the oil & gas industry. What we have found since the beginning of this dynamic which began with the changes to the music industry. The number of industries that have been disintermediated is comprehensive, which has provided those that have not been with better tools and understandings in which to resist these forces and maintain their hold for longer periods. Leaving the inefficiencies that should have been worked out in the industry to continue and to leave the methods of senior management to survive by cannibalizing prior established value as they’re incapable of building any new value. The loss of serendipity, spontaneity and creative destruction are unintended consequences of society's dependence on software that define and support organizations. People, Ideas & Objects et al are therefore establishing a permanent software development capability to accommodate the changes within the industry in the future and to reinstate these economic principles. 

A feature of our user communities service providers is what we are calling Cloud Administration & Accounting in oil & gas. An extension of the Cloud Computing paradigm that has inherent business value. Eliminating the need for each producer to incur the costs of building and maintaining the unshared and unshareable, non-competitive advantage of their administrative and accounting capabilities. To offer these services as a variable cost, charged directly to the Joint Operating Committee which in turn enables detailed, actual, factual financial statements to be prepared for each property. Therefore if it is profitable it will continue to produce, if not it will be shut-in to incur a null operation, no profit or loss. What People, Ideas & Objects et al will have done is turn all the producers costs variable, based on production.

The Preliminary Specification is a thirteen module ERP (Enterprise Resource Planning) software system designed for the dynamic, innovative, accountable and profitable oil & gas producer. Built within Oracle Cloud ERP’s tier 1 ERP offering, this executive summary will touch on some of the value-added aspects of how the producer firms will profitably be configured to meet and exceed the energy challenges of the next many decades. Keep in mind while reviewing the Preliminary Specification that it is People, Ideas & Objects claim that we provide the oil & gas producer, as our competitive advantage, the most profitable means of oil & gas operations. And we do this in the following fundamental ways.

Specialization and the Division of Labor

If we review the Preliminary Specification there is a defined restructuring of the industry that takes place throughout the modules. 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 administrative and accounting resources of the producers are reallocated and provided by the People, Ideas & Objects user communities service providers. Each of these service providers are focused on one process, or one element of a process using the entire industry as its client base. So for example there may be one royalty payment processor that handles all of the industries royalty payments. Where the cost of the royalty payment, and the billing for the royalty payment service provider is billed directly to the appropriate Joint Operating Committee, not the individual producer. We are moving from the reliance on producers' fixed administrative and accounting capabilities to a reliance on the industries variable administrative and accounting capabilities.

The advantages of moving to a system and methodology such as this is its lower cost and efficiency. The costs associated with the royalty payment processor would be a small percentage of what is incurred collectively by the industry today. By focusing on the most efficient way to process royalty payments, and only royalty payments, the service provider would become specialized and reduce the time and effort in administering these tasks to a small component of the costs incurred today. Around 1776, 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 process, and particularly the administrative and accounting processes of the North American oil & gas industry subject to this type of analysis, complete with the software development capability as defined by People, Ideas & Objects, similar results in productivity would be attained. All economic growth since the late 1700’s can be attributed to enhanced organization through specialization and the division of labor. Society today requires software to define and support any enhanced version of specialization and division of labor. People, Ideas & Objects software and our software development capabilities are therefore critical for the oil & gas industries future performance and growth.

Capability to Remove the Marginal Production and Become Price Makers

The high costs associated with exploration and production, and particularly shale, it’s no surprise that producers are reporting losses on operations. What is surprising is that producers have done nothing to mitigate the chronic and systemic overproduction that has caused the decline in oil & natural gas prices. The reason for this chronic overproduction is the producers have to generate the revenues to cover the overheads they incur in what is called the “high throughput production” model they employ. This model has the overhead costs of the producer firm being incurred whether there is production or not, and as a result, it makes their operation a high cost operation, even at full production. At lower production volumes it skews their earnings and their overhead costs appear out of place.

In the Preliminary Specification we have employed the “decentralized production” model. The service provider charges for their services directly to the Joint Operating Committee the costs of their accounting or administrative service. If the property is shut-in due to low deliverability, high costs or other reason for its lack of profitability then there is no charge incurred for the overhead item by any of the individual service providers as they will have conducted no work on that property, and neither the producer or the Joint Operating Committee are incurring any of the accounting or administrative overhead during times of shut-in production. Therefore the only costs that are not covered during times of shut-in production are the costs of capital. The producer can therefore shut-in unprofitable production based on the accurate, detailed accounting and therefore attain the highest level of corporate profitability by not having their losing properties diluting their profitable ones. Save those petroleum reserves for a time when they can be produced profitably. Those reserves will not have to carry the incremental costs of subsequent monthly losses that would need to be recovered in the future if it continued to produce unprofitably. Cut their oil & gas inventory and storage costs by holding them as reserves. And finally, by keeping that unprofitable production off the market those commodities will find their marginal price.

