If You Don't Like Change, You're Going to Like Irrelevance Even Less, Part II

 As mentioned, the competitive nature of all businesses will need to transition in the short term in order to maintain a competitive capital structure. This will be most evident in the North American markets where the adoption of technology is seen as a cultural advantage, is the most advanced and the best prepared. We are now entering a period of advanced creative destruction where the old will no longer be acceptable in terms of its financial performance. When the alternative, albeit which only promises today, will go to those who undertake the journey in the most timely fashion. Oracle is setting a new expectation of how organizations must compete. The individual responsible for this fundamental change of the basis of competitiveness and ushering in this information revolution works for Oracle Corporation, its founder, Larry Ellison. More than anyone he’s provided the infrastructure that businesses need in order to implement the vision he and Oracle are offering. What was revealed last week was nothing more than the icing on the cake. The cake which he began creating when he sold his then unwritten relational database to the CIA in the 1970s. 

People, Ideas & Objects Preliminary Specification sees the producer firm's footprint reduced by extracting their administrative and accounting resources from them and reconfiguring them into our user communities service provider organizations. Focused on one individual process and managing that process on behalf of the entire North American producer population as their client base. The ability to do this provides the oil & gas industry with our decentralized production model, turning its overhead costs variable based on profitable production. These are managed through the use of what are commonly referred to as microservices. Microservices are able to break down monolithic systems and enable them to be managed in ways that are, more or less, possible. What we propose to do is to break down the business processes associated with the oil & gas producer and service industry operations in North America and reconstruct them through our user community and their service provider organizations based on the individual process management of microservices. 

At their CloudWorld conference Oracle announced it’s implementing a broader vision on a much larger scale. Using a partnership they’ve established with J.P. Morgan Chase to provide expense reporting as a microservice. Oracle Cloud ERP, the base system of the Preliminary Specification, will provide individuals that use their credit cards, on behalf of their employer or business, the ability to designate the classification of the charge and its disposition. Oracle's microservice will assess whether it is an acceptable charge based on the firm's expense policies, if it’s an eligible corporate expense it would be coded directly into the general ledger. At the end of the month these charges would be paid back to the employee. At no point in this transaction did J.P. Morgan Chase or the employer consume any administrative or accounting resources in the recording of this transaction. A few milliseconds costs of electricity replaced the transaction costs of the employees at J.P. Morgan Chase. The employers administrators and accountants time in reviewing, processing, approving, coding and paying the charges may have incurred double digit hours. The incremental seconds incurred by the firm’s employee to tag the charges designation offsets the many hours spent by them each year in preparing their expense reports. Those that may have missed the discussion on designing transactions in last week's blog posts may want to revisit the Resource Marketplace module and its role in implementing these features in oil & gas through our user community.

We see these features of Oracle Cloud ERP leveraging many of the same Organizational Constructs of the Preliminary Specification. Specialization and the division of labor, the only proven method of generating value, is employed here. Oracle is doing their work in developing the relationships and writing these microservice capabilities. J.P. Morgan Chase is doing their job in providing a better banking service by leveraging their capabilities with Oracle technologies. And the division of labor between computers and people is working by separating the processing and storage, and people are better redeployed to productive and profitable activities. The Organizational Construct of Information Technology is well presented in this example. What we can assume through the automation of these business processes is the accuracy of the data will be higher, less money will be spent on costs being incurred on unauthorized expenditures, and time is not wasted when alternatives such as this exist.

The specialization and division of labor between People, Ideas & Objects and Oracle is clear. Oracle is involved in the generic business processes that would be marketed and of value to all businesses that use their product in any industry anywhere on the globe. People, Ideas & Objects will be implementing the Preliminary Specification on top of Oracle Cloud ERP and therefore the North American oil & gas producer is able to gain this value proposition throughout their organization for both the oil & gas and generic business attributes. 

It’s no doubt the producers will claim they’ve had this level of functionality in their organizations. And that will be a true statement when we see they pay their employees expense accounts. However I do challenge them with their limited budget to undertake the work that Oracle did with J.P. Morgan Chase and all the other banks. Write the software for them and then all the other banks North American producers use. Then do the same for each of the service industry providers and other generic business processes that Oracle will be undertaking. And do so with all the other North American producers doing the same work individually in order to obtain the same value that Oracle and People, Ideas & Objects et al would have otherwise provided. If the fallacy of the officers and directors obstinate business approach to the Preliminary Specification isn’t comical to you, please visit our value proposition. Or maybe the summation of our offering as represented in Cloud Administration & Accounting for Oil & Gas is just too good to believe.

Although I did not hear it from Larry Ellison, Safra Catz or any of Oracle’s other leaders making presentations at the conference. Two presenters did make comments regarding Oracle's approach to deal with “medium to large business” organizations. This is contrary to People, Ideas & Objects thinking and it’s important to note here that Larry Ellison is the founder of NetSuite, a small business Cloud ERP system now owned by Oracle. However I believe this to be a redundant approach. We will provide our solution to all classes of oil & gas producers from Exxon to yesterday's startup. We feel our approach is valid and ask, what is it that’s provided in the expense report example with J.P. Morgan that Oracle would be unable to provide to the startup oil & gas producer? This is the standard of expectation that I demand that our user community take the Preliminary Specification to in terms of functionality and process management. This expectation raises the level of our systems quality needed to be produced for all producers and users in order to attain this level of service. It is a necessity as the propensity to overproduce is precipitated through the need for revenue which is assumed to only ever be made up on the basis of “more volume.” 

If You Don't Like Change, You're Going to Like Irrelevance Even Less, Part I

 The title is a quote from General Eric Shinseki, Chief of Staff U.S. Army.

I left a cryptic message on Friday in order to buy myself some time to write more about what I saw last week and its implications to People, Ideas & Objects, our user community and their service provider organizations. There will be significant impact felt across the oil & gas producers and the greater oil & gas economy. It feels to me that the landscape has tilted decidedly towards the vision presented in the Preliminary Specification. Except it hasn’t done just that. It has shifted well beyond that vision and into a conceptual model that I feel is enhanced from today’s vision of People, Ideas & Objects and to one that will be undertaken in other industries in the short term. Presenting further difficulties to any business that doesn't understand and undertake the direction that is put forward for what I think will become the short term norm for North American businesses. What I see is the capital structures of all firms have a new element of understanding which sees a firm's ability and capability to operate and compete will be on a substantially greater upward economic trajectory. Those that are unable or unwilling to exist in this new environment will be subject to the same or even more dismal conditions than what North American producers have faced this past decade. 

As a result I’ll be rewriting the Preliminary Specification to make the adjustments to reflect this new environment and overall vision. What I began in April in terms of the rewrite of the Preliminary Specification, its organizational implications and structure remains 100% valid and everything being added is incremental. I do not expect it to take much more than an additional quarter to rewrite what has been published since April. Once people understand our more robust and broader vision, its implications to our user community and their service providers will be better understood. People, Ideas & Objects user community is one of three of our distinct competitive advantages, our priority and we’ve been focused on its development since March 2014. It is in this area that others in the broader commercial marketplace are seeing the value in its organization and structure. How our user community and their service providers are the critical aspects of how these changes come about. Others are taking what we’ve started in oil & gas and expanding it far further than I considered, creating even greater value for all concerned. Providing a massive opportunity for all North American businesses to advance to a new metric of financial performance, and raising the standard of living of all, much as the industrial revolution did the past century.

