People, Ideas & Objects Response to a Request for Proposal, Part III

Organizational Constructs

Key to the Preliminary Specifications value proposition is its alignment to six different organizational constructs that impute an understanding and common sense approach of how our system operates. These organizational constructs consist of the Joint Operating Committee, enabling and facilitating the expansion of Specialization and the Division of Labor, Intellectual Property, Innovation, Markets and Information Technology. Developers and users of the system will default to these constructs for the process definitions, frameworks and methods used in order to gain an enhanced understanding of what should be the case and the follow on consequences. Enabling an approach where a dynamic, innovative, accountable and profitable oil & gas producer will be the focus of all who work within the greater oil & gas economy.

The Joint Operating Committee

The first organizational construct that contributes to our value proposition is the use of the Joint Operating Committee as the key organizational construct of the dynamic, innovative, accountable and profitable oil & gas producer. The Joint Operating Committee is the industry's legal, financial, operational decision making, cultural, communication, innovation and strategic framework of the industry. When we move the compliance and governance frameworks of the producer firm away from the hierarchy and into alignment with the seven frameworks of the Joint Operating Committee, we’ll achieve an increased organizational speed, innovativeness and accountability in producers. Continuing on with the theme of this wiki page of “what, how and why” we do that, these are some of the advantages that are gained.

Adoption of the culture of the oil & gas industry in the form of the Joint Operating Committee is one of the fundamental changes that we’ve made in our ERP system. By doing so we’ve changed everything that is currently done in oil & gas administration and accounting and recognifigured it around what is unquestionably its cultural method of operation. Creating an opportunity to provide a solution to these issues and take this once in an industries lifetime opportunity to move back to the more natural flow of the oil & gas business, focused around the seven frameworks of the Joint Operating Committee.

Our research taught us that when alignment of compliance and governance with operational decision making occurs, accountability is the result. This is intuitively understood. We believe this to be a source of conflict throughout the oil & gas industry today which creates an atmosphere and culture of unaccountable decision making. The contradiction occurs when operators assume the responsibility of managing the Joint Operating Committee based on the need to have the requisite capabilities available to conduct the necessary field operations. The Joint Operating Committee holds the operational decision making authority which is then delegated in the operating procedure to an operator based on the results of voting by its producer participants. A threshold percentage is established for any decision to be passed. Let's assume 60% is the required percentage for approval and the operator has a 33% working interest. Decisions are then made on this basis, AFE’s are issued, funds are spent and the initiative fails. Who’s responsible and who needs to be accountable for the difficulties experienced? We believe this to be the root cause of a related issue we identified in our discussion regarding Specialization and the Division of Labor. When producers have never been held accountable for the day to day individual field decisions that were made, during any period of their tenure at the producer, why would they then be held accountable for any decisions when they’ve assumed the officer or director roles in the firm? Just “muddle through.” It is the culture of the industry which developed over the past six decades that underpins this unaccountability. In its place a culture of excuses, blaming and generation of what we call viable scapegoats is the product of this lack of accountability. To resolve this the Preliminary Specification aligns and implements the Compliance & Governance module to the operational decision making framework of the Joint Operating Committee to establish a new culture of accountability for the decisions that are made.

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

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

Oil & gas has a looming crisis in its ability to source the appropriate level of engineering and geological resources available to it as a result of retirements, low numbers of graduates and higher production throughput. People, Ideas & Objects therefore questioned whether the ability of each producer firm would be able to continue to establish the full suite of their in-house earth science and engineering capabilities and capacities at the level necessary to meet all of their needs, just-in-time, on a go forward, commercial basis. This would be particularly difficult when the solution to the shortfall in resources can only be resolved by a revised specialization and division of labor. Producers would not be able to commercially sustain the burden of a full suite of operator capacities and capabilities with such a diverse demand after specialization and the division of labor. And therefore we concluded the control or agency problem would need to be resolved on the basis of the knowledge being transferred to where the decision rights were held. It is specifically in the Research & Capabilities, Knowledge & Learning and Resource Marketplace, but also throughout all of the modules of the Preliminary Specification that we’ve moved the knowledge of each of the participating producers in a Joint Operating Committee into alignment with its operational decision rights. Where it is then possible to pool the available and specialized technical resources of the producer members of that Joint Operating Committee or available in the specialized market.

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

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

To which we’ve humbly suggested that “ideas” be added to that list. We also have Professor Carliss Baldwin noting that “knowledge begets capability and capability begets action.” 

What will become of the oil & gas earth science and engineering related capabilities and capacities now that officers and directors have cast their future to clean energy. Renouncing shale and casting it to the back seat of the bus where no one will see or hear from it again. Shale being what can unquestionably be the most advanced science the industry has ever seen or developed. Shale technologies will at best develop no further, atrophy or be cast to the four winds. I’ll reiterate that People, Ideas & Objects have a plan to make shale commercial in the energy independent North American market in the form of the Preliminary Specification. Shale is a critical and highly necessary element of North America's energy independence. 

Officers and directors of producer firms have to stop reading the tea leaves as to what they believe investors want. Investors want profits, everywhere and always, and that is all. With their contrived positioning of clean energy and environmental concerns I would ask what is it in oil & gas that will be the new frontier if it is not clean energy? Offshore, the arctic or conventional, maybe heavy oil or any of the other areas producers previously renounced as commercially viable? It is this focus on clean energy that will do more damage to the industry and seal the fate of the existing producers. What message is being communicated to their investors in oil & gas or its related service industries. Let’s assume the service industry is looking for capital for a driller to build a new rig. Their potential investor’s first question would be “why? Producers aren’t focused on oil & gas, it's clean energy.”

In a related manner, if investors haven’t seen any effort by the officers and directors to make shale commercial, don’t see producers investing in their organizations profitability or remediating any of the damages, what message does that send?

People, Ideas & Objects have repeatedly stated the fact that each boe provides 10,000 to 25,000 man hours of equivalent labor, or 28 to 71 times the entire world's population. Producers' capitulation of shale resources should be seen as irresponsible when we understand that it’s the world's most powerful economy that is the largest consumer of energy. Why aren’t officers and directors seeking to make shale profitable and accountable by adopting the Preliminary Specification? It’s reasons such as these that the people who are elected to the boards of directors are given such responsibilities. Selling to energy consumers the immense value they gain from their use of oil & gas and taking the political high ground away from government actors and environmental groups. 

In terms of alignment of the legal framework of the industry. The Joint Operating Committee is the representative organization that is established for the partnership between producer firms in any and all oil & gas properties. It is the standard method in which industry operates and all agreements and understandings are on the basis of the work done through these joint ventures. It is a rarity that a producer firm will have a 100% interest in a property. The diversity of producers in these holdings are necessary to mitigate the producers financial risk and due to regulatory requirements demanding specific land holdings etc in order to drill and produce. Current accounting systems report on Joint Operating Committee activities however People, Ideas & Objects et al have expanded the accounting and administration of these organizations to the level of stand alone reporting entities. Producing detailed, actual, factual financial statements each month for each Joint Operating Committee. It is therefore in that manner that we’re able to evaluate the performance of the property on the basis of its actual cost on a competitive basis of what the North American capital markets expect. By ensuring that each Joint Operating Committee remains profitable on a monthly basis by not overproducing based on commodity price information. 

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

It's no longer enough to own just the oil & gas assets. It’s also necessary to have access to the software in the form of the Preliminary Specification which makes the oil & gas assets profitable. We are configuring an industry of successful producer and service industry organizations based on the issues that have caused systemic failures that are and will continue to dictate future difficulties. Non participating producer boards of directors in this initiative will have told their shareholders they’ve opted out of an investment being made in their organizations profitability, accountability and performance.

People, Ideas & Objects Response to a Request for Proposal, Part II

 Our Value Proposition

What if ERP software in oil & gas was no longer seen as an overhead cost but as the business opportunity that it is? Which is the perspective that oil & gas producers need to adopt in order to move their organizations to a higher trajectory in terms of performance and accountability. There will be no further development of any organization in any industry without the software, and most particularly the ERP software, which defines and supports an organization's structure, performance and capability of changing. Otherwise we will continue to have the paradox that we have in oil & gas where the status quo is satisfied with the status quo and therefore only the status quo will ever be offered. People, Ideas & Objects believe this is the source of the tragic cost we’re all realizing with much more damage soon to arrive. It’s no longer adequate to just own the oil & gas asset. Without access to the ERP software in the form of the Preliminary Specification there is abundant evidence now that North American oil & gas assets will never be profitable. Regardless of the price of the commodity, producer officers and directors have proven not to be working in anyone's interest other than their own. The level of destruction they’ve authored has been unequaled in the history of business. We should note this occurred while our Preliminary Specification was being offered to mitigate these damages. The faith, trust and goodwill that was built in prior generations has been destroyed and the industry remains in the hands of those who operated in such bad faith. Now that there’s money on the table in the form of higher commodity prices, and potentially detrimental energy shortfalls this winter, actions need to be taken by the investors in oil & gas to specify the selection of an acceptable tier 1 ERP provider. And that selection can only be People, Ideas & Objects, our user community with their service provider organizations operational on Oracle Cloud ERP.