If producers across the industry follow this process then oil & gas prices would not have the significant declines that we’ve experienced in the last number of decades. If the downswing in oil & natural gas prices were averted by way of a reduction in unprofitable production volumes, the total revenues and profits of the industry would provide for profitable operations everywhere and always. Stabilizing the industry by removing the boom / bust cycle and its destructive force throughout the greater oil & gas economy. People, Ideas & Objects believe we have a responsibility to use oil & gas resources effectively, and that implies that we at least produce them profitably from an appropriate accounting basis. We owe this and the passing of a viable and profitable industry as an obligation to future generations. Producer bureaucrats claim this is collusion and have used that as an excuse to lose effective control of the financial, operational and political frameworks of the industry. They will not listen to the fact that making effective, independent business decisions at the property level, based on actual, factual accounting that determines profitability is not collusion. As a result they have destroyed the industry and are unable to provide an alternative strategy or plan to deal with the issues and opportunities they face, and by unfortunate default, the service industry.

Innovation for Profits

As the fourth element of our competitive advantage of providing the profitable and innovative oil & gas producer with the most profitable means of oil & gas operations. We focus on innovation as the way in which to enhance the profitable nature of the producer and to ensure that the consumer's cost of energy is as low as it can be. Innovation for profit, particularly from the science basis of the business, is the successful perspective for the 21st century oil & gas producer. It is within the DNA of the Preliminary Specification how the processes of innovation are identified and supported that enhance the ability of the innovative and profitable oil & gas producer. From Professor Giovanni Dosi.

In the most general terms, private profit-seeking agents will plausibly allocate resources to the exploration and development of new products and new techniques of production if they know, or believe in, the existence of some sort of yet unexploited scientific and technical opportunities; if they expect that there will be a market for their new products and processes; and finally, if they expect some economic benefit, net of the incurred costs, deriving from the innovations.

With an inventory of oil & gas assets that are non producing. The dynamic, innovative, accountable and profitable oil & gas producer will have readily available properties to focus their innovations on.

Lower Costs of Exploration & Development

The oil & gas industry needs a dynamic, innovative, accountable and profitable service industry in order for it to be dynamic, innovative, accountable and profitable. In the brief moments that we’ve had “good times” in the industry, producer firms accused the service industry of being greedy and lazy due to the high field costs that were being experienced. Today the service industry has had their activity levels slashed and their accounts receivable extended for up to 18 months by the producers. A situation that puts their organization, unnecessarily, in jeopardy. There is substantial conflict between what is required and what exists. We do not believe this is an appropriate posture for the future of the industry if it is to fulfill its objectives. The Preliminary Specification works to mitigate this conflict by addressing the issue of how the producer firm deals with the generation and management of ideas in the service industry. Currently the producers ignore and abuse the rights and ideas developed by the vendors that they use. And as time has passed, the number of companies that have initiated new products, services and competition have dwindled. Leading to the situation where the producers have a limited number of very large service industry participants who have the pricing power on their side during the alleged one or two “good times” these past decades.

It is through the Preliminary Specification that the producers begin to respect, sponsor and support the ideas generated by the service industry. Oil & gas producers do not compete on the basis of drill bit manufacturing technologies. It is on the basis of the respect by producers of the service industries Intellectual Property that will enable service industry representatives to respond with new and innovative products, services and competition. Through a variety of interfaces in the Resource Marketplace and Research & Capabilities modules the producers are able to participate and lead the creation of new and better products, and services by clearly expressing their needs and allowing the service industry to respond.

When the oil & gas industry has a dynamic, innovative, accountable and profitable service industry supporting the oil & gas industry then the profitability of the oil & gas producer will be enhanced, further contrasting People, Ideas & Objects business model to what the current bureaucracies may be using today.

Earth Science and Engineering Resources

The Preliminary Specification recognizes and supports the dynamic, innovative, accountable and profitable oil & gas producers competitive advantages of their land and asset base, and their earth science and engineering capabilities. It is through the use of innovation, specialization and the division of labor that we leverage the earth science and engineering resources of the producer firm. As with the points above, investments in innovation are undertaken with the express intent to return a profit. Innovation in the sciences of oil & gas are part of the producer's competitive advantages and are therefore the express purpose of the modules within the People, Ideas & Objects Preliminary Specification.

In terms of specialization and the division of labor, the producer firm must approach the issue of the pending limited base of earth science and engineering resources. Pending due to the retirement of the brain trust of the industry, the lack of new hires from the universities, the expected throughput increases in North America and the ever increasing demand of geology and engineering with each incremental barrel produced. People, Ideas & Objects have developed the pooling concept to eliminate the unused and unusable surplus capacity of these resources that are trapped within the silo’s of each bureaucracy. In addition we have used specialization and the division of labor to reorganize certain skills within these professions to service providers who can specialize in the specific skills. It is with the pooling, specialization and division of labor that the demand for engineers and geologists will be more manageable. This organizational structure is identified and supported throughout the Preliminary Specification.

These are a summary of some of the aspects of our competitive offering for the oil & gas industry. They are structured to provide the producer and industry with a profitable and innovative operating base in which to approach the 21st century. 

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.