So what's happened? Last week Oracle held their annual CloudWorld conference and I saw what it was that they were doing with their products and services. Yeah, yeah, yeah technology schmology. I hear you. If you ignore this however I feel it will be at your peril. Of the approximately 350,000 words in the Preliminary Specification there are maybe 5,000 of those discussing technology with most of that being Oracle related. Which would be close to the same number of words regarding technology that have been written in this blog’s over 3.5 million words. People, Ideas & Objects, our user community and their service providers are providing a business focused solution to the oil & gas industry and how to solve them through Information Technology. Providing a sub-industry as a gap that we see between the oil & gas producers and the technology providers. Oracle is presenting a much broader landscape in which we can operate. This provides significant advancement of our product offering and value to our user community and their service provider organizations. All to the betterment of North American based oil & gas producers. Therefore it is your right to turn your back if you should choose to do so, and your responsibility to have turned your back on what it is that we’re doing here. What Oracle has done in my opinion is to use their product technology and services to double the value that we’re able to provide the dynamic, innovative, accountable and profitable oil & gas producer. A substantial value proposition unmatched in the ERP marketplace.

My plan here is to organize my thoughts of how Oracle is now configuring their products and services to make these changes. There is a substantial amount of material that I still need to go through and I’ll be posting short posts such as this daily until I’ve finished. I’ll then begin the rewrite of the Preliminary Specification starting with the impact on the user community and service providers. Next week is the beginning of third quarter earnings for the oil & gas producers and we’ll see what effect the officers and directors have had on the productive capacity and financial performance of North American producers. I can only suggest that with the state of affairs in oil & gas, now would be the point in which a redoubling of one's efforts in terms of reviewing the Preliminary Specification might be considered. To consider the opportunity with an understanding of what may be. Time in the long term is the factor that appears to be evaporating quickly. 

And Just Like That, Everything Changes...

 Details regarding this cryptic message will be explained on Monday. 

Revised Resource Marketplace Module, Part II

Defining the Term "Designing Transactions"

Discussion now begins on what is meant when it is said that users of the People, Ideas & Objects Preliminary Specification will “design transactions” in the Resource Marketplace and Accounting Voucher modules. Transaction Cost Economics is an important element of how the energy industry can control its costs and designing transactions is a key to those savings and efficiencies. Also to highlight the role of the user of this Resource Marketplace module as an active agent in making things “happen.”

As with any marketplace the focus has to be on the user. The user in this case could be either a producer and most particularly an engineer or geologist, a service industry representative or service provider. A user is someone with access to the People, Ideas & Objects Resource Marketplace module who would be optimizing the “tasks” and “actors” involved in transactions, and will be able to turn the producers or Joint Operating Committees needs into a demand for services in the Resource Marketplace Module.

Two changes that may make things appear different in the future as a result of organizing on the basis of using the Joint Operating Committee as the key organizational construct of the innovative producer. One is that designing transactions will become a skill that is going to be used substantially more. And two, the division of labor is going to expand substantially, meaning that the job which may have had a few contractors that were needed to complete today, may now have an order of magnitude more in terms of the numbers of contractors tomorrow. Consider the following.

When people buy a major item in their lives such as a house or a car. They itemize the details of what is, and what is not included in the price. Who is to provide what and the terms and conditions of when the items will be completed. This is what is meant by designing transactions. It's more or less what Lawyers do for a living, or that is to say, it is an important aspect of their work in any commercial sale agreement. This type of work is where the costs and efficiencies of the organization can become onerous and complex. If a firm has “engineered” their transaction costs down to a fine point then they’re able to manage their costs efficiently. This will be the case for an oil & gas producer or Joint Operating Committee. Transactions when their costs include installation, finance, testing, the specifications, types of materials to be used and the engineering consultants, etc. In oil & gas, even for a small job these costs could become problematic. Adding an enhanced level of the specialization and division of labor with the Organizational Construct of the Preliminary Specification and we have a more complex transaction. 

As a producer focuses on their land & asset base and the coordination of the markets earth science and engineering capabilities. Product and service providers will be focusing on their key competitive advantages. Releasing some of their noncompetitive work that they may have done in the past to specialists at different companies. This will increase the number of vendors that a producer will use to conduct normal operations in the field. This specialization and enhanced division of labor will provide greater efficiencies and cost control for the producer firm through more competitive and innovative solutions. Expanding the throughput of the service industry in material ways. It will also increase the throughput of transactions that a producer will have to deal with and put more emphasis on the ability to initially design these transactions. Today the costs of transactions can be reduced substantially through use of today’s Information Technology with special emphasis on the Internet.

On the other end of this process is the product or service provider who is able to contract for what the producer needs. They too will have interfaces to the Resource Marketplace module that are similar to the producers. These users, who may have anticipated what the market's demand is going to be, are the first to configure an innovative solution. Are able to market their product or service effectively in the specific interfaces of the Resource Marketplace Module. These elements of the competitive market changes are reflective of the producer's needs as determined in the Resource Marketplace, and its use of transaction cost economics. This process involves an iterative loop of constant improvement and automation of the transactions and processes in the energy industry. Leading to an enhanced productivity, throughput and performance of all concerned but most particularly the producer firm. 

Lastly, when resources are discovered by the Joint Operating Committee or producer, the contract negotiation between the two parties can begin to take place. The first step in contracting will be the determination of exactly what the transaction should look like as determined by the interfaces provided in the Accounting Voucher module of the Preliminary Specification. This would then lead to the specific negotiations, automation of the creation of the contract, and assignment of the Resources to the contract. From there the Preliminary Specification with Oracle’s software would enable high levels of automation in order to relieve the user from work that is better suited to computers, and focus on the optimization and efficiency of the transaction.

How the Market Must Develop

In many ways the Resource Marketplace module of the Preliminary Specification is the crossroads of many of the other People, Ideas & Objects application modules major processes. It is where the Accounting Vouchers design of transactions will ultimately be exercised. And where the Research & Capabilities overall process of capabilities development and implementation will be realized. Maybe most importantly it is a marketplace module where people will be able to buy and sell their ideas for products and services of what the innovative and profitable oil & gas producers need. The Research & Capabilities module is a long term process of maintaining and increasing the earth science and engineering capabilities of the producer firm and Joint Operating Committees. And the Resource Marketplace module is the day-to-day implementation of those policies from that long term process.

We also see in the Resource Marketplace module some of the efficiencies of using the Joint Operating Committee as the key organizational construct of the innovative producer. And that is an important differentiation of the Resource Marketplace module in comparison to the Accounting Voucher and the Research & Capabilities modules. It is a Joint Operating Committee (primarily) facing module. Therefore it is representative of the many participants of the Joint Operating Committee and therefore will have the influence (industry standardization) of many producers Accounting Voucher needs and Knowledge & Learning modules developments. Optimizing transactions between contracting parties will provide enhanced performance to the overall industry. These changes will not lead to small increments in overall performance, but I believe based on my research into Professor's Langlois and Baldwin's theories, will have exponential performance improvements in terms of reducing their administrative costs.

Another key point is the establishment of the basis of Intellectual Property (IP) which is another Organizational Construct employed in the Resource Marketplace module. An industry such as oil & gas which is based on its earth science and engineering needs is a business based on science. If we are to expand the capabilities in science and innovation in the industry we will be needing to solve many very difficult problems. And as we progress, the volume of ideas needed will be an order of magnitude of what is required today. These problems cannot be solved in an environment where there’s no upside for the individuals to solve them. Addressing the motivation to solve these problems and enabling people to earn the rights to their Intellectual Property within the People, Ideas & Objects application modules is the first step in making the necessary industry wide changes. Turning the oil & gas industry into a far more dynamic business.

Therefore it needs to be asked, if the status quo continues, what officers and directors of the producer firms will be able and willing to address in terms of the redevelopment needs of the service industry. What will they offer as the motivation for rebuilding of the service industry if the Intellectual Property is managed the same as it is today? What will they offer to the service industry in order to prepare for a dynamic, innovative, accountable and profitable environment for all concerned? Or will they continue to ignore the rights of others Intellectual Property and just “muddle through.” And after so many years in which People, Ideas & Objects have been discussing this point, why do we not know the answer?