A brief example of the officers and directors record to clarify their culpability. Each of these specific events are generally known and can be easily verified. On July 4, 2019 People, Ideas & Objects published our White Paper “Profitable, North American Energy Independence, Through the Commercialization of Shale” to wide distribution. The title covers the point of the topic which is the development and integration of the Preliminary Specification. It was rejected out of hand by producer officers and directors who had done nothing about their organizations after many years of their investors' demands for action. Within nine months of the producer's rejection of our specific proposal to deal with the issue of shale, they ran the price of oil into the negative $40 range and were forced to shut-in production. A claim they made to refute the Preliminary Specifications validity in 2017, a claim that was knowingly, and subsequently, proven incorrect. Once oil prices recovered, these officers and directors declared that shale would never be commercial. And in 2021 they announced they were beginning the transition of their organizations to clean energy. Today we don’t know what business it is that they’re in? This is the quality and style of the leadership that is now responsible for our economies energy supply? A responsibility they’re unwilling to recognize, much like their inability to comprehend the need to earn “real” profits these past four decades? Where will we head to next with this unaccountable bunch? Instead of taking the leadership role of resolving the European energy crisis. Companies such as Shell's former CEO recently shrugged and said,

"It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing and as a very, very quick build out of alternatives, "Chief Executive Officer Ben Van Beurden told reporters at a conference in Stavanger, Norway. “That this is going to be somehow easy or over, I think is a fantasy we should put aside -- we should confront the reality.”

The reality that needs to be confronted is the industry dominant "muddle through" culture and strategy. Which has permeated all corners of the industry and aided in many parts of society through the dirty oil / environmental focus to accept that we can transition to clean energy and discard the use of conventional sources. Oil & Gas provides 10 to 25 thousand man hours equivalent mechanical labor per barrel of oil. This amounts to 28 to 71 times the mechanical labor of the entire current global population and if we have to ration or conserve this resource, as Mr. Van Beurden asserts, then we’re making decisions as to who may eat and who may work. We were also allegedly told we held 50 and 100 year supplies of oil & gas in shale formations available in the North American market a few years ago. This was prior to the unanimous declaration by the likes of Shell’s former CEO Mr. Van Beurden that shale would never be commercial and therefore abandoned and sold to invest in clean energy in 2021. Now we hear there may only be 10 to 15 more years of usable, drillable locations of shale in the U.S. How is this? The focus on reserves by oil & gas producers has and always will be redundant. Oil & gas exists in the minds of oil & gas men and women. Of which the industry's leadership, such as Mr. Van Beurden prefers chasing fairy tales in the land of perennial losses and the abhorrent accountability of clean energy. Oil & gas reserves are wholly dependent on economic conditions. At a $5 oil price there’s no oil in the world. At $150 there is a 50 year supply. Technical specifications as to the amount of oil in place are as useless as the estimated remaining usable life of a punch press in a manufacturer. 

In terms of the value People, Ideas & Objects generates, our Revenue Model provides for the lowest cost of obtaining an ERP system in the industry. And that is by charging for the costs of software development, plus an element of profit as our fee structure, on a shared basis across the North American producer population. Therefore the industry is only paying for the one time costs of ERP software development. A fundamentally more efficient value proposition than any of our competitors that are charging each producer individually. Our user community is implementing the Cloud Administration & Accounting for Oil & Gas of our software and the services of their service provider organizations. Realizing the remarkable cost savings and associated benefits of the paradigm of cloud computing across the accounting and administrative domains of the industry. Where the substantial fixed costs of building administrative and accounting capabilities and capacities within each and every producer organization is a redundant, unshared, unshareable costly exercise that we believe is the secondary reason for the chronic lack of “real” profitability in the industry. Turning these non-competitive attributes of the producer firms into the variable overhead costs processed through People, Ideas & Objects Cloud Administration and Accounting for Oil & Gas service. Turning the administrative and accounting capabilities, capacities and costs in the industry to variable costs, based on profitable production. And therefore overhead of the producer firms and Joint Operating Committees will only be incurred during times of profitable production. The inherent benefit of our Preliminary Specifications decentralized production models price maker strategy, is that all production will be profitable, everywhere and always. And all overhead is therefore recovered in current operations. A critical difference to today's method of operation where most overhead is capitalized and therefore the cash incurred is recovered through depletion over subsequent decades. Leaving cash deficiencies for costs such as rent and administrative salaries etc to be replaced by the investors annual stock issuance!

We also provide value due to the fact we’re not focused on the traditional software company concerns of code and customers. Cloud Administration & Accounting for Oil & Gas provides that we’re oriented and focused on the changing business of a dynamic, innovative, accountable and profitable oil & gas producer, and their associated service industries. This highlights the different motivations of the software developer over the long term. With People, Ideas & Objects we generate revenues on the basis of the changes and needs that are communicated through our user community. Our motivation is therefore the constant improvement of the software. In the traditional software vendor’s case they are motivated by their code and customer bases. The larger their code base the more difficult it becomes to change, which coincidentally does not generate revenue. And the larger the customer base the more costly any changes become to the software provider. Coincidentally, these changes to the customer software do not generate any revenues. Hence, their age and size as a firm paradoxically leads to increases in their development costs and overhead burden. What we have is a contrast and conflict in the dynamic nature of the software itself in terms of its cost to each of the oil & gas producers and the motivation behind the developer. In addition People, Ideas & Objects use Oracle Cloud Infrastructure and specifically Oracle Cloud ERP which are based on Java, the first object based ERP system. Therefore People, Ideas & Objects will be the first object based ERP system that is available in the North American oil & gas industry. Providing additional cost benefits over the traditional procedural programming languages.

It is each of these areas that set a foundation for the material value proposition that we provide the North American producers. We have valued this in the range of $25.7 to $45.7 trillion dollars over the next 25 years. There are many aspects of our offering that are not qualifiable or quantifiable and they are detailed in the discussion below. Our quantified numbers are simply as a result of two factors that show that operating the industry on the basis of profitability everywhere and always has a $5.7 trillion dollar increase in the earnings of the North American producers. The remaining $20 to $40 trillion dollars is the amount of capital costs, identified by others estimates, of what is necessary for the next 25 years. Having our Preliminary Specification cycle through the producer's capital costs on a rapid basis, the recovery of overhead in the current month and other methods of managing the business and its cash as a business. Using the same investor dollars repeatedly on a cycle that competes with the North American capital markets expectations eliminates the need to demand the $20 to $40 trillion in new capital from investors to build those handsome balance sheets.

We only include this otherwise redundant business number as part of our value proposition as there has not been any change in the methods used in industry to recognize that a capital intensive industry demands that the consumer's product cost will reflect its capital intensive nature. That has not been the case in the past number of decades. Or the past decade in which the Preliminary Specification has been available. It is investors who have subsidized consumers' use of energy by paying the capital costs. The amount of the subsidy reflected in property, plant and equipment on the producers balance sheets in property, plant and equipment or as we call it, the unrecognized capital cost of past production. Officers and directors have relied on a steady stream of new investor cash each and every year for decades, declared they’re profitable in the most specious manner and left the assets on the balance sheet for the CEO to run down mainstreet and brag how big they grew their balance sheet and how much “cash they put in the ground.” Only in oil & gas could one hear such arguments, however we were subjected to a chorus of this each quarter across North America. 

This overreporting of assets has an equal and commensurate effect on overreported profits. High profits attract investors to invest leading ultimately to overcapacity and overproduction of the oil & gas commodities that are subject to the economic principles of price makers. Therefore collapsing the price of the commodities for the four decades these policies have been in effect. The consequence is an industry that has a present value that is negative. It consumes cash in order to fund its operations. Only People, Ideas & Objects et al have identified this issue and rectified it in our software with the Preliminary Specifications solution of our decentralized production models price maker strategy. 

Contrasting Visions

People, Ideas & Objects, our user community and their service provider organizations have painted a viable and profitable vision of how to rebuild the oil & gas economy in North America from the ashes of what remains. We see the destruction, and much of what will come to be in the next few years and it is not something that people expect. Producer firms are comprehensive failures of tragic proportions. Action is needed to proceed with this software development initiative, and from whom, when and where our funding is sourced is not within our domain of knowing. We only know the one important criteria necessary in order to make this a success. The funding has to come from the oil & gas industry itself. Otherwise industry won’t respect these developments, won’t commit to them, and would only look to alternatives as soon as the opportunity arose. Only when they have some “skin in the game” can we begin to start rebuilding the greater oil & gas economy brick by brick, and stick by stick.

The Preliminary Specification is now a decade old, what if its existence was no longer available, would there be any dividends, stock repurchases or paying off of bank debt by producers? What if the threat of having the option to use the Preliminary Specification no longer existed in oil & gas? The producer firms officers and directors may be on the verge of making this ideal situation for themselves permanent. What they have and have always wanted is just around the corner and only People, Ideas & Objects, our user community and service provider organizations are standing in their way. Producers have cash streaming in, unaccountable organizations that could overnight and at a whim be involved in a variety of different businesses. Accounting methods that have been accepted by all concerned in the industry for decades, including the CPA firms, and a culture of fill in your own adjective here. It’s decision time as People, Ideas & Objects believe the producers are moving now to seal their legacy of unaccountability and non performance in the selection process of a tier 1 ERP system. 

One of the specific requests and requirements by the oil & gas producers investors is that they implement a tier 1 ERP system, such as Oracle Cloud ERP or SAP. The base of the Preliminary Specification is Oracle Cloud ERP and would therefore qualify for this requirement. SAP is used by a few of the oil & gas producer organizations and they are currently offering their solution as we speak. SAP’s system is designed for manufacturing companies where the ability to organize first, second, and third tier industry product production, just-in-time is attainable. Major auto manufacturers use it and SAP makes them their priority as it does any global manufacturing concern. SAP sells their product to oil & gas producers however does not have an oil & gas solution. On September 12, 2022 SAP hosted their 11th annual oil & gas conference in Houston and virtually, and have published a white paper to reflect what they’re selling in oil & gas. On page 6 we see they focus on “Paving the Way for Business Model Innovations” indicating to me they don’t have a plan. However we read on.

• Oil, gas and energy companies pursue a bold vision for 2025 to deliver safe, reliable and sustainable energy products and services focused on the customer and enabled by innovation.
• To do this oil, gas and energy companies will implement new business models with a keen focus on sustainable energy transition. This will include investing in renewables, focusing on retail, electric vehicle (EV) charging at fueling stations, and carbon-cost reduction. 
• To manage the magnitude of data volume through production and operations, collaboration on access to, and analysis of data require intelligent technologies such as AI and machine learning. Connected machines and business processes can help realize industry 4.0 aspirations. 
• Larger oil, gas and energy companies will continue to diversify into adjacent industries such as utilities, solar and wind power, and energy storage.

SAP’s white paper shows the focus on Information Technology to solve the issues facing oil & gas. Touching on all the key talking points, yet we find no instance of the words accountable, accountability or performance. This white paper and their Houston conference reflect SAP’s marketing brilliance which has been stellar and a study for some of the best examples in business. What I see SAP doing here is they’re making public the news that they’re selling unaccountability to producer officers and directors who want to maintain their chronic lack of accountability. Maintaining and permanently securing a lack of accountability in the organization through the ERP software cementing their bureaucratic manner and method of operation for the long term. I’m predicting sales of SAP once the September 2022 conference is over. 

Once SAP is implemented, producers will be defined by their officers and directors in whatever business they may happen to choose that day and built upon the framework of non accountability that has worked so well for them personally. In terms of “what, how and why” SAP proposes to resolve the oil & gas issues and opportunities there is nothing in their white paper. On the contrary it’s heavily focused on environmentally based clean energy transitions in a “safe, reliable and sustainable” way, continuing with the unauthorized diversion of oil & gas revenues that oil & gas investors created with their investment in the oil & gas business. Profits continue to be irrelevant, therefore producers' money either comes from trees or investors. What should also be stated is that without a defined plan in place, SAP’s system will need to set out to define, design and architect the system. A process that took a decade for People, Ideas & Objects as it does for all appropriately built systems. Then the system will need to be built by extending the current officers and directors culture. 

People, Ideas & Objects focus on oil & gas is unwavering and could see the clean energy initiative for what it was. An opportunity to be unaccountable for any of the oil & gas investors money spent in that direction. There is no opportunity for any of the clean energy initiatives to begin to carry the freight that oil & gas does on a daily basis and we discussed that at length in our July 4, 2019 white paper “Profitable, North American Energy Independence - Through the Commercialization of Shale.” Using the Manhattan Institutes Mark Mills to present the fact that the physics do not support a viable or commercial outcome of either wind, solar or battery technologies. We see now the European marketplace, who bought the tailor’s new clothes in the form of this energy transition, are now aware of their purchases deficiencies. Further pursuit in this direction by oil & gas producers only exposes their continued misuse and abuse of their power, authority and responsibility. After a year of this transition it is evident to me that the alleged investors' push and drive for clean energy was contrived for these purposes.

Some people may say that it will be difficult for SAP to build a solution in an environment where the Intellectual Property being commercialized by People, Ideas & Objects exists and has to be avoided. That however will be a bureaucratic feature, and not a bug. The Preliminary Specification will become the excuse that producers will state “we can’t enhance the performance accounting or accountability due to the existing IP that legally has to be avoided.” This may become the latest, and greatest viable scapegoat of all time. 

When I published in 2004 that organizations were defined, supported but also constrained by the ERP software they used. Producers interpreted that as the point in which no further developments of any kind would be done to any of the ERP systems they used. Cementing their organizations in the bureaucratic stasis that they are. Enabling them to secure their hold on power for a few decades longer. Not looking at the need to establish the permanent software development capability of the Preliminary Specification to ensure continued organizational development. Therefore in 2022 the prospective avoidance of People, Ideas & Objects IP will be a further extension of this same logic that precludes producers from ever attaining any level of performance or accountability expected of them. 

People, Ideas & Objects Response to a Request for Proposal, Part I

 Abstract

People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP are based on providing the dynamic, innovative, accountable and profitable oil & gas producer with the most profitable means of oil & gas operations in North America. Our approach is business oriented to focus the industry on generating real profitability to ensure that society is provided with abundant, affordable and reliable energy to fuel their economy. The most powerful economy known to man. Our value proposition is derived from the disintermediation of the hierarchy. To fully adopt and integrate the industry standard Joint Operating Committee, the legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the industry. Sound economic principles such as specialization and the division of labor and Professor Paul Romer's "New Growth Theory" regarding non-rival goods to establish our Cloud Administration & Accounting for Oil & Gas capability. Eliminating the need for each individual producer to build the same non-competitive capabilities of administrative and accounting expertise on an unshared and unshareable basis. Implementation of our decentralized production model as part of our business model ensures that "real" profitability will be earned everywhere and always. There are many other attributes of our value proposition such as innovation that can not be readily quantified and qualified. However, all of these are focused on generating value for all concerned. Where profitability in the primary industry of oil & gas is necessary to ensure that a healthy and prosperous, overall greater oil & gas economy is maintained and sustained for the long term. 

There is no other source of financial resources to do so. Governments only spend money that is taxed from earnings and profits. Investors only allocate their investments from other profitable areas of the economy. Oil & gas producers participating in a primary industry must stand on their own and provide for themselves, the service industry and all the subsidiary industries that are dedicated exclusively to their success. They must provide value for their investors and bankers, their employees and ensure that a healthy prosperous industry is handed down to others. Profits are the only means in which anyone and anything can be sustained on this basis for the long term. To do so takes effort, skill, courage and perseverance. None of these attributes can be pointed to in the current officers and directors of the producers, who coincidentally hold all the authority and responsibility to ensure profitability and accountability are attained, and are the only group who've obtained any personal value from this industry for many decades. These are disconcerting and difficult words aimed directly at those who make the decisions as to which ERP system to use. However, the destruction and damage they've authored is a fundamental betrayal to all those who have worked to build the industry constructively. It is only the officers and directors that have the authority and responsibility necessary to make the changes and avoid a further catastrophe by choosing to implement People, Ideas & Objects, our user community and service providers Cloud Administration & Accounting for Oil & Gas service..