A quotation of Professor Giovanni Dosi from his 1993 article “Hierarchies, Markets & Power” which is a must read for those that want to dive deeper into these subjects. He states a simplistic model of organization will include the following, and I have annotated the area where these are addressed in this sub-industry People, Ideas & Objects are creating;

• The distribution of formal authority. [Industrial Command & Control.]
• The distribution of actual power in the above distribution [The people]
• The incentive structure. [Innovation, Intellectual Property, and capabilities.]
• The structure of informational flows. [Security & Access Control Module]
• The distribution of knowledge and competence. [The people] p. 10
• History, so to speak, solidifies into structures which constrain future developments. p 12

The purpose in developing this “Marketplace” is to ensure the future of the industry structure remains flexible and amenable to the changes in the sciences and innovation. But also to attain and maintain the highest performance. And in this next quotation Professor Dosi notes how this will come to be.

Clearly, it is the domain of Schumpeter’s creative destruction’, and of Moore’s (1978) analysis of the social bases of obedience and revolt, to name but two famous examples, and it applies also to the dynamics of economic organizations and institutions at large. p. 13

As we’ve noted, the big issues in oil & gas are not going to be solved until the incentive structures are aligned towards those that have the capability to solve the problems. Today, in the service sector, the oil & gas industry exploits the lack of identifiable Intellectual Property (IP) by more or less ignoring it and passing it around to the originators competitors in the service sector in order to establish price competition. This lack of respect to those that developed the ideas has brought about a situation where the service industry has ceased to innovate or sponsor any new start-up firms as competition. The producers, and now society, are the ones that lose as they’re unable to have their needs met by a diminishing capacity in terms of the service industry and potential decline in the productive deliverability of the producer firms..

The situation has become so dire as there is little to no research being done and no start-up opportunities in the oil & gas service sector. The exact reverse of what is required at a time like this. The oil & gas producers are reputed to be so difficult to work for that securing staff makes it all but impossible to start a firm, and even if a firm is started, the producers would only look down their nose at it, scoff at the fact the firm was so small. Such is life in their rarefied air.

Nonetheless, what's in it for the producers to accept that the IP should pass from their control to those that will take the time, energy, financial and intellectual risk to solve the producers problems? If we go back to one of the base assumptions that the People, Ideas & Objects software is operating under. We find that the competitive advantages of the producer firm are its land and asset base, and the coordination of the markets earth science and engineering capabilities. Where in these producers competitive advantage does any product or service of the oil & gas service industry provide any value to the producer? Why would they need their Intellectual Property or the ability to control it?

The means to acquire, explore, exploit and produce oil & gas reserves profitably is how the producer makes money. That should be pretty obvious, but on the basis of how producers manage IP in the industry, they seem to think that drill bits and rigs are their future competitive advantages. What the producer needs is the most advanced and dynamic service industry marketplace that is innovative, productive, profitable and fiercely competitive in order for it to achieve its optimal productive output. What the producers should ask themselves, what is it that they have?

Add this cultural change to the numerous other cultural changes that parallel the scope and scale of change introduced in the People, Ideas & Objects Preliminary Specification and the greater oil & gas economy has an idea of the difficulty that lies ahead. These are the difficulties for the bureaucracy of the producer firms themselves. They are the ones that have to change. And I can’t see that happening. “Organizations don’t change, people do.” It's a matter for Schumpeter’s creative destruction to sweep out the old and bring in the new. Or a time to revolt. The new being of course the thirteen module Preliminary Specification that deals with IP in the manner that will allow for the difficult problems to be solved. Based on the culture that our six Organizational Constructs impute and every individual in the greater oil & gas economy will be able to intuitively understand and apply to their work in the industry.

Serendipity, spontaneous order and creative destruction are hamstrung by the ERP software that organizations use. Software and most particularly ERP software defines and supports organizations while at the same time constrains them within that defined configuration. Without the permanent software development capability of People, Ideas & Objects, our user community and their service provider organizations the industry will remain in their current state. Without the IP in the hands of those entrepreneurs and innovators, how will oil & gas be able to rebuild itself and undertake the challenges of its future. 

It All Starts With Actionable Information

Our main objective in the People, Ideas & Objects software application modules is to identify and support the innovative and profitable oil & gas producer. It is within the Resource Marketplace module that I continually run into the conflict that is currently in the marketplace between the producers and the service industry. The conflict being the high cost of field operations and ownership of Intellectual Property. This conflict is the issue that the Resource Marketplace module must therefore seek to resolve by first opening up and developing the actionable information that is available within the marketplace.

The alleged high cost of field operations is the point of view of the producer firms. We have been subjected to the mismanagement of the industry for all but 6 of the last 36 years. It is during those six years that demand for field service far exceeds any capability or capacity of the service industry during the times the producer imposed their “other” thirty year periods. Price is the means in which to control demand for the service industry capacity and that is how the resources are allocated. This violates the producers officers and directors principles in some manner and sets them in the direction of attempting to control their field costs at all times. Cost control is not a business model. It is an engineering activity that limits the scope and understanding of their operation to the minimum level of understanding of the business. The field costs are the focus while the rest of the producer firm incinerates the cash provided by their investors and bankers. A more comprehensive understanding of business is necessary in oil & gas and this is what’s being applied throughout the Preliminary Specification. 

This actionable information can be captured in an interface that is similar to any contact database. The actionable data can be plans and aspirations of the service industry provider in the short to midterm. For example, if they were a small drilling rig company looking to acquire a new rig they could post within the actionable information area of the database, that they were actively looking for producers within a certain geographical region to contract for drilling in the third quarter of next year. Producers seeing this could then see this opportunity and evaluate it on the basis of further discussions with the vendor. The drilling rig company, having contracts in hand from the producers, would then be able to secure the financing and purchase the rig they’ve specified. The rig specification would be highly dependent on those producers' input.

Actionable information can also be from the producer who might be approaching the start-up of a large project and will be looking to staff up to meet the demands. Or a producer may be wanting to develop in a new remote area and needs to have more infrastructure in place. Expressing a need is the first part of having the solution provided. As Professor Giovanni Dosi notes.

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

Centralizing this industry wide information within one location will help to provide the users of it with its ease of use. This information is available on the web in some form and can be imputed what they mean from their plans. By stating clearly what their actionable plans are within a central database will make it easier for users to access. Innovation comes about when the plans are not set and the ideas and opportunities are able to flow leading to business opportunities for those parties.

I want to make clear that this Actionable Information Interface will be different from the interface that is in the Petroleum Lease Marketplace module. Recall there is an interface that takes the capital expenditures of the firms for the next few years, primarily from the AFE and reserves reports, scrubs any proprietary information from it, aggregates all of the producers data and publishes it based on general geographical region. This provides the marketplace with a general understanding of the size of that marketplace in the next few years. And is different from the detailed and producer / vendor specific information that is contained within the Actionable Information Interface. These expenditures are more or less seen as necessary in order to maintain and fully exploit the known reserves. The Actionable Information Interface would be for potential new business. This interface will be a critical part of the process that begins in the Resource Marketplace module and continues through the Research & Capabilities and Knowledge & Learning modules.

A couple of quick points to note. The first item is that the Resource Marketplace module is both a producer and Joint Operating Committee facing module. That is to say it will be used in the producer organization for human resources, payroll and for securing the resources that the producer needs. And will be used by the Joint Operating Committee for the field products and services needed there. The other item pertains to all of the modules in the Preliminary Specification and that is by right clicking the mouse will bring up a contextual menu of options that the user will be able to select an appropriate action from the People, Ideas & Objects software application. Whether this is a Work-Order, a Purchase-Order, AFE, or any of the other documents that are managed throughout the system. This will be available to users through this facility.

It is an underlying assumption of People, Ideas & Objects that high commodity prices are the necessary financing to both rebuild and then enhance innovation throughout the greater oil & gas economy. Therefore the need to stimulate innovation between the producers and the service industry starts with this actionable information. In addition to the funds necessary to finance innovation there are what Professor Giovanni Dosi calls “technical trade-offs.” These trade-offs facilitate the ability for industries to innovate on the changing technical and scientific paradigms. Crucial to the facilitation of these trade-offs is a fundamental component that spurs the change and is usually abundant and available at low costs. For innovation to occur in oil & gas, People, Ideas & Objects assert that the ability to seek and find knowledge, and to collaborate are two “commodities” that are abundant today. With their inherent low direct costs, knowledge and collaboration are the triggers facilitated by the Internet for a number of technical paradigms which will provide producer firms and participants in the greater oil & gas economy with fundamental innovations.

Professor Dosi states “In very general terms, technological innovation involves or are the solution to problems.” Dosi goes on to further define this as “In other words, an innovative solution to a certain problem involves “discovery” (of the problem) and “creation” since no general algorithm can be derived from the information about the problems. Solutions to technological problems involve the use of information derived from experience and formal knowledge. It is the specific and uncodified capabilities, or “tacit-ness” as Professor Dosi describes “on the part of the inventors who discover the creative solution.”

This is the point that I wanted to make in this follow on discussion to the “Actionable Information Interface.” Where will the innovative solutions come from? Who will solve the problems? It will come down to the person who first sees the problem. And that person may be situated anywhere within the industry. He may be the vice-president of production at an oil & gas producer. Or he might be someone such as Steve Jobs who starts out in his parents garage. The point is for the industry to be all inclusive and to have its problems being identified by those who can see them and resolve them with their innovative solutions. I wonder what reading the Actionable Information Interface of 200 producers would provide in terms of seeing what those people in the field discerned were the producers' imputed issues? And how they began solving them.

Revised Resource Marketplace Module, Part I

Resource Marketplace Module

Abstract

People, Ideas & Objects, our user community and their service provider organizations provide our Cloud Administration & Accounting for Oil & Gas service based on the Preliminary Specifications integration within Oracle's Cloud ERP tier 1 solution. Providing North American producers with the most profitable means of oil & gas operations, everywhere and always. We see that it’s no longer enough to own the oil & gas asset, it’s also necessary to have access to our Cloud Administration & Accounting for Oil & Gas service to make their oil & gas assets profitable.  

Adam Smith wrote in the Wealth of Nations that “political economy” is based on three attributes. First there is the “Economizer Argument” which is the fact that each person seeks out the most efficient use of the resources they have. Second, the “Local Knowledge Argument” holds that individuals are best to make decisions regarding themselves and their resources. Third is the “Invisible Hand Argument” where self interest is the motivating factor which forms the invisible hand of the market. In “The Theory of Moral Sentiments” Smith states the three “P’s,” consisting of “person, property and promise” provide individuals with the means of pursuing their interests by appealing to others interests. We therefore are in the business of building value for society in exchange for our efforts. Oil & gas is a primary industry. Its revenues are generated through the sales of persistent oil & gas production. Its interests are captured in the service industry and all of the subsequent tiers of supporting industries that service and supply oil & gas. It is this perspective that the Resource Marketplace module of the Preliminary Specification undertakes.

In the 1990s Professor Paul Romer formulated a number of new theories which became what are known as New Growth Theory. And in 2018 was awarded the Nobel Prize in Economics for these. Professor Romer replaced the economic growth theory of investments in transportation, communication and capital markets which appeared to have waned in their effectiveness due to their maturity. And established New Growth Theory which uses People, Ideas and Things as the three areas where investments will yield the greatest growth. Introducing the conceptual model of non-rival costs which is inherent throughout the Preliminary Specification. Such as our Cloud Administration & Accounting for Oil & Gas provides for the sharing of the non-competitive areas of a producer's overhead infrastructure. Substantially reducing the oil & gas industries aggregate overhead costs. Romer suggested ideas such as the consolidation of one size of coffee cup lids eliminates the need for incremental and unnecessary costs as an example of his principle. It was on January 1, 2006 that I named this initiative People, Ideas & Objects which reflects our adoption of these principles throughout our modules and organizations and that we’re object based Java developers.

People, Ideas & Objects Resource Marketplace module is the manifestation of these broader economic principles. We’ve chosen to employ the invisible hand of the market and Internet to disintermediate the centralized control of the producer firms who have failed comprehensively in their ability to meet their investor needs and other stakeholders, and now appear to be jeopardizing their customers' access to affordable, reliable and abundant energy. The service and other industries provide producers with the scale of operations, geographical diversity and technological skill to undertake their field operations. They are employed exclusively by oil & gas producers yet are treated as leeches and lepers, are and have been serially and chronically abused for decades. This has led to the fundamental breakdown in these industries with their capacity and capabilities diminished far beyond what is currently realized. And like the producer firms themselves, decimated capital structures. The Resource Marketplace module adopts the perspective that the producer firms caused the difficulties in the service and other industries. It is therefore the attitude we’ve adopted that the “producers broke it, the producers will need to fix it” in terms of providing the financial resources from the oil & gas primary industry revenues to rebuild these industries and active involvement in doing so. There’s no one else. And a rebuilding of these markets in the vision of the Preliminary Specification is necessary as the destruction and dismantling of the oil & gas industry at the hands of its officers and directors is comprehensive and complete. 

Preamble

The Preliminary Specification invokes six major organizational constructs which seek to provide everyone that works throughout the greater oil & gas economy with a fundamental understanding of “what” and “how” the dynamic, innovative, accountable and profitable oil & gas producers operate. “How” and “what” is necessary in order to achieve the most profitable means of oil & gas operations, everywhere and always. There are other constructs that are imputed such as the law, the economy and regulatory environment. These are obvious and are not mentioned here other than as frameworks in the Joint Operating Committee as our key Organizational Construct, or elsewhere such as in the Compliance & Governance module. 

The six organizational constructs that are employed in the Preliminary Specification and are particularly evident in the Resource Marketplace module include. 

• Markets
• Joint Operating Committee
• Specialization and the Division of Labor
• Innovation
• Intellectual Property
• Information Technology

Further information as to “how” and “what” influence these have over the Preliminary Specification can be found in our RFP Response and in the Organizational Constructs pages of this wiki. 

Resource management and development are the focus of this module. The unique nature of the oil & gas business demands field operations scattered across the continent. Producers therefore rely on the geographical, technical and operational capabilities and capacities of the service industry's participants in the diverse areas of their chosen operations. In an ideal situation producers would be provided with a broad and diverse offering through dynamic, innovative and thick markets. Due to the past treatment of the service industry by producers this is not the case. It is therefore incumbent upon the producers to seek this objective through their active participation, development and financial commitment to this purpose of rebuilding the service industry to meet its needs. In a situation which is best described as “you broke it, you fix it” producers have degraded the performance of the oil & gas industry to the point where it’s unable to profitably sustain operations. People, Ideas & Objects believe this began soon after the July 1986 oil price collapse and has been the case each and every day since. 

It is our hypothesis that the issues producers face are a result of chronic and systemic overproduction of oil & gas. Capitalizing all of their costs that are incurred, including the majorities of overhead and interest, have bloated balance sheets and conversely over reported profitability. Attracting investors which led to overinvestment which brought about further overproduction. Cutting costs in the field service area was the only method used throughout this period in an attempt to deal with the fact they never were able to capture their costs from their revenues. After 2015, without the investors annual cash infusion as a subsidy. And operating with the assumption that oil & gas commodities were “price takers” they’ve destroyed their business and the greater oil & gas economy. And now they suggest, as we enter a period of deprecated capabilities and capacities, we are to look elsewhere for our oil & gas as they as producers are incapable, unmotivated, distracted and leaderless.

Officers and directors argue that overhead is not the concern that People, Ideas & Objects represent it to be. With some producers reporting overhead being 1% of their revenues. It's good to know someone still has faith in these financial statements. Overhead is capitalized in the industry by 85% on average. This is contrary to what we believe to be the appropriate method of reporting a capital intensive business. It is reasonable to assume an operation such as oil & gas would therefore have significant capital costs being passed to the consumer in the prices charged for their product. That is not the case in oil & gas when the objectives of “building balance sheets” and “putting cash in the ground” override common sense. The cash consumed by the producer firm is literally stored in the ground as they do not receive the appropriate cost of capital, overhead and interest cost in the prices they pass to the consumer. These costs are offset by the investor to allow the producers to have them sit on the balance sheet in property, plant and equipment for decades, or as we call it “The Unrecognized Capital Costs of Past Production” account, and stroke the ego’s of the CEO’s and CFO’s as they strut down main street. This cash deficiency has not been rectified since we initially identified the issue over a decade ago in the Preliminary Specification. Leading us to conclude there must be something in those overhead accounts other than just the excessive size which officers and directors don’t want disclosed. 