To resolve the current difficulties that plague the North American oil & gas industry demands that we organize an approach to how it’ll be resolved. That is the work that People, Ideas & Objects et al propose to do with input from the oil & gas, service and all the tertiary industries involved in the greater oil & gas economy. Readers will note our contradiction in that statement and the belittlement of SAP by commenting that their approach is "blind sleepwalking agents of whomever will feed them." Our approach follows the industry culture contained in the Joint Operating Committee and five other organizational constructs, the overall vision of the Preliminary Specification, our user community vision providing them with the authority and responsibility to implement it with the assistance they require from industry. SAP is following the officers and directors. Industry culture is defined in the Preliminary Specifications six organization constructs consisting of the Joint Operating Committee, Innovation, Markets, Intellectual Property, Information Technology and Specialization and the Division of Labor. The Markets being driven as an organizational construct on the basis of price.

This new oil & gas organizational structure will be the derivative software product of People, Ideas & Objects Preliminary Specification and the services of our user communities and their service providers. What we describe as a rebuild of the industry on a brick by brick and stick by stick basis. We aren't trashing the industry to the dustbin of history. Unfortunately the officers and directors of the producer firms have already done so. Software is what defines and supports the organization in society today. Serendipity, spontaneous order, disintermediation and creative destruction have been hamstrung by the fact that software also constrains an organization in proverbial cement based on its current process management definition. To make any organizational or process change has to be orchestrated through the software first in order to have the change take effect. Otherwise the organization will quickly regress back to the processes existing in the organization's software definition. This is the consequence of our dependence on Information Technology and is what we’ve called a modern day software bug. One that has cost the industry its prosperity as officers and directors took this knowledge, never changed the organizations ERP software and therefore secured their methods of personal aggrandizement. 

Fast forward to the third quarter of 2022 and People, Ideas & Objects believe this same logic is being used again. Oil & Gas investors are demanding producers move to tier 1 ERP systems to enhance their profitability and accountability, of which we qualify with Oracle Cloud ERP. Will producer officers and directors be using this logic to select SAP with their vision of clean energy and pliable "blind sleepwalking agents of whomever will feed them" approach to marketing in order to secure the sale? We believe this would have a detrimental effect on People, Ideas & Objects by eliminating the Preliminary Specification as an active software offering for at least a generation. SAP would have to deliberately avoid our Intellectual Property and that would be considered a feature, not a bug by these officers and directors. Providing them with another viable scapegoat as to why they can not provide the style of accountability or performance being asked of them. Lastly it would ensure the industry maintains the status quo strategy of "muddle along."

Regarding the difficulties we find ourselves with respect to energy. I feel we do not have a handle on the situation and control is out of reach of these current organizations officers and directors. Where we are at is maybe best explained in the Winston Churchill quote, 

Now this is not the end. It is not even the beginning of the end. But it is, perhaps, the end of the beginning.

Background

As pertinent background information, I began this adventure in 1991, I spent the first year promoting Oracle to join in our development of client server systems for Canadian oil & gas. This initiative failed in February 1997 as a result of my firm's inability to secure any commitment from oil & gas producers. Or in retrospect, I believe now that producers rejected the system due to the high level of accountability being introduced. Oracle subsequently tried on their own with Oracle Energy and found the same outcome, no participation from the producers for the same reasons, and left in 2000. There is an inherent level of commitment evident in Oracle's near decade long actions regarding oil & gas ERP systems that is not evident in SAP’s. A 22 page white paper and three day conference are superficial in comparison to the Preliminary Specifications 330 thousand word, viable business model and an active user community that began its development in 2014. Accountable ERP systems have been deliberately avoided for at least the three decades of my involvement and those who offered such products have not benefited due to their specific pursuit of enhanced producer performance, accountability and integrity.

Oracle’s market capitalization is now $206 billion and is the premier ERP provider in the world according to Gartner, SAP’s is $109 billion. I do not recall SAP’s efforts to build an oil & gas solution in the manner that Oracle or IBM have. Together Oracle and People, Ideas & Objects can build the Preliminary Specification to solve these critical issues for the oil & gas industry. And do so by first avoiding the issue of these officers and directors of the North American based producer firms and their desire to maintain their systemic lack of accountability. 

Looking at the decision to purchase and implement an ERP system. It’s expensive, it’s time consuming, it affects the management of the firm and tightens the compliance and governance of their actions. It holds the officers and directors accountable for their actions and decisions. Accounting is about the reporting of performance and as I’ve documented throughout these writings the oil & gas producer officers and directors have morphed the purpose of their accounting to recording value as they’ve chirped in their “building balance sheets” and "putting cash in the ground" mantra. People, Ideas & Objects believe that a capital intensive industry's products would contain high levels of capital costs. Which, if industry would adopt our methods by implementing the Preliminary  Specification, would allow producers to perform and compete for capital on North American capital markets. The ERP decision is made at the board of directors level based on the officers recommendations. Due to the high cost, time and disruption that occurs in the producer firms that undertake ERP implementations, this level of the organization's involvement is mandatory to make the decision. Once the decision is made it would not even be considered again for at least seven years and only if management were dissatisfied. 

I became aware of a specific ask for a tier 1 ERP implementation by investors a few years ago and am unaware of how long it has been since it was first requested. What we do know is that unlike the move to clean energy which was implemented the night the investors allegedly asked, and in what I’ve described was an unauthorized manner, we are unaware of any producer investing in ERP systems. This is wholly consistent with the refusal to provide competitive investment performance through appropriate profitability for the past number of decades. On the one hand moving into unrelated, uncompetitive industries that have no record of performance or value generation, no history of success and massive government involvement is done immediately. The producers, officers and directors will be able to justify these actions with the simple viable scapegoat that they’re “saving the planet,” and the reason they’re not profitable is “they haven’t figured it out yet” for their continuing poor performance. Focusing on oil & gas and enhancing its performance doesn’t intrigue them for some reason, they've abandoned shale as “non commercial” less than 2 years ago. Alternatively enhancing the level of accountability of their actions by implementing the August 2012 publication of the Preliminary Specification, our user community and their service provider organizations is obviously never going to happen if SAP meets the tier 1 ERP requirement demanded by their investors and selected by the producer officers and directors. 

I’ll emphasize the year I started this was 1991, 1992 with Oracle and both ours and their initiatives failed due to the inability of producers to get involved? Yes, that’s a question. This isn’t an issue of the investors that began in 2020 or whenever they first requested the ERP system upgrade to tier 1. This is a culture, a behavior and an infestation across the North American producer population of officers and directors designed to maintain their enhanced personal financial compensation. It is a necessity that producer firms implement the Preliminary Specification in order to wrest control from the hands of a small cadre of officers and directors that have found the source of their personal wealth is through a deliberate, destructive and dangerous level of unaccountability. One that has caused enormous risk to now be realized in societies inability to source profitable energy independence from secure, reliable and affordable oil & gas and about to become permanent if they implement SAP’s ERP software. 

I would like to take a moment to speak about those ERP providers that are in the market throughout this time and the stellar efforts they’ve done. It's one thing to avoid the tier 1 ERP providers and maintain the history as I’ve briefly described here. There are a number of ERP providers that cater exclusively to oil & gas that have been in the business for many years and decades. They too have experienced the abuse of the producer officers and directors who seek deceptive levels of accountability. To suggest these ERP providers have been put on a shoestring diet would be unfair and more appropriate to describe it as a second hand shoestring diet. Never paying for the application itself was a common tactic, only signing a service contract. Never sponsoring any changes to the systems they used. Producer officers and directors have the systems they want providing them with the obscurity they desire, why would they change that? Ensuring that their accounting and ERP systems were always inadequate. And I say that with all due respect to my competitors who have done the impossible in the most hostile of business environments. And should they have provided the accountability necessary, they too would have joined People, Ideas & Objects on the outside looking in.

Let me suggest a hypothesis that builds upon the situation that we have today. If oil & gas producers had the appropriate tier 1 ERP providers in place for the past decades of this history. Would the industry have fallen into the financial, operational and political crisis that we see the greater North American oil & gas economy has become today? Is it the lack of effective ERP systems, including SAP, that have reported inappropriate results of producer firms that enabled the industry to fall into the disaster and destruction that it currently is? I’ll reiterate that the lack of effective ERP systems is the deliberate and desired outcome of the producers' officers and directors actions over the course of these many decades. 

The questions producer officers and directors should be asking themselves. Will consumers demonstrate the same tolerance, patience and perseverance that both their oil & gas investors and People, Ideas & Objects have displayed these past years? Or will they want answers sooner and hold producers accountable for their energy demands and whatever else may be on their minds? Will they demand more than “muddle through” as an answer, and who will they turn to to heat their homes and earn their living? Having a permanent, entrenched and SAP supported, unaccountable organization is a greater concern for the consumers than the oil & gas investor. Investors could always sell their interests. I would advise these officers and directors to rethink their approach and ask themselves, just because they can continue with their unaccountable ways, does that mean they should? No one questions that the oil & gas reserves are in place as a result of the shale formations. No one questions the oil & gas producers capacity to spend investor money to increase deliverability. What’s different today is that investors aren’t volunteering for the “dupe” role anymore. And producers have never been able to earn “real” profits. History may not repeat itself. Will it be a case of oil & gas everywhere, and not a drop to burn?

In writing this I fully understand the implications of doing so. Making this a self fulfilling prophecy is not what I’m intending to do. I am attempting to show the jeopardy we may realize as a result of cementing the established bureaucracy in a term that will last at least the seven years in which SAP will be current, with much longer term consequences. Who will step up after that to assert themselves if People, Ideas & Objects fails in the market, yet the IP of the Preliminary Specification will need to be accounted for in any future solution? And even if there was someone who felt they could provide a better solution, would they be leading their product forward with enhanced performance and accountability in the manner that both Oracle and People, Ideas & Objects were ostracized and vilified for in the past and today?

I also want to clarify, it should not be misunderstood that I’m conceding the point. After 31 years, that’s not even on the table. What I am stating is that the stakes for all concerned will be growing exponentially more difficult in what appears to me to be this next phase of our journey. More difficult for all those associated with People, Ideas & Objects but also for all those who are dependent upon the North American producers in some form. We are heading to what appears to me to be a “quick decision” being made by the producers to adopt SAP based on satisfying their “investors input” much in the manner they adopted investors' clean energy demands. We should ask these producers if those investors that demanded the transition to clean energy ponied up and actively supported these activities. After a year or more I thought there would have been evidence of that by now. That although SAP satisfies the investors general requirement of a tier 1 ERP system. It’s a decision that is made in the best interest of the officers and directors continued, deliberate and destructive lack of profitability and accountability and as with so much of their activities is specious. SAP will also be the least costly in the short term, however far more consequential to the outcome of the industries profitability, accountability and prosperity. To suggest that People, Ideas & Objects may benefit from the decision made from the producer firms is an argument that doesn’t comprehend the value that’s been destroyed by this deliberate bureaucratic sloth and doesn’t understand the relationship People, Ideas & Objects have with producer officers and directors.

Why "Just" a Preliminary Specification

 We noted earlier the seven year long cash crisis in oil & gas which has precipitated a cannibalization of producer business processes. Layoffs occurring in both the oil & gas producers and the service industry start at the beginning of the businesses development process and therefore seek not to disrupt current production. However, seven years of officer and director inactivity, has now cut into the capabilities and capacities of these industries. There’s been a proliferation of new processes as noted in this World Oil article. This noted trend won’t end here either, the move to the Internet of Things will open new opportunities for capabilities that would have seemed impossible and unimaginable seven years ago. Such as last week's Elon Musk SpacEx / TMobile announcement. Which will soon enable the access and control of oil & gas remote facilities. 

The first advantage of having a Preliminary Specification is that we can set the direction we’re headed with a vision and viable business model, but not lock that into the 2012 environment that existed at the time the specification was initially published. And this is why People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP are configured to provide the industry with a permanent software development capability for oil & gas through our Cloud Administration & Accounting for Oil & Gas service to ensure a dynamic, innovative, accountable and profitable industry.

Within producer firms today, officers and directors have had expectations that investors would provide the financial resources to “build balance sheets.” Similar assumptions were made with respect to business in general, the service industry and other vendors providing producers with market solutions which would spontaneously appear on command. As a participant in the ERP market space I am witness to these assumptions and methods used throughout the producer population. It was incumbent upon producer firms to ensure that any competitive advantage that a supplier had, would be extracted and distributed to their competitors in order to sponsor price competition in that product or service. This is a well known fact and is now one of the impediments to the need of the industry to stand on its own two feet, innovate and why it can’t, won’t and will not be able to under the current administration. We’ve seen the game played out too many times to know the outcome. It is this reason that People, Ideas & Objects are dependent on Intellectual Property to safeguard and protect our efforts against this behavior in the short to long run. 

The long and short of it is that nothing will be done while this culture exists. It must be ripped and replaced by a culture that has the following characteristics. 

• It needs to respect the participation of others in order to secure a dynamic, innovative, accountable and profitable oil & gas economy. 
• Everyone in the industry now knows and understands why “real” profitability in the industry is such a critical necessity, everywhere and always. 
• Provide generic, aggregate producer information to vendors in terms of the anticipated capital expenditures by region, product or service classification as detailed in producer reserves reports. 
• It needs to pay its suppliers as if they were business partners and not extend accounts payable schedules to the ridiculous levels we’ve seen recently. 

These are just a few of the functions of the Preliminary Specification as it stands today. I could go on but the point is that it's all just basic business in the form of a basic business culture! The one thing that everyone would point to as being the producer's responsibility and undertaking. The current culture has fostered a behavior where officers and directors sit atop a primary industry and hand out the pennies to those that will beg the loudest and provide the greatest (personal) favors. A culture which has developed where “power tends to corrupt and absolute power corrupts absolutely.”

Coil tubing providers and Packers Plus are good examples of another phenomenon in their struggle for acceptance by producers. Being denied entry into the industry for decades due to their ground breaking technologies. The lack of funding to ensure that no ERP developments are made. The protracted argument with People, Ideas & Objects over the ideas contained here. Which began with enhanced profitability and accountability which were argued against consistently that profits didn’t matter. That is why there was nothing beyond a Preliminary Specification developed. Therefore, Intellectual Property was all that was needed to seize the higher ground from those who thought profits were irrelevant. Imagine an industry that utters the words “profits don’t matter!” In ERP you only get what you pay for and producers have paid for nothing and therefore achieved their objective of abysmal accountability ensuring their unprofitability. 

There is now no capacity and capabilities in the ERP tier 1 marketplace and producers are left with two development choices that provide for their investors' demands, SAP or People, Ideas & Objects et al. Only we have an oil & gas vision, an understanding, a plan and a Preliminary Specification and most important of all, our eight years of development of our user community based on a compelling and powerful user community vision. A product offering that may be terminated in the next quarter through producers “compliance” to their investors' demands for a tier 1 ERP provider by selecting SAP. Eliminating People, Ideas & Objects and our user community from the market due to our pursuit of accountability and profitability for producer firms.

What will be the state of affairs in oil & gas when SAP is in need of replacement in 10,15, 20 or 32 years? Who will be the one to stand up then? I can assure you their IP will need to be spectacular, it’ll have to be in order to avoid the Preliminary Specifications and its derivative works! Will whomever that is focus on accountability, profitability and energy independence in the North American oil & gas? Or follow SAP’s lead by providing producer officers and directors with exactly what they want, unacceptable levels of accountability. Producers can make their own ERP selection decisions and I’m pleased with my actions over these years in taking the fight to them. I’ll leave you with these quotes from Joseph Schumpeter and Milton Friedman about the importance of “just” a Preliminary Specification. 

The first thing to go is the traditional conception of the modus operandi of competition … in capitalist reality as distinguished from its textbook picture, it is not that type of competition which counts but the competition from the new commodity, the new technology, the new source of supply, the new type of organization … which strikes not at the margins of the profits and the outputs of the existing firms but at their foundations and their very lives … It is hardly necessary to point out that competition of the kind we now have in mind acts not only when in being but also when it is merely an ever-present threat. It disciplines before it attacks. The businessman feels himself to be in a competitive situation even if he is alone in his field. 

Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy: 84–85.

And

Can capitalism survive? No. I do not think it can … its very success undermines the social institutions which protect it, and “inevitably” creates conditions in which it will not be able to live and which strongly point to socialism as the heir apparent. 

Joseph A. Schumpeter (1942), Capitalism, Socialism, and Democracy: 61.