Overhead is a material cost in oil & gas and we believe that its size, particularly for the producer firm, is the secondary reason for chronic unprofitability. We therefore in addition to addressing the primary reasons for the lack of profitability, our decentralized production model also addresses the overhead costs of the producer firms. Through the reorganization of the administrative and accounting resources of the producer firms to the service providers in the Cloud Administrative & Accounting for Oil & Gas service, each producer will no longer have to incur and maintain the heavy cost of fixed administrative and accounting capacities and capabilities. These costs which are non-competitive attributes of the industry will become shared and shareable. We are using Professor Paul Romer's “non-rival” costs to offer this service. Turning these into the variable cost, variable based on profitable production, industry wide capacity and capability for administration and accounting. 

Officers and directors have argued this couldn’t be done due to the scope and scale of the service. However, I’ll temporarily concede they may have a point on scale, what I won’t concede is how they’ll approach the issue of scope when it is as large as ours, each producer would need to individually undertake the same scope as People, Ideas & Objects, what Intellectual Property would each one of the producers use and their budget limited to their own resources. Conversely with respect to scale, People, Ideas & Objects conceptually has an aggregate budget of the industry's resources to apply to this issue and resolve it through the principles of engineering. 

Secondly these overhead costs are subject to the abilities and capabilities that People, Ideas & Objects, our user community and their service provider organizations are providing in the form of a long term software development and service capacity and capability. Therefore specialization and the division of labor will be the iterative process of enhancing the quality of our service and at the same time increasing the throughput of our productivity. Specialization and the division of labor will provide a short term increase in performance in terms of costs over the status quo. And when the overall throughput capacity of these resources are increased substantially due to the iterative long term application of these enhancements from specialization. 

It is within the Resource Marketplace module that we’re able to approach these costs in significant ways. First by eliminating and reducing the overall costs that the industry incurs in replicating exact capacities and capabilities within each producer firm that are not distinct competitive advantages. Turning them into the variable, based on profitable production, non-rival costs that they are and establishing the Cloud Administration & Accounting for Oil & Gas service. Secondly, subjecting them to the primary means of value generation through specialization and the division of labor, in an iterative process by way of our permanent software development capability. And lastly charging these costs directly to the Joint Operating Committee and therefore ensuring they are priced into the production costs of oil & gas. Removing the cash sink-hole the industry is known for. With the Preliminary Specification ensuring that only profitable production is produced everywhere and always, and the variable nature of these overhead costs in the Preliminary Specification, the cash incurred in overhead will be returned to the producer in the current period, or not be incurred during times when a properties production may be shut-in.

Dare I ask again, in light of the obvious value this would provide, and the technical viability of doing this is just as possible as what could be attained within a producer firm, what is it that’s in those overhead costs that’s so controversial to the producers officers and directors?

Executive Summary

What People, Ideas & Objects, our user community and their service provider organizations have set out to accomplish in the Resource Marketplace module is captured in this quotation from one of the primary research sources we’ve used. Professors Richard N. Langlois and Giovanni Dosi were used extensively for the research that was conducted in the development of the Preliminary Specification. In this quote from Professor Langlois we learn the direction that we’re headed.

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

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

Similar interfaces will be provided for use to the service industries. Transactions have two parties, the efficiencies of the producers would inherently include the efficiencies to the service provider. It is not just producers in the Resource Marketplace. Key to the efficiencies in the Resource Marketplace are the mitigation of transaction cost friction. Friction on both sides of the transaction, due to the fact that transaction costs and most particularly dynamic transaction costs in the Resource Marketplace are costs that will ultimately be borne by the Joint Operating Committee and passed on to the producers.

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

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

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

Introduction

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

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

 Recommendation

The Issue

The world has begun to understand and appreciate the value inherent in oil & gas. With 10 - 25 thousand man hours of equivalent labor in each barrel. Our global level of consumption is 28 to 71 times the entire population's physical capabilities. To replace that this century would be ambitious. What we can do and what we must do, and what we should have done all along is not waste one drop of these resources by ensuring they’re produced profitably, everywhere and always. To ensure that we’re responsibly using the resources and leaving future generations with proof that we did, by passing on a viable, strong industry to manage that resource and the resource itself that is abundant, affordable and reliable?

Why would we ever produce any oil & gas unprofitably?

What we know today is that none of the North American oil & gas that has been produced in the past four decades has generated one cent in profitability at any time. It was a process of taking investor money to “build balance sheets” and “put cash in the ground.” Words that were spoken throughout the industry as if they had some actual meaning. A misguided and deluded group of officers and directors that have been self dealing for so long they know no difference and have failed comprehensively in their role of generating profits for their shareholders and now their organizations failure to meet the consumers demands for energy. Officers and directors who when faced with the challenge of making shale formations, or any part of their business, commercial decided it was best to walk away and pursue the green pastures of fake energy. 

These are not my issues and I certainly did everything I could to mitigate these disasters we’re about to experience. They are not my responsibility as I chose to address the issue and was ostracized and vilified for it. Which if the officers and directors of the producers might want to take note, did not deter me from doing my job. If someone suggests that People, Ideas & Objects et al Preliminary Specification is only “vaporware” they’d be correct. They’d also be stating the obvious fact that the officers and directors have succeeded in killing off a viable threat to their existence. An existence that has proven to be wholly unproductive and damaging to all concerned, and most particularly society in general. What I have had to persevere as a result of the engaged battle with these bureaucrats since the May 2004 publication of the Preliminary Research Report has been a shame in light of the consequences of the producers inaction regarding their lack of support for this initiative. I repeat, not one penny in support has been received from them towards the development of any aspect of this work. I only received abuse that I would equate to the equivalent of repeating beatings with baseball bats in the alley behind the dumpster. And now, with the desperate issues Industry faces, with no preparation or capacity to deal with them, what we’re seeing is what we’ve always seen “muddle through.” After seven years of their investors' refusal to continue being the “mark,” all we see in response from the officers and directors to their investors is that they’ll “muddle through.” 

People, Ideas & Objects are aware of the high upfront cost and makeup of our development and implementation budget, our budget is based on 5,000 man years of effort. The issue we’re resolving is comprehensive and we’ve discussed at length both the necessity of the Preliminary Specification and its cost. Officers and directors' concern for these high costs is moot when the value that has been wasted since its publication in August 2012 is tragic. These costs may have at one time been considered opportunity costs, however the fact that these costs have now been incurred annually for decades and led to such evident destruction proves they were never opportunity costs.

Management of risk in business is a skill and takes a certain amount of industry knowledge and understanding to mitigate. Officers and directors of the producer firms are alleged to be motivated by such objectives yet have done little to deal with the associated risk of the oil & gas business. In terms of hedging oil & gas commodities, our sample of producers which represent approximately one third of the Canada and U.S. production profile. Reported hedging losses of $34.2 billion in the last five quarters. Therefore we can assume this would represent over $100 billion in losses for the broader population of producers. Such is the skill of the officers and directors of the producer firms. The arguments regarding our budget are specious and self serving in light of the consequences being experienced today and the time constraints officers and directors have imposed on themselves.

The selection of the Preliminary Specification may be seen as the producers first step in reclaiming their integrity in the eyes of their investors. There would be incremental value beyond our defined value proposition in doing so. As the value differential in terms of the cash flow multiple vs. the market capitalization of our sample of 18 producers representing 11.562 million boe / day is $220.2 billion, therefore potentially triple the number for the North American producers. It may be that the capital market is predicting a decline in the oil & gas producer firms, or, is the fact that this differential is consistent across many quarters more valid? Of the more active traders in these firms markets are the producers themselves. In the first half of 2022 $13.4 billion in share buybacks were conducted by our sample of producers. Without these share buybacks how understated are these differentials? To assume action by producers is possible reflects my naive optimism. The reality is the officers and directors will “muddle through.”

What if the following scenario was the case. Producer officers and directors ceased to be subject to the whims of the commodity price swings and learned to build value everywhere and always through the implementation of the Preliminary Specification. 

• How much of that $220.2 billion for our sample of producers and $660.6 billion for the industry valuation differential would be reclaimed by proceeding with People, Ideas & Objects et al? 
• Elimination of the need to hedge commodities occurs when profitability everywhere and always is being earned and the cyclical nature of the industry is worked out.
• How much larger would that valuation differential grow when and if producers select SAP? 
• If officers and directors choose SAP does that prove People, Ideas & Objects allegations of a deliberate and destructive lack of performance and accountability? 
• For those major producers who’ve used SAP, in some cases for decades, reflect that they’re part of the problem?
• These are clearly not concerns of the producer firms based on their history. Will these ever become concerns of the producers, officers and directors?

My argument is this, the development budget of the Preliminary Specification is a slight after taste in terms of the scale of opportunity costs, hedging and market valuation losses that officers and directors feel are acceptable. We certainly don’t hear any concern coming from them about these issues. We have a highly advanced society today that has many complex and difficult issues and opportunities. When points of view such as the Preliminary Specification are offered in 2012 should they not be looked at objectively and evaluated on the basis of their potential to mitigate risk in the long run? Or maybe even before then, such as our Preliminary Research Report in May 2004. We have a similar situation captured in a Winston Churchill quote that addresses the point.

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

Therefore the issue is the officers and directors of the producer firms who have personally benefited at the expense of all others associated with oil & gas. Officers and directors have been the ones who were responsible for ensuring none of this happened, had the authority to deal with it and the resources to correct it. They’ve now begun the process of sauntering off the field into unrelated industries and businesses. Unable to provide a viable solution to the difficulties they’ve created. Yet, they want to take the primary oil & gas revenues with them. Primary oil & gas revenues that were generated through the efforts of their investors, employees and the service industry who provided them and will be needing them to rebuild the industry from the mess that producers made. To add insult to injury, the one action they will take after seven years of not listening to their investors is they'll implement SAP instead of People, Ideas & Objects to ensure they won’t have to be held accountable for this damage and destruction, and no one will find any of the skeletons they’ve hidden in their closets. 

Accounting for the Damage & Destruction

There is no doubt that many in oil & gas don't fully appreciate what it is that I’m discussing when I talk about damage and destruction. Officers and directors do and they’ve clearly understood since the publication in May 2004 of our Preliminary Research Report. They’ve always seen it as a threat and know they would not personally benefit from it. We can all agree that the “endless repetition of history” is what we’ve been faced with for centuries in so many situations. However we live in a society now where time does not afford us the luxury of that viable scapegoats acceptance any longer. Many people will be affected negatively in the most dire manner in Europe and the Northern Hemisphere this winter. And what about subsequent years? Today people are waking up to the folly of green energy and the imminent environmental Armageddon's entry into its seventh decade. Oil & gas is nothing like oxygen to the body. It’s analogous to the blood that allows everything else to function. 

Nonetheless here is People, Ideas & Objects recommendation to North American producers. Select the Preliminary Specification as the industry standard ERP system. Bold, audacious and justified on the following basis. Today producers may feel they’re sailing on for a good run and do not have to concern themselves with the past. What is evident in their second quarter 2022 financial statements is that there are legacy damages and difficulties ahead. The greatest that I can see is the lack of trust, faith and integrity the capital marketplace holds for the producer firms. Cash flows are poor in comparison to the capitalization that’s been recorded and barely support the “lofty” valuations producers feel they may have earned through their obstinate “muddle through” strategy. Comparing today’s performance to the past four decades doesn’t impress. However, even these valuations are not being believed, and in most cases North American producers are trading at half those valuations. 

The handful of producers that are able to perform at the level of their cash flow multiples should be participating in the development of the Preliminary Specification as well. Those that are not performing will be the ones who will be desperate for revenue and putting their entire production profile on the market despite the implications to the commodity price. It might be wise to remember the negative $40 prices of April 2020 of which no one individual producer was responsible. The Preliminary Specification recognizes the Joint Operating Committee and the integration of the producers within the partnership will enhance the collaboration and innovation throughout the property, the producer and the industry. Having producers partners in their Joint Operating Committees operational on the same standard, objective basis through the Preliminary Specification will be beneficial.

Investors of these producer firms need to let it be known that the only acceptable solution to them is People, Ideas & Objects, our user community and their service provider organizations with Oracle Cloud ERP. Selection of SAP or any other ERP system is not an option. This has to be specifically communicated in the same manner that the prior request for a tier 1 ERP system was made. Otherwise there is much to lose for all concerned.

We’re kidding ourselves to think that officers and directors will act in any way contrary to their “muddle through” behavior. A behavior that has become the culturally systemic method of operation. There is no need to understand this than to assess the situation in terms of the industries standing today. All of these points are a result of decades of mistreatment and abuse of their position of power, authority, accountability and responsibility for the purpose of personal financial gain. The cumulative symptoms and attributes that have led to the damage and destruction People, Ideas & Objects rant about include… 

• Never selling the attributes of oil & gas that consumers gain from the use of their products. Losing the political agenda to environmentalists and woke politicians.
• Becoming wholly dependent on outside capital to support all business operations.
• Overreported capitalization due to “building balance sheets” and “putting cash in the ground” enabled producers to leverage their positions excessively during two decades of low interest rates. Creating a future crisis due to extreme levels of debt during a period of normalizing interest rates.
• Creating organizations incapable of profitability, understanding of how or what to do to earn it. Culturally sealing the inability to determine profitable operations were ever necessary and assuming they were not.
• Never taking responsibility or accountability for anything. Blaming, excusing and creating viable scapegoats of others whose fault they’ve fallen victim to. Enforcing a culture of “muddle along” and inaction.
• Liquidating the value of the industry to the point where it has a negative net present value. Current operations demand that capital be consumed in day to day activities.
• Deprecating producers' organizational structure, operational capacities and capabilities. Cannibalizing the service industry as their last source of capital financing by extending a/c payable to 18 months. Fundamentally destroying the greater oil & gas economy.
• Capital structures of producers and the service industry are unsupported by debt or equity providers. Zero remedial efforts taken to address these concerns. Approaching one full decade of inaction and uncaring since investors began their withdrawal from industry. Continuing cash flow from a capital intensive industry sustains their personal aggrandizement, therefore what’s at issue?
• Losing the mid to long term capacity to meet the consumers market demands for energy. The most powerful economy will consume the most energy. Creating a distinct threat to the most powerful economy ever developed. Therefore what’s at issue?
• Incapable of standing up to teenage wanna-be environmentalists. Asserting the value add of the oil & gas products in the lives of the consumer. Turtling at any and all points of conflict. Leaving it to pipeline companies and others to fight their battles, while they pay the grift to the environmentalists not to protest producers.
• Employing their cultural propensity to abandon prior efforts which include their latest and greatest effort, shale, which they’ve now declared would never be commercial. Instead of remediating these assets they moved on to the next latest and greatest thing. Notice the slight of hand?
• Sauntering off the field in the direction of the unaccountable clean energy businesses where they’ll continue to prosper personally and never have to concern themselves again with being successful. Using the oil & gas revenues to support these activities through contrived boardroom battles. Listening to the “investors” concerns for the environment is the only issue of the investors they’ve ever responded to.
• Therefore, the producers leadership has walked off the stage with the oil & gas revenues in tow to the land of unaccountability where they’re “saving the planet!” 
• After all of this, what are producers offering oil & gas investors? A history, a legacy, a culture of failure, greed and “muddle through.” A theft of their revenues they invested to build. An inability to understand their primary role is to earn profits. A point they not only disagreed with, they laughed when I suggested it and have no clue about how to earn it. Culturally incapable of doing so.
• Seeking to seal this culture permanently in their implementation of SAP to keep the party going. 