Milton Friedman said it as well.

Only a crisis - actual or perceived - produces real change. When that crisis occurs, the actions that are taken depend on the ideas that are lying around. That, I believe, is our basic function: to develop alternatives to existing policies, to keep them alive and available until the politically impossible becomes politically inevitable.

I’ll be resuming the process of rewriting / updating / revising / editing or whatever it is I’m doing with our Preliminary Specification after September 12, 2022 intermixed with more of this RFP related discussion. You can find the text of these past five posts on the wiki under RFP Proposal sub-page Discussion. And pinned to the top of @piobiz Twitter feed. 

Intellectual Property

 Intellectual Property, research and our user community are the three competitive advantages that People, Ideas & Objects have defined and based our offering upon. It is this configuration that is designed for the speed of development and implementation of our software, our quality and our ability to continuously improve and enhance with our software development, user community and their service provider organizations. Intellectual Property is the basis of how this community evolves and resolves the issues and opportunities of the North American oil & gas producers. Providing for a dynamic, innovative, accountable and profitable means of oil & gas operations everywhere and always. Setting the foundation for profitable, North American energy independence. This is the strategic position we’ve taken in this market. We have defined and resolved the oil & gas industry issues and opportunities in the Preliminary Specification to capture a substantial 25 year, $25.7 to $45.7 trillion value proposition due to our focus on profitability. Where we recently identified $660 billion in incremental value was available to investors in the short term. The Preliminary Specification is focused around the use of the Joint Operating Committee as the key organizational construct of the industry. The legal, financial, operational decision making, cultural, communication, strategic and innovation framework of the oil & gas industry. When we move the compliance and governance framework into alignment with the seven frameworks of the Joint Operating Committee, we achieve organizational speed, innovativeness and profitability in the producer firms.

The commercialization of this Intellectual Property has been contracted to People, Ideas & Objects. It is focused on profitability and accountability in oil & gas and resolves the issues that are present in the industry today, and with this IP supporting our user community through our user community license, enables our software and supporting service providers to continually adapt to the needs in oil & gas. This has created substantial conflict between our firm and the producer officers and directors. We feel our conflict with the producers has expanded to include their investors and bankers, service industry, staff of the producers and the energy consumer are all disappointed and frustrated with producers performance. Disappointed in terms of the inability to source adequate supplies of energy, the cost of energy supply and the lack of North American energy independence that was in hand only a short time ago. The handful of people who personally prospered financially at the expense of all these others are now identified as the individuals who did nothing but “muddle through.” Who had the responsibility and authority to ensure these things don’t happen but didn’t care and refused to consider the criticism of People, Ideas & Objects and the solution we offered. A solution they know is appropriate however eliminates their ability to personally prosper financially.

Investors have stated they expect to see tier 1 ERP systems implemented within the industry in order to alleviate their concerns regarding the lack of profitability and accountability. We suspect producer officers and directors are therefore orchestrating in the short term a move to meet these investor demands with an implementation of SAP systems that are unprepared and inconsistent with industry needs. SAP, lacking in an oil & gas vision and specification of “what, how and why,” is being selected for its ability to be configured based on these officers and directors current methods for poor accountability as we’ve noted in our writings. SAP is holding their 11th annual oil & gas conference on September 12, 2022. Highlights of their oil & gas materials include.

• Companies will work together in meeting production, profitability, and safety targets (possibly as “pay for outcome.”)
• Ultimately, they are shifting to core profitable and sustainable value pools and minimizing their exposure to the market volatility.

And this YouTube video

I see these as one of three possible alternatives that SAP is promoting. 

• It may be an extension of their Performance Management feature set that has been available in the marketplace for many years. Indicating no change in the status quo of the prospective SAP users or oil & gas investors.
• To suggest that SAP is offering a solution to the oil & gas industry that caters to the definition and needs of the officers and directors, as People, Ideas & Objects allege, as the reason for this potential selection process proceeding. They are in fact offering themselves and will become blind sleepwalking agents of whomever will feed them. However, SAP also needs to walk both sides of the streets in this transaction. If they’re not promoting and providing a methodology of enhanced profitability then I would see that as problematic for many reasons. Knowing producer bureaucrats as I do, SAP would only be setting themselves up as a future viable scapegoat of the producers' officers and directors as to why they subsequently failed, post SAP integration. For example, the viable scapegoat of “SAP did not implement appropriate profitability and accountability methods, they failed.” (By mentioning this alternative one can see how much I’ve personally enjoyed the interactions and the experience I've gained from the officers and directors of these producer firms.)
• Or, someone has devised a method of oil & gas profitability that “borrows” heavily from the Intellectual Property being commercialized by People, Ideas & Objects. Under the name of “pay for outcome” or “sustainable value pools” and “minimizing their exposure to the market volatility.” 

Regarding the last option, as a software company People, Ideas & Objects would never violate any Intellectual Property of any other software or service oriented company. When the dependence of software firms revenue streams is on the pristine nature of the Intellectual Property under use is above reproach and of a historical legacy that is evident throughout, as an example, the writings of our blog and wiki. We know that those that are dependent upon IP for their revenue streams are of the same mindset. 

I am also of the belief that the officers and directors of the producer firms are wise to the needs of innovation and development in the software field and the need to rely on IP as the basis of how that arises. That producers would evaluate software offerings on the basis of the origins and pedigree of the IP that is proposed to be used in their organization to ensure that it does not infringe upon others Intellectual Property and therefore be able to continually use those products through their appropriate life cycles. Ensuring that their reputation of being upstanding, law abiding citizens that would never take others property would not even need to be mentioned here.

Investors Will Decide

 People, Ideas & Objects have identified a threat that we feel is terminal to our existence as an operational software organization. This threat is the officers and directors of the producer firms looking to seal their methods of performance and accountability by implementing an SAP configuration that is of their design. Which is their right to do and a specific demand of their investors to implement a tier 1 ERP system. Bold and audacious for me to suggest that an independent decision of a firm would not be what they’re entitled to do. Simply when the method of performance and accountability of these officers and directors has led to the comprehensive damage and destruction we see today and which I detailed two days ago. No one outside of the rarified air of the producer firms officers and directors have benefited as a result of any of the activity in oil & gas these past decades. These firms have been structured to “appear” healthy in order to facilitate the enhanced and innovative personal compensation these individuals enjoy. Therefore the broader threat of this continued non performant, “muddle through” process of “putting cash in the ground” and “building balance sheets” would continue as soon as the producers complied with investors demand for a tier 1 ERP system by selecting SAP for the next generation, and People, Ideas & Objects fades into the distance as an operational software organization. 

The fundamental new impulse that sets and keeps the capitalist engine in motion comes from the new consumers’ goods, the new methods of production or transportation, the new markets, the new forms of industrial organization that capitalist enterprise creates … that incessantly revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one. This process of Creative Destruction is the essential fact about capitalism.

Joseph A. Schumpeter (1942) Capitalism, Socialism and Democracy: 82 - 84

And

According to Schumpeter, this disruptive process of creative destruction is the foundation of the economic progress of society through time. Thus, Schumpeter provides a road map to the policy environment conducive to economic development—jurisdictions that allow the process of creative destruction to unfold, rather than those that put up barriers to protect the status quo, are the ones that grow faster and have stronger economic progress and development.

— The Essential Joseph Schumpeter (Essential Scholars) by Russell S. Sobel, Jason Clemens

Producers methods of management have refused to consider any change such as the Preliminary Specification, our user community and their service provider organizations. People, Ideas & Objects et al's focus is on providing the dynamic, innovative, accountable and profitable oil & gas producers with the most profitable means of oil & gas operations. It’s not enough to just own the oil & gas asset anymore, it's also necessary to have access to the software that makes the oil & gas asset profitable. On a comparative basis our vision, methods and Preliminary Specification detail the value proposition of “what, how and why” we provide these values in detail. Throughout our history I’ve had many failures in my attempts to provide ERP systems to producers. I’ve recently realized that these failures, as were the failures experienced by Oracle in 2000 and IBM in 2005, were market failures due to the inability to attract any support from producers. The common denominator to all my and other vendors' market failures was our focus on enhancing the accountability in producer firms. Additionally, the history of abuse by the producer firms towards their existing ERP providers has been beyond what could ever be considered incidental or inconsequential to today’s oil & gas industries' damage and destruction, or the actions to now select SAP and seal this industry in perpetual bureaucratic malaise. On the contrary they were and are deliberate.