In all of this there has been no response from oil & gas producers. From our initial Preliminary Research Report in May 2004, the investors strike beginning in 2015, not a thing has been done. What needs to be acknowledged by these officers and directors of the producers is that it is within the scope of their domain to deal with their issues. Profitability is the issue. The solution is in front of them in the form of the Preliminary Specification. There will be no one from now on that hands them anything. If they dispatched their ways and means to the scrap heap of history. Adopting the Preliminary Specification profitability would provide all the money they could ever want to do as they pleased in terms of the business. Do they want to have $800 billion to build LNG facilities in Canada, make that money. The means of which are on the table. If they want to do anything that they can think of in North American oil & gas then the only thing stopping them is their own obstinance. Build a profitable business and the world is your oyster. I’ll spell it out explicitly. If you want to pursue green dreams make oil & gas profitable. 

But no, they’ll outlast the investors who’ll be back begging to get in. I mentioned that oil & gas ERP systems were abandoned by our investor class in the mid 1990s. This was due to our inability to perform financially because we were unable to convince producers to manage their business appropriately as far back as then. If we assume that the Preliminary Specification et al is the appropriate solution. If we assume that the value proposition is as it's stated, you would assume that the ERP investors would be bashing down my door. Two things are stopping this. 1) I won’t accept their money because I am unaware of how I can make money in this business without having the producer buy-in that this RFP Response addresses. 2) ERP investors are not here. They know what the situation is and based on their experience from the 1990s have left. Nothing has changed and therefore they remain where they are. 

Producers need to understand that they’ll never attract investors or bankers ever again until such time as they change the performance trajectory of their firms. There are no signs of that, only their obstinate and stubborn “muddle through” strategy that destroyed everything and continues to do so.

These are the issues that People, Ideas & Objects set out to address with our Preliminary Research Report in May 2004. What had become the basis of our research that led to the Preliminary Specifications publication in August 2012. An interesting quotation from Mark P. Mills of the Manhattan Institute has a direct application to the history of oil & gas.

Brookfield’s CEO said that the strategy follows the same deal-making common in other capital-intensive industries. Companies will happily take any supplemental money, but the market opportunity, not the subsidies, underpins such big investment gambles. The key, to use the famous truism from Walter Wriston (the former, storied CEO of Citibank), is that “capital will always go where it’s welcome and stay where it’s well treated. Capital is not just money. It’s also talent and ideas.”

Putting this into context as to what’s occurred in North American oil & gas. Culturally, producer officers and directors grew to believe that investors became an organizational subsidy. Not the means to pursue the market opportunity. 

To deal with this today demands only one solution and that is People, Ideas & Objects et al as defined in this RFP response. What this also proves is the common knowledge that “organizations don’t change, people do.” The resistance to change that we’ve experienced, and that of the producers' investors, has originated in one area of each and every North American producer, the officers and directors. Our final attempt to deal with them was in sending an offer to the directors of the producers in July 2021 which they ignored. This Response to a Request For a Proposal is highly derivative of the proposal that was sent to them. This proposal is not directed at them and therefore, no harm no foul, my abuse is inert. 

We are directing this RFP Response at those investors who have seen enough to know the situation today is not being addressed effectively. People, Ideas & Objects don’t need to tear things down in order to start over. That’s already been done, we need to rebuild the industry in the vision of the Preliminary Specification. The only way we’ll accomplish that is for the investors to tell the producers officers and directors to fund the Preliminary Specification specifically. What will happen in North American oil & gas if this doesn’t happen has been speculated earlier in this proposal and can be assumed some time this winter by looking out the window.

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

 Our User Community & Their Service Provider Organizations

People, Ideas & Objects user community is our primary focus and priority. They are the means in which we can ensure that we’re building a quality Cloud Administration & Accounting for Oil & Gas ERP system.

The competitive advantages of our user community and service providers provide the following areas as their distinct competitive advantages. This is a fundamentally different basis of competition and one that overall provides significant value from the producer firm to the entire oil & gas economic structure. Approaching the overhead costs of the producers in a systemic and analytical manner and breaking down the individual processes into standardized, objective methods provides the industry with the overall value proposition of the Preliminary Specification. Each individual user community member will work part-time with our development team defining, designing, developing and implementing their understanding and the input of the producers into derivative products of the Preliminary Specification. They are the principal individuals of their service provider organizations that then operate the accounting or administration process on behalf of the industry. 

What you will not find here is any mention of price based competition. Service providers are setting their own prices for their services. And are provided with exclusive licenses to manage their specific process. All human endeavors are motivated by self interest and our user community and service providers are no different. However, their self interest is achieved when they focus on the task of providing the oil & gas producers with the most profitable means of oil & gas operations. And not have to concern themselves with another firm establishing a competitive service, based on price, that did none of the heavy lifting in terms of determining “how and what” was needed, and will continue to be needed, to provide the oil & gas producers with the most profitable means of oil & gas operations. The competitive basis of our user community enables them to get their head in the game and fight to ensure that producers are profitable everywhere and always by using these distinct competitive advantages. Leveraging these with their ability to exercise change in the software and methods of their process management and how they’re conducted in industry. 

The structure of the producers overhead through the reorganization to our Cloud Administration & Accounting for Oil & Gas service has turned these fixed costs variable, based on profitable production. Overhead costs will be recaptured in the current period, and therefore the cash incurred to fund overhead will be paid by the consumer and returned immediately to the producer. Replacing the twenty year process that exists today and the cause of the producers heavy reliance on investors for cash. It is these competitive advantages that provide substantial value to the producer firm. To be able to get to the root of the value generation demands deep analysis and complex work. Something that would be difficult in an environment where price competition was the primary concern.

What it is that the user community will compete upon is the following classifications of items. These will be the basis of a shared understanding between the user community that determines how one user member was able to leverage specialization to enhance productivity in their process by… When we factor in the time and sense of urgency in which this product must come to market, then this will be highly appropriate. This sharing will be collaborative and competitive. Seeking a performance and quality product on a never ending basis. This is the effective way in which the user community and their service providers have been configured in their licenses. 

The last point regarding our user community and their service provider organizations competitive advantages. Is the distinct specialization and division of labor between computers and the people involved in this community. Computers have excelled in the areas of processing and storing of data and information. People on the other hand have the distinct advantages that are listed below. This is a unique perspective in comparison to today’s oil & gas producers ERP systems implementation.

Accounting & Administration Expertise

Well trained and experienced in their fields, our user community members are providing the administrative and accounting expertise as their primary value add to the process. This applies to their service providers as well. As stated our Cloud Administration & Accounting for Oil & Gas service is a sub-industry between the technology and the greater oil & gas economy. Filling a gap that we see between the two as we feel they’re not communicating effectively. 

Analysis of Conflict & Contradictions as Analytic Tools

Conflict and contradictions indicate the source of the issue. Analysis of these two factors will help to reveal the possible alternative solutions. When we apply these in the business world the behaviors, communication methods and other factors can provide insight and understanding to issues and their resolution. These are part of the more advanced style of tools that will be needed to resolve the many exceedingly large issues the industry and our user community will encounter. 

Application of AI & ML

Artificial Intelligence is overrated in the marketplace at this time. AI is a module in the Preliminary Specification where we are able to establish effective and efficient algorithms from our user community that can be shared and are shareable across the industry. Offsetting the inordinate cost of each producer involved in the difficult business process of developing, testing and proving AI algorithms. Machine learning is a far more effective tool that will be valuable to the user community due to the unique perspectives they have on industry data. They’ll have data sets of the process they manage of the entire industry's data. This data set would be interesting to analyze from the point of view of its unknown unknowns. 

Automation

Automation will be invoked to ensure that the most effective and efficient operations are provided to those producers participating in these developments. Relieving the administrative and accounting resources to pursue higher level, value added opportunities. Reduction of costs in this sense is a worthwhile pursuit, not just from the point of view of the reduction of the costs. Reduction of costs implies high levels of automation are in play. Automation does not just reduce cost directly it does so indirectly through the reduction of error. Reduction of errors reduces time. What admittedly is becoming a more critical resource as we proceed through the 21st century economy. 

Collaboration

I noted earlier a collaborative, collegial environment would be the basis of the competitive environment between our user community and their service provider organizations. The basis of collaboration and cooperation is the importance of the work that they’re undertaking and their critical role in rebuilding the oil & gas industry. 

Compromising

Finding the solution in a world of difficult and complex issues demands that creative solutions meeting the needs of those parties are understood and accommodated. Although we are rebuilding brick by brick and stick by stick there are established industry methods, regulations and processes that need to be adopted. We need to bring about new ways of implementing them and organizing them. This demands that our user community members offer industry solutions that work for all concerned. 

Creativity & Design

It may be hard for some to imagine the concept of creativity in the field of administration and accounting. However there is nothing that will be more critical in the discovery, testing and implementation of new and innovative procedures that provide value to the oil & gas industry. We published the Preliminary Specification in August 2012 and soon after, in March 2014 began the development of our user community. As a result people within the larger oil & gas industry have had the model in the form of the Preliminary Specification and our user community vision in their minds for the better part of a decade. Understanding what their involvement could be, should they decide to join our user community based on the principles set out in these documents. Enabling them to prepare themselves, both directly and indirectly for the time when our development and implementation begin. 

Creative Destruction, Spontaneity & Serendipity

Each of these are established economic principles that have been eliminated from the business landscape of the 21st century through the development of software. The unchanging methods and procedures that software defines in organizations, and particularly the ERP systems locks organizations into unchanging and unchangeable situations that only serve the status quo. People, Ideas & Objects have established through our user community and service providers that they’re able to make the effective changes necessary to ERP systems that will be derivative of the Preliminary Specification. Establishing a permanent user community and software development capability is a necessity for businesses to continue to evolve throughout the 21st century. 

Explicit and Tacit Knowledge

Providing software in the marketplace is a small part of the solution today. What software does is capture the explicit knowledge and codifies it within the software processes management. It is the service that is affiliated with that software where the value of the software is derived. The service must include the tacit knowledge as part of the package offering, such as our Cloud Administration & Accounting for Oil & Gas. The software and service must be able to make the changes necessary to accommodate the accelerated pace of change in today’s market, and what we can only assume will be the case tomorrow. 

Ideas

The uniquely human element that will be in demand. The idea that generated a dollar today will produce a nickel tomorrow. The need to have exponential volumes of ideas will be a demand of the future in everything that we do. How these are captured and implemented in the software and the services provided here will be a necessity. And with the shared and shareable model these ideas, once proven, tested and appropriately implemented will be leveraged throughout the industry. Building value for all concerned.  

Innovation

People, Ideas & Objects at al’s Preliminary Specification and these supporting services are structured under the basis of innovation. Our research into the Preliminary Specification determined that innovation is a defined and replicable organizational process. These have been incorporated throughout this sub industry that we’re building. Importantly our user community and their service providers are able to affect the changes that are needed to facilitate the oncoming innovation in efficient and effective ways through the design of their organization.  

Integration

Integration or implementation falls under the domain of responsibility of our user community and their service providers. These are the critical components and the final steps in ensuring the quality of software and services we’ll be providing. Integration begins on day one of the development in terms of the planning and preparation of these changes. It will be our user community members who will ensure that their service providers are appropriately implementing their processes management throughout the industry. As the principal owner of the service providers they’ll be duly authorized and the responsible parties.

Issue Identification & Resolution

“Muddling through” is over. They’ll be no more ignoring the issues in oil & gas. People, Ideas & Objects are providing the tools, methods and organizational constructs in which issues are addressed and resolved. We see that software is the issue in that it is sealing organizations in concrete. Which is good from a governance perspective, however it must be innovative and capable of change in order to achieve the higher level performance trajectory of a dynamic, innovative, accountable and profitable organization in the 21 century. This will be an order of magnitude more difficult than what the culture of oil & gas is currently familiar with. As difficult as the situation in industry appears to be today. Consider how much simpler it was only a decade or two ago. What will it be in a decade from now in terms of the issues and opportunities that these firms face. To be unprepared as we are today is dangerous. 

Judgment

Not a distinct competitive advantage of computers. A uniquely human characteristic that will be the basis of understanding for the remainder of this century and as long as we choose to. Oil & gas is being seen for the value that it is in the consumer marketplace. Unfortunately for the risk of shortages and its impact on civilization. Setting the proper landscape for a more dedicated environment in which oil & gas can prosper and conduct its business operations. What is our judgment regarding the capability and capacity of the current producer organizations to realize these opportunities?

Leadership 

I expect that our user community will provide leadership in terms of the administration and accounting of North American oil & gas producers. An expectation that includes the development and evolution of the business model and “what, how and why” the industry earns its profitability. The objective and standard basis of how that is evaluated and provide the industry the tools to evolve at the speed and capacity necessary to meet its future demands. 

Negotiating

Negotiation and compromising on the basis of the interactions between producers and our user community will occur on a frequent basis. Compromises and negotiations on the Preliminary Specification however can not and will not occur. The business model is integrated and wholly dependent on that model functioning together. Changes at the Preliminary Specification level may have implications that are unknown in other areas of the system. If these changes are necessary then these can be analyzed and corrected based on the best understanding, once developed. 

Planning

Planning in a dynamic environment is a futile activity at times. It however communicates to participants the information necessary to begin the process. It is the first step. 

Quality

Define it, clarify it, communicate it and ensure that it's implemented. It used to be when you drove downtown to go to work in the morning, and when you returned at night. You would see 2 - 3 cars broken down on a 15 mile trip. This was the opportunity that Japan exploited to enter the North American auto market. They introduced reliability. Software is going through a period of higher reliability primarily due to the cloud computing era having the ability to secure the environment of software and services operations. Phones are far more sophisticated than people realize with Steve Jobs starting in the mid 1980s when he was fired from Apple. And Sun Microsystems with the commercial release of Java in 1994. Cloud Administration & Accounting for Oil & Gas, standardization, objective accounting and other methods will secure higher reliability on top of these technologies. And there is so much more that can be done by a duly authorized and capable user community. 

Research

The abundance of primary research today is as we would expect in the 21st century. We can choose to stand on the shoulders of giants, or recreate it again if we like. The amount of primary research that has been unused at this point is probably larger than what has been implemented. There is rich ground here for value generation to those that can begin to turn these ideas into reality in oil & gas. In light of all the competitive advantages listed under our user community, putting research under their domain is a natural fit. We see this as highly complementary to the research that People, Ideas & Objects have listed as part of their competitive advantages. 

Specialization & the Division of Labor

We’ve covered this extensively in all areas of this RFP Response. It is the source of all economic value generation realized since 1776. However, software disables its natural process of development by “gap-filling” when it has no capacity, and the organization has a vested interest in the status quo. Producers have relied on “cost cutting” to generate value for decades and have nothing to show for it but a fundamentally destroyed service industry. Specialization & the division of labor in terms of development of our user community and their service providers will be continual. And they will be introducing the same throughout the greater oil & gas economy.

Thinking

The contrast between “doing” and “thinking” may grow more significant as we proceed through the 21st century. Writing is thinking. Time and the speed of organizations to provide their basic functions, such as oil & gas, is in jeopardy today. “Doing” more may not resolve the issue. Getting ahead of the game may be a thing of the past and a luxury we can tell our grandchildren about. What we’re faced with today is an environment that will demand testing of hypotheses of various scenarios of possibilities and assessing the different outcomes. Determining what is right based on what will work to generate value for the firm. An environment where what the individual gets out of it will be based on the value they’ve generated.