In addition to the alternative of People, Ideas & Objects there are other forces that have been obstructed and completely eliminated through these officers and directors actions. These include disintermediation, decentralization, creative destruction, spontaneous order and serendipity. What’s been learned is what I described in May 2004. That software defines and supports the organization, but also constrains it. Stating this in support of implementing the ideas of the Preliminary Specification and its permanent ERP software development capability. However, the interpretation was that if the software was never changed, their ability to maintain their unaccountable ways would continue unobstructed. However they’ve failed to consider the consequences of their lack of accountability and profitability on the long term health of the industry and continued while systemically destroying the industry and all that are associated with it. 

Today the game has changed for these officers and directors. There is a direct and specific ask from the investors for the change in the ERP systems that are used. There are cash rewards around the corner for them that make the past look… Through consolidation and the elimination of the startup, small and junior sectors of the industry their administrations will remain unchallenged for a generation, at a minimum. The declaration of new business ventures focused on clean energy has provided them with a clean slate of possibilities in terms of future obtuse accountability. If only they could secure the software that meets theirs and their investors needs, which is where SAP fulfills their dichotomy. They would then be able to continue in any chosen direction of their choosing.

Time is now the resource that is at a premium. What is necessary for the oil & gas investor is to be specific as to what is an acceptable solution for tier 1 ERP solutions. Which can only be the successful implementation of People, Ideas & Objects, our user community and their service provider organizations Preliminary Specification with Oracle Cloud ERP as the oil & gas’ solution. No alternative will be acceptable. 

Alternatively, if these decisions are made to implement SAP then the consequences will be realized by others. The consequences will be a continuation of the status quo level of unacceptable performance, accountability and behavior that has been displayed here for decades. If anyone believes that the officers and directors' reformed behavior of the past year will be permanent then they should ask themselves, why have they not implemented any solution to these issues since People, Ideas & Objects began pointing them out? Cash being paid out of oil & gas companies for any reason that is discretionary will be stopped and that cash will resume its direct path back into their more “traditional” pockets. The quantitative analysis of the difference between the value proposition being offered through the Preliminary Specification is easily understood when we look at the industry today. And ask, what quantity of financial resources will be necessary to bring the existing infrastructure up to the needs of a profitable, energy independent North American oil & gas industry? Consumers have been warned to be advised! A despicable response.

People, Ideas & Objects see the issues that are clearly in front of us. We were fortunate enough to have foreseen them and prepared the Preliminary Specification to address them with a viable, workable business model. What was forward thinking only a few years ago is now timely. The pace of change in industry demands that the associated component of our offering be available, our user community and software development capability as an industry wide, permanent ERP capacity and capability. Operationally we do not understand how the bureaucratic performance and accountability that we’ve seen over the past decades with the industry standard strategy of “muddle through” will provide any value for anyone outside of the officers and directors in the status quo configuration. With the issues and opportunities around the replacement, refurbishment and expansion of the infrastructure necessary to achieve profitable energy independence in North America. What we see as SAP’s stated product vision of a clean energy transition and compliant implementation are failures made to order. Failures for all concerned except that fortunate small cadre of officers and directors of the producer firms which have had the requisite authority and responsibility to do otherwise. 

Radical Surgery vs. Bandaid Approach

 I trust my interpretation and perspective on oil & gas and its resolution is not being misconstrued. It would be foolish and naive for anyone to believe that human nature of self interested individuals would go so far as to define a scheme such as what I’ve accused producer officers and directors of. That’s not what’s at issue, in my opinion. What is at issue is the unchecked pursuit of self interest by the officers and directors has traveled too far along the scale of what is acceptable. And this is measured by myself in the form of a status quo pursuit of a highly damaging and destructive method of management whose consequences are too broad and advanced to continue. It is the damage itself that I find unacceptable and only point to the fact that the officers and directors are the only ones that have financially benefited. Not that I have any misguided belief that this was some anomaly of human nature of how people behave. The structure of the user community and service providers, indeed the entire sub-industry as I call this environment necessary to resolve this issue, is structured around self interest as the motivation to get things done. The key difference is our motivation is contingent on providing the most profitable means of oil & gas operations and to do so successfully. The risks associated with this damage are too extreme to allow it to continue. Each barrel of oil contains the equivalent of 10 to 25 thousand man hours of mechanical labor. An amount of labor that is 22 to 55 times the size of today's total population. An irreplaceable resource that powers our economy, our way of life and indeed our civilization. It is my opinion that some things are better left within a range of acceptable standards and tolerable levels. 

The issues that oil & gas producers are dealing with today are of the standard fare business issues that occur when overcapitalization of this scale has been undertaken. It’s no mystery that we’ve traveled down this road. The officers and directors would have been aware of this too, their problem is that they’re culpable and liable even if they weren’t aware. As they were well aware of People, Ideas & Objects et al’s solution which we’ve been offering in the form of the Preliminary Specification for the past decade, and a specific request of a few years ago from their investors to upgrade to tier 1 ERP systems. A history that reflects a risk that any further loss of faith (consumers) in their administration would be costly. An administration that today has that deer in the headlights look, incapable of any action, heading into the most difficult energy season mankind has ever known and singing the praises of solar and wind. Ours is not the solution to this difficulty in the short term and that is the reason we began this process so long ago. We can now only rebuild the industry from what is left.

Therefore the question becomes what is the resolution. Do we resolve this through radical surgery to try and save the patient? Or will a bandage and a slap on the back do? What’s the diagnosis, is there an issue? Everyone has their own opinion and People, Ideas & Objects et al’s is as follows. The ultimate sign of failure is 2015s refusal by the investors to support the industry participants' capital structures. Banks are of a similar thinking. Inability to conduct the appropriate level of business activity and diminishing capabilities. This is in the field through the service industry and through the internal recruitment of critical earth science and engineering professionals. Maintaining production deliverability in this constrained environment is the next “potential” shoe to drop. As bad as each of these issues, the one that is the root cause of all of them is the obstinate, persistent and failing strategy of “muddle through.” Nothing was done to deal with these when it was timely. 

My prior post detailed how I believed the industry had failed. Today this discussion will seek to understand why I feel a wholesale rebuild of the brick by brick and stick by stick character is necessary.

Culture Shock

• Clean energy is not the message to be sending throughout the oil & gas and service industries. How can we leave oil & gas in the hands of those who don’t believe in its future, who have not safeguarded their investors' assets and diverted their funds to unrelated industries that are commercially unproven and done so in unauthorized fashion?
• Faith, trust and good will has been destroyed throughout the greater oil & gas economy. The need for producers to actively participate in rebuilding these is a necessity. 
• A culture that is unaware of the need to earn profits, but also how and why. A culture that is only capable of spending money and can not achieve the higher level performance trajectory necessary to qualify as profitable operations. A culture that is fundamentally unaware of the difference or the point of this argument. 
• A culture that assumed “investors” supplied for all that was needed. One that asked for more money from investors while at the same time, when asked about the money raised two years ago, stated “that’s history and just accounting!” And “profits don’t matter.”
• What happens when the industry sees an initiative such as People, Ideas & Objects snuffed out for political reasons? Who will step up with any initiative on behalf of the greater oil & gas economy when the culture of “muddle through” is seen as permanent and intractable? This is not what an innovative industry needs.

These are just the highlights that come to mind at the moment. I like to think of myself as rational. Only a fool would go into a situation such as this and attempt to resolve the issues that this culture produces and undertake to make changes within it. This culture would consume anyone who tried. It would be an attempted mosquito bite where the demise of the mosquito was certain. 

In our prior post we detailed how layoffs have cannibalized the internal processes from year 1,2,3… 7 of the producers due to the 2015 investor strike and coincidental seven year cash crisis. The same applies to the service industry. Therefore these processes need to be rebuilt. Providing the opportunity to do so without this culture attached in any way. One that starts with year 1 of the process from the vision of the Preliminary Specifications objective of providing the most profitable means of oil & gas operations everywhere and always. Rebuilding the industry and infrastructure on the basis of a dynamic, innovative, accountable and profitable producer, industry and service industry, brick by brick and stick by stick. In essence the way I look at what the industry consists of today isn’t worth keeping. Our opportunity exists in the fact that we don’t have to scrap it. The officers and directors have scrapped it for us. They can rebuild it with SAP’s blind, sleepwalking agents and their vision of clean energy. Or investors can be specific about their demand for tier 1 ERP systems and make the choice for the oil & gas industry by choosing People, Ideas & Objects, our user community, their service provider organizations and Oracle Cloud ERP. 

The state of “muddle through” has damaged industry to a point that is far more advanced than the producers, officers and directors may realize. Assuming the Preliminary Specification proceeds. It won’t be as a result of their desire to select a tier 1 ERP provider, and it won’t be a result of which tier 1 ERP provider they’ve chosen. If I were a participant in this small cadre of oil & gas officers and directors that were in this situation. Where the culture of failure was this comprehensive and tragic. And they were being forced to change based on the elimination of their influence in said damage and destruction. I’d begin questioning what role they’d have in continuing, but most of all why should they continue and how best to leave the place in a position where it could be rebuilt. 

A Fundamental Betrayal

 This post is in response to an article that was posted by World Oil regarding comments by the CEO Ben Van Beurden of Shell Plc at a conference in Europe. He stated,

“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing and as a very, very quick build out of alternatives,” Chief Executive Officer Ben Van Beurden told reporters at a conference in Stavanger, Norway. “That this is going to be somehow easy or over, I think is a fantasy we should put aside -- we should confront the reality.”

I responded to the World Oil article through Twitter with the following comment.

No!

Another viable scapegoat is unacceptable. The ultimate capitulation of accountability here. The individual with more authority and responsibility to have dealt with this long ago!  My pinned tweet above was refused by those in power. [Our July 2019 White Paper] Then in nine months they ran the price of oil to negative $40! Declared shale was a lost cause, sold it and focused on the ultimate unaccountability project in an unauthorized manner “clean energy.” 

Today’s failure started long ago and we published our solution in August 2012. #failure

First of all, this is not a betrayal by Shell Plc, its investors or employees at any time. This is a comprehensive failure by Ben Van Beurden and his cohort of officers and directors of their “muddle through” club. The fish stinks from the head down. The company has been led off the cliff and now he wants to use the convenient excuse that it's Putin’s fault and consumers should learn to go without. This is not the history and culture of Shell. The investors, employees and annuitants are a group of individuals who have built a company that is the highest standard of which most companies seek. They’ve been betrayed by these self-serving officers and directors who’ve used and abused the industry to the point where the consumer is told to go without?

In light of the history of People, Ideas & Objects since the August 2012 publication of our Preliminary Specification. The people that need to be going without are those that caused this damage and destruction. To blame this catastrophe on someone like Putin, who will only take advantage of any situation he can find, is ridiculous when it’s Ben Van Beurden and his cohort who gave him the gold plated offer to do so. 

Don’t let the door hit you on the way out, Ben.

How I See the Oil & Gas Industry Has and Will Fail

 I want to put in context what we’ll be seeing from People, Ideas & Objects in the next few months. Based on Our Response to an RFP we see a window of opportunity in which to assert our solution to the North American oil & gas producers. This is in direct response to what we feel is a contrived and wholesale industry transition to SAP that has producer officers and directors seeking to secure their methods of management permanently. Therefore we are looking forward to putting across our advantages in direct comparison to SAP and to make oil & gas investors aware that these actions are being undertaken and a $660 billion differential of our value proposition that would be immediately lost if SAP was selected. We believe the Preliminary Specification has a provable value proposition across the North American producer population with its focus on the most profitable and accountable means of oil & gas operations everywhere and always. Therefore you'll see a more frequent posting with shorter and more focused discussion around these topics. Direct comparisons between the two oil & gas ERP systems will be part of that discussion. 

I have a distinct and unique perspective of seeing the state of the North American producer population. Frequently summarizing it as a failed, damaged and destroyed industry. The elements of that failure and why I can’t see the current administration doing much in terms of its destroyed financial, operational and political frameworks. I fail to see how producers can continue on without specifically addressing these difficulties. This is not the foundation that can provide for what is demanded and expected of it. Another attribute of this perspective is that there’s no doubt as to where the fault lies in terms of the responsibility for the damage and destruction, the time frame that it has been in place and the resolution being the rebuilding of the industry under the vision of the Preliminary Specification, our user community and their service provider organizations. 

As far back as the 1980s producers have sought to record all of their costs as capital costs with minimal operating and overhead costs being realized in the current period. These have built excessively large asset balances that are reflected in equally excessive overreported profitability. This has attracted excessive amounts of investor capital which industry has relied upon to create a production profile that consists of systemic, unprofitable production. Which is ultimately expressed as overproduction, which has led to a systemic and highly detrimental, long term erosion of global commodity prices. Such as when Alberta based natural gas producers were paying customers to take product off their hands, just last week. All of this hidden through the handsomely built, bigger, better, beautiful, balance sheets bureaucrats boast about.

Producers stand with little of anything on their financial statements other than large volumes of property, plant and equipment and their supporting debts. Collectively these large balances across the industry do not generate, even at today's prices, the volume of revenues necessary to operate “real” profitable operations of a viable industry. It is reasonable to assume that oil & gas investors agree with that assessment as additional capital investment has been suspended since 2015. Since that time a mad scramble for cash has sought to make up for the cash deficiencies and remedy the capital needs of each year's capital budget. Each year becoming more desperate and destructive to the producers long term financial health and the integrity of their officers and directors. Producers have no capital structures, no support from the financial or banking communities, no trust with the service industry they’ve destroyed in this process, shortages of capacities and capabilities within that industry and short to long term staff shortages in their own industry. 

When an industry is faced with difficulties such as those being presented, the logical action is layoffs. And many have been conducted. The most important point to make here is the area where the layoffs occur. The first year's layoffs need to maintain the capabilities in the producer firm's processes. The long lead times of securing the land, drilling and equipping a property for production can take up to ten years. To ensure this continues you only cut at the first year of this process, the assumption being these resources can be reclaimed next year when things improve. And if the difficulties continue you’ll cut those that are involved in the second year of the process. The third and fourth and so on. After seven years of the investors' strike and critical cash shortage it is reasonable to assume that in addition to the financial difficulties, the operational capacities and capabilities have not been providing the appropriate pipeline of new opportunities for an effective operation. The cupboards are bare. Those that were needed in the first year processes may have been outside of the industry for the better part of six years and will be difficult to get back. This deprecation and destruction will not be evident on a financial statement but will begin to show when the need to resume operations is demanded of the organization. Extension of this thinking to the service industry makes it a particularly difficult aspect of the financial and operational difficulties producers face. And the loss of these resources is an unnecessary tragedy where the replacements will not be recruited from producers experienced best of breed forerunners. Then we need to add the dynamic of shale’s steep decline curves. Rebuilding oil & gas is not a luxury, it’s a necessity.

Politically the producer officers and directors have taken a back seat to managing the industry for the past number of decades and left it to others to define their role in society. Today they have no evident value in asserting any need and are therefore relegated to hiding under the desk politically to ensure no one sees who they are. Frequently pointing the finger at others to redirect the focus.

What’s surprising is that nothing’s been done about these difficulties. People, Ideas & Objects et al’s Preliminary Specification has been vilified and ostracized for our attempts to increase profitability and accountability to deal with these issues. We find it curious why the industry state of affairs remains and we’re the only group outside the investors that have expressed the appropriate concern. If it is as we suspect that SAP is being used to establish the existing permanent means of unprofitability and unaccountability that we documented in our RFP Response, then the possibility of People, Ideas & Objects survival over the next decade while SAP proves this hypothesis is very low. Is this what’s desired?

Some might say that the Preliminary Specification is too expensive and I can assure everyone that initially it is. Producers could have done something about that, however those opportunities are long past. Besides, our value proposition makes it the best investment producer officers and directors could make at this time, and maybe in their careers. A budget where oil & gas investors will be provided with an assurance that producers are committed to profitability and accountability and are seeing they’re dealt with. Looking at SAP in terms of its cost, and it may be initially less expensive, however there’ll be no returns in terms of the quantifiable or qualifiable profitability and accountability set out in their clean energy transition vision. On the contrary. It will be providing the producers officers and directors continued unaccountable and unprofitable cannibalization of the value generated by the oil & gas investors investment in oil & gas. Acting as their blind sleepwalking agents of whomever will feed them.

Time is now the resource that is at a premium. What is necessary for the oil & gas investor is to be specific as to what is an acceptable solution for tier 1 ERP solutions in oil & gas. Which can only be the successful implementation of People, Ideas & Objects, our user community and their service provider organizations Preliminary Specification with Oracle Cloud ERP as the oil & gas’ solution. No alternative will be acceptable.